Q3 2022 ANI Pharmaceuticals Inc Earnings Call
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Good morning, everyone. My name is Todd and I will be your conference operator.
At this time I would like to welcome everyone to Eni Pharmaceuticals third quarter 2022 financial results.
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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 November .
Very nice 2022.
It is now my pleasure to turn the floor over to MS. Judy Diclemente Investor Relations for Eni Pharmaceuticals. Please go ahead.
Thank you Todd welcome to Eni Pharmaceuticals third quarter 2022 earnings results call.
As Judy Diclemente of insight Communications Investor Relations for Eni.
With me on today's call are Nicole Wadhwani, President and Chief Executive Officer, Stephen Carey, Chief Financial Officer, and Christopher much head of rare disease of Eni.
You can also access the webcast of this call through the investors section of the Ini website at Www Dot Eni Pharmaceuticals Dot com.
Before we get started I would like to remind everyone that any statements made on today's conference call that express a belief expectation projection forecast anticipation or intent regarding future events and the company's future performance may be considered forward looking statements as defined by the private Securities litigation.
Asian Reform Act.
These forward looking statements are based on information available to Eni 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 Eni pharmaceutical <unk> dot com.
For the benefit of those who may be listening to the replay or archived webcast. This call was held and recorded on November nine 2022.
Since then <unk>.
They have made announcements related to the topics discussed so please reference the company's most recent press releases and SEC filings and with that I'll turn the call over to Mikael <unk>.
Sure.
Thank you Judy.
Good morning, everyone and thank you for joining our call.
Our financial results for the third quarter reflect the clarity of our company's purpose to serve patients in need.
Alignment of our growth strategy and the dedicated focus on operational execution.
I am pleased to share that Eni delivered record net revenues of $83 8 million in the third quarter of 2022.
Cheating, 61% year over year growth and 13% quarter on quarter growth.
Our non-GAAP EBITDA. This year has increased from $4 3 million in Q1 to $9 $9 million in Q2 to $19 6 million in the third quarter of 2022.
Over the past 12 months.
Further strengthen the foundation of Eni with new capabilities and strategic initiatives.
Liver sustainable growth.
First we have fully operational our integrated rare disease platform.
With medical affairs market access sales and marketing patient support specialty distribution and compliance infrastructure and capabilities.
Second a proven generics and 505 B B two R&D engine further enabled with additional R&D investments towards niche limited competition pipeline products.
And third our ability to drive cost competitiveness consolidating our manufacturing network through the closure of the facility in Oakville, Canada, and consolidating distribution operations post acquisition.
The third party warehousing and logistics provider.
At this time, we are maintaining our guidance of 2022 total company revenue.
$295 million to $315 million and adjusted total company non-GAAP EBITDA guidance at $54 million to $60 million.
Now, let me share details of the progress made across our key business lines.
For our rare disease business unit building a successful core colson gel franchise remains our top priority.
The company achieved strong <unk> revenue growth delivering $12 6 million in sales up from $10 2 million in the second quarter.
For those new to the Eni story.
<unk> launched retrofit earlier this year in January .
<unk> is an NDA product and Eni acquired from Merck.
In terms of the launch trajectory I am pleased to report that cumulative new patient cases initiate it increased by greater than seven so greater than 50% to 765 plus cases.
We also continued to make further investments in our hub patient support services and distribution network.
Physician interest in <unk> continues to build.
The prescriber base increased by greater than 50% since our last report to 380 unique prescribers.
And importantly, approximately one third of the prescribers have written more than one prescription.
Prescriptions continue to be distributed across our targeted indications, which include certain chronic autoimmune disorders, including acute exacerbations of multiple sclerosis, and rheumatoid arthritis and access the ordinary 14 due to nephrotic syndrome.
We remain focused on market access and bringing savings to the health care system.
Our efforts are paying off.
As patients across commercial Medicare and Medicaid payers have access to <unk>.
We believe that with the addition of <unk> into the ACTH market, all stakeholders, namely patients prescribers payers and pharmacy benefit managers gain another treatment option.
Most importantly, we continue to see evidence that our efforts are having a favorable impact on the overall number of patients receiving critical ACTH therapy.
Turning now to the other business segments.
Our three Q generics business revenues grew by 51% over the prior year quarter on the strength of our acquisition execution and success in bringing limited competition drugs to market.
We continue to invest in our generics and 505, <unk> R&D platforms to drive future growth.
During the first nine months of 2020 to be filed 11 andas.
In the third quarter. We also successfully launched multiple limited competition products, including protocol Paradise Valley of tablets and each futile hydrochloride capsules.
Our previously announced plan to consolidate manufacturing operations and cease operations at <unk>.
<unk>, Ontario, Canada manufacturing facility in the first quarter of 2023 is on schedule.
We have begun manufacturing many of the oilfield products in our U S facilities and are starting to see the benefits of the operational efficiencies from this initiative.
As we complete this transition we remain confident that our product in new Jersey manufacturing sites can support our future growth and provide continuous service to customers and patients in need.
As part of this process, we are actively engaged and have made meaningful progress with a short list of potential buyers for Oakville.
Once fully executed this operational efficiency is expected to improve our profitability and cash flow by $7 million to $8 million on an annualized basis.
Steve will have more to share on this shortly but we currently expect onetime cash charges of approximately $2 7 million and noncash charges of $4 $4 million in conjunction with this action.
Business development is one of Eni's core strengths and we continue to actively support our internal efforts what opportunities arise.
As previously announced we completed the acquisition of four limited competition Andas from <unk> pharma.
We expect to see the full impact of these product acquisitions in 2023.
In the established branch business unit, we continue to focus on efficiently promoting our key brands.
The utilization, we utilize our suite of commercialization techniques, including Tele sales teams and ongoing patient support through co pay assistance and patient starter samples.
For our dermatology portfolio, we have partnered with an established dermatology company and expect our key dorm brands to return to growth on the back of these efforts.
We are also actively evaluating business development deals to expand our portfolio of established spreads.
Before I turn the call over to Steve Let me share an important recent addition to the Eni leadership team.
I would like to welcome Christa Davies, who joined Eni as Chief Human Resources Officer.
Crystal brings over 20 years of executive leadership experience in human resources talent management, and organizational development and will no doubt be an asset to the company as we grow and evolve into a leading biopharmaceutical company serving patients in need.
Steve will now walk through our detailed third quarter financial results.
Steve.
Thank you Nicole and good morning to everyone on the call. My comments. This morning will be focused on the three months ended September 32022 versus prior year unless otherwise noted.
For the three months ended September 32022, we posted total net revenues of $83 8 million up $31 8 million or 61% as compared to the prior year period.
Driven by strong gains in both of our operating segments.
Revenues for our generic established brands and other segment were up $19 2 million or 37% over the prior year.
While our rare disease segment posted $12 6 million during the current year quarter.
Dollarized revenue gains were driven by generic products and the 2022 launch of purified CT drove in jail.
Net.
<unk> with generic pharmaceutical products were $53 1 million during the third quarter of 2022, an increase of 51% compared to $35 1 million for the prior year period.
The increase was principally driven by revenues from commercial generic products acquired in our acquisition of <unk> and revenues from multiple new product launches.
<unk> tempered by a decrease in revenues from sales of several legacy Eni generic products.
Net revenues of rare disease pharmaceutical products, which consists entirely of sales of purified protropin gel were $12 6 million during the three months ended September 32022.
There were no sales of rare disease pharmaceutical products during the comparable prior year period.
Royalty and other revenues were $3 $5 million in the current year quarter, an increase of $3 3 million from the prior year, principally driven by licensing and royalty income related to the video product.
Contract manufacturing revenues were $4 $8 million during the third quarter of 2022 more than double the $2 4 million posted in the prior year period, primarily related to the addition of the <unk> contract manufacturing revenues.
Tempering the gains would be above categories, where net revenues for established brand pharmaceutical products, which were $9 8 million. During the three months ended September 32022.
This represents a decrease of 31% compared to $14 3 million for the same period in 2021.
Driven by lower volumes of many of our brand products, including <unk> X inderal, La and Inderal XL.
Operating expenses increased by approximately 60% to $88 8 million for the three months ended September 32022.
$55 6 million in the prior year period.
Cost of sales, excluding depreciation and amortization increased by $8 5 million to $32 9 million in the third quarter of 2021 compared to $24 4 million in the prior year period, primarily due to increased sales volumes of generic products include.
$6 5 million of costs related to the video products during the current year period with no comparable sales activity in the prior year and an increase of $1 $7 million related to increased sales of products subject to profit sharing arrangements.
Excluding the impact of acquisition accounting stock compensation and the effects of our Oakville, Ontario plant closure.
All of which are detailed in the tables contained in this morning's press release.
Cost of sales on a non-GAAP basis as a percentage of total adjusted net revenues decreased four four points.
From 42 point excuse me from 42, 6% in the third quarter of 2021 to.
To 38, 2% in the current year period.
Primarily as a result of.
Favorable mix from the impact of our sales of purified Protropin gel.
Coupled with increased royalty and other revenues in the current year period.
The decrease in cost of sales percentage was partially offset by lower sales of established brand products in the period.
Research and development expenses were $7 7 million in the third quarter of 2022.
An increase of $5 2 million from the prior year period.
Merrily due to expenses related to <unk> generic research and development activities.
During the current year.
With no comparable expenses in the prior year.
Bold with in process research and development charges of $1 2 million recognized in the current year period in conjunction with purchase accounting for our <unk> acquisition from Oklahoma Farm Pharma LLC.
Selling general and administrative expenses increased by 75% to $30 1 million in the third quarter of 2022 compared to $17 2 million in the prior year quarter, primarily due to a $10 3 million increase in sales.
Marketing expense related to our launch of purified core Trofim zelle.
Increased generic expenses, primarily related to the addition of <unk> head count and activities and tempered by a zero point $4 million decrease in transaction expenses related to the <unk> acquisition.
Depreciation and amortization expense was $14 2 million for the three months ended September 32022, compared to $11 3 million for the same period in 2021, an increase of $2 8 million.
Primarily due to the amortization of intangible assets acquired in the <unk> acquisition.
We recognized $1 5 million of restructuring expense in the third quarter of 2022 associated with the anticipated closure of our Oakville, Ontario, Canada facility.
Costs included <unk> 4 million in termination benefits and $1 2 million and fixed asset impairment charges and accelerated depreciation.
No restructuring activities were recognized in the prior year period.
We currently anticipate that we will incur another zero point $6 million of severance related cash charges and another one 9% to $2 4 million of noncash accelerated depreciation over the course of the next two quarters.
We have excluded both the onetime charges, resulting from this action as well as the residual Canada results from our non-GAAP financial measures as detailed on this mornings tables in this morning's press releases.
During the quarter ended September 32022, we also recognized a noncash fair value adjustment of $2 5 million related to the contingent consideration recorded in conjunction with the video purchase accounting.
This expense is due to a reduction in the discount rate utilized.
And the passage of time.
Our 55, GAAP net loss per share for the quarter reflect significant amortization and purchase accounting related charges, resulting from the <unk> acquisition, coupled with the sales and marketing expense behind our initial commercial launch of cultural fit as.
As well as the Oakville related restructuring activities.
On an adjusted non-GAAP basis, we had diluted earnings per share of <unk> 64 for the quarter compared to $1 <unk> per share for the prior year period.
Adjusted non-GAAP EBITDA for the current year quarter of $19 6 million was up $3 million or nearly 20% as compared to $16 6 million for the third quarter of 2021.
And importantly on a sequential basis was up $9 7 million or nearly double as compared to the second quarter of this year.
From a cash and balance sheet perspective, the third quarter marked a return to positive cash flow from operations with $3 6 million of cash provided by operations after significant utilization of cash from operations. During the first six months of the year as we invested.
Behind the core truths in launch.
During the quarter, we also utilized over $7 million of cash and our acquisition of four Anders from opium pharma.
As of September 30th balance sheet.
The company had $56 3 million in unrestricted cash and cash equivalents and $297 8 million in face value of outstanding debt, which is due in November of 2027.
Finally, with this morning's release.
Reiterating the following core elements of our full year 2022 guidance.
Total company net revenue between $295 million and $315 million.
Representing approximately 36% to 46% growth as compared to $216 1 million recognized in 2021.
Core Trofim specific net revenue guidance between 40 million and $45 million.
Company, adjusted non-GAAP , EBITDA between $54 million and $60 million.
And adjusted non-GAAP diluted earnings per share between $1 34, and $1 62.
We will now open up the call for questions. Operator. Please go ahead with the instructions.
Thank you 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 star two.
Once again that is star one to ask a question.
Pause for a moment to allow questions to queue.
Okay.
We'll take our first question from Elliot Wilbur of Raymond James.
Thanks, Good morning.
First question with respect to retrofit trends in the quarter the keel.
Thinking about.
The 50% increase in patient cases.
Initiated 50% plus increase in number of prescribers can you just sort of help us bridge those figures versus the actual sequential revenue change in the quarter, which is roughly half that more around 25% understanding obviously.
All patients Werent.
Available for the entire period, but just trying to understand maybe what else may be occurring.
Under the surface there and <unk>.
Additionally, I wanted to ask a question on the.
Number of prescribers that have written more than one prescription.
You indicated last quarter, it was roughly a third or more than a third this quarter, it's still more than a third but.
Help us think about short persistence of therapy for patients who start if we're not seeing more meaningful improvement in terms of numbers prescribers, writing multiple our axis and I've got a couple of follow ups for Steve, but I'll stop there for the moment.
Got it.
Thank you Elliot and good morning.
So the answer to your first question look we're <unk>.
With a launch trajectory increase physician interest in our product and expanded market access.
<unk>.
Enrolment of fulfillment for purified <unk> gel is similar to other rare disease programs. We continue to work closely with the Pbms and payers and invest in our hub and patient support infrastructure. As a result, we continue to see improvement in the new cases converting to patients on therapy.
And then obviously there is the details of that dynamic that is it.
That is responsible for the I guess the question that you asked a 50% increase in.
The number of prescribers, 50% increase the number of cases initiated and that matching up with the launch numbers. So that's the answer to your first question and then the second question regarding <unk>.
380, prescribers and persistence of therapies for existing patients.
And I'll, let Chris take that question.
Thanks Nikhil.
As you said I think we're very encouraged by the increases we're seeing in new prescribers as well repeat prescribers.
The other pieces that we're still we still have a lot of.
Physicians, who are submitting their first prescription for <unk>.
<unk> and so those that have started earlier in the cycle, maybe <unk> and earlier and <unk> have the ability to that.
Look for more patients to prescribe so on an absolute basis. The number of repeat prescribers is increasing so we're very encouraged by that for sure.
We'll continue to monitor that and we expect that to continue to increase.
We made headway into more and more prescribers and more.
Based on the.
Positive reception, we're getting I think from a from the standpoint of the patient mix.
The persistence.
Really keeping a close eye on that because as you know, we're really focused on three different target indications and they have different.
I think.
Persistent.
Treatment persistence curves.
And we're continuing to look at that.
They are different based on the specialty.
Okay.
Okay. Thanks, and then just quickly for first Steve has there been any change in the original targeted investment spend SG&A spend behind the controls.
Asset this year, which I think was originally indicated to be in the range of 42% to $46 million are you trending towards the higher end of that range lower end or have you actually sort of change that.
That metric and then if you could just comment on gross margin trends, perhaps in the base generics business Marine revenue was better than than X or outperformed external expectations, but also look like you had a decent improvement in the margin profile of that portfolio.
As well and just trying to tease out those numbers, but I just wanted to get some more color there. Thanks.
Yeah, Thanks, Elliot and good morning.
Both very good questions in terms of the portrayal fin gel SG&A numbers.
As you probably noted this morning, we reiterated the core revenue and profitability measures of our annual guidance we.
We did not specifically up the core growth in spend guidance and that was intentional.
As we progressed through the fourth quarter and made plans for 2023, we continue to focus on investing in key initiatives to drive future growth rate and set separate franchise up for success in 2023, and so as such we're maintaining it to a degree.
Flexibility in those spend areas.
Broadly speaking.
He will be.
Within.
Our.
Close to the ranges that were previously put out but again, we're maintaining flexibility to make strategic decisions as we invest into the business as the calendar turns to <unk>.
Three.
As we're focused as you would imagine very focused on the mid and long term success of the of the franchise.
On the second question regarding the gross margins I'll speak to the overall, because we did have a very strong.
Gross margin profile in the third quarter and within that I'll touch on the generics.
A bit as well.
If you look sequentially right. Our non-GAAP adjusted gross margin was 61, 1% in the third quarter, which is up just a touch over seven points compared to the second quarter of 'twenty two.
And that improvement was driven by multiple factors.
First favorable mix contributions from purified ports rofin gel and the established brands business on a sequential basis.
Favorable quarter over quarter royalty and license income.
Thirdly incremental revenues from off contract sales of select generic products due to market disruptions.
And that that homes in on your point on the generic profile.
And then lastly, certain operational efficiencies that we've begun to realize due to the planned closure of our Oakville, Ontario manufacturing plants as we move products that were manufactured in Oakville into our other manufacturing facilities, where we're gaining.
<unk> fees.
In those go forward facilities, so really.
Kind of kind of good news in the quarter across multiple platforms Elliot.
Okay. Thank you.
Thank you and as a reminder, if you would like to ask a question. Please press star one we'll take our next question from Brandon Folkes of Cantor Fitzgerald.
Hi, Thanks.
My questions and congratulations on the progress.
Maybe just two for me both clinical frozen.
Can you talk about the overall market book with frozen.
Are you seeing it grow year on year, just this whole non crop report and decent numbers and you're putting up decent numbers.
Yes, it does seem that they maybe actually.
On an underlying growth in the market that lets get the commentary what you're seeing there.
And then just following on from the earlier question can you provide any color on negative number of vials per patient Youre scheme can be sort of 750 patients start so far.
I will just remind us traditionally we want.
We target indications what they had averaged thank you.
Got it thank.
Thank you Brendan and good morning.
I'll let.
Chris to answer the first question on overall market growth and then I'll take the second one on number of vials So Chris.
Yes. Thanks.
Yes. So this is something we've been closely watching as we all know that theres been a significant decline in the overall market for the past number of years and so we've certainly seen the market stabilize and we have seen initial signs of growth.
We feel that is.
A very positive.
Some of our launch and certainly a result of those are in part a result of our educational programming with the physicians and.
And the interactions we're having.
Alright.
Just to build on what Chris just said as you may have heard in the in the.
The competitors' earnings call yesterday that they too have spoken about demand stabilization and it plays out until the data that's available in terms of PR access.
So.
Most importantly.
From what we can see.
There are more patients beginning to.
The benefit.
Benefit from Acte's therapy.
And then in the declining trend that had been seen in the past few years and that is that is aligned with what we had expected to happen.
And to your second question on on number of vials per patient.
Look our targeted indications continue to include certain chronic autoimmune disorders, including acute exacerbations of multiple sclerosis, rheumatoid arthritis, and access urinary protein given nephrotic syndrome.
So directionally.
<unk>.
What we see prescribers use for multiple sclerosis during an acute exacerbation.
Is lower than what we see in rheumatoid arthritis, and nephrotic syndrome, and obviously that depends on the patient.
And the prescriber deciding.
How many vials can use for patient, but directionally for multiple sclerosis.
You see lesser number of miles versus rheumatoid arthritis nephrotic syndrome.
And then.
In terms of further specificity looked throughout the initial launch period.
Sought to find balance between sharing information to assist the investment community.
While not giving away competitively sensitive data. So I appreciate your understanding on that Brandon and thank you for your questions.
Thanks, so much and congratulations.
Thank you.
Thank you we'll take our next question from Greg Fraser with <unk> Securities.
Good morning, Thanks for taking the questions.
For the third quarter open in the third quarter can you talk maybe high level about how much of the growth was driven by new patients versus switches from acthar.
He noted that the prescriptions have been distributed across your targeted specialties. When do you plan a stand your promotional focus to other specialties that are big writers of Acthar like Pulmonology and ophthalmology.
Got it so.
So.
And good morning, and thank you for your questions.
Chris do you want to take the first one on new patients versus switches and then I'll take the <unk>.
Second one on expanding focus.
Yes sure so.
So.
Generally we've talked about this before our focus really is on the switch market necessarily I mean, we're really educating around new patient starts and so we think about our market in terms of new patients and then refills.
In a quarter and so what we can say is that.
Kind of month over month quarter over quarter, the proportion of the the the.
Refill contra.
Contribution.
Continues to grow and this is exactly as we expected and modeled so.
As we continue to have new patients.
We benefit from the contribution of those new patients in each quarter and were showing.
Any progress there, but the benefit of the resold also is an important.
Contributor.
Yeah and to build on what Chris said so our.
Our discussion with the prescribers around finding the appropriate patients for our therapy and knocked around switching from from one therapy to another.
So that's the first question and then second.
Okay, sorry for the general response, but throughout the launch there we're trying to find balance Greg as you will appreciate between sharing information to assess the investment community, while not giving competitively sensitive data.
We are excited about the.
Opportunities that.
<unk> ahead.
Both in the near term and in the midterm for purified cocoa from gel and there are multiple such opportunities.
But we'll share more as.
<unk>.
As we progress forward and thank you for your understanding.
Yes totally understand thanks for that and one more question on the generics business can you comment on base erosion and completion for new launches in the quarter and for the full year are you still.
Are you trending towards your prior expectation for base erosion in the high single digit to low double digit range or are you tracking ahead of that thank you.
Yes, so I think the the <unk>.
<unk> been on.
Based on erosion versus new product launches I think as youll see in our quarter on quarter.
Much as we planned the erosion that we're seeing.
Is.
Is made up for by the multiple limited competition, new product launches that we've done so.
That strategy.
Our approach of our ascent sure that.
We're launching enough products to make up for the base erosion, you are seeing the growth quarter on quarter and margin X business and what we expect.
Is that to continue.
Then in terms of are we tracking.
Over or below.
What we expected I think that were basically in line with the erosion that we had that we had expected.
Thank you.
Yeah. Thank you Brad.
Thank you. It appears that we have no further questions. At this time I will now turn the floor back over to Nick <unk> for any additional or closing remarks.
Thank you.
Thank you everyone for joining our call this morning.
We are pleased with the progress made and remain focused on capturing the full potential of our lead rare disease product cuatro from gel.
All while advancing our active generics and 505 <unk> R&D engine to continue delivering high quality medicines to those in need.
As always we appreciate the support of our shareholders and look forward to sharing our future progress.
Thank you again for joining our call and stay well.
This does conclude today's call. We thank you for your participation you may disconnect at any time.
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