Teligent, Inc.
Q2 2017 Earnings Call Transcript

Published: 9 Aug 2017

[Operator:]

Good day, ladies and gentlemen, and welcome to Teligent Second Quarter 2017 Business Update. [Operator Instructions]. Except for historical facts, the statements in this presentation as well as other statements or other statements made or to be made by Teligent Inc. are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and involve risk and uncertainties. For example, without limitations, statements about the company's anticipated growth in future operations, the current or expected market size or its products, the success of current or future product offerings and research and development efforts in the company's ability to file for and obtain U.S. FDA approval for future products are forward-looking statements. Forward-looking statements are merely the company's current prediction of future events. The statements are inherently uncertain and actual results could differ materially from the statements made herein. There is no assurance that the company will achieve the sales levels that will make its operation profitable or that FDA filings and approvals will be completed and obtained as anticipated. For a description of additional risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission, including its latest annual report on Form 10-K and its latest quarterly report on Form 10-Q. The company assumes no obligation to update its forward-looking statements to reflect new information and development. As I reminder, this conference is being recorded. I'd like to introduce your host for today's conference, Mr. Jason Grenfell-Gardner, President and CEO. Sir, you may begin.

[Jason Grenfell-Gardner:]

Thank you, Terrence, and good afternoon, ladies and gentlemen. Welcome to the Teligent business update covering the second quarter 2017. I am Jason Grenfell-Gardner, the President and CEO of Teligent. And I'm joined today by Jenniffer Collins, our Chief Financial Officer. Thank you for joining us today. I'll be providing you an update on the core elements for our business and our expansion plans. Jennifer will then provide a more detailed breakout of our financial performance for the second quarter. Over the past quarter, Teligent has continued to execute on the delivery of our business plan. We received one further approval from FDA in July for a new ANDA, received a prior approval supplement clearance for a line extensions and received 3 product approvals from Health Canada. Each of these approvals is an important incremental building block to the Teligent story. Together, with new and growing product launches throughout the year so far, we've been successful in achieving a very strong quarter in revenue of $18.4 million of which $15.9 million was Teligent label product. An increase of 43% over the same period last year. This mix of sales dynamic is important as we continue to grow at the Teligent label business. Today, we market 19 topical products in the United States, 4 injectable products in the U.S. and 30 injectable products in Canada. Each approval, line extension and launch is important as we diversify our business. During the quarter, we faced relatively stable markets across most of our portfolio, with the notable exception of Lidocaine 5% ointment and Zantac injection. So let me talk about both of these. In the Lidocaine ointment market, we saw a significant double-digit price erosion arising from the entry of a new competitor making this now a 7-player market. Despite this, our overall Lidocaine ointment revenue increased quarter-on-quarter as the result of new business. Excluding the impact of Lidocaine ointment, price erosion in the portfolio for the quarter was 1.6% compared to Q1 2017. In the Zantac injection market, our sole source position of this market was challenge by the reentry of a competitor. At the same time, the overall market utilization of Zantac or Ranitidine injection has declined significantly following the market shortages at the end of 2016. These shortages have caused some practitioners to change therapies, reducing overall Ranitidine utilization. The combination of the overall market prescribing reduction and competitive reentry has caused us to reevaluate our expectations for this product for the remainder of the year. We will continue to monitor the situation closely as we gauge the impact of the product availability on prescribing behaviors. Turning to the pipeline, we filed 2 ANDAs in the past quarter, including the first Denovo injectable ANDA, and 4 ANDAs in Canada. We also filed our first prior approval supplement to support the site transfer of our ophthalmic product. As of today, we have 34 ANDAs on file with FDA, representing a total addressable market of $2 billion. And we also have 4 applications on file with Health Canada. That being said, the past quarter has been quieter on the regulatory side than we would like. The shorter review process under GDUFA and the need to respond quickly to FDA inquiries has intersected with the FDA's ATI manufacture inspection process in a difficult way. Several of our pending ANDAs have been impacted by regulatory inspections at 3 of our API suppliers, infecting 8 molecules in 21 ANDAs, representing $745 million of our pipelines total addressable market, or 37%. In most cases these have been minor inspection 483 observations at our suppliers, that needed to be responded to and cleared by FDA before the applications linked to these sites could be advanced. This is a process which bureaucratically takes time. Time which is not provided for in the current review process. In 2 of these cases, the suppliers have now resolved their issues, clearing 13 of these 21 ANDAs to move forward. We continue to work with the remaining supplier to encourage them to respond in a timely and complete manner to FDA to clear any outstanding impediments to approvals. In our estimation, these regulatory speed bumps may have delayed the impacted applications by 1 to 2 quarters. Indeed, we are in receipt of a number of complete response letters in which the only outstanding issue is the clearance of the API manufacturing site. Given the recent resolution of these issues, we would anticipate that over the course of the coming quarter, we would see approvals from these applications. The combination of our reassessment of the Zantac market together with the impact from the regulatory delay has caused us to update our guidance for the year, now forecasting revenue at $75 million to $85 million and gross margin between 47% and 50%. This continues to represent significant growth and development over the previous year. Looking ahead to the coming months, we have reviewed the applications pending with FDA and believe that there are approximately 10 potential approvals that we could anticipate before the end of the year with the total addressable market of $345 million. Our team will now be prepositioning inventory to be able to launch these products as soon as possible on product approval. Finally, a quick note on our expansion progress. We've made significant progress over the past quarter, as we work towards our goal of liquid-in-a-vial before the end of the year. Our project remains on-track and on-budget as we move ahead. I continue to be personally very excited about the capabilities that we're adding to allow us to have greater control over parts of our supply chain, particularly for sterile injectable manufacturing. Our team is preparing the first-ever injectable products to be manufactured at the site, and is looking forward to moving into the extension over the coming months. Let me turn the call over to Jennifer now to provide more details on the results of quarter.

[Jenniffer Collins:]

Thanks, Jason, good afternoon, everyone, and again, thanks for joining us today. Our total revenues for the second quarter in 2017 was $18.4 million, an increase of 7% compared to last year. Net revenue from the sale of our own products increased 43% over the same quarter last year. The increase in revenue compared to last year resulted from the expansion of our U.S. generic product portfolio to 23 products from 16 a year ago In addition to a gain in share of 2 of our existing products. Revenues from Lidocaine ointment 5% represented 22% of total revenue in the second quarter. Revenue from Lidocaine hydrochloride topical solution represented 12% of total revenue in the second quarter. And revenues from Zantac injection represented 9% of total revenue in the second quarter. Revenue from our products dropped slightly sequentially this quarter, due to with decline in revenues from our U.S. injectable marketed products, primarily due to the market changes with Zantac that Jason described earlier. Revenue from our topical genetic products and our injectable products marketed in Canada grew sequentially from last quarter. Product sales from our contract service business were $2.4 million in the second quarter compared to $5.9 million in the same quarter last year, and $3.4 million in the first quarter of this year. Contract services revenue at the percentage of total revenue was 13% in this quarter compared to 35% of total revenue in the same quarter last year. As you remember, we often talk about our contract service business as a purchase order business, which can cause variability in our quarter-to-quarter revenue from that business. Contract service revenue from our pharmaceutical customers represented 86% of second quarter contract service revenue compared to 92% last year. Now let me turn to gross margin. Gross margin in the second quarter of 2017 was 44% compared to 56% in the same quarter last year and 55% in the first quarter of this year. Compared to the first quarter, we experienced a decline in margin as a result of inventory write-off due to the lagging sales of one of our frozen bag products. We will no longer manufacture this product in a frozen bag. In addition, as we scale our operation to support the growth of our business, we experienced some production inefficiencies as well as a slight decrease - slight increases in distribution fees related to our intelligent label sales business in U.S. We also do not have a favorable product mix in the second quarter in both contract services and our own label products compared to the same quarter last year. Sales of injectable products represented 33% of total revenue in the second quarter compared to 38% in the first quarter of 2017. Our partners currently manufacture all of our injectable products. The expansion of our facilities to include sterile manufacturing capabilities and the transition of these products from our partners to our own plants will also help improve margins over time. SG&A in the second quarter was $4.7 million compared to $4.3 million in the first quarter and compared to $3.7 million in the same quarter last year. SG&A as a percentage of sales for the second quarter of 2017 and '16 were 26% and 22%, respectively. We do not plan to make any additional investment in the corporate services group that will support our growth and beyond. Over time, we expect SG&A as the percentage of sales to continue to be flat to down, depending on the total range of revenue. Consistent with our strategy and our dedication to building a foundation to expand our portfolio, we will continue to invest significantly in R&D in 2017. We invested $5.1 million in the second quarter as compared to $4.8 million in the same period last year. The most significant portion of our R&D cost relate to clinical studies and development work to support our TICO strategy. Based on the timing of the milestones and studies, we will start to see a significant sequential quarterly growth in R&D to support our strategic objectives. For the quarter ended June 30, 2017, net cash used in operation was $0.4 million, which included $5.1 million of R&D expenses. For the quarter ended June 30, 2017, we used $9.5 million in cash and investing activities, primarily related to the expansion of our facility. We expect the final budget for the facility expansion including necessary equipment utilities and process controls for the increased topical production and new sterile fill-and-finish suites to approximate $55 million. We hope to have this extension substantially completed before the end of this year. In the second quarter of 2017, we recorded a net loss of $0.9 million compared to a net loss of $2.9 million in the same period last year. The net loss in the second quarter includes a gain related to foreign exchange of $3.8 million. As you may recall, when we completed the Alveda acquisition, we established Teligent subsidiaries in Canada and Estonia to complete the purchase. Because of the fluctuation in foreign exchange rates during the quarter, we recorded this noncash gain of $3.8 million related to the foreign currency translation of these inter-company loans to our fully owned subsidiary. Depending on the changes in foreign currency rates, we will continue to record a noncash gain or loss on translation for the remainder of the term of these loans. Due to the nature of the transaction, there is no economic benefits to the company to hedge this transaction. For the quarter ended June 30, 2017, net loss included amortization and depreciation of $1.1 million compared to $1 million in the same quarter last year. Our net income in the quarter includes $2.4 million in noncash interest expense, primarily related to the amortization of the discount related to our convertible notes. We've included adjusted EBITDA, earnings before interest tax depreciation and amortization, as well as adjusted net income in our earnings release. As you may have seen, there's a non-GAAP disclosure related to how we calculate EBITDA and adjusted net income. We'll continue to provide this information as long as we determine it to be helpful to investors to monitor the operations of our business excluding certain items. Our adjusted EBITDA for the second quarter in 2017 was $0.3 million, which was after our R&D spend of $5.1 million. As always, Jason and I are grateful for your participation today, and look forward to updating you soon. I'll now turn the call back to Jason for his closing remarks.

[Jason Grenfell-Gardner:]

Thanks, Jennifer. The Teligent story continues to evolve as the execute our business plan focused on our TICO strategy. It continues to become more diversified, more robust and more complete. Despite that, we're still in the generic pharmaceutical market. There will be competitors who enter some markets and fall out of others. There will be regulatory wins and sometimes challenges. For us, we do this as a question of not if, but when, and we're confident that continuing to execute and deliver on the things that we do control will also deliver value. Before opening up the questions, I want to thank our Teligent team from the U.S., Canada and Estonia who do the work every day to drive this execution forward. Together, we're building a pretty remarkable business. And I'm grateful every day for their perseverance and hard work. With that, Terrance, let me open it up for questions.

[Operator:]

[Operator Instructions]. And our first question comes from Matt Hewitt from Craig-Hallum Capital.

[Matthew Hewitt:]

Thank you for the color on the Lidocaine and Zantac situation. Maybe we could dive into couple of others, you talked a little bit about what's holding up the pipeline, and I'm curious, what gives you confidence or what kind of confidence can one gain from, even your partners, your API suppliers, who are responding to the FDA that you can in fact get those up to 10 approvals by the end of the year. Is the FDA responding to those 43's in a faster fashion? Or any color there would be helpful?

[Jason Grenfell-Gardner:]

Sure. So in the two that have been resolved already, one of them was for our supplier for erythromycin. And you saw the approval of erythromycin gel in July, which says to us, yes, you can go through this process, you can respond to the regulatory issues, and then the FDA will pick up that file and move it forward. In the case of the second that got resolved and it was a little bit more recently, we know that they've received their EIR letter from their inspection now that those items have been cleared out. But it becomes a sort of element of working through the bureaucratic machine. So we know that we go back to the FDA, we make sure that they know that their other department has given out the letter for compliance, so that we can continue to push these things forward. And we do hear from our project managers that they are moving forward. So that's an interesting intersection, actually, in GDUFA, that I don't know was fully considered, how long that process takes to resolve when there are 43's or observations from inspection. And I think we may see more of that in the industry overall as people's pipelines move forward, given the shorter review times in GDUFA 2.

[Matthew Hewitt:]

Okay, thank you for that detail. Shifting gears a little bit. For Adrenaline. First generic market, you're the only generic that I can tell on the market, you launch back in February. I would have anticipated a little bit more from a market-share perspective. And I've seen this not only with your company but with a couple of others where first you are the only generic on the market and they are not getting to a normalized or what I would consider a normalized market share. What is happening on the competitive side that is, I guess, capping off or preventing further gains there?

[Jason Grenfell-Gardner:]

Well there was a great article in New York Times actually, yesterday, that I would point you to, it's got a great tile, it says, "Take the generic, patients are told, until they are not." And there is something really fascinating happening in parts of the prescribing universe and the fulfillment universe, where patients are actually being driven towards more expensive brand of drugs as of virtue of some behind the scenes discounts that are given out and some special negotiated deals that some brand companies are doing with PDM and other payors. So there's a lack of transparency there, that's driving some patients in that direction. In the case of flurandrenolide specifically, we were puzzled by the same observation that you had. And we did a pretty significant deep dive into it, to try to figure out what was going on, where? You, I think, alluded to this, I think it was right that it's not just our specific drug in this form, it's actually across the flurandrenolide presentations. You'll see that the generic drugs are struggling to get more than about a 40% market share there. What we think is happening, is that brand players in that space are using specialty pharmacies together with direct negotiated deals with payers to try to drive volume towards some of those brandied drugs. I think we're on to them. And I think we are developing some strategies that we believe will be effective in countering some of that. But it's a pretty pernicious practice that is fascinating as this continues to evolve.

[Matthew Hewitt:]

Interesting, okay. Maybe one more for me then I'll hop back into the queue. But of the things that's come up on some of your peers calls is Clarus1. Is there any impact? Or do you have any exposure to Clarus1? And if not, does that represent an opportunity?

[Jason Grenfell-Gardner:]

Sure. So Clarus1 has been probably more of an opportunity for us than anything else. As Walmart was working through its approach to generic drugs over the course of past couple of years, the contracting process for certain parts of the market definitely slowed down. So our installed position at Walmart was not as strong as in some of their competitors in the space. That being said, we've always had a fairly good presence with McKesson and also with the legacy McKesson Rite-Aid business as well. So Calrus1 has probably on balance been a benefit for us more than anything else.

[Operator:]

And our next question comes from Elliot Wilbur from Raymond James.

[Elliot Wilbur:]

First question for Jen and Jason as well. Historically, you've enjoyed a pretty strong topline ramp in which to spend into. But with respect to R&D expectations for the balance of the year, should we still be thinking about absolute spend along the same lines that you've discussed historically?

[Jason Grenfell-Gardner:]

Well, maybe I'll take that, Elliot. I think it's a great question. We've looked at R&D and we spent fairly aggressively in R&D as we believed in the pipeline and the ability to deliver it. I think we still have that faith and that confidence in it. That being said, we are also fairly pragmatic, right? I mean, we have some goals in terms of where we want to end the year in terms of total cash, and where we want to see our balance sheet develop. So we're going to look at those R&D opportunities as we progress throughout the year. As you get towards some of the bigger spend in some of those R&D programs, for example, some of the basal constriction studies that are still outstanding for the year. I guess, I would say that not all of these projects are equal in terms of ROI. And so as that revenue line gets adjusted, our expectation in terms of ROI for those programs also gets adjusted. And that being said, those which have lower anticipated ROI might get pushed from Q4 to Q1. And we think we can probably do that without having the material impact on the business in the near term.

[Elliot Wilbur:]

Okay. And a follow-up question for Jen, on the gross margin dynamics in the quarter. You mentioned a lot of items that maybe impacted the quarter from more or one-time perspective, obviously, the inventory write-off did. But I'm trying to - basically sort of tease out some of these items that may be considered more one-time, such as a write-off, versus just the current business mix. And you know probably - obviously the margin pressure on Lidocaine. Maybe the question to ask as just what was the dollar amount of the write-off in the quarter and if there's any other dollar amounts that you want to call out specifically that shouldn't carry through the rest of the year?

[Jenniffer Collins:]

Yes, the inventory write-off I mentioned in - earlier my remarks was $500,000 for the quarter. In terms of the other things there was comments about kind of the growing pains of the expansion with some smaller production inefficiencies during the quarter. I think we've kind of talked about as we continue to ramp up the facility, resources and capabilities to be able to accommodate the growth, depending on where we are, at the topline, you may see those inefficiencies slightly. But I must say that the inventory write-off was the most significant of those items in the quarter.

[Jason Grenfell-Gardner:]

And maybe just to give a little color around that Elliot, I mean this was a - one of the products that was kind of an appendix to the vascular products that we bought from Concordia back in 2015. This is a frozen bag cephaelis foreign product. So it's not a product that we would ever manufacture internally. It's also a product that required fairly specific manufacturing processes, it's manufactured for us, here in the U.S. by Brandt & Company. It's distributed by that same company. So we don't really have really control over the distribution channel. And so it's really one of those things where we look at the economics of - do we stay in this, and what would that mean? It really didn't make sense. So that's when we decided to put an end to it.

[Elliot Wilbur:]

Okay. And then just last question for you, Jason. Sort of overall industry dynamics, or specifically, just current market dynamics in the topical arena in inocular. Historically, you have talked about, basically sort of the capture model or the switch model in terms of launching new products into the market, basically the thinking along the lines Teligent can capture roughly 20% share at a 20% discount and then you look at your products like lidocaine ointment, certainly seems like - a lot more guys got kind of same idea and it turned out to be probably more competitive than you would have anticipated. So I guess the question is, is that switch model you think still accurate with those parameters in just in terms of sort of gauging the overall level of competition. You think lidocaine is sort of an exception to the long running rule in terms of a very limited competition in the tropical space. Or you think that maybe this is volume from kind of a 2 or 3 player per product type of market into something more along the lines of 5 to 6?

[Jason Grenfell-Gardner:]

It's a great question, Elliot. And I think we have to go back to understanding how some of these products are different from the others. Lidocaine ointment is a product that requires 0 bio equivalence work in order to launch the product. And so the variance entry in the product, one would always assume to be relatively low. I think, you see that then when you have a product that's gone through such significant price dislocation, it's going to attract market entry more quickly than anywhere else. You can track that the something like the Conzol product. The Conzol product, which has gone through interesting price gyrations, which I think are very different, requires about - an equivalent study that would cost someone probably $5 million to $6 million to run. So the economics of entry are very, very different. And then in between that, of course, you have these corticoid steroids that have the basal constriction studies. And despite the significant price dislocation that we've seen in a number of those products, the amount of new market entry has been relatively limited. Getting those products through basal constriction studies is still a combination of both art and science. We're talking about very high subject to subject variability. And a process that's not necessarily very well-known and that has to be conducted usually in the United States or in populations "represented in the DUS" population. So they are different products in that way, I think that's an important thing to remember. And I think that's underlined by the actual economic performance of the products in the quarter, while you've seen lidocaine has some significant price challenges for the overall market, we still maintained a - and grown a fairly healthy share, I think we've got about 35% share of that market, which - despite it having 7 players. And we also have been able to largely maintain our position there. So I think we feel - that's pretty good. But look at the rest of the market that has those various entry. Those markets have been relatively stable. And even when you see market entry, the dislocation or price erosion has been pretty limited. All right, thanks, Terrance, we'll take the next question.

[Operator:]

Our next question comes from Dewey Steadman from Canaccord.

[Dewey Steadman:]

I guess on the new injectable facility, launching at liquid-in-vial at the end of the year, what's the timeline and steps that you have to go through to get the facility fully cleared by FDA?

[Jason Grenfell-Gardner:]

It's a great question, Dewey. So there's a couple of important parts to that. The first is to remember that we've designed a facility that is capable of producing both terminally sterilized as well as aseptic products. So on the first step, we'll be looking to qualify [indiscernible] into facility product that is terminally sterilized. That's something that we will start working on from the end of this year. The goal would be to submit a PAS somewhere in Q2 and trigger an inspection of somewhere before the middle of next year. So our goal would be within the next year, really to be up and running, so Q3. So we start with terminally sterilized product and then we work on the aseptic product and have all of that done in 2018.

[Dewey Steadman:]

In terms of the guidance revision. In the second half, how much of the guidance revision do you ascribe to the delay in approvals versus overall market conditions, especially for lidocaine and Zantac.

[Jason Grenfell-Gardner:]

The biggest issue is around Zantac. I mean Zantac, we anticipated that there would be incremental competition in our forecast. What we did not anticipate was this significant decline in Zantac utilization in an institutionalization setting. So if you look back and look at QuintilesIMS data for 2016 you look at quarterly data for Zantac utilization compared to where we see Q2 of 2017. Q2 is running at about a 35% to 40% utilization rate compared to the historical average. Now that sometimes happens when you have a market shortage, you know practitioners change, they started using other things. And getting them back and having people aware that the product is back and available to market takes some time. We do see signs of the monthly data that there seems to be a positive trend. But it's certainly not a trend that's positive enough to give us confidence that we will be where we originally thought we would be in our original guidance. I think lidocaine is a less important part of the story. We've done some of the sensitivities there. We feel pretty strong about our ability to fight that position. And in the rest of the market, with respect to the delays from the FDA, I would say that the secondary impact after Zantac.

[Dewey Steadman:]

Okay, and then my last question. This time product-level business development opportunities, have you seen any resets in valuations there or are there any interesting opportunities there to do additional deals like you did for the Concordia products or the Astro products?

[Jason Grenfell-Gardner:]

So we continue to look at those product-level opportunities. Where we're very much interested in them. I think anything that we can do that continues to help accelerate revenue, and accelerate operating leverage in the facility is a good thing. I would say though, that valuation levels still remain - the spread still remains pretty wide. I've been following a couple of strategic processes that have been ongoing in the industry. And you look at what you can buy, public company stock for compared to what some of these transactions looks like they are trading at and that gap is illogically wide. So we continue to watch that, but we're also still have pretty sharp pencils when it comes to doing our math. Thanks a lot, Terrace we'll take the next question.

[Operator:]

And our next question is from Scott Henry from Roth Capital.

[Scott Henry:]

I was just going to ask a couple of questions about some of the products in this quarter and how we should think about them going forward? I guess for starters it looks like lidocaine 5%, you mentioned the double-digit price erosion, but we did - it did bounce from, call it, $3.4 million to $4 million in Q2. And how should we think about that, ae we going to see a dramatic drop off there? And similarly, with the Zantac injection, and how should we think about the Q2 number relative to the rest of the year?

[Jenniffer Collins:]

Hi, Scott, thanks for your question. I think for lidocaine ointment what we're assuming for the rest of the year is that, that price erosion we did see in the second quarter would continue at pretty much that rate through the rest of the year in terms of our share and we would defend the share that we have. So I think in terms of absolute dollars, it might be down slightly and sequentially in the next couple of quarters. On Zantac side, I'd say, that Q2 units are pretty consistent with where we think we could be for the next couple of quarters. And I don't think there's going to be very much change from where that is. There are some opportunities that Jason talks about, depending on what the trends and the IMS data looks like and what the - if there's any change on that end we would be kind of looking for that. But that's not what we kind of forecasted in the updated guidance.

[Scott Henry:]

Okay. And then, thank you, Jen. And then contract manufacturing, obviously, it's a little lumpy was down in Q2. I mean, should we expect it to stay at those levels or might it bounce, revert to the mean? How should we think about that one?

[Jenniffer Collins:]

So I think what we've talked about a lot is that contract services over time is going to continue to decline. I think, we've certainly seen some challenges there in terms of quarter-over-quarter and it's a purchase order business so we are a little bit at the mercy of those customers to submit those orders. And we have some orders in Q2 that we have fulfilled in Q3 now, just in terms of the timing of those. But I would say for on a run rate for the year, we'd probably end up in the second half pretty close to where we were in the first half.

[Scott Henry:]

Okay. So second half looking like the first half would imply somewhere between first and second quarter as a true run rate?

[Jenniffer Collins:]

Yes, it could, you know depending on the timing of the quarter. But I'd say if you compared the first half to second half it will be pretty close.

[Scott Henry:]

Okay. And then, one thing that jumped out at me was the 12% contribution for lidocaine topical solution. As far as I recall that has not been that significant of a product. Could you talk about what happened there? And how we should think about that going forward?

[Jason Grenfell-Gardner:]

Sure, Scott, I'll take that one. So lidocaine topical solution was a drug that was actually the first NDA that we ever got approved back in 2014. And I think when we originally got that approved we were the 4th player to that market. And over time that market has continued to evolve. But when we looked at the market on the initial launch, our strategy was essentially to be the backup supplier. We didn't expect this to be a market that we wanted to go after aggressively. It wasn't the market from a size perspective that made a lot of sense for us to invest, trying to go after market share. So that's how we originally priced the product, that's where we positioned it in the market. As you roll forward in time, and sort of my concluding remarks there, time and chance sort of happens in the generic Pharma industry, we found ourselves essentially on an on-again off-again sort of position in that product. So right now, the market has product from 2 players, ourselves and one other in the market, how that evolves over time, based on whatever their manufacturing issues may be, I don't know. But for the second quarter, we did benefit more than we would have historically, just based on those dynamics.

[Scott Henry:]

Okay, great. Thank you for that color. And I guess just one bigger picture question for you, Jason. And - obviously the generic industry is cyclical. It's not uncommon. But when you think about the markets that you play in and the TICO strategy, how do you think - where do you think we are in the cycle right now? I mean, you think we're closer to the bottom - I mean, obviously, we are closer to the bottom than we were a quarter ago. But from someone that lives the industry, how do you think about that cyclicality? And when we could start to see it turn?

[Jason Grenfell-Gardner:]

Yes, I think - I always try to break this down across different elements of TICO, the topical injectable complex ophthalmic. On the topical side, you've seen that there's been a little bit of market entry in some of these lower barrier products. You kind of expect that. Will take some time for folks to work through that. But the total count of participants in the market, is still are really, really small, right? I mean, this is an N=10 kind of market not an oral market with hundreds of players in it. It's still a market where on balance - there's probably more risk in market disruption than there is in market erosion. And part of reason for that, I think is, again, around what has happened in the supply chain. So we have relatively concentrated suppliers, particularly on a molecule-by-molecule, presentation-by-presentation basis. And we have very concentrated customers, which means any disruption to that market from a supply-chain perspective, a manufacturing issue, a stability issue is going to have outsized disruption in the market overall. And right now, as I look across the portfolio, and the competitive set that's sort of what we see and we see happening regularly. One of the challenges I think for all of us in the industry, whether we're are investors, analysts or management is to be mindful of the good things when they happen, but not expect them to last forever, right. The sole-source position in a Zantac or in a lidocaine or anything is a passing event. And it's a great thing and you take advantage of it while you can and you make sure that you manage your supply chain to be able to have that advantage. But underneath all of that, you have to be building a business that has a robust R&D pipeline. The ability to get drugs approved. And the diversification that allows you to have a portfolio approach to that market. And I think that's what we have done in the topical piece. And you translate that to what's going on in injectables. In injectables we still see significant market disruption on a regular basis. It's put us in this position with Zantac, it's put us from time to time in positions with some of the cephaelis forms. We look at Canada, and in Canada we're often in sole-source positions because of supply-chain issues. Again, those will come and go, what increases your optionality is the pipeline that supports it. And we continue to do our work in the complex side. We continue to do our work on ophthalmics. So I think coming back to your question, are we hitting towards the bottom of this or not? I don't know. I don't know because it's all going to depend on what happens in individual products and supply chains over the course of the coming weeks and months. What we do know is that FDA is being significantly more responsive. It is working through applications more quickly. And so for those of us who are in markets where we've developed these pipelines and these capabilities, I think we should benefit as they continue to get approved. So I continue to be an optimist.

[Operator:]

At this time, I'm showing no further questions.

[Jason Grenfell-Gardner:]

All right. Thank you. Well, thank you all for joining us on today's call and your continued support and interest in Teligent. I look forward to seeing some of you at the Raymond James Conference in Chicago in a couple of weeks. And next month at the Morgan and Stanley Conference in New York. Thank you again for your support and for supporting Teligent. And have a great evening.

[Operator:]

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.