Good afternoon. And welcome to Depomed’s First Quarter Fiscal Year 2015 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today’s presentation, there will an opportunity to ask questions. [Operator Instructions] Please note today’s event is also being recorded. At this time, I’d like to turn the conference call over to Mr. August Moretti, Chief Financial Officer. Sir, please go ahead.

Thank you, Operator. Good afternoon. And welcome to our investor conference call to discuss the first quarter 2015 financial results announced earlier today. With me today are Jim Schoeneck, President and Chief Executive Officer of Depomed; Matt Gosling, Senior Vice President and General Counsel; Scott Shively, Chief Commercial Officer; Srini Rao, Chief Medical Officer; and Jack Anders, Vice President of Finance. I would like to remind you that the matters discussed on this call contain forward-looking statements that involve risks and uncertainties, including those relating to commercialization of NUCYNTA, NUCYNTA ER, Gralise, CAMBIA, Lazanda and Zipsor, the company’s financial outlook for 2015 and other statements that are not historical facts. Actual results may differ materially from the results predicted and recorded results should not be considered an indication of future performance. These and other risk factors are more fully discussed in the Risk Factors section and other sections of our annual report on Form 10-K for the year ended December 31, 2014, and of our quarterly report on Form 10-Q that we filed with -- we expect to file yet today with the SEC. Depomed disclaims any obligation to update or revise any forward-looking statement made on this call as a result of new information or future developments. Depomed’s policy is to only provide financial guidance and guidance on corporate goals for the current fiscal year, and to provide, update or reconfirm its guidance only by issuing a press release or filing updated guidance with the SEC in a publicly accessible document. References to current cash, cash equivalents and investments are based upon balances as of March 31, 2015, all guidance, including that relating to the company’s expected total product revenues, operating expenses, adjusted non-GAAP earnings, and adjusted EBITDA is as of today, May 11, 2015. I’ll now turn the call over to Jim Schoeneck.

Thanks, Augie, and thank you, all, for joining us today. For today’s call, I’ll start by reviewing our progress in 2015. Then I will turn the call over to Augie to discuss our financials. And finally, I will provide a few closing comments, after which we will open the call to questions. You’ve heard us talk about transformation over the past couple of years to describe the rapid and continue advancement of Depomed, becoming a leading specialty pharmaceutical company focused on pain and neurology. The series of strategic and timely transactions have contributed to that transformation, which began in 2011 and the most substantial by far is the one that we announced to complete it this year, the acquisition of the NUCYNTA franchise from Janssen. The strength of our existing product portfolio, combined with the introduction of our new flagship product NUCYNTA, puts us on track to become one of the top five companies selling branded pain pharmaceuticals in the U.S. by 2016. Since 2011, the Depomed story is one of tremendous growth. Today we are providing 2015 total product sales expectations of $310 million to $335 million. That’s triple -- that’s triple the 2014 product sales more than five times our 2013 product sales and the number almost two big to calculated from the $1 million in product sales we posted in 2011. The ability to grow the demand for our products once acquired has enabled us to emerge as a leader in the pain and neurology marketplace. In the first quarter of 2015, we continued to demonstrate that ability, led by the strong revenue and prescription growth of Gralise, CAMBIA and Lazanda. Total product sales were $31.7 million, up 47% compared to $21.5 million in the first quarter of 2014. And here are the numbers that demonstrate our…

Thank you, Jim. There are two areas I will cover today, first, a review of our first quarter results and second, our updated guidance for 2015. Before we get to the Q1 results, I would like to remind you that as discussed on our February earnings call, we changed accounting method for our PDL transaction effective October 1, 2014. Accordingly, the Q1 2015 results are not comparable to the Q1 2014 results as they do not include any amounts relating to non-cash royalty revenue, non-cash interest expenses or non-cash taxes relating to the PDL transaction. Also the Q1 2014 financials include $11 million of milestone revenue from Mallinckrodt and Ironwood. To put our Q1 results in perspective, I want to refer to the discussion we had in our February call, where we mentioned that first quarter product sales have historically been weaker than Q4 product sales for two reasons, one, our wholesalers tend to reduce inventory days on hand of our products during the first quarter of the year and two, the resetting of annual insurance plans and their deductibles tends to reduce patient demand for branded drugs in the first quarter of the year. We encountered strong prescription demand for our products in Q1 of 2015. But as expected, our wholesalers reduced days of inventories on hand at March 31, 2015 by approximately 10 to 14 days compared to December 31, 2014. Accordingly, product shipments during the quarter for Gralise, CAMBIA and Zipsor were less than product demand with the biggest impact on net sales of CAMBIA. Finally, a word about non-GAAP financial measures. In addition to GAAP presentations, we have presented non-GAAP financials in today’s earnings release along with an appropriate reconciliation to give our investors and other readers of our financials a view of our operations. I…

Thanks, Augie. In closing, I am immensely proud of what the Depomed team has accomplished in such a short time. We are in a period of tremendous growth with the remarkable amount of opportunity ahead of us. In 2016 with the full year of NUCYNTA sales and our financials, we expect product revenue to position Depomed as a top five companies selling branded pain products in the U.S. All of us at Depomed, including those in our sales force, who have just joined us today, thank you for your interest and support as we build the great company together. Now let’s open the call to questions.

[Operator Instructions] Our first question comes from David Risinger from Morgan Stanley. Please go ahead with your question.

Yes. Thanks very much. And congrats on all of the business progress and your updates. I was hoping that you could just frame for us, Jim, some of the recent prescription trends of note and then help us understand any inflection that you are expecting or any directional points that you would like to make with respect to key product prescription trends. And then separately, Augie, if you could just help us frame the cash flow outlook for this year. Obviously, you provided the EBITDA guidance. I believe that the EBITDA guidance is after certain one-time expenses, but it excludes transaction related costs. So anyway if you could help us understand if your cash flow outlook differs much from your EBITDA guidance, that would be very helpful. Thanks very much.

Dave, thank you. This is Jim. I’d like to say I think you have probably the most data in a single question I have ever had on one of these calls. But we will do our best. And if we don’t, please come back in and make sure that we do. On release, CAMBIA and Lazanda and we have very strong trends on all of those right now with the lease up 18% in the quarter over the prior year and we are seeing that continue in terms of the weekly scripts since the end of the quarter. CAMBIA, if anything is even starting to accelerate as I mentioned, the quarter was up 34%, but March was up 40% and we continue to see just almost every week record highs on the prescription trend for CAMBIA as we continue to make further penetration in the market. I mean, as we’re trying it, I think we are on pace. By the end of the year, we could be the number two within that branded migraine marketplace. And then with Lazanda, I mean we just have a dramatic increase there. This last week on the SHA data which -- that probably is the market that the IMS and the SHA data separate the most. The IMS data just does not seem to pickup the Lazanda market particularly well. And this is the market that we actually look at more on the dollars than we do on the script simply because the script sizes can vary tremendously. I mean, they can be anywhere from two bottles of Lazanda, which will be 16 doses for a script up to some that can be up to 90 bottles, so just tremendous differences there. But the dollars last week were actually on a gross basis over $800,000 for the week for Lazanda. So if anything that looks like Lazanda is picking up a bit more and we are just starting to see some of those new territories that I mentioned kicking in. And then on the inflection piece of it with NUCYNTA, I think that’s the most germane there. As we relaunch in June and I would expect that we’re going out with the new positioning. We’ve got a sales force that will just be -- just lot of people, just coming on board with us. So by a traditional measure, I would expect to start seeing from inflection on those, probably about fourth quarter or so. So, I will turn it over to Augie for the other part of your question unless Jack’s going to do it.

Hey David. This is Jack Anders. On the cash flow, adjusted EBITDA does include cash interest that we expect to pay. So, I would take that adjusted EBITDA amount back out the expected cash interest that we would be paying as well as the transaction cost. But however, there is some timing delays in terms of when we actually physically payout the cash interest, as well as particular royalties around our arrangement. So from a pure modeling perspective, I would use a lower number than an adjusted EBITDA number, closer to half to 75% of that adjusted EBITDA number.

Okay. Great. Thank you very much.

Thanks, Dave.

And our next question comes from Randall Stanicky from RBC. Please go ahead with your question.

Hey, guys. It’s James for Randall. A couple of questions. Given the updated guidance for sales this year, if we take the NUCYNTA pricing increase and the prior guidance without NUCYNTA, the midpoint seems to imply not much script growth for NUCYNTA. I know Augie had mentioned earlier gross on net maybe not as favorable as J&J had, which I’m sure plays into it. But can you tell us how much of that impact is expected to be and is there anything else that you are seeing changes from payer demand or slower pricing flow-through or anything else like that?

James, it is Jim. We had always anticipated that it would take sometime for the price increase to flow through, so that’s I think part of what you’re seeing in terms of our comment on the gross to net and then the reflection on the guidance. I think we’re also on the other products trying to be, I will call it, realistic or conservative in terms of that there maybe some impact as we relaunch NUCYNTA. So, I would caution you to just do a pure minusing on that wherever we were before, we would have taken down slightly the other products, just to account for that some disruption that may happen during the NUCYNTA launch and that would affect CAMBIA and release primarily.

Got it. Okay. Actually that answered my second question as well. And are you able to give us maybe an update estimate on the ex-NUCYNTA number, is that possible?

Actually at this point, James, our approach is to aggregate product revenue. We will obviously break it out in quarterly reports that we filed but from a guidance perspective, we’re aggregating all of the products.

Okay. All right. That’s fine. Thank you.

Okay, James. Thanks.

Our next question comes from Jason Butler from JMP Securities. Please go ahead with your question.

Hi. Thanks for taking the questions and congratulations on all the progress. Just wondering if you can give us a little more color around the reimbursement hurdles you faced in 1Q and kind of the magnitude of the rebound you would expect? Just in terms of again thinking about how more closely correlated demand and revenue growth will look in 2Q versus 1Q.

Yeah. So, Jason, I think really two things there. One, we did see less of a decline from fourth quarter of ‘14 to first quarter of ‘15 then we saw the previous year. So, I think perhaps now that we are in the year of the ACA where we saw less of an impact over last year unlike Gralise was about a 9% drop. This year, it was closer to 3% or 4% drop. So, I do think, things kicked in a bit quicker there. And we certainly have seen things coming back and beyond over the last few weeks. And then in terms of the -- anything else you would add to that, Augie?

No. And again, the pattern that we’ve encountered over the last couple year is that, days on hand bills as we go through the year and Q4 will have the highest numbers. And our assumption is that we’ll build to that in more or less linear passion.

Okay. Great. Thanks. And then, just in terms of thinking about NUCYNTA IR versus ER. How should we think about, how you’re going to actively manage the focus there for the sales force and where you expect to see the growth, should we expect to see more growth in one franchise versus the other?

I’m going to turn it over to Scott Shively, our Chief Commercial Officer.

Hey, Jason. Great question. So there is great potential for both the brands, both the ER and the IR. To figure upside, growth potential is no doubt with the ER and that has much to do with the lack of consistent re-sourcing its launch and as it does with the upside in terms of market potential. So the ER will be our bigger priority of the two, but the IR actually leads the ER, because the natural flow of patients if they are filling a prescription for IR. We have acute pain that becomes chronic that often ends up in ER, its great advantage to have the same molecule with formulations, so that’s kind of our approach there.

Okay. Great. That’s helpful. Thanks for taking the questions.

Hey, Jason. Thanks.

[Operator Instructions] Our next question comes from Traver Davis from Piper Jaffray. Please go ahead with your question.

Hey, guys. Thanks for taking the question. I just want to drill down a little bit on the product sales guidance, is there any -- can you provide us any color on the proportion of full year product sales that will come in the second half of the year to try to give us a better idea of what run rates are going to look like going into 2016? And then just secondly, on the -- on EBITDA, you provided us, obviously, your thoughts that include some one-time expenses in 2015? I’m just wondering if there’s a target in mind for what adjusted EBITDA could look like in 2016, just a very rough estimate on a percentage of revenue basis is a target around 50%, which we kind of see for many of your peers realistic and potentially what you maybe shooting for? Thanks.

Trevor, we haven’t broken out the period of revenues as we go through the remainder of the year. As Jim mentioned, the re-launch of NUCYNTA is scheduled for June. We had talked about getting to the estimated numbers, reflecting some potential disruption in Gralise and CAMBIA. And so our expectation is that that we’ll exit the year in fine shape with respect to all of these products and if there is disruption it will happen in Q2 and Q3. I can’t be more specific than that in terms of trying to break out how the revenue falls. And with respect to EBITDA for 2016, as I mentioned, our policy is to give guidance for the current year. We would expect that, we’ll end this year in strong shape, from a cash flow and EBITDA basis. But we haven’t -- we are not in a position today to give you guidance on what adjusted EBITDA looks like for 2016.

And Trevor, I think long-term we would -- the next couple of year we would move towards those industry norms. Whether we hit it next year or not, I think is really the question, whether it’s next year, ‘17 or something like that and I -- that kind of 50% level that you are talking about Traver adjusted EBITDA.

Just one follow-up on the product sales. So you may have seen that perhaps the expected range of product sales maybe came in a little bit less than some were expecting. Do you think that may be more targeted towards the second quarter and the disruptions you talked about for the other commercial products and also with kind of an adjustment period here with NUCYNTA and the launch initiatives going on for that product, or do you think there were those that just missed the boat here?

Traver I think part of it is what you mentioned toward the end which is the -- but I am not missing the boat, but the second last thing you said and that was around the more post relaunch disruption as possible. Now we are going to have more people out selling these brands with a more effort against the brands. So that’s a good thing, and I think that will eventually help the brands even compare to where we are now, I am talking about Gralise and CAMBIA in particular, but the point is at this point we don’t know. And I think one of the things the management team here has tried to do is be realistic as we talk about these type of numbers. Same thing on NUCYNTA, I mean it’s possible we could start to see an inflection sooner. But if I go by what the industry norms are, it would be later in the year. And so I think we don’t want to get ahead of ourselves or get over our skies until we actually see the data, I mean that’s basically how we’ve done in the past and how it would look for us to continue doing it, it’s really do it around the data not the hype.

Okay. That’s helpful. Thank you.

Our next question comes from Scott Henry from Roth Capital. Please go ahead with your question.

Thank you. And good afternoon. Just a couple of questions, I want to get my arms around the SG&A or the operating expense guidance to make sure how to correct. To the $195 million to $210 million, that includes the $21 million in deal cost?

Yes.

Okay. And what -- have you broken out R&D from within that context?

We haven’t, Scott.

Okay. Would you like to?

The only color I can give you is that the R&D expense has some variability in it as a result of the fact that the bulk of the expense for paediatric trials and there’s uncertainty with respect to enrolment rates and with at least one of the trials has to start date.

Okay. And if I kind of -- if I take to say the $174 million to $189 million which would be excluding the $21 million. And I carve Q1 out of that because you’ve reported it. And I take the next three quarters and divide it by three, is that a reasonable proxy for a run rate? I mean are there levers -- are there any other levers that I am perhaps not thinking about?

I think that’s a pretty reasonable estimate on it, Scott.

Okay.

That there’s going to be some fluctuation just as we are -- as we are maybe a little bit heavier on some of the NUCYNTA pieces even later this year, but I think that’s a pretty good estimate.

Okay. Thank you. That’s helpful. In terms of the NUCYNTA legal events with regards to intellectual property, any event to be aware of in the next six months to a year?

Matt.

To a year, yes. The 30 months expires in May of next year Scott, so we would anticipate the case to be resolved by that time. We’ll kind of go through expert discovery and pre-trial conference get it, get the trial baked in and that’s sort of how the next year will go.

Okay. And remind me I think I probably have it. Do we have a defined first filer on this?

It’s a new chemical entity so you could reasonably expect a number of filers filed on the first day they could file Scott so.

Okay. So we should assume there is not a first filler?

You should assume there is not just one, I would say.

And that’s on NUCYNTA, Matt?

And they are both actually. The fillings could have happened on the same day.

Okay. Thank you. That’s helpful. And I guess, Jim, just color wise on NUCYNTA, any reaction to the price increase. Did you -- I mean, any noticeable push back or just pretty much business as usual?

I mean at this point, you can see that on the script trends there really has been no change in terms of script trends. If anything, the decline on NUCYNTA IR moderating a bit more as you’ve been reporting out, and the ER, even with the limited group that’s selling it, continues to increase year-over-year.

Okay. And I guess just a final question, with regards to the ER for thinking about the market share. It seems like it’s actually been creeping up the past year or year and a half. Should we expect kind of continued trends and then perhaps an inflection, I don’t know how long it will take but you’re adding reps, so there should be an inflection point. Is that kind of late 2015 event?

Yeah. I think it’s a late 2015, and if you’re right, the point of adding reps getting back to having full support for medical, having some of the speaker program and other types of things that fall under the promotional sides as well. And having all of that back into the mix will affect not just the sales or upside, but I would expect to be fourth quarter or late ‘15 event.

Okay. Great. Well, thank you for taking all the questions.

Thank you, Scott.

Thanks, Scott.

[Operator Instruction] Our next question comes from Chiara Russo from Janney. Please go ahead with your question.

Yeah. Hey, guys. Thanks for taking my call. I guess my first question is about sort of the sales reps, if you guys could give us a little bit of color, sort of, on the background and maybe the pedigree of what you’ve got coming on board?

Scott, go ahead.

Yeah. I’ll be happy too. Yeah, so -- we’re just actually almost wrapping up has been a very, very successful recruiting program. We’re ahead of our goal in terms of number of reps, that we’ve got acceptances from already, well over 110 already. So almost there. As Jim said, we are looking at that having every position filled in time for the launch which is fantastic accomplishment. The profiles tend to be a bit more experience reps, many of them with pain experience, pain background, coming from some of the company, they might think we are fortunate because there is a lot of interested talent out there. We’ve also benefited by it lot of the fact of the good press about company and the success we’ve had. So very much delighted with the level of talent and the progress in recruiting.

Yeah. I do think it helped us a lot having the deal close early because that way we were able to get so many people interested in the company. I think that’s part of what drove that 3000 plus number of applicants for the open position.

Great. Thank you. Are you taking any of the Quintiles people?

Quintiles people?

Yes. Quintiles, yeah, we are today. We put down them equally within the recruiting mix there. They got to compete for all the position. And we were taking a good chuck of them, pretty hard proportion, and that’s terrific because they have the experience, obviously in the product historically and also great relationship with the some of the high prescribers. And they fit in very nicely, synergistically with our existing team. So, with that, I would add them as well as very, very good outside talents as well.

That’s both at the sales rep level and at the sales management level.

All right. Great. And I assume that you guys are not going to breakout revenue via NUCYNTA ER versus IR, correct?

We’re currently not planning to break those out on a go forward basis.

I don’t think so. All right. Yes. That was all my questions. They were mostly and answered. Thank you, guys.

Thank you, Chiara.

Chiara, Thank you. And with that, I once again thank you all for your interest in the Depomed. We believe that the financial outlook for the company has never been stronger. We look forward to reporting on our progress over the rest of 2015 as we continue to grow Depomed. Thank you so much.