Q3 2022 Eagle 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'd like to welcome everyone to Eagle 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 7th 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 Todd welcome to Eagle Pharmaceuticals third 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 <unk>.
Chief Financial Officer, Brian Haynesville.
And Vice President of Medical Affairs, Dr. Michael Greenberg.
This morning Eagle issued a press release detailing the financial results for the three months ended September 32022.
This press release and a webcast of this call can be accessed through the investors section of the Eagle website at <unk> 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 Reform Act.
These forward looking statements are based on information available to Eagle Pharmaceuticals, Wilson excuse me 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.
Eagle 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 <unk> Dot com for the benefit of those who maybe listening to the replay or archived webcast. This call was held and recorded on November seven 2022.
Since then Eagle may have made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings.
With that I'll turn the call over to <unk>, President and CEO Scott Hill.
Well. Thank you Lisa good morning, everyone and thank you for joining our call today. It was another strong quarter for Eagle Your earnings growth trajectory that we had expected continued in the third quarter with non-GAAP earnings per diluted share coming in at $1 12.
For the year to date, we have sold $114 $9 million of vasopressin taxi combined we are posting record earnings this year as evidenced by the fact that in the first nine months of the year. We have already earned $6 69 per share to put it in.
Context that number already tops that were previous best full year ever of $4 34.
In 2017.
So we really are on a solid path of earnings growth and while there may be a disconnect with our current valuation. We believe 2023 has the potential to be another strong year for Eagle in terms of both revenue and profit.
Story is fairly simple we have a company, which is generating a lot of cash with a very strong balance sheet, we have taken that money and use it to fund the acquisition of Acacia the equity stake in analog licensing of land deal all in the clinical development of <unk>.
Additionally, we repurchased $10 million of our shares this quarter, bringing our total repurchases to $246 million.
We remain very excited about the acacia products, our emphasis and by stable and hopeful for the potential of <unk> portfolio of novel <unk> land Elo and Cao too.
We had a strong first nine months of 'twenty, two and we expect 2023 and 24 to be strong in terms of revenue and profit as well to reiterate we believe we will sell more <unk> in 2023 than we did in 2002.
And then.
Bendamustine situation is very manageable, we anticipate increased revenue as we build out and realize the full value of the acacia products and from the potential approval of land do law. Additionally, we anticipate deploying the cash from our earnings and strong balance sheet not only to fund our key clinical initiatives.
But also to make an accretive acquisition to round out the portfolio.
We believe we have put ourselves in a strong position to achieve all of this through our disciplined approach to managing our cash and balance sheet between potential acquisitions and our pipeline. We believe the eagle can grow significantly in both the short and the long term, we are well on our way to achieving our stated objective.
<unk> of transitioning to a branded pharmaceutical company with a diversified portfolio of assets.
Now turning to the third quarter. The third quarter was an active and productive time for Eagle, we are relaunching <unk> and by favorable the two products, we acquired in the Acacia transaction.
We submitted an investigational new drug application to the FDA for <unk> two a novel first in class broad spectrum.
Andy virulence agent for the treatment of severe community acquired bacterial pneumonia and in August as you May recall, we took an equity stake in analog.
Were thrilled to share that <unk> 001, a new chemical entity being developed as an agnostic respiratory stimulant.
Had two big wins in the quarter first DNA 001 received orphan drug designation for the treatment of apnea of prematurely from FDA.
And second MLR receive an additional award worth up to $50 million based on achievement of milestones from BARDA to advance an intramuscular formulation of <unk> 001.
<unk> is the biomedical advanced research and development authority, which is part of the administration for a strategic preference newness and response in the United States Department of Health and human services.
This is incredibly exciting news for the program.
When we look at our business in its entirety, we have built a formidable stream of earnings from our legacy products, specifically been Deca rapso track as them in Japan brand Index, and most recently vasopressin and Panther exit this.
This base has provided us with a record year supported by record sales profits and earnings.
Eagle finds itself in a particularly strong position as mentioned, we have a company, whose revenue earnings and cash flow are strong and at the same time, we were able to invest heavily in our pipeline a pipeline that has so much potential to contribute meaningfully to the options available to acute care and other physicians treating critically.
Ill patients and Peri operative patients as well as to diversify eagle's revenue stream.
Well I will touch briefly on <unk> alone and in a 001. This morning I strongly urge you to attend our Investor day on December six when you will hear from our group of internationally renowned Kols and physicians, who will provide in depth explanations of the scientific and clinical rationale.
Behind these programs as well as the substantial unmet medical needs that each address.
Let's start with <unk> 001, and agnostic respiratory stimulant under the development for three indications postoperative respiratory depression.
Community drug overdose and apnea prematurely.
<unk> is designed to work virtually by inhibiting big potassium ion channels in the carotid bodies, which are located in the neck by inhibiting. These channels. <unk> 001 is designed to utilize the body's own ventilatory control system to stimulate breathing and it does so across <unk>.
Multiple causes of respiratory depression.
Helpful to think of <unk> 001 is a pharmacologic ventilator and as such you can imagine you can imagine the myriad of applications.
<unk> 001 is expected to enter a phase two study with the first patient dosed early next year, the trial's expected to recruit about 200 subjects over one year.
Turning to <unk> two a novel agent with a unique mechanism of action for the treatment of severe community acquired bacterial pneumonia, it's being developed as an adjunct to the clinically indicated antibiotic treatment.
And potentially offers unique therapeutic benefits to critically ill patients.
Some of those benefits could include shorter duration of critical care management, such as mechanical ventilation and ultimately a reduced mortality risk as well as an immediate decrease in inflammatory biomarkers.
Severe community acquired bacterial pneumonia is a challenging disease to treat and remains among the leading causes of death infectious diseases worldwide.
So there is an incredible opportunity to shift the treatment paradigm for patients with severe community acquired pneumonia.
The IND for <unk>, two has been submitted and we aim to be dosing. The first patients in this adequately powered phase two study enrolling approximately 276 patients at 120 sites worldwide as early as the beginning of 2023.
And remember too that the NDA submission to FDA for land deals under review and the action date is may 31 of 2023.
The filing seeks approval for <unk> for the short term reduction of an tricolor rate in patients with super ventricular tachycardia, including atrial fibrillation and atrial flutter.
Our Bendamustine franchise revenues continue with another strong quarter. There continues to be a shift in the United States market away from Lyophilize trend towards the liquid RTD products than deca, and they'll wrap so which offer numerous advantages for patients in <unk>.
Care providers.
According to <unk> data <unk> share of the Bendamustine market is now down from 15% to 9% since January .
In Q3 of 2022, the gross profit generated by our Bendamustine franchise grew by 9% compared to Q3 of 2021.
These products have provided us with consistent high margin contribution throughout their lifecycle.
Of note, we have historically paid a 10% royalty on all bendamustine products toward development partner.
These royalties have a lifetime cap that we will soon reach helping the contribution of Ben Deca they'll wrap so the pre activism beginning in 2023.
Even as we continue to diversify our commercial portfolio with the additions of <unk>, our emphasis by favorable potentially land deal off we expect the bendamustine franchise to remain a meaningful part of our earnings.
We are confident that we will sell more temp vaccine next year, then we will have this year.
Q3 run rate is significantly higher than reported sales, it's trade works off inventory and as part of emphasis and by favorable made gains in the marketplace. We believe they will begin to approach the value levels that we anticipate.
We remain quite enthusiastic and Youll hear more on our Investor day, which I will discuss before turning the call over to Brian .
I encourage you all to attend our December 6th Investor Day, preferably in person at the Palace Hotel in New York or via webcast you.
You'll be hearing from some of the best and brightest internationally recognized key opinion leaders, who have firsthand experience treating these devastating conditions. They will speak to the urgent treatment gaps and hospital based medicine today, and al and how our pipeline and commercial products can play a significant role in addressing those guests.
With that I will turn the call over to Brian Cahill to discuss our third quarter financials Bryan.
Thank you Scott and good morning.
In the third quarter of 2022 total revenues.
It was $65 $9 million compared to $39 $9 million in Q3 of 2021 Pri.
Primarily reflecting continued revenue from sales of vasopressin and <unk> as well as the addition of perhaps a somewhat favorable.
Two our commercial commercial portfolio.
Product sales during the third quarter were $38 $1 million compared to $12 $1 million in Q3 of 2021.
<unk> sales were $13 $8 million and <unk> sales were $1 $7 million in the third quarter of 2021.
<unk> product sales were compressed for the quarter as we see customers working through launch order quantities.
Actual contracted sales volume by customers was as much as four times that of reported sales.
As trade inventory was reduced.
<unk> product sales were $8 $5 million in the third quarter of 2022 compared to $4 $9 million in Q3 of 2021.
Third quarter, right Ametek's product sales were $7 6 million compared.
Compared to $4 $5 million in Q3 of 2021.
<unk> 2022 royalty revenue was $24 million compared to $27 $7 million in the prior year quarter.
Royalty revenue includes royalties earned on sales of <unk> in the U S and <unk> in Japan.
This quarter, we recorded $3 $8 million of other revenue.
For accumulative sales milestone on the sales of <unk> in Japan by our marketing partners from bio.
We recorded $3 $8 million milestone payment from the <unk> and <unk>.
One $2 million or <unk> <unk> per basic and diluted share less than anticipated due to currency declines of the Japanese yen.
Gross margin was 64% in Q3 compared to 79% in the prior year quarter. This decrease was the result of the additional addition of <unk>.
Sales of these impressive and flexi, perhaps us by favorable.
So our portfolio, which contributed lower margins than historical revenue mix, which has been dominated by the <unk> royalties.
Compressing margin.
Is the inclusion of amortization expense this quarter.
Related to the newly acquired products, which will continue going forward.
On the expense front R&D expense.
Were set were $9 $3 million for the third quarter of 2022 compared to $23 $3 million.
In the prior year quarter.
This decrease was largely largely attributable to the non recurrence of upfront payments for our <unk> and land Youll license Landy law licenses and loss preparedness for <unk> and phase <unk> for Q3 2021.
This was partially offset by increased expenses in <unk> 2022 related to our <unk>, two and pull the strength clinical trials compared to the prior year quarter.
Excluding stock based compensation and other noncash and nonrecurring items third quarter 2022, non-GAAP R&D expense was $8 $7 million.
We expect R&D spend in 2022 on a non-GAAP basis to be less than $40 million. This change in estimate reflects lower than previously expected near term expenses related to the post approval obligations for the newly acquired Acacia products and the timing of expenses related to the <unk> two clinical work.
SG&A expense in the third quarter of 2022, or $23 5 million compared to $18 5 million in the third quarter of 2021.
This increase was driven by higher head count and marketing spend in this our first full quarter with Acacia as well as increased spend for external legal and other professional services.
Excluding stock based compensation and other noncash and nonrecurring items third quarter 2022, non-GAAP SG&A expense was $18 $3 million.
We expect our SG&A spend in 2022.
Our non-GAAP basis to be $64 million to $68 million.
This increase from prior period guidance is inclusive of the head count costs associated with our expanded commercial efforts.
Net loss for the third quarter of 2022 was $3 $5 million or 27 cents per basic and diluted share compared to net loss of $5 6 million or <unk> 43.
<unk> per basic and diluted share in the prior year quarter.
Adjusted non-GAAP net income for the third quarter of 2020 to $14 9 million or $1 13 per basic and $1 12.
Per diluted share.
Compared to adjusted non-GAAP net income of $7 $5 million or <unk> 57 per basic and <unk> 56 per diluted share in the prior year quarter.
For a full reconciliation of non-GAAP measures to the most comparable GAAP measures. Please see the table at the end of our earnings release.
As of September 32022.
And following the completed acquisition and synergies synergize of Acacia the company had $15 $4 million in cash and cash equivalents.
$96 9 million and net accounts receivable and $59 3 million and outstanding debt.
Resulting in $53 million and net cash plus receivables.
In the third quarter of 2022, we repurchased an additional $10 million of our common stock as part of our $160 million share.
Share repurchase program.
From August 2016 through September 32022, Eagle has repurchased $246 $1 billion.
Of our common stock.
This month, we have refinanced our collective debt facilities, including the near term expiring TLA.
And revolver as well as the private loan acquired from Acacia.
The company now has a new three year $150 million facility with a bank group led by J P. Morgan that includes a $50 million term loan a.
And a $100 million revolving credit facility.
The terms, including covenants of this facility has been publicly disclosed and are largely similar to those of the expiring facility.
With that I'll ask the operator to open the call for questions operator.
Please go ahead.
Thank you Sir 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.
We will pause for a moment to allow questions to queue.
Yeah.
We will take our first question from Tim Lugo with William Blair.
Alright, Thanks for taking my question and congratulations on the strong quarter.
I think most investors I can speak to.
Regarding eagle.
There are still many moving parts heading into 2023 can you discuss kind of broadly.
You don't need to give guidance, obviously, but can you just discuss broadly how you think.
Product mix will change in 2023.
Typically obviously deca it sounds like there might be some royalty payments coming off I know, you're very bullish on vaccine next year.
Can you just maybe give us a sense.
So where those products will be moving next year.
Thanks, Tim.
Very very thoughtful as we look towards the future and maybe it's good to discuss 'twenty, three which is what it's on everybody's mind, but also 24 and 25% I think 23 from a mixed standpoint is going to be very similar to 22 I believe we will have a strong <unk>.
In domestic franchise from a revenue standpoint, but certainly from a profit profitability standpoint, as you mentioned as these royalties were paying going away.
And the same thing with <unk> is we stayed <unk> as expected here internally to be a larger product in 'twenty three than it was in 'twenty two and.
And you can see the move over the last year away from Lyophilize trend.
Too bad Deca and Bill wrap so.
And just for.
History, we earn no profit, we don't receive a royalty on that trend of business. So as trend of declines there is a shift from that value overtime, fintech or bell wrap so which we do receive value from.
And when we speak to our customers and we look at the landscape.
We just happen to believe that we created and developed products that our customers want to buy <unk>.
So as we talk about the mix next year, you'll see the mix pretty similar to this year and we think 'twenty threes potentially.
Depending on the value of those three products to be another really strong earnings year for us when we get past.
23, then youll start to see the growth of the Acacia products, which we expect to have a solid year in 'twenty, three but but grow to those levels. We've discussed in 'twenty four 'twenty five hopefully we received the approval for <unk> the law and that starts to contribute as it ramps probably not a tremendous amount in 'twenty three but we.
Have high hopes for it in 'twenty four 'twenty five so just.
To try to shorten the conversation 23 similar to 2000.
To 'twenty to 'twenty four 'twenty five these new products take hold and as we've stated we're still anticipating making an accretive acquisition to further enhance the portfolio. We think we have plenty of room with the cash in the balance sheet to make a pretty sizeable accretive acquisition relative to our size.
That will bring revenue into 'twenty three 'twenty four 'twenty five and essentially that's why we're so darn excited about the prospects of the company in.
<unk> 001, and Cao to pass their clinical trials are phase II studies, which we should get the results to at the end of 'twenty three than this company will never look to save those products are so significant in size. We will have met our goals of being a diversified pharmaceutical company and we're just in great shape.
Great. Thank you for all that color.
Thank you Tim.
Thank you we'll take our next question from Brandon Folkes of Cantor Fitzgerald.
Hi, Thanks for taking my questions and congratulations on the progress.
Two from me just sharron.
Sure and what you're saying about the market shift away from Trianda, but can you just help us think yes should we expect the generic arbitrage bendamustine when the tree and the generics do show up and then may be just.
Along the same lines just.
Tim <unk>.
I heard your commentary on the inventory work down in the demand in the quarter, but can you just update us maybe just what youre seeing in terms of pricing there and that erosion in terms of reimbursement for generic usage. Thank you.
Yes. Thanks, Brandon is there let me let me tackle the <unk> as we've said before.
<unk>.
<unk> trend is down to 9% and 9% for good reason.
Ben decade, Bill reps are just improved products that our customers want and have benefits for the patients as well.
I know, we're all concerned about what happens when we have trended generics coming to the market, but that would be a therapeutic substitution audit generic substitution bill wrap so we probably.
Then deco, we probably have another five years of exclusivity and our customers recognize that and they are pleased about that and so we have that 9% of the market on transit to worry about but we never received any profit from that and we believe that there'll be no.
Minimal shift, especially in community oncology away from the two two <unk> products over to trend and so when you take a look at all of that that's going on in the marketplace. The way, we're reimbursed and then.
This 10% royalty going away.
As of right now we are still in the same ballpark that we've always been in this.
25% give or take range of value that will lose.
And Thats very manageable with all the other growth that we have going on in the company, which we still expect 23 is going to be a very strong year for us if everything else that we're forecasting goes.
According to our plan, which brings us to your <unk> question and it's the same thing in <unk> as a brand it's not a generic product and we treated as a brand and we marketed as a brand and we've hired some new sales reps, calling on our customers and talking about the attributes of the product.
And so our price remains at a branded level and we expect that we will be able to achieve sales because of those product benefits greater than the sales that we achieved in 2002.
And again, it's because of <unk> or just <unk>.
Better products that are wanted by patients and physicians that use them and nurses by the way so.
We're confident in our ability to still maintain.
Strong earnings in 'twenty, three and use those earnings to not only fund our clinical programs that could just be.
Remarkably exciting to patients but to continue to.
Fund all of the work that we do here and so we're bullish as we turned the corner from this incredibly breakthrough year for us.
And being able to fund another acquisition to just continue to grow off of this new base that we've established for the company.
Okay.
Thank you as a reminder to ask a question. Please press star one at this time.
We'll take our next question from David <unk> of Piper Sandler.
Hey, Thanks, So just a few so first on vasopressin, sorry, if I missed this but can you comment.
On the extent to which there was any.
Inventory headwinds or tailwind.
Along the lines of what you talked about what's been factoring any any inventory impact for base. So during the quarter. So that's number one number two any comments that you can make on the potential impact of <unk>.
Our ready to use pemetrexed products that they have in the queue at the FDA, how you think about that.
Potential impact of that.
If theres any impact at all.
And then lastly on Bendamustine and I'll cover has commented that they're seeing declines in overall bendamustine usage due to changes in the overall.
Treatment paradigm for NHL and CLO, So I guess with that in mind, how are you thinking about that in the context of the pressure on.
Bendamustine overall do you expect that to continue.
Do your thing because youre thinking lineup with Teva is there. Thanks.
Thanks, David Okay. So thats a lot let me, let me make sure I get to each of the three points, let me take bendamustine.
First Ben.
As for the last several years been a slightly declining.
Marketplace in terms of Houston, CLO in NHL and Thats not changing so the.
The total market of Bendamustine has been declining a little bit every year and that's going to continue right that's not that shouldn't be a surprise to us.
Any body, but as you saw.
With the way we've been handling it and the opportunity that we've had from a profit standpoint look Q3 of 'twenty two grew 9%.
Over Q2 of 'twenty one.
Think that's probably.
The.
A surprise to people, but when you think about it if you've been watching the Rx is from <unk>.
Decline.
<unk> scripts have to go someplace, and theyre coming to either <unk> or they'll wrap so where we go from making no value out of a trend of sale sale, obviously, making value added <unk> and our thinking is actually that over time, even with generics going coming onto the market that that trend.
The market they lay off of lives market is going to continue to shift.
Two the RTD products and that eventually.
Get to the second half of 'twenty three there is probably going to be a lot less lyophilize use.
Usage in the marketplace than there is today, even with generics and so that bodes well for us in 2003, as well as having that 10% royalty we have been paying going away, having said all that we will have some declines in bendamustine overall, but we do have five years left of exclusivity.
Most likely with Ben Deca, and I think as you get through those five years. It will continue to decline slightly but still be a very meaningful part of the company into <unk> into 28 or.
<unk> 29, where we have the exclusivity.
So we're really excited to keep the bendamustine business.
Live in very healthy here at the company and just look at Q3 numbers and we're very excited about it in terms of <unk> Rte, we've taken all of that into account.
As we've made our prediction have more <unk> sales. It is just a very big market I think the market for <unk>. When Alimta was branded was one 3 billion in the year.
And so it's a very big market. So when we predict that we'll sell more <unk> and 'twenty. Three then in 'twenty two we've taken all of this into account.
And we're reasonably confident in our forecast and predictions and then when it comes to days depression, there hasnt been much fee so inventory in the marketplace.
The base of sales that we had this quarter are what I would call normalized.
So with that.
Hope I've answered all of your questions.
Yes. It is.
Thanks.
Youre welcome.
Okay.
Thank you. It appears at this time, we have no further questions in queue I'll turn the floor over to Scott tariff for any additional or closing remarks.
Thank you again for joining our call today, we're very proud of the strong earnings growth trajectory were on as well as the outstanding pipeline progress that we're funding through our commercial operations, but to gain a deeper understanding of the potential of these programs and products. Please join us at the Palace Hotel in New York on December 6th I think it's going to be a fantastic.
Nick.
Hey.
It's going to be an engaging in educational few hours with some internationally renowned experts on hospital and critical care Medicine, We hope to see you. There we look forward to it we're very excited about hosting it I think it is just going to be a fun day for all of us to participate in and with that thank you and we look forward to.
Can you really wonderful quarters here at Eagle. Thank you again.
This concludes today's call. Thank you for your participation you may disconnect at any time.
Thank you.
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