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Master recording for reservation number 21738685 for Insys Therapeutics. Ladies and gentlemen thank you for standing by and welcome to the Insys Therapeutics Third Quarter 2013 Financial Results conference call. During the presentation all participants will be in a listen only mode. Afterwards we will conduct a question and answer session. At that time if you have a question please press the one followed by the four on your telephone. If at any time during the conference you need to reach an operator, please press star zero. As a reminder this conference is being recorded Tuesday November 11, 2014. I would now like to turn the conference over to Lisa Wilson, investor relations for Insys Therapeutics. Please go ahead ma’am.

Lisa Wilson:

Thank you (Melody), good morning and welcome to the Insys Therapeutics 3RD Quarter 2014 earnings call. This is Lisa Wilson of In-Site Communications, investor relations for Insys. With me on today’s call are Mike Babich, Chief Executive Officer and Darryl Baker, Chief Financial Officer of Insys. This morning the company issued a press release detailing financial results for the three months [that] ended September 30, 2014. This can be accessed through the investor relation section of the Insys’ website at Insysrx.com, and you can also access the webcast of the call from there.

Mike Babich:

Thank you Lisa. Good morning everyone and thank you for taking the time to join us today. In the 3rd quarter of 2014 we focused on executing our strategy to further build current sales while advancing multiple research and development programs that will - if successful - enable us to expand and diversify our future revenue stream. This marked our 7th consecutive quarter of top line growth and profitability. Net revenues increased to $58.3 million, of which $58.2 million came from Subsys. And our adjusted EBITDA for the quarter was $23.7 million.

Darryl Baker:

Thank you Mike. Total net revenue for the 3rd quarter of 2014 was $58.3 million, which was an increase of 100% compared to $29.2 million in the 3rd quarter of 2013. Our primary revenue driver continues to be Subsys which contributed $58.2 million to net revenue during the 3rd quarter of 2014. This represents a $29.8 million increase from Subsys revenues of $28.4 million in the prior year quarter.

Mike Babich:

Thanks Darryl. As you are aware we received a Refuse To File letter last month from the FDA for our Dronabinol Oral Solution NDA. The reason for this was because we failed to provide a pediatric study plan that was deemed inefficient in our submission. Since that announcement the company has submitted the pediatric study plan to the agency and we anticipate discussing this with the agency in the next few weeks and we anticipate resubmitting the NDA shortly thereafter.

Operator:

Thank you. Ladies and gentlemen if you would like to register a question please press the one followed by the four on your telephone. You will hear a three toned prompt to acknowledge your request. If your question has been answered and you would like to withdraw your registration please press the one followed by the three. If you are using a speaker phone please lift your handset before entering your request. Again to register for a question please press the one followed by the four, one moment please for the first question. And our first question comes from the line of Randall Stanicky with RBC Capital Markets.

Randall Stanicky:

Great, thanks guys for the questions. Mike I have two, first on Subsys and then secondly on business development. But first on Subsys, based on the REMS data that you’re seeing do you still see sequential growth ahead and can you confirm that double digit growth in that product for the next couple of years is still what you guys are seeing and expecting?

Mike Babich:

Thanks Randall. Regarding Subsys in Q4 we do expect sequential growth not only in scripts but in revenue. And we believe that the product moving forward can achieve double digit growth in the next couple of years.

Randall Stanicky:

In what share are you assuming, obviously the market share has started to pick up. I mean how are you guys seeing market share play out?

Mike Babich:

Sure, as a reminder you know we do get TIRF REMS market share from the McKesson who administers the program for TIRF. That data is owned by the TIRF therefore we’re not allowed to release it. But I can say that the trends you recently see in the IMS and WK data are a better reflection of what we’re seeing and we saw continued growth in Q3 over Q2 and we anticipate seeing market share growth in Q4 over Q3. Unfortunately I just can’t give the exact market share at this time.

Randall Stanicky:

Got it, that’s helpful. But if we move to business development you guys now have 90 million in cash, you have no debt and you an opportunity to add some diversifications to the business at some point. So how are you thinking about that, about capital outlay and then maybe you know therapeutic areas of interest that you guys could look forward to moving on. Thanks.

Mike Babich:

Sure, so you know first off we feel that we’re in a tremendous position because of our pipeline, you know, having the ability to you know potentially start to four phase 3 trials in 2015. It makes us unique from the perspective that we actually, you know, have a pipeline, so we’re definitely sensitive to whether or not the need is there for diversification. We have taken a closer look at further, whether it be products or other assets that are available to us and we’d be ignorant not to look at those opportunities given our ability to potentially diversify.

Randall Stanicky:

Mike just a follow-up on that, obviously the pipeline’s a big opportunity, but if you were to move forward with another opportunity, be a business development, should we be thinking about that as, you know, bringing in another single product or could we be thinking about company acquisitions? Thanks.

Mike Babich:

Sure, I think when we look at, you know, things we’re definitely looking at both when those opportunities present themselves. But again, you know, I think right now our core focus is making sure these four phase 3 trials start and the opportunity has to be perfect for us for an acquisition.

Randall Stanicky:

Thanks Mike.

Operator:

Our next question comes from the line of (Rory Bajani) with Oppenheimer, please proceed.

(Roy Bajani):

Hi Mike and Darryl thanks for taking the question. So just as far as the housekeeping question, the oral Dronabinol filing fee, that should hit in 4Q and that’s that $2 million filing fee or thereabout, is that correct?

Mike Babich:

Yes (Roy) that’s correct.

(Roy Bajani):

Okay, and then in the REMS data are you still quarter over quarter growth in the total breakthrough pain market not just Subsys alone?

Mike Babich:

We have not seen much growth in the breakthrough cancer pain market in the data that we see. This has been a market that’s been, you know, relatively flat since from 2011 to the current time period that we’re in. So you know for us it’s a market share, you know, grab this is the current indication. I don’t think [it] provides a tremendous opportunity for, you know, larger growth in scripts as this has been in declining markets since 2007, but we do expect that the flattening in this market will continue and if we do I think if you were to see a move in the market you’d see a slow uptick in scripts. But, there has been no major movement over the past couple of quarters in the overall market.

(Roy Bajani):

Okay, and then last quarter I thought you indicated that you’re going to file an IND for Sildenafil in 2014. Is that still the plan or what is the plan there?

Mike Babich:

There is still an opportunity for that product to get filed this year. Obviously we were ecstatic with some of the other Pre-IND meetings and because of the fact that those fall in the supportive care space we had to focus to begin you know phase 3 trials are obviously a lot more important than initial phase 1. So you know from a strategy perspective we wanted to accelerate the other supportive care products and eventually we will file the IND in Sildenafil whether it be, you know this quarter or you know early in 2015.

(Roy Bajani):

And the same with Diclofenac and Ketorolac?

Mike Babich:

We’ve never commented on IND filing dates for those. Those were molecules that we’ve taken through the R&D portion and I would anticipate us putting out a list of more molecules next year that we’ll be bringing through clinical programs.

(Roy Bajani):

Okay, and then the last one for me is are you continuing to hire reps in - even though you indicated that Subsys trends are still increasing I would figure that there’s probably decelerating growths. Are you continuing to hire reps in the face of those trends?

Mike Babich:

Sure, as always we, you know, hire reps based on, you know, business opportunity. We continue to see that reps that have been added over the past couple of quarters become profitable in a very near term. So we’re always looking for opportunities to expand the sales force if the business needs are there, so I would anticipate that there would be you know small amounts of sales reps added over the next quarter or two to capture that opportunity.

(Roy Bajani):

Okay, thanks for taking the questions, I appreciate it.

Mike Babich:

Thanks (Roy).

Operator:

Our next question comes from the line of (Michael Theram) with Wells Fargo, please proceed.

(Michael Theram):

Hi, thanks for taking the question, my first question is on Subsys. If you take a little bit longer view of the next quarter and look out into next year or sort of ultimate peak, could you give any sense of how you’re thinking about ultimate market share and potentially a range of ultimate peak sales?

Mike Babich:

Sure, regarding the overall market I would estimate that, you know, the overall market for the TIRF class this year will fall between $450 million and $500 million based on the conversion from a generic - largely generic market back to a brand in market. We still feel that a 50% market share for Subsys is attainable overtime. There will always be a generic component to this business so we - based on whatever current levels are out there in IMS and WK, we still feel we have room to grow not only in market share but revenue heading into 2015 and 16.

(Michael Theram):

And do you think you’ll provide Subsys peak sales guidance at any point the way you have for Dronabinol OS?

Mike Babich:

Yes I think it’s a little unique because with Subsys you know I think our - it’s pretty obviously what you know peak sales can be based on the market versus you know our market share. I think our opportunity for Subsys long term is in the label expansion studies. We have an upcoming meeting with the agency to discuss an opportunity for what we’ll want to do with Subsys to try to get a label and replace IV in certain settings.

(Michael Theram):

And my next question is on catalyst that we might look forward to as you get started with some of these trials. What and roughly when might we expect in terms of data releases or other events along the way?

Mike Babich:

Sure, I would - you know I think the - as stated the Buprenorphine sublingual spray program for acute pain appears all set to go based on recent FDA meetings, so enrollment is going to be important to watch there for acute pain. The Bunionectomy study you know with 320 patients, Bunionectomies are very common so I think rapid enrollment in that program would be something to watch. I would state that the CBD program, the phase 1 we were excited, in the fact that the FDA would want us to test CBD in the epilepsy population in the phase 1.

(Michael Theram):

My last question is on the business development topic, you mentioned that it would really have to be an ideal fit. When you think about fit what are some of the criteria you think about? I’m thinking specifically about things like you know does it need to have on market revenue versus when you do something that was more for pipeline. And in terms of financial criteria you know for example does it have to be immediately creative or other financial criteria that you think about? Thank you.

Mike Babich:

Sure (Mike). I believe it would be - have to be an on the market type of product. We feel that our pipeline is you know robust so adding something to the pipeline itself probably isn’t as advantageous and we have to make sure that the product also has a - we have a tremendous growth rate with our Subsys current strategy and we believe that we have a long term growth rate of our you know pipeline and current available products. So it’s something that would definitely have to have some type of growth associated with it. So we’re very financially driven so we don’t want to lower our growth rate as we go forward if we look at opportunities.

(Michael Theram):

Okay, thank you.

Mike Babich:

Thank you.

Operator:

Our next question comes from the line of Jason Butler with JMP Securities, please proceed.

Jason Butler:

Hi, thanks for taking the questions. So just one question on Subsys, can you talk about what you’ve seen so far in October and early November in terms of growth from the REMS data?

Mike Babich:

Sure Jason, I can’t directly address the REMS data but I think my comments regarding we expect to see continued you know revenue growth and script growth gives us enough of an indicator right now six weeks into the quarter that we do see trends moving in a very positive direction.

Jason Butler:

Okay great. And then in terms of wholesale or inventory levels any changes that you’d noted throughout the quarter there?

Mike Babich:

No, our wholesaler levels given the fact that this is a DEA controlled two substance we are actually able to keep tight controls within the inventory levels and our inventory levels average between four to six weeks. And that’s been constant throughout the whole year and we anticipate that being constant heading into 2015 as well.

Jason Butler:

Great, and then just one last question for Darryl. You said that you expect to start paying tax on - you know on a cash basis in 4Q. Can you help us understand what kind of the tax rate we should expect both in terms of gap and non-gap?

Darryl Baker:

Sure Jason. You know the gap tax rate is you know currently coming in at about 40%, a little bit north of 40% actually. Currently it’s too early to say what the cash tax rate is given the - again the NOL’s that we’re continuing to utilize and then the excess tax benefits we’re receiving from option exercises. So I expect that going into 2015 we’re going to have the ability to you know kind of forecast that cash tax rate much more effectively. It’s just too hard to say what Q4 is going to look like at this point.

Jason Butler:

Great, thank you and thanks for taking the questions.

Mike Babich:

Thanks Jason.

Operator:

And our final question comes from the line of David Amsellem with Piper Jaffray, please proceed.

(Trevor Davis):

Hi guys this is (Trevor Davis) on for David, thanks for taking the questions. I just want to drill into Subsys just a little further. So can you talk about the Subsys prescriber concentration and how that has changed over the past quarter or so. And then also can you comment on manage care access, have there been any major changes or wins delayed related to Part D or commercial plans. And then just lastly how should we think about the gross to net spread for Subsys in 2015 particularly with the class being on the exclusion list of Express Scripts or I guess put it another way, how should we think about net selling price in 2015? Thanks.

Mike Babich:

Sure (Trevor), this is Mike, I’ll address all three of those. So first off regarding diversification of business which is important for any product, we continue to see an - a wider prescriber base for Subsys and that trend has continued throughout the year and we see the wider based more and more doctors using this product in Q3 versus Q20. And if you recall some of the data from 2013 we had prescribers that were writing you know 3 to 5% of scripts. We now have no writer writing more than about 2% of scripts so the diversification definitely a great tool for us as we continue to grow the product.

(Trevor Davis):

Great, that’s helpful, thanks guys.

Mike Babich:

Thank you.

Operator:

We do have one more question coming from the line of Robert Sussman with Bentley, please proceed.

Robert Sussman:

Good morning, on the Sildenafil can you give us a possible timeframe for proof of concept and when you might license it to one of the generic makers overseas, how far out an even like that could be?

Mike Babich:

Sure Robert, you know the next goal is to you know do the proof of concept, I don’t want to give any timing on that at this point, but I think the proof of concept is going to be an very important milestone for that program because again with like any of our spray candidates the proof of concept really figures out the dose ranging that’s needed for a product to potentially achieve the same type of bioequivalence to the branded product that we may eventually be competing with. So I think after that proof of concept in that phase 1 we would have a better opportunity for discussions moving forward.

Robert Sussman:

Do you think the opportunity is still there in view of what Vivus has done recently with a faster delivery method.

Mike Babich:

Absolutely I think that you know I’m aware of their improved onset of action, but I think we’ve you know proven with our spray technology that that would also be a great route administration and this is an enormous market with tremendous opportunity so we’re just as excited about it this quarter as we have been in the past.

Robert Sussman:

Okay, thank you very much.

Mike Babich:

Thanks sir.

Operator:

That does end the Q&A session, I’ll turn it back over to you Mr. Babich.

Mike Babich:

Thank you everyone for your time and addressing our questions and listening to us about our 3rd quarter call and we look forward to talking with you in the future. Thank you.

Operator:

Ladies and gentlemen that does conclude today’s conference call. We thank you for your participation and ask that you please disconnect your lines. Thank you and have a great day.