UNIDENTIFIED PARTICIPANT RBC CAPITAL MARKETS, ANALYST: [Recording in progress] (Technical difficulty) trading at about $240 [million market cup] and today it's about [$2.3 billion market cap]. So when you look at those statistics it's about [$2 billion of equity value] for shareholders. Not only that, in the time span of 12 years the company has grown revenue at about more than 20% CAGR, and (inaudible) sales, the last 12 months sales, as per the last quarter are about [$370 million].

Now the company (inaudible) different therapeutic areas with a focus on cardiovascular, cardiovascular and [thyroid deficiency]. And it is important to note that (inaudible). So with this data I will introduce the CEO of Lannett, Arthur Bedrosian, and the CFO, Marty Galvan.

ARTHUR BEDROSIAN, CEO, LANNETT COMPANY INC: Thank you very much. Thank you everyone. Lannett's been a great company to work with, especially the staff [and I, we've] done a great job with the company. It's not something I do by myself I might point out, but with all the staff. We have over 400 employees now in various locations.

We are in the generic drug field. We've been 73 years in business now this year. We've never had a CGMP warning letter from FDA. We hope to continue that. It's not hard to be a compliant company but our goal is to do the best we can.

With regards to the products we have on the market, I believe all of you in the room know the healthcare space and know that generic drugs are equivalent to the brand. In some cases the generic drugs are actually better than the brand. A lot will depend on when we introduced the generics to the market. Sometimes our technology might be more advanced than the technology the innovator company used. Sometimes our formulations might be better. So it's not that we're always equivalent, sometimes we do have a better product as well.

We take a lot of pride in [managing] our products at the company. We have a tremendous track record and a lack of recalls, for example. We generally?-- not that we're perfect and we don't mistakes, but we do catch them internally, and usually mistakes are human errors.

The US drug industry has been a remarkable industry, growing dramatically, 86 percent and most of the prescriptions [now] filled generically. So we're a part of the healthcare solution with lower cost products being brought to the marketplace than the innovator brand. But we respect the innovator companies for having the ability to launch new molecules for new diseases and new treatment, so without them there wouldn't be a generic industry. So we look forward to continuing to work with big pharma in terms of the market in the healthcare field.

The United States market, we have 39 products in the US currently. We have a number of facilities in the United States, roughly six now. The original one in Philadelphia is still one that we operate out of. We then moved to two additional facilities and we purchased two facilities from the IRS recently. We haven't fitted out those buildings but we did demolish the interiors so that we can pave the way for the manufacturing operations to be filled into those spaces, as well as laboratories and what have you.

And then the eventual plan is to consolidate the two companies?-- the two other buildings into the two facilities that we have, and possibly all three into the two facilities that we purchased from the IRS. It's on 40 acres with over 600,000 square feet. We currently have 150,000 square feet in the Philadelphia area we operate from.

In Cody, Wyoming we have our facility for the raw materials that we manufacture, what we call the active pharmaceutical ingredient, or API. So that's our sixth facility. We have 20 [ANDAs] at the agency and we also have a good track record of compliance. Remember we're heavily regulated in our industry, not only by FDA and DEA, but we're a public company so the SEC regulates us and you can imagine all the other agencies. So being a compliant company is something we work very hard to achieve every day.

We have a good management team at the company, and I (inaudible) introduce my new president. I've brought in a president to help with succession planning, and the importance of succession planning and continuing the growth of the company. I found an individual that I think is stronger and better at the job than I was, and I tried to hire someone that was better than me in this role. And the hope is that he will transition into the CEO position as well in the future.

Succession planning is important for a company our size because we're growing so rapidly. So I found someone that had a lot of experience in mergers and acquisitions as well as in global operations as well, because that may be the area that we (inaudible) to grow and expand into. We wanted to make sure we'd ready for all those areas. As you see most of the people on my staff, most of the senior management have a lot of experience within the generic drug industry.

Our strengths are the individuals that are in the industry and the people that work for me have brought a lot of talent to Lannett from the time we all joined the company. And that talent really has evolved into the growth that you heard about earlier, before I was introduced. So we have a great opportunity to continue to do a good job in this marketplace.

The products that we sell, as [he] mentioned, the thyroid deficiency is one of the larger areas. That's a product we distribute. We're not the manufacturers of the product. That product's made by our partners at Jerome Stevens Pharmaceuticals. We've been distributing their products now for over 11 years. We have a long-term contract with them that goes out to 2024.

The other product that's in the cardiovascular space that we get from Jerome Stevens is the digoxin product. A lot of people have heard about the additional competition that's come into that marketplace. Starting next month there will be seven people in that space, including ourselves. Previously, just maybe a year ago, there was just myself and one other competitor in that market.

The other products are representing the market that we operate in. But the plan for this company is to vertically integrate in controlled substances because as a small company in 2005, we made the board aware that as a small company we wouldn't survive in the marketplace as a pure generic drug company, and we had to specialize. The field we specialized in was the controlled substance space. So you're going to see this pie chart start to change as we concentrate on more and more pain management products and controlled substances.

Currently at the agency, and in our pipeline, the pipeline of products that we develop internally, so we've got 20 at the agency and there's 42 in some stage of development, and we have 39 products on the market. We have over 90 applications, I think over 100 (inaudible) approved that we own. Not all of them have opportunities in the marketplace. Sometimes we discontinue a product if the prices get too competitive, and then all of a sudden when the competition seems to lessen and there's more opportunity, we'll bring back one of those older products into the marketplace. But generally speaking, 39 [or] most of the products we're marketing currently as we speak today.

The controlled substance market, it's a rather robust market. In 2005 I told the board we should get into this area. It was a $3 billion market. By this year it's up to $27 billion, of which $3 billion is available generically, so there's a $24 billion opportunity in front of us generically.

And when you look at that opportunity, you've got to realize the patent cliff everybody talks about within the pharma industry doesn't really impact Lannett because in our space, within controlled drugs, there's a lot of abuse (inaudible) products being introduced in that space with a patent. So in my world, we seem to be getting more patented products, more opportunities to introduce generics [to] them, and higher margin products are being introduced as well. (Inaudible) patent activity, the parent products, the abuse that's [in a] product are coming into the market at higher pricing.

The explanation how we do all this, well we take a look at the opium plant. It produces four alkaloids. From those four alkaloids you get eight active pharmaceutical ingredients, what we call APIs. From that you can derive 44 products.

The vertical integration plan, as you can see with the products on the right, is essentially to introduce a generic to all those well-known products. Our goal is to continue to file applications for the dosage form, and then have a subsidiary manufacture the raw material in our Cody facility in Cody, Wyoming. The plan ultimately is to be vertically integrated because the profits from the raw materials, as well as the profits from the dosage forms, combine to increase our margins overall.

The vertical integration has higher margins, and I explained how we get to them, and currently two of our products are vertically integrated. The plan is for more and more of our products to be vertically integrated. So while I may file an application with a competing raw material, when we get the product approved we would then file a supplement to get our approval?-- our raw material to be approved by FDA to be used in the product. So we would have two sources of supply for our (inaudible).

The goal of course is to make sure that the raw material we're making for ourselves makes sense, otherwise we would buy the raw material if it doesn't make sense to make the raw material. So it's a buy or make decision when we decide which raw materials to make, and whether to make all of them or not.

The growth strategy of course is not just left with the internal growth, the organic growth, it's also involving mergers and acquisitions. I know I've been talking a lot about (inaudible) a lot of valuations. We've done some due diligences. We're on the tail end of a couple of due diligences now. When I say tail end, we're talking about closing transactions in the next month or two, the plan being to try to at least get some acquisitions done. We're still looking at other opportunities that are out there. We realize that's one of the ways we'll grow our business, but we still continue to file licenses and grow organically as well.

One of the products that we have is putting us into the specialty pharma area, and that's a product we call C-Topical. It's cocaine hydrochloride that's used medically in surgery. And as you can see from this chart, there's a lot of opportunities in the ear, nose and throat area where this drug, a cocaine topical product, is considered the gold standard for surgery.

It's also found to be very useful in integrating the balloon sinuplasty, so we've also had some joint meetings with physicians where (inaudible) and Lannett would introduce the C-Topical product as an adjunct to the balloon sinuplasty. There's also the eustachian-plasties as well. So we're finding some additional uses for the product aside from just ear, nose and throat surgery and the emergency room use that we originally thought about the product.

It's a very unique product. It's in Phase III studies. We hope to have the NDA filed within this calendar year, and that is our goal. We've fallen a little bit behind. We hoped to have it filed last December, but we ran into some difficulties with some of the protocols during some of the testing. We did have a meeting with FDA and the FDA was cooperative with us in trying to help resolve it. So we're waiting for the letter to be submitted to FDA and then to get the letter back, and then our clinical study will be continued with those minor changes. And hopefully we file a new drug application by either August or December of this year at the latest.

The sales of the product is detailed like any other product to physicians, but because this product is really earmarked for ear, nose and throat groups, we've targeted the United States with essentially 20 sales people. Ten of them are already working for us and out there detailing the product. And based on the results of the 10, we might expand that to the 20 that we were told would be needed to cover the United States. And as you can see, this [chart] would represent the entire United States if we had all 20 people out there. Currently we're covering a smaller portion of the market and the test market. We're using a contract sales organization to do the detailing.

And I'll now turn over the financial discussion to my colleague, Marty Galvan.

MARTY GALVAN, CFO, LANNETT COMPANY INC: Okay, thank you. Thank you, Arthur, and good afternoon everyone. So on Arthur's last two or three slides we talked about the strategic plan for Lannett, and we like to think of that in terms of a three-legged stool, that is our base generic basis, controlled substances, and the third leg being the brand business.

This is a slide that reflects the revenue numbers that come directly from our strategic plan. A few key comments here. You can see that by fiscal 2019 we see ourselves getting to $590 million in revenue. I should add that Lannett's on a fiscal year end June 30th reporting basis. So this is $590 million in fiscal 2019, going from, in 2013, $151 million. It's a 25% CAGR. This is all organic growth, so there's no acquisitions in these numbers.

(Inaudible) slide of Arthur's and he's referred to the price increases in the company. We've essentially reflected in here no new price increases from today going forward, except on our brand product, that's the C-Topical product, and that's the section of the slide reflected in the yellow at top. Also on this slide now you can see the company expanding into controlled substances over the period of the chart.

In the $590 million in fiscal 2019, a couple of comments there. We have $250 million of new products in that number. The $250 million is basically 47 products at about $5.5 million each. Arthur previously spoke about 20 products at the FDA and another 42 in our development process. So to come up with the 47, we basically [force] ranked the 62 products, chose the ones that we feel most comfortable with in terms of projections and profitability, and basically came up with 47 products times, on average, about $5.5 million.

And lastly, the other point I'd like to make on this slide is that there's discussion these days about the concentration of Lannett's product line. On an earlier slide you saw that levothyroxine is a large product in our portfolio. Digoxin is also a large product. These are both products that we distribute on behalf of Jerome Stevens Pharmaceuticals. Right now those products together are 50% of our revenue, but by fiscal 2019, that percentage is actually cut in half. So we reduce the concentration from 50% down to about 25%.

This slide shows some of our achievements over the last six months or so. I'm going to touch on many of these points in several slides coming up, but from a financial perspective, a very successful second quarter and first half of fiscal 2015. Down at the bottom half of this slide you can see where we achieved four approvals, product approvals from the FDA in the last six months, our first half of our fiscal year. Now we continue to invest in product development and also have 20 applications awaiting approval at the FDA. And finally we had some significant business development progress in the first half of our fiscal year.

This is a look at the history of Lannett's revenue going back to 2001. It's a 28% CAGR, no acquisitions in here. You can see there were three years of?-- three individual years of down sales. These sales reductions were related to specific regulatory issues with the products we've noted there. But then you can see in the following years, sales then continued to increase significantly. And the $400 million in the last bar in green, that's our guidance, the midpoint of our guidance that we have provided, and we'll come back to that number in a minute.

Fiscal 2014, so this is for the 12 months ended June 30th of 2014. You can see sales were up 81%, truly a significant increase year-on-year. Operating income is up over five-fold. Back on the sales line, the 81% growth, about 77 of the 81 percentage points is price increase, the remainder is volume. And you can see gross margin expanding tremendously by 26 percentage points in the year compared to the prior year.

This next slide is our second quarter that we just announced back earlier this month. You can see again a significant increase in sales. That increase of 71%, it's predominately price, well entirely price for that matter. Gross margins up 15 percentage points to 76%. Operating income is up more than two-fold. Earnings per share in the second quarter were at $1.21. That's compared to $0.46 in the second quarter of the previous year.

A quick look at our first six months performance. Sales are up 84%, again driven by price increase. Operating income up three-fold. Here again for the first half gross margins at 76%, that's a 21 percentage point increase versus the six months of the prior year.

Balance sheet. The legacy of Lannett, for many years historically it was a family-controlled company, and that's clearly reflected, in my opinion, in our balance sheet. There's no debt on the Lannett balance sheet right now. We have cash of $185 million, a very strong balance sheet. This provides us now with the opportunity to leverage the balance sheet to further the plans of the company going forward.

This is the guidance that we provided back in our second quarter earnings call earlier this month. We've compared these numbers to last year's performance. I'll just provide some comments as compared to our previous guidance that we had out there. Also I'll point out that we're feeling very?-- we're feeling comfortable with this guidance now for the remainder of the year. A couple of the [south side] analysts have us at numbers somewhat higher than these numbers, but we still believe these are the right numbers to work with for the?-- using these numbers, this will get you to the right numbers, we believe, for the second half of our fiscal year.

So midpoint of revenue, $400 million. That's up about 5% from the previous midpoint, which was $380 million, reflecting our ongoing confidence in our outlook for fiscal 2015. Gross margin at midpoint 74.5%. That's about a half percentage point higher than the previous guidance. R&D, the R&D guidance at midpoint, we actually took that down a bit compared to the previous guidance. (Inaudible) the previous guidance was what we'd issued back after our first quarter earnings call. That would have been back in October. I'm sorry, back in November.

The R&D, we actually took that down a bit. We had very aggressive plans to increase our investment in R&D in fiscal 2015. You know six months later we find out we just can't move that fast. We don't want to spend money inefficiently, so we actually took down the guidance to reflect our pace that we're seeing now for the first half of fiscal 2015.

SG&A is about similar to the previous guidance. Our effective tax rate, actually we've taken that down to 34.5% at midpoint. Previously it was at about 37% at midpoint. We had a couple of favorable developments in the last six months, one being a reduction in our Philadelphia city tax, and also the R&D tax credit being reinstated by Congress. And finally CapEx at $40 million to $50 million. That's about similar?-- that is the same number we had in our previous guidance.

And with that I'll turn it back to Arthur.

ARTHUR BEDROSIAN: Thank you, Marty. So there's a lot of good reasons to invest in Lannett if you haven't already invested in Lannett. And if you have, then you've probably enjoyed the opportunity to see your appreciation in the value of company. We continue to do the same things we've been doing for the past 13 years, hope to continue to grow it the same. We're certainly a bigger company. We recognize some of the things we have to do to continue with that growth.

And we certainly are working very hard in terms of the mergers and acquisitions area. We realize that the street is waiting for us to announce something, but you know we're not going to spend your money foolishly. After all you entrusted it to us. We'll do the right kind of merger and we'll do the right kind of acquisition. We are looking to grow the company, and you can be sure we'll continue to operate it the same way we have.

And I welcome my colleague, Mike Bogda, as president of the company. That certainly will free me up to be able to do more things now that we've expanded the company. So thank you very much for your time and attention. If there's any comment, anybody has any questions, we'd be happy to answer them. Okay, well thank you very much everyone.

MARTY GALVAN: Thank you.

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