Good afternoon and welcome to the Depomed's Fourth Quarter and Year-end Fiscal 2015 Financial Results Conference Call. All participants will be in listen-only mode. [Operator Instructions]. 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 Christopher Keenan, Vice President of Investor Relations. Please go ahead.

Thank you, operator. Good afternoon, and welcome to our investor conference call to discuss the fourth quarter and full year 2015 financial results announced earlier today. The press release covering our earnings for this period is now available on the Investors page of our website at depomed.com. With me today are Jim Schoeneck, President and Chief Executive Officer of Depomed; August Moretti, Senior Vice President and Chief Financial Officer; Matt Gosling, Senior Vice President and General Counsel; Scott Shively, Chief Commercial Officer; Srini Rao, Chief Medical Officer; and Jack Anders, Vice President of Finance. I would like to remind you that the matters discussed on this call contain forward-looking statements that involve risks and uncertainties, including those relating to commercialization of NUCYNTA, NUCYNTA ER, Gralise, Cambia, Lazanda and Zipsor, the company’s financial outlook for 2016, development, plans and expectations for cebranopadol and other statements that are not historical facts. Actual results may differ materially from the results predicted and recorded results should not be considered an indication of future performance. These and other risks are more fully described in the Risk Factors section and other sections of our quarterly reports on Form 10-Q and Annual Report on Form 10-K for the year ended December 31, 2015 that we expect to file later this week with the SEC. Depomed disclaims any obligation to update or revise any forward-looking statements made on this call, as a result of new information or future developments. Depomed’s policy is to only provide financial guidance and guidance on corporate goals for the current fiscal year and to provide, update or reconfirm its guidance only by issuing a press release or filing updated guidance with the SEC in a publicly accessible document. References to current cash, cash equivalents and investments are based on the balances as of December 31, 2015. All guidance, including that related to the company’s expected total product revenues, operating expenses, adjusted non-GAAP earnings and non-adjusted EBITDA is as of today, February 22, 2016. I'll now turn the call over to Jim Schoeneck.

Thank you, Chris and thank you all for joining us today. I'll start by reviewing our 2015 business achievements followed by some top line financial results, progress made on our NUCYNTA growth initiatives and finally steps we've taken to create additional shareholder value. Augie Moretti our CFO will then discuss our financial results and guidance before I provide closing comments and open the call to questions. 2015 was an exceptional and transformational year for Depomed, as the successful execution of our growth strategy now positions us as a leading pain and neurology focused company. We believe that we have one of the most highly differentiated pain portfolios in the U.S. and are poised to deliver results for many years. Highlights of the year include; acquiring the U.S. rights to the NUCYNTA franchise from Janssen Pharmaceuticals, re-launching the products in June and demonstrating clear year-over-year growth in prescription volumes and market share under our ownership, securing a $575 million debt facility from Deerfield and Pharmakon to finance the closing of the NUCYNTA acquisition, allowing for a non-dilutive approach to funding this important deal. Settling our ANDA Litigation against Watson Laboratories surrounding Zipsor, securing marketing exclusivity for Zipsor until March 24, 2022; settling our appeal of the Gralise ANDA win over Actavis, ensuring market exclusivity for release until 2024. Then late last year, acquiring cebranopadol from Grünenthal, a novel, first-in-class, late-stage analgesic in development for moderate to severe chronic nociceptive and neuropathic pain. And then earlier this month, announcing a favorable Markman claim construction ruling in the ongoing patent infringement case against the three NUCYNTA ANDA filers with Depomed prevailing on all disputed claims. Turning to the financial results, we finished 2015 on very strong footing, as we reported another record quarter with outstanding top and bottom line results. We continue to…

Thank you, Jim. Today I’ll cover three areas; first, I will review a few of the highlights of our fourth quarter results; second, I'll discuss the accounting for the cebranopadol acquisition that closed in mid-December; and third, I'll provide our guidance for 2016. I want to mention at the outset that with respect to our fourth quarter and full year results and our 2016 guidance, I will be discussing certain GAAP measurements as well as certain non-GAAP measurements, which we expect to continue to present in future periods. Please refer to today's press release for an explanation of our non-GAAP financial measures and tables that reconcile the company's non-GAAP adjusted earnings per share and non-GAAP adjusted EBITDA. As Jim just outlined the fourth quarter was an exceptionally strong one for Depomed both in terms of cash flow and product revenue. As of December 31, 2015, cash, cash equivalents and marketable securities were $210 million, which represents a quarterly increase of $35 million. Keep in mind that we used $25 million as partial payment for cebranopadol in December and if we had not used the funds to acquire cebra, the Q4 entries in cash would have been $60 million. The cash increase is principally the result of our non-GAAP earnings but a portion of the cash increase is the result of timing associated with our payment on sales rebates related to NUCYNTA, our royalty payments to Grünenthal and our interest payments on our convertible debt. With regard to sales rebates related to NUCYNTA, some of the managed care and government contracts for NUCYNTA are still under Janssen's contracts. From a process perspective Janssen initially pays these rebates on our behalf and then we reimburse Janssen after Janssen bills us. This intermediary step causes a delay in the timing of when Depomed…

Thanks, Augie. Our financial performance was just the one part of the exceptional year that we had in 2015. We secured and financed $1 billion acquisition, seamlessly integrated and re-launched NUCYNTA and tripled our revenues and profits. This success was driven by our incredibly dedicated team of employees. What I witnessed throughout last year was a true commitment to see Depomed succeed and thrive. I could not be prouder the way our sales force and our home office stayed focused on our mission and goals as we work together to build the great company. And to our shareholders, we remain steadfast in our commitment to creating value and I thank you for your [levering] support. And with that, operator we'll open the call to questions.

Thank you. [Operator Instructions]. Our first question is from Randall Stanicky at RBC Capital.

Jim, just to set off on NUCYNTA, just sort of what you're thinking about the growth cadence correctly here given its your most important growth driver. If we look at the 3Q to 4Q growth of 5% that you detailed, can you help us understand from the moving parts -- the script growth versus the gross connect the inventory levels and then importantly the flow through of the previous 44% price increase as well as the 9.9% increase from December that would be helpful?

Yes, Randall, there is a lot there. I'll start and I'll let Augie jump in on some of this. I think the easiest one is the last one which is really there really is no real effect of the 9.9% yet, because at the time when you take that 9.9% weighing the quarter, there is also an accounting adjustment for future returns that basically offset any benefit we got from that in the fourth quarter. As we mentioned before in terms of the 44% price increase we took in April, we believe that at this point through the end of the year we had received about half the benefit of that. There are some resets on some of our managed care contracts that will roll over -- rolled over as of January 1 and we'll see some more the benefit of that 44% starting in our next quarter as we report back in May. In terms of the scripts, I mean you've got the script data and as Augie mentioned, the days on hand at wholesalers went up really slightly, but I just it was a day or two or Augie you may want to comment further on that?

The increase in days on hand at wholesalers was approximately three days.

Okay. Well three days, okay.

Is there a way that you could help us as we look at 2016, help us think about the price versus the volumes split? I mean, obviously this has been a re-launch product, the script growth has been solid. But how do we think about that as we think about 2016?

Yes, Randall. As we came out at the end last year we were up about 20% year-over-year in ER scripts and had flattened out IR scripts. As we would keep going in the year we would expect that the ER would accelerate from there and grow faster than the 20%. As I mentioned during some of my remarks, we really are adjusting the benefit of everybody, really starting to kick-in on and we've got some new materials that are out there, some new programming elements that are there. I think importantly the customized tool that I mentioned on the managed care side will give the reps the ability to go in and address the exact audience -- the exact patient coverage that that physician has and how that plays through their patients. So we'd expect that and we would expect to get some growth out of the IR as well. So I mean it really is a volume story with the price component to it, is the way I would think about it.

Okay and let me follow-up with one more question on the business development front. I mean you guys have talked about BD for several quarters now and obviously there is a payment coming from the Deerfield perspective that I think most of us are thinking you're going to take advantage of. How much flexibility does that leave you to do deals over the near-term and then how should we be thinking about where that that interest is in terms of how much capacity you have to bring on additional on market products?

So Randall I think, we have quite a bit of capacity. Just to briefly review the terms of the loan payment. For instance the loan agreement allows us, if we were to acquire a new asset or allows us to provide a new lender first lean on the assets of the acquired, the newly acquired assets. There are no limitations on our ability. No consent requirements to make an EBITDA positive acquisition. We have the ability to issue convertible debt without limitation and I think there is a very fair amount of flexibility there. I think in terms of how much capacity, I think it is dependent upon the cash flow characteristics of the asset that we would buy. But I think given the cash generation that we've seen and the fact that we do intend to pay down the $100 million in April, I think the balance sheet is in very good shape and is able to support continued acquisition at a fairly high level.

And Randall, I will just throw in a piece and as Augie has mentioned that it is a prepay choice that we have in April for those that may not be familiar with it. In the first half the principal payment is not due till the third anniversary of that debt.

Okay, just one more quick if I can squeeze it in, you are looking for assets, you're competing against companies that very well tax rates, do you need to address your tax rate and is that putting you at some level of a disadvantage in terms of some of the opportunities that are out there?

As we said, we continue to look for, if there was an opportunity to be more tax eventful. We only want to do it as we said if there is a strategic piece with that and actually it will be an asset or it could be something on geography but we would definitely want more than just doing it for solely tax purposes. Certainly, it does come into our calculus in terms of how we think about things but at this point in time it hasn't hampered and hopefully it won't going forward and hopefully we can do something about the tax piece. But again we'll be very particular in terms of when and how we do that

Okay, great. Thanks guys.

The next question is from Scott Henry of ROTH Capital.

Thank you and good afternoon. I'm going to start -- I am going to hit the NUCYNTA question from a little bit of a different angle, I don't know, if it would be helpful or not. But if I think about the revenue per script in fourth quarter of '15 and now I think about revenue per script throughout 2016, what would you expect the delta to be on that? I'm just trying to get an idea of how much pricing, I should think about when I think about 2016, obviously the volume we can make our own assumption.

Yes, so on the price piece stand, I will let Augie jump in as he wants to here. On the 44% price increase, we would expect to get about another 10% on that as we get into '16, just so some of the resets that take place. Then we would expect to also get some benefit of the 9.9% price increase, that we took in early December.

So sequential growth of -- it sounds like towards 20%.

Well you won't get the full 9.9%, there's some resets on that so you only get a part of that to start with as well. So, take some portion of that plus the 10% and that's I think a pretty good range on the price.

Okay, fair enough and helpful. Other question, your January prescription data, Jim, it just looked a too little weak, not just within Depomed. Is there any thoughts, is that noise? Is that co-pay three setting? Just I want to get your thoughts on that January.

I think, I mean some of its the co-pay resets that come into place every year now, I think you've got more people that are on high deductible plans than you've ever had before, I think that certainly plays in as well and we've seen some of that around the healthcare exchange discussions that are going on. I'll say that some -- one of the areas that we're strongest on the NUCYNTA IR side is actually up in the Northeast and a couple of storms that have come through up there, certainly have not helped. Now those are regular January, February phenomenon, so I'm not trying to put it broadly on that. But just when you look at the month of January we did have that big one hit that I think definitely affected things in one of our stronger areas on the NUCYNTA IR side.

Okay. In shifting below the line, it certainly gets harder and harder to kind of decipher through the numbers below the line. Fundamentally everything looks great. But Augie I guess it will be helpful -- I feel like, if I can have a couple of more pieces to the puzzle. Historically I have GAAP, R&D and SG&A including stock comps, now we're going to excluding guidance, excluding stock comp. I mean could you give me some parameters on what stock comp should be for SG&A and R&D in 2016?

Scott, I think -- this is Jack here. I think you have to take a look at our Q4 stock comp numbers and assume a slight uptick from that Q4 run rate, I think that's probably the best the fair estimate.

And is the bulk of that in SG&A?

The bulk of it is in SG&A. There is a small component in R&D and those pieces will be outlined in our 10-K and I think you might be able to get there by looking at the GAAP to non-GAAP reconciliation.

Okay and speaking of stock comp, 4.5 million I believe in Q4, I think that was an uptick from prior quarters. It sounds like that 4.5 million will continue at that higher rates, could you talk to why that uptick? Is there some accounting reasons for that?

A piece of that is in terms of when the stock options are granted or restrictive shares and that has a piece of it, as well as some of the underlying assumptions around forfeiture rates. We did see a slight uptick around all those in Q4.

Scott, one of the things to consider in the back half of the year is with the acquisition of NUCYNTA, the total number of employees in the company went from about 300 to 500 and so we had some initial stock option grants for those people in the second half of the year as well.

Okay, that makes sense. And just very quick question, so interest expense, should we be modeling in $85 million and will that $5 million in prepayment, will you book that as a recurring type of event? I mean is that factored into your non-GAAP adjusted earnings?

It's figured into the non-GAAP adjusted earnings, but it’s not clear the categorization of that. I believe it'll be interest expense but there's an argument that it would.

Could be looked as a gain on -- as a loss on early extinguishment of the debt that may be pulled out of interest expense in its own line item.

Okay, and the final question, shares outstanding 84 million for 2016, it was 81 million in Q4 so we're adding 3 million on. Why is that? Is that a function of the accounting again or is there something different in there?

It’s probably a function of just additional options being granted as well as options being exercised. We obviously have our own -- we do have RSUs out there. So it's just generally an uptick when compared to where we are in 2015.

Okay, it seems like kind of a big delta for just normal recurring options that but I guess it is. Thank you for taking the questions.

Thanks Scott.

The next question is from David Risinger of Morgan Stanley.

Hi, this is Neil Shelton on for David Risinger. Just two quick questions. One can you guys just provide a framework for cash flow in 2016 including operating cash flow and planned uses of cash? And then secondly can you discuss key formulary decisions to watch for NUCYNTA later this year? And also maybe a bit on the competitive outlook concerning we do have a couple of new launches coming into the opioid space. Thank you.

Neil we have never kind of pointed towards free cash flow but obviously you've got our EBITDA numbers and you know what the -- in the principal component there is the interest charge against that to get to free cash flow.

I guess more specifically if you can kind of provide me with maybe like -- kind of like how we should expect cash flow to evolve over the course of the year?

I would say that first as we indicated in the discussion today on the call, first quarter is a heavy cash use quarter for us because that is the quarter we pay the Grünenthal royalties and arrears and we pay the interest on our convertible debt. It's also the quarter in which we pay employee bonuses. So Q1 would typically be the weakest cash flow quarter and it would strengthen as we go through the year. Again in terms of your Grünenthal and the convertible debt interest that again that will come in quarter three, but Q1 should be on the light side but it should strengthen as we get out of Q1.

And in terms of the other two pieces of your question Neil, in terms of the coverage, we don't expect any big things during the course of the year. I think most of it happened as of January 1. We've been able to retain positions, I mentioned earlier in my comments about the Tennessee BlueCross BlueShield and that's a big one. That's a very tightly controlled BlueCross BlueShield plan. We've also recently had a win with the employee -- the federal employee program. So the federal employee benefit program has moved Oxycontin back to Tier III. NUCYNTA, NUCYNTA ER stay at Tier II. The reason that that one is important as that you have got copays, attritional copays with the Tier II in that plan but most of the variance of that federal employees plan have actually got coinsurance which can be anywhere from 45% to 60% of the cost of the drug. So it's certainly going to get much more expensive for people to be on Oxycontin in that federal employees plan. So that's what I frankly just found out about today in terms of that win and that's effective as of first quarter.

Got it, thank you.

The next question is from Ami Fadia at UBS.

Hi, thanks for the question, a couple of questions. Firstly just on Lazanda, you mentioned that there was an inventory draw down in the quarter. Could you quantify that and do you see that reversing into first quarter?

In terms of days on hand two months ago.

I think from a quantity perspective it's probably about a drawn down of about 10 days, however Lazanda given that it's a smaller amount of quantity of prescriptions and bottles that go out the doorstep fluctuates a little bit as the demand fluctuates. And then the second part of the question was?

Do you expect it to reverse or let it continue?

You know no clarity yet. I mean as I said that Lazanda is a product that does fluctuate quite a bit given where the demand is.

I mean one of the things in general, one of things happened over the last year in Lazanda is the number of bottles per prescription have gone up. So if you're simply watching prescriptions you get kind of one level of demand but on the bottles, the bottles have actually gone from about 10.5 bottles per script and this is eight sprays per bottle which can be eight doses or be four doses because you can take one per nostril, it's gone up to about 15. So that's part of where you see the big delta between the bottle increase and why we talk about that rather than simply looking at per scripts.

Got it, second question was just on your interest expense guidance, you said $80 million does that include non-cash that gets adjusted out of for you non-GAAP numbers?

Yes.

Okay. And then lastly just sort of on your revenue guidance in how you're thinking about top lines for the next 12 months. How are you thinking about balancing between NUCYNTA growth which is extremely important for the next year but also maintaining your base business growth?

So I mean one of the things that we've done from the beginning of the sales force expansion is we have two different types of reps within that sales force. We have one group that focuses primarily on pain specialists. They're selling NUCYNTA and NUCYNTA ER and that is by far the largest part of their bonus consideration, their incentive compensation. And then behind that they have a smaller amount on Gralise and Zipsor. There is a second group that's about a third of that total group that sells NUCYNTA and NUCYNTA ER, but also Gralise and Cambia. They really are primary carriers of Gralise and their bonus incentive comp is split about equally between the three. So that's part of the way we do that. We got one group that's focused much more on NUCYNTA and NUCYNTA ER and the other that's more focused -- that's more balanced between them, really offering support to NUCYNTA, NUCYNTA ER, but really carrying the primary weight for Gralise and there is the sole one selling Cambia.

Got it. If I may squeeze one last one in. There is a bit of a variability in how people are thinking about tax rate for '16, if you could give us some visibility there?

I think that the closest approximation would be something in the mid-teens. There are a lot of moving pieces in looking at the effective tax rate for next year, in particular the variability and the R&D expense and the associated credits, R&D tax credits. And we -- I think for internal for approximating purposes I think the best estimation is current mid-teens as a cash tax rate on their non-GAAP earnings.

Our next question is from Ken Trbovich at Janney.

Just a couple of quick ones. On the Lazanda sales force now making calls for NUCYNTA, NUCYNTA ER, is there some sense you can give us as to how many sort of unique physicians this might represent relative to the existing sales force targets or is this really more sort of a support role like you've mentioned earlier with the other sales force split?

I think it's really more of a support role. I mean that group has a total of about 2,000 doctors in their universe, but in terms of unique, I can't give you the number that's unique because there is some overlap between who they call on and who the general sales force calls on. So I don't know -- just don't know the number Ken.

No problem. And then follow-up on some of the questions regarding clarity on the sort of non-GAAP number for R&D and SG&A. Specifically you've mentioned Augie I guess that it's excluding stock compensation, but does it include or exclude the in-process R&D charge that you're going to take as of $3.5 million to $4 million a year?

There isn't any IP R&D charge in those numbers.

And Ken we took for GAAP purposes, we took the entire IP R&D amount in our GAAP financials in its entirety in Q4 of 2015.

Got it. Except that in the press release, you've got the statement saying, it will be amortized over 15 years from the date of acquisition.

That's the tax -- on the tax side.

On the tax side not the expense side.

Yes.

Okay. And then last question just with regard to the SG&A, I know you've mentioned the Endo litigation and the fact that there is probably sort of a front end loaded component to this. Can you give us a sense as to what you guys are thinking that Endo litigation expense might look like? And then for example if that was deferred, there is a huge spread here in that R&D spend, I am just wondering, how much of its specifically to cebra?

The Endo litigation is right about Ken, we are probably talking in a $3 million range in the first four or seven months of the year. So the expenses will go away.

And Ken we said in the past that again there is a range on the cebra development expense that will be a function of how quickly we can get the work done, but the closest approximation for cebra is approximately $10 million of that R&D spend will be cebra related?

Next question is from David Amsellem at Piper Jaffray.

So just a couple, just a question just on the commercial landscape for NUCYNTA ER. What are your high level thoughts on the potential impact of Belbuca or do you look at that as not having any impact at all? I mean Endo didn't have a lot more reps calling on a lot of the same people that you guys call on. That's question number one. Number two is, any thoughts on the need to further expand the sales organization from the 277? And then last question is just in terms of the acquisitions, just within the broader CNS space I mean can you talk about therapeutic adjacencies beyond pain and migraine that you'd potentially be interested in or that will be attractive to you? Thanks.

Thanks, David. I'm going to ask Scott Shively, our Chief Commercial Officer to answer the first one and that's on the Belbuca question.

Hey David, so there is bupre high dose approval and impending launch. We look at it as initially a product that's more of a niche player because it's a buccal film that's not going to [eat] so much in the broader overall marketplace and it's got the nature of the product itself. So, definitely we are going to be watching them but we aren't that concerned with it. We are the major player in the market.

David, I think of the other things to that question and it really is a volatile piece, Schedule 3 you would be able to be called in. There is a piece of having explain, how to use it to the patient that's a bit different than just taking a pill. And so that will be one of the [things] to watch, the development autopsy how broadly it will get used. I know that, there's been something started about kind of instead of hydrocodone now that's been off schedule, I'm just not sure that's what's going to happen. I think that's our broad opinion on it. And then in terms of the sales -- number of sales reps, I think for 2016 we are properly sized. One of the things that we see is that to really secure this market long-term, we need to make sure that we've got the people at the top of the influence pyramid firmly in our camp and I think we're just really developing that now with the pain specialists and with the neurologists that see a lot of pain. Some of the key people on the IR side like some of the orthopods and rheumatologists. So we're really focused around those specialty audiences and driving along with some of the primary care that we call. The expansion would really be a -- a further step would really be more primary care. And so with that -- I think once we get market share built up some more, then we would look to do that, whether we would do it directly or do it through a co-promote really remains to be seen. And we'll continue to look at that on what the timing might be should we do that and what the best method may be. And then finally on the adjacencies question, so we look at things -- on one end we look at the things like addiction therapy which is really a bit outside of the traditional CNS side, but one that we certainly see would be one where we could take expertise we have and some relationships we have to be able to play there. And then on the other side, there's drugs that we may look at for rheumatology and orthopedics now that we're in those two specialties within particular NUCYNTA IR. So I think those are the areas that when we talk about adjacencies that's really what we're talking about.

Okay, thank you.

The next question is from Jason Butler with JMP Securities.

Just a couple of quick ones on NUCYNTA. When you think about the target prescribers that you have set out to focus on when you deploy the new sales -- or the full sales force, can you talk about what percentage of prescribers you're targeting that haven't -- hadn't written a prescription that are now writing NUCYNTA prescriptions?

Scott do you have any sense on that one

The number of prescribers actually is up rather significantly both for NUCYNTA ER and NUCYNTA IR, NUCYNTA since we launched it. Our targets were -- we targeted largely high prescribing high decile long active opioid prescribers for NUCYNTA ER and mid oncology prescribed NUCYNTA already. So I don't think there is a lot of new -- brand new prescribers who really have not prescribed anything, but we've pretty good [docs] since launch in the numbers.

Well I am trying to remember [max] growth. I think broadly on the numbers Jason and these are like -- I'm going to do this, since this is very dangerous but it's somewhere around 8,000 or so prescribers of the long acting. That sound about right, Scott?

Yes. Just got the numbers here. our NUCYNTA ER prescribers are up 16% since launch and the IR prescribers are 5% since launch and what's also interesting is the number of docs writing both ER and IR, is up to 18% since launch which is a pretty nice progress.

And just to get a sense how about how many people are prescribing the ER?

Over 13,000 -- 13,300 plus.

Okay, great, helpful. And then another focus you had when you initiated the re-launch with the dose and getting up to the right dose. Can you just talk about what you're seeing now in the marketplace? And then does this 2016 guidance assume any increase in average dose versus 2015?

Yes. Let me take the second part first, Jason. It's a very slight, I mean, we're talking about low to mid single-digit increase because of the dosing level. We think this will be a long-term build. It's not going to be it just will happen short-term, it's in your long-term build and because of the additional prescribers as Scott mentioned and the expansion of the number of patients that is going to confound anybody trying to look at like an average dose, because people are going to start off with the 50 milligram twice a day and then build up to the 100 milligram from there. What I'd actually do is look at the raw numbers of prescriptions on something like the 150 and eventually the 200. I think that’s probably a better comparison than trying to do a weighted, because as long as we are increasing the number of patients on the drug as we are right now it's going to be a bit of confounding factor because of people coming in at the lower doses.

I'll just say that we forecasted that they are going to increase moving up the sales, we might get this as a follow on in terms of [mixed breaks] thus far.

Okay great, yes, helpful, thanks for taking the questions.

The next question is from Irina Koffler at Mizuho.

Hi, thanks for taking the question. So I wanted to explore your guidance range on revenue. Could you just speak to you know what you view as your most volatile product? What could really get you to the upper end of the range? What would keep you at the lower end of the range? That's the first question. And then the second question is, could you go through this balance sheet item you have for accounts payable and accrued liabilities? And just to discuss what the components are that's in there, I noticed it's gone up significantly since 2014, thanks.

Okay. Why don't I take the first piece of it and then I'll let the finance guys jump in on the second. I think the -- I think it's really proportional to the size of the assets and where we are in the inflection curve. And so it really is NUCYNTA and NUCYNTA ER, that's going to be the biggest flux in terms of the guidance both the potential for upside and the potential for the lower side of that range. As you think about it we are -- we have got about 20% year-over-year on volume right now on ER, we're flat but it come up to 9% decline on IR. So that really is the biggest piece of it. The Lazanda, Cambia and Zipsor are all relatively small. We've said that Zipsor is definitely the bottom product in the bag. It basically is a reminder call now in the part of the sales force that's selling it, which is not even all of them. And then on Gralise, Gralise has been very steady, so I think that's in a fairly tight range. So I think it really is more fluctuation around the NUCYNTA and NUCYNTA ER. And I mean the one that could surprise depending on what else happens in the marketplace could be Lazanda. And I would say surprise more for the upside than the downside just depending on what might happen in the marketplace with competition.

Jack do you want to?

On the accounts payable and the accrued liabilities, I mean there is a lot of items in there. As I said they will be even more clearly broken out in our 10-K but obviously we have items like our sales rebates and Augie mentioned the timing of NUCYNTA rebates and when we actually have the cash outlay. Also in there obviously are accrued royalties and as well as just general APs and other items that flow in there.

And I would say that that account is going to be a relatively large number as we move through the year reflecting the increase in our revenues. So again we'll always be paying rebates and arrears. We already have this situation with Grünenthal on the royalty piece where you're going to have that account filled twice a year until we actually pay it out. But I think when you see the 10-K you can look at the rebates and returns number which is a separate line item and it's essentially a quarter of sales. And it's been that way now for since the acquisition of NUCYNTA.

It's kind of tough to look at it from the end of 2014 to the end of [2015] because if you look at it at the end of 2014 it doesn’t have any of those NUCYNTA accrued sales discounts in there and when you're looking at the end of 2015 it looks like there's a pretty big jump from yearend to yearend but it’s not really apples to apples.

And the one -- the part of that rebate line that builds the most is actually the returns piece because you're looking at trying to estimate what returns may come in on products that have sometimes three and four year shelf life. So as we get into two, three, four years of shipping on that, that is the number that bills but yet there's very little that comes off until you reach the return periods which can be two to three years out. So Irina, thank you. I don't know if you're still there, I hope you are. If you aren't, thanks.

And my follow up was, if you do get that big return at some point, so how is that going to be treated? Thank you.

Well it's not as really a big return it's that you've got more and more product that you've shipped out into the pipeline and so that comes through gradually as well, even if it’s a small percentage it just builds up as you ship more over a number of years, as you bring products on board. Essentially on the full return side right now we've only got nine months of product that we shipped that we're liable for the return on NUCYNTA and if that's a three year shelf life, as we continue to ship over this next year that amount builds before you get any returns that actually come in against it.

So taking the return reserve as a reduction to net sales and it correspondingly builds on the balance sheet until you actually resolve the returns.

Okay, thank you.

The next question is from Chiara Russo at Cantor Fitzgerald.

Probably pretty quick, I just wanted to touch on something I know Augie you said that, you said 2016 your sales force is properly sized. And I was just curious as sort of what type of metrics you look at in terms of assessing your sales force capacity and at what point do you say all right our pain specialists are saturated and how quickly do you go ahead and pull the trigger on expanding out from more of the specialist to the primary cares?

Yes, Chiara it was me, it was actually Jim, not Augie, an answer on the sales force side. But we have used for our last couple of expansions including for NUCYNTA, ZS Associates who I think are the undisputed leader in the industry that all of the top companies use as well. And you put that into -- you work with them to basically build up the models and basically use an optimization model. And so you then pick what point of the curve you want to go to in terms of return. We went fairly far out on the curve for this first couple of years of NUCYNTA, because what we didn't want to do is size it and then have to resize it within the first year because of the disruption of physician relationships. And so we're very purposeful in terms of doing that and taking it to the size that we did. In terms of the next piece of it, we do that analysis periodically again with them to basically look at where we are. Some of that's on how share is building among the specialists. But right now on NUCYNTA ER for example we are at 1.75% share, so we would like to see it get pass that point before we would do an expansion. I won't give you an exact number where but we want to see a bit more build before we do that. I think we have a lot of growth from where we are right now without having to put the additional expense on it. And as we saw with NUCYNTA and we can actually implement it. We've hired our first reps on NUCYNTA in late April, early May, and some in mid-May and then had them off selling by the third week of June. So we can turn it with the territories and everything else in about a three-month period.

Okay that's good to know. And I know I think you've touched on this very early in the call that you had about 900 speaker programs in 2015, do you expect to have the same amount for 2016 or do you expect that to grow obviously have a little bit more, you have the full year this time around?

Yes. That was really from call it July on and summer's typically not the biggest. But I will let Scott answer that.

So we obviously just launched in June that’s a two quarter period, so yes there will be more in this year and more diverse in nature as well. We think we'll get a pretty good return on this investment because the medical -- for the educational piece of this coupled with the follow-up by our sales force is a pretty attractive force.

And my last question obviously I actually get a lot questions around the NUCYNTA Endo stuff. Obviously you co-payed it in March, how are you guys feeling the preparations are going and is there still enough to dialog to Actavis and if the potential for settlement still on table?

Well since Matt is here, I going to turn it over to Matt.

Yes, Chiara, definitely we feel very, very good about the case going into trial next month. Beyond that obviously we're not going to comment specifically on any sessions we are having. We have in the past and kind of will continue to. We'll get settlements when they kind of make sense for the company and when they are within merits. So we'll see if anything evolves there.

This concludes our question-and-answer session. I would like to turn the conference back to -- Mr. Schoeneck, you can make some closing remarks. Thank you.

Great, great, thank you. I want to thank you all for your continued interest in the company. I think as we head into this year, we really are in a terrific position. We have made such a transformation over the last 18 months. We've got the people on board and now experienced in their positions in the field and I think we're really ready to truly be able to make a difference in the marketplace. And it really comes to back our mission which is really to provide value to patients and to families of people with pain and CNS diseases and then to provide value to the providers and payers as well and in addition to you the shareholders. And we want to thank you for your staying with us and look forward to updating you as the year goes on.