Q1 2021 ANI Pharmaceuticals Inc Earnings Call
Good day, everyone and welcome to today's Eni Pharmaceuticals first quarter 2000, 22021 earnings release call. At this time all participants are in a listen only mode. Later, you will have the opportunity to ask questions. During the question and answer session.
He made regular sort of ask a question at any time by pressing the star and the one on you touched on the phone.
You can always remove yourself by pressing the pound key. Please note today's call is being recorded its now my pleasure to turn on the conference over to Lisa Wilson. Please go ahead.
Thank you operator, welcome to Eni of Pharmaceuticals, Q1, 2021 earnings results call.
This is Lisa Wilson of in.
<unk> Communications Investor Relations for Ni.
With me on today's call are on the keel Lawanda, President and Chief Executive Officer.
And Stephen Curry, Chief Financial Officer of an eye.
You can also access the webcast of this call.
Through the investors section of the Eni website at Ni Pharmaceuticals Dot com.
Before we get started I would like to remind everyone that any statements made on today's conference call that express a belief expectation projection forecast anticipation or intent regarding future events and the company's future performance maybe considered forward looking.
Statements as defined by the private Securities Litigation Reform Act.
These forward looking statements are based on information available to and I Pharmaceuticals management as of today and involve risks and uncertainties, including those noted in our press release issued this morning.
And our filings with the SEC.
Such forward looking statements are not guarantees of future performance.
Actual results may differ materially from those projected in the forward looking statements.
And I, specifically disclaims any intent or obligation to update these forward looking statements, except as required by law the.
The archived webcast will be available for 30 days on our website and I pharmaceuticals Dot com.
For the benefit of those who maybe listening to the replay or archived webcast.
This call was held and recorded on May 7th 2021.
Since then and I made of made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings and with that I'll turn the call over to Nick keel La Lonnie.
Thank you Lisa.
Morning, everyone and thank you for joining our call.
The first quarter of 2021 was an important period for us as we made significant progress towards our goal of building a sustainable biopharmaceutical company to serve patients in need.
We defined four pillars of our strategy and achieved important milestones, including substantial work on finalizing the court for Olson S. NDA filing and commercial team build out signing definitive agreement for acquisition of <unk> during the amps generics R&D and acquisition of the Nba's from Sandoz.
Can we expand our branded product portfolio.
I will speak to these growth drivers and outline our plans to achieve our goals.
Before I get into that I hope that you and your families are safe and well and our thoughts are with those around the world facing the crisis caused by this destructive virus.
Next let me share of couple of thoughts about the general operating environment.
The biopharmaceutical industry has simultaneously been at the center of the of efforts to treat and prevent COVID-19, and has also been vulnerable towards the overall impact to.
Through the first quarter of 2021. It was the continued decline in prescriptions across branded and generics segments.
According to the IQ via the <unk>.
Our ex segment declined 15% year over year, when adjusted for 90 day supply.
This dynamic combined with seasonal factors has contributed to softness in prescription levels for Eni branded and generic products.
In the first quarter 2021, Eni achieved net revenues of.
The $54 5 million compared to $49 8 million in Q1, 2020 and delivered adjusted.
Adjusted non-GAAP EBITDA of $18 9 million I.
I would like to thank the Eni it on.
Our partners suppliers customers and advisors for their support and ensuring our medicines reach patients in need and we make strides forward on our overall strategy.
On our last quarterly call I laid out four pillars for future growth.
Now I'd like to map, our recent progress to each of these foundational pieces.
First our top priority remains centered on building a successful courts rofin gel franchise, we see core Crawford as the transformational opportunity for the company.
<unk> represents a new brand product with only one competitor in the same class achieving $770 million in revenues in 2020.
We are eager to bring this much needed product to patients in need.
This launch has the potential to dramatically change the size and scale of our company.
We continue to make solid progress achieving the key project milestones and are on track to re file our supplemental new drug application or NDA in this quarter.
Every confidence that our steam submission package will be robust and comprehensive.
Yeah.
In February we brought on Chris months, as our Chief commercial officer, and head of rare diseases to spearhead our launch strategy and commercial plan. He brings deep experience in the successful commercialization of rare disease therapies of Alexia on and Mark is currently building his team and most recently brought on board.
Bill <unk> as VP of market access and share your present ski SVP marketing to drive launch readiness.
Okay.
Our second pillar is to strengthen our generics do you with enhanced development capability.
Last quarter, we announced our agreement to acquire in the video and we are on track to close that transaction in the second half of this year we.
We have filed a definitive proxy for a shareholder vote on June 2nd on the financing of this transaction I E. The issuance of greater than 20% of equity to the sellers at two 7% capital.
As Steve will discuss later, we are on track to secure our term loan b financing and finally, we are in the process of getting FTC approval.
Yeah.
As we have outlined there are many reasons why we believe the <unk> acquisition truly represents a pivot point for Eni.
Company moves from a heavy reliance on business development deals to accompany with the robust internal R&D engine.
The investment thesis of adding of best in class R&D engine.
An attractive list of new launches is already playing out.
Since our announcement the video has received several product approvals, including limited competition opportunities such as Famotidine solution. The generic version of Pepcid and generic Fluphenazine.
For 2021, and 2022 alone the video has more than 25 of anticipated product launches, including some with competitive generic therapy designation.
Furthermore, they have more than 30 additional products under development.
We are pleased that the leadership team because of proven track record of success will be joining the eni family to drive growth.
Moving now to our third pillar maximizing the value of established brands through programmatic business development and innovative access and go to market strategies.
The early April we signed and closed.
And accretive deal to acquire the Nba's for Oxy stock Barragan and Penn Dell.
And the Endo for of Mexico on from Sandoz.
The acquisition further leverages, our innovative brand commercialization infrastructure as well as our North American manufacturing footprint.
Accordingly, we are ensuring that patients in need continue to have access to these products.
Okay.
We have already begun selling these high quality dermatology products, which generated net revenues of $13 2 million in 2020.
As part of this acquisition, we also entered into a multiyear manufacturing and supply agreement for Oxy stock Pandora in the past cycle, we plan to transfer the manufacturing packaging of these products to our own manufacturing sites in the future.
One noted on manufacturing facilities and capabilities.
The pandemic continues here in the U S and rages on other parts of the World, Our North American manufacturing footprint remains increasingly irrelevant.
Fly changed become more localized.
We are very pleased with our progress to date as we execute on these critical strategic initiatives.
With that I'll turn the call over to Steve to discuss our Q1 2021 financials as well as provide guidance for the year.
Okay.
Thank you Nicole and good morning to everyone on the line.
Net revenues for the first quarter of 2021 were $54 5 million up $4 7 million or nine 5% as compared to the $49 8 million posted in the first quarter of 2020.
Sales of our generic products were $33 million during the first quarter of 2021, a decrease of 12% compared to the 37 5 million for the same period in 2020.
As Nick mentioned in his remarks, there was softness in the pharmaceutical industry during the first quarter of this year.
Principally due to the COVID-19, pandemic and further compounded by seasonal factors.
In response, our wholesale and retail customers continue to adjust their inventory levels to match the realities of the depressed prescription volume.
These dynamics negatively impacted the market for many of our branded and generic products.
In addition, the decrease reflects lower average selling prices among large generic products over the comparable period and the shift in mix towards generic products with lower average selling prices.
From a product perspective, the net decrease was driven by declines in sales of as that of <unk>.
Methazolamide <unk> and dice in oxalate.
Tempered somewhat by increased revenues from the sales of Palo Teradata on ER and EES.
Net revenues for our branded products were seven $5 million during the first quarter of 2021.
The decrease of 17, 9% compared to $9 2 million for the same period in 2020.
The decrease primarily reflects lower unit sales of inderal, XL and in the Pratt XL Tim.
Tempered by increased sales of case at ex and Inderal la.
Yeah.
Royalty and other revenues were $11.4 million during the first quarter of 2021.
On the increase of $10 3 million from $1 1 million in the same period in 2020.
This increase is due to the recognition of ani's contractual share of royalties due for Pat and the rights related to kite pharma is oncology product, yes Carter.
The revenue recorded in the period is the direct result of the recent resolution of certain litigation between kite and the third party entity with which <unk> has its direct contractual royalty relationship.
We will receive $12 3 million of cash related to this transaction in may and as such this amount is in the accounts receivable as of the balance sheet date.
Yeah.
Our cost of sales, excluding depreciation and amortization decreased by $1 $8 million or eight 3% to $20 million in the first quarter of 2021.
$21 8 million for the same period in 2020.
The decrease primarily reflects the non recurrence of $2 7 million in cost of sales representing the excess of fair value over cost for inventory acquired in the of Maryjane acquisition and recognized in the first quarter of 2020.
Okay.
The decrease was tempered by a $500000 increase in royalty expense due to an increase in sales of products subject to profit sharing arrangements.
Excluding the impact of the prior year step up of the marriage and inventory.
Cost of sales as a percentage of net revenues decreased to 36, 7% during the first quarter of 2021.
From 38, 4% during the same period in 2020.
Primarily as a result of royalty revenue of $11 $2 million with no associated cost of sales during the three months ended March 31 2021.
Research and development expense decreased in the first quarter of 2000 $21 million to $3 million compared with $6 3 million in the first quarter of 2020.
Primarily due to the non recurrence of the $3 $8 million in process research and development charge recorded.
As a component of day, one accounting for the marriage of an acquisition during the first quarter of 2020.
Selling general and administrative expenses increased from $13 7 million to $17 $6 million, an increase of $3 9 million or 28, 5%.
Primarily due to $2 9 million of transaction expenses related to the pending the medium acquisition incurred in the three months ended March 31 2021.
Expenditures on the core Trofim prelaunch inventory were de Minimis in the current quarter as compared to $4 $6 million in the prior year due to the timing of activities with our supply chain partners.
Yeah.
Adjusted non-GAAP EBITDA was $18 $9 million in the first quarter up $1 3 million or seven 6% from the comparable period in 2020.
As detailed on table four of this mornings press release, our adjusted non-GAAP diluted earnings per share is $1.04 for the quarter flat with the prior year period.
Okay.
We generated $27 million of cash flow from operations in the current year period and as of March 31, 2021, We had 21 5 million of on restricted cash and cash equivalents.
Total net debt as of March 31, 2021 decreased to $159 5 million as compared to $179 1 million as of December 31 of 2020.
This figure represents two three times net leverage on the trailing 12 month basis.
Yeah.
I'm also pleased to mention day in the April we received inaugural ratings from the two major rating agencies, Moody's and S&P.
Moodys assigned the B two rating with a stable outlook and S&P global ratings assigned the B plus rating with a positive outlook.
Establishing the company with Moody's and S&P represents another milestone in the maturation of the company and.
And forms the foundation for the syndication of our $300 million term loan B and $40 million credit facility with true is in support of the new video acquisition.
Finally, when we last met with you on our March 9th Conference call, We reinstituted annual guidance.
At that time, we indicated the following full year 2021 figures for Ani's Standalone.
Prior to giving effect to the <unk> transaction.
Net revenues of $207 million to $218 million of.
Adjusted non-GAAP EBITDA of $60 million to $65 million and adjusted non-GAAP diluted earnings per share of between $3 and 30.
And $3.59 per diluted share.
It was highlighted at that time that these guidance figures assume the total U S pharmaceutical prescription activity rebound to pre COVID-19 levels.
The first quarter actual results just discussed are a clear indicator that volume levels in the U S generic market continued to be impacted.
With that said, we remain cautiously optimistic that the 10 achieve our originally stated financial goals and therefore reiterate our full year guidance, albeit with the current orientation towards the low end of the range.
As with before any sustained COVID-19 suppression of script activity.
Will adversely impact our ability to reach these goals.
I'll now open up the call for questions. Operator. Please go ahead with the instructions.
And at this time, if you would like to ask a question. Please press the star and one on your Touchtone phone that start in one you can always room of yourself by pressing the pound key.
We'll take today's first question from Elliot Wilbur with Raymond James. Please go ahead.
Thanks, Good morning busy morning, juggling from different calls here I apologize, Steve if I missed this in your prepared commentary, but just some.
Some color on the swing in your scarred of royalties and why the large impact.
This quarter and.
That's just the one time item in things revert to normal after that and then I also want to ask a question on operating cash.
So.
I think you indicated was just over $20 million in the quarter, which is a pretty strong first quarter for the company at least by historical standards.
It's just kind of a timing issue in terms of maybe receivables collection, but any additional color that you could provide there would be helpful. And then I've got a couple of follow ups for Nicky.
Which I'll hold off until you respond.
Sure sure.
Good morning, Elliot nice to speak to you. So so yeah on on the revenue.
Royalty revenue line item.
There was a settlement that occurred at the level above ani's so between kind.
And the entity debt.
Our debt we receive our royalty is directly from.
And so that revenue.
Triggered a royalty to eni in the quarter.
And was recognized as such.
So we do anticipate that this is the.
The last royalty of then related to yes, gahr debt for the company.
And Youll find we just posted our 10-Q.
And on the FCC the website. If you look in the revenue recognition section of the 10-Q this morning.
You'll see a bit further color on on that transaction.
And then yeah. We were we were very pleased with the cash flow in the quarter at about $20 million for the quarter.
And Youre right right. If you look at quarterly cash flow.
For the company right it can be a little bit of.
Little bit lumpy as the quarters tick on.
The established strong cash flow quarter on.
This go around.
I don't think there's anything specific to highlight about the $20 million if at all.
Operational and.
No nothing specific and to be clear.
As we said in the prepared comments the.
The 20 million that was generated in the quarter does not include the cash that will be received for the <unk> card of royalty.
So we will be receiving over.
Over $12 million here in the month of March related to that transaction and Youll see that reflected in the second quarter cash flows.
Okay.
Apologize I actually had one additional question for you just whats happening on the branded side of the business.
Just looking at the sequential decline.
Obviously kind of out of.
Off trend.
Is that function of just lower units lower pricing lower trade inventory.
Is that a new run rate or is that somewhat anomalous.
Sure why don't I take that out of the numbers.
Yes, you want to grab that nickel true yes.
Yes.
So thank you and good morning Elliot.
I think that.
In terms of the brand the business third.
Two things debt.
To clarify here I think first is in response to your question is that the the.
On the drop.
Q on Q is largely related to units and we believe that there is an impact of reduced prescriptions and.
The COVID-19 related impact we have seen.
A bit of an uptake in the month of April since then so.
The two.
The point on is this the expected run rate going forward and I think the second thing is.
As you as you know well Elliot.
Part of our growth for our brand business has been.
Doing.
The deals almost every year and we just.
Signed and closed the farmer derm deal.
Which will.
<unk>.
We'll move.
We are the driver of growth.
The rest of the year.
And so I just wanted to add that.
Yeah. Thanks, So I just had two quick follow ups for you could you just talk a little bit more about the farm it or the.
Deal.
Interesting basket of assets you guys Havent had any presence from the tactical space historically, just sort of curious as to what motivated that was it just purely opportunistic or is that more of a calculated strategic move to enter a <unk> dosage form of category, where frankly of.
A lot of the the bigger once important players have pulled back fairly.
Fairly substantially and then just my last question is on on <unk>.
<unk> been on a bit of of win streak in terms of recent approvals.
Famotidine, obviously very interesting.
Just given the size of that market kind of what's happening there.
I mean, these are sort of consistent with what you had anticipated.
When you were doing your diligence.
But just sort of curious I guess, specifically on <unk>.
<unk> looks like it could be a fairly important opportunity just kind of given the overall market and limited competition. There just sort of wondering maybe how that transpired versus the expectations that were established during the diligence. Thanks.
Yes.
Thank you again, so I'll take your second question first which is on <unk>.
Yes, the absolutely the investment thesis is playing out as we had planned.
Got it.
On the World Class R&D engine headed by Xiaomi delivering multiple.
Uh huh.
The new launches of <unk>.
Zane.
Famotidine Meloxicam and Dicyclomine I think these are all.
The limited competition promoted in obviously stands out.
And then.
In terms of.
The out of this compare with the with what are <unk>.
Diligence of our plan was I think it's probably on the positive side.
You know.
This is a good run and when you look at these portfolios in aggregate you the puts and takes.
And then the right now just on the on a streak of wins and I think that that is again the testament of the.
So the thesis that this is a world class R&D engine and team.
And they are delivering and you know this is just the continuation of our strong track record that they have built over the years.
And we look forward to welcoming the the entire <unk> team to the Eni family and Oh, you know into two moving the moving forward and driving growth together.
So that's on the the medium acquisition and their launches and then on farmer Jerome.
Look I think it's the combination of two things I think one is as you were as you know over the years Eni as well.
Strong muscle and programmatic business development and continuously scanning the market to see what other interesting opportunities that are out there.
And this was an interesting opportunity that came up.
With Sandoz, making a strategic decision to.
The go into different direction with their derm business and I think that the advantage. It has is.
It has the ability to for us to leverage our commercialization of infrastructure. It is the ability for us to leverage on manufacturing infrastructure. So we have a three year.
The supply.
Cremant with Sandoz, but going forward, we can transfer it to our own manufacturing so strategically it aligns with how we think about these opportunities.
And then.
And that's why we did the farmer derm deal.
Yeah.
Yeah.
Okay.
Okay.
Thank you we'll take our next question from Dana Flanders with Guggenheim Partners. Please go ahead.
Hi, This is the debit on for Dana Thanks for the questions just a couple for me.
First I know some peers of reference of generic price erosion and I think you alluded to that in your comments.
I'm, just trying to get a sense.
Of what generic pricing trends youre seeing in the first quarter are you still typically able to quantify the impact on generic growth for the quarter driven by volume declines versus the price erosion.
And can take that one the kiln.
On a year over year basis.
We saw about 6%.
Price erosion in our overall generic franchise for the year over year period.
Yeah.
Okay, great. Thank you and then on.
Gross margin on a year over year basis, it looks as.
As well as the sequential basis it looks like the gross margins were higher obviously inherently assisted by the onetime royalty free of scar to can you, perhaps speak qualitatively to where you think margins will shake out.
For the year relative to Q1 levels.
Yeah sure. So so yes, the first quarter margin profile did.
Did benefit from the the royalty items.
In terms of our full year margins, we would continue to see kind.
Kind of.
Mid to high.
50% Okay.
The range for the for the remainder of the year.
Okay and then the last one for me just non core troponin.
Can you talk a little bit more about your preparations and commercial readiness ahead of potential launch of I know I think you guys. The started manufacturing earlier this year do you anticipate.
That youll be able to immediately launch following approval in the second half of them.
Or are there any other gating factors that may push some of the launch into 2022.
Yeah, So let me take the stevia so.
And thank you for your questions nice to meet you.
I think that on.
On controls on the re filing where in the sort of final phases of putting on a re filing S. N D. Together.
And are on track.
We're compiling the information we're reviewing the information we've obviously got a dedicated team and external consultants that are helping us put the package together, we remain and continued touch and engagement with the FDA to get any clarifications to ensure that our packages as robust and comprehensive.
Possible.
And we remain confident of being able to re file in this quarter.
With regards to launch timing I think we've not given.
Given guidance on that.
The true pathway will follow will file on this quarter.
And.
But in terms of being able to launch once we get approval that is absolutely the plan.
We have the manufacturing that is being done in preparation for that and also you know.
We're ramping up our commercial team as we as I spoke about in my prepared remarks, we of course, much as head of rare disease and he's building out his team for market access marketing.
And.
So we are we're absolutely preparing to launch soon as we get approval.
Okay. Thank you very much.
Okay.
Once again, it is star and one on your Touchtone phone for the questions today, starting on one well.
We will go next day, Brandon Folkes from Cantor Fitzgerald. Please go ahead.
Hi, Thanks for taking my questions.
So maybe just firstly per.
To close of the video acquisition.
How do you think about capital allocation priorities post the close is business development is still going to be.
As key on do you think it could take a bit of the backseats of investing in sort of R&D and <unk>.
The video just any color there.
With the great.
Maybe just one clarifying question Sir on this is going to revenue payment.
Is is this something that was contemplated in the initial guidance range and just any color there.
Yeah, well that's all for now thank you.
Yeah, So Steve on I think the first one on you can take the second.
Perfect.
Yeah, so on capital allocation going forward.
The the idea of behind the.
The the medium acquisition is very much to reduce the reliance on.
On the.
Business develop the development entirely and to have a growth engine that is.
That is internal to the company that is in our and our full control.
And that is the debt.
That is the intent, having said that and so we will allocate.
You know appropriately appropriate amount of capital for the new video of R&D engine and for the overall Eni R&D engine.
And as far as business development look this is a core strength and capability of the company being able to source scrip.
Diligence.
You know get the deal done and then integrate and deliver.
And that is the strength that I would love to retain and we'll continue to do that.
And again, we'll we will we'll continue to scan the market and be open for deals.
I think to reiterate something that we've said all along the this is about as rich a.
Environments from of targets and assets perspective, as we have ever seen.
And so we'll continue to look at that however from a capital allocation perspective.
Absolutely. The the you know the we will we will back of the R&D engine all the way.
And behind the acquisition.
Okay.
Steve.
Yes and on.
The yes, Scott of royalty Brandon and good morning.
On the that item was not fully contemplated in our original guidance range that we gave at the last call.
The.
Sure.
Thank you very much the person maybe one more from a perfect plan just tackling.
One of the other Christmas from a bit of a different angle.
Your interactions of what sort of the environment you're seeing.
Anything that would lead you to think that the review full carpet may not be a six month review and then secondly, any.
The color on the shelf life of your cold frozen. Thank you.
Yeah, let me take that.
Thank you again, Brendan and good morning.
Look on shelf life is something that we.
We'll not comment on.
The stand that are.
Competitors, who may listen in on stuff, So I think.
We will try to steer clear of that.
And.
In terms of the review period with the with the FDA look we're putting together as comprehensive of package and as robust of package as we can think of.
We.
I'm, making sure that you know it's the it's the best thinking of our team and best thinking of.
The let's put it the world class consultants that are advising us on our re filing.
And couple that with active engagement with the FDA.
I think we feel that we're very confident.
Confident the we're putting for the.
You know of very comprehensive and robust package and.
And I'll remind you that you know.
As we were doing the new medium transaction.
The sellers as well as the private equity from the pipe ampersand.
Both had.
You know as part of diligence so everything.
And you know and they had external ex <unk>.
Experts look at are filed in our of plans.
And you know the recommendation to their clients I E. The sellers of the video as well as the Ampersand was to go ahead and you know <unk>.
On the equity of Eni.
So that's to give you like all of you know there are many sets of eyes on experts looking at this we're actively engaged with the FDA and you know what.
We're taking the time to put the best package forward.
Yeah.
Great. Thank you very much the both of you and congrats on all of the progress since taking over.
Thank you Brendan.
He's been it appears we have no further questions I will return to Florida, and the kilowatt wanting for closing remarks.
Thank you Keith.
I am pleased with the progress we've made on a short time and under challenging industry conditions.
We look forward to updating you as we advance Cort Rofin, we are thrilled about the prospects of ramping our internal research and development capabilities with the <unk> acquisition.
As a company we will continue to seek out opportunities for growth along the four defined pillars of our strategy.
We appreciate very much your ongoing support as we work to deliver value to shareholders and bring important therapeutics to patients in need thank.
Thank you all for your time today and stay safe. Thank you.
Thank you.
This does conclude today's program. Thanks for your participation you may now disconnect.
Yeah.
Okay.
Yeah.
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