Good afternoon, ladies and gentlemen, and welcome to the Cumberland Pharmaceuticals Fourth Quarter and Full Year 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'd like to turn the call over to Elizabeth Davis, Corporate Relations for Cumberland Pharmaceuticals. Please go ahead.

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.

Thanks, Elizabeth. Good afternoon, everyone, and thank you for joining us as we review our 2012 results and discuss our strategy for 2013. With me on today's call are Marty Cearnal, our Chief Commercial Officer; Rick Greene, Cumberland's Chief Financial Officer; and Amy Rock, our Senior Director, Regulatory and Scientific Affairs. I'd like to begin by reviewing some of our 2012 highlights and then move on to providing an in-depth update on our development and commercial activities, followed by a review of our financial performance. We'll then conclude with Cumberland's plans and outlook for 2013 before opening the call to questions. So let's begin with some highlights from 2012. We continued to make progress on a number of key initiatives as we advanced our mission, delivering products to improve the quality of health care for patients. As we review the full year 2012 financial results, we're pleased to report a productive year, which included continued profitability and positive cash flow from our operations. We also ended the year with a very strong balance sheet, including over $70 million of cash reserves, nearly $100 million of total assets and minimal debt. We provided our products to a growing number of patients in 2012, and we realigned our sales force to efficiently provide continued support for all 3 of our marketed brands. In 2012, our clinical development team completed patient enrollment in 4 new Caldolor studies. In September, we announced top line results of our first pediatric study, demonstrating that Caldolor resulted in a significant reduction in narcotics given to children undergoing tonsillectomy procedures. We recently announced top line results from 2 adult registry studies that support the safety of a shortened infusion time for Caldolor. These 2 large studies evaluated Caldolor in 450 patients in 34 leading medical sites around the…

Thanks, A.J. I'll start by reviewing the top line results from 2 registry studies evaluating the safety and efficacy of Caldolor administered over a shortened infusion time in adult patients. The first registry study was a Phase IV multicenter, open-label surveillance study. It assessed the safety and efficacy of Caldolor administered intravenously over 5 to 10 minutes for adult patients in the hospital setting. These patients had either a pre-existing fever or pain which was greater than a value of 3 on a 10-point scale. Eligible patients were enrolled to receive 1 of 2 dose strengths of Caldolor: 400 milligrams for fever or 800 milligrams for pain. It could be treated for up to a 24-hour dosing period. 150 patients from 13 clinical sites across the country were enrolled in this study. Caldolor reduced both pain levels and temperature in the study patients, and the shortened infusion time was well tolerated. The second registry study was a Phase IV multicenter, open-label surgical surveillance clinical study and assessed the safety of Caldolor administered intravenously over 5 to 10 minutes to adult hospitalized patients undergoing surgical procedures. Eligible patients in this study were enrolled to receive 800 milligrams of Caldolor, administered prior to the surgical procedure at induction of anesthesia and could continue Caldolor therapy for up to 24 hours. 300 patients from 21 U.S. clinical sites were enrolled in this study, and the shortened infusion time was also well tolerated in the surgical study. Today, I'm pleased to report top line results from our recently completed pilot clinical study comparing Caldolor to ketorolac. We evaluated the safety and analgesic efficacy of Caldolor compared to ketorolac injection in treating pain following knee arthroscopy procedures. 51 adult patients were enrolled at the Ohio State Medical Center. Compared to patients receiving ketorolac, patients receiving Caldolor experienced less post-operative pain and received less rescue narcotics both prior to discharge and in the 24 hours following surgery. Patients in the Caldolor treatment group were also less likely to require any rescue narcotics prior to discharge. The top line results from each of these recently completed studies will be presented at appropriate medical meetings, and final study reports will be published in appropriate medical journals. Meanwhile, our pediatric fever study is nearing completion, and we expect top line results from that study to be available in 2013 as well. All of this new Caldolor data will ultimately be incorporated into an FDA submission to update and expand the labeling for the product. Turning to our development candidate. We continue our program to evaluate Hepatoren as a treatment for Hepatorenal Syndrome. Our Phase II study is now well underway at a network of 14 medical centers across the country with patient enrollment continuing to progress. And now I'll turn it back over to you, A.J.

Thank you, Amy. I'd now like to review our defense of Acetadote and the related intellectual property. Acetadote was first approved as an orphan drug in early 2004 with 7 years market exclusivity. At FDA's request, we developed a new formulation of the product and registered that formulation in early 2011, launching the next-generation product soon after. In April of last year, the U.S. Patent and Trademark Office issued a composition of matter patent for Acetadote and its formulation. We then received several Paragraph IV challenges to the new patent. We took appropriate action, initiating suits to contest each of the challenges. In November, we entered into a settlement agreement with Paddock Laboratories and with Perrigo Company to resolve 2 of those challenges. As part of that settlement, we entered into a license and supply agreement with Perrigo to distribute an authorized generic version of Acetadote. We were disappointed with the FDA's decision in November to approve a generic version of Acetadote based on the old formulation of the product. We therefore initiated a suit to contest the FDA's decision. We found during the resulting legal proceedings that the FDA initially concluded that the original Acetadote formulation was withdrawn for safety reasons and no generic version should be approved. The FDA later reversed its position based on the possibility of drug shortages and the presence of EDTA and other formulations. At the same time, the FDA noted that exclusively marketing an EDTA-free product would be preferable because it would eliminate the potential risk of EDTA. We learned that initial shipments of the old formulation generic were made towards the end of last year, and we then followed up with initial shipments of our authorized generic distributed by Perrigo. It's important to note that both Acetadote and our authorized generic are EDTA free. We believe there will be a preference for the EDTA-free products over the old formulation generic that includes EDTA. Based on these developments and on Perrigo's forecast, we expect to retain significant acetylcysteine injection revenue through the sales of both our Acetadote brand and our authorized generic. We'll continue to pursue all options available to us to advance our patent infringement litigation against the remaining challengers, and we'll continue to provide updates on any other material developments as they occur. I'd now like to turn it over to Marty Cearnal to provide an overview of our commercial strategy and the activities we're undertaking to support all our marketed products. Marty?

Thank you, A.J. As A.J. mentioned, we continually evaluate the performance of our sales organization and the alignment of our territories across the country. At the end of 2012, as a result of this ongoing monitoring and assessment, we implemented a realignment of our national sales organization. We believe this realignment will provide for a more efficient national coverage for our products, putting us in a stronger position to support our existing brands. We will be implementing a new commercial strategy for Acetadote this year. We'll maintain active sales force promotional coverage of 500 key medical facilities and all poison control centers across the country. We will use nonpersonal promotion to continue our communication efforts in noncalled-on accounts. We'll work with our partner Perrigo as the market transitions to a brand with an authorized generic market. As A.J. mentioned, both the Acetadote brand and our authorized generic formulation are EDTA-free. Targeted promotional efforts to support this new formulation will consistently contain the EDTA-free message at all levels in the distribution and use of the product. It is important to note that the new EDTA-free formulation also offers enhanced stability compared to the old formulation. And this, too, will be a part of our differentiation message. Now onto Kristalose, which remains the only prescription laxative product that features the established safety and efficacy of lactulose combined with the convenience of premeasured powder dose. In 2012, Kristalose efforts resulted in sales equal to our most optimistic expectations. We will continue to promote this product to high prescribers in this product category. During 2013, we'll expand our total audience for the product with a telemarketing campaign to all high-potential users. Further, we'll continue to study the market impact of our developing dose equivalents pricing strategy. During 2012, we conducted a pilot couponing program…

Thanks. As Marty just outlined, we believe our commercial strategy will allow us to continue to maintain a significant share of the Acetadote market as it transitions, while accelerating growth of both Caldolor and Kristalose. I'd now like to turn it over to Rick Greene for a review of our 2012 financial results. Rick?

Thank you, A.J. For the year ended December 31, 2012, Cumberland's net revenues were $48.9 million. Net revenue for Acetadote in 2012 was $37.5 million compared to $42.5 million in 2011. Remember that due to shortages of the competitive product, we received a boost in Acetadote revenue back in 2011. Those shortages abated during 2012, and Acetadote returned to a more normal growth pattern during the second half of the year. Net revenue for Kristalose in 2012 was $9.4 million, up 10.6% from $8.5 million in the prior year. Net revenue for Caldolor in 2012 was $1 million. During the fourth quarter of 2012, net revenue was $13.7 million, up from $13 million during the corresponding period in 2011. For the 3 months ended December 31, 2012, net revenues were $10.3 million for Acetadote, $2.7 million for Kristalose and $0.4 million for Caldolor. For the year ended December 31, 2012, our total operating expenses were $40 million compared to $41.3 million in 2011. Total operating expenses for the 3 months ended December 31, 2012, were $10.4 million compared to $11.3 million for the prior year period. It is important to remember that during the fourth quarter, our operating expenses included $0.7 million of nonrecurring expenses associated with the realignment of our sales organization. Excluding these nonrecurring expenses, total operating expenses were $39.3 million for the year and $9.8 million for the fourth quarter. I am pleased to report that net income for the year ended December 31, 2012, was $5.8 million, up from $5.7 million in 2011. Furthermore, net income for the fourth quarter increased nearly 100% to $1.8 million compared to $0.9 million for the same period in 2011. This increase was caused by continued quarter-over-quarter sales growth, along with our ongoing expense control. Diluted earnings per share for the year ended December 31, 2012, were $0.30, up from $0.28 in 2011. Diluted earnings per share for the fourth quarter were $0.09, nearly double the $0.05 in earnings during the fourth quarter of 2011. Please note that after adjusting the nonrecurring items previously discussed, the adjusted diluted earnings per share were $0.32 for the year, which is in line with our financial guidance. At the end of the year, we had over $71 million in cash reserves, which total cash, cash equivalents and marketable securities. Total assets at December 31, 2012, were $98.5 (sic) [$98.6] million compared to $95.5 million at the end of 2011. At December 31, 2012, Cumberland had total debt of $4.4 million compared to $4.9 million at the end of 2011. Shareholder equity increased to $85 million at the end of 2012 from $82.9 million for the previous period. Overall, we have continued profitable cash flow positive operations for the company and ended the year with another strong balance sheet. That completes our financial review for the full year and for the quarter of 2012. A.J., I'll turn it back over to you.

Thanks for the financial review, Rick. We're pleased with the progress we made in 2012, highlighted by those financial results, our agreement with Gloria for China, the completion of 4 new Caldolor studies and the new Acetadote patent. Our strategy moving into 2013 is to maximize our near-term opportunities while laying the foundation for the long-term expansion, diversification and success of our business. First, we'll work to make the most out of the 3 FDA-approved products we have through focused, efficient sales marketing efforts. We continue to feel that FDA-approved brands are valuable assets, and we have the commercial infrastructure in place to grow and build this portfolio. As we do on the worldwide rights to all our brands, in 2013, we intend to further expand our network of international partners. In that regard, we've already established 2 key new partnerships this year with SOHO Industri Pharmasi in Indonesia and Sandor Medicaids in India for the commercialization of Caldolor in their countries. We're pleased to welcome both of these very capable partners who will now pursue the regulatory approval and also prepare for the launch of Caldolor in their respective countries. As we wrap up a significant amount of clinical work for Caldolor, we're now asking our product development team to advance several new product candidates. We intend to pursue a series of new, internally developed candidates led by Hepatoren, which is in Phase II patient studies. Our development colleagues have already successfully registered 2 products, Acetadote and Caldolor, with the FDA. We feel this experienced team can now focus on the work needed to develop and register additional new products for the company. We'll step up our business development activities as well in 2013. We intend to expand our product portfolio through the acquisition of a late-stage development or marketed product. Our interest is in one that matches our established hospital acute care or gastroenterology capabilities. While we do remain selective, we are seeing very interesting new product opportunities and working hard to acquire a fifth product. Meanwhile, we'll continue to contest the Acetadote patent challenges and vigorously defend our intellectual property in 2013. And we'll be sure to provide updates on any new developments on this matter through our SEC filings. As always, we'll focus on growing our top and bottom lines while maintaining financial discipline and 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 to open the line for questions.

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

This is David Gu on for Michael. So I guess the first question I have is that the IPO proceeds have been seen on your balance sheet for a while now and we haven't seen a lot of BD transactions or acceleration of R&D pipeline. Can you comment on your plans for this cash?

Sure. We've been protecting that capital and do intend to use it for acquisition purposes. Please note that following our IPO, we did acquire the worldwide rights to ifetroban, which we will be pursuing for multiple indications starting with the Hepatoren initiative, evaluating it for -- as an injectable product for the treatment of Hepatorenal Syndrome. And we feel that is a key addition to our portfolio. Moving ahead, we're very interested in adding another product, either a late-stage or an approved product. And this year, 2013, we'll be stepping up our BD efforts in that regard. And finally, as we noted, we will also be redirecting our product development group. Now that they've largely completed the ongoing Caldolor work that they've focused on the last few years, they'll be working on a series of new products internally developed, like we've done with Acetadote and Caldolor. So please be assured, we are determined to expand and diversify our portfolio over time, and the proceeds from the IPO will be very valuable in doing that.

Okay. And also given the recent generic launches, I mean, should we expect to see any new cost reduction initiatives in 2013?

We had a significant change in our overall cost structure due to the sales force reorganization that occurred in late 2012. And that was a onetime reorganization of our sales team in order to more efficiently cover the key targets for all 3 of our brands. As we go forward, we will continue to manage the business with financial discipline. We're determined to maintain profitability, and we do have flexibility in the way we operate this business to manage our expenses as revenues materialize.

Okay. So I guess, the impression that I'm hearing is that we should not be expecting like further reductions in the sales force or perhaps a reduction in your promotional expenses in 2013? Would that be correct?

Well, yes. To be clear, the sales force reorganization occurred at the end of 2012, and that, in turn, will lead to a significant change in our SG&A spending in 2013. So the action was taken late last year, but the impact of that action will occur here in 2013. And the sales organization may actually grow as we bring on new products. So that's something to keep in mind as well. We're determined to have an appropriate infrastructure here in the United States to support not just these 3 brands but additional products as well. And over time, we may need to actually expand the sales organization to support new products.

Okay, that's helpful. And I'm sorry, if I could just sneak 2 more follow-ups. For your Q4 R&D, can we expect that to be the new run rate as we go into 2013? And also, your Q4 cost of goods sold appeared to be high compared to previous quarters; can you tell us what happened there?

Yes. Let me take the last question first. Cost of sales were impacted in the fourth quarter by a reserve for inventory. We took approximately $0.7 million additional reserve on our inventory. So that was the largest factor there. In research and development, the quarter-end number is not the right run rate to use. That was reduced in the fourth quarter largely with us wrapping up studies. So if you're thinking about how your model should look for next year, I would look at our historical spend over the last 2 years on that line item.

And at this time, I'd like to turn the call back to management for any closing remarks.

Yes. I just wanted to say thanks to everyone for joining us on the call today. I want to assure you that Cumberland remains in a strong financial position, and we will continue to operate with financial discipline, having just delivered another profitable year with cash flow positive operations. We appreciate your time and interest in our company, and we do look forward to providing you with another update following the end of the first quarter. Thank you.

Thank you, sir. Ladies and gentlemen, that concludes our conference call for today. If you'd like to listen to a replay of today's conference, please dial (855) 859-2056, using the access code 97366269. Alternatively, a replay of the webcast will be available on the company's website. I would now like to thank you for your participation. You may now disconnect.