Q2 2021 ANI Pharmaceuticals Inc Earnings Call

[music] of all locations on the home. Please standby, we'll begin a program in 1 minute.

Good day, everyone and welcome to today's.

Hey, and I of Pharmaceuticals incorporated second quarter 2021 earnings call. At this time all participants are in a listen only mode. Later, you'll have the opportunity to ask questions. During the question and answer session. You may registered of ask a question by pressing star and 1 on your phone you may withdraw yourself from the queue by pressing the pound key.

Please note this call may be recorded I'll be standing by should you need any assistance. It is my pleasure to turn the program over to Lisa Wilson.

Thank you Leo.

Welcome to Ani's Pharmaceuticals, Q2, 2021earnings results call.

This is Lisa Wilson Investor Relations for an odd.

With me on today's call are the keel, Lawanda, President and Chief Executive Officer, and Steve Carrie.

<unk> financial officer of the Ni.

You can also access the webcast of this call 3 of the investors section of the Anr website and anti 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.

The 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 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 August 6.2021.

Since then and I made of it may have made announcements related to the topics discussed. So please reference the companys. Most recent press releases SEC filings and.

And with that I'll turn the call over to Nick kiln <unk>.

Thank you Lisa.

Good morning, everyone and thank you for joining our call.

Before I begin I'd like to acknowledge the challenging times, we're facing is the.

The pandemic lingers on.

Continues to impact lives around the country and the world all of them.

The very much appreciate the continued efforts of our employees our partners suppliers and customers as we focus on ensuring patients in need get access to our medications.

I am pleased to share that on June 29, we accomplished 1 of our key goals.

We refiled, our supplemental new drug application for S. N V 8 to the U S food and drug administration for court for often Jeff.

Building a successful court rofin business is the first of our 4 pillars of our overall growth strategy.

But before I discuss the details of the court Rofin program and other progress we have made during the quarter, let me share some high level of performance metrics for the quarter.

Second quarter revenues totaled $48.6 million.

<unk> of $48.5 million in the comparable quarter in 2020.

Adjusted non-GAAP EBITDA was $13.1 million.

Key drivers of our performance versus last quarter for.

The successful new product launches share.

The capture and existing molecules and improvement in overall market volumes in our generics business and for.

For our brand business integration of the Sandoz, the dermatology portfolio and improvement in overall market volumes for key.

Steve will cover the financials in more detail shortly.

As many of you know we have put a great deal of effort.

For the engaging with industry experts and the FDA along the way into preparing what we believe is the robust and comprehensive filing package to the FDA for core growth from Jeff.

We filed the S. NDA on June 29, 2021 of.

Our goal date is October 29.2021.

Since our submission we have been engaged in regular productive communications with the FDA.

This is expected for this type of SMB 8 filing.

This free filing is a significant milestone for the organization.

I am proud of what we have accomplished to date.

In parallel we are continuing to strengthen our rare disease business leadership team and overall organization to drive the core Trofim gel launch preparation we.

We've made good progress on and remain focused on executing the holistic commercial approach that ensures this critical product reaches and serve the patients in need.

With only 1 competitor in the same class the cultural from gel market opportunity remains significant and capable of transforming the size and scale of our company.

Turning now for the second pillar of our growth strategy, which is the strength of our generics business with enhanced R&D capabilities and increased focus on niche opportunities.

Our acquisition of the video was an important step in this direction.

The acquisition remains on track the clause in the second half of this year pending FTC clearance and customary closing conditions and.

In the interim we are actively planning for integration and ensuring that we combine the complementary strength of the 2 companies to bring more new products to market sort of more patients and customers and maximize the value of our combined assets.

Since the deal finding in March the <unk> best in class R&D engine has continued to deliver.

The median has gained approval to launched 9 new products, including limited competition products, such as Famotidine powder for oral suspension and Fluphenazine tablets.

In parallel the video must file for new Andas overall.

Overall the.

The volume performance well in line with our investment pieces and we look forward to closing the deal.

As you May recall, our third pillar for sustained growth is maximizing the value of our established brands portfolio.

The early April we signed and closed an accretive deal to acquire the NDA for Oxy Scott.

Jim and Dan Bell Creek.

And the NDA for <unk> cream from Sandoz.

I am pleased to share the these high quality dermatology products are now integrated into the Eni portfolio.

This acquisition exemplifies our stated strategy to expand this part of our business by identifying opportunities with the potential to leverage our innovative Brian commercialization of infrastructure and our North America manufacturing Kurt.

In closing, we had a productive quarter and we are pleased with our progress to date, our goal remains to execute on critical initiatives aligned with the 4 pillars of our growth strategy to build a sustainable biopharmaceutical company.

Serving patients in need.

With that I will turn the call over to Steve to discuss our Q2.2021 financials.

Steve.

Thank you Nicole.

And good morning to everyone on the line.

While we are acutely aware that many communities across the country are dealing with the resurgence of COVID-19 cases, we were pleased to see the initial signs of a return to growth for the U S generic prescription market in the second quarter.

While total U S generic market prescriptions for the second quarter of 2021 continue to trail pre COVID-19 levels day.

We're up versus prior year.

And versus prior quarter, we hope for the renewed health of our communities and the continued return to normalcy as the second half of the year progresses.

Turning to Eni results net revenues for the second quarter of 2021 for $48.6 million as compared to $48.5 million posted in the second quarter of 2020.

Sales of our generic products were $34.2 million during the second quarter of 2021, an increase of 2.4% compared to $33.4 million for the same period in 2020.

The net gain was due to the increased sales of Fenofibrate potassium citrate ADR vancomycin oral solution and the second quarter of 2021 launch of Nicardipine.

However, these increases were tempered by declines in sales of Methazolamide make the stat penicillamine and mixed amphetamine salts.

Net revenues for our branded products were $11 million during the second quarter of 2021, an increase of 3.8% compared to the $10.6 million for the same period in 2020.

The primary reason for the increase was the launch of <unk> for products acquired from Sandoz in April and increased sales of the <unk> XL.

These gains were tempered by decreased revenues of that again and the rib IDEXX.

Contract.

Manufacturing revenues for $2.3 million during the second quarter of 2021 compared to $2.9 million for the same period in 2020 due to decreased volume of the orders from contract manufacturing customers in the current period.

Royalty and other revenues were $1.1 million during the second quarter of 2021, a decrease from $1.5 million for the same period in 2020.

This decrease primarily reflects declines in product development revenues earned by Eni, Canada, and the non recurrence of royalty revenue related to <unk>.

Our cost of sales, excluding depreciation and amortization increased by $1.6 million or 7.8% to.

For the $22.3 million in the second quarter of 2021, mainly as a result of increased volumes in the current year period.

The increase was tempered by a $1.2 million decrease related to the decline in sales of products subject to profit sharing arrangements.

In addition, during the 3 months ended June 32021, and 2020, we recognized $1.5 million and $1.4 million respectively in cost of sales representing the excess of fair value over cost for inventory acquired in the.

<unk>.

Excluding these purchase accounting related charges and other non-GAAP items as detailed in our press release.

Our gross margin was 57, 2% for the current year period as compared to 69% in the prior year period.

The compression in gross margin is mainly attributable to increased volumes at lower average selling prices.

Research and development expenses decreased from $3 million in the second quarter of 2020 to $2.8 million in the current year, primarily due to the non recurrence of zero point for millions of 2020 severance related expense associated with the restructuring of our inter.

And of course Rofin development team.

Selling general and administrative expenses decreased by 11, 3% from $21.2 million to $18.8 million, primarily reflecting the non recurrence of $6.5 million of termination benefit of expenses related to the 2012.

The departure of our former President and CEO.

These decreases were offset by $1.7 million of transaction expenses related to the pending the <unk> acquisition.

And $2.5 million in sales and marketing expenses related to of course rofin prelaunch activities incurred during the 3 months ended June 32021.

On August 3rd 2021, the company entered into a settlement agreement with <unk> Pharmaceuticals, LLC to resolve all claims related to our longstanding commercial litigation, which was scheduled for August 25th trial.

Under the terms of the agreement <unk> will pay Arbor, $8.4 million and Arbor will dismiss of the action with prejudice.

Neither party admitted wrongdoing and reaching the settlement.

We recorded an $8.4 million dollar charge in the second quarter as the type 1 subsequent event and we will pay the settlement from cash on the balance sheet. This month.

Yeah.

Adjusted non-GAAP EBITDA was $13.1 million in the second quarter down $2.3 million or 15% from the comparable period in 2020, driven by declines in gross profit.

As detailed on table 4 of this mornings press release, our adjusted non-GAAP diluted earnings per share is <unk> 67 for the quarter compared with 69 in the prior year period.

On a year to date basis, we have generated $29 million of cash flow from operations in the current year period and as of the June 30 balance sheet date.

We had $24.3 million of the unrestricted cash and cash equivalents.

Total net debt as of June 32021 increased $22 million 2 of $181.5 million as compared to 159.5 million as of March 31 of 2021.

Driven by borrowings to fund the April acquisition of the Sandoz products.

This figure represents 2.7 times net leverage on a trailing 12 month basis.

Consistent with our comments on the first quarter earnings call and in recognition of the ever evolving nationwide COVID-19 trend.

We reiterate our full year guidance, albeit with the continued orientation towards the low end of the range of.

Our 2021 guidance figures for Eni standalone prior to giving effect to the <unk> transaction are unchanged as follows net.

Net revenues of $207 million to $218 million.

Adjusted non-GAAP EBITDA of $60 million to $65 million in.

And adjusted non-GAAP diluted earnings per share of between $3.30.

And $3.59 per diluted share.

As with before any sustained COVID-19 suppression of script activity will adversely impact our ability to reach these goals.

Finally on behalf of the entire <unk> family.

Thank our shareholders for the overwhelming support show of support for the <unk> transaction at our annual meeting of shareholders and in the vote to approve the finance a portion of the transaction with the Eni of equity.

We are energized by the potential of this acquisition and look forward to locking arms with the video in our ongoing mission to bring high quality pharmaceutical solutions to patients physicians and payers.

We continue to expect to close the transaction in the second half.

With that I'll now open up the call for questions.

Please go ahead with the instructions.

At this time, if you would like to ask a question press Star 1 on your Touchtone phone again that is star 1 to ask a question to remove yourself from the queue. You May press the pound key.

1 moment, while the queue.

We will take the question from Elliot Wilbur of Raymond James Your line is open.

Thanks, Good morning, not surprisingly I guess first question will be with respect to the.

The free filing an acceptance of the NDA for core trove of an actually a 3 part question for yourself in the queue.

Specifically I guess based on initial interaction and dialogue with the agency on.

On the filing.

You have a relatively short timeline here in terms of the.

Established action date, just wondering if you have any sense yet as to the agency's view of the requirement for inspection or inspections at any or all of the the key points in the.

In the supply chain.

The second part of the question is specifically has there been any dialogue with the agency around the infantile spasms indication on the label.

Or is that just not part of the discussion at this point in time and then last part of the question I just want to get your thoughts on recent trends in the.

The competitive product XR.

The sales there have declined rather substantially over the last couple of quarters. There may be a lot of unique factors. There in terms of I guess, just mallinckrodt status and it may be the removal from some of the government programs, but you have signaled more of a true specialty approach in terms of Relaunching This asset and I just wanted to get.

Maybe your initial observations on whether you think this decline in units and ex or maybe create an easier setup for you in terms of launch or whether you think that there may be more heavy lifting involved in terms of trying to reactivate unit demand in that market.

Okay.

Thank you Elliot.

I will take these questions 1 out of time.

The first question on <unk>.

The agency view.

Inspection requirements.

As you know well.

We can.

Give specifics on the on the dialogue what I can say is.

We've put a great deal of effort in digital diligently engaging with multiple exports out of the FDA.

Along the way and are preparing what you believe is a robust and comprehensive filing package to the FDA called Brooklyn.

Oh the.

No.

Since our submission on June 29 for the FDA has engaged in productive communication.

As would be expected for this type of question of NDA filing. We've responded to the request and are pleased with the continued engagement with the FDA.

So that's on your first question.

On the on the labeling and specific on the infantile spasms again.

This is the competitive situations. So I cannot feel that question of this time.

And then your third 1 which as you know with what's going on with a competing product.

Look we're monitoring the market dynamics closely here right as you would imagine.

And we continue to believe that the.

Commercial opportunity is going to be significant for Eni.

And most importantly to bring a.

A much needed therapy to patients in need and while I cannot go into specifics for competitive reasons, we do believe that our holistic commercial strategy addresses the headwinds that our competitor is facing.

Yeah.

Okay, maybe just 1 quick follow up question on the.

Pending volume.

Acquisition, I guess has the interaction with the FTC sort of gone according to plan in terms of <unk>.

A review of any potential overlap for divestiture requirements is that business at this point of sale tracking in line with some of the initial.

The numbers you provided in terms of the expected the immediate revenue and EBITDA contribution from from that deal.

Yeah.

Yes.

Thank you for that Elliot look the acquisition remains on track for close in the second half of the year.

Obviously as I am saying that we're factoring in the aware of the discussions are with the FTC.

And look we are we're actively planning for integration and ensuring that we combine the complementary strength the needs to bring more new products of the market sort of more patients and customers and maximize value of for combined assets.

And look as I said in the prepared remarks there.

The new mediums performance.

Vince.

Since the deal closed has been well in line with our investment thesis and the.

And a number of cases the head.

And as you would have noted in terms of the approvals that they have gotten 1 thing I forgot to mention in my prepared remarks, which I would like to add is.

Over the last couple of months.

<unk> has also had a successful.

GMP inspection there was the.

The prior approval inspection, but they also did the GMP inspection with the FDA.

And you know just continues to maintain its no surprise to us, but they continue to maintain there.

A very strong track record with the FDA.

Terms of Sop.

E&P in.

That's another sort of strength that we will carry for them. So yes.

Okay.

And this does conclude our question and answer session for today I'd be happy to return the call to our host for any concluding remarks.

Yeah. Thank you. Thank you Leo this is Nick here of the warming again.

Look I'm very pleased too that we were able to accomplish our goal of re filing the NDA for <unk> in Q1 and with the strides that we continue to make in building out our business based on our 4 core pillars for growth.

But the night towards the future. We are excited about the prospects of ramping our internal research and development capabilities and capturing all of the synergy synergistic opportunities, we see with the video.

As always we remain committed to delivering value to shareholders and bringing important medicines to the patients in need.

We want to thank all of you for your time today.

And hope that you and your family and friends stay safe during this lingering pandemic. Thank you.

Okay.

This does conclude today's call you may now disconnect your lines and everyone have a great day.

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