Michael S. Anderson - CEO Michael F. Kanan - SVP and CFO Gregory J. Divis - EVP and CCO Lauren Stival - Director, IR

Matt Kaplan - Ladenburg Thalmann John Boris - SunTrust Robinson Humphrey, Inc. Scott Henry - ROTH Capital Partners Jason Butler - JMP Securities François Brisebois - Laidlaw & Company Michael Sesser - Deutsche Bank

Good morning, ladies and gentlemen, and welcome to the Avadel Pharmaceuticals' First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will have a question-and-answer session and instructions will be given at that time. [Operator Instructions] I'd now like to turn the call over to your host for today’s conference, Ms. Lauren Stival, Director of Investor Relations. Ma'am, you may begin.

Good morning. This is Lauren Stival, and I want to welcome you all to Avadel Pharmaceuticals first quarter 2017 earnings conference call. Before we begin, I'll start with some cautionary statements. The following presentation regarding Avadel Pharmaceuticals plc includes a number of matters that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. These risks include risks that products in the development stage may not achieve scientific objectives or milestones, or meet stringent regulatory requirements; uncertainties regarding market acceptance of products and the impact of competitive products and pricing. These and other risks are described more fully in Avadel's public filings under the Exchange Act, including the Form 10-K for the year ended December 31, 2016, which was filed on March 28, 2017. Except as required by law, Avadel undertakes no obligation to update or revise any forward-looking statements contained in this presentation to reflect new information, future events, or otherwise. We will be using a slide presentation for today's call, which can be accessed by going to the Investor section of our Web site and selecting the Events and Presentations page. After prepared remarks, we will be opening the call to questions-and-answer period. On the call today we have Michael Anderson, CEO; Mike Kanan, CFO, Greg Divis, our CCO At this time, it is my pleasure to turn the conference over to Mike Anderson, our Chief Executive Officer. Mike? Michael S. Anderson: Good morning, ladies and gentlemen. As always, we appreciate your joining us on today’s call. I’m very pleased with the financial results for the first quarter. We generated $52.5 million in revenues, a Company record, and we were both cash flow positive and profitable. Over the last 2 years, we’ve seen an increase in competition for our two largest products, at times a bit earlier than we'd have liked. However, this competition has always been anticipated, and our financial performance reflects our ability to execute our business plan. Although these products are not strategic in the sense that they have no IP surrounding that, we were and still are very strategic in our selection of unapproved products for which to file NDAs. We have built this business around gold standard products and look for other factors that could provide us with a good return for the longer term, such as injectable products where the barriers to entry are higher. We believe our products can continue generating strong cash flow for a number of years and, as a result, allow us to self-fund our ongoing clinical operations and any potential growth opportunities we may come across. Since these products are really what drive our financial results today, I'll begin today’s call by providing a brief overview of market dynamics during the quarter across our sterile injectable products and discuss what we anticipate going forward. As many of you know, a second competitor to our ephedrine sulfate product, Akovaz, entered the channel around mid quarter with a somewhat more aggressive pricing approach than anticipated or was really required to gain share. However, we were able to keep the necessary accounts to have a great quarter. As we’ve discussed before, the IMS market data shows the annual market volume to be somewhere in the neighborhood of 5 million vials per year. Not captured in that data are approximately 2.5 million vials that are sold to the repackaging market. As you might conjecture, given our IMS share, which falls in the range from 15% to 20%, this is a market we’ve prioritized and we estimate our overall share up to 7.5 million vial per year market to be over 40%. Given that we’re now participating in a 3 player market, it is reasonable to expect increased pricing pressure and some loss of share. As such, we anticipate revenues for Akovaz to trend down in the coming quarters. On April 28, as expected, a third competitor received approval for its generic neostigmine, which competes with our Bloxiverz product, and we expect this product to enter the channel soon, and this is in line with our previous assumption of a competitor at midyear. The overall neuromuscular blockade market is estimated to be about 4.8 million vials per year. Just under 2 million vials of those almost 5 million have shifted to sugammadex, an alternative molecule promoted by Merck. We do not, however, anticipate neostigmine disappearing; and with high gross margins, this will continue to be a meaningful product for us. I'm confident in our ability to maintain our requisite share of this market as we have over the past several years. As for our phenylephrine product, Vazculep, we saw no changes in this market. We share the 1 ml market with one competitor and have approximately 40% of the 1 ml market. We continue to have 100% of the 5 and 10 ml markets. We generated $10.2 million in revenues in Q1 and expect to continue steady state in this market barring the entrant of a third player. The unapproved to approved piece of our business is one that we will continue working on, and as announced, we're planning to complete work on a fourth by the end of this year and file shortly thereafter. We believe this product has revenue potential of between $30 million and $40 million per year and since it will be both Irish revenue and not subject to the 20% related party royalty, it should add nicely to both our top and our bottom lines. As previously mentioned, we continue to evaluate other unapproved products to develop. Now moving on to our REST-ON Phase III trial of once nightly Micropump sodium oxybate. During the first quarter, we initiated patient screening and enrollment at sites in the U.S. We expect a large portion of our patients to come from the U.S. sites. We are still relatively early in the trial, but based upon what we're seeing thus far, our internal projections for enrollment have not changed. Beyond what I've discussed, we will wait until sometime in the early in the second half of the year to give a more meaningful update on the progress of our study. I'll now address the rest of our commercial products and business development efforts before handing the call over to Mike Kanan to discuss our finances. At this point in time, we think we’ve moved through many of the issues that were inhibiting our pediatric product sales. We've made improvements to the sales force, distribution, and stocking, and we’re happy to report that TRx trends for our largest product in this bag, Karbinal ER, a liquid antihistamine, continued to trend upward and have increased 26% on a quarter-over-quarter basis and 67% year-over-year. We continue to grow this product despite its seasonal nature, which tends to see its strongest sales in the spring and the fall. We recently launched Flexichamber, our portable spacer device for use with MDIs for the treatment of asthma. Early observations indicate that pediatricians see the benefits of a portable product and intend to use it as an alternative to products that cannot be transported easily. As you saw in our financial statements released this morning, we're now sitting with almost $180 million in cash and marketable securities. I want to ensure investors that we are actively looking to put this cash to use through the acquisition of products that would be immediately accretive and/or a company that was both accretive and a good strategic fit. We have a large number of ongoing discussions, some of which we think could be great opportunities for our Company. Our business development efforts are an important priority for Greg Divis, our Chief Commercial Officer, who just joined us in January. Greg brings an incredible amount of experience, managerial and business development and has already made meaningful contributions to the kick start of our pediatric business and product line. We recognize that we need to continue both to add diversified revenue streams to the Company and to provide our sales reps with more products to leverage. I also want to address some questions that have been raised about our announcement several weeks ago that we’ve initiated steps to reduce our staff in Lyon by 47 positions. Having previously disclosed our intention to divest Medusa and Trigger Lock, two of our technology platforms, we obviously don’t have the project load that once we had in our French R&D operations. In order to more closely align our R&D needs with an appropriate number of scientists, this decision has been made. We have also made the decision to relocate some functions to be closer to the stakeholders, which contributes to that number. This decision shouldn’t be construed as a movement away from our R&D roots, rather, it should be viewed as a move designed to align our R&D with our current business strategy, while ensuring greater efficiency. Decisions like this are very difficult to make, especially to those who are immediately affected. However, these actions will make the Company stronger and more focused moving forward. Our R&D organization in Lyon continues to be an important part of our future. I will now turn the call over to Mike to discuss our financial results. Michael F. Kanan: Thank you, Mike, and good morning to everyone on the call, and thank you for joining us today. As you may have seen in this morning's release, we began the year with strong financial results and significant cash flow generation. Revenues from our hospital sterile products was a record for the quarter and was led by the strong performance of Akovaz. For the -- first quarter revenue was $52.5 million. For the year, we are narrowing our full-year guidance to be in the range of $170 million to $185 million as a result of a second competitor for Akovaz entering the market a bit earlier than anticipated and the shift in market conditions for neostigmine. For the quarter, diluted adjusted EPS was $0.26, well ahead of Street estimates on the higher revenues I just spoke of, lower spending, specifically around R&D, and a lower tax rate. We continue, however, to expect R&D to be in the range of $40 million to $50 million in 2017 and we expect our full-year adjusted tax rate now to fall in the -- to the range of 60% to 70%, down from 70% to 80% in our previous guidance. As a result, we are increasing our full-year adjusted EPS guidance to a range of $0.30 to $0.45, which is up from our previous $0.20 to $0.35 per diluted share. Cash flow generation in the first quarter was also strong, as it continues to be a primary financial focus for our management team. In the first quarter, we generated $25 million in operating cash flow. Our cash and marketable securities at March 31, 2017, was $179 million, up from $154 million at December 31. We continue to have ample liquidity to execute our strategy, including the completion of the REST-ON trial and invest in selective other growth initiatives. As you know in late March, our Board approved a modest share buyback program. We did not buyback any shares in the first quarter, as we needed to finish certain regulatory requirements with the Irish authorities, namely we needed to file our initial statutory financial statements with those authorities. We will begin buying back shares depending on market condition shortly, but hopefully before the end of the second quarter. Now let's move on to how we performed in the first quarter. Revenues in Q1 were $52.5 million, up $9.4 million from Q4 2016 on strong Akovaz revenues. This was partially offset by lower Bloxiverz revenues due to changing market condition. When compared with the first quarter a year-ago, revenue was up organically 45%, as Akovaz had yet to be launched. I have more to say on product specific revenue performance in a minute. Gross margin was 93% in Q1, essentially flat with Q4, but up from 89% in Q1 of last year on a better product mix from Akovaz and certain one-time items in Q1 of last year that did not repeat this year. Research and development expenses during the first quarter totaled $7.2 million compared to $13.5 million in Q4. This decrease was the result of certain start-up costs associated with the REST-ON trial we incurred in the fourth quarter that did not repeat in Q1 and the timing of spending in Q1 2017. Compared with the prior year, R&D was up 34% or $1.8 million due to higher costs related to feasibility studies and clinical programs. I expect R&D to be between $10 million to $12 million per quarter for the balance of 2017. SG&A was $11.8 million in the first quarter compared to $10.7 million in Q4 and $9.5 million in Q1 of last year. The increase in SG&A compared to Q1 last year was due to several factors, including the addition of FSC's sales and marketing costs, continued investment in infrastructure and personnel and higher stock-based compensation expenses. I expect SG&A to range between $10 million to $12 million per quarter for the balance of 2017. Contingent consideration expense was $9.6 million in Q1. This non-GAAP expense is the cash payments on accruals we make for our contingent consideration liabilities. As many of you know, as part of the Éclat acquisition, we pay 20% of our gross profit on Bloxiverz, Vazculep and Akovaz indefinitely to certain related parties. This amount will obviously vary from quarter-to-quarter, depending on the sale and gross margin levels of those three products. Now continuing down the P&L, other expense changes in fair value of related party consideration was $1.3 million in Q1. This non-GAAP expense also relates to cash payments and accruals for royalties on the net sales of Bloxiverz, Vazculep and Akovaz to certain related parties. This amount will also vary from quarter-to-quarter, depending on the sales levels of those three products. On a non-GAAP basis, diluted EPS was $0.26 per share for Q1. Our non-GAAP effective tax rate for the quarter was 41%. This is the lowest non-GAAP tax rate we’ve had in a while driven from the strong Akovaz revenues. As you recall, a large portion of our Akovaz revenues are recorded in Ireland, where the product was principally developed. The rest of our revenue is in the U.S. where it's taxed at the U.S. corporate tax rate of 35%. Most of our expenses, however, are incurred in France and Ireland, where we’ve no history of income and, therefore cannot record for accounting purposes any tax benefits. In addition, as you’ve heard me say before, our contingent liability payments are also not tax deductible, as they’re part of the acquisition cost of the public lot. Since most of the Akovaz profits are in Ireland, we expect our tax rate to decline in 2017 when compared to 2016 and should continue to trend towards a more normalized level as we continue to launch or acquire more products from Ireland. Let's move on to the next slide, which covers our GAAP results. Please refer to the appendix to today's slide presentation for a reconciliation of our non-GAAP results to our GAAP results. The primary difference between our non-GAAP and GAAP results relates to how we treat the acquisition-related earn-out in contingent liabilities and restructuring costs. For our non-GAAP numbers, we substitute the cash payments and accruals for the amounts we record for GAAP purposes. For GAAP, however, we use a fair value approach as required by the accounting rules. In the first quarter, we recognized a gain of $7 million that lowered the fair value of acquisition-related liabilities for Éclat, primarily because of changes in the pricing environment for Akovaz and changing market conditions for Bloxiverz and the lower fair value of warrants held by a related party. Keep in mind, these gains are reflected on a GAAP basis only and are not reflective of the cash payments we make on a quarterly basis. In addition, we owe contingent royalties on total revenues of our first three hospital products to certain related parties. We also adjusted the fair value of these liabilities and recorded a noncash gain on a GAAP basis of $600,000 for the quarter. This true-up is included in other expense, changes in fair value of related party payable. Additionally, in our GAAP results for Q1 were $2.7 million in restructuring costs. As Mike previously discussed, this charge is a portion of the costs associated with our planned reduction in force in France. We expect total cost could be as high as $4 million and expect annual pre-tax savings once fully implemented of $3.5 million to $4 million. Our GAAP net income for the first quarter was $25.4 million or $0.59 per diluted share compared to a GAAP net loss of $6.1 million and $0.15 per diluted share in the same period last year. The increase in net income is largely due to the gross margin on $16 million in higher revenues and the gains we recorded in Q1 associated with our contingent consideration liabilities. Moving on to sales by product. Sales of Bloxiverz were $13.9 million in Q1 compared to $16.9 million in Q4 2016. This decline was a result of lower volumes due to sugammadex, which was introduced in the second quarter of 2016, now accounts for approximately 34% of the neuromuscular block reversal agent market. We are pleased, however, that our share of neostigmine market remained at approximately 40% as we exited Q1, which was slightly up compared to Q4. When compared to the same period last year, Bloxiverz revenues declined $10.8 million, primarily due to the entrance of another competitor in late December 2015 and the overall market declined due to sugammadex. Sales of Vazculep were $10.2 million in Q1, down slightly from $10.6 million in Q4. Pricing and volumes remained stable in Q1. Akovaz sales were strong $25.6 million in Q1 compared to $11.3 million in Q4. Akovaz's market share in the total market, which includes the GPO market and repackager market has continued to grow despite new competition. And as you heard Mike say it's now estimated to be greater than 40%. In Q1, our pediatric sales, which are included in the line item called other, totaled $1.5 million. We continue to invest a good deal of time and effort in putting the right people in the right places; expect the underlying performance of this segment to continue to improve. As an example, we were able to grow Karbinal ER TRxs by 67% compared to last year, while the total market was slightly down year-over-year. Furthermore, we officially launched Flexichamber with sales force promotions to physicians the last week of April. Moving on to our cash flow summary. Our operating cash flow for the quarter was a strong $25 million. And as a result, we ended the quarter with $179.2 million in cash and marketable securities, up from $154.2 million at December 31 and up from $160 million a year-ago. Our liquidity continues to be strong, and we continue to be cash flow positive and expect that will continue in 2017. In closing, let me just summarize how we ended the quarter from a financial standpoint. As you heard us say, our quarterly revenues of $52.5 million were the highest in company history. And maybe more importantly, we were able to convert these strong sales levels to a strong adjusted EPS of $0.26. We had strong cash flow, which increased our cash and marketable securities to $179 million, up from $154 million just 3 months ago. We recognize one quarter does not make a year, and we still have more work to do. We are optimistic about the balance of 2017 and expect revenues to be in the range of $170 million to $185 million and EPS in the range of $0.30 to $0.45, which is up from our previous guidance of $0.20 to $0.35. And I'm pleased that our tax rate is moving in the right direction, although we’ve more work to do there as well. I now expect our adjusted non-GAAP effective tax rate to fall in the range of 60% to 70%, which is down from 70% to 80% in our previous guidance. And finally, we expect to be cash flow positive for the balance of the year. With that, I will now turn the call back over to Mike before taking some questions. Mike? Michael S. Anderson: Thank you, Mike. As we move into the remainder of our year at Avadel, we’ve several promising catalysts to provide support for our growing business. We’ve a robust unapproved to approved drug product business that continues to provide excellent cash flow, and even though it's always been a competitive business, we’ve continued to grow and maintain our market shares. While some may have written these products off as having a short lifespan, it should be quite clear that the tails continue to provide meaningful revenue. Number two, we have a promising pipeline of future product opportunities currently in the feasibility stage and an extraordinary product opportunity in a Phase III clinical trial, sodium oxybate. Additionally, we’ve a commercial infrastructure that is now growing and a war chest of almost $180 million to fund potential acquisition or licensing opportunities. In summary, we believe that both our near-term and future outlook are quite positive. With that, operator, we will be happy to take questions.

Thank you. [Operator Instructions] Our first question comes from the line of Matt Kaplan with Ladenburg Thalmann. We do ask that you ask one question and one follow-up at this time. Your line is open.

Hey, guys. Congrats on the very strong results in the quarter. Michael S. Anderson: Thanks, Matt.

Can you give us some more color in terms of the progress you're making with the REST-ON Phase III study? Michael S. Anderson: Yes, sure. We will be glad to, Matt. As you know, we dosed our first patient at the end of last year. We began our clinical trial in our European sites to refresh those who may not remember, we're conducting a Phase III -- the REST-ON clinical study is a Phase III placebo-controlled efficacy trial that's being run through 264 patients in 50 to 60 clinical sites in Europe, Canada and the U.S. We began that study in Europe. Those sites were up first. The sites in the United States, where actually we expect the majority of our patients, have -- were just begun about 1.5 months or so ago. And so we're -- we still have some sites to open or to initiate here in the U.S., and we're in the process of doing that as we speak. We have seen in the last several weeks a marked increase in prescreening and participation in the trial. And -- but it's still somewhat early here in the United States, and we'll try to give you a more effective update sometime after the end of the second quarter. I think, we will be able -- be in a position to be able to update that more effectively. As the trial is going today, we -- there've been very few hiccups and -- but it's a year-long trial, and it's -- it has to continue on. We have to enroll a lot of patients, some -- all of whom have to be naïve to sodium oxybate. And it's, as you know, an orphan disease. So at the end of the day, we don't underestimate that, and we've reflected our objective of getting the enrollment completed at year-end based upon those conditions and the number of patients who would participate. So I don't know if that's what you were looking for, Matt. I think that's kind of the best we can offer today.

That's helpful. Thank you. And if I may, another question, in terms of your internal programs, you mentioned kind of continuing to grow your pipeline, both organically and potentially through acquisition. Can you give us an update in terms of the programs you have internally ongoing and feasibility and when those could potentially bear fruit? Michael S. Anderson: Yes. We have now five programs underway internally. And I’m talking about programs that relate to -- that have IP or drug delivery capabilities added to them. Those are ongoing in our R&D facilities in Lyon. We are currently engaged in feasibility studies on all of those. And once we are very, very certain that those products are technically able to be done with either Micropump or LiquiTime, we will begin talking individually about what those products are. In the interim, as you may know from our Web site, we have described some of those products with respect to the therapeutic category. So what we don't want to do is get into a position of describing a product and then finding out down the road that technically there's some challenge that we didn't anticipate, and we'd like to mitigate that chance as best we could. I would point out to you the reason for this is because creating extended-release liquids is a challenging technology. The objective of making a liquid long acting that has good stability is sometimes contradictory. And we're obviously obligated to have both of those attributes, and that's one of the reasons that these kinds of products take a little longer. As you know, there are very few people who are actually doing this today, I think two companies maybe, and so it's a unique challenge, but we think we've made vast improvements to our technologies over the last couple of years.

Great. Thanks for the added detail, Mike. Michael S. Anderson: Yes.

Thank you. [Operator Instructions] Our next question is from the line of John Boris with SunTrust. Your line is open.

Thanks for taking the questions and congratulations on the results this morning. Michael S. Anderson: Thanks, John.

Just back to the REST-ON trial, Mike, the 50 to 60 clinical centers I think most of them are supposed to have IRB approval. Can you just maybe give us some insight on the centers in the U.S.? How many do you have and how many are actively enrolling versus those that still might need IRB approval? And then, I just have 1 follow-up. Michael S. Anderson: Yes, sure. We have a few, John, that still require IRB approval, and we're working through that process as we speak. You see that particularly in academic institutions, as you know. Those sites we've made pretty good progress, we're opening sites not every week, but pretty much close to every week for the sites that are ongoing in the United States. So we feel pretty comfortable about our progress, but we are particularly buoyed by the number of patients we're seeing from these sites. When we originally began this study, we were given numbers from various clinical sites and investigators that were significantly higher in terms of patients they can provide than we thought. We've kind of paired a lot of those back, and they’ve been reflected in our expectations. So, we still have some sites in the U.S. that require IRB approval, but most of the sites that are up, obviously, all sites that are up are at this point in time do have IRB approval. So we are moving through that. We should have that completed in short order.

That’s great. And then, the follow-up just has to do with the competitive environment on [indiscernible] and I think Endo indicated this morning that they've recently been approved, adding another inhibitor in there. Just did that play a role in the adjustment of the revenue guidance? And then, any thoughts on Bydureon's market share within that market? Michael S. Anderson: That’s a great question. First of all, yes, Endo, we've -- we obviously had anticipated Endo. They had listed back when they acquired Par that there has been work-in-process on neostigmine, so it was pretty apparent to us that that product would be coming into the marketplace. We modeled it at midyear. By the time they get it into the market, it will probably, we guess, be midyear since we are close to that now. And so we -- obviously, it will have some impact. I'd point out to you that ever since we’ve been in this business we’ve had competition. We’ve had competition come that would surprise other people, we’ve not ever really been surprised. Sometimes by timing, we’ve been surprised. But at the end of the day, the job in this business, unapproved to approved drugs, is to maintain your market share and gross margin in spite of competition. And -- but that’s what our challenge and that’s what we will expect to do with the presence of the Endo product in the marketplace. I think the neostigmine marketplace has been more heavily impacted by far over the success that Merck has enjoyed with sugammadex. And if there is anything that has surprised us, that has been part of it. In Europe, the share of sugammadex that’s been available for a number of years and where price controls are different, has -- it was very modest, I think in the neighborhood of 10%. We see them already through the end of Q1 at somewhere over 35 -- around 35% of the market, which is quite candidly, far greater than we thought. They are different molecules. So what they’ve done is they’ve taken about 2 million vials of that 5 million vial market away, and the likelihood is, is that, that for the foreseeable future will stay with sugammadex. So what happened is, is that when we began this journey we had a 5 million vial market; now we got a 3 million vial market. What we have done is -- all through the numbers of different competitors that come into the market, we’ve been able to hold on to our share, which is stiff around 40% and we are pleased with that. It shows that we can operate this business, and in some cases, against far larger companies. Michael F. Kanan: Just a comment, John, on our guidance. As you may remember, last quarter we said when we talked about our guidance of $170 million to $200 million, we said that the top end of the range would have assumed no competition in either -- additional competition in either ephedrine or neostigmine, that obviously is not playing out that way. So we are now narrowing our guidance a bit as a result of these two new competitors. So that’s the primary reason for narrowing the range there.

Thanks. I appreciate it.

Our next question comes from the line of Scott Henry with ROTH Capital. Your line is open.

Thank you. And I guess, just to continue on -- very quickly on the neostigmine market, Mike, what’s your sense of the sugammadex trend? 35%, certainly more than I'd have expected, almost by magnitude, but do you sense that 35% is that closing in on a peak or do you think we are going to -- how high could that trend get? And then as well, how do you anticipate pricing when the next entrant from Endo comes into the market? Michael F. Kanan: Great questions, Scott. So first of all, I don’t have a crystal ball. I think we’ve seen some -- beginning of some moderation in their script growth over the last couple of weeks, whether that is a permanent thing or an idiosyncrasy attached to those 2 weeks, it's hard to tell. Candidly, neostigmine has been the gold standard for, what, 50 -- over 50 years. Sugammadex offers a more rapid reversal and it offers more effective reversal of neuromuscular block in people who have had deep neuromuscular blocks. And so I think there is clearly a role for it, they’ve done quite well with it. Their pricing has, as you probably know, been closer to the price of a generic neostigmine than it has a branded product that we would typically expect to see today. And to some degree, we think that may have had some role in this. I don’t know whether it will continue or whether it won't. If it got over 50%, I would be shocked, but I think that there is probably a little room left for them, and we are watching it closely. There will still always be a very big neostigmine business, and it will always be important to us. As it relates to the second part of your question, Endo entering in the marketplace, as you know, they were -- they’re the company who also got approval for ephedrine. We would hope that with three players already in that business and the declining marketplace as a result of sugammadex that the pricing that they would employ would be reasonable. Injectable products are difficult to make today. GMP standards are higher, and it's more costly to maintain facilities appropriately. And I think to a large degree, that’s why we’ve over time seen more erosion in these markets than we have. And I would hope that, that would continue to be the case. We will do what we’ve to do to protect our gross margin and to maintain our fair share of the marketplace, but we will see. We expected them, they will be here. When they get here, well, we will handle the accounts that are important to us and do it as best we can.

Okay, great. And one follow-up question, just with regards to Akovaz, I generally had thought about that as a $300 million market, given the more aggressive pricing environment, how should we think about that market size under current pricing? Thank you. Michael S. Anderson: Good question. Well, I think it's no longer a $300 million market, obviously. How it ends up, I’m not sure, Scott, that we’ve seen all of the share adjustments that will have to be made yet. And those been in the business, they’ve taken the price down. Akorn has gotten an approval since we’ve gotten ours, so you have a three player market, two people with a vial, one with an amp, and I think there is still some shifting ongoing. So, I think it's probably a little early to speculate as to what the final size of that market will be, but it's a big market, there are a lot of vials, and we are going to do our best to end up again with our share.

Okay, great. Thank you for taking the questions. Michael S. Anderson: Thank you.

Our next question is from the line of Jason Butler with JMP Securities. Your line is open.

Hi. Thanks for taking the question. Just one on Vazculep. You said there were no changes in the market dynamics in the last quarter. Can you talk a little bit about your thoughts on the market dynamics? And in your mind is there a reason why there aren't other people pursuing the opportunity or are you aware of other people that you think may come to the market if not this year then next? Michael S. Anderson: So Jason, we are not aware of anybody who has filed. We would normally be aware and so our -- and I’d could only guess that the reason that there hasn’t been all that many or there hasn't been other people coming to the market is it's relatively small market. And sometimes if companies have lots of product opportunities that are more valuable to them, these kinds of opportunities, like phenylephrine, would be second fiddle. So we’ve always modeled additional competition coming in and that’s, as Mike described earlier, always been reflected in ranges that we’ve given for our guidance on revenue. And we did that at the beginning of the year with Vazculep and we’ve yet to see anybody. We are almost at year -- midyear, they could come tomorrow or we could close December with the same number of players. It's just impossible for us to really be able to tell, but we always assume somebody is coming. I’m assuming it's just because of size of the market.

Okay. That’s great. And then, the follow-up just on the pediatric business, you saw pretty impressive growth there this quarter. Can you talk about where you think the magnitude of growth can trend for the remainder of the year? Michael S. Anderson: Yes, I’m going to let Greg answer that. He is kind of been the guy who has got this business turned around, so he will respond to that. Gregory J. Divis: Hi. Good morning, Jason. Thanks for your question. I think you’ve seen over the last number of weeks and in Q1 the result of what has been months of work of realigning and resetting the pediatric organization, both from where we put people and the direction we’ve provided them and there has to be a level of execution, and that continued on through Q1 with the growth that we’ve seen. I think right now as we think about the year we expect to have what we'd characterize as modest growth as the year continues, as we think about it from a demand generation standpoint, as we continue to refine targeting, refine sales force deployment and get even more asserted on where we are going and the leverage we are pulling to drive demand. So, I'd characterize it as modest growth and we are really focused on Karbinal ER as our lead product and now the launch of Flexichamber.

Okay. That’s great. Thanks for taking the questions.

Our next question is from François Brisebois with Laidlaw. Your line is open. François Brisebois: Hey, guys. Thanks for taking the questions and congrats on a great quarter. Michael S. Anderson: Thanks, Frank. François Brisebois: So I was just wondering -- yes, so just wondering for the FSC just what they had hit on to the sales deployment. So what do you think it was that got Karbinal ER to grow that much even though the market was actually lower, and should we see Flexichamber becoming the main product or should Karbinal ER keep that spot? Gregory J. Divis: Well as we look at today, Karbinal ER is our lead product. We think it has the market and the volume that offers the greatest potential in terms of pure value and revenue contribution to the Company. Flexichamber is a [indiscernible], but -- and it's we will call 1a and 1b. The great news is that they are very synergistic in terms of who we call on. You’ve an allergic asthma population that is quite overlapped between pediatrics and pediatric allergists. So the synergy there is quite good, and it's allowed for a more efficient targeting and call planning process that puts our people in the right place. What I believe is driving the increase we’ve seen is a combination of a few things. One is just the improvements that have been put in place, some of the enhancements, the deployment, the execution, the accountability, but also we are in a market that is predominantly OTC and patients are coming to physicians still for relief. And we’ve got the best long-acting liquid antihistamine that’s available for those patients who are looking for a prescription. So when you put all that together, we’ve seen the growth that we’ve seen, and we certainly expect to continue to have the modest growth for the remainder of the year. François Brisebois: Okay, great. And then just for a follow-up, probably for you here, Mike. Can you talk about why narcolepsy is still under diagnosed? And is that getting better? I’m just thinking in terms of enrollment here for hopefully the end of the year for sodium oxybate? Michael S. Anderson: Good question. And in our view, it is -- and in the view of KOLs and investigators that we talk to very, very frequently that there is a great belief that it's still under diagnosed. A lot of these patients present to primary care physicians, they would get flipped all around on different kinds of therapies and ultimately when those don’t work as they are supposed to, they end up being referred to a sleep center where they can do the appropriate studies and where they can be appropriately diagnosed. Listen there today are somewhere in the neighborhood of 50,000 diagnosed narcoleptic patients. Less than half of -- far less than half of those are on sodium oxybate therapy. Could be lots of reasons for that. Some may have failed, some may choose not to want to prescribe a controlled drug. I mean, there -- some feel like you can satisfy the needs and requirements of those patients with only Provigil or Nuvigil or what have you. So there are a lot of reasons, but we do feel like and as we’ve talked to our KOLs in the enrollment area, as I mentioned earlier, Frank, the numbers they give us are far larger than the ones that we’ve put into our planning. So if they are able to provide even a portion of those above what we’ve considered, then we will be in pretty good shape, but I think we will have to see. It's challenging, obviously, to find patients who are naïve and who have never taken sodium oxybate. François Brisebois: Okay, great. Thank you. That helps a lot. That’s it for me. Michael S. Anderson: Thank you.

[Operator Instructions] Our next question is from Michael Sesser with Deutsche Bank. Your line is open.

Hi, guys. How are you doing? Michael S. Anderson: Good, Mike. Michael F. Kanan: Hi, Mike.

So I just had a quick question with respect to the share repurchase program, because obviously shareholders would like you -- to see you do it at the lowest price possible. And at this point, you announced that last quarter haven't done any, and now we’re hoping to get it started by the end of the second quarter. And my concern is just that should investors want to position themselves in front of that, you might not get as favorable a price as you otherwise would have. So, what kind of price sensitivity do you have and, I mean, how do you think about just the accretion from the share repurchase program? Michael F. Kanan: Hi, Mike. Thanks for the question. Yes, we haven't -- well, we announced the program late in March. So we didn’t get anything purchased in the first quarter primarily because we still needed to finish certain Irish statutory requirements. Those requirements are now complete and we’re now here soon free to begin a modest share buyback program. I’m not going to talk specifically about our strategy around where we believe the right price point is for buying our shares back, but I can safely say that we believe the intrinsic value of Avadel is much higher than where our share price is today and we feel like returning some piece of our $180 million of cash is the right investment for our shareholders. So we will be careful about how we buy the shares, and we will allocate this $180 million appropriately to projects that are good returns on capital. Again, our priority for use of cash is to fund our organic growth, which includes the REST-ON trial, do some sort of meaningful accretive acquisitions of product or companies and then lastly, to buy back shares. So, we will be watching both of those things very carefully as we move into completing and starting this share buyback.

Okay. Thank you. Michael S. Anderson: Yes.

Thank you. I’m not showing any further questions. I will now turn the call back over to Mike Anderson for closing remarks. Michael S. Anderson: Okay. So thank you once again for joining us today. We are happy to have provided such a, what we feel like is an excellent report on our progress and we look forward to visiting with you and -- as we report future quarters and other news. Thank you so much and have a great day.

Ladies and gentlemen, this does conclude the program. You may now disconnect.