Teligent, Inc.
Q1 2015 Earnings Call Transcript

Published: 29 Apr 2015

[Operator:]

Welcome to the IGI Laboratories Incorporated First Quarter 2015 results conference call. [Operator Instructions]. Except for historical facts, the statements in this presentation as well as oral statements or other written statements made or to be made by IGI Laboratories, Inc. are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and involve risks and uncertainties. For example, statements about the company's anticipated growth and future operations, the current or expected market size for its products, the success of current or future product offerings, the research and development efforts, and the company's ability to file for, and obtain U.S. Food and Drug Administration, FDA, approvals for future products are forward-looking statements. Forward-looking statements are merely the company’s current predictions 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 operations 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 developments. I would now like to turn the conference over to Jason Grenfell Gardner. Mr. Grenfell Gardner, please go ahead.

[Jason Grenfell Gardner:]

Thank you Andrew. Good afternoon ladies and gentlemen and welcome to this IGI Laboratories’ business update, covering the first quarter 2015. I am Jason Grenfell Gardner, the President and CEO of IGI; and I am joined today by Jenniffer Collins, our Chief Financial Officer. Thank you for joining us today. A few weeks ago I have the opportunity to set out for you our key organizational goals for 2015 a year during which we are building the foundations of our business, adding the important and critical skills and projects that will drive our business forward. Today, I’d like to give you an update on first quarter performance and then these key initiatives and in particular give you a more granular update on first R&D and R&D productivity; second the specific deliverables of the TICO development plan and third our capital allocation plans moving forward. And these three core areas the IGI team has continued to make great progress to help us build a broadly based business for the future. Before I talk about these initiatives let me speak to the first quarter results for 2015 and the current market environment we see. Revenue for the first quarter 2015 was $10.7 million up 56% over the same period in 2014. While revenue decline sequentially compared to the fourth quarter of 2014 by 20% this is was in line with our expectations given incremental sales opportunities in the fourth quarter as result of market disruptions. Over the last two quarters we’ve seen revenues accelerate as result of positive market conditions for certain of our products notably for Econazole Nitrate Cream. As we discuss today in our earnings release looking forward we see some instability in that market which we believe may impact our full year expectations. This instability is being caused by comparative pricing pressures and market share changes which we expect to impact our business. Naturally it’s challenging given the degree of product sales concentration and customer concentration in our industry to immediately offset some of these effects. We anticipate that for the second quarter of 2015, this will have the effect of reducing our revenue to between $7 million and $8 million in net sales. Our sales team is currently working to respond to these market changes. Over the course of the coming weeks we will revert back to you within update on anticipated full year guidance. Despite the impact of market fluctuations and individual molecules the strategic business plan has continued to move forward. Let me give you an update on the individual components of that plan. First, in research and development our R&D program has continued to march ahead. Together with today’s filing we now have 24 ANDAs pending at the FDA with a total addressable market of $702 million according to IMS Health data of February, 2015. With the new stability guidance, increased regulatory requirements and increased pre-review times our time to compile these ANDAs has also increased. In particular we’re working diligently to ensure that our new filings do not fall into a refused to receive status and that requires significant internal pre-review before filing but we believe that will result in better filings, [fueled] efficiencies and ultimately faster approvals. By the end of the second quarter we anticipate filing a further four ANDAs and that pace should continue to accelerate throughout 2015 to achieve our goal of at least 20 filings. Of these 18 remaining products to be filed, 16 of the products have their exhibit batches manufactured and stability programs have started with the balance starting slated for the beginning of May. In addition to fillings and course there are also reviews sand responses. Our team has received and is processing six complete response letters and one deficiency letter relating to product submitted on 04, February 2013. Perhaps most interesting has been the change in the dynamics of FDA's treatment of fillings post October 1, 2014 or the beginning of PDUFA year three. Of the 5 ANDAs that we have filed since the beginning of this PDUFA year accepting today's filing all 5 have been expected for fillings, we have received two information requests which look like many complete response letters and even labeling requests. By contrast of the 7 ANDAs filed before October 1st in 2014 only two have been expected for filing and we have received only one labeling request. Clearly newer filled under the good year for guide lines are received in priority in terms of review and processing at the FDA. Before we understand the impact of this on our program these new information request letters with the required turnaround time of 30 days. To achieve this we've created a specific cross functional team called the DART the Deficiency Action Response Team to turn these request throughout. They are doing an amazing job and I believe this will be the key to performing under the standings quality applications submitted with timely responses from our team. In summary I would say that our R&D program is on track for delivering on our 2015 goals and building with future. Turning now to the injectable business and ophthalmic business, you will remember that our target for 2015 was to get the first of the ANDA and volume products back to market. I'm pleased to report that we've made significant progress on this over the past quarter. During the first quarter we exercised our option to acquire two additional injectable products from [Indiscernible]. This brings our total number of products in our injectable ophthalmic pipeline to 22 of which 20 are injectable liquids allow for powders and two are ophthalmic liquids. We have prioritized that list to focus foremost on the molecules currently under our storage of those with single source supplies. Slowly with the strategy deliver values and proper count they had also create opportunity for us to access attractive markets with little or no competition. We've made significant progress in establishing a network of quality focus contract manufactures who can support our cost structure specifically for injectables we finalize agreements with two contract manufactures for certain of these drug products and we've also completed our technical audits of their facilities. We've completed the manufacture of our regulatory stability badges for the first products and are proceeding with the development work on the second. Given the accelerating progress that we've made over the past few months including the scoping and definition of additional product development work I can say that we are on track to submit our first prior approval supplement and request to FDAs facilitate product re-launch by the end of 2015. Second on ophthalmic our we've completed the RFP process for our two pipeline products as a result we've identified the manufacturer for at least one product and have completed our technical audit of their facility we expect to submit our first [Indiscernible] approval supplement before years end. It's also important to reiterate that our short term plan is to build internal development expertise for our injectible ophthalmic pipeline similar to what we have today for our topical business in [Indiscernible]. To that end we are actively interviewing for our first two R&D positions to drive our in house developments efforts and minimize the work needed to be done by contract manufactures. Finally on our first 505(b)(2) project we have an upcoming dialogue with the FDA about our product R&D approach and following this we would anticipate being able to provide of our reasonable timeline and expectations around the project. Across our [TICO] strategy we've made significant progress in this first quarter of 2015. With all of these things going on internally we've also been working on our business development projects. Here I'd like to correct what seems to be a common misunderstanding about our capital allocation strategy moving forward. We've spent a lot of time working on the manufacturing strategy for the business for the next few years both to the topical business and for the injectable business. As many of you know we have looked at a number of our opportunities in particular in the injectable manufacturing space. So, whether because of concerns of our quality or because of valuation we believe the universe of doable deals in that space is very small indeed if any. At the same time we've been running opportunities to add incremental injectable manufacturing capability organically what we call the build option and I want to be clear here if we do proceed with a build option we will do so in a way that was smart, fast and limited in terms of capital expenditure as I said to you a few weeks ago we think that there are compelling alternatives to drive shareholder value and the key to that is the limiting the capital expenditure involved. Frankly I believe the alternatives where we invest less than $15 million to $20 million to achieve this strategic capability would be the upper end of our expectation. That’s important, because beyond our existing capital requirement that leads around $125 million for IGI to do accretive transactions that grow and diversify our business. Here is my commitment and that is the entire IGI team to ensure there are capitals put to good use sufficiently and in good time. As we move away from looking at injectable side acquisitions our [BB] team is actively looking at revenue generating products and businesses across the spectrum that compliment IGI. As ever there is a lot going on here in IGI. We continue to execute on our business plan that we build to diversify especially with generic business. Before continuing let me turn over to Jennifer to discuss the numbers for the first quarter 2015.

[Jenniffer Collins:]

Thanks Jason. Good afternoon everyone and again thanks for joining us today. Our total revenue for the first quarter of 2015 was 10.7 million and increase of 56% over the same quarter last year. Revenue for the first quarter of 2015 included 8.1 million of net revenue from the sale of our own IGI label products compared to just 2.9 million in the same period last year. The increase in net revenue was attributed to addition revenue generated from our Econazole Nitrate Cream 1.5% as compared to the same quarter last year. Revenue from Econazole represented 53% of total revenue in the first quarter of 2015. Revenue from one major customer totaled just under 50% of revenue in the first quarter of ‘15. As Jason discussed earlier one of the members within this customer informed us that we could expect the decline in sales volume for our Econazole Nitrate Cream product. As the impact of these events has yet to occur and due to the timing of receipt of this information we’ve now been able to complete our assessment of the other market opportunities and the full impact of these changes on future net revenue. Within the short term we expect the total revenue for IGI in the second quarter could be in the range of 7 million to 8 million. We do expect to successfully maintain a portion of the current volume overtime but at a reduced price. We have considered this reduction in price as find our growth to new accruals for chargebacks at March31, 2015. And we would expect near term declines in buying patterns from this customer over the couple of months to accommodate the decline in volume sold through this particular contract. As we continue to expand our portfolio of products we will be able to mitigate the product concentration risk we have with our current portfolio which will allow us to more effectively manage changes in market demand. Consistent with historical trends customer orders for Econazole Nitrate Cream 1.5% were down sequentially as compared to the fourth quarter of 2014 and as we have discussed on our last call we did continue to see the impact of net pricing for Econazole that has resulted from the pricing transparency created by the customer concentration of the major wholesalers and retailers in the first quarter as compared to the fourth quarter as product distribution shifted within our existing channel. When we record gross revenue from the sale of our IGI products, we then make estimates of various allowances, which reduce product sales. These include estimates for chargebacks, rebates, cash discounts and returns and other allowances. We have considered the recent changes in net price Econazole estimates and in addition during the first quarter of 2015 we have included approximately 300,000 of charges related to our increased pricing which took effect in January of 2015 for our lidocaine topical solution. Our product sales from contract services was 2.4 million in the first quarter of ‘15 as compared to 3.4 million in the first quarter of last year. Our decrease in contract manufacturing revenue in the first quarter as compared to the prior year was primarily attributable to the timing of purchase orders from two pharmaceutical customers in the first quarter of last year. Contract manufacturing and formulation services revenue from our pharmaceutical customers represented 79% of first quarter revenue as compared to 71% in Q1 of last year. Sales of OTC and cosmetic products were 71% in Q1 of this year compared to 29 last year. As our contract manufacturing business is make-to-order business there may be some variability in these percentages resulting from the sale of pharmaceutical products quarter-to-quarter, however we’ve been successful year-over-year in the transition of our customer base to include more pharmaceutical products. As expected we were able to generate a gross margin of 53% in first quarter as compared to only 42% in the first quarter of last year. These improvements are attributable primarily to our revenue growth year-over-year and the mix of products. Our SG&A as a percentage of sales for the first quarter of 2015 and 2014 were 18% and 19% respectively. We do plan to continue to manage our administrative cost while expanding our customer base and product portfolio but we expect to make some additional investments in SG&A over time to support our growth. Consistent with our [TICO] strategy and our dedication to expanding our product portfolio in 2015, we have continued to invest in R&D. We spend 2.6 million in the first quarter of 2015 as compared to 1.4 million in the same quarter last year. In order to continue to expand the pipeline and drive shareholder value we continue to expect to meet our target of at least 20 ANDAs filed in 2015 and we expect to continue to increase our R&D spending in 2015 as compared to last year. This will add to the 24 submissions we have on file with the U.S. FDA and begin to build the organic pipeline in our injectable complex and ophthalmic markets. This will allow us to continue organic R&D growth in all specialty generic pharmaceutical areas of our [TICO] strategy. The increase in R&D cost will be driven by our plans to expand our R&D team as well as additional cost to required for outside testing and data construction studies. We plan to manage that growth be consistent with our strategic plans. In the first quarter of 2015 net cash used in operation was 114,000 and included 2.6 million of R&D expenses. Our continued investment in our portfolio expansion to our own organic R&D development is critical for our future. In the first quarter of 2015 cash used in investing activities was 1.7 million which includes 1.5 million paid for exercise of our option to purchase the two remaining injectable products from Valiant that Jason discussed earlier. Now we have 20 injectable products in our portfolio and our team is hard at work executing the necessary steps to bring those products back to the market as soon as possible, in the first quarter of this year we recorded net income of 6.6 million compared to 167,000 last year. Net income in 2015 included a non-cash gain of 8.6 million related to the accounting for the mark to market of our derivative liability in addition to non-cash interest expense of 1.8 million. As you know in December of 2014 we completed our offering of 143.75 million 3.75% convertible senior notes which after fees helps to strengthen our balance sheet and we ended the first quarter of this year with a 157 million in cash. In connection with the offerings we recorded an original derivative liability in the amount of 43.7 million. As of March 31, 2015 the fair value of this derivative was 32.8 million, after the recorded gains on the change in the fair value of the liability. We will continue to mark to market this derivative liability until we can increase our offer our share counts at our annual meeting on May 20, 2015. In order to have sufficient authorized shares available to satisfy the equity conversion provisions of our convertible amount. The remaining liability will continue to be amortized over the five year term as announced. After this transaction we thought it would be helpful for investors to review our adjusted EBITDA earnings before interest taxes and depreciation and amortization as well as adjusted net income. As you may have seen we've now included in our earnings release non-GAAP disclosure related to how we calculate EBITDA, adjusted EBITDA and adjusted net income. We will continue to provide this information as long as we determine it will be helpful to investors to monitor the operations of our business excluding certain items as outlined in the tables and our released. We have several investor conferences scheduled in the next few weeks and we hope to be able to update you in real time on our progress. Jason and I are committed to continuously improving our communication with investors and potential investors and we understand the importance of transparency with the investment community. We are grateful for you participation today and look forward to updating you soon and hopefully seeing some of you at the upcoming conferences or at our annual meeting on May 20. Now I will turn the call back to Jason for his closing remarks.

[Jason Grenfell Gardner:]

Thanks Jennifer. This first quarter was another quarter of strategic progress at IGI while there is some turbulence ahead in the coming weeks as we work through these market changes I'm confident the IGI team has the skills and the resources to position us well for our next successes. With that let me pause and open this up to questions. Andrew?

[Operator:]

We will now begin the Question-and-Answer Session. [Operator Instructions]. The first question comes from Matt Hewitt from Craig-Hallum Capital. Please go ahead.

[Matt Hewitt:]

First one I think we’re going to need a little help to understanding the Q1 and Q2 a little bit better. So as I look to your press like, it looks like there was $12.5 million of chargebacks and rebates that hit in the first quarter, that’s more than at least than I was anticipating based upon the consensuses numbers I think then everybody expecting, was there some catch-up from Q4 or is there some other situation that maybe we’re not ready to that elevated the chargebacks and rebates in the first quarter.

[Jenniffer Collins:]

Matt, thanks for your question. I think there is a couple of elements that added to chargebacks in the first quarter. The first is that increase in net pricing that we’ve been talking about both on our March call and today so the net pricing on particular with the Econazole Nitrate clean product as the channel, the distribution within the channel has shifted the net price has declining. So chargebacks for certain sales to certain customers, through the distributors the net price has declined in the last couple of months. So that’s something where we have taken effect of those chargebacks in the first quarter, which are higher percentages than we’ve seen in the past. The second would be the 300,000 that we included in the first quarter result as a result of the [indiscernible] price increase and the third would be for inventory that was remaining in the channel for our customer where we’ve had some changes in pricing that we’ve been talking about that is leading to the Q2 decline in revenue the net pricing on for the remaining of that inventory will decline significantly in the near term. So we’ve accounted for the effect on the remaining inventory at the end of March with those changes in pricings of the chargebacks that will flow through. So it’s the combination of those three things.

[Matt Hewitt:]

Okay. And then I guess the follow up on that, this customer or it sounds like it’s a customer of your customer that you’re losing, are you losing that customer to another Econazole manufacturer or is it a shift in the product demand itself, is there another product out there that is replacing Econazole in the physician prescriptions.

[Jason Grenfell Gardner:]

Yes. So let me address that. So first we've historically had a 24%, 25% market share in Econazole and as you know you these customers have consolidated with wholesalers and retailers being together. So what we have actually seen is one of our competitors rather aggressively come after our market share with this specific customer. So it is someone coming after our market in Econazole.

[Matt Hewitt:]

And now they’re doing that bundling with other products or from a pricing perspective so the full price increase actually hasn’t been borne or is there discount aspect that they’re helping take that share with?

[Jason Grenfell Gardner:]

I'm unfortunately not privy to all of their pricing but what I can divine in market is that this is largely some significant changes in practice.

[Matt Hewitt:]

Okay. I guess shifting gears a little bit as far as the facility is that something where, I think on your last call you had stated that there was some ways to expedite the process so that you felt comfortable that you could get that facility up and running by the end of 2016 is that still on track or as you dug in deeper to that opportunity maybe it will take a little bit longer.

[Jason Grenfell Gardner:]

No, I think that is still on track. What has been in terms of our development plan has really focused on how best to do this in a way that gives us that capability and does it both capital efficient way as well as a time efficient way. We have just come back from talking to all of our equipment manufacturers for that specific project negotiating delivery and acceptance times and I think that pending of course some discussions to be had in May and June to finalize that, we feel like we’re pretty well on time for that right now.

[Matt Hewitt:]

All right. Maybe one more from me and then I’ll hop back in the queue. You went into some details regarding the FDA and that’s much appreciated and how post October 1st of last year you are seeing a much faster review time or do you consider or have you considered then taking some of the applications from that you haven't may be received notification on that we're prior to that October first date have you consider pulling those and resubmitting them given the faster at least the faster speed post October 1st.

[Jason Grenfell Gardner:]

Yes. I think that there are three application that we submitted back in June that given the market and given market size that would make sense for us to view that. We anticipate potentially slighting those in again were kind of the valuating this together with the feedback we get from FDA in the real time but we would stop as in to make incremental batches in the second half of this year again noting that those would all requires six months of real time stability to be added to our existing stability data before we could re-file them so that would be looking at refine potentially in January or February of 2016.

[Operator:]

The next question comes from Donald Ellis of Avondale. Please go ahead.

[Donald Ellis:]

Thank you for taking the questions. Just following up on the Econazole obviously. Is there a new player in market or is this a competitor that reduced the price on a [indiscernible]?

[Jason Grenfell Gardner:]

It is an existing player in the market.

[Donald Ellis:]

Okay. And did you guys mentioned that in a couple of weeks you plan on providing guidance for the second half of 2015?

[Jason Grenfell Gardner:]

Yes. That's right. I mean to put some context to this these market changes have happened within the last 36 hours. So, we haven't been able to fully vet or responds and make sure that we can give you a view of how that will completely effect 2015 and there is certainly will be a market and a competitive response from us but I can't tell you exactly what that will look like until we finished our work together with our customers in this market.

[Donald Ellis:]

Understood. Last question is regarding you said you had filled five ANDAs after PDUFA in October 2014 have you described refer to the size of the market those five products are addressing?

[Jason Grenfell Gardner:]

I know we have updated the guidance in terms of total addressable market after having filed each one. I don't have them at the top of mind but we could certainly look into that for you.

[Operator:]

The next question comes from Greg Gilbert of Deutsche Bank. Please go ahead.

[Gregory Gilbert:]

Thanks. And a couple, first I know the Econazole changes fresh but how does it shape your thinking about your models across the board for products its only become the market. And then Jenniffer maybe specifically can you talk about how much gross to net changed relative to your prior assumptions for 2015?

[Jason Grenfell Gardner:]

So, I guess touching on how the shapes are global to royalty here. One of the things about the generic marketing which we work is that there is this optionality of upside on pricing and that happens because of market disruptions, that happens for a number of different reasons but to the extent that someone wants to behave in an aggressive manner or to try to take share at the expense of price or margin that's always going to be a constant struck on this business. So there are times that things are very good and there are times that things are continuing along as a standard business model. The way I think we deal with that is by continuing to build a diversified business model that's why we have 24 ANDAs on the file, we'll finish the year with more than 48 ANDAs on file hopefully some approved but everyone on those that is approved helps to diversify that risk it also increases the options to participate in those market dislocations as they happen across the product portfolio. So these things do have that unfortunately and it's in the nature of having a concentrated portfolio to the extent that we do and somewhat exacerbated by the extent of customer and concentration. These customers now are making up in some cases more than 30% of market share on an individual basis then it's hard to kind of move around some of the so it's somewhere in the [installed] challenge with the business. So that's the plan and developing that diversified model and continuing to drives that diversification should help to address that over time.

[Jenniffer Collins:]

And then back to the change and expectations and charity backs for the first quarter. I think when we talk to folks back in March certainly we had known about the lidocaine charges that was within our expectations I think net pricing continued to decline into the first quarter and into April slightly. So that in addition to this most recent price change which we’ve accounted for at the end of the quarter for the outstanding inventory from March 31st that will have to be charged back at these new net prices. That’s the new information that was added to the first quarter.

[Gregory Gilbert:]

But you’re not going to quantify the gross to net from here, right?

[Jenniffer Collins:]

What the forecast for the gross to net is?

[Gregory Gilbert:]

Yes, for the rest of the year so folks have the magnitude.

[Jenniffer Collins:]

I don’t think I can give that at this point just because we’re still working on what the historical rates and how that will affect what we have forecasted for Q2 right now, but I’ll certainly take another look at it for you [Greg] and see if there is more granularity we can give when we update the market in the couple of weeks.

[Gregory Gilbert:]

All right. And just one last one still the plan to be EBITDA positive for the year or is that off the table so you come back to us.

[Jason Grenfell Gardner:]

I think we got to look at that within the context, so what we’re able to do to address these changes in the market and there what can be move throughout but it certainly something that will mindful.

[Operator:]

The next question comes from Rohit Vanjani from Oppenheimer. Please go ahead.

[Rohit Vanjani:]

Hi Jason and Jenniffer thanks for taking the questions. With respect to lidocaine, is that all under your assumptions I mean if you took the pricings in 1Q you had to give some rebates is that -- you’re going to realize the full impact with no customer losses beginning 2Q?

[Jason Grenfell Gardner:]

We forecast the sales out in for that specific molecule again on a customer-by-customer basis going forward. There has been a bit of moving around depending on some supply by the competitor but it has been relatively stable. So I think we’ve got that baked in at least with respect to Q2.

[Rohit Vanjani:]

So there is no dynamic change in terms of losing customers with lidocaine other than what you’ve already anticipated last quarter.

[Jason Grenfell Gardner:]

That’s correct.

[Rohit Vanjani:]

Okay. And then going back to Econazole I mean besides this last 36 hours would you have said that guidance was intact 36 hours ago and this customer change happened with whoever was aggressively rebating on price.

[Jason Grenfell Gardner:]

It was and we were -- I think we were confident with the guidance until these recent customer changes.

[Rohit Vanjani:]

Okay. And so would you still expect a ramp going throughout the year I mean there is seasonality associated with the Econazole anyway but you still expect to ramp going up quarter-by-quarter at least.

[Jason Grenfell Gardner:]

Indistinguishably I would say yes just because we have incremental product launches throughout the year, but again we’ve got a lot of homework to do for all of you to give you the best visibility and the best transparency possible. We’re going to do that work in and we'll certainly come back to you with more detail over the next couple of weeks.

[Rohit Vanjani:]

Okay. And then diclofenac 1.5% I would have thought that that would have been launched, I mean is there a timing or any clarity on timing for the launch of that product.

[Jason Grenfell Gardner:]

Yes, so we are in touch with the FDA on the issues around diclofenac and the feedback from FDA is that they are aware that this is pending with them. There are no outstanding issues that need to be addressed by us, they just need to process this through the FDA and through their internal challenge they don’t feel particular urgency around this product I think we give, I don’t think that they did. You may know that over the course of the past four months that the FDA has averaged the total number of ANDA approvals of less than 20 ANDAs per month. So I think that gives you a sense of their urgency but we are in active dialog with them to hold this out.

[Rohit Vanjani:]

And then could you just repeat your commentary about I may have got it wrong, you said there were maybe five ANDAs that you requested labeling and some that look like many CRLs, is that right?

[Jason Grenfell Gardner:]

So the five ANDAs excluding today’s filing that we’ve submitted since October 1, 2014. We have received acceptance for filing notification on all five. So that’s great. The second is that we received these letters which are called information requests on two of those five fillings and we received a labeling request on one of those five fillings. These information requests sort of look like complete response letters but they are not complete response letters.

[Rohit Vanjani:]

Right. Does that involve the work that's involved with the CRL that you have to kind of go back to the drawing board and figure out what's going on with manufacturing or something like that?

[Jason Grenfell Gardner:]

It’s primarily chemistry not so much manufacturing it is a very similar to historical deficiency letters that you would have seen in a chemistry deficiency so as I said these come with a fuse that requires a turnaround in about 30 days in some cases that's challenging because of the chemistry that's required but so far we've been able to meet the requirement.

[Rohit Vanjani:]

So it's [indiscernible] that 30 day lag or maybe 60 days between the back and forth with the FDA that's the only drag on the timeline that from the initial filing.

[Jason Grenfell Gardner:]

That's right.

[Rohit Vanjani:]

Okay. And then the one labels request does that indicate that I mean usually when the NDA the kind of ask for labels in month eight or so one month before the PDFUA, what is the case with ANDAs in terms of asking for the label how is that related to timeline of [indiscernible]?

[Jason Grenfell Gardner:]

Yes, historically labels were one of the last things that you asked for and then based on that you could sort of project forward approval time lines. In this new world we don't know how labeling swaps in with all of the other disciplines and it's a little bit perplexing because the idea of complete response letters was originally to put all of these deficiencies together in one letter so we can't tell yet whether this is a first past review which will then go to a second past review which will result in a complete response letter or whether there is some other mechanism through which the agency is working. Right now I think our best response is to be as responsive as complete as quickly as possible so that the onus is on the agency to deal with and to manage those approvals.

[Operator:]

[Operator Instructions] The next question comes from Dr. Ressnik, a Private Investor. Please go ahead.

[Unidentified Analyst:]

Yes. It's aggressively value of the products that are on this coming year, how much more does that add to the current addressable the market value?

[Jason Grenfell Gardner:]

Yes. Thanks for your question Dr. Ressnick it’s a good question. The difficulty in answering it is that we don't always know which application of the agency is going to move forward more quickly or to approve more quickly of the one that I think we've spoken about earlier here today [indiscernible] 1.5% which is tentatively approved pending the agency finishing its clerical duties, we think that the total market there is probably somewhere between 18 million and 20 million today and we expect that there should be one or two further applications to be approved this year, but again it's very hard for me to handicap which of those the agency is going to approve.

[Unidentified Analyst:]

Okay. Let's assume that they approve the one that's you're going to be submitting or have been submitted, what do you think would be that number if you got them all approved?

[Jason Grenfell Gardner:]

So, we said that the total addressable market of on file with the FDA right now about $700 million historically the best guidance that or the best advice that I could give someone to handicap that would be to look at what a normal market share would be on getting those approved. In this market assuming that we are a third player to the market we would historically expect around a 20% market share and we would anticipate that there would be about a 20% discount to install market pricing to make that happen, so I can't give you the exact number but I think if you runs through a logic like that you will arrive at a pretty good estimate.

[Unidentified Analyst:]

Again that's for the current number products that you have already submitted and how about the ones that you are going to be submitting are you able to give some guidance on that?

[Jason Grenfell Gardner:]

Yes. I think we had said for the price that we anticipate submitting through the end of 2016, that's a total addressable market of those products is between $1.2 billion and $1.3 billion and I think a similar sort of logic would apply there as to the math that I just gave you.

[Operator:]

The next question comes from [indiscernible] Please go ahead.

[Unidentified Analyst:]

Hi, thanks for taking question. [Technical Difficulty] 25%, 30% in the aftermarket, can you update would you consider and the Board consider using some of your cash to buy back stock given that you’re going to be down 50% from where it was raised initially and in addition what insight is consider purchasing something [Technical Difficulty] the confidence to investors.

[Jason Grenfell Gardner:]

Bob, thanks for your question. We haven’t got I think to that stage of discussing where we are in terms of those. Right now I want to deal with the immediate issues of dealing with the market and our market response to these specific products and these specific customers. Once we get through that we’ll look at some of the other strategic options that are out there I don’t want to use what you’ve suggested out of that, it’s always something and I think people should keep in mind but for the next few hours I have to focus on from this specific issue.

[Operator:]

As I see no further questions. This concludes our question-and-answer session. I would like to turn the conference back over to Jason Grenfell Gardner, President and CEO for any closing remarks.

[Jason Grenfell Gardner:]

Thanks Andrew. Thanks everyone for your questions today and your participation in this call. We got a lot of work to do so lot of work ahead of us I’m very confident that with this team we’re going to achieve the results that we need. Let me just remind you the Annual Shareholders Meeting is scheduled for May in New York City. It will be pleasure to see any of you there. Thank you again for your continued support. Have a great evening.

[Operator:]

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.