Welcome to the Lannett Company Fiscal 2014 Third Quarter Financial Results Conference Call. My name is Jeanette, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Robert Jaffe. Mr. Jaffe, you may begin.

Thanks, operator. Good afternoon, everyone, and thank you for joining us today to discuss Lannett Company's Fiscal 2014 Third Quarter Financial Results. On the call today are Arthur Bedrosian, President and CEO; and Marty Galvan, Chief Financial Officer. This call is being broadcast live at www.lannett.com. A playback will be available for 3 months on Lannett's website. I would like to make the cautionary statement and remind everyone that all of the information discussed on today's call is covered under the Safe Harbor provisions of the Litigation Reform Act. The company's discussion will include forward-looking information reflecting management's current forecast of certain aspects of the company's future, and actual results could differ materially from those stated or implied. This afternoon, Arthur will provide a brief overview, and Marty will discuss the financial results for the quarter in more detail, followed by Arthur's concluding remarks. We will then open the call for questions. With that said, I will now turn the call over to Arthur Bedrosian. Arthur? Arthur P. Bedrosian: Thanks, Robert, and good afternoon, everyone. I'm pleased to report outstanding financial results for the quarter. For the fiscal 2014 third quarter, we recorded the highest net sales, gross margin and net income in our company's history. Compared with last year's third quarter, net sales doubled to $80 million, gross margin more than tripled and net income grew 6-fold to $23 million, equal to $0.63 per diluted share. We're pleased to have reported 6 consecutive quarters of record net sales, as well as the ninth consecutive quarter, in which net sales and adjusted EPS succeeded the comparable prior year period. Similar to preceding quarters, the primary drivers for our excellent third quarter performance were the combination of price increases on key products and strong sales on existing products. Our momentum has continued throughout our current fiscal year and we continue to expect our 2014 to finish strong. With that said, we have revised our estimates for the current year due to recent price increases and the timing of related upfront customer credits. Marty will discuss our full year guidance in more detail shortly. With that brief overview, I'd like to turn the call over to Marty to review the financials. Then I'll provide an operational update. I will open the call to questions. Marty? Martin P. Galvan: Thank you, Arthur, and good afternoon, everyone. As Arthur mentioned, our strong momentum from the first half of the year continued into the third quarter. For our third quarter, net sales more than doubled to $80.0 million from $39.0 million in last year's third quarter. Net sales for our largest product category, thyroid deficiency, grew to $28.3 million, or 35% of our total net sales. Our 2 other largest categories, cardiovascular and pain management, had net sales of $21.3 million and $8.4 million, respectively, representing 27% and 11% of our total net sales, respectively. As to net sales of our remaining categories, migraine was $4.8 million or 6% of total net sales; glaucoma was $4.5 million or 6%; gout was $3.4 million or 4%; antibiotic was $3.4 million or 4% of total net sales; gallstone was $1.0 million, equal to 1%; obesity was $915,000 or 1%; and other presented $4.0 million or 5% of our total net sales. Gross profit more than tripled to $56.1 million, or 70% of net sales, from $15.2 million or 39% of total net sales. Research and development expenses increased to $10.6 million compared with $5.2 million. Selling, general and administrative expenses increased to $9.6 million compared with $5.2 million in the same quarter of the prior year. Operating income reflected outstanding growth, increasing to $36.0 million from $4.7 million in the third quarter of fiscal 2013. Net income attributable to Lannett grew nearly sixfold to $23.0 million, or $0.63 per diluted share, from $3.9 million, or $0.14 per diluted share. Now, comparing the first 9 months of fiscal 2014 with the comparable prior year period, net sales rose 74% to $193.2 million from $110.9 million. With respect to cost of sales, and as previously announced, we issued 1.5 million shares of our common stock in connection with the signing of the contract extension with Jerome Stevens Pharmaceuticals. As a result, cost of sales for the first 9 months of fiscal 2014, included a nonrecurring pretax charge of $20.1 million related to this contract extension. Continuing with the remainder of the income statement and for completeness and comparative purposes, I will provide both GAAP and adjusted amounts for gross profit, operating income and net income. Gross profit, on a GAAP basis, was $98.5 million, or 51% of net sales. Excluding the JSP contract renewal charge, gross profit was $118.6 million, or 61% of net sales. This compares with gross profit for the first 9 months of last year of $42.2 million or 38% of net sales. R&D expenses increased to $21.1 million from $12.6 million. SG&A expenses increased to $26.6 million from $16.6 million. Operating income, reported in accordance with GAAP, was $50.7 million. Excluding the JSP contract renewal charge, operating income was $70.8 million compared with $13.1 million in the fiscal 2013 period. GAAP to net income attributable to Lannett Company was $33.6 million, or $0.97 per diluted share. Adjusted net income, which excludes the impact of the JSP contract renewal charge equal to $12.6 million after tax, was $46.2 million, or $1.34 per diluted share. This compares with net income attributable to Lannett Company for the first 9 months of fiscal 2013 of $9.8 million, or $0.34 per diluted share. The first 9 months of last year included a favorable pretax litigation settlement of $1.3 million equal to $0.03 per diluted share. Our balance sheet at March 31, 2014 remains strong, with cash, cash equivalents and investment securities totaling $123.5 million. Now turning to our guidance for fiscal 2014 full year. We have recently increased prices for certain products. These increases are expected to have the effect of lowering net sales in the fiscal 2014 fourth quarter, due to related upfront credits, but resulted in a significant benefit in fiscal 2015. With that said, we are now expecting the following for the full year fiscal 2014: Net sales in the range of $261 million to $267 million, down from previous guidance of $275 million to $285 million; gross margin as a percentage of net sales of approximately 61.5% to 62.5%, revised from 61% to 63%; R&D expense in the range of $30 million to $31 million, revised from $30 million to $32 million; SG&A expense ranging from $38 million to $39 million, revised from $39 million to $41 million; the full year effective tax rate to be in the range of 36% to 38%, unchanged from previous guidance; and capital expenditures in fiscal 2014 in the range of $24 million to $26 million, down from $28 million to $32 million, which includes $10 million for the purchase and partial fit-out of 2 buildings recently acquired by the company. It is important to note that our guidance for fiscal 2014 does not include the impact of the Jerome Stevens contract extension, which we expensed in the first quarter of fiscal 2014. At this point, I'd like to provide some preliminary thoughts on our outlook for next year. We intend to discuss our guidance for fiscal 2015 in more detail on our next conference call. Based on our current thinking, we anticipate annual sales to be in the range of $330 million to $350 million. Our estimate includes price and volume increases and expected competition on certain products. We expect full year gross margin, as a percentage of net sales, to be in the range of 66% to 68%. And lastly, we anticipate total operating expenses to continue to be approximately 24% to 26% of net sales. With that, I will now turn the call back over to Arthur. Arthur P. Bedrosian: Thank you, Marty. Subsequent to the quarter end, we received approval for Diazepam Oral Solution concentrate, 5-milligram per mL, a Schedule IV controlled drug. We are hopeful the delays in receiving approvals on our current application will continue to shorten. As Marty just discussed, we have significantly ramped up our investment in product development. Thus far, in fiscal 2014, R&D is nearly twice that of the comparable period -- comparable prior period. Our development efforts include products that we believe can generate more revenue and higher margins. We expect within 7 weeks, to file an additional 5 ANDAs. Our current pipeline of ANDAs includes 19 product applications, pending at the FDA. And if no approvals are received by June 30, we will have 24 applications pending. We're awaiting acceptance letters on 2 ANDAs that include P IV challenges. And we have an additional 47 products in various stages of development. Regarding our Oxycodone Oral Solution, we remain optimistic that we will receive FDA approval in the near term. With our specialty pharma business, we currently have 11 sales representatives detailing our C-Topical solution product. We commenced our Phase III clinical trial and a target date for our NDA submission remains December 2014. We plan to announce a strategic alliance with a major Chinese company on Monday. Our team is looking at products, as well as companies that are a strategic fit and accretive to our business. We continue to evaluate several potential acquisition candidates, which includes the opportunity to globalize and further vertically integrate our operations. In addition, we are focused on searching for potential acquisition and a tax favorable jurisdiction to enhance shareholder value. We're looking to augment our senior management team with talented executives to help guide the company into its next phase of growth and development. To sum up, we continue to be very positive about our future prospects for a number of reasons. We have a large number of ANDAs pending at FDA, a deep pipeline of products and development, and we continue to look at acquisition candidates to complement our existing business. All of us at Lannett are excited about the opportunities that lie ahead, and we look forward to reporting on our progress. Let me take this opportunity to thank my colleagues at Lannett and our many shareholders for their support and confidence. Marty and I now would like to address any questions you may have. Operator?

[Operator Instructions] And our first question comes from Scott Henry. Scott R. Henry: I just had a couple of questions. I just want to understand the levers that are going on for Digoxin and Levo. Could you talk about -- when you said selective price increases, I believe Levothyroxine had a price increase. Could you talk about the magnitude of that? And pricing on the Digoxin as well? Arthur P. Bedrosian: Well, it was more than Levo. There was a 50% increase on Levo and the other price increase for another product. We do believe those 3 increases in this quarter are the ones we're in now. The Levo being the largest, but the other one will have significant price increase as well. Scott R. Henry: Okay. And did Digoxin have a price increase this quarter as well? Arthur P. Bedrosian: No. The other product was Ursodiol. Scott R. Henry: Okay. And when we look at Levothyroxine now, where is the generic relative to the brand? How is that hanging out in terms of pricing -- post price increase? Arthur P. Bedrosian: Well, on price increases, we would be roughly at 75% of the brand with this new increase. Scott R. Henry: Okay, that's helpful. And shifting to Digoxin, the cardiovascular category. I thought you said it was $21.3 million, how should we think of that number? I mean, I guess it sounds like next quarter probably -- we'll probably see growth next quarter and then we'll start to see it kind of edge down in line with your expectation? Martin P. Galvan: Yes, Scott. So this is Marty. And that number, the $21 million, it's almost entirely the Digoxin product. And as we said last quarter, as competition comes into that category, we do expect the volume to decrease. So you should think in terms of the -- sequentially a reduction from the third quarter into the fourth quarter for that product. Scott R. Henry: Okay. So in the third quarter, it will go down next quarter? Martin P. Galvan: Correct. Scott R. Henry: Okay. And... Arthur P. Bedrosian: The quarter we're in now. Just to sort of clear, the quarter we're in now we're talking about that ends June 30. Scott R. Henry: Yes. Yes, correct. And then I just want to understand that market just so -- I mean it can get pretty confusing with the script data. You are expecting -- you baked in continued Par growth, Hikma as well, do we have any color when they are coming into the market? I assume that's in your guidance as well? Arthur P. Bedrosian: Well, we had always expected them to be in the, my personal feeling was July. There's still no discussion coming out of the company as to when they are launching, as far as talking to their customers. So July still seems to be to target we're working towards. And if they don't launch in July, then they launch later on, that's possible. But that's still the same time frame we've used for our guidance. And Caraco, we still haven't heard anything from them, but they now announced closing their Detroit plant. That was the facility that actually made the product. So we don't know if that causes a further delay for them to reenter the market or if they moved it into another facility or not. Scott R. Henry: Okay. But you're assuming they'll come in? And it sounds like that could be being conservative? Arthur P. Bedrosian: That's correct. That's -- the approach we're taking is to be conservative that they'll both be in the market. We felt, though, Hikma's Westward Division in the summer; Caraco, sometime later in the year, calendar year. Scott R. Henry: Okay, great. That's very helpful. Final question, Arthur, Marty, just so we understand. Could you talk a little bit about how this customer credit works with regards to the accounting and the magnitude. Just so we can get an idea of what's going on and what to expect in the numbers? Arthur P. Bedrosian: Okay. What happened is we have customers that have 60-day buy-in opportunities. So they have options. They can go ahead and accept the price increase and ask you to issue them a credit immediately for the price increase. So they'll pay for the product upfront, and then ask you to give them a credit before the increase goes into effect. They have those 2 choices. Generally, they take the credit upfront. So what happens here is we increased the price, as you know is a 50% increase. They then turn around and ask us to give them a credit for that price increase in advance. And then they start paying the higher price. So from our perspective, we'll see the bulk of these benefits in the first quarter of 2015. So in a few months, starting July, the benefit will accrue to us more ultimately. In this quarter, we get hit on the revenue side because of those credits. But this is routine in the way these credits work. It's just -- normally, it doesn't have this magnitude because we don't have the kind of volume and profits on a particular product that will impact you so much. But, generally, anytime you raise a price or decrease a price, you have that same impact upfront. Scott R. Henry: Okay. That's helpful. And I guess, this is kind of a tough question to ask, but if we didn't have this customer credit, do you think it would still be within your prior guidance or possibly ahead of it, given the price increase? Arthur P. Bedrosian: Absolutely. It's the only way to further decline [ph]. Scott R. Henry: Yes, yes. So I mean is that absolutely -- would you be within the guidance or do you think you would be ahead of it? Martin P. Galvan: Probably both. Arthur P. Bedrosian: I said within the guidance. Most likely, probably on the top side of the guidance. Martin P. Galvan: On the top end.

And our next question comes from Elliot Wilbur.

Question for Art, with respect to Levo and the 50% increase, how close is that to the actual ASP that you are, in fact, realizing? Arthur P. Bedrosian: I don't know if I have an answer. But the average selling price for the product, how close would we be? Martin P. Galvan: Yes, I think...

How much of that 50% increase are you actually seeing? We know that the catalog price is around 50%, but in terms of your... Arthur P. Bedrosian: 30% of it is what we're seeing. 30% of that 50% is what we're seeing.

Okay. And then sort of looking at Levo numbers just reported and then amplifying that by the recent price increase, obviously, it would seem like the incremental Levo sales alone would get you well within the range of your guidance for fiscal '15. So I'm just trying to figure out what other elements may have more conservatism in there? Or if you actually just maybe factored in the possibility of another competitor on Levo in '15? Martin P. Galvan: Yes. So, Elliot, you went down the right path here. So we gave the thyroid category sales for the quarter so you can get a run rate for how well Levo is doing. And then we took about 30% -- effectively a 30% price increase on top of that number and that's what we've kind of working into our 2015 guidance. But to your point, I mean, we have worked into the guidance, the assumption that there will be competition in categories, probably mostly on the Digoxin category in terms of a notable decrease year-on-year. We've worked that into our numbers for 2015. And then as you would on imagine, there would be many, many ups and downs but hopefully, that helps you in what you're thinking.

Okay. And then maybe, Art, can just weigh in on this. I guess it's been known for some time that there's a couple of additional ANDAs pending at FDA on Levo. But it just doesn't ever seem like there's anything new there. And I'm just wondering, from your vantage point and given your competitive intelligence sources, whether or not you've heard anything new with respect to some of these other applicants? Arthur P. Bedrosian: No, the application to the agency, no one is talking about anything. It stays -- there remains just 2 people what we estimate have applications pending. Since then, I'll talk to any of the customers. We presume they have no clue. When and if those applications will be approved. And our experienced with the FDA is very similar. There's a lot of communication coming from the agency. So no one is able to really determine when they're going to get anything approved and it makes it difficult. But usually the customers who have some -- the companies that have an inkling they're going to get an approval, we'll start talking to their key customers to see if they're going to be buying the product and how much they'll buy, so they know how much to make. None of that is going on in the Levo market at all.

Okay. And Art if I could -- if I could just maybe get you to share with us your thoughts on potential strategic activity and the deal market. It seems like, at least for larger companies, it's almost impossible to find good deals out there, or at least transactions at good prices. And it definitely seems like it's a sellers' market. So I'm not sure if you're -- you've shared that belief based on some of the things that you're looking at. But you talked about the possibility of looking to do something globally. And I'm wondering if that's just a reflection of the fact that maybe asset prices in the U.S. are just kind of beyond what you're comfortable, pain or is it may be related to something more financially driven, such as potential for a taxing [ph] version or some sort of transaction along those lines? Arthur P. Bedrosian: Well, actually, the United States, we found about 4 potential acquisitions. We've talked to a few of them and we're close to 1 of them. So that I'm finding no difficulties there. Yes, in some degree, it's a sellers' market. But only from the standpoint that if it wasn't a sellers' market, I'd be buying those company's for less money, but we're still not going to overpay by the standards of the industry. They're all good companies, they're all accretive, they're all within our sweet spot. As far as I can tell, almost all of them are all privately owned, second-generation companies that we know for some time. And we've had a lot of discussions. So we found about 3 or 4 of those that you might say we've lined up. Overseas, we came across -- our French banker found an opportunity for us in Italy that so far is turning out to be very rewarding. We're talking to each other about doing some alliance on products. They want to buy 3 of our products to distribute and market in Europe. And we want to buy 1 of their products, and 1 of their technologies for the U.S. market. And we're also hoping to merge the companies. They like Lannett, we like them. They weren't for sale as a company. And the relationship seems to be growing. So globalization could be in our future with respect to that. On the inversion front, Marty is the driver on that one. And we certainly have approached a company that would be the size company we need to approach to do an inversion because we certainly are concerned about the recent deal that was announced that might put a damper on inversions going forward after December of 2014. Now we're not going to do an inversion just to do one. We look at the one that actually is in our sweet spot, makes a lot of sense from every other angle, except tax concerns. And then it adds to it the tax benefit. So it's really one of those unique opportunities you find. And I will say that, at least their CEO is entertained, listening to an approach. So hopefully, that will lead to something. So we're very comfortable with that. There's plenty of opportunities in the U.S., at least 4. 1 overseas, and we weren't actually looking for overseas. The inversion that we were looking for and have found one of the size that would work for us because it had to do with our market cap. So I don't see overall we're having any difficulty. But remember in our size, it's easier to acquire a company. It's harder for the Mylan and the Actavis and Teva to find the company that's going to move their needle.

And our next question comes from Rohit Vanjani.

Just on the mergers, I mean, you were talking about an Italian company potentially doing a merger and an inversion. Would you have -- is that both of those companies you could potentially be or it's just one or the other? Arthur P. Bedrosian: No, the Italian company is eventually a merger. Right now, we're talking about products for both sides, exchanging products, so to speak. We have interest in one of theirs. They have an interest in 3 of ours. And they also have some API formulations that we're talking them about. So our discussions have been rather serious with regards to the products. There is also an interest on their part to possibly merge with Lannett, but that was off. We felt let's get the product deals on because that's more interesting to both of us immediately. And then we would talk about a potential merger. They felt comfortable, they like Lannett and we felt the same way about them. They had nothing to do with merger. They're only EUR 66 million. So they're not large enough to do an inversion. But the other company that we approached is large enough to do an inversion. And they are located in 1 of the favorable countries tax wise. So we're certainly approaching them. Our approach is really -- we can't ignore what our competitors are doing. We can't ignore that we're in a business and we're paying a 37% tax rate when all of our competitors are paying considerably less than that. Shareholder would be concerned if we ignore this. But the overseas, the inversion, that's a -- let's call that a little more of a long shot. Short-term, the other acquisitions, I think, are more realistic and more likely to be the first thing we announced.

Okay. So with the Italian -- is there a room for both of those? Were you doing a merger and inversion with the other company? Marty, just -- sorry, go ahead. Arthur P. Bedrosian: Marty tells me that we could do both. So stop whining, we can handle it.

Okay. And then if you just did the merger alone, you would still realize a lower tax rate? Arthur P. Bedrosian: No. With the first -- the Italian company, no. There would be no change in the tax rate. It's only the other company where they are large enough where we could do an inversion, and that would have a significant impact on our tax rate. And with these kinds of profits, we have to really consider this inversion issue. It's a serious consequence if we can do it in terms of shareholder value.

Okay. And then on the Digoxin market, are you still anticipating Par grabbing a 20% share by the end of the year? Arthur P. Bedrosian: In units, yes. So we're still okay with that.

Okay. And then any expectations for what you said Hikma in mid-year and then Sun-Caraco at the end of the year even though they're having facility issues at Detroit. Any estimates on what share they're going to take? Arthur P. Bedrosian: No, actually, they do not even announce when they're going to get into the market. It maybe a year before they are a player in the marketplace. It can have a profit, but they're not talking to anybody. And now they've closed the facility to make the product at and they were planning on making theirs as far as we could tell. So if this throws a monkey wrench in their plans, well, that benefits us, of course. But -- again, I really don't know any more than that.

Okay. And then on the pipeline of thalidomide, have you filed that ANDA? Arthur P. Bedrosian: Yes. That's been filed now over a month.

Okay. And you're still expecting a 10-month approval timeframe on that? Arthur P. Bedrosian: Roughly, we believe in that we do for plan, so we'll see.

Okay. And are you still expecting oxycodone and 1 other product in fiscal 2014, is that right? Arthur P. Bedrosian: Well, the oxycodone for sure. But my optimism is getting stretched to its limit. So that should have been approved already. We just sit here and wait and we certainly have pushed the agency and reached out to Congress that's been very helpful to us to help us get an answer here. So I'm expecting that by next couple of weeks there some kind of an answer on that one. And that ANDA would be approved.

How long has that already been at the agency? The oxycodone product? Arthur P. Bedrosian: April was 2 years. And that was an expedited review that they gave us, so it should have been approved over 1.25 years ago.

Okay. So there were -- I think a couple of quarters ago, you were talking about 5 product approvals in fiscal 2014, oxycodone you definitely think it's going to happen but in the 4 other products we can say it's going to happen in first half of fiscal 2015, maybe? Arthur P. Bedrosian: Well, one we just received. So I was expecting 5. That was not one of the 5 I was expecting, by the way, to be frank with you. Out of the 5 I expected, 1 may get approved by June 30 and then 1 was a surprise that we received earlier than we were expecting.

Okay. And then have you -- to further dive, have you talked about how big that market is or what share you can grab or anything like that? Arthur P. Bedrosian: Not yet. We haven't really made a determination on that because we're still trying to determine how much of that product is not recognized by IMS or Wolters Kluwer data, because it's not prescription driven, but institutionally driven. So we're still working on that detail.

Okay. And then the last question for me is, are you seeing anything on the doxy front? I think Hikma had warned investors last quarter that sales of generics could slow because of first that competitors come in to doxy and the FDA moved it to the drug store -- or moved it off of the drug shortage list? Lastly, are you seeing anything there? Arthur P. Bedrosian: Not really. Because our doxy is a monohydrate form so we don't really expect any change there. We never really got the real benefit for the hyclate, which will be item that was in short supply and big demand. The monohydrate is the one that we sell. And we do sell a 20-milligram hyclate, but that's the dental product. That was never a big item either. So we don't really expect any change down within our products, on the doxy product.

And our next question comes from Matt Hewitt. Matthew H. Tiampo: It's actually Matt Tiampo in for Matt Hewitt. A couple of quick questions for me. First and quickly, and I apologize for this. But I missed the -- Marty your comment on migraine. Do you know how much revenue for migraine in the quarter? Martin P. Galvan: Yes. It's in the line of -- well, that -- migraine was $4.8 million. Matthew H. Tiampo: And then, Arthur, I want to talk about the rollout of C-Topical and the extra reps. It looks like pain management had a pretty nice quarter, was that mostly C-Topical? Arthur P. Bedrosian: No. It was really across the board. C-Topical is doing well. But remember, it's a little premature to determine whether the 11 reps are really making the bigger contribution as we expect. It's really been, what, maybe 5 months now, at best. Part of it in training. So maybe 3 months, actually, out on the road. So we'll know a little bit more by June 30 in terms of that. But the feedback we're getting and the meetings that they're having with the physicians and certainly some of these physicians have large centers where they do a lot of these procedures. It's very upbeat and certainly a lot of the joint presentations we made with the company acquiring that does the Balloon Sinuplasty and the eustachian tube-plasty. That's been very rewarding. Matthew H. Tiampo: Good. And does the plan still to go to 20 reps over the balance of the year? Arthur P. Bedrosian: Yes, it is. And as we're approaching, they're actually looking for the additional reps. That's how optimistic we are, that we will engage them.

And our next question comes from John Newman. John L. Newman: I just have 2 questions for you. The first one is, what does the guidance for 2015 assume in terms of ANDA approvals? Does it assume that THALOMID gets approved? And the second question I have, related to the credits that you gave upfront on Levo, have you taken any sort of a reserve? Or do you normally take any sort of reserve when you do pricing increases, just to account for product returns that were purchased at a lower price at the new higher price? Arthur P. Bedrosian: I'll answer half the question. I'll let Marty answer the second half of your question. No, there's no new product approvals in that guidance. We always do the guidance based on existing products that we already have approved. Any approvals that come next year will just be on top of that guidance. And Marty, you want to take a second half of this question? Martin P. Galvan: Yes, John. So in the second part of your question, the reserves, we -- as far as returns, we do figure that in, is there other -- when we make our sales, we do make reserves for anything that we anticipate based on historical -- based on our experience? We do reserve for returns, these price protection programs, things of that nature. When you see our -- on external reporting, as you know and you will see the numbers on Friday when we release our Q. The rather extensive reporting of all those reserves in the footnotes. But yes, the answer is yes. We take all of those reserves into account as we make the sale. Yes. John L. Newman: And do you tend to see -- I don't know if you expect this, do you tend to see more product returns when you take a larger price increases? Or is it a little bit more consistent than that? Arthur P. Bedrosian: It's always consistent and it's a very small portion of our products' return. So no, no one is buying it at a high price or buying the material that they already bought, returning it at a high price. No, that doesn't work. Usually, the sum of the product on a routine basis. So they just raise the price on their existing floor stock and start charging more money for it. That's where the real benefit is, not returning it to us. But we don't have anything like that. I mean, not to say that there aren't companies out there that have been rumored to do things like that, we're talking about customers. We tend to know our customers and we do not have any of those types of bad actors, you might say. John L. Newman: Right, right. And just one more question on thalidomide. Can you talk a little bit about the REMS program that you have in place? How do you think the agency is thinking about that? And whether you would anticipate any sort of unforeseen challenges if you do get THALOMID approved in terms of rolling out the REMS program? Arthur P. Bedrosian: Okay. Well, first of all, when I get an approval -- REMS program was done by an outside firm and we spent a considerable amount of money doing this, not that we couldn't do a REMS, but we wanted to make sure there wasn't going to be any challenges but if the REMS company we used have submitted a lot of REMS to the FDA, they're well-known to the FDA. So I don't see any reasons for this REMS to be challenged whatsoever. Now we know that Celgene will challenge the steps program, which is incorporated within their REMS, which is how the product is delivered to the patient at some point? We believe our process circumvents that patent. So we don't see any issues. Now we certainly know that Celgene, in our experience with them being very litigious will litigate with us, and it will end up the same way the last one did. We ended up settling with them. I'm not allowed to go into the details, but I think you could read between the lines.

And we have no further questions at this time. Arthur P. Bedrosian: Okay. Well, thank you, again, for joining us today. We're always available to answer further questions and look forward to reporting on our continued progress on our next call. Thank you.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.