Good morning, everyone. And welcome to ANI's Second Quarter 2017 Earnings Call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question-and-answer session [Operator Instructions]. Please note this call may be recorded. It is now my pleasure to turn today's program over to Mr. Arthur Przybyl. Please go ahead.

Good morning, everyone. And welcome to ANI's earnings conference call for the second quarter 2017. My name is Art Przybyl, I am the CEO. And with me today is Stephen Carey, our Chief Financial Officer. Before we begin, I want to refer everyone to the forward-looking statements language in this morning's press release and ask each of you to review it carefully is important context for this conference call. Discussions will also include certain financial measures that were not prepared in accordance with Generally Accepted Accounting Principles. Reconciliation of those non-GAAP financial measures can be found in our earnings release dated today. Today, we reported our second quarter results. Record net revenues of $44.8 million, record adjusted non-GAAP EBITDA of $19.1 million and record adjusted non-GAAP net income per diluted share of $0.98; increases of 43%, 24% and 31% respectively as compared to the prior year. These results are a direct reflection of our business model and management's execution. As a result of these reported financial metrics, we are reaffirming our annual guidance, annual revenues of between $181 million to $190 million, adjusted non-GAAP EBITDA of $73.1 million to $77.2 million, and adjusted non-GAAP income per diluted share of $3.58 to $3.94. Our two significant business platforms, generic pharmaceutical and branded pharmaceutical products, generated $31.5 million and $11.7 million in second quarter net revenues; increases of 40% and 56% respectively as compared to the prior year quarter. In the first quarter, our cost sales was 40% of net sales, excluding Inderal inventory step-up costs indicative of 60% non-GAAP gross margin. For the remainder of 2017, we expect to continue to broaden our generic and brand product lines. In the second quarter, we launched an additional generic product, diphenoxylate hydrochloride and atropine sulfate tablet and effectively captured our targeted market share. This product launch increases our generic product line to 23 total products. We continue to pursue transactions in both generics and brands to add value and scale to our existing product portfolios. Corticotropin gel and its re-commercialization effort continues to progress. API manufacturing and weighted analytical chemistry efforts continue on plan, and we have selected a finished dosage for manufacturer intend to initiate finished dosage for manufacturing of Corticotropin gel in the second half of this year. In this press release, we have included table five that is intended to provide Corticotropin re-commercialization milestone updates as we advance to our sNDA regulatory filing. In addition to our manufacturing and analytical method work, we have developed a comprehensive regulatory filing plan for Corticotropin gel and intent to meet with the FDA to present the plan in the second half of this year. I will now turn the conference call over to our Chief Financial Officer, Stephen Carey, who will provide you with more details on our financial results.

Thank you, Art. Good morning to everyone on the line, and thank you for joining the call to discuss ANI's second quarter 2017 financial results. For the quarter ended June 30, 2017, ANI posted net revenues of $44.8 million, non-GAAP adjusted EBITDA of 19.1 million and non-GAAP EPS of $0.98 per diluted share. All three of metrics represent new quarterly records for the Company and are a reflection of ANI executing its strategy to broaden its portfolio in order to achieve strong contribution across multiple product lines. 15 of our 30 product families posted quarterly net sales in excess of $1 million and an additional two product families were just shy of this mark. As a point of comparison, only eight of the Company’s products achieved this level of sales in the second quarter of 2016. Net revenues for the second quarter reached $44.8 million, representing 43% increase from prior year and was driven by continued execution of key 2016 product launches, and the first full quarter of InnoPran XL and Inderal XL sales in our brand portfolio. On a sequential basis, reported net revenues increased 22% or $8.1 million from the first quarter of 2017, reflective of strong sales gains in both our generic and brand product lines. Second quarter adjusted non-GAAP EBITDA was $19.1 million, representing $3.7 million or 24% increase from the year ago period. This result was achieved while increasing our year-over-year investment in R&D by $1.4 million as we continue to advance our Corticotropin re-commercialization project. On a sequential basis, adjusted EBITDA of $19.1 million grew $4.4 million or 30% from the first quarter of 2017. GAAP earnings per share increased from $0.10 per diluted share in the second quarter of 2016 to $0.23 per diluted share in the current period; while our adjusted non-GAAP…

Thank you, Steve. And moderator, we will now open the conference call to any questions.

[Operator Instructions] Your first question comes from the line of Elliot Wilbur of Raymond James.

Art, it always seems like every time you -- at least in the last year in reporting financial results, it's another fire drill in the generic drug industry. So on that note, maybe you could talk a little bit about, if you were out pitching your stock today and talking to investors, seems like the perception out there in the investment community is that if you're in a generic drug space, long enough, eventually something bad is going to happen to you. But what do you think differentiates your business model from what we've seen happen to a lot of other competitors?

So two very important points from my perspective. So in my opinion, we were never a company that built our business on increasing prices on legacy generics dramatically. And if you a company today that has had to roll back those prices to today's levels and you borrowed heavily to buy assets and you're over levered, you're in a lot of trouble, because there's no backstop for rolling back those prices. That is not us. We're not highly levered. We've got a strong balance sheet and cash flow position and we’ve been able to grow the business and create value from our product launches internally, our partnerships and the transactions that we used monies to acquire assets. We also have a branded portfolio, which is not the case with every generic company that generates now annual revenues that approximate $45 million other than 80% gross margins. So we’re not a pure play generic story that sees customer consolidation and margin shrinking, and pricing lowering back. And I think that is something that differentiates us from the rest of some of the companies in the space that are having some difficulties. And yes, we tend to choose ideal days to announce our earnings. I think we’ve been involved with some of Hilary’s tweets we’ve been involved with the Bellwether exploding today negatively. But in the end, we keep putting up numbers as a management team. And so I think the numbers are reflective of the strength in our business model today, and going forward.

One thing we haven’t really heard you guys talk about, and I think it’s something that’s been almost universally talked about by other companies, at least with exposure to generic space is the impact of consortium. So obviously you have a niche portfolio. You’re one of only a couple of players, if not the only player, in a lot of these products. But how is the evolution of these consortiums impacting your business? And have you really seeing an impact today at least from some of these recent combinations?

Well, from our perspective, Dave, allowed us to increase our market shares. We have provided value to the consortiums. We’ve seen, obviously, what we feel is maybe over bate customer consolidation to three consortiums for our business that drive better than, I think in the neighborhood of 90% of all those scripts. That’s a little scary. But we’ve been able to provide value to these consortiums, and they actually increase our market shares. And as a recent example, when we launched diphenoxylate, our targeted market share was to capture one of those consortiums, we indeed did that. And so that is generating revenues and margin for us, margin dollars for us, going forward. So we certainly try to work with the consortiums to do what we want, and we want to see our market shares go up. We want to provide value and we’ve been able to do that. And hopefully that will continue to be the case, going forward.

One additional question for you. Could you just may be update us in terms of what your current thinking is with respect to potential launches for the balance of the year, and then maybe more specifically about the process? I guess, one of the perceived advantages of where’s your current positioning is, is it the vast majority of the pipeline, could be run through FDA using CB30 or potentially supplemental processes, which should be more expeditious and more efficient than going through the traditional ANDA process. And obviously a lot of other players are really getting caught up in terms of the ways from FDA and getting products to market. I am just wondering if you’re still seeing the same level of efficiency that you had seen previously and that you hope for with respect to CB30. Just a little bit more color on your second half launch dynamics?

We still have launches scheduled for the second half of the year. And yes, some of them are CBE30 launches; some are also prior approval supplements. We do have ANDAs in the pipeline as well. And we certainly have experienced some of those ANDAs that’s being held up by CRLs by Comprehensive Review Letters that extend out some of the TAD dates or some of the approval dates. That’s a little disconcerning to us. But we have factored in some additional launches into our guidance. But I would say that rising to a level of some of the launches that we had last year, we don’t have a couple of products that were very meaningful to us last year, this year. So we are generating our revenues this year off of building on existing product lines and increasing market shares associated with many of those products. But you should still continue to expect to see us launch products certainly in the second half of the year from the Teva baskets, don’t forget we are just beginning our IDT partnership basket of products we launched one so far this year. And so we should continue to see additional product launch in the second half. And we think we’re in, obviously, good shape very good shape to hit our expected respective revenue guidance number that we’ve pointed you towards.

Then last question really quickly, just for Steve. So you’ve had a couple of questions this morning on receivables and in DSOs. They’ve leveled off a little bit this quarter, but still at least in the last four to five have trended up. So not really sure what we should be thinking about given the current revenue mix in terms of what’s the bright DSO level for the business?

Right, I mean, what you’re seeing on that receivable balance really is the strength of this quarter sales figures. And so we expect the cash collections to really kick-in in the third quarter of this year on the strength of second quarter sales. I mean, as a general statement Elliot, we essentially think about cash flows off of sales, directionally beating on the quarter lag. Obviously, the first quarter of this year was our low quarter in terms of our anticipated results. You see that with strong sequential gains for this quarter, and for our expectations for the back half of the year. So I would say essentially directionally a quarter lag on cash flows, if that helps.

And if I could just point out that’s one of the beauties of our brand portfolio as well, Elliot. Those monies come into us cash collection wise in approximately 30 to 35 days where generic revenues are typically in the neighborhood of 75 to 90 days payment terms. So as we again recently added to our branded portfolio with InnoPran and Inderal XL, you’ve seen the jump in receivables. But you’ll see that money flow to us quicker certainly associated with that branded product.

Your next question comes from the line of Dewey Steadman of Canaccord.

I guess, first not to dive in the weed is too much. But can you give us some color based on what Teva was saying today on your Claris1 experience, so far, and how you're participating in that group? And then also the pricing for your basket launches, both from Teva and IDT. How does the pricing for those products compared to what Teva and IDT saw before they exited those markets? Thanks.

Let me take the back half of that question, and I don't know the answer to what Teva saw on pricing on those products, because that's several years ago, those products have off the market when we bought that basket of products from Teva for several years. And the same is true of IDT. I believe IDT bought their basket from Sandoz that we’re representing in the marketplace for them. So I honestly don't know the answer to that. In respect to Claris1, we just don't comment on individual customers in respect to businesses with them. We're bound by, in many cases, confidentially agreements with these customers and so we just chose not to comment.

And on Corticotropin then. Have you requested the meeting with FDA yet? And if not, what's the usual timeline for them to get back to you to schedule something?

So we've not requested an FDA meeting as of yet. We want to understand our process characterization effort for a drug substance, the purified Corticotropin powder. So we are not ready to request that meeting just yet. We're in the midst of manufacturing our first scale of batch, a five kilogram batch size of Corticotropin powder. And obviously, we want to understand the analytics, as well as our capabilities a lot-to-lot consistency before we request that meeting. Those meetings, my regulatory individuals telling you can be between 60 days and we'd be granted a meeting, so in that timeframe.

For that two to three months per batch to scale to manufacture the intermediate scales of the API. What's the gating factor in that time to manufacture? I would think it would be quicker than that?

It's a good question. It’s just a function of equipment and scale. And when we are manufacturing eventual commercial batches, commercial batch sizes of Corticotropin, it'll also take approximately two months. And so that is just the timeline for our contract manufacturer again to make a batch of purified Corticotropin powder.

Your next question comes from the line of Scott Henry of ROTH Capital.

I guess starting on the big picture, solid quarter top line and bottom line. I noticed you've maintained the guidance. The question is do you feel more comfortable with your guidance? Or were you just expecting some of the back half came into the second quarter, because it did seem to be a very strong quarter?

I mean our comfort level, I presume it's just intuitive rate to that as we fill the bucket as the year goes on. The confidence interval increases in terms of whether second half pulled forward into second quarter. I would say no to that not in any meaningful fashion. We did have an anticipated strong ramp second quarter versus first quarter. And we think that sets us up nicely for what we need to achieve in the coming two quarters to round out the year, and the annual guidance.

If I could add to that, Scott the exercise that we do obviously in the fourth quarter of a prior year to establish guidance for the year that exercise is redone and recaptured at the end of every quarter. So we’ve had confidence in our guidance numbers that we put out this year. And we certainly continued to do, which is why we’ve obviously reaffirmed our guidance going forward into the second half of the year. And again, we conduct this exercise at the end of every quarter, take a look at our market shares, our units, our ASPs on a SKU basis and tally them up and make sure that they are certainly well within any guidance ranges that we give. And obviously if we were above or below, we do an analysis as to whether we need to shift guidance. We obviously feel very good about our annual revenue guidance since the beginning of the year and continue to feel that way after the results of the second quarter.

And then a follow-up question. When I think about your main product line, Nilutamide fenofibrate, there’s bunch of them and certainly Inderal LA. Were there any changes to the competitive dynamics that were unexpected that you would want to comment on just as we get a sense for some of the key products, any surprise competition, either coming or going? Or was it pretty much as expected over the past quarter?

Pretty much as expected, Scott.

And then shifting gears I think there were four new product approvals recently Diphenoxylate, Atropine, Inderal, Indapamide, so hopefully I didn’t put you those names too bad. But of those four, any comments on the potential revenue size or any more material than others? Just trying to get a sense of the context of those product approvals?

Just so the audience understands, it’s three products Diphenoxylate and Atropine is a combo product. And outside of EEMT, which we admittedly built the company off of and had a large concentration at one time of our overall revenue base, I think it’s down to about somewhere in neighborhood of less than 15% now. We just don’t comment on our net sales per product. I will make a macro comment that Diphenoxylate is a good product for us. We entered a marketplace with two competitors and still reasonably good margins, where Indapamide and Pindolol are more competitive products. So more in the -- less contributors and more in the arena of the commodity type generic. But diphenoxylate was definitely a nice contributor to margin dollars, and will be.

Final line of questioning just on the Corticotropin milestone updates you included; first on the Type C meeting with the FDA. I'm just curious and as much as you can give color. What are the key discussion points for a meeting such as that? Is that just a binary, you submit a plan it's yes or no decision? Or are there some key issues that we should be thinking about?

Certainly, we are going to present our regulatory filing plan along with some of the progress associated with analytics, we’ll call it the modernization approach to the NDA, as well as you know we want to demonstrate that we have a good understanding of what I call process characterization or lot-for-lot consistency, but there is a lot that goes into that regulatory filing plan. And so we intend to present it with, what I would say, is a reasonable balance of data points of meat on the bone if you want to characterize at that way. We will certainly -- it is hard for me to answer your question what our expectation should be out of that meeting. We certainly expect FDA to discuss with us that plan and some of their thoughts and ideas. And part of the reason for meeting with FDA and not just filing an sNDA and then having them tell us we'd like to see this in the modernization plan, I would like to see that, is to get ahead of that. And to give us plenty of time to incorporate any of the FDA's comments into additional data points that they might be looking to see prior to us filing the sNDA. So when we file the sNDA and in a perfect world when we get a PDUFA date of four months, in a perfect world, you’d like to see it will get approval, an expedited review and approval for a product like that this that obviously is breaking, potentially breaking a very large monopolistic position in today's phama world. And so that's part of the reason for the -- that' really the main reason for the FDA Type C meeting, is to give them a heads up as to what they're going to see land on their desk in the future, and to make sure that we can again incorporate their comments into the future sNDA filing.

Thank you for the color on that. And thank you for taking the questions.

You're welcome Scott.

Thanks Scott.

So at the end of these questions, I just like to thank everybody in the audience for attending ANI’s Second quarter earnings conference call. Hope you all have a nice afternoon. Thank you, bye-bye.

Thank you. This concludes ANI's Second quarter 2017 earnings call. You may now disconnect your lines at this time. And have a wonderful day.