Harrow Inc (HROW) 2014 Q4 法說會逐字稿

Good afternoon, and welcome to the Imprimis Pharmaceuticals fourth-quarter and fiscal-year ended December 31, 2014, financial results and business update conference call. My name is David and I will be your operator for today's call. (Operator Instructions)

Before the call begins, the Company would like to note three points. First, our financial report press release is available on the Investor Relations page of the Company's website at www.imprimispharma.com.

Second, this call is being recorded. Replays of the call will be available shortly after the call concludes through April 12, 2015. Please visit the Investor Relations page of the Imprimis website to access the replay.

Third, I would like to remind everyone that management's prepared remarks and answers to your questions on today's call will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements represent management's current estimates based on current views, assumptions, and expectations that may prove to be incorrect. As a result, matters discussed and any forward-looking statements made are subject to risks, uncertainties, and changes in circumstances that may cause actual results to differ from those discussed today.

Examples of forward-looking statements may include those related to any anticipated growth of the Company's ophthalmology business; the launch of its urology business; the market potential for its ophthalmology and urology products; any anticipated increases in sales of its products or revenues; any ability to achieve third-party payer coverage for the Company's formulations; its plans for prescription dispensing operations, including integration of its two pharmacies and proposed opening of an outsourcing facility in 2015; and any plans to pursue acquisitions of additional formulation opportunities and further develop and commercialize these or any of its other current assets. Imprimis assumes no obligation to update any forward-looking statements in the future. The Company encourages all listeners to review the more detailed discussions related to these forward-looking statements, including the discussions on some of the factors that may cause results to materially differ from those discussed in these forward-looking statements, contained in the filings the Company makes with the SEC, including its annual report on Form 10-K for 2014 fiscal year and the related press release announcing fourth-quarter and year-end results, both of which are available on the Company's website.

I will now turn the call over to Mark L. Baum, Chief Executive Officer of Imprimis Pharmaceuticals. Mark?

Thank you, and thanks to everyone for joining us today. Since this is our 2014 year-end call I want to provide a summary of what we accomplished during the fourth quarter and the past year, discuss trends we see in our business, and also touch on our goals for 2015. I'll then turn the call over to our CFO, Andrew Boll, to review quarterly and fiscal year-end financials. Following Andrew's review of the financial data, I will provide a preview of what we see coming in 2015.

To summarize, in 2014 we launched our ophthalmology business in April with our Go Dropless educational campaign and flagship Dropless Therapy formulations for ocular surgery, primarily cataract surgery. We completed validation and recently introduced our new LessDrops portfolio of combination eyedrops, which are being used for LASIK surgery.

We developed our urology business inlicensing our patented Hep-Lido-A, or HLA, formulation for interstitial cystitis, and recently soft launched the related Defeat IC educational campaign.

We acquired two prescription fulfillment centers, Pharmacy Creations in Randolph, New Jersey, and Park Compounding in Irvine, California, and we expanded their distribution capabilities to an aggregate now of 40 states. We commenced construction on an 8,600 square feet leased facility that, once construction is complete, is expected to serve as a new location for Pharmacy Creations and will help meet anticipated demand, including having a separate outsourcing facility intended to comply with current good manufacturing practices, or cGMP, a manufacturing standard allowed under Section 503B of the U.S. Food Drug and Cosmetic Act.

We do not believe there is another pharmaceutical company in America like ours, which is designed to have a business model efficient enough to access the pharmaceutical market in such an impactful with such a relatively small investment of, capital, and we really have only just begun. Before I review the quarter and the year, I want to discuss our strategy and the disruptive nature of our pharmaceutical development, commercialization, and distribution business model for those of you who may be new to Imprimis Pharmaceuticals.

According to a recent Forbes article, out of 220 drugs approved over the past decade an average of $4.3 billion was spent in R&D cost per drug. This fact caused us to question the sustainability, especially for small companies, of that drug development model, especially at a time when the need for novel and lower-cost medicines has never been greater.

Imprimis is pioneering a disruptive pharmaceutical development business model that allows us to take well-characterized FDA-approved generic drugs and repurpose them for a new use as a proprietary compounded drug formulation. In effect, we take off-patent generic drugs and use them in new ways to solve unmet medical needs, while at the same time seeking to create new patented or patentable formulations. We believe our disruptive model can dramatically lower drug development cost and shorten drug development time frames.

Let me now take the theory to practice. Imprimis owns a drug-combining technology called SSP technology. SSP technology allows for the combination of generic drugs or active pharmaceutical ingredients that ordinarily do not mix naturally, and it allows them to mix. It can make combinations of drug suspensions that were previously not able to be made.

We used our SSP technology to formulate our flagship ophthalmology compounded drug formulation, which is a combination of a steroid and an antibiotic. We own the intellectual property rights to the combined formulation and have filed patent claims on it.

Although we do not own the separate generic components, the steroid and the antibiotic, we do own the IP rates to the combination formulation of the two with our SSP technology. Importantly, without our SSP technology, simply combining the two active generic ingredients together would yield something that is therapeutically unusable.

In other words, imagine if Coca-Cola and cherry did not mix, and we discovered that by using a third ingredient and a new proprietary production process we were able to make the mix in a way that created a new combined formulation, Cherry Coke. In this example we wouldn't own the individual ingredients, the Coke and the cherry; but Imprimis would own the combination formulation, the Cherry Coke, if you will.

Using my beverage analogy, during 2013 and 2014 we sought to acquire numerous Cherry Cokes. Today we own or have inlicensed numerous patented or patent-pending combinations of repurposed generic drugs that are currently being sold or that we soon plan to bring to market.

Once you have assets like we have, assuming you have orders, you need to be able to fill those orders. For us, because we are selling compounded drug formulations, we needed to acquire redundant prescription fulfillment capabilities.

During 2014 we acquired our first pharmacy in New Jersey, and we negotiated to acquire our second pharmacy in Irvine, California, a transaction that closed on January 1 of this year. These acquisitions have in fact given us a base fulfillment backbone to meet market demand for our compounded drug formulations.

Looking into 2015, we recently entered into a lease for an 8,600 square foot space in New Jersey, which will replace our existing Randolph, New Jersey, facility once its lease expires at the end of 2015. We have begun building this space into both a compounding pharmacy and, importantly, an outsourcing facility to help us meet anticipated demand in the coming years and to address other strategic issues I will touch on shortly.

We believe the investments we made in 2014, including our pharmacy acquisitions and our compounded formulation developments, particularly in our core areas of interest, including ophthalmology and urology, have positioned us to generate stockholder value for many years to come.

Let's take a look at our activities in ophthalmology in 2014, focusing on the cataract surgery market and the combination steroid and antibiotic drug I referenced earlier. More than 3.6 million cataract surgeries took place in the US in 2013. It's the number-one invasive surgical procedure by volume.

As a result of the procedure itself, every patient is at risk for inflammation and infection, conditions that if left untreated can lead to devastating results including blindness. Before we entered the market, inflammation and infection were treated by self-administered eyedrops -- usually three separate eyedrops: a steroid, an antibiotic, and an NSAID, which stands for nonsteroidal anti-inflammatory drug. If you add up how many times these drops have to be administered, it is hundreds of times over the course of a month post-cataract surgery.

Keep in mind the patient population for cataract surgery is generally over 75 years of age. So administering drops can be challenging.

For decades pharmaceutical companies have made billions of dollars selling eyedrops. Wouldn't it be beneficial to combine these drugs into one drop -- or better yet, to inject these medicines into the patient's eye at the end of the surgery, to the site and source of the potential inflammation and infection, and relieve patients of the burden of eyedrops altogether?

The problem among others has been that many of the steroids and antibiotics used by cataract surgery patients, they just don't mix together and therefore cannot be injected together. I previously described our SSP technology: it solves this mixing problem and allows for these generic drugs to be combined for injection in one single compounded formulation. Our intellectual property covers a host of relevant combinations of steroids, antibiotics, and NSAIDs.

Our SSP technology has enabled a paradigm shift in cataract surgery, creating the opportunity for what we are branding across the country as Dropless cataract surgery, or Dropless Therapy. Use of our Dropless Therapy formulations can free patients from the high cost and the hassle of applying eyedrops after cataract surgery.

Leading ophthalmologists have been at the podiums of major eye meetings to independently discuss the patient outcomes they have observed by using Dropless Therapy. In these presentations, one, physicians have reported that the single painless 5-second injection of Tri-Moxi, one of our Dropless Therapy compounded formulations, eliminates the need for eyedrops in better than 9 out of 10 patients. This is an important achievement for cataract surgery patients.

Secondly, the reported CME, or cystoid macular edema, rates for physicians using Tri-Moxi are lower than those reported for patients using eyedrops. And after well over 50,000 procedures we have not heard of one single reported case of endophthalmitis, a potentially devastating condition that can occur post-surgery. By the way, the reported incidence of endophthalmitis for eyedrops post-cataract surgery is about 2 in 10,000.

So because of the clinical outcomes that have been publicly reported by ophthalmologists and the fact that our chief competition is multiple bottles of eyedrops, we like our chances to soon become the preferred choice for many ophthalmologists and patients for post-cataract surgery inflammation and infection prophylaxis.

We regularly hear from our physician customers and their staffs, who appreciate not having to deal with phone calls from upset patients who have had their eye drop prescriptions changed at pharmacies or who may have overused one prescription but his insurance company did not pay for a refill. As a result of the work we did in 2014 to lay the groundwork for Dropless Therapy, I am proud to say that Dropless Therapy has taken off in America. Prescription volumes have grown each quarter, and we are filling more prescriptions every week from regular customers.

Beyond the cataract surgery market in our injectable Dropless Therapy choices, last year we used our SSP technology to make combination eyedrop versions of our Dropless Therapy formulations, including a new compounded formulation of prednisolone and moxifloxacin, called Pred-Moxi. Once again, without our SSP technology these generic drugs do not mix sufficiently well.

These new combination eyedrop formulations were tested for use in another high-volume ophthalmology market, this time for LASIK surgery patients. The idea exiting from Dr. Bill Wiley, one of our valued Dropless Therapy cataract surgeon customers.

The question was whether we could reduce the number of eyedrop applications for LASIK surgery patients, and save these patients money and hassle, while at the same time increasing patient compliance. There are approximately 700,000 LASIK procedures in the US every year; and after assessing two formulations -- two LessDrop formulations -- on 30 patients each, Dr. Wiley stated, and I quote: "By combining the steroid and antibiotic medications together, we were able to provide excellent surgical outcomes and reduce our patients' use of eyedrops following LASIK surgery by 50 percent."

"In a highly competitive LASIK market," he said, "any convenience recognized by the patient can provide a marketing advantage to a practice." And "based on our findings, we intend to fully integrate" these "formulations into our" practice. End quote.

We believe this new family of formulations, which Imprimis is branding in the name LessDrops, will serve our ophthalmologist customers and their patients in several important ways. Importantly, our LessDrop formulations will be offered at a significant cost savings compared to many other eyedrop alternatives available today.

LessDrops will be a family of combination formulation choices for our physician customers: a triple drop consisting of an antibiotic, an NSAID, and a steroid; secondly, a steroid and antibiotic combination; and thirdly, an NSAID and steroid combination. We are confident that our ability to combine necessary medicines for LASIK patients provides us with yet another opportunity to become the preferred choice for many ophthalmologists treating inflammation and infection post-LASIK surgery.

Cataract surgery and LASIK are the initial uses for SSP technology and are formulations in ophthalmology. We expect our customers, our physician customers, to continue to find new opportunities to use our platforms to treat inflammation and infection in other ophthalmic conditions this year.

Now that I've discussed our first two ophthalmology family of products based on our SSP technology, I'd like to talk a bit about our sales strategy, which is a land-and-expand strategy. It is noteworthy that the ophthalmologists we are reaching with our Dropless Therapy formulations, which is the injectable formulation, are generally the same physicians who are performing LASIK procedures.

So targeting one group of physicians who perform multiple types of procedures is an efficient way to land -- that land aspect of our strategy. Landing gets us in the door with something unique that the physician can't get anywhere else, that solves important pain points in the physician's practice.

The expand part of our land-and-expand strategy is achieved by offering nonproprietary compounded formulations and prescription drug products to our customers. This is a key initiative for 2015.

How does this work? Our Dropless Therapy or LessDrops physicians prescribe other medicines for their patients, for their cases. They buy these nonproprietary generic products from our competitors. In order to expand our presence in the prescribers' offices we have created targeted clusters of nonproprietary formulations to offer to our customers through our pharmacies.

Examples are in the cataract surgery market: drugs like povidone-iodine as an anti-septic, and mydriatics which are used to open the pupil. Hyaluronidase is another high-cost product for surgery centers that we can save them money on by providing.

These are profitable add-on products that allow us to expand our presence in our physician customers' offices. Our focus is to meet our customers' needs, save them money, and provide better customer service than our competitors.

Because we offer unique advantages over our competition in the markets we serve, we have chosen to approach our current sales and marketing activities as a land grab, as opposed to a margin optimization approach. For example, we purposely decided to make our Dropless Therapy compounded formulations available at prices that would afford us a relatively friction-free access to the market.

In the case of Dropless Therapy, the doctors, ambulatory surgery centers or ASCs, and hospitals are actually paying for the formulation out of their pocket. In essence the schoolteacher, if you will, is paying for the students' books.

In order to be successful with a drug that the physicians or ASCs are paying for out of their piece of the pie, you really need to have something that the market wants. I hope you will agree with our belief that generating more than 240 Dropless Therapy customers, and growing, less than one year after launch of these products and with less than five dedicated sales professionals speaks to the interest level in the market. To give you an idea of the interest we experienced recently, in this quarter of 2015 we collected hundreds of qualified leads at the first three major ophthalmology meetings.

In order to sustain our advantages in the market, to create durability, Imprimis must make our core formulations to a standard called cGMP, which stands for current good manufacturing practices. This is the same standard that larger pharmaceutical companies are held to.

Fortunately, we are operating in a potentially opportunistic regulatory environment. In late 2013 Congress passed and President Obama signed the Drug Quality and Security Act. This new law created an opportunity for companies like Imprimis to invest in a new category of pharmaceutical manufacturing facilities called outsourcing facilities.

Why? Because outsourcing facilities are allowed to ship interstate and without a prescription for an individual patient. These efficiencies, if realized, may allow faster and continued expansion of our formulations into the markets we serve.

As I previously said, we have begun the construction process in an 8,600 square foot space in New Jersey that we intend to serve as a compounding pharmacy and an outsourcing facility. This new state-of-the-art facility will replace our New Jersey facility when its lease is up at the end of the year, and we hope to begin producing our flagship ophthalmic and urologic formulations this year to cGMP standards in our new New Jersey facility.

Let's talk a bit about public payer support for Dropless Therapy. We believe that moving to a cGMP production standard may give us a better case to make to CMS, the Centers for Medicare and Medicaid Services, and other public policymakers that Dropless Therapy should have some level of support from Medicare.

Current Part B Medicare policy mandates that physicians and surgery centers will not be separately reimbursed for administering Dropless Therapy. This policy could limit access to those who might benefit the most from Dropless Therapy, such as the poor and the physically and mentally challenged.

There's also an economic argument to be made that paying Imprimis $100 for a cGMP Dropless Therapy formulation and substantially eliminating the higher cost of eyedrops could, we believe, potentially save CMS over $1 billion a year; and that is just for cataract surgery alone. We believe that Medicare will want patients from all backgrounds to have access to and financial support for medicines like Dropless Therapy, that provide a unique, important benefit to patients that they cannot get from any other currently available therapy options.

We also hope that Medicare is concerned about potentially saving the system about $1 billion a year. And at the very least, we hope that Medicare will soon allow Medicare recipients to have the choice to pay for Dropless Therapy, in many cases save themselves money by not having to pay for eyedrops.

A few final points about our ophthalmology business before I discuss our upcoming urology launch. Revenues from our Dropless Therapy formulations for the fourth quarter increased 101% compared to the related revenue recognized during the third quarter of the prior quarter (sic - see press release, "third quarter 2014"). This equates to over 13,200 Dropless Therapy units sold during the fourth quarter.

We now estimate we service north of 2% of the people in the US who have cataract surgery. While we expect to have sales variability in the first-quarter 2015 due to some seasonality effects, we believe this positive market capture trend will continue in 2015.

Also, a number of instrument and device manufacturers, including some of the largest and most respected names in the industry, are now offering products independently to support Dropless Therapy. We are now working with several of these companies to further awareness of our formulations and to support their interest in building products for Dropless Therapy.

Now I'm going to transition my remaining remarks to one of our most important accomplishments of 2014, which was the planning and execution of our urology program. I am happy to announce that we have commenced sales of one of our key urology formulations and are set to formally widely introduce this formulation to key market participants in May of this year at the American Urological Association, or AUA, conference in New Orleans.

The cornerstone of our urology launch is a patented compounded formulation for interstitial cystitis, which is also sometimes called painful bladder syndrome, that we recently inlicensed from a traditional pharmaceutical company. For those of you who do not know what interstitial cystitis is, or IC, let me take a few minutes to describe this condition.

IC results in reoccurring discomfort or pain in the bladder and the surrounding pelvic region. According to the Journal of Urology, as published by the NIH, nearly 5 million Americans are affected by IC or PBS. IC is highly underdiagnosed, and diagnosis can take on average five to seven years to make.

Because of its underdiagnosis, some leading experts estimate that as many as 10 million American men and women are affected with IC. By the way, about 85% of the patients are women.

Depending on the severity, IC patients will make trips to the restroom to urinate as many as 60 times per day, making it difficult to live a normal, functioning life. Sadly, severe IC patients all too often contemplate, and some even commit, suicide.

The only FDA approved oral medication for symptoms associated with IC is a drug called Elmiron. It is now off patent, but last year had sales of more than $200 million, with peak sales significantly higher than these levels.

For those suffering from IC, unfortunately, Elmiron can take six months to start to relieve IC symptoms and has pretty negative side effects. It also requires multiple doses per day; and if you miss doses, efficacy is diminished.

According to a recent patient survey we conducted in concert with IC Network, which is one of the largest national IC advocacy organizations, out of more than 360 respondents over 65% indicated that they experienced IC-related flares up to once a month or more; and 83% indicated that they have three or more flares per year. This survey revealed that the flares generally last between three to seven days.

So let's imagine that you or someone you love suffered from this terrible condition. She is seen by her primary care doctor for years, while the condition is considered mild and manageable. Eventually she is sent to a urologist, who tries one therapy after another to treat what is yet to be diagnosed as IC.

The disease intensifies and becomes more and more the focus of her daily attention. She knows something is terribly wrong.

People she respects start to think it may be something in her head and not a real disease. The disease is now moderate and approaching severe. She is now becoming less and less functional in her daily life.

Finally, she finds a specialist who understands IC, and she is diagnosed with IC. Her urologist prescribes Elmiron, telling her it will take as long as six months to work and that she may suffer some pretty emotionally and physically challenging side effects.

This is an all-too-real story for many, which we believe explains why patient advocacy organizations are particularly strong in the IC community. We are establishing ties with these IC advocacy groups and with a nationwide network of IC specialists.

We are confident we can make a big difference in the lives of IC patients across the US with our Defeat IC campaign and our patented Hep-Lido-A, or HLA, compounded drug formulation. By the way, please learn more about our Defeat IC campaign by visiting our physician-facing website at the www.DefeatIC.com.

Here are some facts about HLA. HLA, which is delivered to the bladder as an installation, is a recommended treatment for IC according to the AUA treatment guidelines. HLA installation procedures are reimbursable by private healthcare providers and to Medicare beneficiaries under the CPT code 51700.

Based on our internal research, we believe procedure reimbursement ranges from about $150 to $280, depending on the setting of the bladder installation. Reimbursement for the HLA formulation itself has historically been approximately $60; and we have priced HLA at $60 to $65 per dose. We plan to dispense single units and four-packs of HLA.

HLA-based formulations have been studied in four separate double-blind placebo-controlled studies, which have demonstrated that HLA formulations can immediately reduce IC symptoms. In 2014 physicians wrote more than 80,000 prescriptions for compounded HLA, which were filled by four compounding pharmacies across the country.

These prescriptions generated about $5.5 million in sales, and that was with virtually no dedicated sales and marketing effort. Imprimis has the option to convert its currently nonexclusive license for HLA to an exclusive license in April of this year, only a month away. If we elect to do so, in due course we expect we could capture substantially all of the existing legacy prescriptions for HLA in the United States, and we would then begin the process of growing our user base across the country.

Our internally conducted market research has informed us that to date IC bladder installations have not been standardized in terms of content, of active pharmaceutical ingredients, quality of production, messaging, and customer support. Physicians who use HLA and those who would like to use HLA have expressed to us a strong interest in seeing a reputable company serve this underserved market with a high-quality cGMP HLA formulation.

Last but not least, ahead of schedule we have begun to record revenue for HLA sales as we migrate existing prescribers to our Imprimis Rx pharmacies.

What does HLA and our Defeat IC campaign mean for shareholders this year? We believe the total US market opportunity for IC, even at $60 per dose, exceeds $4 billion a year. This is based on an estimated addressable market size of 5 million US patients, with an average of four flares per year, and with each flare lasting 5 to 7 days and requiring about four doses per flare.

Once again, as long as our competition is a pill that may take six months to start working, may cause challenging side effects, we believe we have the opportunity to become the preferred choice for many physicians and their patients seeking to provide relief from the symptoms of IC. HLA gets us in the door, once again, and allows us to land, build the relationship with the urologist or the gynecologist.

Our expand strategy in urology is connected to a few large-market, high-margin, proprietary and nonproprietary urology compounded formulations and drugs that we are excited to be able to offer to our base of HLA urologist customers. These include a new proprietary ED, or erectile dysfunction, formulation and our patented -- patent pending, pardon me -- pentoxifylline injectable formulation for Peyronie's disease, among others.

This time next year we believe our urology business will be a major factor, along with our ophthalmology business, in contributing to the growth we anticipate for Imprimis. I will hand the call over to Andrew Boll, our CFO.

Thank you, Mark. Hi, everyone, and thank you for joining our call. I will run through the fourth-quarter and the full-year financial results and provide a brief financial outlook for 2015.

Total revenues for the fourth quarter were approximately $550,000. Total cost of sales was about $377,000. Operating expenses totaled $2.9 million, yielding a net loss of about $2.75 million for the quarter.

Total revenue for 2014 was just under $1.7 million. Total cost of sales was about $1.1 million, and we recorded a net loss of about $10.1 million for the year, which was consistent with our expectations.

As we move into 2015 we believe that revenues will increase sharply. This year we will be including into our consolidated financials and business strategy the existing sales of our recently acquired California pharmacy, which did over $4 million in sales last year.

Additionally, as we launch new formulations, including our HLA formulation, we believe we will see strong sustainable revenue growth for the year and into the long term. For Q1 revenue looks to be coming in slightly below total revenues for all of 2014, and we expect a large portion of our 2015 revenue being recorded in the latter part of the year.

When operating efficiently, we expect gross margins for our flagship ophthalmology and urology formulations to exceed 50%. If we are able to improve production efficiency and grow order volumes, we expect our overall gross margins will improve throughout the year.

At December 31, 2014, our balance sheet had just over $8 million in cash and cash equivalents and no significant. We had just about 9.3 million shares of common stock outstanding. I will now hand the call back to Mark.

Thanks, Andrew. Looking forward to 2015, we believe our business is at an inflection point. 2014 we put our commercial foundation in place. 2015 is about execution and expansion of our commercial reach.

Entering 2015, while we have been dealing with inclement weather and seasonality associated with cataract surgery, we continue to experience growing interest in and acceptance of our core ophthalmology formulations. Importantly, today we are at the same point in time with our urology business as we were last year with our ophthalmology business. The main difference is that we are confident that the putt, if you will, to use a golf analogy, that we have to make in urology is much shorter than our ophthalmology putt was.

With HLA we have an established, patented formulation that has made a big difference in IC patients' lives. It is well characterized and has been the subject of multiple double-blind placebo-controlled studies. There is reimbursement for the procedure and for the compounded formulation itself.

And we have 2014's book of business consisting of more than 80,000 prescriptions to potentially start with. The patient population for IC is large. IC is a chronic condition; and as I said before, we have already begun to record revenues for HLA sales.

We are building relationships with the major IC advocacy organizations, and we have a message to those who suffer from IC that we believe is positive and uplifting. In 2015 if our business model ramps as we expect, the high degree of leverage and efficiency in our business model will become readily apparent in our financials.

Adding to Andrew's comments, we expect growth in our top line with an increasing amount of revenue coming from our new urology formulations and nonproprietary business. In order to protect our technology positions and to build on the strength of our intellectual property, we continue to aggressively pursue patents around our core technologies and formulations and their applications. We continue to consider working with potential strategic partners who have novel ophthalmology and urology formulations and related technologies, to bring these formulations to market through our disruptive business model.

I do not want you to think, though, that everything goes our way at Imprimis. We operate in a relatively new and highly regulated space which results in uncertainties regarding the regulatory landscape in which we operate. And we are acting as a disruptive force in the markets we serve, which can cause discomfort for incumbents.

We have other challenges, and hurdles sometimes slow us down. Goes without saying, though, that it takes patience, perseverance, and a commitment to get the ball over the line for those who we serve -- our customers and stockholders alike.

Before I conclude I want to talk about the culture we are building at Imprimis. Every great company is made of motivated, creative, energetic, and committed employees who care about what they are doing and who they are doing it for. We are assembling at Imprimis a team of truly outstanding professionals, people who love doing something different and who love being a part of building a completely different kind of pharmaceutical company. Everyone here loves knowing that their voice, their hard work and creative energy is making a difference for physicians and patients each and every day.

At this time I'd like to open up the call to questions from our participants. Operator?

(Operator Instructions). Matt Hewitt, Craig-Hallum Capital.

Good afternoon, gentlemen. Congratulations on the great progress made in 2014.

First question, if I heard you correctly in the guidance component, it sounds like the ophthalmology segment will be the primary driver in the first quarter. But how should we think about the revenue split as the year progresses?

As we get, I guess, towards the fourth quarter will that be more evenly split with urology and the other formulations that you will be generating? Or what will be the primary driver as we exit the year?

Thanks for the question, Matt. In terms of our projections, we have not given that sort of guidance. What I can tell you is that the two other major areas of our business outside of ophthalmology are obviously our urology program and then these add-ons, this expand strategy that I discussed in the prepared remarks.

I think everything that we have learned so far in urology that we had originally planned for, our original projections, as we've gotten deeper into our market research we've realized that the market seems to be larger than we actually had thought originally. And then at the same time, when we think about our expand strategy and selling additional ophthalmology and urology products to our existing, growing customer base, we have seen that that strategy appears to be working.

I can't give you guidance in terms of what percentage of our revenue at the end of the year will be split between those three main businesses. What I can say is that we continue to have strong growth in ophthalmology, as we hope to report in the first quarter and also the rest of the quarters of this year.

What we are really excited about, though, and I hope the market will soon see, especially as we migrate the existing HLA customers to our platform and grow that business substantially, is that the urology business is, I think, going to be hopefully a nice surprise for our stockholders in the future. And then the last segment, in terms of adding on additional ophthalmology and urology formulations, that should start to reveal itself as well here, as early as this quarter, because we are selling our LessDrops formulations and we will be formally launching our LessDrops platform at the upcoming ASCRS meeting, which is in San Diego next month.

Okay. Maybe you could update us on the progress that you've made with CMS regarding the Dropless campaign. Reimbursement there? Is there a possibility of an ABN? How should we think about pricing for the Dropless this year?

Yes, we -- what I can tell you is that obviously expansion of margin and expansion of the price that we sell that formulation for -- the family of formulations, actually, for -- is a critical matter for Imprimis this year and certainly in the years to come. CMS has not changed its policy from the time that we launched our formulation. They have basically said that they pay a universal fee to surgery centers for cataract surgery, and they are not going to pay anything outside of that fee for Dropless Therapy.

What our strategy is, is to -- as you alluded to -- focus on the ABN. That strategy as a predicate in the premium IOL market worked really well, so our focus is on a patient choice strategy.

We believe that the predicate with Medicare on the premium IOL side will work for what we are doing with Dropless Therapy. So our focus continues to be on convincing Medicare that an ABN should be allowed, or an advanced beneficiary notice, that would allow patients, Medicare patients, the choice to pay for Dropless Therapy instead of having to pay for co-pays for eyedrops that are very difficult to use.

Okay. Thank you for that update. How about the opportunity in the 503B segment? Has there been any progress on that front?

There has, most certainly. I think one of the items that I hope you gleaned from the prepared remarks is that we are investing in 503B. We have made the decision to build an outsourcing facility as a part of the new facility that we are building in Roxbury, New Jersey.

So we are really excited about that. Recent guidance from the FDA I think supports what we are doing there.

We're going to have two separate facilities. One will be a compounding pharmacy, and one will be an outsourcing facility where we will make our core ophthalmology and urology formulations to a cGMP standard.

And to connect the outsourcing facility question to your prior question, we think that CMS -- in particular the folks that we're dealing with in the ophthalmology group -- will appreciate the fact that we are actually making our Dropless formulations to a cGMP standard. I think that to the extent that we are able to realize the efficiencies that the outsourcing facility brings, including the increased quality that cGMP is, we hope that that will aid us down the line in convincing Medicare that they should allow an ABN and allow patients to have the choice to pay for Dropless Therapy formulation.

But we are excited about our outsourcing facility. It should be open before the end of the year. And when it does and we've validated our core formulations, we will be able to ship interstate without a prescription to a cGMP standard, and that will create some really important efficiencies for our Company.

Okay, fantastic. Then maybe one more for me. You had mentioned in the prepared remarks and on the call the 240 cataract surgeons using Dropless today. How many of those would you characterize as being high-volume surgeons? And so -- help us understand from a volume perspective going forward.

There's about 10,000 cataract surgeons in the United States. We split those up and say that 20% of those or 2,000 of those surgeons do 80% of the procedures.

The strategy that we initially employed was to go after those higher-volume cataract practices out of the gate. So what I can tell you is the last time we had a call we had about 140 of those practices as retained customers, and four months later we have north of 240.

Those 240 by and large are comprised of those higher-volume cataract surgery practices that we are bringing on. Some of them are just starting; some of them are fully using this for all of their premium patients; some of them are using it for all of their patients. But those 240 -- north of 240 practices represent those 2,000 higher-volume practices that we've been targeting.

Okay, great. Thank you for the update.

Tim Chiang, CRT Capital Group.

Mark, maybe you could talk a little bit more about just the significance of having Park Compounding? As I recall, with that you get entrance into a number of key states on the West Coast. Certainly I would think that you are going to benefit from just getting a lot more access to the ophthalmologists in states like California.

Could you talk a little bit about that heading into the second half of 2015?

Sure. The Park acquisition I think has just been a wonderful partnership between our Company and the former owners since we've closed on January 1. First and foremost, the original anticipated revenue that we thought they were going to do in 2014 actually turned out to be higher. So the numbers showed, as you will see on one of the filings that we made today, the 8-K, that they did north of $4 million in revenue. So the business is doing very well and it's profitable.

Secondly, though, the former owner of the business is an amazing formulator. You may have noticed in my prepared remarks that I mentioned that one of the add-on products that we are going to sell into our urology customer base is an erectile dysfunction product. That's a new, potentially patentable product that we are really excited about.

It happens to be for a formulation that is sold around the country called TriMix, and we have a new take on it that provides some really important differentiating factors from what everyone else around the country is offering. That formulation, the intellectual property, the claims, actually came from the transaction that we did with Park. So Park has not only brought increased revenues and profits but intellectual property.

And then thirdly, in terms of licensure, we're now able to sell into the California market because of Park, and the other smaller markets like Hawaii and Oregon. But as important as those new markets are, it provides us with redundancy in licensure and with our East Coast facility.

So it's really important in the business that we are in that, if one facility has to -- can't produce for a day or a week, that you have the ability to fill orders. So it's important to have multiple facilities crosslicensed and to have staff that are crosstrained in all of the formulations that we make.

So Park all the way around from licensure to new intellectual property and other ways that they can creatively help our Company and add value, and of course in terms of its revenue and profitability, has been a wonderful transaction for our Company.

Great. Mark, just one follow-up. You indicated that you are going to launch the Hep-Lido-A formulation starting in May, and you highlighted that there's, what, about 80,000 prescriptions. Do think you can capture all of those prescriptions within the next 12 months post-launch?

The answer is we should be able to substantially capture all of the existing prescriptions from the physicians who are prescribing for HLA formulations. I can tell you that we have been in touch with the four sublicensees, and I have met with one of them; I'm going to meet with another one actually next week; and meet with another one the week after.

We've been in discussions with them, and we're going to work with them and make sure that the patients that they serve have continuity of care and that they have access to this important formulation. So we're working with them.

But the answer is we should be able to get substantially all of those prescriptions, certainly by the end of the year. But I think the real focus of a lot of the marketing work that we're doing right now, with our existing physician-facing campaign -- pardon me, our existing patient-facing campaign and our soon-to-be launched physician-facing campaign, is the market opportunity is very large for IC. We've seen that just and the soft launch period when we've begun to record revenue.

We really want to focus on the patients out there who have not been diagnosed and who, if diagnosed, are receiving treatments that are being made by their physicians in the physicians' offices. So that is a very, very large market opportunity for us. So while we are migrating the legacy folks on to our platform we're really going to make a hard charge for these new folks and to bring them into the fold as well.

Okay. Maybe just one last question. It looks like you guys are citing a couple major medical meetings, the ASCRS meeting in San Diego. Is there going to be any incremental data that you expect to come out with at that meeting for your Go Dropless products?

Tim, I just looked at -- we were just looking at the ASCRS cataract portion of the meeting yesterday, and I think we found five or six, maybe seven, presentations that will discuss Dropless Therapy. Historically we've had two or three; seems to be increased momentum. These are physicians who will be presenting and discussing their experience with the formulations to the audiences at the ASCRS meeting.

Okay, great. Look forward to seeing those posters.

Yes. One thing I would add, Tim, we are in the process -- there is a Dropless Therapy study underway and the results should come out hopefully in the first half of the year, if not by the third quarter. It is being conducted by four past presidents of the ASCRS.

This is an important validation of the work that we have done. So you have four past presidents of the ASCRS that are conducting an investigator-initiated study of Dropless Therapy.

So we are really excited for the results of that work, which should come out here pretty soon. That study is underway.

Okay, great. Thanks.

(Operator Instructions) John Grimley, TJW Capital.

Hey, Mark; congrats on the progress. I just want to make sure I understand. I initially started talking with you probably a year and half ago; we were talking about the opportunity for Dropless.

Now, when I look at what you guys are doing in Dropless, of the 240 doctors that are using you guys for Dropless, what percentage of those do you think you can sell incremental ophthalmology products to or incremental compounded products? And what is a target dollar value that those doctors could take in from you outside of just the Dropless business?

We have good relationships with these doctors. We are solving, as I said in the prepared remarks, some pretty important pain points in their practices. So I would say that we have a chance, a good chance to sell into all of those relationships.

Those relationships are buying some of the formulations that I mentioned from other competing pharmacies and generic drug companies out there. And there's really no reason why we can't offer them a high-quality formulation at a cost savings and service the heck out of them, so that's what we're going to do.

I think, though, the 240 number, the number north of 240, which is where we are at now and increasing every month -- we seem to be picking up at least 25 to 30 new accounts per month based on the historical numbers. The other opportunity with this expand strategy is not necessarily with the physicians themselves, but also with ambulatory surgery centers.

The ambulatory surgery centers are out there with their universal fee having to purchase a lot of these generic drugs themselves. As I mentioned in the prepared remarks, hyaluronidase can cost $100 a unit; so to the extent that we can offer hyaluronidase for a large chain of ambulatiory surgery centers -- and there are quite a few of them out there -- and hospitals, we are excited about that.

That's a profitable formulation. It's not proprietary, but in addition to selling into these physician accounts we are also going to focus in on the ASC and hospital market as well with some of these nonproprietary formulations that are pretty profitable.

I think you know and anyone on the call knows that generic drug prices are going up fast. With the way regulation is nowadays, a lot of these generic drug companies are getting out of that business, or they are limiting the number of products they sell. So prices continue to rise.

So we have an opportunity, I think, to take advantage of that and sell into those markets.

Then just to follow up, if we look forward a couple years, which business is the bigger business, the ophthalmology or the urology business?

I will stick my neck out on the line on the question and I will unequivocally say that, based on what we have seen, John, the IC market and the urology opportunity is our biggest opportunity. One of our first sales -- and not every patient is like this -- but one of our first sales, the patient happens to use the formulation effectively more than once a day, every day of the month. His insurance reimbursement -- and so this patient uses thousands of dollars of the formulation each month.

Like I said, not every patient is like that; but to the extent that you have a nice blend of patients and you think about the number of patients that are out there, and you think about some of the margins that Andrew spoke about, I can tell you without question that our IC opportunity in urology is something we are really excited about investing in this year.

Then the 503B plant or manufacturing facility, you didn't say when you hope to have that completed by, did you?

I believe I did; but if it wasn't clear, John, it is underway, plans have been drawn up, and we expect to have the facility open -- certainly the pharmacy portion of it -- by the fourth quarter of this year. And the 503B portion of it should be completed right at about the same time, if not a month or so later.

With cGMP, though, you can't just build a facility and open it. You have to validate your processes for each formulation.

So you think about our core formulations and Dropless Therapy and HLA for IC patients, those will obviously be the first three formulations that we'll validate. Once they are validated, we will be able to start serving the markets and the customers we have.

Great. Thanks a lot. Congrats on the progress.

Ladies and gentlemen, we have reached the end of our Q&A session, and I would like to turn the call back to Mr. Mark L. Baum for closing comments.

Thank you to everyone for attending. If you are a stockholder I want to thank you for your investment and the trust that you've placed in our Company.

If you investor-related questions I want to encourage you to please contact our Director of Investor Relations, Bonnie Ortega. Her direct number is 858-704-4587. Thank you again, and this will conclude our call.