Rockwell Medical, Inc.

I would now turn the call over to Mr. Rob Chioini, Chairman and CEO of Rockwell.

Good morning. Thank you for joining us.

This morning, I will briefly cover fourth quarter operating results and I will update our SFP clinical study progress as well as our Calcitriol progress.

Fourth quarter of 2011 revenue was just under $12 million, and gross profit was $1.5 million. Sequentially, fourth quarter 2011 revenue was essentially the same and gross profit was up slightly from third quarter 2011.

Gross profit margins increased 1.5 percentage points sequentially. For the year, revenue was $49 million and gross profit was $5.6 million.

As we've mentioned to each quarter this year, our sales and gross profit in 2011 was affected by a single international distributor, who did not order the same amount of product as they did in 2010. Net loss for the quarter was $9 million compared to a net loss of $1.7 million in the fourth quarter last year.

R&D spending increased significantly in Q4. We spent $7.9 million compared to just $1.7 million in Q4 2010.

The R&D spending was expected and reflects the accelerated patient enrollment in our 3 ongoing clinical studies.

Cash and investments at the end of the fourth quarter were $17.5 million compared to $20.2 million in the previous quarter of this year. Regarding our cash, we just increased our position significantly from a recent stock financing that netted $16.2 million.

Our pro forma cash balance is therefore approximately $33.7 million post-financing. The financing is targeted for clinical development and provides the company an ample cushion for any unexpected costs that may arise prior to SFP commercial market entry.

The financing was done by high-quality institutional investment funds and we are pleased with their participation and support of Rockwell.

Now turning to SFP clinical progress. As you know, our CRUISE studies and our PRIME study have been ongoing and enrolling patients.

Currently, we have 135 active sites in the U.S. and Canada participating in both CRUISE studies, and we have 21 active sites in the U.S.

participating in the PRIME study. We are nearing completion of enrollment in all 3 studies, which we will believe will occur within the next 8 to 14 weeks.

The CRUISE studies, which are enrolling a total of 600 patients, are the Phase III efficacy studies needed for FDA approval. The PRIME study, which is 100 patients, is our marketing study designed to capture ESA-sparing data, while also measuring markers of inflammation and oxidative stress.

This is an important trial because ESA, which is otherwise known as EPO, is the most expensive drug in dialysis, and reducing its use significantly lowers costs for dialysis providers. If data from this study demonstrates any amount of ESA-sparing, we expect it will be a significant driver of SPF adoption once SFP enters the marketplace.

As I mentioned on the last few calls, we continue to have productive discussions with targeted pharma companies for potential licensing of SFP ex U.S. in both Europe and Asia.

As this process matures and we arrive at a decision, we will update you.

Regarding our Vitamin-D progress. We acquired an approved generic drug in the third quarter of 2011, it's called Calcitriol.

It's active Vitamin-D injection. We are now in the process of having a batch manufactured to generate stability data.

We will then submit the stability data to the FDA for their review and upon their approval, we will enter the commercial market with Calcitriol. Based on our progress to date, we estimate commercial launch of Calcitriol in the second half of 2012.

We expect Calcitriol sales to be materially accretive while incurring minimal SG&A expense.

Personally, I am extremely excited about adding Calcitriol to our product line. I expect Calcitriol to generate significant sales and profit for the company.

Our captive customer base alone should generate $50 million in sales annually. Calcitriol, together with our concentrate, should generate $100 million in sales going into 2014.

And under such a scenario, we expect gross profit margins to be 25% to 30% versus our current 12% to 15%. This is a great addition to our concentrate business.

Calcitriol should strengthen our existing base business, increase our sales revenue considerably, generate significant operating income and provide us with further leverage to penetrate the $600 million IV iron market once we launch SFP upon market approval. We are very excited about acquiring Calcitriol.

To conclude, we are pleased with our fourth quarter and our full year 2011. We continue to make considerable progress in our Phase III clinical studies.

We continue to move Calcitriol closer to the market launch and our operating results were in line with our expectations. We expect our operating business will continue to grow and help offset R&D costs.

And we anticipate our existing sales and distribution infrastructure will be a critical component to our success in first capturing Calcitriol sales and then SFP sales upon FDA market approval.

I will now turn the call over to Tom for his comments on the fourth quarter financial results.

Thank you, Rob, and good morning everyone. I'll provide a financial review of the fourth quarter and the full year, as well as our financial position and cash resources.

As a brief overview, our sales for the fourth quarter were $11.9 million, $2.4 million less than last year's fourth quarter due mainly to lower international sales from a single distributor. As a result of these lower international sales, coupled with inflationary pressures, our gross profit dollars were $800,000 less compared to last year's fourth quarter.

Our fourth quarter R&D costs increased to $7.9 million in Q4, compared to $4.2 million in Q3. This was due to accelerated enrollment in our CRUISE and PRIME studies.

Overall, our fourth quarter loss was $9 million, of which $7.9 million was R&D. For the quarter, we had non-cash charges for equity compensation of $1.25 million.

Our cash and cash equivalents, including short-term investments, decreased by $2.7 million from the end of the third quarter. Exercise of warrants and options in the third quarter netted approximately $900,000.

For all of 2011, our sales finished the year at $49 million compared to $59.6 million in 2010, again, due mainly to low international sales to a single distributor. Gross profit decreased $4.2 million, R&D costs were $17.8 million in 2011, while our total loss was $21.4 million, and we had $4.4 million of non-cash charges for equity compensation.

In reviewing our sales, sales were $11.9 million in the fourth quarter, compared to $14.3 million the fourth quarter of last year. International sales were down $1.5 million, domestic sales were up $600,000 due largely to dry acid conversions.

We also had a one-time R&D grant of $0.25 million in 2010 that did not recur in 2011. During 2011, our customers continued to convert to our dry acid concentrate product line to lower their costs.

This reduced our sales dollars but improved our gross profit margins due to a reduction in the shipping costs. Our dry acid concentrate product mix increased to 58% of overall acid concentrate gallons compared to 49% in 2010.

Our gross profit in the fourth quarter was $1.5 million which was $800,000 lower than Q4 of 2010. Reduced international sales, orders and inflationary cost increases for fuel, materials and labor drove the decrease.

Sequentially, our gross profit margins improved 1.5 percentage points over the third quarter, mostly due to improved product mix and internal actions to reduce costs. Gross profit for 2011 was $5.6 million and decreased $4.2 million compared to last year.

Lower sales, coupled with inflationary cost increases, were the drivers behind the decrease in gross profit. Our net loss for the quarter was about $9 million, compared to $1.7 million last year, R&D expense for the quarter totaled $7.9 million, reflecting the accelerated pace of enrollment in our Phase III clinical studies.

Net loss for 2011 was $21.4 million, with $17.8 million attributable to R&D expense. We also had $4.4 million in non-cash charges for equity compensation.

The loss per share for 2011 was $1.21, compared to $0.16 last year.

On liquidity and capital resources. Our cash position, including our cash and short-term investments, was at $17.5 million at year end.

Our cash position decreased $2.7 million from the end of the third quarter, and approximately $6.7 million during 2011.

In February of 2012, we closed a registered direct offering raising gross proceeds of $17.5 million and netting $16.2 million. This raise, coupled with our year-end cash, gives us cash resources in 2012 of approximately $33.7 million, not including the additional cash that may be generated from our business operations.

We also anticipate adding approximately $11 million this year from expiring warrants that are in the money. And we continue to have a substantial cash position with significant levels of liquidity to fund ongoing operations and clinical development programs and to support our other growth initiatives.

I'll now turn the call back to the operator for some Q&A.

I have a lot of financial questions, I think. First, with Calcitriol.

You've mentioned that you're going to launch it in the second half. Can you help us understand the ramp there?

Is it different than a typical drug ramp? Would you expect the acceleration -- what kind of cost would you incur with that ramp or is it just pure operating leverage?

It's pure operating leverage, we expect the cost to be minimal. We expect the ramp will be rather swift based on our current customer base which we'll go after and target first, and actually have been doing now for several months.

Okay, great. And then on R&D, that operating leverage, I mean, is this $7 million the new run rate for R&D at this point?

Is it going to offset all the operating leverage you have from that in Calcitriol ramp -- launch?

The R&D expense should continue to operate in the sort of $7 million range, maybe a little bit more for a quarter or 2, and then it should reach its peak and then begin to diminish as the year goes on and as the trial begins to conclude.

And then for gross margin expectations. With the conversion to your new dialysate, what can we assume for gross margins into this year?

If you have any, can you frame the case plan increase from that product mix?

What was the last part of that question? Can we reframe what?

Can you quantify the expansion of gross margin with the product mix shift to your higher margin dialysate?

Right, right. So are you talking about our dry acid product?

Yes, yes.

So the dry acid product gives us a better margin. I defer to Tom here, but I think we're probably going to be dependent on some of the other costs.

The inflationary cost that we might run into, gas being the most important, probably be in that 12% to 16% range.

So at 16% gross margin range or gross profit improvement? I imagine it's first margin -- I'm sorry, cost of goods [ph] range?

Or I'm sorry, gross margin range?

Yes, I think on the concentrate business, we'll continue to operate in the similar range to what we have historically over last year or 2. And then as we add the Vitamin-D volumes, that will have a large impact on improving our margins because of the difference in margin between the drugs and the concentrates.

I have a question about CRUISE and PRIME data timing. Do you expect to announce PRIME study data before CRUISE or do you expect them to come out around the same time?

PRIME data will come out approximately 3 months or 4 months before CRUISE data.

Okay. And do you see any trends in iron management and bundling now that bundling has been out for a year?

Has the market changed as you expected?

Yes, I mean, going into the bundle, many of the dialysis providers had changed protocols on managing anemia and the most -- the 2 most significant changes were trying to reduce EPO and trying to increase iron use. And I think both of those things have happened to a certain extent.

Okay. And do you see any price movements of your competitor Vitamin-D product?

So there's 2 brand name Vitamin-D products, Hectorol and Zemplar, and then there's Calcitriol, which is that the generic version. Zemplar and Hectorol, at this time, pretty much split the market.

The differences with Zemplar, you need 4 to 6 micrograms per treatment, and with Hectorol you need on average, 2 to 4, but with Calcitriol you only need 1 to 1.5. So Calcitriol on a per treatment basis, which is the way we'll price it in the marketplace, will be able to give the provider an edge or a reduction in cost.

We want to thank you today for joining us. We appreciate your time and your continued support.

Thanks.