Cumberland Pharmaceuticals Inc (CPIX) 2011 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Cumberland Pharmaceuticals fiscal 2011 full-year earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session, and instructions will follow at that time. (Operator Instructions) As a reminder this call may be recorded. I would now like to introduce your host for today's conference, Elizabeth Davis of Corporate Relations. Ma'am, you may begin.

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

Thanks, Elizabeth. Good afternoon, everyone, and thank you for joining us as we review our 2011 results and discuss our strategy for the upcoming year. With me on today's call are Marty Cearnal, our Chief Commercial Officer; and Rick Greene, Cumberland's Chief Financial Officer. I'd like to begin by reviewing some of our 2011 highlights, and then provide an in-depth update on each of our products and discuss our financial performance. We'll conclude the call with Cumberland's outlook for 2012 before opening to questions. So let's begin.

We made significant progress on a number of key strategic initiatives in 2011, resulting in strong revenue and earnings growth as we advanced our mission of improving the quality of healthcare for both patients and providers. We provided our proprietary products to a growing number of patients, driving an increase in total net revenue, from $45.9 million in 2010, to $51.1 million in 2011. This increase of 11.3% was in line with our 2011 revenue guidance. We also expanded our network of partners outside the US to make our products available to patients in international markets. While the registration process and overseas markets does take time, these new partnerships are laying the groundwork for future revenue streams that will contribute to our growth.

Over the last three years, we have invested heavily in the expansion and development of our commercial organization to support the growth of our current and future products. And we are now beginning to realize the impact of the operating leverage provided that investment -- provided by that investment. Our 2011 revenue growth of 11.3%, translated into net income growth in excess of 130%, as our net income grew from $2.5 million in 2010 to $5.7 million in 2011. This financial performance is due to the continued success of our established brands, as well as the strong culture of financial discipline throughout our organization.

We accomplished several key objectives in 2011 that we believe will serve as the foundation for our future growth. One of the most significant achievements last year was the FDA's approval of the next generation formulation of Acetadote. That approval enables us to provide continued support for this potentially lifesaving product. We then launched in transition to the next-generation product during the first quarter last year and grew the brand's volume significantly compared to prior periods. The beginning of 2012 also brought another important milestone for Acetadote, as earlier this month we received a notice of allowance regarding our patent application for this brand. This new composition of matter patent provides strong long-term protection and prompted us to allocate significant resources to support the products' continued growth. Acetadote has become a standard of care for treating acetaminophen toxicity, which continues to be the leading cause of poisoning in the United States. With approximately 35% market share, we believe that Acetadote still has significant potential for growth remaining. We also believe there are substantial opportunities to further grow this brand at new indications and other markets, as well.

In the fourth quarter of last year, we were pleased to announce the acquisition of full rights to the Kristalose brand. Early in the year, we did experience supply delivery disruptions, which impacted Kristalose sales volume in 2011. Ownership of the trademark and FDA registration has allowed us to streamline the supply chain for Kristalose and avoid such disruptions going forward. In addition, full ownership of this brand positions Cumberland to invest in continuing to support Kristalose and return it to a growth product.

Another key milestone achievement in 2011 was the addition of the fourth product to our portfolio, Hepatoren. It's our newest pipeline product for which we have identified several potential niche indications. We were initially developing Hepatoren for the treatment of hepatorenal syndrome, a life-threatening condition for which there is no approved product in the United States. We believe this late-stage, acute care product is an excellent strategic fit for our Company and our hospital sales organization. The clinical development program for this brand is well under way, with product supplies successfully manufactured and IND cleared by the FDA and the Phase II study progressing.

Another primary focus for 2011 was to significantly progress the stocking of Caldolor, our injectable ibuprofen product, into a core group of facilities and then grow pull-through volume in those accounts. Caldolor was approved in mid-2009 following the priority review as the first FDA-approved intravenous treatment for pain and fever. We launched the product later that year, and have continued to introduce Caldolor to hospitals and surgical centers across the country. We've now secured stocking in more than 600 institutions throughout the United States, representing steady progress. And during 2011, we shifted the focus of our efforts from driving formulary approvals and stockings to growing pull-through of sales volume for that product. We continue to receive favorable feedback from the medical community regarding their use of Caldolor to improve the management of pain. Though volume has not scaled as we originally anticipated, physicians acceptance has been, and continues to be, positive.

As we've seen with many recent product launches, the hospital market has become increasingly difficult and time consuming to penetrate. While we remain confident in our ability to build another valuable brand for Cumberland, we recognize that full development of Caldolor will require an extended time frame and a different approach. We've reflected on our experience with Caldolor to help refine our overall commercial strategy and expectations for this product, and we've also revised our sales forecast and outlook for this brand. Today I'm announcing a new commercial strategy that will redeploy resources to support near-term growth opportunities for all our brands, without compromising Cumberland's long-term success. This new strategy will refocus the efforts of our sales organization with a significant increase in support for Acetadote and Kristalose, building upon the important recent milestones for both brands in order to more aggressively pursue near-term growth drivers. At the same time, we'll take a more focused approach regarding our Caldolor promotional efforts, concentrating on the larger opportunity in the management of pain.

This new commercial strategy involves several initiatives, including redeploying our hospital sales force based on Acetadote high-potential targets, and reallocating promotional time with a shift to both Acetadote and Kristalose. We will also complete a consolidation of our sales organization in conjunction with a new territory segmentation that allows for more focus on select priority accounts. We're expanding the sales training and assessment programs that have demonstrated successful results in increasing sales productivity. And, finally, we will work to wrap up our ongoing clinical studies to provide additional data to support Caldolor, and we will phase out the 400-milligram Caldolor vial size in the United States as part of our focus on pain.

Overall, we are pleased with our 2011 accomplishments and believe the Acetadote approval and the Kristalose acquisition milestone, provide important growth opportunities for our Company. Our new commercial strategy will build on this momentum and allow us to more aggressively pursue near-term growth, while also laying the foundation for long-term success. I'll now turn it over to Marty Cearnal to provide an update on the activities we're undertaking to support all our marketed brands and share a more detailed overview of our new commercial strategy. Marty.

Thank you, A.J. Let's start with Acetadote. Following the introduction and approval of the next-generation product in early 2011, we reported second quarter that shortages of the competing oral product positively impacted volume for Acetadote. These shortages continued during the third quarter of 2011 and did contribute to strong year-over-year growth in Acetadote shipments. These shortages were corrected in the fourth quarter, and we experienced a temporary slowing of Acetadote orders, as institutions allowed inventory levels to normalize, following unusually high buying patterns during the summer months. We've subsequently saw these shipments stabilize and resume a more normal growth trend by the end of the year. As we move into 2012, following the receipt of the Acetadote patent, we are shifting our commercial strategy to more aggressively grow this brand. We estimate the annual market opportunity for Acetadote's current indication for acetaminophen-induced liver toxicity to be approximately $120 million. This market continues to grow despite government efforts to reduce abuse of the many products containing acetaminophen.

Clinical studies and Poison Control centers both tell us that this problem persists. We currently have approximately 35% of the market based on our 2011 sales level, implying significant further growth opportunity for Acetadote in its current indication. Our new strategy will increase promotional efforts committed to Acetadote. First, we are redeploying our sales organization to maximize coverage of high-potential Acetadote accounts across the country, in order to drive continued near-term growth for the product. Secondly, we will allocate a much greater percentage of our sales team's time to Acetadote promotional efforts. We believe these efforts, coupled with initiatives to drive higher productivity, will maximize return on the investment in our sales organization.

In addition, we continue to explore opportunities to expand the market potential for Acetadote. We previously reported on our efforts to seek a potential new indication for Acetadote to treat acute liver failure, or ALF, resulting from non-acetaminophen-related causes. Following the FDA's request for additional data, we identified over 200 more patients that had been treated with Acetadote for ALF. We have now completed our analysis of this data and found that while it is supported, some of the case report forms were incomplete and missing information. We want to ensure a quality FDA submission, and have therefore decided to sponsor the collection of data on additional patients. We remain committed to this effort and the belief that Acetadote is of clinical benefit to ALF patients. Further, we remain committed to the continued development of our products in order to make them available to new patient populations.

Now on to Kristalose. We initially began co-promoting this brand in 2004. In 2006, we acquired the exclusive US license to Kristalose and relaunched it under the Cumberland brand. Kristalose is the only prescription laxative product that features the established safety and efficacy of lactulose, combined with the convenience of a pre-measured powder dose. In November 2011, we acquired the FDA registration and trademark for Kristalose and now own the worldwide rights to this brand. This important development provides a number of benefits to Cumberland. Moving forward, this will allow us to simplify the supply chain and avoid supply disruptions like those we experienced in 2011. We have been pleased with the recovery of prescriptions for this brand after we were able to restore full supply late in 2011. This recovery gives us the confidence to allocate additional promotional time and effort to this brand as part of our new strategy.

The acute and chronic constipation market is large, but crowded with numerous products; many generics. Ownership of the FDA registration and trademark will allow Cumberland to explore new growth opportunities for this brand, including new markets and new indications. We can now pursue opportunities to make Kristalose available in international markets and invest in the development of new indications. The chemical properties of lactulose, combined with the unique powder presentation of Kristalose, could offer benefits to patients in other therapeutic areas. Now that we own the assets associated with this brand, we can explore investment in these growth opportunities.

The next area I'd like to cover is our new commercial strategy for Caldolor, which has been driven by a number of factors. First, continued positive feedback from physicians assures us of the product's favorable medical benefits to patients and providers. In addition, we're seeing a growing backlash regarding narcotics used in the hospital setting, and as a result, a growing need for Caldolor use. While these dynamics support Caldolor's long-term market opportunity, the dramatically increased focus on pharmacy costs in hospitals has been a more significant obstacle than originally anticipated. We have consistently said that we will continually evaluate all of our product strategies, and based on our analysis and observation, we have crafted a new strategy for Caldolor heading into 2012.

While Caldolor has the potential to improve patient care in a broad range of areas within the inpatient and outpatient institutional settings, we are adopting a more focused approach. We will be targeting a more limited number of select priority accounts, specifically focusing on the opportunity in pain management. We expect this concentrated approach will be more productive and cost-efficient as a way to promote the product in the current market environment. We believe our new commercial strategy can build Caldolor in this environment to $50 million in annual sales over the next five years, on its way to more significant sales volume in the longer term.

As a part of the redeployment of our sales resources to target Acetadote potential and focus on select priority Caldolor accounts, we will be able to consolidate our sales organization, moving from 113 reps and managers to 100. This consolidation will be completed by the end of the first quarter and will increase our coverage of Acetadote market potential, while reducing overall sales and marketing expenses. We continue to develop this more efficient and targeted sales organization into a high quality specialty force capable of promoting both current and future products. As part of this development, we will continue to implement new sales training and assessment tools to further enhance productivity.

As a part of our strategy to focus on Caldolor's pain indication, we've decided to phase out the 400-milligram vial size. This vial size was targeted at the fever indication. Given the current volume of the product and our revised forecast, it did not make sense to continue to offer two vial sizes. In addition, hospitals can provide two fever doses from one 800-milligram vial, and reduce their cost per dose. Clinical trials for pediatric, pain and fever, and the adult registry studies with Caldolor, are ongoing. Once complete, these studies will provide important new data to further support and enhance our promotion of the brand in the US and international markets. With that, I'll turn it back over to you, A.J.

Thank you, Marty. Moving beyond our commercial brands, I'd like to share an update regarding our development activities. In early 2011, Cumberland acquired the rights to ifetroban and initiated clinical development under the brand name Hepatoren. Ifetroban had previously been developed by a large pharma company through seven Phase II studies targeting significant cardiovascular indications. That development program did not meet all its goals for these large indications, and the product was subsequently donated to Vanderbilt University. Researchers at Vanderbilt identified ifetroban as a potentially valuable compound in treating patients for several new indications. Vanderbilt, in turn, partnered with Cumberland Emerging Technologies, or CET, our majority-owned subsidiary, to transfer all the associated data and manufacturing know how and establish a plan to redirect and complete ifetroban's development.

We've initiated development of an injectable formulation of ifetroban to treat patients suffering from hepatorenal syndrome, a life-threatening condition involving progressive kidney failure, for which there is no US-approved pharmaceutical product. Hepatoren will be targeted to hospital critical care physicians and share many of the same call points as Acetadote. We've reached an agreement with the FDA regarding their requirements and obtained their clearance for the product's investigational drug application, or IND. We've also commenced product manufacturing and initiated a multi-center Phase II clinical study with patient screening under way at major institutions around the country. We remain optimistic about this product's potential, and continue to believe it is an excellent strategic fit, given our strong presence in the hospital acute care arena.

Before we turn to a financial update, I'd also like to review our international activities. We've continued to build our international network of partners and progress our brands for these markets. Today I'd like to report that Alveda Pharmaceuticals, our commercial partner in Canada, received approval to market Caldolor in that country. We will now work closely with Alveda to support their commercial launch of this brand here in 2012. I'm also pleased to announce that we have reached a major new agreement with Harbin Gloria Pharmaceuticals, a China-based pharmaceutical company for the commercialization of both Caldolor and Acetadote in their country. Under the terms of this new agreement, Harbin will have the exclusive rights to register and commercialize both Acetadote and Caldolor in China. In exchange for this license, Cumberland will receive up front and milestone licensing of payments, as well as royalties on product sales.

We believe this represents another important milestone in our strategy to grow Acetadote and Caldolor in other markets, and Cumberland will continue to work to build our brands and build international market share with the goal of helping many more patients around the world. We're delighted to partner with Harbin Gloria to expand the global presence of our products and improve the quality of care available to hospitalized patients in China. Expanding into new international markets is a key component of our growth strategy, and this partnership represents an important milestone in our effort to establish a strong Asian presence. We continue to make progress in the international markets and expect them to become important contributors to the Company in the coming years. So let's now turn to our financial performance for 2011. Rick, would you please walk us through those results?

Yes, A.J,, thank you. Good afternoon, everyone. I'll start by highlighting our continued revenue growth. For the year ended December 31, 2011, total revenues increased by $5.2 million to $51.1 million, from $45.9 million for 2010, representing year-over-year growth of 11.3%. Net revenue for Acetadote in 2011 was $42.5 million, compared to $35.1 million in 2010, representing growth of more than 21%. Net revenue for Kristalose in 2011 was $8.5 million, compared to $9.5 million for the prior year. This change was largely due to the impact of supply shortages referenced earlier.

During the fourth quarter of 2011, net revenues were $10.9 million for Acetadote and $2.3 million for Kristalose. While Caldolor growth sales grew during the year, net revenues were negatively impacted by reserve for returns taken in the fourth quarter related to the discontinuance of the 400-milligram vial product. That resulted -- that reserve resulted in negative net revenue of $0.1 million for 2011. Caldolor growth sales during the fourth quarter were $0.1 million. As a result of the reserve, Caldolor net revenues were negative $0.2 million for the quarter, and reduced our total net revenues for the year. For the three months ended December 31, 2011, net revenue was $13 million, up from $12.8 million during the corresponding period in 2010.

For the year ended December 31, 2011, total operating expenses were approximately $41.3 million, compared to $39.4 million for 2010. This increase was primarily a result of increases in cost of products sold, research and development, and general and administrative expenses. Total operating expenses for the three months ended December 31, 2011, were $11.3 million, compared to $10.6 million for the prior-year period. Net income for the year ended December 31, 2011, increased more than 130% to $5.7 million, compared to $2.5 million in 2010. Net income for the fourth quarter increased nearly 9% to $0.9 million, compared to $0.8 million for the same period in 2010. Diluted earnings per share for the year ended December 31, 2011, were $0.28, up 133% from $0.12 in 2010. Diluted earnings per share for the fourth quarter were $0.04, consistent with the fourth quarter of 2010. At the end of the year, we had approximately $71 million in cash and cash equivalents. Total assets at December 31, 2011 were $95 million. During 2011, we retired our term loan and expanded our senior credit facility from $6 million to $10 million, further expandable to $20 million. In addition, we extended the facility's maturity to 2014, reduced pricing, and arranged more favorable financial covenants.

Before turning the call back over to A.J., I would like to provide our financial guidance for 2012. For 2012, we will be begin providing earnings guidance. We expect 2012 diluted earnings to be in the range of $0.32 to $0.38 [See Press Release] per share, reflecting growth of about 15% to 30% over 2011 levels. We believe earnings are a good indicator of the value we're delivering to shareholders. Our accelerating profitability reflects our culture of fiscal discipline and return on investments we have made in building our organization. This guidance reflects a continuation of the existing trends, as well as our expectations for results of implementing our new commercial strategy. With that, A.J., I'll turn the call back over to you.

Okay. Thanks for the financial review, Rick. We were very pleased with the progress Cumberland made in 2011. And in addition to delivering solid financial results, we accomplished several key objectives that will serve as the cornerstone for our future growth. The approval and successful launch of the next-generation Acetadote, and the acquisition of the worldwide rights to Kristalose, positions these brands for continued near- and long-term success. We also added a fourth product, Hepatoren, which we believe is an excellent complement to our current offerings. In addition to these three milestones, we continue to focus on incremental growth of our brands, significantly increasing Acetadote sales, while building physician support for Caldolor and making steady progress stocking the product in over 600 institutions.

We're already building on that momentum here in 2012. The year is off to a fine start with the allowance of the Acetadote patent which extends the life of this important product, and the recent agreement reached with Harbin Gloria for China. As we look to 2012, we will continue to pursue growth for each of our established brands. It is important to note we will also pursue additional patent protection, as well as new international partnerships for our brands. We will also seek opportunities to expand our portfolio through new indications, and we will work hard to deliver a fifth product this year. Most significantly, the implementation of our new commercial strategy will support a highly targeted approach that will increase operational efficiencies, while driving near- and long-term growth across our brands. As always, we will continue to focus on strong revenue and earnings growth, acting with financial discipline, and remaining focused on our mission of advancing patient care. And now I'd like to turn the call back over to the operator so we can open the lines for questions.

(Operator Instructions) Our first question comes Ami Fadia from UBS. Your line is now open.

I had a couple of quick questions. First of all, would you elaborate a little bit on the sales force realignment plan? The change in the total sales reps from 130 to 110, what is the implication on the SG&A spending line. And plus, for the 100 reps that you'll have by the end of the first quarter, how do you plan to allocate those across the three products? And then I have one or two other follow-ups.

Let me start with that one. This is a conclusion of a project that we began during 2011. We began with a careful analysis of product potential across all three of our products, and made the decision to reallocate our people, relocate certain territories, and gradually reduce the number of sales people and managers that we had to match the potential that we identified. Remember that we are, as we said, moving into 2012 with a revised strategy. That strategy focuses on a specific number of high-priority accounts for our Caldolor product, and allows us to direct additional time to the support of both Acetadote and Kristalose.

Could you quantify the percent of times of sales force time that would be allocated to the three products, and maybe any implication on the spending?

Let me deal with the allocation part of that question. Our hospital sales organization will be spending 50% of their time promoting Acetadote, and 50% of their time promoting Caldolor. Our field organization will be spending 70% of their time promoting Kristalose, and 30% of their time promoting Caldolor.

I'll touch on the expense reduction. We expect a reduction in 2012 as a result of the changes in the sales force. We also expect to pick up additional dollars as a result of lower FDA fees for discontinuing the 400-milligram product.

Got it. That's very helpful. And just with respect to the partnership in China, could you quantify the up-front amount that you would be receiving? And also with respect to Acetadote, could you remind us what the FDA requirements are for the acute liver failure indication, and give us a sense of how much of that information you already collected, and if there is anything else that you need for submitting the (inaudible) information for approval?

Okay. I'll address your questions. You first asked about China, and I just want to say that we are delighted with Harbin Gloria as we feel very appropriate partner for Cumberland in China. They are a rapidly growing Chinese pharmaceutical company with strong coverage of the Chinese hospital market. And they are prepared to apply their resources to both register and commercialize our products in their country. With that deal has just been announced and has just been signed, and they're on their way back to China. And we had to disclose this development, but we're not in a position to go into the financial details at this time. We want to give them the opportunity to make a subsequent announcement on their market. They are traded on one of the Chinese exchanges. But I can tell you that it's a major opportunity for Cumberland. It's one of the world's largest markets for pharmaceutical products, and the agreement does include a combination of milestone and royalty products, royalties associated with our product sales.

Turning to ALF, remember we identified acute liver failure from all causes, other than acetaminophen poisoning, as a new indication and opportunity for Cumberland. And we also identified a study that had been conducted in this area which served as the basis for our original submission to the FDA. FDA agreed that the data in that study was supportive for this indication, but did ask for some additional information. We identified subsequently over 200 patients who had been treated with Acetadote for acute liver failure, and have now completed our analysis of that additional data. And again, while we found it supportive, unfortunately, the way it was collected, it was incomplete. They were missing information in the case report forms. So we want to assure a high-quality submission in order to get this indication approved. And therefore, we've taken this decision to go ahead and sponsor an additional collection of patient data in a high-quality manner.

This initiative to pursue a new indication for Acetadote was launched in parallel with the patent initiative, as two alternatives for ongoing protection and support for the brand. Now that we have the issued patent, the granted patent, we are -- I'd just say the ALF becomes less of a priority for us, but it is still an indication we want to pursue.

Got it. And then just the pieces potential of $120 million, is that over the next five years?

The $120 million market potential for Acetadote is the market as it exists today. That's the total market of which we have currently approximately a 35% share.

Thank you. Our next question comes from Michael Tong of Wells Fargo. Your line is now open.

Two financial questions. Number one, how much did the return reserve for the 400-milligram dose affect your gross margin in the fourth quarter? And along the same lines, how should we think about gross margin going forward, given the new portfolio of products that you have. Secondly, your tax rate seems to have jumped up quite a bit in the fourth quarter, and again, how should we think about the tax rate going forward?

Michael, the $300,000 that we recorded in reserve was booked in as a reserve in revenue, so it didn't directly affect gross margin. Going forward, you should continue to think about our gross margins in the low 90s. The tax rate, fourth-quarter tax rate, is just a true-up of all year. We're comfortable in the low 40%s, 42%s is what we're targeting for 2012.

Okay, and if I can just follow on the gross margin. What was the push and pull in the fourth quarter? If I back out your full-year numbers from your nine months data, it looks to be that it's more in the mid-80% range. What's the driver for that?

Well, we discussed the revenue reserve. We also recorded reserves related to inventory, as we've discussed in the past. We evaluate our inventory on a quarterly basis and make adjustments related to that. We did take some additional reserves related to inventory in the fourth quarter, and that's caused a decline in the margin to 85% for the quarter.

Thank you. Our next question comes from Jason Aryeh with JALAA Equities. Your line is now open.

Hello, AJ and Marty, congratulations on a terrific job on this Acetadote patent. Everyone doubted you, and you guys were persistent and pulled it off. And I think clearly this is the main value driver for the Company, so we commend you. Couple questions, Hepatoren, can you give us the development time line of that? And in the financial side, can you -- we just touched on it a little bit, but we had revenues down, COGS up, R&D up, G&A up, and accounts receivable up. Can you just address why each of those went that direction? Thanks.

Sure, okay. We'll split those questions up. I'll take the Hepatoren question, and then turn it over to Rick to discuss any questions you have on financials. It was a lot of work to transfer ifetroban from the large pharma company with the help of Vanderbilt over here to Cumberland. It involved the transfer of all of the manufacturing, all of the data associated with the brand. And as I mentioned, there were seven Phase II studies, and all of the FDA filings that had been made. Having gotten through all that, the next challenge was to successfully manufacture clinical supplies, which we are pleased to deliver. It was a hard product to make, but we've figured out how to do that, and we do have released clinical supplies. But we also had a visit with the FDA and agree on a development plan and seek their approval to start the clinical studies, which we did achieve that clearance in 2011.

So we have been busy since organizing this study among some 20 major medical centers across the United States, and it is a Phase II study. The study is up and running at a majority of those sites who are now actively screening patients with hepatorenal syndrome. We will go ahead and round out the complement of sites. And all of that work we believe will pay off as we move into the pivotal study, because we will rely on the same group of centers for that pivotal work, as well. So it is difficult at this point to predict exactly when Phase II study will end and the pivotal study will begin, but I feel like we're working hard with this Hepatoren effort and making good progress. Rick, I'm not sure exactly what the financial question were, but I'll turn it over to you to address.

Jason, you may have to repeat the question, but I think you just wanted just to walk through our cost and expenses and talk about changes there. And I'll do the significant line items, and then if there is anything I missed, I'll come back and touch on those. Cost of products being up, we've discussed earlier, up largely as related reserves recorded related to inventory. Research and development, as we mentioned on previous calls, continues to increase. We've got a number of studies ongoing, the costs related to those studies are increasing, and we expect that trend to continue as we close studies out in 2012. G&A increased in the fourth quarter, largely as a result, we always record our annual bonuses to corporate employees in the fourth quarter, and that's the reason it would be up quarter-over-quarter. Those were the three--

And accounts -- thank you. We thought that on the G&A. On R&D, just going back maybe to AJ's discussion on Hepatoren, when you guys in license you talked about a $5 million development expense for the product. Are you guys still there, or has that gone up?

No, I believe we're still there. We don't expect the cost of that to be $5 million in 2012. That will run a course over 2012, 2013, but we're still committed to a $5 million number.

Okay. Great. And then accounts receivable were up fairly significantly, I guess $4.5 million to $7 million.

Yes, we had a very good December, as it relates to sales. We generally run 30 to 35 days in sales outstanding. And because of the December we had, the number of -- the AR number went up. Most of that, all that has been collected at this point, there is no issues in any collectibility related receivables. It has been all collected since the end of the year.

Great. That is what we figured. Then the last question, and clearly, as we have been pounding, I'm sure, much to your non-delight, Caldolor, now we have a post a negative quarter. I realize that is a negative net, but even on a gross basis, $100,000 now, 2.5 years post-launch, and in the face of Ketorolac having a severe shortage. So I guess I'm still confused as to why 50% of our hospital reps' time and 30% of our field forces' time would be spent on a drug that is clearly a money-losing proposition? It just -- I would have expected a more severe cost-cutting around that, and maybe even to try to out-license the product.

Marty here. We remain committed to this product because we continue to see positive feedback from the physician users, and we believe that as we grow that face of users through our current pull-through strategy, we'll build some centers that will, in fact, have an expanding influence. We think the potential remains there. We have revised our forecast down. But for a Company our size, $50 million product out over five years is still a significant contributor. We believe that we can hit those numbers.

I hope so. It would be great. Anyway. Congratulations again on the Acetadote patent. Superb value driver.

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back to management for any further remarks.

Well, yes, I'd just like to thank everybody for taking the time to join us today on our call. I'd like to also acknowledge and thank our employees for their fine and dedicated efforts. We appreciate your time and interest in Cumberland, and we will forward to providing you with updates after the first quarter. Bye, everyone.

Ladies and gentlemen, thank you for participating in today's conference. This concludes today's program. You may all disconnect. Everyone have a great day.