Q1 2021 Eagle Pharmaceuticals Inc Earnings Call
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Good morning, everyone. My name is Leo and I'll be your conference operator at this time I'd like to welcome everyone to Eagle Pharmaceuticals, first quarter 2021 financial results call.
All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period.
At that time, if you have a question. Please press star one on your Touchtone phone.
As a reminder of this conference is being recorded today may 10th 2021.
It is now my pleasure to turn the floor over to the MS. Lisa Wilson Investor Relations for Eagle Pharmaceuticals. Please go ahead.
Thank you Leo welcome to the Eagle Pharmaceuticals first quarter earnings call. This is Lisa Wilson Investor Relations for Eagle Pharmaceuticals.
With me on today's call are Eagle, Chief Executive Officer, Scott terrorists.
And Chief Financial Officer, Brian Cahill.
This morning, the company issued a press release detailing financial results for the three months ended March 31 2021.
This press release and a webcast of this call can be accessed through the investors section of the Eagle website and Eagle U S 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.
Format. These forward looking statements are based on information available to Eagle Pharmaceuticals management as of today.
And involve risks and uncertainties, including those noted in this morning's press release and our filings with the SEC such forward looking statements are not guarantees of future performance and actual results may differ materially from those projected in the forward looking statements.
Eagle Pharmaceuticals, specifically disclaims any intent or obligation to update these forward looking statements, except as required by law.
The telephone replay.
We will be available shortly after completion of this call you'll find the dial in information in today's press release the Ark.
Hi of webcast will be available for one year on the website at Eagle U S Dot com.
For the benefit of those who maybe listening to the replay or archived webcast. This call was held and recorded on May 10th 'twenty 'twenty. One since then Eagle may have made announcements related to the topics discussed. So please refer to the company's most recent press releases and SEC filings with that I will turn the call over to Eagle CEO Scott tariffs.
Thank you Lisa good morning, everyone and welcome to our conference call today, the lingering effects of COVID-19 continue to impact our industry and although the country is beginning to open up it may take some time to return to pre pandemic levels of access to providers and patient visits Eagle has done a tremendous job in the face of these challenges but.
Our peers, especially those in the oncology space, we have all felt the effects of fewer oncology visits oncology treatments across the industry were down this quarter, mostly for patients holding off their chemotherapy visits waiting for the washout period for the vaccinations. However, we expect chemotherapy visits to return to normal this year.
At the same time, our expenses are up a little bit more than in previous for quarters, mainly because of the way the R&D fell into the quarters for the year, we expect boat sales to bounce back in expenses to come down over the next three quarters and Brian will walk you through the numbers in a few moments.
In 2020, we had a great year from an E. S. Yeah from an earnings standpoint, the focus of course is and has been on the pipeline and how we ultimately grow the company.
The acknowledged the approach we have taken has been a slow process, but we believe that we and our shareholders will be rewarded the.
The stock buyback of 23% of the company should ultimately lead to significant value creation for our shareholders.
We anticipate our revenue next year will be significantly higher than in the past years the.
The <unk> launch in February of 'twenty, two with four months of exclusivity and of $1 $3 billion market alone is significant as we go through today's presentation. You'll also hear that we expect the vasopressin launch. These two events combined with the two good pieces of news reported this week.
This past week out of Japan should all lead to this large growth.
We will also touch base on the substantial progress we are making in our pipeline both organically and projected in licensing.
We have adapted to these unprecedented times and continue to focus on growing our business and positioning ourselves for sustainable growth.
Let's look at the progress since our last call just two months ago.
Starting with Vasopressin, obviously, a critical short term program for US vasopressin is tracking exactly as outlined previously.
Based on discussions with the FDA at the post CRA all meeting, we designed and completed a pilot study to provide clarity on the appropriate experimental conditions for the final study the.
The pilot study results were as hoped.
And the data provided the clarity for the conditions.
Two weeks ago now we completed the final study that we need to respond to FDA and that study also ran as expected we will be receiving unaudited results shortly and we will update our shareholders accordingly, the <unk>.
Final audited report takes a few weeks and then we require some time to prepare and send the full response to the CRM <unk> to FDA.
Based on all of this our expectation is these final study results will be available here soon and then in a relatively short amount of time. After this we will fully respond to the CRA al in the previous timeframe articulated which is by mid year I will remind everyone that we are first of <unk>.
File for this anda referencing raise of the peso strength.
Which had a total U S sales of $786 million in 2020, our Anda is currently prioritized by the FDA and also flagged as the COVID-19 priority.
Our expectation remains that we will receive final approval in plenty of time to bring the product to market. This year.
Furthermore, we want to note that the majority of questions asked by FDA, our molecule questions not necessarily specific to the eagle formulation.
We believe those questions will be asked of all Anda holders. Our formulation is robust and has held up well to all questions. FDA has asked of us thus far as we turn our attention now to the patent trial. If you recall from our prior statements. The non infringement case when you break it.
Down is relatively easy to understand the.
Of the patents involved in the trial require of days of price and product within a specific ph range of three 7% to 3.9, while the specifications for our vasopressin product require of ph below that range. So if we can manufacture our product and maintain it within the specifications which are outside.
<unk> of the ph range of $3 seven to three nine we should prevail in this litigation of.
Though the delay has been extremely difficult for all of US we feel that we are close to a conclusion.
There is somewhat of a silver lining to the delay since the time that the trial was initially scheduled back in May of 2020, we have been collecting a tremendous amount of additional ph data all of which has been positive. Therefore, the delay has allowed us to gather significantly more proof and assurance to the court that our product is manufactured.
Factory and maintained within the appropriate non infringing ph range, we recognize that our launch.
Is later than we had anticipated, but we again, we are now coming to the end of that process with the CRA all being responded too soon in the court case within 60 days from now.
We reiterate our expectation of bringing the product to market by year end.
The trial will be taking place in person not virtually.
We believe that the strength of our position will become clear during the trial and we look forward to that week.
We also have had two excellent pieces of news coming out of Japan, Our Bendamustine product license to sym bio from Eagle and marketed under the trade name <unk> was approved by the Pharmaceuticals and medical devices agency for a new indication for the ready to dilute liquid formulation for the true.
<unk> for relapsed or refractory diffuse large b cell lymphoma used in combination with rituximab.
This latest approval is another meaningful extension of our Bendamustine franchise, and we believe it will significantly increase the market opportunity for track of Sim in Japan, and just last week <unk> announced that they have filed their application for the 10 minute rapid infusion liquid formulation of ahead of.
<unk>.
Over the past 12 months <unk> has been selling $85 million per year based on the recent approval as well as the filing an anticipated approval of the 10 minute formulation, we believe that the milestones and royalties coming from these products will contribute $25 million.
At peak and we believe we can get close to that peak income level as early as mixed year.
Moving on to <unk>. The <unk> launch is only nine months away from now as you recall, we settled with Lilly in December of 2019 and received final FDA approval in February of 2020, it's.
It's a significant market as the U S sales of Alimta in 2020 totaled nearly $1 $3 billion.
And where we will have four months of exclusivity. We are also approved for the multi dose vial, making <unk>, an even larger opportunity for us as you know we were granted of unique J code, which provides coding clarity to outpatient facilities and physicians and facilities access for patients in reimbursement from Medicare.
Kate and commercial insurance. This is an exciting time, leading up to our launch.
We are now within nine months of launching into $2 billion of branded sales between vasopressin and <unk> and they are of Bendamustine Japanese label expansion should get us close to our previously discussed disclosed peak milestone and royalty revenue of $25 million as early as next year I realize.
What everyone is waiting to hear more news on vasopressin. The good news is that we will be re filing by mid year and the trial is happening. Shortly we will finally get this behind us and we just have to be a little bit more patient.
Now let me touch briefly on our full of the SRAM program, we expect to have the results from our formulation work shortly depending upon those results. We plan to run the small pilot study and then consult with the FDA prior to starting a clinical trial regarding ran index. Our work on nerve agent continues. The study is ongoing we expect.
The report as day, the data as it becomes available.
We also have some important new directional comments to make as.
As we have discussed we have been searching for acquisitions and in licensing to augment the organic development.
Such examples of our co promotion agreement with time technologies for their SM 88 product to treat pancreatic cancer. We look forward to updating you on further progress here. Although it is premature to provide additional details. We are now in late stage diligence for several in licensing opportunities.
That would leverage our capabilities meet our criteria and broaden our portfolio and pipeline, we aim to finalize a few transactions.
Which would considerably bolster our EPS in the short and long term lastly, I'd like to extend a warm welcome to Dr. The Luciano <unk>, who recently joined our board of directors, Dr. <unk> of former FDA official and renowned public health care of expert who has spent her career at the forefront of U S health.
Care policy addressing some of the world's most complex challenges.
Taken together, we are very excited about vasopressin <unk> and <unk> as we look forward to 'twenty, two 'twenty, three and 'twenty for all of which have the potential to provide a consistent future revenue stream for Eagle, we expect the vasopressin and <unk> launches will generate significant cash along with the.
Our current net cash position at the same time, we believe we have some exciting and promising strategic transactions that will broaden our portfolio of important therapeutics with that I'll turn the call over to Brian Cahill to discuss our first quarter results Brian.
Thank you Scott and good morning.
In the first quarter of 2021 total revenue was $41 3 million compared to 46 million in.
In Q1 of 2020 product sales during the first quarter decreased by <unk> $6 million.
For year totaling $17 1 million compared to $17 7 million in Q1, 2020, primarily driven by a $4 $6 million decrease in random net sales.
And of $1 $1 million increase in <unk> sales.
The <unk> product sales were $5 7 million in the first quarter compared to $4 6 million in Q1 of 2020 Eagle.
The Eagle recognizes about RASK of revenue on shipments by Eagle to wholesalers the.
The increase in sales was the result of an increase in our market share based on IMS data eagle's market share of the Bendamustine wholesaler shipments to end users was 9% of the U S spend amongst the market in the first quarter compared to 7% for the prior year quarter.
Okay.
First quarter around index product sales for $6 8 million compared to $11 4 million in Q1 of 2020.
Orders of brands ex our cyclical driven primarily by product expiry with few customers acquire dantrolene unless their stock is expiring.
Q1, 2020 royalty revenue was $24 million compared to $28 3 million in the previous year quarter. This was almost entirely from bad debt.
For each period.
As we've discussed in the past beginning on October one 2019, eagle's royalty rate on the Deca increased from 25% of 30% and on October one 2020, the rate increased again to 31% on October one 2021, it will increase for <unk>.
<unk>, 5% to 32%.
Royalty revenue also includes royalties earned from sales of <unk> by some bio.
Gross margin was 74% during the first quarter of 2021 as compared to 83% in the first quarter of 2020. This reduction in gross margin was driven by revenue mix revenue from product sales includes the supply of Deca and track of some to our commercial partners all of which Eagle earns no.
Profit.
On the expense from R&D expenses were $14 $3 million in the first quarter compared to $9 4 million in the prior year quarter.
Excluding stock based compensation and other noncash and nonrecurring items R&D expense during the first quarter was $13 1 million.
The year over year increase was largely attributable to higher spend on vasopressin full of strength and round of ex.
We expect R&D spend in 2021 for the non-GAAP basis will be $26 million to $30 million anticipated 2021 R&D spend includes.
EBITDA of $1 14 CMC initiatives.
The <unk> trials for the treatment of nerve agent exposure.
EBITDA 111 development activities.
And CMC and analytical initiatives and the launch preparedness for vasopressin.
These costs may be higher as we consider our plans to launch vasopressin and gain more clarity on our full of the strength clinical path, we will adjust the guidance accordingly as necessary.
SG&A expenses in the first quarter of 2021 totaled $19 9 million compared to $24 8 million in the first quarter of 2020.
The decrease was primarily related to the non recurrence of the $2 $5 million charge.
As for the time transaction.
And lower marketing travel entertainment and trade show expenses as the result of reduced travel due to the COVID-19 pandemic.
Excluding stock based compensation and other noncash and nonrecurring items. The first quarter 2021, SG&A expense was $13 4 million.
We are lowering our non-GAAP SG&A expense guidance for 2021 to <unk> $52 million to $56 million this reduction.
<unk> reflects management's ongoing efforts to evaluate our operating expense.
During this transitional period.
While we remain committed to the prudent management of our costs, we will continue to position ourselves to maximize our near term growth opportunities.
Net loss for the first quarter was zero point $4 million or <unk> <unk> per basic and diluted shares.
Compared to net loss of $2 $9 million or <unk> 21 per basic and diluted shares in the prior year period.
Adjusted non-GAAP net income for the first quarter of 2021.
It was $33 $2 million or 24 per basic and diluted share compared to adjusted non-GAAP net income of $11 7 million or <unk> 86 per basic and <unk> <unk> per diluted share in the prior year quarter.
For a full reconciliation of non-GAAP net income for the most comparable GAAP financial measures. Please see the tables at the end of our press release.
As Scott discussed earlier, our multiple aspects of our business continued to be impacted by the COVID-19 pandemic.
We still anticipate the normalization of the oncology market as the pandemic abates.
Of our supply chain remains uninterrupted and we believe we can continue to advance our pipeline without delays.
Our 2021 expense items continues to contemplate of near term returns of normal operations and no additional delays of key projects related to the pandemic.
As of March 31, 2021.
The company had $105 $2 million in cash and cash equivalents.
And $32 million in outstanding debt. So we had $73 2 million of net cash.
We had $44 $9 million of net accounts receivable.
In the first quarter of 2021.
We purchased an additional $1 $4 million of Eagle's common stock as part of our $160 million share repurchase program.
From August 2016 to March 31, 2021, we have repurchased $208 3 million.
Of our common stock.
With that I'll ask the operator to open the call for questions. Operator. Please go ahead.
At this time, if you would like to ask a question. Please press star one at this time again to ask a question that is the star one to withdraw yourself from the queue you May press the pound key.
We'll take a question from Tim Lugo of William Blair. Your line is open.
Hi, This is John on for Tim Congrats on the quarter and the progress. Thanks. So much for taking our question I was just wondering if you can give some color on the timing of any potential of BD opportunities you might be thinking about.
If we might see anything within 2021 or more likely we'll see something in 2020.
Thank you.
And maybe at the followup, how youre thinking about the sizing of any prospective deal.
Wonderful. Thank you. Good speaking use of this morning I appreciate the questions. The timing of the licensing is probably in the near term I would say this year clearly.
Is the expectation where as we mentioned in the call where we're doing a good job moving through diligence on the number of potential opportunities I would add that the one of the aspects of it is that these are programs that we'll be able to fund out of current cash and future cash flow.
Which is tremendous.
Depending on how the next few months ago as we try to pull this together, we may be able to reshape.
Additionally, reshape the pipeline and the portfolio using existing assets to the company existing cash which could be very exciting if we can get it done and so sizing varies. These some of these products are pretty significant relative to the size of the company.
Some of them are products that are already filed some of them are products that are in development, but its a short term growth opportunity as well as of mid and long term. So let's just see what happens and hopefully we will have a good few months continuing to evaluate the opportunities and moving some of them forward.
Alright, thanks, so much for the color and congrats thank you good speaking to you. Thanks.
And once again that is star one to ask a question, we'll move next to Daniel Busby of RBC capital markets.
Hey, good morning, I have a couple of questions for.
First on Vasopressin can you provide any guide rails on when you would expect to receive a decision from FDA following a NDA resubmission.
And if that's the priority for FDA and what are the.
The earliest and latest stage you would expect to hear back after resubmission.
Second can you talk a little bit more about the expected cadence of royalty and milestone revenue.
And in Japan beyond 2022.
Talking about potentially hitting $25 million next year I think that's a little bit earlier than you had previously communicated so are there any one time payments in that number that would result in a step down in 2023 and beyond. Thank you yeah. Thanks, Danielle appreciate it so in terms of days of price and it's we can't give you a perfect timing.
We think it's going to be.
Can we phrase it I would say relatively soon it has been prioritized as a priority Anda and then of COVID-19 flag and the conversations that we've had with the agency leads us to believe that it is the priority for them.
What we've said is I think the best guidance that we can give because we don't have anything else to articulate other than we think debt once we get this.
Responded to in full here in the next short while that the approval will come.
Well in enough time to get the product launched this year.
And I wish I can give you more specifics, but we can but thats our best understanding.
At the current time.
And then in terms of the <unk> royalties I'm going to turn that over to Brian, but what I will say is <unk> been doing a great job.
They are running ahead of our internal schedules they have been able to get the 10 minute filed quicker than we anticipated in the we're able to get the with the very significant expansion of their label approved well beyond our expectations and timing as well. So we're really just thrilled with the work that they're doing.
Out of Japan, and so let me turn it over to Brian If you can give a little bit more color on the numbers sure Hey, Dan.
So.
You've seen our press release the.
The RTD has been approved.
With the <unk>.
Alright on the way.
We think that they will.
They will elevate to that level of our royalty, we haven't disclosed our royalty percentage, but theres also an aggregate net sales milestone that we expect will also be achieved in 2022 to reach that peak.
Okay. So could there be a slight step down in 2023, when you remove the sales milestone.
Modeling perspective.
Sure.
Okay. Thanks for the color guys.
Sure.
Thank you.
Our next question is from David <unk> of Piper Sandler Your line is open.
And the inks.
Your willingness to settle the suppressor in and those comments on their recent call suggested of willingness. So can you talk about whether you've engaged or are engaging in the dialogue with endo.
That's number one number two is just overall strategy I mean, you're talking about licensing is the strategy still injectables and specifically five of IV twos.
That's the presence of kind of an outlier because it's the paragraph four so let's talk about.
In General Scott.
With BD, where you want to take the business and what you're envisioning. Thanks.
Thanks, David and I appreciate the.
For the call.
So look the settlement I don't know what to say about that.
Of course, as we've stated in the past, we have an openness and the willingness.
To settle under the right conditions, our belief is that it's our obligation to <unk>.
Optimize the situation for our shareholders and we believe we're sitting in a pretty good place.
The CRM was unfortunate, but we've had the industry experts, helping us we've been through a meeting with the FDA. We believe we're confident in our approach that we're taking and we're going to submit.
To respond to that CRM completely here shortly and because of the priority review two priorities really we expect that we're going to get it approved we had the court case coming up in July 7th.
As a dialogue here earlier on the call of the were outside of the ph range. We're very confident in our position I think that's going to become clear in that first week.
Of July July 7th eighth and ninth when we're in in the courtroom. So we're in pretty good place.
And we are open minded.
But we've worked really hard at this we've spent well over $25 million now, bringing a first to file an anda to the market.
We have our nose to the grindstone so to speak and we think we're going to get an approval in the early court decision as well and so let's just see how that all.
It works out.
So there.
There you have it it's just.
It's just I think we're in a good strong position right now in terms of licensing we're looking for unique product opportunities.
Not necessarily all in the five of IV to space, what we're finding I think if you step back and look at one of the significant strength of Eagle is our footprint and our sales force capability in the hospital and acute care and oncology and we're finding.
Companies.
A number of companies quite frankly outside the U S that have spent a lot of time and money in R&D over the years and they've done a good job with the FDA here in the states.
But they haven't they don't have the capability that we have of being able to market those drugs sell those drugs and bring them through FDA or run some clinical trials that may still be needed and so what we're finding is.
Opportunities to strengthen our hospital acute care critical care oncology portfolio by leveraging the strength that we have and we're finding potential partners, who match up with us well that need what what we have and let's see what happens again, I think it's a little bit too premature.
David but we have opportunities that we're in.
I would call pretty far along with debt would strengthen the portfolio in the very short term as well as providing us a further pipeline.
In the mid and long term and so we're pretty excited that debt, we could wind up strengthening.
Our product offerings here pretty significantly and the exciting part about it is being able to do it out of current cash flow and with our current financial resources, which would be <unk>.
Wonderful if thats, what we are able to achieve.
Okay. Thanks.
Thanks, David.
And once again to ask a question. Please press star one on your Touchtone phone, we'll move next to Brandon Folkes of cancer Fitzgerald.
Hi, Thanks for taking my question.
Maybe just one from me can you just talk about sort of view of manufacturing and scale up for phase I.
Should the decision Tam quite early and how quickly could you have products in the market. Thank you.
Yes, Brian and thank you all I can say about that is as we've as we've stated we expect to be in a position to be able to bring the product to the market. This year.
And I think that's all we can say at this point, but.
Let's get it submitted here over the next short while let's go to trial here in the next short while and then I think the rest of it will take care of itself.
Great. Thank you very much thank you.
Okay.
And it appears that we have no further questions at this time I'd be happy to return the call to Scott tariff for any closing remarks.
Well thank you.
Everyone. Appreciate it and I think we're setting ourselves up really very nicely in the future with all of these launches and potentially additions to the pipeline plus what we're doing with nerve agents and full of the strand.
Just going into a very exciting growth curve I hope for the company and with the share buyback we've had over the years I think we'll all be rewarded and we're looking for it to it and so thank you again for being on the call. We all appreciate it. Thank you.
This does conclude today's conference call you may now disconnect your lines and everyone have a great day.
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