Q4 2021 ANI Pharmaceuticals Inc Earnings Call
[music].
Yeah.
Good day, everyone and welcome to today's <unk> Pharmaceuticals, Inc. Fourth quarter 2021 earnings results call. At this time all participants are in a listen only mode. Later, you will have an opportunity to ask questions. During the question and answer session. You may registered to ask a question at any.
Time by pressing the star Antoine I have touched on phone. Please note. This call maybe recorded and I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Judy Diclemente.
Thank you Brittany welcome to Ani's Pharmaceuticals, Q4, 2021 earnings results call. This is Judy diclemente of insight Communications Investor Relations for a N I.
With me on today's call are Nikhil, <unk>, President and Chief Executive Officer, and Stephen Curry, Chief Financial Officer of Eni you.
You can also access the webcast of this call through the investors section of the a and I website at Www Dot Eni Pharmaceuticals dotcom.
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 may be considered forward looking statements as defined by the private secured.
<unk> Litigation Reform Act.
These forward looking statements are based on information available to a N 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.
Archived webcast will be available for 30 days on our website and I pharmaceuticals Dot com.
For the benefit of those who may be listening to the replay or archived webcast. This call was held and recorded on March 15, 2022. Since then and I may have made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings and with that ill.
Turn the call over to Nikhil Lalvani Nikhil.
Yeah.
Thank you Judy.
Good morning, everyone and thank you for joining the Eni pharmaceuticals call today.
And for your interest in our company.
You your families friends and colleagues continue to stay safe and well.
I'll start with commenting on the overall 2021 performance and 2021 Eni delivered revenues of $216 1 million and adjusted non-GAAP EBITDA of $64 8 million.
Our adjusted non-GAAP diluted earnings per share of <unk> 54.
Reflects the increased number of shares outstanding.
During this period, we continued to face increased competitive intensity and resulting pricing pressures in the generic side of our business as well as the impact of Covid on prescriptions for both our established brands and generics businesses.
Proud and appreciative of the hard work of all of our employees customers partners and suppliers as we continue to deliver high quality medications.
Patients in need.
In 2021, we also achieved important goals against the key pillars of our growth strategy to drive Eni passed an inflection point in our evolution towards becoming a leading biopharmaceutical company.
First on January 24th 2022, we announced a full scale commercial launch of the lead asset of our rare disease business purified Court Rofin Joe.
Bringing cork rofin gel to market was a victory for Eni and more importantly for patients score Trofim, Joe has the potential to help patients with certain chronic autoimmune disorders, including acute exacerbations of multiple sclerosis, and rheumatoid arthritis.
Excess urinary protein urine nephrotic syndrome.
These patients are forced to cope with a devastating disease on a daily basis.
Multiple evidence based treatment guidelines indicate that corticotropin or ACTH, maybe considered for patients who require additional treatment beyond standard of care, which often includes steroids.
Our claims based epidemiology analysis suggest that less than 10% of patients who are steroid resistant and refractory across primary indications received ACTH therapy.
The ACTH market in 2021 was approximately $600 million in revenues, reflecting the significant impact of the COVID-19 pandemic on the only competitor in the clubs.
The alleviation of the Covid impact is visible in the growth seen in the ACTH market between Q3 and Q4 of 2021.
The reintroduction of Cork Rofin gel for select indications gives prescribers, another ACTH therapy, which could mean, a greater chance for an effective treatment for some patients.
As we share more about the court rofin gel launch please bear in mind that we have held back information do not reveal our plants to our competitor.
We have invested significantly in building a world class rare disease team and the infrastructure needed to drive a successful launch.
<unk> leadership team led by Chris months has experienced over 'twenty rare disease product launches.
Recent additions to the leadership team include Dr. Marie Paul <unk>, as Chief Medical Officer, and those with Powell as Chief.
Clients officer and head of legal.
Our winning Salesforce will be approximately 50 person strong and led by their inspirational leader Paul Clark.
Our clinical account executives have an average of over 12 years of successful sales experience in the rare disease and specialty areas, including with leading rare disease focused biopharmaceutical companies such as Alexia on horizon, our myeloma and Gilead.
Nearly 75% of the sales team as one of the President's club or equivalent top down sales award in recent years.
In preparation for launch this experienced team went through comprehensive clinical and product training to fully prepare them to hit the ground running on day one of launch.
We are also in place strong functional teams, including medical marketing market access commercial operations analytics finance and compliance.
In addition, we have secured the U S based distribution footprint and supply chain CT Rofin gel is now available through our network of specialty pharmacies and distributors for appropriate patients health care providers.
Can submit a prescription and initiate access to treatment through a specialty pharmacy by visiting Www Dot Kirkland I'll call.
We've also established an updated our manufacturing processes and ensure a sustainable U S based supply chain for key starting materials API and finished goods.
Eni is committed to supporting meaningful patient access to court rofin gel and to bringing a more affordable ACTH therapy to government and commercial payer plans prescribers and patients.
We are very encouraged by our ongoing conversations with payers as well as the pharmacy benefit managers or pbms.
As part of our commitment to establishing meaningful access to courts Rofin, Joe We've created CT rofin in your corner, a dedicated program for patients and their caregivers throughout the treatment journey that includes one on one access reimbursement support financial assistance for eligible patients.
And nurse provided injection training.
CT rofin in your corner also provides access and reimbursement support for health care professionals and their staff.
Finally, we are very pleased with the early physician response, we have seen for core Crawford.
Perfect timing as most physicians already for in person visits.
We're confident that seeing the strong weekly trends for prescriptions and new patient case initiations continues to accelerate over the past six weeks as our sales force is meeting with physicians and our initial focus specialty areas.
Overall, the court Brooklyn gel launch is off to a very good start and we continue to expect core trofim, Joe to be a significant growth driver with commercial longevity.
While we are not yet ready to provide specific core profit guidance in this early stage launch we're encouraged by the early traction we are seeing.
Turning now to the second pillar of our growth strategy.
<unk> had our generics business with enhanced R&D capabilities and increased focus on niche opportunities.
In November we completed our acquisition of the video pharma, bringing a high performance R&D engine to Eni.
R&D engine continues to deliver with eight new product launches since deal closure and five new Anda filings already in 2022.
Today <unk> has over 30 Endo files pending with the FDA and over 25 applications and multiple 505 B two products under development.
Really important.
R&D engine strengthened its track record of bringing limited competition products to the market with the largest number of competitive generic therapy CGT approvals.
Most recently and I received CGT designation and the associated.
Okay.
My.
Most recently and I receive CGT designation and the associated 180 days of exclusivity for the launch of <unk> and Hydrus solution. In addition to receiving approval of our first <unk> product.
Our R&D efforts across New Jersey bought at local and now fully integrated under the leadership of semi shuttle them.
Along with Chad Gassert, who leads our portfolio strategy and corporate development functions. We are focused on increasing the productivity of our R&D teams and strengthening our product pipeline to bring much needed quality affordable medications to patients in need and to increase the sustainability of our generics business with new product launches.
<unk>.
As you would expect we have in place a clearly defined 100 day integration plan.
<unk> key functions, such as commercial HR operations quality supply chain and finance.
Our teams continue to execute well against these plans with the dual focus on ensuring continuity of business operations and capturing synergies from the combination.
The eight new product launches consistently high service levels.
And positive feedback from our customers highlights the effectiveness of our integration.
Our synergy capture efforts cover procurement savings distribution and operational efficiencies and enhanced R&D productivity as mentioned earlier.
Overall, the new medium pharma acquisition is off to a great start.
The third pillar of our growth strategy is to maximize value from established brands.
Through innovative commercialization strategies and strong business development, which has been a long standing strength of Eni.
In 2021, we successfully acquired and integrated four dermatology brands from Sandoz.
We continue to evaluate accretive asset acquisition deals of this area and further augment our unique commercial and organizational capabilities.
The fourth pillar of our growth strategy is to expand our <unk> business.
Bridging our north American manufacturing footprint, and so deep certain unique manufacturing capabilities.
Several of our customers are facing the pricing headwinds from increased competition with.
We continue to explore opportunities that you just did the addition of the new medium site in New Jersey, and new customers in the medium serve brain.
I'd like to close by sharing three elements of Eni strong foundation that enables us to deliver sustainable growth and becoming a leading biopharmaceutical company serving patients in need.
First <unk> new capital structure comprised of the recently completed $75 million equity raise and the closer of the new $300 million term loan b $40 million revolver and $25 million pipe gives the company significant flexibility and ensuring a strong.
You are five port Rofin gel commercial launch supporting the integration of the video into Eni and propel the next phase of growth for Eni.
Second we have in place high performing leadership and teams with the necessary experience and expertise across our diversified businesses.
Finally, we're cultivating eni United culture to serve our patients and physicians in need by continuing to identify patient populations that are underserved and medicines that can help them.
Now Steve will provide the details behind our Q4 2021 financials.
<unk>.
Thank you Nicole and good morning to everyone on the call.
As Michael just mentioned the company completed numerous strategic initiatives in the fourth quarter of 2021, most notably the F. D. A approval of core trophy and the close of our acquisition of <unk>.
The corresponding refinancing of our debt structure and a secondary public equity raise.
These events have had significant impacts on our fourth quarter financial statements.
On October 29th we received FDA approval for our purified protropin gel product in RA.
Response, we proceeded with the final prelaunch spend necessary to fully build out our rare disease sales and marketing team.
During the fourth quarter, we finalized marketing plans and field force materials.
It out recruitment of key home office personnel and fast tracked recruitment of our clinical account executives in advance of our January 24th 2022 full scale launch.
These efforts resulted in $9 2 million of core Trofim specific fourth quarter spend.
It has continued to be added back to our non-GAAP metrics as prelaunch expenditures.
Beginning in the first quarter of 2022.
We will reflect the full core trofim S DNA spend in our non-GAAP metrics.
On November 19th we closed our acquisition of the video and as such the videos results for the final 41 days of the year are reflected in our consolidated results.
Our preliminary purchase price allocation as reflected in our December 31, 2021 balance sheet and reflects GAAP fair market value of the consideration of $206 2 million intangible assets of $139 2 million and goodwill of $24 3 million.
Yeah.
We incurred approximately $9 4 million of transaction costs.
Which were expensed as incurred and are reflected in SG&A and our GAAP financial statements and have been added back for our non-GAAP measures.
Okay.
In conjunction with the close we refinanced our previous term loan a credit agreement with a $300 million term loan b and a $40 million revolving credit facility.
The new debt was utilized to fully repay $200 1 million of turn a term loan a debt and to partially finance the new video acquisition.
The new term loan B bears interest at LIBOR, plus 6% with a 75 basis point LIBOR floor.
In addition, we issued approximately 2.5 million restricted shares of common stock to selling shareholders in the medium.
Shares continued restrictions on their post close transfer ranging from three to 24 months following the completion of the acquisition.
Lastly, we placed a 25 million of series, a convertible preferred stock to ampersand capital and a pipe transaction.
The preferred shares accrued dividends at a rate of six 5% per year, and our payable either in cash or in kind.
These shares are recorded as mezzanine equity on our December 31, 2021 balance sheet.
In November we placed $75 million of common stock in the secondary public offering resulting in the issuance of $1 5 million common shares and net cash proceeds of $69 7 million after cost of issuance.
The culmination of these activities and financing efforts resulted in $100 3 million of unrestricted cash on our balance sheet as of December 31st.
This balance along with our $40 million revolving credit facility, which remains Undrawn places us in a strong position to support the courtroom and launch from the integration of the video and allowed the company to explore product level tuck in acquisitions during the course of 2022.
Now, we will turn to fourth quarter financial results.
Despite ongoing industry headwinds, including significant generic price pressure Eni has continued to grow through incremental revenues from the new video acquisition with net revenues for the fourth quarter of 2021 of $60 9 million as compared to $57 3 million.
Posted in the fourth quarter of 2020.
Or a 6% increase.
The video contributed $7 7 million of net revenues during the initial 41 days.
Consolidation of results.
Net revenues for generic pharmaceutical products were $41 6 million. During the three months ended December 31, 2021, an increase of 8% compared to $38 7 million for the same period in 2020.
The net increase was primarily due to the November 19th acquisition of the video.
In the third quarter 2021 launch of Nebivolol.
Tempered by sales declines for toll parodying and vancomycin and a decrease in the average selling price of generic products.
Net revenues for branded pharmaceutical products were $14 7 million. During the three months ended December 31, 2021, a decrease of 7% compared to $15 8 million for the same period in 2020.
The change was a result of fewer units sold of <unk> and inderal XL, partially offset by the second quarter 2021 launch of brand products acquired from Sandoz.
Contract manufacturing revenues were $2 8 million during the three months ended December 31 2021.
An increase of 26% compared to $2 2 million for the same period in 2020.
Partially due to the video related C D M O games.
Operating expenses on a GAAP basis increased by 49% to $84 7 million for the three months ended December 31, 2021 up from $56 9 million for the prior year period.
Cost of sales, excluding depreciation and amortization increased by $9 4 million to $33 9 million in the fourth quarter of 2021 compared to 24 5 million in the prior year period.
As a result of increased volumes.
The increase also includes a charge of $3 7 million to recognize the excess of fair value over cost for assets acquired as part of the new video transaction and a $1 9 million litigation settlement, which was recorded to royalty expense.
These items were partially offset by $1 6 million a decrease related to sales of products subject to profit sharing arrangements.
Excluding stock compensation and these impacts on a non-GAAP basis cost of sales as a percentage of revenues was 46, 2%.
Compared to 42, 6% on a like basis for the fourth quarter of 2020.
The 3.6 point reduction in margin is principally the result of price compression in our generic product offerings and negative mix.
Research and development expenses declined from $3 7 million to $3 1 million a decrease of 15%.
Primarily due to the timing of generic R&D projects and the completion of the R&D phase of the courtroom fin re commercialization project.
Selling general and administrative expenses increased by $16 3 million in the fourth quarter of 2021 to $30 7 million compared to $14 4 million in the comparable quarter in 2020.
The increase primarily reflects $4 3 million of transaction expenses related to the video acquisition.
$9 2 million in sales and marketing expenses related to court drove in prelaunch activities and increased head count costs, including those associated with the video and subsequent to the acquisition.
Yeah.
Depreciation and amortization expenses were $13 7 million for the three months ended December 31st 2021, an increase of $2 8 million.
Compared to the same period in 2020.
The increase is primarily a result of the initial amortization of intangible assets acquired in the video transaction.
Adjusted non-GAAP EBITDA for the fourth quarter was $16 2 million compared to $17 2 million for the fourth quarter of 2020, a decrease of five 8%.
Our adjusted non-GAAP diluted earnings per share was 54 cents for the quarter compared to 80 cents for the fourth quarter of 2020.
It is worth highlighting that fourth quarter non-GAAP EPS metrics reflect $14 2 million diluted shares representing a partial quarter of additional shares outstanding related to the new video acquisition in the fourth quarter equity raise.
During the year, we generated $3.3 million of cash flow from operations and as of December 31, we had $100.3 million of unrestricted cash and cash equivalents.
Cash flow from operations. During 2021 was constricted by approximately $10 5 million of cash settled courts rofin prelaunch activities.
$9 4 million of new video transaction costs, and $8 4 million of cash settled litigation settlements.
These items were tempered by approximately $13 million of cash collected in the second quarter related to the final, yes Garda related royalties.
Total net debt utilizing the face value of debt.
Net of our cash on hand as of December 31 was $199 7 million an increase of 12 million from September 30th 2021, driven by incremental debt incurred with the new video acquisition.
As tempered by the additional cash on the balance sheet, principally resulting from the public equity raise.
Net leverage was three one term turns on a trailing 12 month basis as of the balance sheet date.
Now turning our attention to forward looking guidance.
For the projected 12 months ended December 31, 2022, and I is providing guidance on X courts, rofin that revenue and ex score drove an adjusted non-GAAP EBITDA.
Total company research and development expense.
And core trophy specific SG&A.
The following summarizes 2022 guidance.
For total company X purified core Trofim gel. We currently anticipate net revenues of between 260 and $275 million.
Presenting approximately 20% to 27% growth as compared to 2021 and.
And adjusted non-GAAP EBITDA of between 70, and $75 million, representing 8% to 16% growth as compared to 2021.
On a total company basis, we expect research and development expense of between 16 and 18 million.
And relating specifically to purified coach Rofin gel, we anticipate direct selling general and administrative expenses of between 42 and $46 million.
In addition, we currently project between 16.9 and $17 3 million shares outstanding.
And then the effective tax rate of approximately 24% prior to any federal tax reform.
With that we'll now open up the call for questions. Operator. Please go ahead with the instructions.
At this time, if you would like to ask a question. Please press the star and one on your Touchtone phone you may remove yourself from the queue at any time by pressing the pound key once again that is star Antoine if he would like to ask a question.
We will take our first question from Brandon Folkes with Cantor Fitzgerald. Your line is open.
Hi, Thanks, taking my questions.
Maybe just two from me.
Yes.
I know that you may not be willing to answer this at this stage, but I guess canaccord <unk> launched in <unk>.
Are you willing to just talk about where you are seeing initial reception there.
And then maybe just on the video and can you just remind us in terms of what you said about that acquisition being accretive should we think of it being accretive in 2022.
<unk> recorded a net loss of $1 4 million from close to December .
Anyone.
Any any way of how to think about.
Iridium being accretive in 2022 and its impact on operating cash flow going forward. Thank you.
Yeah. Thanks, Thanks, Brendan good to hear from you Steve why don't I take the first question and then you can.
Hold a second.
Yeah.
Sounds good.
Alright so.
Regarding early traction of course rofin as you rightfully pointed out we want to be.
Thoughtful about what we share.
Given.
Our competitors early stages on our launch and our competitor maybe listening and so what we're willing to say at this point is.
Look it's a it's been perfect timing for US is most physicians are ready for in person visits.
Seeing a strong weekly trend for prescriptions and growing week on week.
And new patient case, initiations, and so while we're not yet ready to provide specific quarterly guidance. In this early stage of launch we're very encouraged by the early traction we're seeing.
Steve.
Yep.
Yep Yep.
Thanks, Brendan and good morning, yes, so so on the video.
The video is generating a modest growth overall for our overall brand I'm sorry, our overall generic Bismarck.
However rate our base business, we do expect to have continued.
<unk> erosion, so as we've talked a lot about in the past on the generic side of the house right. It's a.
A game of having our generic launches outpaced the erosion in our generic base business.
And so we do see a our generic business posting.
Growth in 2022.
In the overall guidance, however, remember that on the established brand business.
That you would continue to have erosion in that portfolio.
And as typical and consistent with past practices.
Our guidance does not reflect any assumptions around business development.
And as I said in my prepared comments right now.
It does expect now that the video is close we do expect to continue to look for them.
The product level.
Tuck in acquisitions.
As we've done historically in the past and so you know what.
In the guidance, which reflected we do have.
Reductions on the.
Brand X core truth inside of the house. So I think that's what you're seeing in the overall guidance.
Thanks, Chris.
I think yeah, Brad and last point and.
As I was speaking to my prepared comments Ray on the expense side I think you alluded to.
GAAP net loss in the fourth quarter, there's obviously in the fourth quarter, a very significant amount of.
Transaction related expenses, whether it relates to the.
The video transaction the debt refinancing.
And the equity raised and so I would I would point everyone to the press release and the tables to the press release, where we not only have the reconciliation to get to the BOP gap.
EBITDA metrics, but we also provide a reconciliation for you know some of the key functional expense areas and so, particularly on the SG&A side I would I would point you to those non-GAAP reconciliation.
And if I could just follow up there.
You know I, just I'm talking about the video operations in particular.
I'm just looking in the K I think they recorded a net loss of $1 4 million.
That sort of month and a horse.
How should we.
Yes.
Yeah Yeah.
From the.
Paying that up from the from the.
The pro forma disclosures in the K, yes Brendan.
Or just to hit a person with yeah.
Yeah.
Integrated seven that Evan.
Right in that in that gap footnote disclosure.
That's.
Inclusive of all of the purchase accounting.
Adjustments and overlays that GAAP has you do in business combinations, that's where that would have amortization of intangibles.
Inventory step up exact assumption.
Thompson's et cetera, and so yeah. So that's on a fully baked GAAP basis.
Okay. That's very helpful. Thank.
Can I just sneak one more coming back to Exxon.
<unk> tried to be important but on the XR market.
Your competitor did put out numbers this morning.
Nicole you did touch on this that decline and you mentioned you are seeing it reverse.
Any way you can help us frame, how youre thinking about the cold troponin market in general in terms of how much it could reverse in 2022 give it you know hopefully with Covid and lifting.
Yeah look.
At this point.
I think a couple of things a couple of data points to share I think you I think we all know.
What.
What are the the ACTH market was in in 2020, I believe it was $770 million ish right. So that's one data point.
You also know that.
This is in the public domain that the only other player has taken a price increase recently.
Or this for this product and that you know the other data point that I shared ride for the claim space Epidemiology analysis suggested that less than 10% of patients who are steroid resistant and refractory across primary indications or CVC chemotherapy.
But I think just those two data points, we're willing to share at this point.
And that's what drives our understanding of the tremendous opportunity.
And this product tends to benefit patients in need.
Oh, great. Thank you very much if I could you.
Yes, Thanks, Brian .
We will take our next question from Greg Fraser with truly Securities. Your line is now open.
Good morning folks thanks for taking the questions.
Following up on the comments on the generics business.
Can you provide some color on how youre thinking about price erosion for the base business in 2022 and can you also comment on how much erosion you saw in Q4 for the base business.
Yeah.
Sort of like.
So I'll take the first part and I'll let.
Steve chime in for a second.
Looks like you know as.
Many of the larger players have reported earlier I think that.
We see the erosion in our.
In our base business to be in the high single digits low double digits, obviously it varies there.
Increased competitive intensity is harder.
Hard a lot about more approvals for products that already have.
Two to four players.
We're not counting.
Counting on the portfolio.
Folio that we have in the.
Pipeline.
Now we have from the new video acquisition.
For me in our New Jersey, two to sort of bounce.
And drive growth and achieve growth from these new launches so that's.
That's where I would.
Orient you to in terms of erosion.
Regarding Q4, Steve.
Yeah. Good morning, Greg Yeah in Q4, actuals, we experience.
Base generic erosion in our in the low double digit range.
Prior to product launches.
So fourth quarter experience as well.
Essentially in.
In line with the planning assumptions I just wanted to.
Got it okay.
And then on the SG&A spend for a quarter off and how much of that is temporary and launch spend that will wind down over time or should we think about that $42 million to $46 million of base level of spend that you'll ramp up as necessary to drive demand as a product grows.
Yeah no good question so.
As mentioned before the middle of our sharing to north Andover important information.
<unk>.
You know as far as our spend of 42 to 46, just to give you a bit more color.
First major spend bucket. Obviously these people you know a bit more than half the spend is on the people. We can divide this into two groups. We have an almost 50% strong sales team as we mentioned earlier.
Our clinical account executives are highly experienced in rare disease over 12 years of expense from the leading rare disease companies such as horizon Alexia on Alabama.
And gilead, 75% of them have one President's club or equivalent in recent years. So please sorry for that and you understand that when you think of cost to company for rare disease sales rep. So that's that's one.
Addition, we'd have to bolster our organizational infrastructure in key areas, such as marketing medical market access compliance operations and analytics.
And then to your point there is also a significant spend.
On commercial and operational infrastructure, some of which is a you know what I say.
Set up expense.
As you know a lot of this we've got to build from scratch. These include infrastructure and system for the sales team, including Viva cover my Meds hub other operational data and analytic systems and services.
Finally, there are the key areas of Opex that are typical for a rare disease launch across marketing medical compliance et cetera.
Again, we would prefer to steer clear of the specifics of these of our programs in the mix but.
But that hopefully gives you a.
A bit of color on the.
The SG&A.
I guess overall.
So directionally I think that.
This would be the ballpark of course, you know.
As we expand our coverage.
We can see that.
Increasing but not you know not significantly I think that this would be in the range of what we are planning for year on year.
We're going after the cut the indications that we currently are pursuing so.
Yeah.
Got it that's very helpful and so Atlanta.
So we hope to see I guess.
Sorry, Greg just one last thought so we will see you know the.
The leverage in the in the years going forward right. So yeah.
Understood.
Got it.
On payer coverage. He made some comments I'm curious where coverage stands if you can comment on that in terms of covered lives and how you expect coverage to evolve this year.
But for covered lives by year end, just any additional color there would be helpful. Thank you very much.
Yeah.
Greg as you're aware this is a important.
And critical area.
And we you know.
Uh huh.
We're we're having we're committed to supporting meaningful patient access and to bring this more affordable ACTH therapy to both government and commercial payer plans prescribers and patients.
We are in ongoing discussions and are encouraged by the discussions we're having with payers as well as the pharmacy benefit managers or pbms.
And we look forward to sharing more details.
And in the future.
Thank you.
And we will take our next question from Elliot Wilbur with Raymond James Your line is now open.
Thanks, Good morning.
First question or questions for for Steve I'm getting a lot of inbounds in terms of clients asking us to help help.
Help sort of bridge the gap between EBITDA run rates topline run rates exiting <unk> and <unk> and the initial.
2022 guidance and then the simple question is this when the Vietnam deal closed you guys talked about a pro forma EBITDA run rate for the first nine months of around 66 million, which would.
Work out to about nine at almost $90 million on an annualized basis and then the full year guide for 'twenty 'twenty. Two is 70 to 75 million I'm, having a little bit of difficulty bridging those two numbers, even allowing for step up an erosion in the AR in India. The base business. So can you just.
Sort of help.
Reconcile those two numbers for me and think about what some of the various moving.
Parts may be.
Yeah sure thing Elliot and good morning, yes, so so I'm just.
Just to refine the did the back of the envelope math that you've done.
On a pro forma basis.
The company is producing about $86 million of the EBITDA.
And if I look at the fourth quarter run rates.
Do the times for math right that I think many of your clients.
Are probably doing.
It really comes down to a couple of factors that we discuss one is.
Continued pricing erosion in the AR in the generic space.
The environment is absolutely tougher today.
And then you know roughly this time last year, when we announced them over the M transaction.
So that that pricing.
The impact on the on the company's plan and the results and guidance.
Is is.
More significant.
And then again just the continued erosion in the established brands business.
Those those two factors together right. When you have they combine for a pretty significant negative a negative mix negative price and negative mix because of the generic business is growing.
Growing and they are established brands business is declining.
And so we're seeing you know.
Meaningful compression in the gross margin percentages.
That that really is the bulk of the story on the expense side of the equation when I look at the fourth quarter pro forma run what run rates compared to the guidance.
You know were essentially projecting.
Relatively flat spend both in SG&A and R&D. So it really is that gross gross profit.
Effect on the EBITDA line.
And just to build on what Steve said that with the full year number I think.
There was.
Nonrecurring.
Events in 2021.
Which is the S part of royalty and certain.
Nonrecurring milestones for Iridium C D M O business that were substantial.
And that's that's what's reflected in the overall full year number.
Right. So if you yeah, good great point, Nicole if you adjust for those items.
Elliot you to.
Combined pro forma business would be.
The in the low <unk>.
Low seventies.
For EBITDA generation.
Oh, okay.
Okay, So not no I cannot.
Yes.
As of midnight right mid seventies, yeah. So.
Remember in the in the 86 right.
Remember the Eni in the fourth in the first quarter of last year had $11 million pick up from the final yes Garda.
A royalty closeout, so that takes 80 675.
And then in the in the video portfolio remember they have.
A bit more of.
C D M O arrangements.
That are more focused on the development side of the equation as the.
Base, a N I C D M O which is.
Kind of more plain vanilla manufacturing portion so in.
In the in the video portfolio.
When you look at quarterly performance, there can be a little bit of a chunky knits in terms of milestone achievement and Sir.
In certain triggers for revenue on a on their C. D M O side of the house.
So if you were to if you were to adjust for a couple of those events you would take that 75 down into the low seventies, probably 72 ish.
Okay understood I guess I, just wasn't making those adjustments.
And a follow up question with respect to core Trofim and formulary placement and an initial coverage I understand that this is still kind of in the early stages here Nick here, but maybe you can just help us think a little bit about.
Your expectations in terms of formulary placement I mean, you're starting to see various coverage policies appear.
And honestly, they're kind of all over the place I mean, we're seeing courts rofin.
Placed on tier three with prior authorization required similar to Acthar and then we've seen it all the way down to where its actually bumped Act star from.
Formulary altogether or where you know the payers are requiring step through therapy with CT rofin before patients can eventually.
Get on actual Irish I mean did they they do which obviously is quite favorable for for you guys, but I'm just I'm trying to think about like where there's all these coverage policies.
[noise] evolving and enter the public domain like you know sort of what's the what's a reasonable expectation I guess in terms of where you expect the.
The majority of coverage to kind of fall for Curt Rofin.
Yeah.
Thank you Elliot.
Look.
We are committed to supporting meaningful patient access that's reflected in the more affordable ACTH therapy.
So if we block to both government and commercial payer plans.
And as I said before we're very encouraged by the ongoing conversations.
Prefer to steer clear of the detailed.
But I understand the ask and.
I look forward to sharing more about the specifics of lives covered.
Formulary status.
Have we achieved.
And giving you more specifics than in future conversations.
Okay and then just maybe last question in terms of just a quick clarification question. So with respect to first quarter 2022.
Financials.
Fair to assume that you'll recognize revenue for all.
CT trofim shipments into the indices.
And as a distribution channel.
Yes, Elliot that sets us correct yep.
Yes.
Okay. Most of my questions. Thank you.
We have no further questions on the line at this time I will turn the program back over to Nicole for any additional or closing remarks.
Yeah. Thank you.
So thank you everyone for joining us on the call. This morning, we appreciate your support as we move forward on our path of bringing high quality medicines to the patients who need them and delivering shareholder value.
Our 2021 was a momentous year for Eni It is only the beginning.
Thanks, again and stay well.
This does conclude today's program. Thank you for your participation you may disconnect at any time and have a wonderful day.
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