Executives: Edward Miller - Director, IR Dr. Horst Zerbe - President and CEO Andre Godin - EVP and CFO

Analysts: Swayampakula Ramakanth - H.C. Wainwright Greg Eisen - Singular Research Patrick Tully - Endeavor Asset Management

Operator: Greetings and welcome to IntelGenx First Quarter Financial Results Management Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] I would now like to turn the conference over to Edward Miller, Director of Investor Relations at IntelGenx. Please go ahead, Mr. Miller.

Edward Miller: Good morning and thank you for joining us today for the IntelGenx First Quarter 2016 Management Call. With me on the call today are Dr. Horst Zerbe, President and CEO; and Mr. Andre Godin, Executive Vice President and CFO. Before we begin, I would like to remind you that all amounts are in U.S. dollars and today’s remarks contain forward-looking statements that represents our expectations as of today and accordingly are subject to change. We do not undertake any obligation to update any forward looking statements except as may be required by U.S. Securities and Canadian laws. A number of assumptions were made by us in preparing these forward-looking statements, which are subject to risks, results may differ materially. Details on these risks and assumptions could be found in our filings within the Canadian and Securities and Exchange Commission, the SEC. I would now like to turn the call over to Dr. Zerbe.

Dr. Horst Zerbe: Good morning and welcome to IntelGenx first quarter 2016 results conference call. I would like to start out by mentioning that we had a very successful grand opening two days ago with close to 150 guests in attendance, amongst them quite a few shareholders or although shareholders who were not able to attend that grand opening, we have a new corporate video available on our webpage that provides quite useful information on how our new facility is looking now -- is looking right now. On today’s call, I’ll initially provide a brief corporate update. I will then comment briefly on the facility update. And I will also give an update on our pipeline projects, which will include the status of the term sheets that we signed earlier in the quarter. And then finally, I will turn over to Andre who will review the first quarter financial results. On the corporate side, as we announced early in the quarter, we completed our leadership by hiring VPs of corporate development and business developments, and this will surely help us accelerate the execution of our business plan. On the facility side, we completed the construction of our state-of-the-art manufacturing and laboratory facilities. What’s going on right now is that after all the equipment has been delivered, we are now wrapping up the installation of the equipment in order to be ready for manufacturing. And today, we are mastering one regulatory hurdle. In that, we have an inspection today by Health Canada that is reviewing the facility with respect to the compliance with precursor requirements. And we need the precursor requirement -- I’m sorry, the precursor license in order to proceed with the work on our cough and cold film. I’d now like to discuss some of our pipeline projects, initially Forfivo sales. Just to start out with this statement, first quarter sales didn’t quite meet expectations; they were rather disappointing. I will not during by update any comment on any numbers. Should anybody want to have a discussion of those numbers, Andre should be prepared to discuss those during his presentation. So, my comments are little more general in nature. We of course contacted our licensing Edgemont to find out what the reason for the disappointing Q1 sales were. And the reason is quite obvious, Edgemont had announced late last year in December, to be precise, a price increase, a 10% price increase to be effective in January and that cost a very significant pre-buying activity by the wholesalers in December. That is the reason why December sales were extremely high and then subsequently January sales dropped quite dramatically. Now sales caught up in February and were fully back on track in March. After a discussion of these events with our marketing partner Edgemont, we agreed with their conclusion that this is a onetime event and both parties -- both companies are convinced that there is no change of the overall growth pattern to be concluded from this. And as we look at March and subsequently April sales, we are very confident that there is no change at the overall sales front. With we expect to our Rizaport product, we announced earlier in the quarter that we signed a binding term sheet with the JUSTE Group for the commercialization of Rizaport in Spain. The execution of the definitive agreement is depending upon successful completion of the due diligence and that is really customary in situations like this. What I can report today is that the due diligence is moving along very well. The most significant hurdle in this -- and I guess it’s in any due diligence process, namely the film to operate opinion; that hurdle has been successfully mastered. We received a film to operate opinion from patent counsel clearly indicating that there is no IP out there that would present a risk of us infringing those patents. And so therefore, we have full clearance to move forward to commercialization. And in fact, under the terms of the binding term sheet, the definitive agreement will be signed this quarter, meaning second quarter. Under the terms of the -- or expected terms of the definitive agreement, and again, I cannot disclose any specific numbers, IntelGenx and our development partner RedHill Biopharma will receive upfront and milestone payments. There will be a royalty on net sales. And since, we are manufacturing commercial supplies after product at our facility here in Montreal at IntelGenx, there will also be a manufacturing profit. Commercial launch in Spain is estimated for second half of 2017. Just to give you a sense of why the launch will still take a little bit, annuity [ph] upon execution of the definitive agreement, JUSTE will submit the file to the Spanish authority for national approval. As I believe I mentioned on previous calls, this national review is not going to deal with the technical parts of the dossier, the technical dossier has already been approved. The national face only deals with pricing aspects. And as I mentioned before, it’s expected to be completed within 12 months. Immediately upon receiving national approval, JUSTE will submit an application for a site change because the initial application provided that a German contract manufacturer would manufacture commercial supplies and we decided to do the commercial manufacturing at IntelGenx. The approval of this site change is supposed to take three months, and you add twelve months and three months and that gets the launch of the product into mid of 2017. We’re quite confident and actually in advance discussions with the JUSTE Group that commercialization in other jurisdiction will occur sometime after the initial launch in Spain. Under the terms of the definitive agreement the, JUSTE Group has rights of first refusal for the Belize, the Caribbean, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Mexico, Nicaragua and Panama. So, in other words, Grupo Juste is very active in South and Latin America. We also have conversations on going actually also quite advanced for commercialization of the product in European countries beside Spain. Some of those discussions involve companies other than JUSTE; I can’t disclose those names, obviously. But, we have high confidence that the commercialization of the product will eventually extend beyond just Spain, in Europe. I would also like to briefly comment on the term sheet for three products that we signed with a global pharmaceutical company earlier in Q1. We’re still not at liberty to disclose the name or any details of the deal, because we’re under a very strict confidentiality obligation with that company. What I can report though is that -- again the due diligence process is moving on very well. And as a matter of fact, representatives of this company are at IntelGenx today. They will b as we speak to continue the due diligence process and the visit will focus on technical and facility aspects of the due diligence. What I can also say is that the IP portion of the due diligence process is going very well. We received a film [ph] operate opinion from patent counsel, again stating that there are no third party patents out there that would prevent our partner from commercializing the product. The definitive agreement is going to be executed or finalized this quarter in Q2. And again, this is really the extent of what I can disclose at this point about this deal and the partner due to that strict confidentiality obligation that we have under the term sheet. As far as the Par project for opioid dependency is concerned, as you all know, the file is under review at FDA since July of 2013. Now, at this point and since quite some time, the launch timeline is no longer driven by the FDA review but rather by the litigation. And there are currently two cases pending. One case deals with the so called Orange Book patents. And because these are Orange Book patents, the case can be referred to as a Paragraph IV litigation, Paragraph IV meaning it is being dealt with under the rules of the Hatch-Waxman Act. And the third patent that is involved in the litigation is not an Orange Book patent, it is a process patent. And that is being held by Monosol. And as a process patent, it does not qualify for listing in the Orange Book and therefore there, is a second case, a non-Paragraph IV case that is dealing with this third patent. Both cases are being handled by the same judge at the same court. And I want to emphasize that despite quite a few rumors and speculations that we are hearing and reading, we cannot make any prediction as to when the judge will issue a ruling on those two cases. And I can give you a quick information as to where these two cases stand. The Paragraph IV case is a little more advanced; the court case was held in December. And since then, we are waiting for the Judge to issue a ruling; the Judge has not issued a ruling yet. The second case, the non-Paragraph IV case is a little behind the Paragraph IV case. That case is currently in the discovery phase. The only other comment I would like to make is that Actavis 30 months stay, which was instated under Paragraph IV, has expired in February. Now, Judge Andrew, the presiding judge over this case has a record to issue his rulings on or around the expiry of the 30 months stay. So for that reason, we’re expecting that a ruling will occur at some point in time. But, again, we cannot and we do not want to speculate on when the judge will issue any ruling. To wrap this up, the 30 months stay that was imposed on or instituted on the Par IntelGenx case, expires in September of this year. A few words on our Tadalafil project where we’ve also made significant progress. Tadalafil is indicated for treatment of erectile dysfunction and pulmonary hypertension or application includes both indications. We will commence the manufacturing of submission batches in June of this year, so, in other words, next month. And we’re preparing for the filing of a 505(b)(2) NAA submission in Q4 of this year, late this year. Since the review time of 505(b)(2) applications is at this time is anywhere between nine and twelve months, we expect to achieve -- to receive approval late next year and that would be in time for a launch around the expiry of the substance patent of Tadalafil, which occurs in November of 2017. But, we have now or recently engaged a top business development firm to help us secure a future commercialization partner. So, we have just stepped up our efforts to find a marketing partner. We do see interest from potential licensing partners. I can report that we have verbal agreement with a partner for commercialization in Europe, but we are of course looking to find partners for the U.S. as well, and we do see interest there. As we are making progress or as we are going to make progress with these efforts, we will of course keep our shareholders informed. And with that, I’d like to turn over to Andre, who will review our Q1 financial results.

Andre Godin: Thank you, Dr. Zerbe. Let’s talk about financial results. Total revenue for this quarter amounted $818,000, which represents an increase of $193,000 or 31% compare to $625,000 for the three months period ended March 31, 2015. The increase for the three months period of this quarter corresponds -- for this quarter, sorry, is mainly attributable to the attainment of milestone from Edgemont, totaling $3 million from which $2.7 million was recorded in last fiscal year and $333,000 for the first quarter of 2016. Operating costs and expenses were $1.5 million for the three months period ended March 31, 2016, compared to $610,000 for the corresponding period of 2015. The increase for this quarter is mainly attributable to an increase in R&D expenses of $364,000, mainly because of an increase in patent cost of $203,000. SG&A increased by $498,000, which is mainly attributable to an increase in salaries and benefits of $274,000 due to the hiring of new executives as well as employees in manufacturing and quality departments to support the beginning of the manufacturing operation. For the first quarter of 2016, net comprehensive loss was approximately $700,000 or $0.01 negative per share compared to a net comprehensive loss of approximately $380,000 or as well $0.01 negative per share for corresponding period of last year. Cash on hand as of March 31, 2016 was $2.1 million, representing a decrease of approximately $800,000 compared with the balance of $2.9 million as of December 31, 2015. The decrease in cash on hand is mainly attributable to the net loss of the quarter. The Company is presently working on many initiatives in building our cash flow, which includes the two previously announced terms sheets that Horst previously discussed as well, which we expect to close in the second quarter. These term sheets would generate upfront payment as well as R&D revenue and future milestone payments. I will now turn the call back to Dr. Zerbe to close out for the day.

Dr. Horst Zerbe: Thank you, Andre. So, we are very pleased with the progress we made in this quarter, many positive developments to look forward to and executing our strategic plan. And I can only point out these four additional products that we will implement as a key, two term sheets that we mentioned, frequently on this call. To summarize, net sales of Forfivo XL increased by over 30% compared to the same period in 2014; and as I pointed out are expected to continue to grow. Our new manufacturing facility construction is now completed and the equipments all delivered and operational qualification is ongoing. We strengthened our management team to accelerate the execution of our business plan. We established strategic partnerships with relevant partners in the pharmaceutical industry. And, we look forward to closing the previously announced term sheets to enhance oral film products towards future commercialization. So, we are very confident in IntelGenx’s future. And we look forward to continuing on this positive momentum for 2016. And again, and as always, I would like to thank everybody here at IntelGenx for their dedication and hard work. And I would like to thanks our shareholders for continued support. And with that, I would now like to turn the call over for questions.

Operator: [Operator Instructions] The first question comes from the line of Swayampakula Ramakanth from H.C. Wainwright. Your line is open.

Swayampakula Ramakanth: Couple of quick questions, I just want to clear and understand what were the royalties received from Edgemont during the first quarter of ‘16? I don’t know if you gave a number on the call.

Andre Godin: We need to clarify something. The way we account our royalty is based on when we receive the royalty. This is the accounting policy that we have adopted since the beginning. So, basically, the Q4 royalty number is the one that is reflected in Q1 numbers. The Q1 royalty number will be recorded in Q2. So, we will get this number. But, we have disclosed that the net sales was $2.5 million, but the calculation would be roughly 12.5%. But, we don’t have the precise number. All we can say is that it’s up 39% from the previous -- I mean the corresponding quarter from last year and had a small decline from the Q4 2015.

Swayampakula Ramakanth: So, in the recorded revenues for the first quarter, the royalties were which came from the fourth quarter, was it like 400 some thousand?

Andre Godin: It was --- if I recall, they were $380,000, in that neighborhood.

Swayampakula Ramakanth: Okay, just trying to understand the whole breakdown of your 818; that’s what I’m trying to do.

Andre Godin: What we basically do is we give a little bit of an outlook of what Q1 sales have demonstrated, because we do get the numbers. But it’s not relevant for the actual first quarter results. It’s only an indication of the trend, or to explain a little bit, why there was a dip in January and February; March is back at the same level as December and April seems to be in the same trend. So, we feel that it’s really a onetime event.

Swayampakula Ramakanth: Okay. So, this 10% price increase, this is normal, this is not unique to Edgemont; this is how the operations work. We all understand that. But, are you concerned at all or -- so, because the way it came out in the call, at least it told -- initially told me that things are slowing down, but then, you came back and said, it is not so. So, what is your final thinking about this? Like, it’s actually doing as good as what you’re expecting or doing a little bit lighter than what you’re expecting or is it better than what you’re expecting, overall?

Dr. Horst Zerbe: We had pretty through and lengthy discussions with our marketing partner Edgemont in order to get a full understanding of the numbers. And we’re at this point -- and I would really like to emphasize that we’re confident that the dip in January is onetime event, solely attributable to pre-buying activities of the wholesalers in December. And the finding that the January was low due to the pre-buying activities is supported by the simple fact that buying in December went up correspondingly. Sales then recovered partially in February and were fully back in March. So, there is no indication whatsoever that the growth trend that we have been seeing for this product for the past two years will be changed significantly in any way, no indication for that. So, we’re very confident that the trend is going to continue. If you want to chime in, Andre?

Andre Godin: The fact that March is back to the December level, knowing that December was a very high month because of the pre-buying; it shows that there is no concern to have. We have indication that April is in the same neighborhood. So because of those facts, we believe that there is no issue whatsoever with 450.

Swayampakula Ramakanth: And then, regarding 450, what are the additional milestones that we could expect from Edgemont over the rest of the year?

Andre Godin: I mean, there is one potential milestone that could be reached this year if Edgemont reach $15 million in net sales, which would trigger $2 million milestone. That’s on a calendar year basis. So, we won’t know until the end of the year. There are other milestones, exclusivity milestone as well as $20 million in net sales milestones that could potentially be earned in 2017; I mean 2016 would be very aggressive to believe that we could reach those milestones. And these two milestones are accounting in total for -- is it $7 million 7-8 million?

Dr. Horst Zerbe: 8.

Andre Godin: $8 million. Yes, one is five and one is three. So, that could potentially be earned in 2017. Then again, it’s based on calendar year basis. So, both payments for this year’s potential milestone and next year’s potential milestone will be received into Q1 of the following year.

Swayampakula Ramakanth: Okay. So, what is the exclusivity milestone? Is it like for x number of months that they hold exclusivity; is that what it is? And what’s that x number of months?

Dr. Horst Zerbe: For the period of time that the product has been on the market without a competing product to be present and competing product is defined in the agreement as a product containing 450 mg of bupropion hydrochloride.

Swayampakula Ramakanth: Okay. Is that like 40 months, 50 months, something like that or you have not -- you’re not…

Dr. Horst Zerbe: One is 48 and one is 60 months.

Andre Godin: Yes, 60 months.

Dr. Horst Zerbe: The relevant one that we’re looking at is 60 months, and 60 months would come up in 2017, as Andre just mentioned. That would be the milestone in triggering a payment of $5 million.

Swayampakula Ramakanth: Regarding the Reckitt Benckiser versus Par, the court decision, upcoming court decision; let’s say it comes in favor for you, how long would it take for the product to come to the market and what kind of -- what’s the kind of milestones or royalties that can be expected from the opioid dependent product?

Dr. Horst Zerbe: First of all, with respect to timing, should the ruling come out in our favor, the expectation is that there will be an appeal. This is pure speculation; I want to point that out. But, our marketing partner is assuming that whatever the ruling is going to be, whether it comes out in our favor or against us that there will be an appeal either way, which would push assuming that is what we can definitely expect, assuming a ruling this year that would push the launch into late next year. And there will be a milestone on approval, which I am not at liberty to quantify. At this point, we have a confidentiality obligation, under which we cannot disclose any financial details of the deal with Par. But qualitatively speaking, there is an approval milestone and then what’s going to kick in immediately will be our royalty split. And we’re going to receive a -- again, I cannot disclose the number, but a double-digit royalty on Par’s net profits.

Swayampakula Ramakanth: So, I just want to understand a little bit more on the strategy itself. I was there on the 10th to see your site and that was good; it was helpful to me. But, what I’m trying to understand is with all that manufacturing facilities, setup and everything else, what’s the overall strategy for you in terms of utilizing the manufacturing facility? And are you thinking of doing some contact manufacturing for products, which are already in the market or that capacity that you have is all earmarked for the products that you are currently developing internally, either by yourself or with development partners?

Dr. Horst Zerbe: We expect, as a matter of fact, the manufacturing facility to be filling up rather quickly. It will initially all start out with the manufacturing of a whole bunch of submission batches. That is just the name of the game. In order to qualify for commercial manufacturing, all the submission batches that are being made to support an application, ANDA or NDA have to be made at the eventual commercial manufacturing site. So for the next year, would be very busy manufacturing submission batches for the migraine product, for Tadalafil, for our cough and cold product, and for a number of other products. And we are of course looking into contract manufacturing opportunities and will deal with that opportunistically. As opportunities will present themselves, we will take advantage to those. The expectation is that they will not play a very significant role in our overall business; we rather expect that the facility will be extremely busy with the manufacturing of our own products. But of course, if an opportunity presents itself and we have the capacity, we will gladly take advantage of those.

Swayampakula Ramakanth: And one last question from me, you were talking about the two products which are being reviewed by potential partner with whom you have a term sheet signed up and the due diligence is ongoing as we peak. The reason that you bring this up, is that because you are quite confident that the due diligence is just a formality and you pretty much have things lined up and just the numbers came at this point or is it just one of the many folks who are kind of walking through the facility and getting the due diligence?

Dr. Horst Zerbe: I think I understand your question correctly, but let me just categorically state this. We never take due diligence lightly. Due diligence is never routine for us. We take it very, very seriously. And due diligence, or successful completion of the due diligence process is a mandatory step to move towards execution of the definitive agreement. What we do here at IntelGenx is in anticipation of the due diligence procedure to have all our decks aligned, if you will, and to make sure that both from a facility standpoint and from a regulatory standpoint as well as from an IP standpoint, we have all angles covered and so as not to run the risk of extending the due diligence process unnecessarily. So, for example, on the IP side, we would never go into a due diligence process without knowing with certainty that we are not infringing on third-party IP. Were that the case, we wouldn’t have done our homework properly. And that is why, I said before that I’m happy to announce that the film [ph] to operate opinions have been issued for all those products. Those are yet to be accepted by the partner but that is going to happen because there is no relevant IP out there. So, we’re taking that very seriously. We’re working very hard already in advance of the diligence process to make sure that no unexpected hurdles come up. And this is how due diligence is being handled at IntelGenx. I hope I understood your question correctly, and this answers it properly.

Operator: Your next question comes from the line of Greg Eisen from Singular Research. Your line is open.

Greg Eisen: Let me start with the Suboxone litigation issue. Do you have to clear both of those suits in order to get approval or is it simply a matter of whether the judge agrees with you or not, once their allowable period ends, I think you said it was September, that you would essentially by default gain approval?

Dr. Horst Zerbe: The expiry of the 30 months stay and FDA could issue an approval; they are no longer withheld from doing so under the 30 months stay. The question then whether our marketing partner will actually launch the product is entirely Par’s decision and is simply a risk assessment. Now, it happens in very rare cases that companies launch at risk, in other words, before a final ruling of a case has been issued. In a case like this, Suboxone is a very big product with annual sales well in excess of $1 billion. I simply doubt that Par will move ahead with -- with an at risk launch. I’m not speaking for Par, I can be entirely wrong. But, I’m not so sure that Par will go ahead with an at risk launch. And that is why I said before that, whatever the ruling is going to be, whether Reckitt Benckiser prevails or whether Par IntelGenx will prevail, there will be appeal. And I think the outcome of the appeal will then decide the launch timeline. I hope that answers your question, Greg.

Greg Eisen: Okay. But, the outcome of the appeal will essentially set the launch timeline. In order to put that to occur, assuming you prevail at appeal, do you have to prevail after appeal on both of those cases, because you said the second one is only in discovery right to know?

Dr. Horst Zerbe: Yes. But, the second case is very different from the -- the second being the non-Paragraph IV case, is very different from the first case. And I expect that again that is pure speculation. I expect that the case is not going to go to court but that there will rather be settlement after the Markman hearing, Markman hearing being the claim construction hearing. Because we have so strong evidence for both non-infringement and invalidity of that patent that’s in contention there that we believe that there will be settlement after Markman.

Greg Eisen: I think I understand that, okay. Let me move on. With the Rizaport, going to Rizaport, I understand what you’re saying about the timeline for your partnership in Spain and what it represents also for those other countries that that partner has first right of refusal for. Regarding the United States, are you still essentially on the same track as you were before for manufacturing the submission batches here in Montreal and submit and going through, that’s the plan.

Dr. Horst Zerbe: Nothing has changed there from the standpoint of the submission timeline. We have -- the manufacturing of the submission batch is lined-up for June. It’s going to take about four months. Then, we’ll initiate the severity studies and we’ll then submit by the end of the year. So, nothing has changed here.

Greg Eisen: Sure. Okay, I get it. Regarding Tadalafil, it sounds like it could be close in terms of getting -- how do I ask this question? Is it critical to you from a business point of view to have a product on the market right when the patent expires from the branded manufacturer or is it not critical to be on the market that day? It sounds like you’ll be on the -- you can get approval to start manufacturing for your own sales around the time the patent expires? But at the same time, it kind of sounds like given that everything else has delays and it could get pushed out some. So, how critical is it to be on the market right when the patent expires?

Dr. Horst Zerbe: I keep mentioning the expiry date of the patent because that would be the earliest possible launch date. In our estimation, if there was a delay, unless it would be a very long one, but if there was a delay of a couple of months or so, that would have no impact because we’re not expecting any other Tadalafil film to be launched anytime soon. So, what might or might not be out there would be direct generic versions of Cialis. And those would not impact very much at all on our product because the film would be a brand product, a 505(b)(2) NDA brand product. So, the quick answer is even if there was a slight delay, which we’re not expecting at this point, that would have no significant impact on the performance.

Greg Eisen: Okay, I understand that. Let me move on and ask about loxapine. I don’t know if you discussed that but you had -- you did say something earlier this year I guess by press release about loxapine. Can you give us an update on where that stands?

Dr. Horst Zerbe: It’s still under development. We announced earlier this year that we completed a Phase 1 study, confirming that we are faster than the currently available loxapine tablet. And that’s important because our loxapine film is intended to be used as a rescue medication. However, even though we’ve already established that it is faster than the tablet and therefore already qualifies as a rescue medication, we feel that there is room for more improvement to make it even better, even faster. And that’s the work that’s currently on going in the lab. And because it’s ongoing laboratory work, I didn’t report on that initially in the initial presentation.

Greg Eisen: And the term sheet you have for these three drugs that were -- that you cannot identify, am I correct at assuming they are three drugs that are not the drugs that we’ve discussed already so far or might they -- may they be some combination of drugs we’ve already discussed as well as new drugs that have not been previously discussed?

Dr. Horst Zerbe: You mean that we discussed today?

Greg Eisen: Yes. So, we’ve discussed loxapine, Suboxone, 450, Rizaport, Tadalafil…

Dr. Horst Zerbe: No, no. These would be different products.

Greg Eisen: Would be completely different from what we’ve discussed?

Dr. Horst Zerbe: Yes.

Greg Eisen: That’s encouraging. And when you get a definitive agreement on them, am I correct, from what you’ve said already on this call that you would receive some kind of licensing fee at the time of the definitive agreement, shortly thereafter?

Dr. Horst Zerbe: There will be an upfront payment, there will be development revenue, R&D revenue, which will be not insignificant, and there will be pretty significant milestone payments on approval and for being first filer. And very definitely, one of these opportunities has a very, very big chance, a very good chance to be the first filed application. And then, there will be a very lucrative profit split at the back end. I would like to point out though that even though the definitive agreement is not fully available yet, we will in all likelihood not be able to at least fully disclose all the commercial terms of the agreement. That is just standard procedure in the generic industry, not to disclose all the financial details of any deal. We just have to live with that.

Greg Eisen: Okay. And the correct point you are talking about the generic industry that for these three new products you would not be filing a 505(b)(2) on it?

Dr. Horst Zerbe: I can’t comment.

Greg Eisen: Understood. Let me turn to kind of the other side of the equation, the overhead side. You had a large -- obviously a larger increase in SG&A this quarter. Should I consider this SG&A level to be basically a good run rate to use for the rest of this year?

Andre Godin: I think that the SG&A might go down a little bit in the quarters to come. I would probably -- we could maybe talk on a separate call and maybe I can give you a little bit of indication. But, the first quarter, there is some accrual taken for the year. And I think that the SG&A might be a little bit inflated, not that much but a little bit. So, it might slightly go down in the quarters to come. So, I would be a little bit conservative -- go on the conservative side for the remaining of the year.

Greg Eisen: Understood. And R&D was up in the quarter. I guess the same question, is this essentially a run rate where R&D will be for the year?

Andre Godin: That again -- it all depends on the term sheets that are being negotiated right now, because they involve development costs. So, if -- like we expect we signed all those term sheets, then R&D expense should increase, but revenue will increase accordingly because we do record revenue from R&D when we are in development phase for products. So, basically, the Q1 was mainly because of patent costs, so not really for development costs that it will depend on the upcoming litigations. But, I would hope that R&D would go up, because if it does go up, it’s a good sign. But, it’s difficult because a lot of things are pending on signing those term sheets and then going forward with development costs of these products.

Greg Eisen: Understood. Looking at the balance sheet, should I expect that you will pull down the remainder of your term loan facility, remainder of that facility to be drawn down in the second quarter; will that get down to pay for the final purchase cost of the machinery?

Andre Godin: Yes. By the end of Q2, the launch of the all draw down at C$3.5 million -- by the end of Q2 for sure, it’s going to be at this level.

Greg Eisen: And Q2 -- am I correct in assuming that in Q2 you will see the remaining payments for the machinery accrued into the balance sheet at that point and then everything?

Andre Godin: Yes.

Greg Eisen: Okay. So, as far as your current plans, as we know are, okay. And then everything the second quarters will go down to the maintenance level of equipment expense?

Andre Godin: Yes, you will get the full picture by Q2, definitely, because we got all the equipment but they’re not all fully in installed. But, by the end of Q2, everything is going to be in operation. And so, which means equipment will be paid and the loan will be at its full limit.

Greg Eisen: Okay, good. I’ll let someone else go. Thank you, Andre.

Operator: The next question comes from the line of Patrick Tully from Endeavor Asset Management. Your line is open.

Patrick Tully: Couple of quick questions. I think some of concern by the shareholder base revolves around cash flow and the current cash position. I’m assuming that you will be receiving the upfronts and other R&D milestones or first to file milestones in plenty of time to tell you for the future basically and that you won’t -- you don’t foresee any need to raise money at any point ever again, can you -- unless as you stated on the task force that if you saw an attractive acquisition or something to that of that nature, can you confirm what my thinking is?

Andre Godin: Yes. I mean we have no concern for cash at this movement. I mean you are right and upon signature of the definitive agreement of both the JUSTE Group and the global pharmaceutical company that will be generating upfront payments. And a lot of development costs will start at that point, which also generates revenue in. With royalty obviously from 450 expected to go back to the initial growth rates that we’ve seen and potential milestone there as well, we’re not -- and we are also working on other initiatives. I mean those are some of the initiatives that are basically known by the shareholders but we’re looking on -- working on other initiatives that I cannot disclose at this time, which makes us very comfortable about the cash situation at IntelGenx. So, we’re not going to be looking to do any public offering that you can be well seasoned [ph] and comfortable about this.

Patrick Tully: Just a follow-up then, assuming all goes to plan, and if the stock remains as undervalued as I think we all feel that it is, do you ever -- and your cash balance gets in excess sense of let’s say 7 million or 8 million or 10 million, in the next couple of years, would you ever consider a share buyback?

Andre Godin: That’s very speculative, Patrick. I think that it is something that a company could always look at doing, but because of the type of business model that we’re in and activities that we’re in, I think that we could probably use the money to make further progress in some of our project developments and may be create more value there. But, it is very speculative. I mean if we were in the situation where we had more money than what we need, we would look at it. But, I don’t foresee this in the near term.

Patrick Tully: That’s probably a good thing. But, the Par’s -- one of the Par drugs that were released back here, I think it was -- you had originally said that you’re going to file with the FDA by year’s end, if my memory serves me. If the partnership, if that gets cornered in the near term, would that probably still take place and you would be entitled to a milestone payment on that or…

Dr. Horst Zerbe: I’m sorry for interrupting. I missed which project you’re talking about.

Patrick Tully: The second Par project that was turned back to you?

Dr. Horst Zerbe: Okay, I’m sorry, yes. It’s difficult for me to comment at this point for a number of reasons, one, the most important one being ongoing BD activities on this particular program. So, I would like to abstain from any comments on this at this point. I hope you can understand.

Patrick Tully: Yes. And I just want to clarify or confirm something that I think you said earlier in the call, all Rizaport manufacturing for global sales will now, we can assume are going to be done, your facility no longer going to contract any of that out, is that correct?

Dr. Horst Zerbe: That is correct.

Patrick Tully: So, that’s good. I know of course, you’re concerned for long term time of that IP protection, I assume that’s a good thing. Also and finally, can you just talk very briefly about the Alzheimer’s drug that was presented the other night in terms of where you see that; is the IP on that locked up; is it patent protected; do you have a license; what is the test for that drug?

Dr. Horst Zerbe: Okay. The drug we’re talking about is Montelukast. We announced that yesterday in a presentation that that was given by one of the researchers that we have on a contract for this product. And Montelukast is an anti-asthmatic drug that has been on the market for a long time. There is no patent protection for the molecule itself. And we are qualifying it for the use in certain neurodegenerative diseases and then in plain English that would be cognitive impairment dementia, various from of dementia that could be Parkinson’s and dementia that could be -- would go all the way to Alzheimer’s disease and particularly mild cognitive impairment, which is a huge indication. There is not one product out there that’s available for the effective treatment of mild cognitive impairment. So, from a substance standpoint, there is no IP that is in our way. We have been working on this product for some time now and we have a patent application pending for the product that we have in development. So, our specific IntelGenx product will have patent protection. Is this a sufficient response to your question?

Patrick Tully: Yes. I just want to make sure are you somehow -- do you have legal rights to it? I mean you don’t see anybody else jumping into your -- I assume you wouldn’t have had the doctor that’s under contract with you making public presentation on it, if you weren’t extremely secure in having somebody else come in, in front, run you on this product?

Dr. Horst Zerbe: We are confident that nobody is ahead of us at this point.

Patrick Tully: And do you have any legal barriers to that to somebody coming in or not?

Dr. Horst Zerbe: There is unfortunately no chance to obtain a method of use patent. That option is not available.

Patrick Tully: Okay. So, it would just be first to market opportunity?

Dr. Horst Zerbe: It would be what we typically do in our business; it would be protection for our particular product and formulation.

Patrick Tully: Okay. Most…

Dr. Horst Zerbe: It would be -- I am sorry for interrupting, Pat, because it’s an important additional comment. There is one aspect of method of use where we are still contemplating filing an application, so one aspect of method of use might still be patentable.

Patrick Tully: Okay. I would just point -- I mean I am telling you something that you already know, but I mean it seems to me that any other company, be it a company that’s producing revenues or development stage company switching to Alzheimer’s drug in its pipeline trades at multiples of where you guys trade at. Are you going to at some point develop a public relations strategy just around this drug?

Dr. Horst Zerbe: Yes, we will.

Patrick Tully: Okay, alright. Thank you very much.

Dr. Horst Zerbe: I can’t be specific at this point, but there is a very clear yes to that question.

Patrick Tully: Okay. Thank you.

Dr. Horst Zerbe: You are welcome. And by the way, Pat, congratulations to the wedding of your son.

Patrick Tully: Thank you. I appreciate it, Horst.

Operator: And there are no further audio questions at this time, I will turn the call back over to the presenters for closing remarks.

Dr. Horst Zerbe: Okay. There doesn’t seem to be any other question. Then, again thanks to everybody on the call for your interest in the company and for your continued support. Thanks.

Andre Godin: Thank you.

Operator: This concludes today’s conference call. You may now disconnect.