Good afternoon, ladies and gentlemen, and welcome to Cumberland Pharmaceuticals Third Quarter 2012 Earnings Conference Call. [Operator Instructions] This call is being recorded, and a replay will be available for 1 week, shortly following its conclusion. At this time, I would like to turn the call over to Elizabeth Davis, who handles corporate relations for Cumberland Pharmaceuticals. Please go ahead.

Thank you. Good afternoon, everyone. Before we begin, we'd like to advise that this call will include forward-looking statements, which reflect our current views about future events. These statements are subject to risks outlined in the Safe Harbor section of today's news release and detailed in our 10-K and 10-Q reports on file with the SEC. Despite our best efforts, actual results could differ materially from our expectations. Information shared on the call today should be considered current as of today only, and please remember that the company assumes no duty to update it. If anyone has not seen our press release issued today, you can access it on our website at www.cumberlandpharma.com. We also post and maintain the current version of our corporate presentation on the Investors portion of our website under Events and Presentations. Additionally, this conference call is being webcast through our website and will be archived there for future reference. I'll now turn the call over to our Chief Executive Officer, A.J. Kazimi.

Thank you. Good afternoon, everyone, and thanks for joining us as we review our third quarter results. With me on today's call are Marty Cearnal, our Chief Commercial Officer; and Rick Greene, Cumberland's Chief Financial Officer. We'll start by reviewing the quarter highlights and then we'll provide an update on our products. And then also, we'll provide development update and discuss our financial performance. So let's begin with the quarter highlights. I'm pleased to report that we've achieved another quarter of strong financial results with net revenue of $12.5 million and earnings of $0.10 a share during the third quarter of 2012. Our 3 marketed products continue to perform well, and we do remain on track to achieve our 2012 guidance. Our net income was $1.9 million in the third quarter, up from $1.8 million during the prior-year period. And as a result of our strong cash flow during the period, we ended the third quarter with total assets of $97 million, including cash and securities of nearly $70 million. During the third quarter, we continue to make progress on our goals, as did our international partners. Our clinical programs remain on plan. And in September, we announced positive top line results from our Phase IV Caldolor pediatric pain study. I'd now like to turn to a review of our progress with our marketed brands and ask Marty Cearnal, Cumberland's Chief Commercial Officer, to provide you with that update.

Thank you, A.J. A key element of our 2012 strategy has been to place more emphasis on Acetadote, following the approval of the brand's new formulation in 2011 and issuance of its patent earlier this year. Increasing promotional resources for Acetadote included the redeployment of our sales organization and allocating a greater percentage of our sales team's time to Acetadote promotional efforts. We continue to intensify our coverage of poison control centers to ensure each center understands our message with the goal that patients receiving Acetadote are dosed completely and correctly. Acetadote sales during the third quarter remained steady. Sales were down slightly compared with prior-year quarter, because last year, as you will recall, there were shortages of the oral competitive products resulting in a boost of Acetadote sales in 2011. On to Kristalose. We're also placing more emphasis by our sales organization on this brand, following the acquisition of full rights to Kristalose in 2011. New marketing programs were launched this year and have been instrumental in driving growth. Kristalose sales are up over last year's, and also grew this year from quarter-to-quarter. We believe the additional efforts devoted to this brand have helped grow this product following last year's supply disruptions and are driving a recovery in sales. Turning to Caldolor. During the third quarter, our sales and reorder volumes for this brand grew to their highest levels since the product's launch. During the third quarter, Caldolor continues to enjoy quarter-over-quarter and year-over-year growth in sales. We credit our more targeted sales approach and a focus on the pain indication for this progress. We have more work to do to build this brand to a meaningful contributor, but we're encouraged by this steady and positive trend. I'd like to point out that one of the most exciting indicators of the potential for robust Caldolor sales is the favorable feedback and repeat usage from a growing number of physicians across the country, and we continue to receive this favorable feedback from the medical community regarding their use of Caldolor to improve the overall management of pain. Now I'd like to turn the call back over to you, A.J.

Thanks, Marty. In September, we did announce positive top line results from our recently concluded Caldolor pediatric pain study. This study evaluated the safety and efficacy of Caldolor in treating pain in tonsillectomy patients ranging from 6 to 16 years of age. The studies show that when administered prior to surgery, Caldolor use was associated with a statistically significant reduction in the number of post-operative narcotic doses required in those patients. There are also consistent trends towards reduction in pain scores and reduction in the incidence of nausea and vomiting in the patients receiving Caldolor. And importantly, no safety concerns were observed during the study in children. We believe this study, in combination with our ongoing clinical trial to evaluate the treatment of fever in hospitalized children, will provide important new pediatric data for this product. We also have 2 adult Phase IV studies under way, evaluating a more rapid infusion of Caldolor in hospitalized and surgical patients. Meanwhile, we're continuing our program to develop Hepatoren, our pipeline product as a treatment for hepatorenal syndrome. This study is now well under way at a network of 15 major medical centers across the country, with patient enrollment progressing. While it is difficult to predict enrollment patterns and therefore, the completion date for each of our ongoing studies, we do intend to announce top line results for each study once we've received and evaluated the data from the required number of patients in each trial. Then a comprehensive study report -- or final study results will be expected in an appropriate medical publication. So I'll now turn to Rick Greene, Cumberland's Chief Financial Officer, to provide an update on the third quarter financial results. Rick?

Thanks, A.J. Good afternoon, everyone. For the 3 months ended September 30, 2012, net revenues were $12.5 million compared to $13.1 million during the corresponding period in 2011. In the third quarter of 2012, net revenues by product were $9.8 million for Acetadote, $2.2 million for Kristalose and $0.3 million for Caldolor. For the 9 months ended September 30, 2012, net revenues were $35.1 million compared to $38.1 million in the prior-year period. As Marty mentioned, we did receive a boost in Acetadote revenue last year due to shortages of competitor products. Total operating expenses for the 3 months ended September 30, 2012, were $9.6 million, down from $10 million during the prior-year period. This decrease was driven by lower selling and marketing expenses associated with our new commercial strategy, partially offset by an increase in R&D expenses. Total operating expenses for the 9 months ended September 30, 2012 were $29.6 million compared to $30 million in the prior-year period. Lower cost of products sold and selling and marketing expenses were offset by R&D and G&A expenses during the year. Income tax expense for the 9 months ended September 30, 2012 was $1.7 million compared to $3.2 million for the previous year. Our effective tax rate was positively impacted in the second quarter by recognition of tax benefits associated with our stock option exchange period -- program during that period. Also please note that while we report tax expense in our financial statements for accounting purposes, our actual cash outlay for taxes is nominal due to our significant tax credits which totaled over $55 million at the end of the third quarter. Net income for the third quarter was $1.9 million compared to $1.8 million for the same period in 2011. Net income for the 9 months ended September 30, 2012 was $4 million compared to $4.7 million for the same period in 2011. Diluted earnings per share for the third quarter were $0.10 compared to $0.09 in the third quarter of 2011. Diluted earnings per share for the 9 months ended September 30, 2012 were $0.20 compared to $0.23 during the prior-year period. We remain comfortable with our 2012 financial guidance for earnings per share, which range from $0.32 to $0.36. Cash flow from operations during the 9 months ended September 30, 2012 was $5.1 million compared to $7.7 million during the prior-year period. At the end of the third quarter 2012, we had approximately $70 million in cash and securities with approximately $51 million in cash and cash equivalents and $19 million in marketable securities. Total assets at September 30, 2012 were $97 million. With that, A.J., I'll turn the call back over to you.

Thanks for the financial review, Rick. Through our ongoing clinical efforts, we do remain committed to the continued development of our approved products including studies evaluating them in new patient populations. We are pleased to complete the first of our Phase IV Caldolor studies and we'll continue to work towards the completion of our 3 remaining clinical studies to support that product. Two are adult registry studies evaluating a rapid administration of Caldolor, and the other is a pediatric study evaluating the product for the treatment of pain and fever in children. Once complete, these studies can provide important new data to further support the brand for both the United States and international markets. Earlier this year, we reported that the U.S. Patent and Trademark Office had allowed our patent application associated with Acetadote. And following the subsequent issuance of the patent, we did receive our first challenges. We believe that challenges such as these are becoming more common for valuable pharmaceutical brands and we have initiated our defense to contest these challenges, and we'll continue to vigorously defend our Acetadote patent and related intellectual property. We'll also continue to provide updates on any new developments on this matter through our SEC filings. So in closing, we believe Cumberland is well-positioned to execute on our strategy and objectives. We remain in a strong financial position with $70 million of cash, attractive margins, continued doubled-digit earnings growth, minimal debt and favorable borrowing terms. We'll continue to pursue additional patent protection for our products, as well as new international partnerships to make our products available to patients in new markets. We'll also seek opportunities to expand our portfolio through new indications, and we are working hard to deliver a fifth product. We are seeing a number of very interesting business development opportunities, but I would remind you, we remain selective, disciplined buyers. As always, we'll continue to focus on delivering revenue and earnings growth, acting with financial discipline, while remaining focused on our mission of advancing patient care while building shareholder value. I'd now like to turn the call back over to the operator in order to open the line for questions.

[Operator Instructions] Our first question comes from Michael Tong from Wells Fargo Securities.

Just a question on Acetadote. As I look at the quarterly revenue run rate for Acetadote, recognizing that 2011 there'd been some positive effect given to a product shortage from competitors, and yet we're seeing 3 quarters so far this year of year-over-year decline in Acetadote revenue. So my question is, A, when should we see a real apples-to-apples comparison as far as revenue for Acetadote is concerned? And then secondly, as we look at this quarter, can you give us some idea as to if we were to exclude the impact from product shortage from last year, how should we be looking at Acetadote revenue?

Sure. Marty, can you take those questions please?

Certainly. Let's start with the apples-to-apples comparison. I think that the big issue, and this is something that we have limited data on, and that is that the wholesaler reaction and the hospital reaction to the shortages last year were greater than we had originally anticipated. And we only get partial information in this regard, because we only get inventory data from a single national wholesaler. But what that shows us is that there remains excessive inventory in the trade, so their reaction to the oral drug shortage was greater than we had originally anticipated. We see that working down, but it has certainly affected us through the first 3 quarters of this year, which is more than we had expected. I think that while it's impossible for us to predict because we don't get information from all the wholesalers, we should start to see this resolve in the very near future.

[Operator Instructions] Our next question comes from Tim Lynch from Stonepine Capital.

Just a few follow-up questions on Caldolor. The $300,000 amount sold this quarter, I forget what you disclosed for the Q2?

Q2 revenues were up $0.2 million.

$0.2 million, okay. So I know we're coming from an incredibly low base here, but just given your subjective comments as well, it sounds like it may not be relevant to this year, but 2013 or 2014, sounds like you're seeing some of the early signs that may lead to Caldolor being a relevant product in terms of actual revenue postings. Can you just expand a little bit more on what you see happening there? I think people may have written off Caldolor, but I know you guys have not, and it will -- it has a good chance of still coming through. So can you still -- can you just expand a little bit on what you're seeing?

What we have seen this year is quarter-over-quarter sequential growth in Caldolor. And we expect that to continue in the fourth quarter and going forward. We remain very optimistic about this product and its position in the market. As Marty indicated in his comments, the physicians who are using this are having great outcomes. So we remain very positive about the prospects of Caldolor.

Our next question is a follow-up from Michael Tong from Wells Fargo Securities.

Maybe just 2 if I can sneak them both in. One, with respect to your guidance for the full year and what you have done so far in the first 3 quarters, you're implying about $0.12 to $0.16 in fourth quarter EPS. Based on what you're seeing now, is it more a top line-driven EPS growth sequentially? Or is it more on expense control? And then secondly, with respect to Caldolor, obviously, expectations have been reset. Is it now a $50 million product as opposed to a $200 million product? How should we think about that?

Rick, can you start?

Michael, I'll answer the first part of your question and then Marty will answer the second question. As it relates to our guidance, we're at $0.20 year-to-date. We're seeing strong growth in both Kristalose and Acetadote -- I'm sorry, Kristalose and Caldolor. Acetadote remains steady. We remain comfortable with our guidance, so your number's exactly right. And we expect that to come for both top line and the expense line. We expect both of those to add to our earnings in the fourth quarter. And this fourth quarter, we also anticipate, clearly, to be our strongest quarter of the year and we expect to do that. Marty, I'll let you answer the other one.

The second part of that, in terms of Caldolor expectations, we did revise our mid-term objectives for Caldolor. And I said earlier this year that we were looking at a product that will generate $50 million 5 years out. We think that based on what we see happening in the marketplace, that we still have an excellent opportunity to achieve that as a mid-term objective and then build from there.

And 5 years out was 5 years from launch or 5 years from now?

That was 5 years from when we announced the change in the forecast, Michael.

Our next question comes from Tim Lynch from Stonepine Capital.

I'll try and sneak in 2 quick ones as well. Cash flow was about $5 million for the quarter. I know your cash from marketable securities remains steady. It sounds like philosophically all that went to stock buyback. I just looked very quickly at the release. Is that how you're kind of thinking about your cash flow right now? Is that what happened? And is that how you're thinking about kind of your current cash flow right now in terms of that opportunity?

Yes, this is Rick. That is what happened, how we would characterize the use of our cash in the third quarter. And we continue to expect to buy stock back in the fourth quarter. Our board has approved up to $10 million of buybacks this year, we're at $6.8 million. So we have some capacity in our buyback plan to buy stock back, and we will. We expect to be in the market in the fourth quarter.

Good. that's great. And then on the additional product, I know you don't know until you know, and I understand, previous disclosures, you're looking at both clinical stage and commercial products. Do you have any current thinking regarding your bias? I mean, obviously, it'd be great to leverage the commercial infrastructure and get the earnings from a commercial product. But at this point, can you steer us in terms of which is more likely of you executing at some point?

Well, in terms of the outlook there, we very much remain interested to landing a fifth product in our portfolio. And it could either be a GI product or a hospital product to complement the existing products and the capabilities we have as you point out. But I'd also say that we are interested in a product that is already approved and we can bring in to have an immediate impact on our P&L, as well as a product in late-stage development, that might be a very nice candidate, it's a strategic match for our organization. So those are the parameters in terms of what we're focused on. We are seeing a heavy deal flow, there are a lot of opportunities out there and our challenge is to find a product that would be a very good match for this organization and available on reasonable terms.

Okay. So either clinical or commercial still ?

Late-stage clinical.

I'm showing no further questions at this time. I will now turn the call back over to A.J. Kazimi.

Okay. Well, we appreciate everyone joining the call today. I'd also like to thank and acknowledge our employees for their ongoing dedicated efforts. We appreciate those of you who are on the call, your time and your interest in Cumberland, and then we look forward to providing you with an update after the end of the fourth quarter. Thank you.

Thank you, sir. Ladies and gentlemen, that concludes our conference for today. If you would like to listen to a replay of today's conference, please dial (855) 859-2056, using access code 50483291. Alternatively, a replay of the webcast will be available on the company's website. I would like to thank you for your participation. You may now disconnect.