Q4 2022 ANI Pharmaceuticals Inc Earnings Call
Good morning, everyone. My name is Ashley and I'll be your conference operator at this time I'd like to welcome everyone to <unk> Pharmaceuticals fourth quarter and full year 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 followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded today March nine 2023. It is now my pleasure to turn the floor over to MS. Judy Diclemente Investor Relations for <unk> pharmaceutical.
Please go ahead.
Thank you Ashley welcome to Eni Pharmaceuticals, Q4, 2022 earnings results call. This is Judy Diclemente of insight Communications Investor Relations for a ni with me on todays call are Nick kill all Wanni, President and Chief Executive Officer, and Stephen Curry Chief Financial Officer.
Hi.
You can also access the webcast of this call through the investors section of the a and I 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 Reform Act.
These forward looking statements are based on information available to and 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.
The archived webcast will be available for 30 days on our website, a ni 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 nine 2023. 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 I'll turn the call over to Nikhil awash.
The kiln.
Thank you Judy.
Good morning, everyone and thank you for joining our call.
2022 was a landmark year for Eni.
Taking us past critical inflection points for our two critical growth drivers.
Our rare disease business with the successful launch of our foundational asset sure.
Hi, Joe.
Generics business with the acquisition and integration of the video and best in class Generics R&D organization.
The significant achievements of 2022 further strengthening and I to deliver a sustainable competitive and profitable growth.
Keep the patient.
Everything we do and remain.
Deeply committed to providing high quality medicines.
And need.
I'm proud to report that.
For the full year 2022.
Revenues totaled $316 4 million.
Passing the $300 million Mark for the first time in the company's history.
This was an increase of over $100 million.
46% year over year.
In the fourth quarter revenues grew by nearly 55% to $94 2 million.
A company record for quarterly revenues.
We delivered remarkable growth in adjusted non-GAAP EBITDA.
$4 $3 million in the fourth quarter of 2022 to $23 $3 million, you look fourth quarter.
Let me now turn to the two strategic imperatives that we need.
Really focused on to drive sustainable profitable and competitive growth in 2023 and beyond.
The first imperative is scaling up our rare disease business.
Our foundational assets.
Portfolio gel.
Great momentum through the first year of launch.
As you would expect we've made tweaks in our strategies as the launch unfolded.
We are pleased to report that the fourth quarter sales totaled $17 6 million and for our first year of launch total sales were 41 $7 million.
Importantly, according to <unk>, the ACTH class of therapy has gone from consistent year on year declines.
Your over your unit growth for the first time since 2019.
From June 2022 to January 2023.
ACTH category has seen eight consecutive months of year on year growth.
As of March eight.
A lot of new patient cases initiated increased to more than 1100 20 with more than 510 unique prescribers.
We are pleased so we have continued to see growth in the number of unique prescribers and an increasing number of health care providers, becoming repeat prescribers.
Overall, we have seen prescriber interest in having them ultimately treatment.
The ACTH category continued to build.
Many of our prescribers had previously slowed or discontinued use of ACTH class and have restarted their use of ACTH therapy. After the launch of purified corticotropin gel.
We continue to be distributed across our targeted specialties, which includes certain chronic autoimmune disorders, including acute exacerbations of multiple sclerosis, rheumatoid arthritis and.
You really poking due to nephrotic syndrome.
We have actively participated in the key national and regional medical conferences and have also initiated peer to peer programs across the specialties.
Did you get physicians to increase awareness and understanding of portraits of gel.
Our peer to peer education programs have been well received with positive early feedback.
We have invested and are continuing to.
And are continuing our efforts with the pbms and payers across commercial Medicaid and Medicare to expand market access for control and for the appropriate patients in need.
In addition, we have further strengthened our patient services and reimbursement teams to support access to core colson gel and reduce the time taken for enrollment to fulfillment.
In parallel we have taken several initiatives to increase the effectiveness of our highly experienced sales force and.
In 2023, we will augment these efforts with enhanced data.
<unk> prescriber targeting.
With the momentum from our launch we will also come at a modest expansion of our sales force to focus on Pulmonology.
Looking ahead and as Steve will discuss shortly in more detail. We expect 2023 revenue from core profit of gel to be in the $80 million towards $90 million range and the court rofin SG&A increase to be estimated at approximately 10%.
We believe that Eni has built a rare disease platform.
Actually encompassing medical affairs patient support market access and specialty pharmacy distribution.
The success of our foundational asset purified Porphyroxine gel has given the company confidence and we are actively exploring assets to acquire or partner on the leverage the platform and scale of the rare disease business.
Before I move on to our generics business I would like to share an important point.
During the early days of the launch we believed it was important to share detailed metrics to give investors insight into the dynamics of and progress of our launch.
As the court rule for launch those gathered momentum and investors are being further confidence we have decided to pair back sharing competitively sensitive detailed metrics such as number of prescribers and patient cases initiated.
Moving now to our second strategic imperative.
Driving generics business school with superior new product launch execution cost excellence and supply reliability.
Sales of our generic pharmaceutical products grew 46% year on year.
We launched several limited competition generics and retain a top 10 ranking in terms of approvals.
In addition, and I continue to retain the second ranking for competitive generic therapy approvals.
This is especially impressive given the scale of our generics business and the large number of companies that compete in the U S generics market.
In 2022, we filed 12, Andas and expect to continue investing in generics R&D to support our growth aspirations.
We are also making large strides in the area of cost excellence.
The consolidation of our manufacturing network is on track Manny.
Manufacturing operations ceased at the Oakville, Ontario site in January 2023, and the relocation of Apple products to U S facilities have been completed.
We are in active discussions with potential buyers for the <unk> site.
And once fully executed this operational efficiency is expected to improve GAAP profitability and cash flow by $7 million to $8 million on an annualized basis.
Looking ahead, we have augmented our analytical and development.
Our analytical and development facility in Chennai, India.
The facility completed a successful FDA audits with the FDA.
2022.
Today over 60 skilled colleagues at the facility contribute materially to ani's efforts to serving patients in need.
Over the years.
He has built a strong reputation as a reliable supplier to patients and customers.
We have invested in maintaining healthy inventory levels, both for materials and finished goods.
All of our manufacturing facilities are in the U S and our domestic supply chain further enhances our reliability as a supplier.
Finally, the strong compliance and audit history across our facilities exemplifies our efforts to deliver high quality medicines.
Most recently during the fourth quarter, the FDA conducted a routine good manufacturing practices audits at our facility in Minnesota.
We have implemented all corrective and preventive actions needed and we have already received a favorable establishes establishment inspection report or.
<unk> classifier that are bought at facility as voluntary action indicated.
I am proud of the dedicated work of our employees and our tax business with over $20 million prescription fill using Eni medicines.
In summary, 2022 was a landmark deal for Eni, taking us passed a critical inflection point so the key driver of Eni's growth.
Scaling up our rare disease business in.
In 2023, and we look forward to building on the launch momentum of building.
Building on the launch momentum of pork rofin gel and acquiring or partnering on other assets that leverage our rare disease platform.
He will now walk through our detailed fourth quarter financial results and discuss our guidance for the coming year.
Steve.
Okay.
Nicole and good morning to everyone on the call.
My comments. This morning will be focused on the three months ended December 31, 2022 versus the prior year unless otherwise noted.
First off as Mikael indicated 2022 has been a transformational year as we successfully operationalize the purified core trophy gel launch.
Integrated that November 2021, the acquisition of the video into our overall operation.
These two platforms for growth drove ani's full year revenue to $316 4 million, marking the first time in its history that our full year revenue has surpassed $300 million.
This represents a $100 million or 46% growth over the $216 1 million reported in 2021 and establishes a new base as the company continues its growth trajectory.
This full year achievement was built upon strong sequential quarterly growth accumulating and $94 2 million of revenues for the three months ending December 31, 2022 up to $33 3 million or 54, 7% as compared to the prior year.
Period, driven by strong gains in both of our operating segments.
Revenues from purified core trophy and gel led the way with $17 6 million in revenues in the quarter.
Revenues of our generic established brands and other segment were up $15 7 million or 25, 8% over the prior year.
There have been by gains in our generic pharmaceutical product line, which was up $16 4 million or 39% year over year.
This increase was principally driven by revenues from multiple 2022, new product launches and partially tempered by a decrease in revenues from sales of several legacy Anr generic products.
Contract manufacturing revenues were $4 million during the fourth quarter of 2022.
Up 45, 9% from the $2 8 million posted in the prior year period, primarily related to the addition of new video contract manufacturing revenues.
Royalty and other revenues were $1 9 million in the current year quarter in line with prior.
Prior year levels.
Tempering. These growth drivers were net revenues for established brand pharmaceutical products at $12 7 million. During the three months ended December 31 2022.
This represents a decrease of 13, 3% compared to the $14 7 million for the same period in 2022, driven by lower aggregate unit volumes across the portfolio.
Operating expenses increased by approximately nine 2% to $92 4 million for the three months ended December 31, 2022 from $84 7 million in the prior year period.
Cost of sales, excluding depreciation and amortization increased by $2 4 million to $36 3 million in the fourth quarter of 2022 compared to $33 9 million in the prior year period.
Primarily due to increased sales volumes of generic products and sales of purified courtroom and gel.
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 net revenues decreased seven three points from 45, 7% in the fourth quarter of 2021.
The 38, 4% in the current year period pre.
Primarily as a result of favorable mix from the impact of sales of purified Protropin gel.
Coupled with the impact of new product launches in our generic franchise.
These favorable impacts were partially offset by lower sales of established brand products in the period.
Research and development expenses were $5 2 million in the fourth quarter of 2022, an increase of $2 1 million from prior year.
Primarily due to expenses related to an increased level of generic research and development activities during the current year period.
Selling general and administrative expenses increased by eight 1% to $33 2 million in the fourth quarter of 2022 compared to $37 million in the prior year quarter.
Primarily due to a $3 $9 million increase in sales and marketing expenses related to our launch of purified protropin gel.
A full quarter's worth of new video head count and activities as compared to a partial quarter in the prior year.
Increased infrastructure to support the growth in our business.
These effects were partially offset by a $4 3 million decrease in transaction expenses related to the new video acquisition.
Depreciation and amortization expense was $14 5 million for the three months ended December 31, 2022, compared to $13 7 million for the same period in 2021.
Increased 0.8 million, primarily due to the amortization of intangible assets acquired in the new video acquisition.
We recognized $1 6 million of restructuring expense in the fourth quarter of 2022 associated with the closure of our Oakville, Ontario facility.
Costs included zero point $3 million in termination benefits.
And $1 1 million in fixed assets accelerated depreciation.
Restructuring activities were recognized in the prior year period.
We have excluded both of the onetime charges, resulting from this action as well as the portions of the Canada results that are expected to be nonrecurring post closure from a non-GAAP financial measures as detailed in the tables in this morning's press release.
During the quarter ended December 31, 2022, we also recognized the noncash fair value adjustment of $1 6 million related to the contingent consideration recorded in conjunction with nobody on purchase accounting.
Our 28 and GAAP net loss per share for the quarter reflect significant amortization and purchase accounting related charges from the new video acquisition.
Coupled with the sales and marketing expense behind our initial commercial launch of core trofim in Oakville related restructuring activities.
On an adjusted non-GAAP basis, we had diluted earnings per share of <unk> 76 for.
For the quarter compared to six for the prior year period.
Adjusted non-GAAP EBITDA for the fourth quarter of 2022 of $23 3 million more than tripled as compared to the $7 2 million posted in the fourth quarter of 2021.
And on a sequential basis was up $4 9 million from $18 4 million in the third quarter of this year.
Also please note as disclosed in the footnotes to tables, three and four to this morning's press release bigger.
Beginning in the fourth quarter of 2022.
And I no longer excludes expense for in process research and development for trophy and prelaunch charges.
Core Trophy <unk> sales and marketing expenses from its non-GAAP results.
Shortly the company excluded these charges.
These changes have been made to align with views expressed by the U S Securities and Exchange Commission.
Prior periods have been recast to reflect these changes.
From a balance sheet perspective, we exited the year with $48 2 million in unrestricted cash and cash equivalents.
And $297 million in face value of outstanding debt, which is due in November of 2027.
As expected full year 2022 was the heavy cash utilization year with $31 2 million of cash used in operations as we invested behind the rare disease platform and had significant build of working capital due to rapidly accelerating.
Sequential net revenues.
Finally, with this morning's press release, we are instituting 2023 guidance.
Total company net revenue between $360 million and $385 million, representing approximately 14% to 22% growth.
As compared to $316.
4 million recognized in 2022.
Core Trofim specific revenue guidance of between 80 million to $90 million, representing 92% to 116% growth as compared to $41 7 million recognized in 2022.
Total company non-GAAP gross margin between 59, 5% and 61%.
Total company adjusted non-GAAP , EBITDA between $78 million and $88 million.
And adjusted non-GAAP diluted earnings per share between $2 nine.
And $2 59.
In addition, we currently anticipate between $16 8 million and $17 1 million shares outstanding.
And then the effective tax rate of approximately 24% prior to any federal tax reform.
We will now open up the call to questions operator, please announce the instructions.
Certainly at this time, if you would like to ask a question. Please press star one on your Touchtone phone.
I would draw your question at any time by pressing star to what chicken that Istar and one and then we will take our first question from Elliot Wilbur with Raymond James. Please go ahead.
Thanks, Good morning.
Question for Nick.
And Steve as well I guess.
Just thinking about expectations with respect to the base business.
<unk> legacy brands backing out the numbers it looks like you're expecting growth in mid to high single digits.
Just wondering what the assumptions are as far as new approvals new launches should we be expecting a similar pattern to what we've seen over the past 12 months, where we kind of see a steady cadence of smaller products coming out of the legacy video pipeline and is there anything that you could offer.
In terms of visibility around any date certain or larger.
Launch opportunities that might enhance confidence in.
Your your modest growth expectations for that component of the business.
Sure.
Thank you Elliot and good morning.
Look I think the 2023 launch cadence will be similar to 2022, where it say.
As you choose your words, a steady stream of launches.
I think that over time the scale of those steady stream of launches will increase.
But to the other part of your question there is some day.
A date certain or a.
A large launch to sort of point to.
There are some sort of realm.
Relatively larger launches, but nothing that stands out as a.
Sure.
Potentially larger than everything else.
A concentration of new product launch revenues.
We currently don't see that that's not factored into that as an assumption into our guidance for the base business for our overhead and our overall guidance.
Yeah Yeah.
The other thing I would add Mike Nicole and.
Elliot and good morning Elliot.
It's just.
As we look into unpack the different elements that roll up into that segment I would say.
We're expecting the growth in that segment to be led by the generic platform.
And <unk>.
Declines year over year.
Established brands side of the business.
And the contract manufacturing side of the business.
So theres, a little bit of mix rolling up into that into that segment.
Observation that you made.
Okay. Thanks, and maybe just a couple of quick financial questions for yourself.
Steve just anything specifically.
Can or want to say about the kind of it looks like the implied step up in SG&A and R&D spend.
So most of that is is targeted to the expansion of Petro fin co.
<unk> activities, but anything else that you can say there in terms of more specifics would be helpful. And then you referenced working capital investment over the course of 2022.
Looking at your adjusted net income expectations based on.
Some of the.
Outlook items that you've offered up it looks like you guys are looking for around 40 to 45 million and adjusted net income anything you could say with respect to anticipated cash conversion ratio. There I'm guessing maybe you would expect to actually over performed more than 100% cash conversion, but I just wanted to to bounce that off.
<unk> and see if there's anything you can give us in terms of.
Expected cash conversion operating cash flow generation and.
In 2023 sure yes sure thing.
Yeah.
We're not offering specific SG&A and R&D guidance. This morning, obviously, the implication and the reality is that both of those line items will be growing year over year.
The R&D side it will be.
Our continued investment in our increased investment in R&D platform.
Principally on the generic side, obviously the company has made a very significant.
Investment in the video platform, one that we're extremely happy with and you can see the clear.
Clear impacts of the performance of the medium end.
<unk> platform in 2022.
And so right, where we're focused on continuing to build.
To build and expand upon that platform.
And then on the SG&A side right.
Touch driven by continued investment in the rare disease platform.
In year, two of the purified portrayal courtroom and gel launch.
As <unk> indicated in his prepared statements we see that.
Direct investment in rare disease S DNA.
Around.
A 10% increase year over year.
And then the other aspects of SG&A right.
Just as the company is growing right at at such a fast clip.
Obviously, the support structure the supporting functions.
Naturally grow around that that growth in the business in order to adequately support.
The company and its objectives and so.
That's something that's been happening throughout the course of 2022 and so there is.
Kind of start off the year with an annual deletion effect of builds and decisions that were made in 2022.
And then.
Touch more layered in as we are.
Envision continued growth across our two two growth platforms.
Uh huh.
The topic of cost.
Yeah, as we look forward to 2023.
We definitely envision getting back to positive cash flows.
The cash flows in 2022.
Where we're expected to be cash use a year as we stood up the.
The rare disease business right. If you unpack the performance on a quarterly basis.
Again in 2022 rate as you have.
Rare disease, and machinery up and running essentially from day, one January one of 2022.
Yet you have sequentially sequential revenues right going from 1 million in the first quarter.
To over $17 million in the fourth.
So that's a very significant effect.
In terms of.
Cash use.
And then.
Courts rofin reaches breakeven.
And as we look forward to 2023, we very much anticipate returning to a favorable cash flows.
On a total company basis.
I'm not going to specifics.
Specify versus your assumed 45 million of operational.
But I would I would tell you.
Would you expect reasonably strong cash flows in 2023, and then building off of that base.
And just one last question around core Trofim NICU is the.
Expansion of the Salesforce specifically Tom.
<unk> towards.
The pulmonologist commodity or would also enable us to enhance the frequency or.
Brand the breadth of your Youre currently.
Current calling pattern and historically I seem to recall the.
But pulmonology indication accounting for roughly 15% to 20% of the dollar value of the <unk> franchise and I just wanted to see if thats sort of consistent with your what's your read into that particular segment of the market as well. Thanks.
Yeah. Thanks, Elliot so I think.
On your point on sales expansion.
You know look we're trying to find a balance between sharing information to assist the investment community.
While not giving away competitively sensitive data so what that was.
That understanding Pulmonology is.
No.
A critical part of the expansion.
However, we may we may go beyond that too, but I think in terms of sharing pulmonology is the area that we'd like to Sharon.
In terms of how much of Acthar sales it is.
Look it's material enough for us to.
Two is in as a sector or a sort of indication for us to say Hey, we'll have.
A dedicated sales force for it and.
And in terms of expanding and.
Due to to reach it reached dose those patients.
Yeah.
Yeah.
Okay.
Okay, well take our next question from me.
So Neal <unk> with Guggenheim Securities. Please go ahead.
Great. Thanks for taking the question. So maybe just a couple more following up on the quarter often launch and I. Appreciate your comments on not wanting to share too much competitive.
Competitive information, but a couple of questions just following up.
And what you did say can you can you maybe just comment a little bit on what you are seeing sort of in the field.
Visions or sort of deciding between cultural can challenge and competing options.
Nice to see the growth return to that market, but in terms of differentiation.
Driving the decision he is cultural thing and then just the second one again as much as you're willing to share kind of baked into your guidance or any comments around what you're assuming around gross to net.
Would be helpful. Just for us it if you wanted to comment thanks.
Sure Good morning, Vermeil in Singapore.
And welcome to your first earnings call.
Two questions on the gross to net.
We are.
Again back to the competitive point, we're not sharing that information.
At this time.
And then in terms of dynamic with with prescribers.
Oh.
We are continuing to see growth both in the number of unique prescribers.
Our new unique prescribers as well as Uh huh.
Health care providers, becoming repeat prescribers that they use.
Use it they see.
They see the benefit and then they use it and then the other thing.
Sure.
We've seen the prescriber interest in having an alternate treatment in the ACTH categories continued to build in many of our prescribers that previously slow or discontinued the use of the ACTH class.
Prior to our launch and then once we've launched and you know as we've created created awareness.
<unk> Court rofin gel and the ACTH class.
They have restarted their use of ACTH therapy.
Of course. This is all of this is for the appropriate patients in need and when you think of that right and this is why the the point on the class and the growth of the class eight months according to like Hugo.
You're on your growth on a monthly basis sort of monthly growth.
The year on year basis, I think as you think of that I think the important.
Point to bear in mind is that if you look a few years ago. The number of patients that were benefiting from ACTH therapy with.
It was significantly higher than that where we are today.
And so that.
That tells you that again, we're seeing this.
Class growth that that is.
The debt the prescriber.
Prescriber interest.
In ACTH class and for appropriate patients.
<unk> continues to build.
Okay, alright, thanks, so much.
<unk>.
Thank you very much.
And we'll take our next question from Greg Fraser with true Securities. Please go ahead.
Hey, good morning folks thanks for taking the questions.
<unk> can you comment on the competitive environment I'm not sure if I missed that.
And just what youre seeing from the incumbent in terms of strategies to defend this business.
Yeah.
Just cut to the chase.
Good morning, Greg look we're again trying to find balance between sharing information that helps us in the Muslim community, while not giving away at it really sensitive data.
We know that our competitors are listening into this call.
Look the way we see it.
And obviously.
They did comment on this publicly.
The day before yesterday, and then also a week ago.
They are seeing.
Stabilization in the demand and growth in the overall class and that they believe I think I think we're all about trying.
Trying to.
<unk> increased the number of patients that can.
For appropriate patients that can benefit from this therapy right.
And I think that's I mean.
That's it I think.
Yeah.
That's what I feel comfortable sharing at this time.
Got it.
This may fall under the same competitive.
Sensitive.
Category, but can you talk about the number of docs that ive been calling you on and how that number.
Prescribers, the 510 compared with the overall call universe.
Yeah.
Definitely competitively sensitive information so that will be starting will be steering clear of that thank you for understanding by mill.
Greg.
Understood, Okay, and what about just the.
The new patient starts are those have those been ramping similarly, with the case initiations.
That said, our payer approvals coming through.
Right.
Yes, I think that the new patient starts are ramping and I think one of the things that we will see in 2023.
The new patient starts in Q4.
We will continue to.
Depending on what kind of indication the wrong.
The the refill vials will keep sort of coming from those so our team obviously is focused on increasing the awareness and and.
And.
Understanding of course, rofin gel and there are as you were pointing out there was a number of factors that drive.
From the number of cases initiated to cases that meet the prioritization criteria and are approved by the insurance plans and the time to dispense with the first vial and then Theres also a variation in terms of the indication makes right. So how many ms patients versus <unk> patients versus lupus patients patients versus nephrotic syndrome patients and the number of.
Vials used for each indication varies.
And also then patients getting lives through our patients the patient assistance program.
I think that's where the color one other one more question when do you expect the operational efficiencies from the consolidation of the manufacturing network to fully materialize.
Yes.
I had a question.
Oh, sorry go ahead I can I can I can grab that one yeah. Good morning, Greg.
Thanks for the insightful questions.
Yes, the the the full GAAP impact and most importantly, the cash flow impact from consolidating manufacturing and in closing of the Oak Hill facility will start to accrue into the result in 2023.
Our operational plans to wind down the facility.
We have tracked very much according to plan.
And we are in the final days of.
Manufacturing completed.
Early this quarter.
And we're in the process of.
Moving and selling off certain fixed assets et cetera. So we're in the final days of the wind down plan as we speak.
That cash flow impact will start to accrue in in 2023.
And certainly GAAP results on the P&L will accrue in.
As you know ray on the non-GAAP results.
non-GAAP EBITDA and non-GAAP EPS.
We've been adding back certain portions of those savings.
The impact of nonrecurring costs.
The CMO side in Canada, we've been adding those back.
Second quarter of 2022, so a portion of that impact and effect.
It is already reflected in the non-GAAP results.
So just.
Before we move on Greg I think just coming back to your question on competitive dynamics.
Just to be again to try and be helpful to the investment community I would point you to the <unk>.
Fact that someone like according to a <unk> eight months consecutively, we've seen year on year growth in the class. So that's one data point.
You also see the.
Our relative market share, but that's another data point is in the public domain and then the.
One is claims.
Claims and that gives you another data point and finally, obviously you see.
The published price I think there's a three or four data points that are available in the public domain that can be helpful too.
Two point to the competitive dynamic and again the overall as we see it.
Right.
Number of patients that were on ACTH therapy, three to four years ago was much higher than where they are today.
And we're increasing awareness and understanding of course rofin gel.
To find the appropriate patients in need.
That's helpful. Thank you.
Yeah. Thanks, Brett.
And we will take our next question from Brandon Folkes with Cantor Fitzgerald. Please go ahead.
Alright, Thanks, taking my questions and congratulations on all the progress in 2022.
I do just want to come back to the cash flow conversion and generation and so you reported adjusted EBITDA of $56 million operating cash burn I think I heard you say Steven City 1 million can you just elaborate on the moving pieces regarding cash flow generation in 2023.
You're talking about getting back to cash flow generation.
And strong cash flow generation at that but just maybe help us bridge that 87 billion gap between adjusted EBITDA in 2022, and operating cash flow is it really just interest payments and working capital boot I mean, why should we not expect to continue.
See a working capital build in 'twenty, three, albeit perhaps lower in 2022, but just given the growth trajectory one of your 'twenty three guidance and then maybe you know what we were expecting for 2024.
I know that's a lot in there, but maybe just to tack on top of that and how.
How is your flexibility to bring in additional assets.
As you finance this organic growth in services. Thank you.
Yep, Thanks, Brendan Yeah.
Thank you.
The biggest the biggest part of the bridge that you described.
Is the change in working capital right.
I think.
But you have to understand that there has been extreme acceleration in <unk>.
Sequential performance both quarterly right. If you look at the quarters, obviously out in the public domain right.
The company posted 94.
In sales versus $64 five in the first quarter of this year.
And when you look at that year over year as we said on the on the call right fourth quarter revenues are up $33 million.
Year over year and so.
At December 31 balance sheet right.
Large portion of that sales gain year over year.
<unk> is sitting sitting in a R.
Right on top of that we on the inventory side of working capital right. We've had a tremendous expansion of the business across both lines right. So.
On the generic side, obviously, we've launched.
Over 20 products in 2022.
So there's working capital builds on inventory to support those product launches and obviously the effect on <unk> as we.
Scott.
And then on the pure if I pour trofim gel side right.
That's a product where supply chain is extremely important.
And.
The production of the inventories there.
What kind of happens.
More periodically right given the specialized nature of that product so.
So you can have lumpiness in the inventory purchases.
Core trophy side, so those impacts are very real.
And.
Theyre very significant when you look at that quarterly progression and as you could imagine right. If you were to unpack the fourth quarter, especially for those growth platforms right.
So it tends to be the sequential growth within the months.
As well.
So well.
Well turning to and then total company cash flow is right obviously.
Obviously, the the second second biggest bill.
If you will in 2022 is on.
Debt financing and servicing the debt finance.
So that cost just shy of $24 million on interest.
And then $3 million of debt principal pay down so those are the biggest impacts.
Of cash flow in 2022, as we look forward to 2023, you're correct. We do expect to have continued sequential build.
I think.
Right, but the impacts of the growth overall growth in the business in 2022.
We'll start to manifest more in the in the cash flow and the cash balance.
So we do expect that right.
Great.
Absolute growth percentages moderate attach rate, we do expect that working capital.
Component to be less severe than it was this year.
Just one other thing to add Brendan and good morning.
Is that you know we also have the sale of the <unk> facility.
They are positive cash flow item.
So to think about.
Great. Thank you very much to both of you.
Helpful and congrats again on the progress.
Thank you ladies apparel.
And we'll take our next question from Oren <unk> with H C. Wainwright. Please go ahead.
Thanks, I have a couple of Oncor Trophy and I understand you have to be a key.
Keep things close to divest competitively here, but just in general on approval.
Coverage trends are those timelines shrinking materially and you discussed your continuing to work to improve coverage and access. So how would you characterize your I guess without specifics, but just your relative positioning to acthar at launch and now and should we expect any material changes in Q1 weather normal.
Seasonal headwinds from.
From resetting our plans and prior offs et cetera, or actual potential tailwind with new coverage wins kicking in and I have follow ups. Thanks.
Yeah.
Good morning, and thank you.
Thank you for your questions.
Yeah look again.
The specifics on market access and relative coverage positions is.
Clearly competitive competitively sensitive information.
I think that.
As I've mentioned during my prepared remarks that we're continuing to work to.
The increase in improved the market access for patients in need.
Both with coverage decisions as well as what's helping.
<unk>.
So our reimbursement team.
Just helping to reduce the time from enrollment to fulfillment.
I should probably steer clear of giving any further specifics beyond that.
Because last time I checked both from Mallinckrodt, where actually listening into my call.
Yeah.
But until the terms of the seasonality in Q1, I mean, we normally especially in rare expensive drugs, we expect a headwind in Q1 it should be just make the standard assumption that that's the case for your product like most or Hmm.
In theory.
We're entering your first full year or are you, hoping to have our new wins.
So I think youre exactly right.
There is a dynamic that's typical for rare disease launches between Q4 and Q1, such as patient switching insurance plans.
<unk>.
And the impact of that and I think that.
And as rare disease products will follow suit on that.
Perfect.
And you did mentioned bolstering the Pulmonology supports and I think it's pretty vague, but maybe other areas.
Areas I'm, assuming you're referring to whatever differentiation you have indication wise versus the Acthar, which I guess, it's not competitive information it doesn't the labels. So maybe you could talk about it.
How material do you view it.
The opportunity in any differentiated indications you have versus actor.
No we're not.
You're right, but it isn't the label and we.
Do have differentiated indications versus that TARP.
We're not sharing.
Anything at this time.
And I think the second part on.
On Pulmonology.
As far as the other indications I think yeah.
Sure.
We pointed in the direction of the modest modest sales force expansion in the area of Pulmonology and I think that that's appropriate to share.
Okay.
And then just a couple of financial ones are more of a operating leverage in 2023, you know what are the biggest drivers there.
In terms of the range is a bull and bear case scenarios margin wise is it just you know how much you choose to invest.
The opex side or is there some material variability in the gross.
So the underlying business units are actually I think I missed in your remarks did you give company gross margin guidance, there and on generic specifically just directionally given you're launching expect to launch competitive generic therapy. There is a possible gross margins over all the generics business can increase in 2023 or is that a would that be too aggressive in them.
Shannon.
Should we assume that they are flat at best.
Yeah.
Yeah, good morning, or and so so yes, we did we did a man.
Total company gross margin profile.
And we say did bad debt 59, 5% to 61%.
61% and that would be on a non-GAAP basis.
And as you think about the different puts and takes in the ranges in the guidance.
Certainly.
Certainly one of them.
Is just how the how the sales mix does does.
It does play out.
As we've talked about in the past re purified core Trofim gel is a is a favorable input.
It grows.
To our overall company gross margin.
Profile.
And however, you know there there is a touch of a headwind year over year.
As I stated in Elliot's question at the at the top of the Q&A.
Or kind of other revenues.
Categories right.
The other.
One that I didn't say Elliot call, which is germane.
In the area of royalties. So would you expect royalty income to decline year over year.
And obviously royalty income has a 100% gross margin profile.
And then as you know rates are established brands business, which has a.
Hi brand margin profile.
<unk> tends to be a declining asset in year over year.
Without.
Business development impact on it and so.
There's puts and takes right in that.
Margin profile guidance.
And then the other aspects rate or just the b.
The implied range is like again, we haven't given SG&A and R&D guidance right, but the implied range is.
That kind of total opex.
And those are in those are in relatively.
Tight ranges, but.
Decision, there and as we've said right we're very focused on.
Continuing to invest behind the two growth platforms.
And this is this is our point of view at a moment in time right obviously.
The year develops.
And we get more experience under under our belt with with the performance and the continued trajectory.
Obviously, we'll.
We will update as appropriate.
And can you comment on the directionality of generic gross margins are now.
Yes, Oh right you're yeah. Your question so.
Would say.
Gross margins for the generic business can absolutely expand and the first thing that I would point to you there.
It is just the the overall aggregate age of the portfolio right.
As you know right gross margin profiles in generics would tend to be back at the launch date.
And then as competitive pressures.
Take care and as time goes on you would have margin compression and so as we are in an era of.
Multiple generic launches off of the strength of the R&D platform.
That lowers the aggregate age of our portfolio.
And it's a positive contributor to the generic gross margin profile.
Great and if I may.
Yeah, Let me just.
So just to clarify or build on what Steve said, he says that it can expand but it put the we havent given specific guidance on the on the mix right, we're giving you would be.
So the mix of the three years right.
I'm talking about the moving parts. So yeah, yeah, yeah yeah.
No no promises in generics.
Building on everyone's questions on cash like I'm, not an accountant. So I'm sorry. If this is a dumb question, but just when we talk about besides the investments in inventory and other working capital investments. So can you just talk about accounts receivable and how that's grown over the Eric just to clarify is that really just a function.
<unk> of time and growth of revenue you know net payment terms and and and obviously a rapidly growing top line or is there potentially any difference in the regular collection cycle with the new orphan business versus the legacy generics is there something unique about.
Accounts receivable collections on the orphan side.
Yes sure so.
I'll answer the first part is in 2022.
The.
The utilization of cash and what's sitting in a yard is largely driven.
By just the normal the normal cycle and significantly.
The accelerating.
Sequential growth.
Again, even within within the months right.
In terms of looking forward as a purified coatesville from gel becomes a bigger overall mix of our business.
The.
I'll tell you generally speaking right.
Contractual relationships and contractual terms for us.
That type of branded product right are more favorable than the terms that you would expect.
In the generic business, so that should be a another underlying positive factor.
Purified corticotropin gel grows.
All percentage of our business.
Thank you that's really helpful. I appreciate your patience with all the questions.
Oh, thank God and very insightful questions. Thank you very much.
And we'll take a follow up question from Elliot Wilbur with Raymond James. Please go ahead.
Thanks, Rick real quickly.
Just going back to core trophy and as we think about modeling the trajectory of the product and the various.
Treatment curves and persistent trends within your three primary indications any particular area, where you have seen over performance perhaps versus the historical.
ACTH usage pattern I guess some of the early data suggests that relative usage.
In nephrotic syndrome is much higher than what we see.
With XR. So I don't know if that's just a function of just not enough data points or if in fact, that's something that you're seeing.
<unk> is as well and then bigger picture question as we start to see the ACTH market recover in terms of unit volumes.
Anything you can say in terms of sort of the patient dynamics there I understand most of these patients would be shortage.
I'm new to therapy, meaning they haven't been on.
I think the trophy reactor are probably for 12 months, but any.
Any perspective, you can offer at least at this early stage in terms of patients who may actually be treatment naive or not previously on ACTH therapies in terms of the mix in last question I'm sure I know the responses already but.
That's our labeling is differentiated because it has the infantile spasms indication anything you can say about your your plans in that area as well. Thanks.
Yeah.
So thank you thanks Elliot.
Insightful questions as always.
You to your question on are we seeing sort of favorable dynamics on.
On one patient.
One indication versus another versus what <unk> historically had.
We will probably need to steer clear of that cause that.
Points.
The direction of focus.
That could be valuable for so it's competitively sensitive so that's one.
I think ill patient dynamics.
I think what we can share is.
You know there are prescribers, who were writing or using easy ACTH class.
And they had either stopped or reduce their writing considerably.
Their interest.
We have driven sort of greater understanding around CT rofin gel awareness and understanding of petroleum gel.
Seeing their interest continued to build and Thats medicine.
Oh, and you can sort of what I can share is.
Prescribers that are writing.
Their first prescription of <unk> gel and then our prescribers that are writing multiple prescriptions a quarter off of Joel.
And I guess, what you can.
Oh I can see from that is that the patients that they put on court rofin gel.
Potentially are seeing right. So I think that that I think that they see they see.
The impact of that they make the decision to decide which are the appropriate patients who continue to put on.
To.
Put on portal from gel.
I think that's what I think that's what I can share and then the last one.
Again these.
These are all dynamics that we are just to be clear. These are all dynamics that we are.
We believe are favorable and and therefore, you see that our guidance for 2023 is 92% to 116% higher and that's why you see that 92%, there's a 116% higher than 2022, and that's why you see that the ACTH class has grown month on month.
Of the eight months in a row.
And then your third question.
On the on the I S indication are competitively sensitive information.
I just wanted to say before we move on I just want to thank all of you for your patience and understanding as we again.
We're all we're trying to find that balance between giving the investment community as much information.
With shedding.
Competitively sensitive information in a two player market right.
Yeah.
And there are no further questions at this time I'll turn the call back over to Nick <unk> for closing remarks.
Thank you Ashley and thank you everyone for joining our call. This morning.
And I is well positioned to deliver sustainable growth and we look forward to updating you on the continued progress. We appreciate your time and interest in.
Thank you.
Thank you.
Thank you and this does conclude today's program. Thank you for your participation you may disconnect at any time.
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Okay.
Sure.
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Okay.
Thanks.
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