Q3 2021 Eagle Pharmaceuticals Inc Earnings Call
Yeah.
Good morning, everyone. My name is Ashley and I will be your conference operator today at this time I'd like to welcome everyone to Eagle Pharmaceuticals third 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.
Kind of if you have a question. Please press star one on your telephone keypad.
If your question has been answered you may remove yourself from the queue by pressing the pound key.
This conference call is being recorded today November nine 2021.
It is now my pleasure to turn the floor over to MS. Lisa Wilson Investor Relations for Eagle Pharmaceuticals. Please go ahead. Thank.
Thank you Ashley welcome to Eagle Pharmaceuticals third quarter earnings call. This is Lisa Wilson Investor Relations for Eagle Pharmaceuticals with me on today's call are Eagle's, President and Chief Executive Officer, Scott tariffs and Chief Financial Officer, Brian Cahill. This morning, the company issued a press release detailing financial results for the three months ended September 30.
2021.
This press release and a webcast of this call can be accessed through the investors section of the Eagle website at Eagle U S. Dot com before we get started I would like to remind everyone.
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 <unk>.
Pharmaceuticals management as of today.
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 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 will be available shortly after completion of this call you'll find the dial in information in today's press release, the archived webcast will be available for one year on our website that 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 November nine 2021. Since then Eagle may have made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings with that ill turn the call over to Eagle's President and CEO Scott.
Thank you Lisa good morning, everyone and thank you for joining our call. Today. This is truly a very exciting time for eagle in the third quarter. We brought two we brought on two great assets Cao to Orlando, All we had a court victory on vasopressin, which we expect to gain approval for and launched shortly.
And we are getting very close to bringing <unk> to the market within 90 days from now in fact, we just held our national sales meeting to prepare for two launches its a truly exciting time with this momentum we believe that we will be on the path to double our revenues and more than double our earnings in.
2020 to over 21.
Over time, we will evolve eagle into a mainstream pharmaceutical company and continue to be a significant commercial organization and the hospital oncology space with the launch of two products in the upcoming months. The company is at an important inflection point.
We've effectively managed our balance sheet building cash while building our pipeline Eagle is in a strong position to take advantage of future opportunities and deployed the necessary resources to keep our company growing.
The best way to articulate our next 18 months are as follows assume for a moment Basil prices launched and we meet our profit targets, we would leave 2022 with a very significant cash position and no debt.
Thereafter, we will be waiting for the Atlanta law approval, and we will be close to interim Cao to results.
And we would be leaving next year with a new base of revenue and profitability.
Our intention is to maintain the new level of profitability and to do so we will need to add to the portfolio and pipeline.
Fortunately, we will be rewarded for managing our debt and cash so well over the years.
Our plan is to make a meaningful acquisition for currently marketed products first.
Our infrastructure and sales team can handle the significant increase in assets with little infrastructure investment.
With this first acquisition in hand, we will then continue to in license or acquire clinical assets.
Our hope is that by the end of next year. This new level of profitability will again be in growth mode.
And also provide an enhanced pipeline.
The really exciting aspect of all this is that we should be able to accomplish this with little dilution or dead relative to our new planned growth.
We have invested about 21% of our money back into R&D and still have about 123 million in net working capital.
Our strategy to grow the company remains highly focused during the quarter, we had diluted non-GAAP earnings per share of <unk> 50 success.
Ara Vasopressin spend was $5 3 million, which is non reoccurring earnings and significantly brought down Q3, we expect a strong Q4 for the existing portfolio heading into a strong 2022, as we launch vasopressin and <unk>.
With that backdrop, let me start with vasopressin, an important opportunity for us and what we expect will be a key contributor to our near term growth once approved.
As those who have followed the story know we had two hurdles to clear one in court and one in terms of getting approval from the FDA. We cleared the first hurdle in late August when the U S District Court for the district of Delaware ruled that our proposed vasopressin product does not infringe any of the patents par asserted against us.
In terms of the second hurdle on August 26, we received a 30 day information requests from FDA, which is very positive and we believe an information request at this point that the review process may be indicative that the anda is advancing towards an approval.
The request they asked for questions three pertained to clarification and one question required additional analytical work on September 20th we responded in full to the request and there are currently no other re review requests.
Based on this recent engagement in our prior FDA communications as.
As well as that we have priority review and are also flagged as a COVID-19 priority.
Maintain our view of an anticipated approval on or before the December 15th 2021 could do to date.
With that goal in mind, we have been building inventory and intend to launch into this lucrative market. Soon remember in 2020 U S sales of visa strict were $785 million, we expect to have 180 day market exclusivity.
We are really excited about this and hope to get good news very shortly.
Now, let me turn to <unk>.
On February 1st exclusive launch date will be here before you know it the alimta market totaled nearly $1 $3 billion last year and this is clearly another great opportunity for us that will contribute to the significant revenue growth that we expect in 'twenty two.
We are going into our exclusive launch on February one 2022, we are gearing up.
Building inventory and we will be ready to go remember too that we have a unique J code for <unk> Z. It's also worth noting that <unk> is a ready to use liquid in contrast to alimta, which requires dilution.
If we look at vasopressin and <unk> sexy in the context of our company today.
He goes a fully commercial clinical regulatory hospital oncology company, we have a team of about 40 direct reps who call on oncologist.
Surgeons Anesthesiologists and hospital pharmacists on a regular basis we.
We have strong relationships for vasopressin. The purchasing decision is made by the hospital pharmacist and they are already our customers importantly, we can launch both products with little to no expansion of our existing infrastructure.
And when you add in the Bendamustine business, which I'll review next that is how we plan to double our revenue next year.
So now turning to Bendamustine, we strengthened our patent protection for Bendamustine in late August when we were granted a new patent which was listed in.
In the Orange book are partner Sym bio launched in Japan, the Sym bio relationship is going well and we expect a full or nearly full conversion to our product in the near term. We also expect royalty and milestone revenues of about $20 million next year.
And now when we look at <unk> two in Lambiel. All we're also very excited about these two new assets. We brought in during the third quarter Cabo to Atlanta yellow as a team when we think about the pharmaceutical industry and how to deploy our cash to bring value to shareholders. We look for opportunities that address unmet medical needs.
And have promising clinical potential.
<unk> two is a novel approach to the treatment of severe bacterial pneumonia as you may recall from our Investor day, we in licensed the global rights to Colo to from comp by OXXO, where we are preparing to continue the clinical development of <unk> two by mid 'twenty two.
If it continues to perform well in larger clinical trials. We think this has the potential to be a groundbreaking advancement in the treatment of severe bacterial pneumonia.
We anticipate investing $25 million to achieve interim results, which are expected.
Round, the middle of 'twenty three.
Yeah.
Turning now to land below while land below as a novel therapeutic in the United States is the leading commercial product and has been used in the care of critically ill patients in Japan and Europe for years. This covered by several patents and we anticipate five years of NCA exclusivity the good.
<unk> here is that we don't believe we will have to run additional clinical trials, we anticipate filing an NDA in the first half of 'twenty to seeking the approval Landy law for the short term reduction of ventricular rate in patients with Super ventricle, tachycardia, including atrial fibrillation and atrial flutter.
We will facilitate the U S regulatory pathway for approval and will be responsible for the U S. Commercialization. Upon approval as you can see we have a lot to look forward to and with that I'll turn the call over to Brian Cahill to discuss our third quarter financials Bryan.
Thank you Scott.
In the third quarter of 2021, our total revenue was $39 $9 million compared to $49 $9 million in Q3 of 2022 products.
Product sales during the third quarter were $12 1 million compared to $17 $3 million in Q3 of 2020.
The decrease was partially driven by lower product sales have been deca, Teva on which we earn no profit.
<unk> product sales were $4 $9 million from the third quarter compared to $8 $7 million in Q3 of 2020.
Eagle recognizes <unk> revenue on shipments by Eagle to wholesalers.
First on IMS data eagle's market share of Bendamustine wholesale shipments to.
To end users was 7% of the U S bendamustine market for the third quarter compared to 5% for the third quarter and the prior year.
Third quarter, <unk> product sales were $4 $5 million compared to $4 2 million in Q3 of 2020.
Orders for <unk> are cyclical driven primarily by product expiry.
Q3, 2021 royalty revenue was $27 7 million compared to $27 $6 million in the prior year core prior year quarter.
Resulting almost entirely from Ben Deca for each period.
Eagle's royalty rate on <unk> was 30% during the third quarter of 2020, and 31% for the third quarter of 2021 Royall.
Royalty revenue also includes royalties earned from sales of <unk>.
By some bio.
On the expense front R&D expenses were $23 3 million for the third quarter compared to $4 8 million in the prior year quarter. The increase is largely attributable to upfront payments for our <unk>, two and land Youll all licenses.
Which amounts to $50 million combined and an increase in development and pre launch costs for vasopressin and <unk>.
Excluding the expense of acquired in process research and development stock based compensation and other noncash and nonrecurring items R&D expense during the third quarter was $7 6 million.
We continue to expect R&D spend in 2021 on a not on a non-GAAP basis.
34% to $38 million.
This reflects our launch preparedness strategy on vasopressin, reflecting our confidence in the near term launch as Scott discussed.
The anticipated 2021 R&D spend.
Includes for the full year launch preparedness and CMC initiatives for vasopressin.
<unk> trials for the treatment of nerve agent exposure, which occurred earlier in the year and EBITDA of $1 14, clinical and CMC initiatives.
SG&A expenses for the third quarter of 2021 totaled $18 5 million compared to $17 7 million in the third quarter of 2020. This increase is primarily related to an increase in external legal costs, partially offset by a decrease in stock comp expense.
Excluding stock based compensation and other noncash and nonrecurring items third quarter of 2021, SG&A expense was $14 5 million.
Our net loss for the third quarter was $5 6 million or <unk> 43 per basic and diluted share compared to a net income of $7 1 million or <unk> 52 per basic and <unk> 51 per diluted share in the prior year period.
Adjusted non-GAAP net income for the third quarter of 2021 was $7 5 million or <unk> 57.
Per basic and <unk> 56.
Per diluted share compared to adjusted non-GAAP net income of 61, 16 $1 million or $1 19 per basic.
And $1 17 per <unk>.
Diluted share in the prior year quarter.
For a full reconciliation of non-GAAP net income to the most comparable GAAP financial measures. Please see the tables at the end of our press release.
As of September 32021, the company had $99 $7 million in cash and cash equivalents and $28 million of outstanding debt.
We had $71 7 million in net cash.
We had $45 3 million in net accounts receivable.
In the third quarter of 2021, we.
We purchased an additional $8 $3 million of Eagle's common stock as part of our $160 million share repurchase program.
From August 2016 through September 32021, we have repurchased $219 $4 million of our common stock.
With that I'll ask the operator to open the call for questions. Operator. Please go ahead.
And at this time, if you would like to ask a question. Please press star one on your Touchtone phone if at any point you'd like to remove yourself from the queue. Please press the pound key again that is star one for your question and we will take our first question from Brandon Folkes with Cantor Fitzgerald. Please go ahead.
Hi, Thanks for taking my question.
Maybe just two from me.
Can you just elaborate on that one request in the city.
<unk> information request for visa.
Yeah do you believe the FDA has had time to work through it at this stage so if.
If there were additional questions I would have come back to you.
And then maybe just secondly, yeah with two significant product launches coming in beta and <unk>.
Can you just talk about your ability to get product into the channel, especially if they can carry of limited competition and you know this is asked instead of a better way.
Macro backdrop, just given some of the largest supply chain.
Challenges I guess, we're hearing across the board. Thank you. Thanks Brandon.
So let me take the first question first the information request was normal course, and what's expected.
When you get down to the end of an Anda. That's part of the reason that were we're hopeful here that where we're going to get this approval here pretty soon on or before the <unk> date is.
It's just.
Normal questions you get is theyre tightening things up.
The information request was pretty minor it was just clarifications three of the four questions, where clarifications and the fourth one they wanted another data point from us.
That we went into the lab. It took a couple of days to run it and we gave it to them. So that was back I think we mentioned September 20th we responded we had to get it to them in four weeks, we took three weeks and based on the.
The discussions that we've <unk>.
<unk> to have we are still the expectation internally as you can see from the inventory build and the Salesforce meeting is that we're going to receive this approval.
On or before that December 15th date until you have it you never know obviously, but we're moving forward based on everything we know internally that we will get this approval here soon.
We're ready to go.
And for your second question is you know obviously this is so important to the company and to our shareholders to launch these two products.
We've done everything that we could for quite a while now to be prepared for the launches and not run afoul of any supply issues.
So as we sit here today, we're very confident that we have enough material right product vial stoppers corrugated everything that we need to be able to ship the quantities that we've been talking about very effectively and what I keep reminding people brand and as well is we.
We're not a generic drug company, we don't sell solely through distributors.
We have 40 reps, calling personally onto people that need to make the purchasing decisions either for the most part the hospital pharmacist for vasopressin and for our community oncology for <unk>. These are people we call on every day and we believe I believe, especially our national sales meeting was very exciting.
We have great relationship with these people and I think we're going to do extremely well commercially I'm very proud of the sales team they are very well prepared.
<unk> supply and <unk>.
And capability I think we're just going to do great. We're in the middle of building inventory.
Assume nothing goes wrong, there we're building quite a bit we will have enough for these launches.
Sure.
We're expecting this doubling of revenue and more than doubling of earnings by the time, we get through next year because of all of this.
Alright, thanks, very much and best of luck to sort of introduce the next months.
Thank you Brandon.
Okay.
And once again as a reminder, that is star and one for your question.
Take our next question from David <unk> with Piper Sandler. Please go ahead.
Thanks, So just a couple of questions on vasopressin, just looking at the commercial landscape.
What's your sense for how crowded the market eventually will be over time, just thinking beyond the initial one.
Today 80 days.
That's number one.
And then number two is <unk>.
<unk>.
Just yesterday announced the contract with Premier.
So with that in mind can you just talk about.
What do you think you can do to sort of maximize your share given what endo is doing well.
With contracting and also to the extent that they have a ready to use formulation that they bring to market. Thanks.
Thank you David well some of the questions a little bit harder to long term value of the market.
Isn't perfectly clear for US you know as you know Endo has settlements and we don't know what those settlements allow for acceleration clauses I think there. It's mid 23 when people come in but we're not sure where they get accelerated too and we don't know if there's a distinction I mean, you would hope that there is.
Distinction between people that get approved and people that don't get approved.
As it's turned out it's just a very difficult product. These peptides. These generic peptides are difficult.
As I look back and eventually when people see the FDA request to us I feel confident that Eagle as a company did what they needed to do all the way along this as we've said some lead times the delays have been due to new types of tests that the agency's required us to do.
And so over time people will be coming into the market, obviously when they come in as an exactly known but what we do know if you look at the landscape Nobody has a tentative approval yet it's just a very difficult and I would add a very expensive product to <unk>.
So we will just have to see what happens on the long term value. We're hopeful that it's a limited market for for quite some time and we have pretty significant value beyond the six months in terms of contracting.
You would expect the innovator to try to contract that's built into our models and into our statements. It's also normal course of action, we would never have expected anything different but we are very confident in our relationships with our customers and the feedback that we've had and our ability to sell product.
And to meet the share that we would expect in our view is we'll probably do better than the normal hospital analog for a generic to come into the market primarily because of the strength of our 40 sales reps, calling on hospital pharmacy. All these years so.
It doesn't faze us nothing unexpected and we've accounted for all of that in the <unk> I don't know what to say that the <unk>. We also don't believe that if they launch it it's going to have impact on our.
On our sales in our numbers, we've taken into account we've spoken to our customers about the art to you. We're just very confident to meet the revenue and profit numbers that we've articulated and we're just excited and anxious can't wait to get the approval and get going.
Yeah.
Okay. That's helpful. Thanks.
David.
And we will take our next question from Tim Lugo with William Blair. Please go ahead.
Alright. Thanks for the question can you talk about how much.
Kind of manufacturing capacity, you believe is out there for vasopressin like compounds when we start to look at other entrants.
And how much of a royalty youll be paying out tier manufacturing and kind of how much of a burden will be going out to manufacturing. So we can kind of figure out that net and then maybe we could talk about just.
Weakness in <unk> during the quarter. If there was anything that explains it because it just market erosion or anything else out there to call out.
Yes, Thanks, Tim good to hear from you the manufacturing and development of days, though has been.
It's a more challenging product because it's a.
It's a peptide.
So I would say that.
I can't comment on what other people have and their ability to manufacturer and what the individual capabilities are of these these companies there's not a tremendous number of people that can do this kind of work, but there's this contract organizations that can do it we think it'll be a limited.
Year or two based on the fact that it's so hard to get the product.
Approved I mean, if you just what we've said before is we're now.
Over.
Just about $15 million in the cost to develop.
Laser pricing, it's a lot of work that needed to be done and we think that other than people getting supply from the innovator that the cost to develop these products is.
Expensive. So the real question is if your fourth or fifth in the market are you going to spend the type of money that we spend to get to the market knowing that we were first to file and.
So I think it's probably the approval costs.
That are going to make it difficult for people who are readily come in.
It's impossible to tell exactly how many people, but I think this will be a relatively stable market for <unk>.
Probably a year or more not just the six months that will we'll have to find out. So that's the first question about the manufacturing and Brian What we said publicly about our payments to our suppliers on both products.
It's.
Sure.
Its normal margin that we have with the rest of our product right. So the we do have some payments to our partners, Tim but the but the margins that we get on it are about the normal margin that we have with the rest of it other than the royalty income obviously that we get from from Penn Deca. So the margins are going to be pretty.
Hi on these two products even after the payments I mean very high relative to the industry, obviously and keep in mind. What helps all of that is that we're bringing these products and quite frankly future products like <unk> into the market into the company without much additional infrastructure cost and Thats why when we say we will.
The doubling of the revenue, we're going to have more than a doubling of the profitability because we're bringing in all of these extra products I would say.
<unk> Z vasopressin Landy law, and we can probably add another product or two to the company with having minimal infrastructure expense and so I think over time, if we were able to transact. The plan that we have youre going to see a tremendous amount of leverage on the bottom line, which is going to be.
This great growth spurt for the company and.
And we have all the wherewithal and the world to go out and acquire additional assets with the way we manage our cash in our balance sheet. So we're just very excited about getting this approval in driving topline and bottom line for several years.
Just very excited about it I think the other question you brought up Tim was bill wrap so and the Bell wrap so decline Brian is just quarterly we expect Q4 to be a rather strong quarter for the company push push.
The new products away from that conversation for a second obviously DSO and <unk> are going to really drive these quarters going forward, but if you just look at our base business with Ben Deca in Bell wrap so in <unk>, we have slated.
Strong revenue quarter for those products in Q4 Q3 was just the way the chips fell.
With the products and the timing, but nothing to do with the core strength of the three products relative to the history that we've had with them.
And then don't forget Q4 was brought down considerably by the expense that we had Q3 was brought down considerably because of the expense that we had with vasopressin and getting ready for the launch and having the trial right.
Okay.
Very excited to hear about the regulatory updates going forward, yes, we will too so between that vasopressin approval then.
Finally, Atlanta yellow on getting into the results of <unk> two.
And then whatever we do now with our cash and bring more assets into the company.
It's just.
Let's go get this little Anda approved and.
Get on with things and go build the company into.
Now a bigger company than it is today.
Thanks, Scott Thanks, Tim.
Okay.
And there are no further questions I will now turn the call back over to Scott <unk> for any closing remarks. Thank you. Thank you again for joining us today as you've heard this morning, we have a lot of exciting initiatives ongoing as we continue to evolve the company and solidify our position in hospital oncology space look we have a strong cash position.
It's enabled us to bring the two significant assets.
We have the exciting pipeline.
It should have a great next year.
Really looking forward to getting vasopressin on the market really soon then we go into <unk> inside of 90 days in.
We'll update you as soon as we know, but we're excited and very hopeful that our next few years look incredible. So thank you again for joining.
Yeah.
Thank you and this does conclude today's program. Thank you for your participation you may disconnect at any time.
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