Welcome to the Fiscal 2018 Fourth Quarter and Full Year Financial Results Conference Call. My name is A.J., and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions]. Please note this conference is being recorded. I will now turn the call over to Robert Jaffe, Investor Relations for Lannett Corporation. Please go ahead.

Thanks, operator. Good afternoon, everyone. And thank you for joining us today to discuss Lannett Company’s fiscal 2018 fourth quarter and full year financial results. On the call today are Tim Crew, Chief Executive Officer; and Marty Galvan, the company’s Chief Financial Officer. This call is being broadcast live at www.lannett.com. A playback will be available for at least three months on Lannett’s website. I’d 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. In addition, during the course of this call, we refer to non-GAAP financial measures that are not prepared in accordance with US Generally Accepted Accounting Principles and may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review Lannett’s press release announcing its fiscal 2018 fourth quarter and full year financial results for the company’s reasons for including non-GAAP financial measures in its earnings announcement. The reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is also contained in the company’s earnings press release issued earlier today. This afternoon, Tim will provide brief remarks on the company's financial results as well as comments on recent developments and near term goals. Then Marty will discuss the financial results in more detail, including the company’s fiscal 2019 guidance. We will then open the call for questions. With that said, I will now turn the call over to Tim Crew. Tim?

Thanks, Robert. And good afternoon, everyone. For the fiscal 2018 fourth quarter and full year, net sales and adjusted net income grew period-over-period. Our overall financial performance for the full year was within the guidance range we provided. Marty will discuss our financial results in much more detail shortly. My comments today will focus on where we see the business going in light of recent events. As announced this week, the company was informed that its supply contract with Jerome Stevens Pharmaceuticals to distribute three products including Levothyroxine will not be renewed. That contract expires in March of next year. We’ve been assured by JSP that it will continue to supply us with the products through the contract expiration and we will work closely with the new distribution partner to ensure an orderly transition for our customers and the patients that they serve. We are of course disappointed by this event and are taking steps to address our new operating reality. Importantly since the JSP products will continue to significantly contribute for most of fiscal 2019, we have some time to progress our growth plans, while also reducing our operating costs. Since January of this year, we have been further enhancing efficiencies and bringing new products to market even as our pipeline expanding. Furthermore, we’ve added key management positions thereby augmenting an already experienced management team that is committed to growing our business. With regard to efficiencies, our primary plant in Seymour, Indiana has significantly increased its output by more than 50% comparing fiscal 2017 to fiscal 2018. We also sold off two unused buildings in Philadelphia for about $14 million and restructured and refocused our Cody Laboratories’ API business significantly reducing operating overheads. We also began the consolidation of our Philadelphia distribution site transferring that function to our primary distribution center in Seymour. Finally, targeted cost reductions were also made in SG&A. With regard to our pipeline and new product launches, since January of this year, we’ve acquired over 20 approved product families. These include the ANDA acquisitions from UCB and Endo. We’ve also in-licensed from partners through initial pipeline products, namely Diclofenac, Fluvastatin, and Methylphenidate ER. Also we now have about 25 products entering later stages of the launch process including Omeprazole, Dronabinol and some of the pain management products. In total, our portfolio of approved but not yet launched products, that we are currently planning to launch have an IMS market value of more than 2 billion. Although obviously actual generic market values will be notably lower than IM assessments. Moreover, we have a pool of over 20 generic products from owned or partner sources that are currently pending approval from the FDA. Several of which we believe could receive final approval and be launched in FY ‘19. These include generic Concerta, [Clarithromycin] and potentially Levothyroxine ER. This pool of products have a combined IMS value of over 4 billion. Meanwhile, we continue to work on our internal development portfolio. In the current quarter, we have already filed five new ANDAs covering two product families and we're targeting more than 10 following this fiscal year. In addition, we continue to work on new in-licensing deals to bring new products to market in the short to mid-term. We played with some real pride with the first eight products we have launched since January, which is substantially more than we have launched in the previous two years. And speaks to the significant improvements we have made in advancing our pipeline and engaging more deeply with our customers. We have forecasted these eight products to contribute over $50 million in revenue for the full fiscal year in 2019. And importantly, with the aforementioned pipeline of products currently in our hands today, we need to maintain this cadence of launch for some time into the future. Nevertheless, a lots of future Levothyroxine revenues, as of course requires, we reevaluate the magnitude and sequencing of our investments for future growth. On the revenue side, we are engaged in an ongoing process to analyze our investment strategy to develop what we believe to be strong risk-adjusted returns and resulting cash flows. On the expense side, we have targeted substantial cost savings across all expense lines compared to our earlier budgets. We've also targeted an additional reduction in discussion on the capital expenditures of approximately $20 million versus 2018. Many other options are on the table that may affect previously announced plans. We believe that continued progression on our base business from new product launches combined with cost containments will ensure that we have sufficient cash flow from operations to provide liquidity to fund our current obligations, projected working capital requirements and capital expenditures through this fiscal year. With that, I'll turn the call over to Marty. Marty?

Thank you, Tim. And good afternoon, everyone. As was mentioned earlier, I will be referring to non-GAAP financial measures. The reconciliation of the GAAP to non-GAAP numbers can be found in today's press release.Our earnings release also includes a schedule of our net sales by medical indication. Now for the financial results on a non-GAAP adjusted basis. For the fiscal 2018 fourth quarter, net sales were $170.9 million compared with $139.1 million for the fourth quarter of fiscal 2017. Gross profit was $76.0 million, or 44% of adjusted net sales compared with $68.0 million or 49% of net sales for the prior year fourth quarter. R&D expenses were $8.3 million compared with $11.4 million. SG&A expenses were $17.4 million compared with $16.2 million. Operating income was $50.3 million compared with $40.4 million for the prior year fourth quarter. Interest expense was $16.6 million compared with $16.0 million. Income tax expense was $9.6 million compared with $10.0 million in the prior year period. Net income attributable to Lannett increased to $24.5 million or $0.64 per diluted share from $15.1 million or $0.40 per diluted share for the fiscal 2017 fourth quarter. Turning to our full year financial results. Net sales were $684.6 million compared with $637.3 million for fiscal 2017. Gross profit was $326.2 million or 48% of adjusted net sales compared with $343.7 million or 54% of adjusted net sales. R&D expenses were $29.2 million compared with $42.1 million. SG&A expenses were $71.0 million compared with $71.3 million. Operating income was $226.0 million compared with $230.3 million for the prior year. Interest expense declined to $65.4 million from $68.7 million for fiscal 2017. Income tax expense was $45.8 million compared with $57.2 million. Net income attributable to Lannett increased to $118.2 million or $3.10 per diluted share compared with $107.9 million or $2.86 per diluted share for fiscal 2017. Turning to our balance sheet. At June 30, 2018, cash and cash equivalents totaled $98.6 million and our debt was $839.3 million. In July, as Tim mentioned, we closed on a sale of two buildings in Philadelphia for $14.0 million. Our cash balance at June 30 does not include proceeds from this sale. As Tim also mentioned earlier, we expect to have sufficient cash flow from operations to provide liquidity to fund our current obligations, projected working capital requirements and capital expenditures throughout this fiscal year. Turning now to our guidance. As a reminder, our fiscal 2018 financial results benefitted from our ability to fill a supply disruption for two key products. For the fiscal 2019 full year on an adjusted basis, we currently expect net sales in the range of $580 million to $610 million; adjusted gross margin as a percentage of net sales of approximately 44% to 45%; adjusted R&D expense in the range of $28 million to $32 million; adjusted SG&A expense ranging from $63 million to $66 million; adjusted interest expense in the range of $63 million to $65 million; the full year adjusted effective tax rate in the range of 22% to 23%; and lastly, capital expenditures in fiscal 2019 to be approximately $30 million to $35 million. Regarding the phasing of our quarters, we expect the first quarter net sales to be approximately 15% lower than Q4. This decrease is partially driven by increased customers -- customer orders in June 2018 with an estimated impact of approximately $15 million in advance of the midweek holiday as well as a related maintenance shutdown of our Seymour manufacturing facility in the first week of July. With regarding to earnings, we expect Q1 adjusted EPS to decrease by approximately 45% compared with Q4 due to the midweek July 4 Holiday, the maintenance shutdown of our Seymour plant, higher operating expenses and changes in product mix. This guidance include sales of recently launched products, previously approved and not yet launched products as well as other products that we reasonably assume will be approved and launched in the period. Guidance does not include sales of C-Topical after our fiscal second quarter. With regards to fiscal 2020, we are implementing a growth plan which includes accelerating product launches and increasing our product offering through strategic relationships and product development. In addition, we are focused on cost savings initiatives to maximize profitability, liquidity and cash flow. Accordingly, we are not providing any thoughts or comments with regard to fiscal 2020 at this time. With that overview, we would now like to address any questions you may have. Operator?

Thank you. We'll now begin the question-and-answer session. [Operator Instructions] And our first question comes from Dana Flanders from Goldman Sachs. Please go ahead.

Hi, thank you very much for the questions. My first -- can you just -- and Marty I know you just touched on this but on revenue guidance, can you just parse out exactly what you're expecting there? I think you mentioned you were going -- you were including products that were reasonably going to get approved and launched. So was that a change versus how you've given guidance in the past on new product launches? And then secondly on C-Topical, if I heard right, you're not including that after fiscal second quarter. Is that just based on dialogue with the FDA and then having to take your product off the market? And then I have one follow-up. Thank you.

Yes, okay, Dana. As far as the products in our guidance, yes, so we are including an assumption of products -- for products that have been approved but not yet launched and are -- some of them are in our guidance. And in addition to that there are some in our guidance that have not yet been approved. So we have a good high degree of confidence that they will be approved in time and so that’s included also in our guidance. As far as C-Topical?

And Dana for C-Topical we’ve had no communication from the FDA regarding the removal of that product from market. We in a caution are going to keep an eye on the further 12 months from approval of the product. However, we know that the competitor to my knowledge has not yet launched in the market the product. And so from a supply perspective, and ongoing continuity perspective there’s certain opportunity to potentially continue to sell that product, directing of course a discussion but for our forecasting perspective we have not included it in the guidance.

Okay, that's helpful. Thank you. And maybe just my quick follow-up. Can you just touch on your manufacturing base and I know you mentioned additional cost opportunities over time. Is there an opportunity to further consolidate that and maybe just specifically can you touch on your plans for Cody? I know you delayed investment in that, you’ve got announcement a couple months ago. And how much revenue do you have generating out of Cody at this time? Thank you.

Thank you for the question. The primary consolidation we have remaining for our business is previously announced shuttering of the Philadelphia manufacturing site, that the process is fairly, fairly long and we’re looking to complete that closing by the end of this calendar year and consolidate those products plus our extending pipeline into the Seymour location as I noted in my commentary, our volume at that Seymour plant is increasing sequential quarter-over-quarter materially from the previous fiscal year and we’re hoping to see that continue as we get products into the marketplace that drives that demand. There’s other manufacturing sites maybe where -- up in New York City, New York Carmel that they mix our liquids and ointments that plant is a result of an acquisition some years ago continues unabated. We are expanding our portfolio with the development arena, we’ll continue to look at where that goes, exactly to that facility or working with contract manufacturers and try to balance our spending and our speed to market. And then as it relates to Cody, as we have previously announced we have restructured that business, a big part of that was going to shared services. So what we didn’t have as much freestanding support on the administrative SG&A side out in that location and targeting a little bit more portfolio selection given the environment for pain management products. It has some API transfer prices, which are company processes which are not significant. But it is importantly the source of our contained C-Topical that is in market today and the solid manufacturing for our future to bring NDA that we hope to see come to market in a year or so.

And our next question comes from Gregg Gilbert from Deutsche Bank. Please go ahead.

Thanks. I have a few, first for Marty, can you tell us how much revenue you’re including in fiscal ‘19 for the JSP products?

Well the JSP in ‘19 we’re -- it’s primarily Levothyroxine and we’re assuming basically the -- what we’ve seen as a historical run rate for the possibly $50 million a quarter.

And the same that you highlighted on the last call for the other two smaller products?

Yes. In total Gregg there, in total about $10 million in the guidance.

Okay. So basically you’re looking for a 50 million quarter on Levo and 75% of the 10 million flow through in the fiscal year from the other two?

Yes.

Can you help us either quantitatively or qualitatively on how much you’re assuming in fiscal ‘19 in terms of revenue for products not yet launched whether they’re approved or not approved and maybe those two different buckets as we see due to some comfort you’re not dialing in much particularly for those and approved?

So you’re right. We’re not dialing in much. But the two pieces, for the price not yet approved is about $20 million in total, but we backup on step. So $20 million for the part that we have not yet launched yet, alright. Half of this $20 million is products that have been approved but not yet launched and the other half of the $20 million is products not yet approved but we have high degree of confidence I spoke of earlier that will see approved this year.

And just so I understand, what grounds your assumptions there. I assume it’s based on conversations you’ve already had with the trade in terms of availability to get some share at prices of ex as opposed to just being a preliminary assumption?

Gregg, it's Tim. Again I’ve been in the market for a while, having spent some time with the team here to really do a better job at launch parameters. So it's a very large pool of products we spoke to in the call 25 or so that are here in the later stages of launch preparations. Many of those are approved, so it’s really our operation readiness. Customer conversations are always ongoing and we're thoughtful to the number of players in the market for getting prices to come with estimates and yet it's not -- we think not to include some level back here in the number of products in front of us. And we're taking some conservative on our guidance for that [volume].

Okay. And just to talk about a couple that you brought up Tim. Generic Concerta, should we assume that that cannibalizes the BX product on the market or could you see in that growth between the two products your new one plus the existing one?

It's our current belief that while we need to be sure that it's clear for customers that there is a different level between the BX-rated products and the AB-rated product. We hope to be approved later this year. We actually see those in slightly different markets. The BX product has current patient they are serving been stabilized on that product. We believe that they will want to stay on that product at different price points as it relates to the rest of Methylphenidate market, so we don't expect a material cannibalization, it's certainly possible, but the extent we can distinguish the product and labels from the source for the customer side. We have some optimism that it will be incremental sale as opposed to cannibalized sales.

And then on Levothyroxine, Methylphenidate ER, can you just frame that opportunity and what the key variables are for whether you can get there and what the gating factors are?

Again it's the scheduled later in the quarter. Again it's an FDA review process and approval. The targeted date is towards the end of -- our estimate is towards the end of the fiscal year. If it comes in earlier we will launch it sooner. If it comes later, it won’t make the year. But it’s not material in our guidance for the new product launches because of the sequencing and timing of that particular launch.

But potentially a meaningful product longer term.

Correct.

Okay. And then lastly, I don't know to what degree you guys can comment on this. But what can you talk about the options here you're exploring to address the capital structure and at least the timeframe around that process that you could share with us at this point? Thanks.

Yeah Gregg. So it's Marty, I'll take that one. So first of all we're evaluating all of our options. This takes some comments today. Our liquidity at this time remains very strong. And we believe we do have sufficient runway here to explore any option that could be available to us. As you know we have products for the -- through March as we said we expect them to continue to provide significant financial benefits going through March. So we have runway here. And then as I said we have runways. So we also -- for the foreseeable future -- for fiscal 2019 as we said in our prepared remarks we expect to make our debt principal interest payments. And we'll certainly be in compliance with the covenants through the end of the fiscal year. But again, we have time and we're evaluating all options.

And your next question comes from Gary Nachman from BMO Capital Markets.

First with the follow-up on the last question, you said $50 million per quarter for Levo. Is that flat line? What are you assuming for the step down of the Levo revenue in the back half of fiscal '19? How will that look in fiscal 3Q and 4Q?

Yes, so, right now in our assumptions, we have it at the $50 million mark or so through the end of March, but to that I would say, we -- this is new news to us. In the last week or so, there is a -- I am going to pass off to Tim here and let him comment on things that….

So, like kind of a normalized value for our view of Levo for current share positions in market conditions is in the realm of 15 million bucks. However, there is lot of moving products out here, right. There is always competitors on the horizon and we don't have that in our forecast through March. It would be possible to drive number of a lower value. We also note that customers remain always interested in maintaining good inventory on Levothyroxine and given this high volume of patients sensitivity, and the fact there has been history of disruptions never mind the fact that one of our competitors plans, makes Levothyroxine had a fairly significant [483]. So, there is of course upside as well to that business based on how those market conditions evolve. And our go forward and run rates are really to -- from our projection in that order management $50 million, there will be variations based on how the market actually unfolds.

And then Marty on the gross margins, you said 44% to 45% for fiscal '19, but what would that be without Levothyroxine? I mean that's a 50% gross margin product, so please do the math for us to be in the high 30s, low 40s without Levo?

I think we do the math usually it works out to about the low 40s.

And so, I know you're at this point not going out for the fiscal '20, but just trending on the gross margins, now that you're doing more the distributor type agreements. Should that stay in the low 40s or potentially go a little bit lower than that over time?

It's little hard to comment on that question right now. There was a lot that we're working on right now. With the new products coming on board, the launches, new licensing. there is also as Tim indicated and my remarks also indicated, we're looking at substantial expense reduction initiatives that take some time in different expense categories to implement. So when you look at the cost of goods sold as our single largest number on our income statement after the sales number. So there's a huge amount of money that we spend there. There is also a same time of areas of opportunity in terms of expense reduction and improving efficiency and productivity of the Company. So, we look into the future as much as we guess Levothyroxine will not be on our listing, but on the other hand with all these cost initiatives that we're embarking on now, will pick up momentum and have a future, have an impact in fiscal 2020 beyond what we assumed in fiscal 2019.

And if I can make, Tim here a clarifying comment on the pipeline itself, there are two components, right, you alluded to this increased in licensing efforts and that's true. But with our pending products, there is probably at the FDA it's probably haven't have. We also do have that large bucket I mentioned that 24 owned and those that are approved in workings and yet to launch. So there's a fairly good blend in both the owned assets and term developed assets, and any part of assets. So, it won't be purely the partnering as part of our go forward portfolio. I would plan to metolazone, which we launched later this year is a great example of high margin product which we're alone and having significant market shares in that marketplace.

Okay. And then last question. You briefly mentioned the cost cutting initiatives, but it sounds like most of would be focused on the manufacturing side. Are you thinking of anything more dramatic whether it's just in terms of R&D infrastructure or G&A? Can you just give us a little bit of a better sense order of magnitude of the types of cost cutting initiatives you're thinking of?

Yes. It is beyond simply capital like we are looking at virtually all of our expense lines for ways to reduce operating expenses and cut cost. Our fundamental story we are articulating we're trying today is that in the sort of new and net Levo through 2020. We are going to be spending as much energy and time as we can to accelerate our product launches, expand that portfolio cut costs, all [indiscernible] trying to optimize our profits and our cash balances trading off in both near term and long term value as well as we also keep an eye to our future maturations and our debt. And as a result of that there's a lot of moving parts at this juncture, some of the guidance that Marty provided reflects some of these targeted expense reductions that take some time to implement during the course of the year and have a more of full effect as we get into 2020.

And your next question comes from Elliot Wilber from Raymond James.

Just a maybe a quick point of clarification on expected Levothyroxine trends in fiscal '19. Tim, I guess what everyone was anticipating that, was there be some sort of breakdown of channel inventory headed into the transition of the agreement such that you wouldn't have a full quarter of benefit in the March quarter? But sounds like based on your comments that that's not what you're anticipating, I just want to get some clarification around that. And then why you wouldn't necessarily expect that to occur?

Well, again our focus and emphasis on that transition conjunction with JSP and in distribution partners to ensure an orderly transition from our supply and to theirs. You should speak perhaps in customers because it's not quite so straightforward. It could actually get good direction and depends upon how we make it again in the customer's best interest and we are currently in our forecast expecting to maintain that product long through the contract expiration.

Okay. And then just shifting gears back to your comments just earlier around C-Top, any visibility or market discussion about when in fact you may actually see a competitive entry? And then in fact it even occurs this calendar year, seems like assuming that the product wouldn't continue beyond December seems pretty conservative based on usual FDA movement on these issues. Just want to get your thoughts on those comments?

Well, I appreciate your comments and certainly think that's a scenario that is possible in this world. I think the FDA can be very thoughtful about ensuring the continued supply. Obviously, if the existing approval does not show the market by that time will -- it's for sure we're selling that product. But again, based on FDA guidance, we are conceptually making that assumption that product is not continue to be in the marketplace. But I do think there is a number of options that exist that could create that continuing FDA discussion in terms of ensuring patient access to that product.

Is there anything you could tell us at this point or you share with us with respect to your own filing that might help shed a little bit of light or maybe help establish a little bit more confidence in terms of timeline of approval or realization of approval?

I think we’ve earlier indicated that we did receive a complete response letter on around our target action date that letter reflected some additional work that we anticipated based on conversations with them. That work is still under development and process and we continue to work on it. The nature of that deficiency is to prove just approval toward the later part of 2019, if successfully completed in the further approval.

Then maybe just a couple of quick questions on the pipeline as well. Thanks for providing some additional clarity in terms of the numeric value and also a couple of additional products. Beyond those already mentioned. Just wondering, if there’s any other assets in there that you look at that you, that are potential first to market or in some new special unique about them where they may have much higher upside optionality than seems to be kind of generally reflected in any expectations and evaluation at this point? Maybe just a quick follow-up to that. Just with the restructuring of Cody. What does it leave you in terms of your approvals on hydrocodone and oxycodone and not sure of dexmethylphenidate came out at that facility or not, which is where or we are on those products or kind of what’s the plan for those?

I'll take it that a couple of questions are in perhaps reverse order. Start with the larger pain products which are in our portfolio are approved and in the launch sequences, have API not sourced from our Cody site. And so well, there is some opportunities for some potential efficiencies sourcing from larger scale, third parties still a competitive approach to how we bring that probably to market. And therefore, those products are in a launch timing or effective by what changes we’ve made on scale of the Cody assets. As relates the pipeline, again this market is a lot of moving parts with these days. I take solace in the sort of ongoing changes and smaller products becoming more valuable. So many other large products coming out of the market and again point to the value of diclofenac of the marketplace today, we've launched metolazone that we launched in the market today. This is how getting up to sort of $50 million of value. As it relates to first the launch markets or one of the fairly discrete for competitive reasons about those sorts of opportunities, we look further into next fiscal year, it is obviously the awareness of our settlement on thalidomide, but it’s really the sort of basket of products aside from methylphenidate, that gives us our confidence and maintain the sort of run rate we established in the previous seven months as we expanded our pipeline and got products into market.

Our next question comes from Matt Hewitt from Craig-Hallum. Please go ahead.

Good afternoon. A couple questions I guess for me regarding the pipeline. You’ve talked about that the cadence similar to what we've seen here in the first half of the calendar year continuing. How, I guess the questions are, when you think about the next few quarters. Is that fourth quarter or could it be little more frontend loaded here in Q1? And then I guess the follow-up to that is, how are you going to manage the cash position with what seems like a pretty large number of launches?

The cadence of launches is we’ve been seven or so in the last six or seven months, we expect to be seven or so in the coming six to seven months. We’ll talk around the realm of 15 perhaps again, we had approval of 24 products, 25 products or so that are nearing late stage launches, we’re launching as we speak as a net result for example. We do have a number of those pain products that are up and ready to go. So, our existing plan as we look forward an operational readiness and most of these products of course having previously approved. So they are prioritized. That sort of cadence of call it seven or so every half year with not exact position, it could be more, could be less. But there is a very large pool of products here that we’re progressing, have progressed and expect to be launching. And I think this year, before this quarter is out of several launches that will speak to, they’ve got into market. We don’t want to get too explicit in the middle of product launches because it gives competitive opportunities for people to push back and constrain our performance. But it’s coming and it’s not backend loaded.

And from a cash standpoint, I mean, how do you balance which products or the timing of those products given that there’s the significant amount of cash that’s required upfront to get the products. Obviously, you can see on the back end, but how will you balance that piece?

Well, cash upfront I mean if you’re thinking that about the purchase price some things like that and most of these transactions have been on a profit share basis when they were owned. And the -- I mean there’s an inventory working capital aspect to it which working to our plans. And obviously I would say, these elements of these launches are in control. I don’t see any strong effect on the business we’re working to our supply chain, our people that do this part of the business, work it into our assumptions on the cash side for working capital purposes, but that it’s in our expectations for fiscal 2019.

And if I can just add, I guess, you’re asking about cash flows, right? Because you’ve already launched a bunch of products since January that those are now generating cash. We don’t launch all 14, 15 automated products looking out the market for a month. There’s kind of a steady sequencing of these products that again do have to get some ramp up on inventory you’re suggesting. There is nothing out here unfortunately that has a $150 million inventory or something like that. These are all single to low-double-digit millions of products and since they are scheduled now over course of the calendar year. And the ones that are more expensive or the cost structure, the cost is a smaller portion of one that our market price I’m saying but has lower COGS, COGS never a huge part of a high price product obviously. It’s just kind of in our existing work capital expenditures. We haven’t seen any bullet shift in our expectations from that full of products.

And your next question comes from Scott Henry with Roth Capital.

I guess just to confirm you spoke of a material impairment to goodwill in first quarter of fiscal ’19. I just want to confirm that would have no impact on your current debt covenants?

Correct. There is -- Scott, as far as our understanding, that’s correct.

And then just from a big picture standpoint, Lannett’s always had kind of three or four key drugs that drive the income statement. Could you speak to what your top four revenue generators are expected to be in a post Jerome Stevens world?

Okay. I think I can take that. Yes, so the key products, Scott, I’ll start with going down the list. It’s continued to be a significant product with the Company. We’ve had some changes, I mean in products just going down my list here. The sumatriptan continues to be strong, it’s going to be less in fiscal, we’re expecting to be less in fiscal ’19 and ’18 and this one of the two products in fiscal ’18, there was a supply shortage in the market. So, we’re able to take advantage of that. There is also ursodiol still continues to be one of our larger products although that is seeing significant price erosion on that particular product. And I think I've hit the largest ones. The metoprolol came onboard and that’s going to be one of the larger ones now. Metolazone, diclofenac, I think I hit on the largest, those are the larger products.

If I could make the obvious comment, it’s not what how we wanted to get here by definition we are a more diversified business and all these product launches, we hope to continue that diversification. So, we’re not full of such tenants and we feel that may be the case of sure by FY 2020, and we’re looking our hardest to make it as diversified as possible when we get there.

And then one question on the cardiovascular line, which has been strong in the past two quarters. That appeared to match up with market share gains for digoxin in the script trends I mentioned. But your verbal commentary seems to say that it’s not the digoxin, it's some of the other products. Could you just clarify perhaps what’s driving the strength in the cardiovascular section?

Yes. Scott, it's metoprolol that came out back in the beginning in the calendar year. So, you’ll see the increase from Q2 to Q3. And then again, from Q3, Q4, what you’re saying pretty much is metoprolol. In addition in our fiscal fourth quarter, we saw additional volume sequentially from the third to fourth. For example atorvastatin had some growth there, but as you said before the largest single product in that category now is metoprolol. It’s about half of the fourth quarter sales. So, the increase you saw in the third and fourth quarters is less significant increases in this year, maybe 10 or so cardiovascular products that are in that category right now.

Okay, great. And just the final question, I believe the thalidomide product comes to the market in March of 2019, if I recall correctly. Could you talk to the magnitude of that product? And how we should think about it from a revenue potential?

It’s, I think the settlement date as earlier mentioned is August of 2019, and we don’t want to talk to our commercial plans on that particular stage at this particular time.

And that concludes our question-and-answer session. I’ll now turn the call back over to management for closing remarks.

Thank you everybody for joining us this afternoon and evening. We look forward to sharing our progress on the next regularly scheduled call.

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