Q2 2022 Eagle Pharmaceuticals Inc Earnings Call
Please standby your program is about to begin if you need assistance during the conference today. Please press star zero.
Good morning, everyone. My name is Katie and I will be your conference operator at this time I would like to welcome everyone to the Eagle Pharmaceuticals second quarter 2022 financial results.
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 and one on your telephone keypad.
As a reminder, this conference call is being recorded today August 19 2022.
It is now my pleasure to turn the floor over to MS. Lisa Wilson Investor Relations for Eagle Pharmaceuticals. Please go ahead.
Thank you operator, welcome to Eagle Pharmaceuticals, second quarter, 2022 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 Terra.
Chief Financial Officer, Brian Cahill.
And Vice President of Medical Affairs, Dr. Mike Greenberg.
This morning Eagle issued a press release detailing its financial results for the three months ended June 30th 2022.
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 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 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 actual results may differ materially from those projected in the forward looking statements.
<unk> pharmaceuticals, specifically disclaims any intent or obligation to update these forward looking statements, except as required by law.
A 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 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 August nine 2022. 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 and with that I'll turn the call over to Eagle's, President and CEO Scott tariffs.
Thank you Lisa good morning, everyone and thank you for joining our call today, we're pleased that our second quarter 2022 results are bearing out the vision that we have been articulating for eagle for some time.
Over the last year or so we are focused on strategically building out our portfolio through acquisition.
Concerning agreements and launches of organically developed products with a stated expectation that we would double our revenue and more than double our earnings in 2022.
We are achieving that aspiration.
Yeah.
Our first half 'twenty two non-GAAP earnings came in at $5 60 per share.
Already more than double the full year 2021 number.
And our first half 'twenty two revenues of $190 million already exceeded our revenues for all of 2021.
In just six months, we have already outperformed our best year.
Our main objective is to grow from here.
The largest disconnect need to bridge for investors is that our internal forecast suggests that we will continue at the 2022 level in 'twenty three with significant growth thereafter.
This is also without further deploying our cash and balance sheet.
Let me take the next few moments to explain our point of view.
First half 2022 sales of days are president <unk> <unk>.
<unk> reached nearly $100 million, our expectations for the third and fourth quarters of this year or that we will remain quite profitable.
Our cash position was strong at $37 million with $86 million in receivables.
For total cash plus receivables of $122 million as of June 32002.
This is after our acquisition of Acacia.
And we have only $48 million in outstanding debt, we are confident that 20 to rebase, our revenue and earnings.
2022 continues to be an active and exciting period for Eagle as we broaden our ability to bring much needed medicines to those who depend on them.
It comes down to the fact that 2022 is a year of significant step up in revenue and earnings for us.
The questions were asked most frequently or where does it go from here can eagle continue to grow from here after posting significant EPS growth and what do 23 and 'twenty four look like.
I would like to make it very clear that our objective is to use 2022 as a springboard for further growth.
We have a very good chance of achieving growth next year and beyond.
On the upside we have added more emphasis in my favor and hopefully lambiel well to our product mix next year.
We also expect to grow year over year.
On the downside based depression will decline and we will lose some been decker loyalty in 'twenty three.
All in all with our current product lineup, our projections today lead us to expect a very strong 2023.
As previously mentioned, we have $122 million in cash and receivables and we do not require a major deployment of cash to achieve our goals.
Add into the mix the potential pedestrian pallet load two and now the three analog pipeline opportunities announced this morning, and we see the potential for dramatic growth from where we are today to.
To be clear, we do not need a significant acquisition to achieve growth in 2023.
Let's see how it all unfolds, but we are very focused on growth beyond the significant earnings and revenue step up that we have achieved so far in 'twenty two.
Let's discuss <unk> sexy in the rest of the opportunities in further detail.
<unk> is a unique market and one that is new to us we develop the product with many benefits our customers have embraced pen taxi.
As evidenced from our first half sales of $54 million.
As this market matures, we believe many of our customers are highly likely to use a generic form of alimta through the end of this year.
This is due to the way that generics are reimbursed in the first six months of their lifecycle.
Thereafter, we expect the dynamics in the market will allow many of these customers to transition to demand.
<unk>, Texas, starting in the first quarter of 2003.
As of today, we believe that we will sell more perm sexy in 2023, then we have in 2022.
Turning now to our hospital business and our recent acquisition of Acacia, which directly supports our stated objective of becoming a leading diversified pharmaceutical company.
With the closing of the transaction, we picked up our emphasis and by stable to commercially compelling SBA approved hospital products with meaningful differentiation.
Both are new chemical entities with patent life extending into the early 2000 <unk>.
And we are seeing a lot of excitement around these two products.
Let me spend a few minutes walking through why we think there is such a strong synergistic fit here and a sizable opportunity.
Brian This is the first and only anti emetic approved by the FDA for rescue treatment of post operative nausea, and vomiting referred to as <unk>.
<unk> prophylaxis.
We already call on most of the same health care providers and institutions.
Our emphasis is also approved for the treatment of <unk> in patients who have not received prophylaxis and for the prevention of T O N E.
Total estimated annual U S addressable market for prophylaxis and rescue is $2 $7 billion.
The second product by Dave <unk> is indicated for the induction and maintenance of procedural sedation in adults undergoing procedures lasting 30 minutes or less.
Here the estimated addressable market in procedural sedation is more than $400 million per year in the United States.
As we commence the integration we were impressed with the cases previous plans.
And the positioning of our hemp system by Sabre.
In our view the two products were underinvested, both from a cost and manpower perspective.
Additionally, the products were launched into very difficult COVID-19 environment, and which access to decision makers and prescribers was limited.
Acacia had approximately 70 employees prior to the acquisition of whom we retained approximately 20.
Most of these individuals are now members of our commercial team.
Reviewing the future plans, we were immensely impressed with the vision experience and leadership skills of the cases, there Brett is saying.
We recently welcomed as Eagle Senior Vice President head of commercial.
Eagle's team is now at its peak commercial strength with approximately 50 individuals.
Deborah brings nearly 25 years of pharmaceutical industry experience, leading commercial launches in the hospital critical care space, having spent 22 years at Eli Lilly prior to Acacia.
We look forward to her leadership as we work to realize the full potential of our emphasis and by favorable and future launched products.
Brian system by stable <unk> to diversify and complement our revenue streams and have the potential to accelerate our growth trajectory and strengthen our advantage in acute care.
We believe that peak U S annual sales of the two projects combined could potentially total $275 million.
And we look forward to demonstrating the strength of the acquisition as usage builds over the next 12 months.
Now turning to Randy on June 1st we announced the submission of a new drug application to the FDA seeking approval for land deal and ultra short acting cardio selected beta blocker.
<unk> is a leading hospital critical care product in Europe and Japan.
Based on feedback from FDA, we expect approval around mid next year with the commercial launch soon thereafter.
Together with Bard Ams system by saying that this would give us three newly approved.
CES with strong patent life going into their growth stage with projections of peak sales just shy of $400 million.
Our hospital pipeline is very strong.
We believe <unk> has blockbuster potential and could be a groundbreaking opportunity in severe bacterial pneumonia.
Which is a leading cause of death worldwide.
Simple terms <unk> two is being developed as an add on to the clinically indicated antibiotic treatment that neutralizes bacterial toxins from the body.
It is well established medical understanding that these toxins significantly contribute to the severity of pneumonia.
We start our clinical trials later this year and anticipate interim results at the end of 'twenty three.
Importantly, the trial ask conditions to add <unk> to their current pneumonia treatment regimen.
In the fall we will begin opening.
We expect will eventually be over 100 clinical sites worldwide.
Now we had analog to the mix strengthening our hospital pipeline. This transaction broadens our acute care business with the addition of a portfolio of novel and CE.
With strong intellectual property protection from the mid 2000 <unk> into the early 2000 <unk>.
Including composition of matter patents.
DNA 001 is a new chemical entity with a mechanism of action that simply described as a molecule that stimulates breathing.
Think of it like.
Pharmacologic ventilator.
You can imagine a number of indications where being able to stimulate breeding would be extremely valuable.
At present and alert has elected to move forward with three targeted indications.
Post operative respiratory depression, its most advanced development program.
Community drug overdose of problem that continues to increase in prevalence and severity.
And ask me a pre maturity a common condition in preterm infants.
We see tremendous potential to address significant unmet medical needs for millions of patients worldwide suffering from acute respiratory depression.
This is another example of our acquiring pipeline products that represent a strong strategic fit with our specialized sales and marketing organization.
And we believe will serve to expand our portfolio of hospital in anesthesia products. We believe we will have approval for these post operative respiratory depression in 2026 and community drug overdose. Thereafter, now let me turn it over to Dr. Mike Greenberg, Vice President of Medical Affairs, who will explain in <unk>.
Greater detail about the initial targeted indications for E N a 001 Mike.
Thank you Scott DNA, Oh, one is a promising molecule and one that we believe has several important uses it's an N C D with a unique mechanism of action being developed as an agnostic respiratory stimulant agnostic in this case means that it stimulates breathing irrespective of the cause of respiratory depression, because it unit.
Is the body's innate respiratory control system.
Current treatments May have limited use for example, naloxone only reverses respiratory depression due to opioids and format only reverses benzodiazepines.
Because in a diagnostic.
Diagnostic it reverses respiratory depression due to opioids.
His opinions, even propofol and we see potential use across multiple patient populations.
First indication is postoperative respiratory depression, which is common in patients recovering from surgery and anesthesia in fact up to 36% of patients are at high risk of postoperative respiratory depression, which is associated with an increased risk of in hospital mortality increase length of stay and higher costs.
Oh, one has the potential to treat respiratory depression without interfering with paints and furnishing or sedation. This and the potential ability of DNA online to address respiratory depression associated with multiple agents such as opioids benzodiazepines propofol differentiates it from other available options.
The second targeted indication is community drug overdose sadly drug overdose deaths are at a record high and poly substance abuse is increasingly common.
Current pharmacologic options are limited and that they only address a single subsequent of abuse typically opioids unusually implicated introducing a withdrawal syndrome Ian.
Oh, one has the potential to treat respiratory depression associated with all the subsequent abuse without inciting them withdraw effect experienced we don't feel like an antagonist, which can be a potential safety consideration.
And the I am or intramuscular formulation being developed in conjunction with the biomedical advanced research and development Authority BARDA has the potential to make this a treatment available in the hospital and in the community setting.
The third indication is asking it pretty maturity referred to as a L. P. The prevalence.
Increases with decreasing gestational age and correctly and is present in up to 80% of infants born at less than 27 weeks of gestation.
Pharmacologic treatment for knee and they typically limited to caffeine or other things.
Brooklyn's treatment could be used as monotherapy or in conjunction with the standard of care.
We look forward to providing updates as we advance the pipeline I'll now turn the call back to Scott.
Thank you Mike for highlighting the important differentiators continuing.
Continuing with our pipeline.
Let me say few words about <unk>, we spent about $6 million on an additional study this quarter representing roughly 75%.
Of our external R&D spend here in Q2.
We expect to have preliminary data readout in about a month or so if the readout is positive.
Hope that we will have finally figured out this very complex product, which we believe could have tremendous benefit to breast cancer patients.
Positive findings would afford us an important opportunity to provide meaningful value to our shareholders as well.
If the study results are not positive we will permanently discontinue this undertaking.
No more money will be invested other than unwinding it.
With that I'd like to turn the call over to Brian Cahill to discuss our second quarter financials Bryan.
Thank you Scott and good morning in the second quarter of 2022 total revenue was $74 $1 million compared to $48 1 million and <unk> of 2021, primarily reflecting continued revenue from sales of vasopressin and put a taxi.
Product sales during the second quarter were $49 2 million compared to $19 $6 million and <unk> of 2021.
Vasopressin sales were $11 3 million and <unk> sales were $16 $5 million in the second quarter of 2022.
<unk> product sales were $8 1 million in the second quarter of 2022 compared to $7 $6 million in Q2 of 2021.
Second quarter, <unk> product sales were $8 8 million compared to $7 $9 million and <unk> of 2021.
<unk> 2022 royalty revenue was $24 $9 million compared to $28 5 million in the prior year quarter.
Royalty revenues include royalties earned on sales of Ben Deca in the U S and <unk> in Japan.
On the expense front R&D expenses were $11 $4 million for the second quarter of 2022 compared to $9 $9 million in the prior year quarter.
This increase is largely attributable to clinical expense for fullest trance and spend on caliber too.
Excluding stock based compensation and other and other noncash and nonrecurring items second quarter 2022, non-GAAP R&D expense was $10 $8 million.
We continue to expect R&D spend in 2022 on a non-GAAP basis to be between 46% and $50 million.
This reflects expected clinical and CMC work on callow too and full the strength and cost of other ongoing programs, including the post approval obligations for the newly acquired Acacia products.
SG&A expenses in the second quarter of 2022 were $36 8 million compared to $16 $6 million in the second quarter of 2021.
This increase was primarily related to costs associated with the acquisition of Acacia, including severance expense as well as other deal costs.
Additionally, external sales and marketing expense increased due to the launch of <unk>.
Excluding stock based compensation and other noncash and nonrecurring items, the second quarter 2022, non-GAAP SG&A expense was $15 $2 million.
We expect our SG&A spend in 2022 on a non-GAAP basis to be between 62 and.
$66 million this.
This increase from prior guidance is inclusive of the head count and external costs associated with commercializing, perhaps us and buy favour.
Net loss for the second quarter of 2022 was $9 5 million or <unk> 74 per basic and diluted shares.
Compared to a net income of $3 $6 million or <unk> 28 per basic and <unk> 27 per diluted share in the prior year period.
Adjusted non-GAAP net income for the second quarter of 2022 was $23 million or $1 58.
Per basic and $1 56.
For diluted share compared to adjusted non-GAAP net income of $12 4 million or <unk> 95 per basic and <unk> 93 per diluted share in the prior year period.
For a full reconciliation of non-GAAP measures to the most comparable GAAP measures. Please see the tables at the end of our earnings press release.
As of June 32022, and following the completed acquisition and Synergize Ing of Acacia the company had $36 $6 million in cash and cash equivalents.
We had $85 $9 million and net accounts receivable.
And $47 $9 million in outstanding debt.
Resulting in $74 $6 million and net cash plus receivables.
With that I'll ask the operator to open the call for questions. Operator. Please go ahead.
Thank you at this time, if you would like to ask a question. Please press star one on your Touchtone phone you may remove yourself from the queue at any time by pressing star Q. Once again that is star one if you would like to ask a question, we'll pause for a moment to allow questions to queue.
Thank you our first question will come from Tim Lugo with William Blair. Your line is now open.
Hey, guys. This is lachlan on for Tim. Thanks for taking my question and congrats on another strong quarter and another deal in the works.
So Scott I was wondering you mentioned that the sort of the payer dynamics around generic alimta.
And how that will impact us two quarters of launch.
I was wondering if you can give any color on sort of what you're saying.
Hum.
So as fast as they launched I know.
It's not been very long, but.
Have you seen bottom.
Slowing growth or declining.
Use of <unk>.
Sort of commentary you could give there would be.
Right.
Sure.
<unk>.
James.
The launch of <unk>.
Pedro and bought him soon.
Can you just talk about what the uptake expectations should be there because I know they came with some yes.
Reimbursement already.
Sort of on the way so.
How should we think about the uptake of them.
Awesome well, thank you and good morning.
Nice to hear from you today, so taking <unk> Z.
First.
It's just an unusual market that we haven't been in.
Previously.
Generics come into the market.
And.
Their price is below where.
Where the market was obviously.
And the way reimbursement works they'll wind up.
There'll be heavy generic usage.
In the next two quarters, three and four and then based on the attributes of <unk>, we expect those sales to come back to us pretty significantly as we mentioned.
While we expect <unk> sales to grow in 23.
Over 22, and we did over $50 million in the first half. This year. So we're pretty excited about <unk>. It really turned out to be a great product for us.
And then as.
As far as our emphasis and by state.
Go.
Acacia actually did a very good job they have a very significant number of formulary victories and now it's really all about pull through.
Have the most significant number of commercial members into team on it now it's obviously a focus of ours. We don't know exactly how the ramp is going to work out we're going to have to see but as we mentioned.
The expectation is those two products will reach $275 million.
At peak sales, which is tremendous for our size tremendous for the company.
Let's see what the next two to three quarters look like as we put the new team in place and try to pull through but we're just very excited about it and if we're right. We're anywhere close to right you can see where the trajectory of this company winds up.
Putting Randy lull in there next year as well same sales force.
That's our excitement right now.
Thanks.
Thank you. Our next question will come from David <unk> with Piper Sandler Your line is now open.
Thanks, So just a couple so first thing I know you've talked about this in the past but.
Thought it would make sense to just get a refresher on your latest thinking on where.
Youre Bendamustine.
They've been deca.
Sure will.
Go.
The presence of generics on the legacy farm.
So just talk about how youre thinking about.
Dynamics next year.
For that franchise.
And then secondly.
So and the competitive dynamics evolving I think you've said in the past that you expected even with more competition to be a meaningful contributor can you just talk to how you're thinking about that.
If you can't quantify it at least.
Some qualitative color on what you mean by meaningful even amid.
Evolving competitive dynamics going forward. Thanks.
Thank you David.
Let me try to summarize your two questions.
Bendamustine.
As we continue to look at the landscape and our thinking it solidified by what we see with <unk> a couple of items to bring up first of all fintech.
<unk> is by far the best product on the market.
Is a 10 minute infusion instead of 30 to 60 minutes and it has been embraced.
Very successfully with everyone about patients and caregivers nurses.
And positions.
When we receive competition from trend.
Later in the year early next year.
Those are therapeutic substitution stupid deck theyre not generic substitution for bid Deca deca will be protected protected into 2028.
So Ben Deca will clearly be a meaningful product to the company for many years to come.
It's just going to be difficult for that switch to take place to a therapeutic alternative with the benefits of the deck, we've been pretty consistent.
Thank the loss will be give or take 30% of our revenue.
Which is very manageable for the company and with the growth that we have we don't believe that the.
The decline that we'll get from Fintech is going to be significant relative to the size of the.
Of the company and our view of that as more solidified now than it has been.
In terms of the day, though.
Always said in the past David is that we looked at bezos sexy combined.
Combined.
Cases, vasopressin as more people come into the market, obviously, the vasopressin markets declined for us I mean, there's no way.
Of getting around that we'll just have to see over time here, how many people actually come into the market and what happens to price.
It's hard to predict.
On the other side, we have had vaccine, which is very strong and is expected to grow next year compared to this year and it's a big number right we've already done over $50 million this year.
So we expect a decline in base, though an increase in fixed fee and all in all growth in those two products for a while we'll have to see how long that is but we.
We expect growth from these two products or at least significant earnings from the two products in the in the.
Near and midterm and we'll just have to see how it unfolds.
But.
When you take in the ups and downs are expectations 23 is going to be pretty close to 22, and that's without deployment of our.
Our balance sheet, our cash so we're pretty excited about the future.
Okay.
Okay. Thank you.
Thanks, David.
Thank you. It appears we have no further questions at this time I will now turn the program back over to Scott tariff for any additional or closing remarks.
Well. Thank you again, everyone for joining our call.
We've been making significant progress in diversifying our revenue base and increasing the breadth of our product and development portfolio and it's only mid year and we've already turned into best earnings performance in the history of our company and we look to sustain and accelerate the growth that we continue to support our commercial launches of broadening our portfolio through acquisitions.
Such.
Such as Acacia now our investment potential to acquire Anti-war, both of which would enhance our position in hospital critical care.
And we appreciate your interest and support of eagerly look forward to sharing more updates as we move forward.
Thank you again and stay well I appreciate it.
Thank you ladies and gentlemen. This concludes today's event you may now disconnect.
[music].