Cumberland Pharmaceuticals Inc (CPIX) 2010 Q4 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to Cumberland Pharmaceuticals fourth quarter 2010 earnings conference call. During the Company's presentation, all participants will be in a listen only mode. Following the presentation, the conference will be open for questions. This call is being recorded, and a replay will be available for one week shortly following its conclusion. At this time I would like to turn the call over to Angela Novak who handles Corporate Relations for Cumberland Pharmaceuticals. Please go ahead.

Great. Thank you. Good afternoon and thanks for joining us today as we discuss our fourth quarter and full year 2010 results. Before we begin, we'd like to advise that our call today will include forward-looking statements. These statements reflect our current views about future events, and are subject to risks outlined in the Safe Harbor section of today's news release. They're also detailed in our annual report on form 10-K which we file with the Securities and Exchange Commission. Despite our best efforts, actual results could differ materially from our expectations. Information shared on the call today should be considered current as of today only. And please remember that the Company assumes no duty to update it. I will now turn the call over to our Chief Executive Officer AJ Kazimi.

Thanks Angela. Good afternoon everyone and thank you for joining us, as we review our 2010 results and discuss our strategy and plans. Also on the call today are Marty Cearnal, Chief Commercial Officer; David Lowrance, Cumberland's Chief Financial Officer; and Doctor Amy Rock, Senior Director of Regulatory and Scientific Affairs. We'll first review 2010 highlights followed by a more in-depth update on our products. And then we'll discuss our financial performance. We'll conclude with our 2011 outlook before opening the call to questions. So let's begin with the 2010 year-end review.

During 2010, we continued to deliver on our mission of providing differentiated products to improve patient care. A primary focus for 2010 was significantly progress widespread stocking of Caldolor, our injectable ibuprofen product. At the end of the third quarter, we reported we had secured 300 institutions stocking the product. Today, I'm pleased to report that we succeeded in obtaining placement for Caldolor at 375 US medical facilities to the end of the year, representing steady progress. Throughout the year, and into early 2011 we've worked diligently on a publication initiative that has led to seven clinical studies supporting the use of Caldolor being published in peer reviewed medical journals. These publications are important new tools for communicating the product's value to the medical community.

Also in 2010, we culminated a development program that resulted in FDA approval for a next generation formulation of Acetadote. We believe this was a critical step in supporting the product which continues to deliver strong growth for us, as well as provide potentially life saving treatment for patients suffering from acetaminophen poisoning. Another key milestone in 2010 was the first international launch of a Cumberland product with our partner Phebra's introduction of Acetadote in Australia. The progress we made on international fronts last year laid the foundation for our plans to expand globally and facilitate additional ex-US product launches. Along those lines, today I'm pleased to announce that DB Pharm Korea, our partner in South Korea, has recently received regulatory approval for Caldolor in their territory. This marks the first approval for Caldolor outside the United States, as DB Pharm Korea now focuses on preparing for the pricing and launch of the product. ¶ We were able to continue to maintain profitability in 2010 and actually exceed our revenue guidance for the year. Total revenue last year increased by $2.3 million to $46 million, highlighted by 16% growth in Acetadote net revenue over the prior year. In a year of ongoing changes in healthcare, affecting the pharmaceutical landscape, as well as the customers we serve, we're pleased with our 2010 results and the continued progression of our long-term goals.

Now, let's take a closer look at our currently marketed products beginning with Caldolor. As I previously mentioned, we continued to make steady progress obtaining hospital approvals and stockings for Caldolor. While we continue to build this base, this quarter we also began the strategic shift to drive pull through use at facilities already stocking the product. The timing of this shift is driven by the fact that we now have in place a foundation of institutions in which we believe we can generate significant volume of use over time.

I'll now turn the call over to Marty Cearnal to provide a further Caldolor update.

Thanks AJ and good afternoon everyone. In the fourth quarter of 2010 we made good progress with Caldolor. Not only with respect to overall hospital stockings, but also with implementation of several new initiatives aimed at encouraging formulary acceptance and preparing for our shift to drive pull through use. As AJ mentioned, as of December 31, we had secured placement of Caldolor at 375 institutions nationwide, representing an increase of 75 facilities over our last report. The previously mentioned publication initiative is a key component in our efforts to continue adding new facilities. As these published studies provide critical evidence to support the product's safety, efficacy, differentiating benefits and overall value.

Early in our launch of Caldolor, it became clear the changes in the healthcare marketplace were forcing hospitals to take a critical look at new products before allowing them to be cleared for use. In addition to strong safety and efficacy profiles, new products must demonstrate clear advantages over products already available at a given facility. Further, price sensitivity and cost cutting standards are playing an ever growing role in the formulary approval process. At Cumberland, our standards for product are equally rigid. Safety and efficacy are most critical, but we must also require that our product offer clear advantages over existing products. Pricing of our branded products must not only provide appropriate margins for the Company, but must also be validated based on the opportunity to contain or reduce costs for the healthcare provider.

We are confident that Caldolor meets all of these criteria. We recognize that formulary committees have hired more stringent standards today than in years past and we are highly motivated to perform the work necessary to continue educating the medical community about Caldolor. Over the past several months, our sales and market team has been working hard to finalize the development and implementation of new training and marketing materials for use in promoting Caldolor to a much larger audience within our targeted hospitals. These activities incorporate all that we've learned during 2010 about how the product is best positioned, as well as key information from studies published over the last few months.

As AJ mentioned, our sales teams will continue pursuing new facility approvals and stockings, however in the first quarter of 2011, we've initiated a dual strategy to also drive pull through use in sales of the product. This means that our sales teams have been calling on facilities that have approved Caldolor to address the extensive list of medical professionals who will use or influence use of the product on a daily basis. This shift includes the entire sales organization. Although time allocation varies from rep to rep based on the level of formulary penetration in their respective territories.

As you might imagine, the physicians and pharmacists who make determinations related to formulary additions have a certain set of criteria by which they evaluate products. These formulary committee members are highly focused on cost, for example, especially in today's healthcare reform environment. While we continue to address this audience, we have begun turning some of our attention to those medical professionals most directly involved in the daily treatment of medical and surgical patients. We're now addressing a wider audience including surgeons, anesthesiologists and numerous other potential Caldolor users that will influence pull through with training and materialises targeted to their specific needs. We believe that our new messages, focused on creating widespread use of Caldolor will encourage a ramp in sales that should develop over the course of the next year, and move us toward our long-term sales goals for the product.

Let's spend a few minutes on some of the key messages that are driving our pull through initiatives. We previously announced that the publication of our clinical studies supporting the safety and efficacy of Caldolor in pre and post operative orthopaedic surgery patients. This study, which was published in the August edition of the peer review journal, Pain Medicine, demonstrated that Caldolor significantly decreased morphine use, while also improving pain control when compared with morphine alone. In addition, and very importantly, this study demonstrated that Caldolor can be safely administered at induction of anesthesia, and reduces both pain and morphine consumption significantly throughout the most painful 24-hour period immediately following surgery. This data provided evidence that Caldolor is safe for pre-operative administration, and it importantly distinguishes Caldolor.

In a recent press release we highlighted the importance of this message to anesthesiologists from which Caldolor is garnering strong support. Anesthesiologists administering the product prior to incision are reporting that Caldolor preemptively combats the cascade of surgical pain, coupled with its continued use in the post operative setting, it's resulting in dramatically improved pain control for patients. Caldolor is providing a dual effect of reducing opioid use and lowering patient levels through analgesic and anti-inflammatory actions. Another important focus for four our new messaging is the availability of data demonstrating that Caldolor can be safely administered as a shorter more rapid infusion. In 2010, we learned that hospitals had an interest in dosing Caldolor over a shorter period of time. Our earlier clinical trials dosed the product over 30 minutes.

We recently announced the publication of data from a clinical trial in healthy volunteers evaluating the pharmacokinetics, safety and tolerability of a rapid infusion of Caldolor compared to oral ibuprofen. The study which was published in the January issue of the American Journal of Health System Pharmacy, demonstrated that the maximum plasma concentrations of Caldolor when administered over five to seven minutes was approximately twice that of oral ibuprofen. In addition the time to maximum plasma concentration was six and a half minutes with Caldolor compare to one and a half hours of oral ibuprofen.

The study indicated that the rapid infusion of Caldolor was both safe and well tolerated as well as providing important new pharmacokinetic data for medical professionals. Caldolor represents a compelling opportunity for hospital physicians to improve patient care at a time when the latest national health statistics report published by the US Government concerning emergency room drug use, shows that ibuprofen is now the most frequently and widely prescribed drug in America's emergency rooms.

We're extremely encouraged by ongoing reports from the field relaying the numerous ways physicians are using Caldolor to improve quality of care for patients. Support from the hospital community is growing, as our momentum with hospital stockings is also growing. Our sales team is energized and well motivated as they begin to educate and generate excitement about Caldolor across a much larger target audience. Now I'll turn it back over to you, AJ.

Thanks for that update, Marty. I'd like to provide an update on several new clinical studies that are currently underway with our Caldolor product. As part of our phase 4 commitments to the FDA, we've initiated two multi-center trials evaluating Caldolor for the treatment of pain and fever in pediatric patients. Our goals with these studies are to not only comply with the FDA's requests, but also to potentially expand our labelling into the pediatric population. In addition, we've initiated two new registry studies related to the administration of Caldolor.

As Marty discussed, we have newly published clinical data supporting the safety of a rapid five to seven minute infusion of the product. The results from that study demonstrated that the rapid infusion of Caldolor was well tolerated in healthy volunteers. These two new studies are designed to bridge that safety data to patients treated with the product and will specifically measure efficacy outcomes for pain and fever after the rapid five to seven minute infusion. Positive outcomes from these studies will provide additional safety and efficacy data for the shorter administration time that can be used to enhance our promotional efforts.

So now let's move on to Acetadote our injectable treatment for acetaminophen poisoning. In January the FDA initiated a campaign to heighten awareness of the potential toxicity associated with acetaminophen and announced that they're asking manufacturers of prescription acetaminophen combination products to limit the maximum amount of acetaminophen used in these products to 325 milligrams per tablet in an effort to reduce adverse events. We welcome FDA's efforts to heighten awareness of this problem which continues to represent the leading cause of poisoning in the United States. We understand these acetaminophen poisonings are under reported and under diagnosed and hope the FDA's initiative will lead to more patients being helped by Acetadote.

As I previously mentioned, in 2010 we completed a development program based on a phase 4 commitment made to the FDA upon receipt of the original marketing approval for Acetadote. We agreed with FDA to explore new formulation of the product that was free of certain elements known to cause allergic reactions in some patients. Cumberland initiated a program to develop a new formulation that addressed the FDA safety concerns and could be scaled in a commercial manufacturing setting, without compromising potency, solubility or stability. We submitted a supplemental new drug application for this new formulation to the FDA in October of last year, which was accepted for a priority review, and in January of this year, we received FDA approval for the new product.

The proprietary new formulation does not contain ethylene, diamine, tetracetic acid, or any other stabilization or chelating agents and is free of preservatives. In addition, we obtained approval for an extended shelf life with the new product from 24 to 30 months. Following approval in January, we announced we would immediately commence the US launch activities for the new formulation.

Today, I'm pleased to report that our US launch activities for this new product are largely completed. We successfully manufactured, packaged, tested an released commercial supplies of this new product. And we've worked with our wholesalers to transition their inventories from the original to the new formulation. The original formulation has been de-listed and shipments of the original product have new ceased. Cumberland is filling all Acetadote orders with the new product. New marketing materials have been developed and rolled out to our sales force and a communications campaign has been initiated to supply poison control centers and US hospital pharmacists as they begin to use the new formulation.

The approval and launch of this next generation of Acetadote product, is consistent with our commitment to continue developing all our products whether to expand them into new patient populations or to improve upon existing formulations. We are pleased to now introduce the new and improved Acetadote to the hospital community and the growing number of patients who can benefit from it. Obtaining FDA approval for and launching the new version of Acetadote is also an important step in our strategy to extend the life of the product so that it will continue to represent a value driver for Cumberland.

We've been able to deliver strong growth with Acetadote since its introduction in 2004 and believe this is still ample room to grow the product, based on its currently approved indication, as well as potential for use in some new patient populations. We're also working with the US patent and trademark office regarding our application for a patent that would protect the proprietary nature of our new formulation. The issuance of such a patent is another component in our strategy to support Acetadote and these discussions with the PTO are progressing.

In 2010 we also submitted a supplemental new drug application to the FDA to request expansion of the labelling of Acetadote to patients with non-acetaminophen induced acute liver failure. That application included data from a clinical trial led by investigators at the University of Texas Southwestern Medical Center, which indicated that early stage acute liver failure patients treated with Acetadote have a significantly improved chance of survival without a transplant. This study also showed that these patients can survive a significant number of days longer without transplant, which would provide those requiring transplant increased time for a donor organ to become available. In May 2010, the FDA officially accepted this sNDA and granted a priority review with a response expected in September of last year.

In August, we announced that the FDA extended its review of this sNDA by three months resulting in a new PDUFA goal date of December 2010. In December, the FDA issued a complete response letter indicating that it had completed its review of the application and had identified additional items that must be addressed prior to the approval of this potential new indication. We are currently in active discussions with the FDA to gain clarity on the pathway to approval for this new indication and we continue to believe that Acetadote can offer a valuable treatment option for this critically ill patient population.

I'll now turn to our Kristalose product. In the fourth quarter of 2010 we announced the publication of a patient preference study evaluating Kristalose, our prescription laxative packaged as a crystalline powder compared to liquid laxatives products. This study, which appeared in a recent issue of Clinical and Experimental Gastroenterology, showed that patients with chronic constipation preferred the taste, consistency, and portability of Kristalose over similar products in liquid form. Overall, patients preferred Kristalose compared to liquid laxatives.

We believe this data is very relevant to our marketing activities for Kristalose, as a key differentiating factor for the product is its ability to enhance patient compliance. We believe the portability and convenience of Kristalose, combined with its clear and tasteless consistency, offers competitive advantages over bottles of sweet, syrupy, liquid products. This new publication helps us evidence that laxative prescribers can encourage patient dosing compliance if they prescribe Kristalose. We have launched a new marketing campaign featuring this new data and expect to see positive results from it in 2011.

I'll switch gears now and talk about another important element of our strategy, which is to develop international partnerships in order to expand our business globally. While we focus our commercial efforts on the United States, we are working to identify appropriate ex-US market where our products can address poorly met needs. 2010 was an important year for us on this front as we continued to build our international partner base and progress the regulatory activities to make our products available in other countries. These activities resulted in the first commercial launch of the Cumberland product outside the United States when our partner Phebra launched Acetadote in Australia in the fourth quarter of 2010. This launch was an important milestone for Cumberland and our intentions are to continue growing into other global markets so it will be the first of many. Phebra has also received approval to market Acetadote in New Zealand and is pursuing regulatory approval for Caldolor in those countries.

Other international developments in 2010 included entering into an exclusive agreement with Alveda Pharmaceuticals, a Toronto based specialty pharmaceutical firm, for commercialization of our Caldolor product in Canada. In addition, our South Korean partner for Caldolor, DB Pharm Korea, recently received marketing approval for the product in that country. We look forward to working with these partners to progress their initiatives and we also continue discussions with potential new partners for other international markets.

So, let's turn now to a more in-depth look at our fourth quarter and full year financial results. I'll ask Dave Lowrance, our Chief Financial Officer to provide that update.

Thanks, AJ and hello everyone. I would like to start by highlighting our continued revenue growth. For the three months ended December 31, 2010, net revenue was $12.8 million, up 20% from $10.7 million during the corresponding period in 2009. This quarterly revenue growth was primarily due to year-over-year growth in revenue of Acetadote as well as an increase in Federal grant revenue. For the year ended December 31, 2010, total net revenue increased by $2.3 million to $45.9 million, up from $43.5 million for 2009. This annual revenue growth was also primarily attributable to the increase in Acetadote product revenue and the increase in grant revenue.

Our total operating expenses for the three months ended December 31, 2010, were $10.6 million, compared with $10 million for the same period in 2009. This increase was driven primarily by increased research and development expenses. For the year-ended December 31, 2010, total operating expenses were approximately $39.4 million, compared with $37.8 million for 2009. Here, the difference was primarily a result of increased selling, marketing and general administrative expenses, partially offset by lower cost of products sold and research and development expenses.

On an EBITDA basis, earnings before interest, taxes, depreciation and amortization were $2.5 million for the fourth quarter, up 176% from $0.9 million for the prior year period. EBITDA was $7.5 million for the year ended December 31, 2010, compared to $6.6 million for 2009. Net income for the fourth quarter increased more than 189%, to $0.8 million compared to net income of $0.3 million for the same period in 2009. This increase in net income resulted primarily from a 223% increase in operating income, coupled with a 64% decrease in interest expense, that was partially offset by an increase in our effective tax rate compared to the fourth quarter of 2009. Our net income for the year-ended December 31, 2010, was $2.5 million, compared to $3.1 million for 2009. This decrease was primarily a result of higher interest expense, associated with the expansion of our credit facility in the third quarter of 2009, and an increase in our effective tax rate in 2010.

Diluted earnings per share for the fourth quarter were $0.04, up 300% from $0.01 per share in the fourth quarter of 2009. Diluted earnings per share for the year ended December 31, 2010 were $0.12 compared to $0.17 for 2009. At the end of the year, we had approximately $65.9 million in cash and equivalents, up from $65.5 million as of the end of the third quarter. Total assets at December 31, 2010, were $92.1 million.

To date, we've used proceeds from our initial public offering to support the launch of Caldolor to significantly expand our sales organization, and to repay debt in 2009. The remaining proceeds are available for continuing to support our products and business development activities. As of December 31, 2010, we have approximately $7.2 million of debt outstanding, with $2.7 million of that classified as current. During 2010, we paid down a total of $12.7 million of debt, which accounts for the bulk of the decrease in our cash balance during the year. We remained profitable during this time, resulting in a 54% increase in our retained earning, which totaled $7 million as of the end of 2010, compared to $4.5 million at the end of 2009.

And now, I'll provide a break out of revenue by product for 2010, as well as offer some forward-looking remarks before turning it back over to AJ. Net revenue for Acetadote in 2010 was $35.1 million, compared to $30.2 million in 2009. Representing 16% growth and furthering a positive trend that we expect will continue in 2011. Net revenue for Kristalose in 2010 was $9.5 million, compared to $9.7 million for the prior year. And while net revenue for Kristalose was down slightly in 2010 compared to the prior year, gross sales of the product actually increased by 7%. This reduction in net revenue was due to an increase in rebates and discounts, including rebates related to recent changes in healthcare legislation. We believe that the growth and net differential has now stabilized and that we can resume a growth track for the product going forward in 2011.

We did not ship material amounts of Caldolor in 2010 resulting in net revenue of $0.1 million for the year, compared with $3.3 million in 2009. I will note that 2009 Caldolor revenue stemmed largely from our initial launch and wholesaler purchases of the product. In 2010, wholesalers were drawing down on inventory from their initial purchases, and as this transition continues and pull through activities gain traction, we anticipate working through the remaining inventory at the wholesalers in 2011 with reorder volume building and ramping during the second half of the year.

In August of 2010 we began providing guidance regarding our revenue expectations with a range of $42 million to $43 million. Following the third quarter, we raised our 2010 guidance to a range of $43 million to $45 million, and are pleased to have exceeded those expectations with a net revenue coming in at $46 million. In 2011, we expect to see a continued growth trend for Acetadote, a growth trend for Kristalose and a ramp in Caldolor sales during the second half of the year based on our transition to pull through sales activities. We also expect a higher R&D spend, more in line with our R&D expenses prior to Caldolor's approval due to increases in clinical activities.

Based on these assumptions, we expect our net revenues for 2011 to be between $50 million and $54 million. While we are not providing quarterly guidance, please keep in mind that our first quarter tends to be seasonally lighter than the preceding quarter and lighter than subsequent quarters. In addition, we have Acetadote's transition to the new formulation in the first quarter, which entails a several week halt in shipments to wind down the prior product inventory levels at our wholesalers. ¶ With that, I'll turn the call back over to AJ, who will be happy to address any follow-up questions.

Thank you, Dave. Well, during 2010 we made progress on many fronts and accomplished several milestones. Highlights included our growth in hospital stockings for Caldolor, completion of the publication initiative to support our products, submission and subsequent approval of our new Acetadote formulation, and the inaugural launch of the Cumberland product outside the United States.

A couple of other recent developments include the addition of two key members to the Cumberland team. In early January, we announced that Joey Jacobs had joined our Board of Directors. Joey is the former Chairman, President, and Chief Executive Officer of Nashville based Psychiatric Solutions, which he co-founded in 1997 and grew into a $2 billion healthcare provider. In 2010, Psychiatric Solutions was acquired by Universal Health Services for $3 billion. We feel very fortunate that his first move following the sale of his Company was to join our Board. Joey has more than 30 years of experience in the healthcare industry, including 21 years at Hospital Corporation of America, or HCA. We believe his hospital expertise as well as his experience in building a successful public healthcare company, will be a great value to Cumberland and our Board.

We also recently announced the appointment of Tan Shaw Chun as Director of International Business Development. Chun is based in Singapore and will lead our expansion initiatives across Asia. Chun has nearly 20 years experience with international pharmaceutical firms, Hospira, MainPharma and Faulding Pharmaceuticals, all global pharmaceutical companies focused on hospital injectable products. His expertise with acute care injectable products along with his knowledge of the Asian hospital market, will be very helpful in our efforts to introduce our products into that part of the world.

I'll finish by noting that we are determined to expand our product portfolio through the addition of a new product in 2011. Because we want to maintain a sharp focus on Caldolor and our other marketed products, we believe an ideal fit would be a late stage development candidate. Our development team can focus on any remaining work and the regulatory approval process for such a candidate and our commercial team can then prepare for the launch of such a product. We expect such a product to be sourced externally, or internally through our subsidiary Cumberland Emerging Technologies. Our strong financial profile puts us in an ideal position to make such a move in 2011.

I'd now like to turn the call back over to the operator to open the line for questions.

Thank you, sir. Ladies and gentlemen, that concludes the Company's presentation and will now open the call for questions. (Operator Instructions) Our first question comes from Michael Tong with Wells Fargo Securities. Your line is open.

Hi, good afternoon. A.J., maybe just a little broader question certainly there is a recent competitor product entry into this space, so as you look to position Caldolor in formularies, what are the anecdotal comments that you hear back from hospitals or formularies as far as comparisons between the two products or have you seen any push back against inclusion of Caldolor in formularies, or is the intention that the formularies adopt both products?

Hi, Michael. Marty Cearnal here. I think the last point you made is actually what we're seeing. And that is that the products are not being viewed necessarily as competition, and we're not seeing push back against Caldolor as a result of the Cadence product introduction. We're proceeding at what appears at this moment to be an accelerating clip in terms of approvals. We're very happy with our progress, and I think that, over the long-term physicians will probably find some role for both products.

Great. Thanks. I'll jump back in queue

We'll move on to our next questioner, Ami Fadia with UBS, please go ahead.

Hi, good evening just as a follow-up on Caldolor. You'd mentioned that some of the factors that the formularies were considering were the pricing, and have you gotten any push back with respect to the other generics that are available in the market?

There's rally been no change in the situations that we're confronting in the marketplace. As we've said, hospitals all across the country are concerned about cost and products do have to be able to demonstrate their value. We think that where we're going with our clinical studies and with our promotional messages, really address this issue, and that, are demonstrating that Caldolor is certainly worth the approximately $50 a day that it -- that it costs the hospital.

If I can have a second question? Could you give me a sense on what you expect the run rate for sales and marketing and G&A expenses to be next year. Would it, should we use fourth quarter as the average run rate going into next year or should it be something else? And also if you could give us a sense on what the tax rate next year would be like?

Yes, this is Dave Lowrance, first of all, we're not providing specific guidance to net income. It is important to note that in, with respect to Q4, that's the period in which we record annual bonuses, and therefore Q4 G&A is usually higher than prior quarters. And with respect to our tax rate, we do have in 2010 items within our P&L that are not deductible for tax purposes. It's not uncommon for that to continue, so our tax rate for 2010 is a good guide when looking at our financials going forward.

Thank you. Our next questioner in queue is Andrew Hilgenbrink with Jefferies & Company. Your question please.

Following up on Michael Tong's question. Now that Cadence has Ofirmev in the market with 160 sales reps, do you believe there's any need to expand your own sales force to retain, I guess, your share of the voice for the market?

You know, we developed the size and structure of our sales organization working very closely with outside independent experts. We think we've sized our sales organization correctly for the jobs that we've been asking them to do. And we have said that over time we will gradually and prudently expand the size of our sales organization so I don't see any reason for us to re-address our strategy at this point.

All right. Follow that up A.J. with a question on what the plan is for the stock re-purchase going forward?

Well, the Board has approved a $10 million stock re-purchase program, which we have been running each quarter in 2010, bringing shares back into the Company and that program will continue to be available going forward.

Thank you. We do have a follow-up question from Ami Fadia, please go ahead.

Hello. Just following up on the Acetadote related comment. Could you elaborate on what's going on with respect to inventory in the fourth quarter as you switch, will there be any -- are you taking back inventory of the old formulation from the wholesalers or are you waiting for that to sort of be pulled through before you start shipping the new formulation?

Yes, as I commented about first quarter activities, we worked closely with our wholesalers to transition out the current -- the old formulation. That resulted in a halting of us actually shipping product out for a certain period of time here in the first quarter. As they worked through that inventory, we then began shipping the new formulation to the wholesalers .

Yes. But why would you have had to stop shipping while they were working through the existing -- ?

Simply because the wholesalers maintain some level of stock in their warehouses, and we wanted to ensure that that product made it to the hospitals where they use this as a life saving product, as that inventory was used up, we than began shipping the new formulation.

Thank you. Next in queue is Michael Tong. Please go ahead.

Sure. Thanks. Actually that's a follow-up question, because, I mean, I was just wondering whether you could have just basically replaced whatever was in inventory with the new product. This way you don't have any of the old product that's got EDTA in there to begin with, which would be, I believe, transparent to the P&L.

Well, Michael, you know, looking at it from the P&L perspective you know is one angle. But, the other piece of this equation here is, we wanted to ensure that Acetadote was available on a continuous basis across the country because it's potentially life saving product and we didn't want any patient who needed it to be without it.

Okay. And then -- and then the follow-up question on Caldolor, as I look at the revenue guidance, I suppose, it's probably somewhere in the $4 million to $8 million range given where your guidance is, and where Acetadote and Kristalose came in at 2010. Just wondering as some of the initial products are coming up upon almost two years in the channel, maybe a little bit less than that, is your revenue guidance appropriately reserved for product that might be coming back to you as it nears the expiration date?

Yes, Michael let me remind you that Caldolor itself has a five year shelf life.

Thank you. We have one final questioner in the queue. Andrew Hilgenbrink. Please go ahead.

Thanks for taking the question. One follow-up. You guys guided to a higher R&D for the full year. Does that include both these, registration type studies that you had talked about on your call as well as expectations for acquiring a new product or would R&D be higher if you were to license a new late stage product?

Well, to address the first part of that question, the increased R&D spend is based upon activities that we already have planned or that are currently ongoing. So any acquisition of a product that would require additional R&D expenditure would layer on top of our expectations.

Thank you. (Operator Instructions) One moment for questions to queue. There appears to be no additional questioners in the queue at this time. I'd like to turn the call back over to management for any closing remarks.

Yes. This is A.J. Kazimi again. One thing I wanted to clarify was the 375 account that we reported today that had approved and stocked our product back at the end of the December, and I just wanted to note that, that report is as of the end of December and we certainly have more approvals and stockings occurring since and our estimate is that by the early March, early part of this month, we are well over 400, and moving towards our near term goal of 500 institutions approving and stocking our products. And please keep in mind that we have many more formulary approvals that occur in advance of the stockings that we report.

I'd like to note the reason we're reporting stockings is that this information has been attained from several sources, including those that can be independently verified. And it represents the culmination of our institutional approval process that results in formulary approval, and then sale of or product to the facility. So I just thought it might be helpful to clarify the timing and nature of the accounts that we reported today. I'd like to thank everyone for joining us on this call, we appreciate your interest in Cumberland and we do look forward to providing you with our next update following the conclusion of our first quarter. Thank you.

Thank you, sir. Ladies and gentlemen that concludes our conference for today.