Remi Barbier – Chairman, President and Chief Executive Officer Peter Roddy – Vice President and Chief Financial Officer

Kevin Kendra – Gabelli

Thank you. Welcome to our earnings call for the second quarter 2014 and thank you very much for being with us today.

On the call with me Remi Barbier, Chairman, President and CEO. Here's our agenda for this call.

After the traditional reminder regarding forward-looking statements. I'll touch on some of the financial highlights of the second quarter.

Remi will then provide an update on our business and we'll have time for questions, after Remi's comments. Please keep in that during the course of this call.

We will make forward-looking statements including statements about some of our products candidates and our finances. These Forward-looking statements involve risks and uncertainties.

Our actual results may differ materially from our forward-looking statements. Further information about these and other risks are included in our annual report on Form 10-K, our 10-Q for the first quarter of 2014 and our other filings with the Securities and Exchange Commission.

Now I'll comment on the financial highlights for the second quarter. We started the quarter with, $47.1 million used $2.3 million in the second quarter and at June 30, we had about $45 million, that translates to between four years and five years of cash to be four years or five years as a strong balance sheet and we'll continue to insert disciple over the use of our cash.

Our guidance for cash usage for 2014 continues to be about $12 million with our guidance focused on cash. I'll ask you to please recall that our revenue in the second quarter 2013 and for the first half of 2014 was not cash revenue and came from the accounting for upfront payments for the Pfizer in years half.

We finished up the accounting for those payments in the fourth quarter of 2013. You won't see this non-cash revenue in 2014.

We increased our R&D spending in Q2, 2014. Primarily on third party activities on our early stage assets up to $1.9 million from $1.1 million in the second quarter of 2013.

As I mentioned on our last call, off of the financial status onto another subject, we had some insider stock option exercise activity in 2014. Some of the auction exercises were so called net exercises and given the how, net exercises are reported to the Securities and Exchange Commission people might confuse net exercises with sales of stock, they are not.

There have been no insider sales in PTI stock this year and again, we are aware of any plans for insiders to do so. And Remi will take it from here.

Okay, thanks Pete. I'd like to discuss a couple things, but before we go there.

I'd like to say that, overall I feel great about REMOXY and where we stand. Based on a couple of contacts, I've had with Pfizer in the past week.

I can affirm, that Pfizer is moving full speed ahead with REMOXY and that the plan continues to be re-file the NDA for REMOXY in 2015. As this being the mid-year point, I think it kind of pays to setback and see, what did we tell shareholders we would do, what did we actually do, and where could we improve.

Overall, the three goals for this year have been to stay in close contact with Pfizer, with the understanding anything we can do to help REMOXY move forward, we would do this. The second goal has been to expand the pipeline of Pain assets, while still maintaining fiscal discipline and the third overarching goal here has been to build awareness of Pain Therapeutics.

Those have been the three themes for 2014, I think in all three themes. We've done very well.

Let me take each one apart. Without going back into history, I want to remind shareholders that REMOXY is I believe extremely well partnered.

We understand that shareholders have a choice, last call [ph] I know there was something like, I think 200 public biotech companies and 90% of them are of these public biotech companies, are I would say in the infancy stage, so are we. While Pain Therapeutics is in its infancy stage, we think we have a well laid out rational plan to get to our walking legs in relatively short amount of time, which is to say a 1 year, 1.5 years.

The cornerstone for Pain Therapeutics of course is REMOXY. I want to remind shareholders that, the royalty on cost approval, our royalty starts at 15% and goes up to 20% after cumulative net sales of $1 billion.

And on approval, we receive a $15 million cash milestone payment from Pfizer. The Patent life is fairly long, I believe at this point it goes beyond 2030.

As far as Pfizer is concerned, we stay in very close communication like I said I've had two communications with them in the past week alone. I'm not aware of any delays, everything I hear is full speed ahead and everything is on track for an NDA refilling in 2015 for Pfizer.

So, I've always said with REMOXY no news is good news and you know the good news I have here is again, everything is on track and I feel great about, where REMOXY is headed. One thing, we did tell our shareholders, is that we would complete a strategically view of all of our assets.

We did this, we completed the second size in the second half of pretty much not that long ago, few weeks ago and the grand conclusion is a rather simple conclusion, which is that we have specific expertise and developing Pain assets and that's really where we want to focus, to that end our vision continues to be, to have at least one possibly two products in Phase III by the time REMOXY is approved. The asset that we have committed is hydromorphone and I should say in abuse-resistant version of hydromorphone.

This is the hydromorphone product that was returned to us by Pfizer sometime ago because they feel it doesn't need their minimum market size. Well hydromorphone, I think in a good year is probably similar between $200 million and $500 million in annual sales.

We think for a small company such as we are, that type of market size is more than adequate for us. So we're pursuing its development.

We plan to initiate a Phase I very shortly, followed by an FDA meeting and we expect to be in a Stage III trial with abuse-resistant hydromorphone in 2015. I also want to say that the hydromorphone that we have on the development, it is not exactly what Pfizer gave back, it is actually a reformulated version if you will, with our partners, we reformulate it, hydromorphone taking into account everything we've learned about REMOXY.

The other drug asset that we are committed to, unfortunately remains undisclosed and it remains undisclosed for a very good reason, for very simple reason. The IP is just getting processed [ph] as we speak, I'm actually spending a fair amount of my time and so a lot of us on the Intellectual Property.

We expect the patents to be written very shortly and filed shortly thereafter. And at this point, we are actually looking for a good conference to announce the product, this fall.

We may announce it at the BioCentury conference or one or other conference that we are invited to, Wall Street type conference. On the abuse-resistance front, I think what we are seeing at the FDA is that abuse-resistant remains an absolute top priority as evidenced by their approval, the potential competitors drug.

I also want to say that, there is still quite a bit of hype around abuse-resistance and the hype really is generated, in mycin [ph] at least buy rather a small number of company that are trying, that are attempting to develop abuse-resistant products, but despite the hype, what the FDA has said and what they've been very consistent about is that they want to see abuse-resistance, they want to make sure that these programs are grounded in real science. And what that means in practice, is companies in order to get any type of abuse-resistant claim will need to show two types of abuse-resistance data both in Vivo, which is to say drug likeability studies as well as in Vitro, which is to laboratory work.

The overall vision for Pain Therapeutics, the long-term vision has not changed. I still maintain that we have a once in a lifetime opportunity to position this company for profit on the other side an approval for REMOXY that is the direction, we are headed and again given the 15% to 20% royalty and given Pfizer's experience and expertise in sales and marketing, I do maintain that we do have a potentially very nice opportunity to build a profitable company.

While at the same time of course, having the depth and breadth of Pain pipeline. At this time, I'd like to close the Pete and Remi session and perhaps open it up for investor questions.

Operator?

Operator?

Hi, guys. Thanks for taking the question.

They asked me first, mainly to the semantics, but I know before you talked about sort of mid-2015 filing for REMOXY, now you're saying 2015 not necessarily mid-2015. So should we be reading that as more of a sort of later 2015 timeframe or is that mid-2015 timeframe still reasonable?

No, there is no slippage in the timeframe. It's the matter of semantics again I'm not aware of any delays, there are no delays everything is moving full speed ahead.

There is nothing to indicate a slippage from the filing date.

Okay and secondly on the hydromorphone product, just wondering why you chose to move forward with that asset as oppose to some of the other ones in your pipeline and then, how should we be thinking about the pathway for that product in Phase III, would be looking at a similar Phase III as we what we saw for REMOXY or could possibly be a bit more expedited smaller trial sort of timeframe. What the right sort of way to think about that?

I think, the way we think about hydromorphone which is a very nice kind of mid-market type product. Again to the $500 million in potential revenues per year, on the other side of an approval and as far as the clinical pathway.

I believe it should be fairly straightforward, which is to say the Phase I, is ongoing or that will ongoing very shortly in order to nail down the final formulation followed by FDA meeting in 2015, followed by Phase III in 2015 as well. Again it's a little bit or early to be precise about being what the Phase III could look like, but in our experience what we did on the clinical front with REMOXY, is a pretty good carbon copy for what can be done for, with strong opioid's such as oxycodone or hydromorphone.

In fact, if you actually look at what competitors are doing, they are very typically following what we did with REMOXY, which is to say a 12-week study randomized placebo controlled etc.

Okay and then maybe if I squeeze one last one and just wondering, some of your competitors been more vocal about getting into the space to point the one recently, so they plan to be a tough player in the space, they have a pipeline of a few abuse-deterrent assets. What do you think, it means for REMOXY in your sort of follow-on compounds as you see more companies getting into the space?

I mean, is this good because it's going to grow the pie for everybody or do you start thinking about, how the market share is going to be carved up in a few years?

Well, that's an interesting question Kevin. When we are the only game in town, certain shareholders were saying, while it's not a real market because no one else is playing in it.

Now a number of different companies are jumping on the bandwagon, you know I'm kind of hearing the same thing, which is maybe it's not a good thing. I actually, I'm in a position where the more the players, the merrier, but having said that there are two key strategic imperatives in order to win in this market.

Remember, this is a very, very easy day into play at a very difficult things to win. In order to win, I maintain that you need two things.

One is you need sales and marketing and what better company out there for sales and marketing than Pfizer. Second thing you need is a drug, an abuse-resistant drug that can really an entire basket, an entire portfolio of methods of abuse.

It's not sufficient to come up with an abuse resistant product that can only prevent snorting or that can only prevent injecting or event both, I think what we've seen in the market place is that, abuses are very clever and depending on how you count, there are somewhere between nine and 12 different methods. The common methods of abusing these drugs and to the extent that we believe REMOXY can prevent or differ the abuse on many, if not all of these nine to 12 methods [indiscernible] administration, I think we are in a great position.

Thanks.

Remi, you want to close this up or shall I?

Sure, I'm happy to close it up. Kevin, also on your last point.

I just want to reiterate that eventually the entire market, which is what something like a $9 billion to $10 billion. The entire market will need to convert to abuse-resistant.

So again, I think there is plenty of room for more than one player, but I still maintain that in order to win, you got to have, you need abuse-resistant data and against many different routes of abuse and it has a result in a clear label differentiation and you need a partner to sell. I think on that note, since there are no more questions.

We'd like to close the conference call. Thank you for your time today and we look forward to reporting more progress in the second half of this year.