ANI Pharmaceuticals Inc. Q1 2023 Earnings Call
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Good day, everyone and welcome to today's <unk> Pharmaceuticals, Q1, 2023 earnings call. At this time, all participants are in a listen only mode.
Later, you will have the opportunity to ask questions. During the question and answer period, you may registered to ask a question at any time by pressing Star then one on your Touchtone phone. Please note. This call will be recorded and I will be sending you bought should you need any assistance. It is now my pleasure to turn today's call over to Judy Diclemente. Please go ahead.
Thank you Ashley welcome to Eni Pharmaceuticals, Q1, 2023 earnings results call. This is Judy Diclemente of insight Communications Investor Relations for Eni with me on today's call are <unk>, President and Chief Executive Officer, and Stephen Carey Chief Financial Officer.
Hi.
You can also access the webcast of this call through the investors section of Eni website at Www Dot anti pharmaceuticals Dot com.
Before we get started I would like to remind everyone that any statements made on today's conference call that express belief expectation projection forecast anticipation or intent regarding future events and the company's future performance may.
To be considered forward looking statements as defined by the private Securities Litigation 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.
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 anti pharmaceuticals Dot com.
For the benefit of those who may be listening to the replay or archived webcast. This call was call was held and recorded on May eight 2023. Since then <unk> may have made announcements related to the topics discussed. So please reference the companys. Most recent press releases and SEC filings and with that I'll turn the call over.
<unk> Nikko.
Thank you Judy.
Good morning, everyone and thank you for joining our call.
And our focus continues to be the competitive designed to help us.
Thanks, Anthony and drive profitable and competitive growth.
Firstly, the scale up of our rare disease business.
At full launch of our lead rare disease assets.
Slide portal from gel and the potential to add assets that leverage the rare disease infrastructure, we have built.
This business will be the largest driver of ani's growth.
The second imperative is driving generics business growth superior new product launch execution excellence.
Excellent and supplier.
Our ability.
These efforts.
These are first coupled with our.
Okay.
These efforts coupled with our enhanced operational excellence.
<unk> to compete and win across our core business segments and to generate record quarterly net revenue.
$106 8 million for the.
<unk> and record quarterly adjusted non-GAAP EBITDA of $33 million.
Outstanding operational performance demonstrates the strength, we have built in our core business segments and I congratulate the team for their hard work in achieving these outstanding results announced this morning.
On the rare disease from we've continued to invest in the launch of our fall baseball rare disease asset.
Hi, Joe.
We strengthened the team and improve how we are servicing patients physicians and payers, which has accelerated our launch momentum and increased access to ACTH therapy for patients in need.
As noted on last quarter's earnings call for competitive sensitivity reasons, we will no longer be providing more detailed metrics on portal.
However, we are pleased to report that the acceleration of our launch momentum as evidenced by the record quarterly number of new cases.
Initiated in Q1, 2023 and record monthly new patient starts and cases initiated in April of 2023.
We are also seeing continued growth in the number of unique prescribers and repeat prescribers in.
In fact, many prescribers, what previously slowed or discontinued use of ACTH class have restarted their use of ACTH therapy. After the launch of pure <unk> gel.
Our promotional efforts are focused on rheumatology neurology nephrology pulmonology we.
We have ramped up peer to peer education programs across our three target specialties of rheumatology neurology and nephrology to further increase awareness of <unk> and Joe.
In addition, we have completed recruitment and Onboarding are modest and dedicated Pulmonology sales team.
Central to our core frozen gel launch have that our efforts to increase market access for the ACTH class for appropriate patients in need.
A critical relevant trend to highlight for the core Trofim gel launch is the growth in the overall ACTH category.
Prior to the launch the Acg's category continued to decline and according to our Hugo had not shown year over year unit growth since 2019.
And I launched pork rofin gel in January of 2022.
And from June of 2022 to March 2023 for 10 consecutive months. The Accs category has shown year over year unit growth According to <unk>.
In fact in the first three months of 2023, the door on your category unit growth.
<unk> has been in the double digits.
First quarter net revenues a quarter, often Joe was $16 $3 million, which was in line with our expectations and bolsters our confidence in our full year quarter Wilsonville revenue guidance of 80 million to $90 million.
We are pleased with the progress of this launch and look forward to announcing the scale and scope of our rare disease business.
We continue to actively explore adding other assets that can leverage our rare disease infrastructure.
Next I will turn to the generic established brands and other revenue segment, which increased to $95 million, an increase of 43% over the prior year.
These results showcase our ability to use our U S manufacturing footprint and adjust our operations to deliver timely solutions to our customers.
During the past few years, we have enhanced Eni is operational excellence by combining longstanding strength in manufacturing at our strong GMP track record with best in class in each of our research and development capabilities.
All with a patient first orientation.
<unk> has enabled us to capture market demand arising from the numerous supply disruptions impacting patients.
There's too much needed medicines.
We have increased our R&D investment with focus on niche opportunities. We continue to file new multiple new andas in the first quarter of 2023 and retained our top 10 ranking in the number of Anda approvals.
We have also retained our number two ranking in competitive generic therapy approvals in 2023.
Our efforts to drive cost excellence have included the consolidation of our manufacturing network with the rationalization of manufacturing operations and Opal, which is now completed.
Discussions with potential buyers for the <unk> site are ongoing.
In addition, we have augmented our analytical and development facility in Chennai, India with over 60 skilled colleagues.
Equally important are our efforts to ensure supply reliability of supply.
We have a strong compliance and audit track record enhanced further by recent successful FDA audits across all three sites.
In fact, our new Jersey site with respect to the March of 2023.
And had zero 40 threes and in.
Nai status.
Last but not the least we continue to maintain healthy inventory levels for finished goods and raw materials, allowing us to capture any opportunities arising from market disruptions.
These achievements demonstrate <unk> ability to deliver sustainable.
Imperative and profitable growth, while keeping the patient at the center of everything we do.
The oral hot overall trajectory of our business boosts our confidence in the 2020 outlook and we are therefore, raising full year revenue guidance to between $385 billion.
The $410 million and adjusted non-GAAP , EBITDA guidance to between $97 million and $107 million.
And adjusted non-GAAP EPS guidance to $2 99.
The $3 45.
Steve will now walk through our detailed first quarter financial results and discuss the revised guidance for Europe in more detail.
Steve.
Thank you Nicole and good morning to everyone on the call.
As <unk> indicated we posted very strong results in the first quarter of 2023 capitalizing on the groundwork we have laid over the past two years to build sustainable growth platforms and strengthen the capabilities of Eni.
We saw growth across our core businesses generating record first quarter revenues of $106 8 million, marking the first time in the Eni history that our quarterly revenue has surpassed $100 million.
This represents $42 3 million or 66% growth over the $64 5 million reported in the first quarter of 2022.
And it's up 13% sequentially from the $94 2 million of revenues reported in our previous record fourth quarter of 2022.
It is important to note that this is the first quarterly reporting period, where results are on a consistent basis with our two growth capital.
The acquisition of <unk>, which closed in November of 2021 and.
And the launch of purified control from Dell, which occurred in the first quarter of 2022.
As such first quarter of 2023 performance is reflective of the organic growth at the company.
Revenues from core Trofim reported in a rare disease segment were $16 3 million in the quarter up $15 million from prior year.
We are pleased with this result, and it is in line with our expectations.
Further we believe this level of first quarter performance creates a strong foundation for achievement of our full year 2023 core trophy and revenue goals.
Revenues of our generic established brands in the other segment Rose 27, 3 million to $95 million, an increase of 43% over the prior year and.
And $13 8 million or 18% as compared to the fourth quarter of 2022.
These increases were driven by a $14 6 million gain in our generic pharmaceutical products.
An increase of nearly 30% year over year.
And a $12 7 million dollar gain in our established brands royalties and other category.
For an increase of 90% year over year.
The growth in this segment was driven by increased volume.
Strong commitment to U S based manufacturing excellence and generic product selection in the RMB and an informed and nimble team.
These attributes one combined enabled the eni to quickly and efficiently.
The market needs.
Operating expenses increased by 16% to $96 9 million for the three months ended March 31, 2023 from $83 $7 million in the prior year period.
Cost of sales, excluding depreciation and amortization increased by $3 4 million to $37 7 million in the first quarter of 2023 compared to $34 3 million in the prior year period.
Primarily due to a shift in product mix and increased volumes of sales of generic and rare disease pharmaceutical products.
In addition, during the prior year period, we recognized $3 $8 million in cost of sales representing the excess of fair value over cost for inventory acquired in acquisitions.
There were no comparable expenses in the current year period.
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 non-GAAP net revenues decreased 13 percentage points from 47% in the first quarter of 2022 to <unk> 30.
34% in the current year period.
Primarily as a result of favorable sales mix from the impact of higher sales of established brands.
Trophy and the net impact of annual inflation of new product launches in our generic franchise.
Research and development expenses were $5 $9 million in the first quarter of 2023, an increase of zero point $7 million from the prior year period, primarily due to year over year timing of work associated with generic product.
Coupled with an increase in projects related to core Trofim gel in the three months ended March 31 2023.
Selling general and administrative expenses increased by 27% to $36 5 million in the first quarter of 2023 compared to $28 8 million in the prior year period Pri.
Primarily due to a $3 $4 million increase in sales and marketing expenses related to core trophy gel and increased head count costs.
Tempered by a zero point $7 million decrease in transaction expenses related to the <unk> acquisition.
Depreciation and amortization expense was $14 7 million for the three months ended March 31 2023.
Essentially in line with prior year.
During the quarter ended March 31, 2023, we recognized a noncash fair value adjustment of $1 million related to the contingent consideration recorded in conjunction with <unk> purchase accounting.
This is compared to zero point $8 million recorded in the prior year period related to this item.
In addition, we recognized $1 1 million of restructuring expense in the first quarter of 2023.
Associated with the closure of our Oakville, Ontario facility.
Restructuring activities were recognized in the prior year period.
We have excluded both the onetime charges, resulting from the fashion as well as portions of the Canada results.
<unk> to be nonrecurring post closure from our non-GAAP financial measures as detailed in the tables in this morning's release.
Net income available to common shareholders for the first quarter of 2023.
$1 million as compared to a net loss of $25 million in the prior year period.
Diluted GAAP earnings per share was <unk> <unk> per share as compared to a $1.27 loss in the prior year period.
GAAP earnings per share reflect significant amortization and purchase accounting related charges.
Relief related to the <unk> acquisition.
With Oakville related restructuring activities.
On an adjusted non-GAAP basis, we had diluted earnings per share of $1 17 per share for the quarter.
Compared to a loss of <unk> 12 per share for the prior year period.
Adjusted non-GAAP EBITDA for the first quarter of 2023 reached a new company record of $33 million.
And reflect significant gross profit pull through from the strong revenue performance.
This is an increase of $28 $7 million compared to the $4 3 million recorded in the prior year period.
Importantly, adjusted non-GAAP EBITDA also rose $9 $7 million on a sequential basis.
Up 42% from our previous record $23 3 million in the fourth quarter of 2022.
From a balance sheet perspective, we ended the quarter with $67 $8 million in unrestricted cash driven by cash flow from operations in the quarter of 21 4 million.
This compares favorably to cash used in operations of $18 9 million in the prior year period.
We have $296 $3 million in face value of outstanding debt, which is due in November of 2027.
In addition, we have $40 million of untapped capacity in our revolving credit facility.
Finally as outlined in this morning's press release, we are pleased to raise full year 2023 guidance as follows.
We raised total company expected net revenues to between $385 million and $410 million up from the previously issued guidance of 360 million to $385 million reps.
Representing approximately 22.
30% growth as compared to the $316 4 million of net revenues recognized in 2022.
We raised total company adjusted non-GAAP EBITDA to between $97 million and $107 million.
Up from previously issued guidance of 78 million to $88 million, representing approximately 74% to 91% growth as compared to the $55 9 million recognized in 2022.
We raised total company adjusted non-GAAP earnings per share.
To between $2 99.
The $3 45.
Up from previously issued guidance of $2 nine.
$2 59.
Representing approximately 120% to 154% growth as compared to the $1 36 reported in 2022.
We maintain the core chosen specific revenue guidance at between $80 million to $90 million, representing 92% to 116% growth as compared to the $41 $7 million recognized in 2022.
And we continue to expect 2023 core drove an SG&A to increase approximately 10% over 2022 to account for a modest sales force expansion.
And we now project total company non-GAAP gross margin of between 60% and 62, 5% as compared to previously issued guidance of 59, 5% and 61%.
In addition, we currently continue to anticipate between $16 8 million and $17 1 million shares outstanding and an effective tax rate of approximately 24%.
With that we will now open up the call to questions operator, please announce.
Construction.
Secondly at this time I'd like to ask a question. Please press star one on your Touchtone phone you may withdraw your question at any time by pressing star to once again Thats Star One we'll take our first question from Elliot Wilbur with Raymond James. Please go ahead.
Thanks. Good morning, first question for Steve as well just wanted to dive a little bit deeper into the over performance in the base business generics and brands and royalty line specifically.
What's that.
Hey, dynamic that emerged late in the quarter or do you simply now have more visibility on the continuation of some of the favorable trends.
That you are seeing versus what you had previously anticipated I guess in early March when you provided initial 2023.
Guidance and then just if you could provide a little bit more granularity in terms of some of the key drivers.
Whether we're talking about competitive wins in the generics business.
Benefit of off contract pricing, perhaps or just new launch dynamics, maybe just a little bit more granularity on where the actual over formats is coming from and I've got a couple of follow ups.
Sure.
Good morning, and thank you Elliot.
So.
No.
But to the first part of your question, maybe I'll take the second part of your question, which is what are the specifics around these trends.
So look.
Ani's for box results in our generics established brands and other segments showcases our ability to leverage our U S manufacturing footprint, and our agility and operations to deliver solutions to our customers.
This has enabled us to capture a market demand arising from the.
Supply disruptions impacting patient access to much needed medicines, we see this as a positive trend in fact, they are impacting our business due to several structural factors.
And there is a mix of factors.
There are product specific issues there.
There are manufacturing site related issues arising from FDA audit outcomes. There are company specific financial issues, such as chapter 11, and chocolate <unk> situations and there are broader market driven opportunities while.
While the mix of these issues will change.
No.
This trend is.
As there is here.
<unk>.
And may be likely to continue.
<unk> remains well positioned with our U S based manufacturing dedication to supply chain and manufacturing excellence and nimbleness as an organization to capture these opportunities.
No.
I would also reiterate that first and foremost the first quarter performance represents strength across all core businesses and as Steve noted in his remarks.
This is reflective of organic growth of the company right and these include strength of new product launches in generics. The continued evolution of our portal and launch and the impact of innovative go to market strategies and our established brands with us. So that's the second part of your question Elliot and then on your first part of it.
What did we know in March versus now.
So look at any given point.
We're giving the best information available to us.
<unk>.
So while this trend may have started earlier in the quarter.
We wanted to give it some time before.
Before we went ahead and reflected that Brett. So it's so our best thinking is reflective of the guidance. We gave in March as we had more.
Visibility, where we are.
Is the guidance.
Okay, Thanks to Kevin Farr.
Slow up for Steve as well going back to the subject matter I guess, we discuss more than usual last quarter and that being cash flow.
Looks like you generated operating cash of just over $21 million.
In the in the quarter.
Working capital looks like it's now.
Neutral versus a negative as its been for for several periods now, but you are still seeing increases I guess in some of the larger.
Working capital asset account, so just wondering with the increase in full year EBITDA guidance, how should we be thinking about cash conversion.
And cash flow performance versus what we saw in the first quarter and are there any other chunkier items that may work.
Work to your benefit over the course of the year now that you've got that $20 million plus contingent liability on the balance sheet.
Yeah. Good morning, Thanks, and thanks for the question. So obviously, we're very pleased with the cash conversion in the first quarter.
Again, we've we posted 21 4 million of cash from operations.
And integrated.
Domestically in line with everything that we've discussed on the evolving calls throughout 2022.
And the year end call just back in March right that.
The 2022 era, where the company was using significant amounts of cash to stand up the floor Trophy.
Gel launch to standup the rare disease business within Eni.
Those chapters.
Starting to starting to.
<unk> in the rearview mirror so to speak right. So when you couple couple that track that we were on.
<unk>.
A very significant and healthy core.
<unk>.
You have a significant unlock with cash in the first quarter.
Looking forward, we would obviously expect that to track with our P&L guidance.
So I think.
We're very confident in having an increasing level of confidence in terms of the cash generation that we expect from the business.
As we look forward to the next three quarters.
Obviously cash tracks the P&L performance.
And lags it by a bit.
And to your question about <unk>.
Key items.
I think the only.
The few that I would highlight right so I've talked to in the prepared comments.
About.
<unk> contingent consideration.
So we do anticipate we will have the two year anniversary of the <unk> transaction in November of this year.
And that will kick off the first leg of the contingent consideration payments to the selling shareholders.
So we're currently anticipating about $12 $5 million.
Payment in.
In this year.
And that would be the very first payment due to selling shareholders.
And there would be a second payment of a similar amount.
Early in 2024, so we're clearly planning for those events and we're clearly.
More than happy to pay those contingent outflows because it.
More than happy to pay those contingent outflows because it.
We're very present, an indication of the strength of the transaction.
And the fact that the <unk> transaction has has.
Not only fulfilled our expectations, but exceeded our expectations.
As we've combined that great business into into Eni.
So that's one on the outflow and then obviously we've talked about.
The Oakville closure rate, which is from an operational perspective.
It's fully complete at this time.
It was completed on on track and are on target with our timelines.
That facility continues to be held for sale in Canada.
Obviously, we can't predict the exact.
Timing of when that sale will close.
But we expect a.
A nice cash inflow from from that transaction.
Okay. Thanks, and then last question for Mikael you highlighted a lot of the pace continued positive trends.
And the uptake of core trophy, and specifically thinking about indications.
Indications that new patient starts and new patient initiations were at record levels.
April do you have any sense as to whether or not these are.
New to therapy or treatment naive patients versus <unk>.
Potential switches from your competitor in the marketplace and I guess the reason I ask the question is some of the some of the data out there and granted it's.
Relatively low frequency may not be that high quality, but some of the data shows.
Early.
Sharp uptick in terms of switches.
<unk> core trophy from from your competitor and not sure if that is.
Accurate or not in terms of what youre seeing and if so any thoughts as to what may have impacted that thanks.
No. Thank you Elliot look I think it's a mix so it's a mix.
Patients that are naive to the therapy as well as patients that are switching.
What I will say is.
There is.
No.
As I was saying, we've ramped up our efforts to increase awareness of <unk> gel and obviously there is.
There is an increase in the number of.
New prescribers as well as repeat prescribers and so with repeat prescribers, what you'll see is that as they start using quarter often Jeff.
And see the many parameter ourselves to use right tightened from enrollment to fulfillment the impact of the patient the engagement with the company I think all of those factors.
Drives there.
The HCP too to think about.
Shifting their usage right.
As I also mentioned in my in my prepared remarks that there is.
A number of.
<unk>.
Prescribers that we used to use ACTH therapy that have just stopped over the years or had reduced their usage significantly and as we've ramped up our.
Increased awareness of Port Rofin gel.
Dave.
Reintroduced ACTH into their suite of <unk>.
<unk>.
Once that they use for patients of course for appropriate patients in need and Thats why youre seeing.
<unk>.
The euro on your monthly unit growth for 10 consecutive months according to accumulate.
So.
Kim we'll take our next question from Neil <unk> with Guggenheim Securities. Please go ahead.
Alright, thanks for taking my questions.
Yes.
Results, obviously here so a couple questions I, just want to dig into a little bit more.
One on the cultural Poseidon I appreciate youre, not saying too much for competitive reasons.
Just wondering if you could share any sort of just general feedback from providers as youre talking about maybe returning to this market of patients returning.
And then also some new.
Can you provide us potentially just feedback youre getting in terms of the product performing relative maybe it's higher.
Appearance with the competitor and also is there any sort of added cost wishes to whom.
Behind the launch sort of for the rest of the year or something.
It sounds like the sales personnel in place now.
Anything else, there or added sort of marketing.
Meaningful increases over what we saw on <unk> and then the second question was just more general.
Again getting back to the cash discussion.
I'm just curious if you can talk a little bit more about sort of your comfort level on your leverage ratio as you think about investing behind a cultural thing, but also potentially bringing in additional rare disease assets.
And a level of debt from close to $300 million, but $2 40 yourself cash plus the accounts receivables. So just curious how much of.
Added leverage you'd be comfortable taking.
But.
So thank you <unk> and good morning. So let me answer your second question and then and then you'll first and then ill let Steve start on the last one around the leverage ratio. So.
We have not.
Adding any costs.
When we had spoken at last quarters earnings call for controls and SG&A, We had indicated that we expect.
10% higher than previous your SG&A.
And I think it is in our press release, so that we will maintain.
The SG&A spend at that so no added cost so that's the answer for.
That question and look in terms of general feedback from prescribers.
I think it's a few things so first is.
That they do.
Comment on the.
On our sales force and our sales force is highly experienced and highly trained.
And the focus the discussions on patient need right and on the ACTH category.
And I think that that engagement is one that they speak very highly all right. Because this is a rare disease product right.
Identifying the appropriate patients in need.
So I think that's the first thing they speak about I think the second.
As I mentioned in my.
In my remarks that.
The central to our corticotropin gel launch has been our efforts around market access and improving the enrollment to fulfillment process and I think the comment about that and.
The reduced.
But a burden that they have there and I think third equally.
Equally important they talk about the reduced cost of the health care system, and the reduced cost to the patient and the and the and the favorability of that and of course.
And again I have to be careful about what I say here, but underlying all of this is the impact to the patient the patients that they're treating and these are.
Complex cases.
Okay.
The peso is dealing with.
Complex.
Indications and Comorbidities.
And the impact that they're seeing on those patients as part of it.
So I think those would be the.
Yes.
The point the feedback that we're getting from the from the HCP and then your last.
Question on leverage ratios obviously.
Steve will jump in which is what.
With the with the EBITDA of 30.
$33 million.
That is a very favorable impact and also our guidance is a very favorable impact on.
On our leverage ratio, but I'll, let Steve comment on how we think about that going forward.
Sure Thanks, and good morning.
Yes, I think it's important because I think your question kind of weaves together.
Two aspects right.
The cash the leverage.
And then also just kind of.
Got it.
The BD thought ray as we look to build out the <unk>.
Their disease business. So I think it's important to note rate as I answer that that there is there's no black and why there is no absolute we're obviously going to be read.
Retained flexibility ray as we approach different business development opportunities.
And every opportunity the rate would have a different profile in terms of.
Yes.
The asset that we're approaching what what is it.
Cash flow profile, so with those kind of caveat.
Obviously, we're pleased with the cash position as of March 31.
And the progress that we've made there.
As I just answered with Elliott's question.
This is a strong platform for us to build that cash position.
As we look to future quarters.
And we will always remain focused.
And balanced in terms of our leverage position.
For for folks that have been following the company for some time.
I think one of the one of the hallmarks of the Eni and how we've navigated the markets throughout throughout the years is to remain a bit conservative on leverage.
And as we spoke about.
On these calls and with our constituents rate in 2022, we were.
We're a bit force if you will go beyond our comfort zone in order to do what was right for the business and to stand up revenue.
<unk> disease and to launch court rofin.
With an eye towards strength and with an eye towards doing the core trophy launch.
Correctly right out of it.
And so we're very pleased that as we look look forward at the current moment, we're delevering organically.
As projected.
We're very pleased that that will continue to occur here in 2023.
All of these factors put us in a better position in a better position of screens.
Q2 approach business development opportunities.
And you May note rate as Youre going back through the prepared comments for today.
Despite the untapped credit facility of $40 million. That's the first time in a while right that wasn't stating that in our 2022 earnings calls because.
Nicolai would not be comfortable.
Tapping into that given the leverage levels that were at in 2022.
So again all of these factors.
We would expect looking forward right, but that that credit facility maybe another.
So.
Of the puzzle for us as we look to continue to grow the business.
Okay. Thanks, that's all very helpful. Thank you.
And we will take our next question from Brandon Folkes with Cantor Fitzgerald. Please go ahead.
Hi, Thanks for taking my questions and congratulation on the very strong results.
Maybe a question for me.
Just on the gross margin this is very strong in the quarter.
Can you just elaborate on why we noticed spectrum further gross margin expansion and the updated guidance just given the increased contribution of <unk> through the rest of the year.
Out of its physical trades and to have better gross margin than the established brands product.
Along those lines can you just talk about any onetime price benefit in the quarter on the base business, especially due to some of the supply disruptions you mentioned.
So maybe I'll ask the second question because it may go hand in hand with that can you just help me.
And the guidance.
It seems if I take the <unk> base business run rates and add the low end of your core pricing guidance.
Getting close to sort of $440 million in revenue. So can you just talk about perhaps some of the one timers in the <unk> headwinds in the base business for the rest of the year.
Is it.
Just sort of conservatism given how early in the year. Thank you.
Okay.
Yes, Thanks Brandon.
So why don't I start and then Steve you can jump in.
Look our guidance.
Implicit in your question, one and three evolution of gross margin and then the question on guidance is really the question on guidance and what our guidance was based on several platforms right. As you would appreciate this includes accelerated launch momentum that we're seeing with portal from gel.
Had a record number of new cases initiated in Q1, 'twenty three but also a record number of new patient starts and new cases initiated in April of 2020, right, which is the month that finished at eight days ago.
And.
So that's the first set of factors and then the second is that the impact of the trend that we're seeing across generics and established brands.
Several favorable structural factors such as product specific issues manufacturing site related issues arising.
Horizon from FDA audit outcomes company specific financial issues, such as capital 11 in chapter seven situations.
And broader market driven opportunities and.
<unk>.
Our.
Our guidance sort of calibrate the upsides from the same right and so that.
As this hopefully question, one and three and then to your question.
Around price benefits book.
Again for competitive sensitivity reasons.
We'd like to give that question to pass I think.
The favorability is.
Is largely driven by volume right.
Yeah, and wouldn't want to add more specifics around the price yes.
Steve would you like to add anything.
I think I think you I think you've covered nikko.
The question and what we're prepared to speak to this morning.
Okay.
We will take our next question from Greg Fraser with <unk> Securities. Please go ahead.
Good morning, Thanks for taking the questions.
Can you comment on how to think about quarterly cadence of generic sales for the balance of the year.
And then on the significant growth for established brand and other revenue was that growth driven primarily by established brands as opposed to the other segments of royalties and contract manufacturing it looks like you're no longer breaking those out separately.
Just wanted to know if theres something chunk in there Joe.
The first quarter outperformance and I'm not sure if I missed this but did you comment on the timeline.
Or give any updates on your <unk> programs.
And if not can you give us an update on this thank you.
Yeah.
Alright.
So.
And good morning, and thank you Greg.
Three questions. So the first question is.
Timeline for 505 <unk>.
We've talked to comment on it commented on it and at this point we're not.
Sharing the information on that so Q1 that will come back.
When there is more to share on the fiber side be two launches.
Your first question on the.
Quarterly cadence for generics.
I think the.
We've always talked about sustainable growth and for generic it's really about ensuring that.
We.
Continue with our strong R&D growth engine rate.
Continue delivering new launches focusing on cost excellence continuously reducing the costs.
And therefore being able to.
To continue to supply and stay competitive and then third is supply security and with all of the three.
Sort of three strategies with the new product launch really at the heart in the center of it we believe that the erosion that we see in our business from generics will be overcome by the growth that we'll get from new launches from supply security and cone cost excellence right and so we'll be able to grow.
The generics business as we as we keep moving forward.
So that tells you a little bit about the quarterly cadence and then on the question regarding whereas the upside from within the established brands royalties and.
Other segment.
Hey, Doug.
While it's while it's mixed.
Part of it is from the established brands segment.
Thank you.
Thanks Scott.
And we will go next to Orient listening with H C. Wainwright. Please go ahead.
Thanks, I have a few just.
I guess build on the prior questions about.
Going forward visibility you've had outperformance from every line, but if we start with generics first.
Again implied in your guidance some conservatism looking forward just can you talk about.
If you expect whatever disruptions happened.
Supply bankruptcy et cetera.
Sure.
<unk> assume conservatively some normalization in the competitive landscape going forward.
And then on the brand legacy brand business, which is obviously a high margin contributor.
Going forward is that still a declining revenue line or do we think that has eroded and volume, but offset by some pricing benefits does that is that a stable business going forward.
A couple of follow ups.
Okay.
So I think your first question was on the.
On the trend so look the impact of the trend right. It has several favorable factors structural factors that I spoke about a couple of times right product specific issues manufacturing related issues from FDA audit outcomes company specific financial issues, such as chapter 11 in chapter seven and broader market.
Driven opportunities.
What you see in our guidance is a calibration of the upsides from the street.
And and then understanding of.
The mix of these issues.
Just how that will persist so thats the answer that question on continuity and then an established brand.
We've spoken about before.
There was a number of steps, we're taking to in our established brands puts us right. So.
<unk> go to market strategy sort of bulk of bar.
Of our established strategy.
For our dorm specific brands that we had acquired from.
From.
A couple of years ago.
<unk> launched a partnership.
Now Paul.
Paul.
With another company to do co promotion, but thats.
That's been pulled flow in August .
As we talked about the operational excellence to ensure that our customers need these products on a timely basis being insured and being able to have a robust local supply chain that can.
That can provide these products on a timely basis to customers.
Okay and follow ups actually before I get to <unk> in the past you've talked about product concentration and no product single product exceeding X percent of total revenue can you update us on I guess the largest single contributor.
Percentage wise in Q1.
And then I had a question.
I think its corporate will provide a long distance right again aside from core drove it.
Thanks.
We make it all I'd say, we haven't we haven't highlighted those products in the past.
I'd say, we're still very pleased with the product diversification in the portfolio.
Okay, and moving onto Cort drove NSE as I may I know youre, not giving I appreciate youre not giving us some more granularity on specific patient add doctor adds but I guess can you just characterize as that launches accelerated in Q1.
<unk>.
Does the pace of new initiations that actual therapy as you pull through insurance adjudication et cetera has that.
Outpaced or is that higher or lower I guess than the new patient referrals are prescribing ads wherever they are coming from I'm, just trying to think about whether you sort of had a catch up this quarter as you pulled through existing prior demand or if it's sort of steady state on that front in terms of conversion and it's really just organic.
End user demand growth.
Yes look.
Our.
The growth that we're seeing right.
It's not as simple as saying.
What's the pace of new patient adds right because theres a number of other factors that that.
<unk> from new cases initiated two actually.
Revenue generating patients right, it's the mix of patients.
Number of vials per patient.
The number of patients that are revenue generating at the time to therapy. So there's a number of different factors I would say that.
As straightforward as you look at the.
What we've done in Q1, and what we're reiterating our guidance for the rest of the euro, but we have high confidence in.
That that mix will continue.
And two.
I think one very important point is that our intention is to continue giving investors the best available information and while we're not giving a specific number we're making it clear that look and even in the month of April .
A record number of new patient starts and new cases initiated and you don't have that unless you have accelerating launch momentum.
As simple as that.
Okay, and you actually kind of segue into my next question you mentioned, the sort of vials per patient or I guess, you can call. It unit per patient can you just comment on.
Not pricing per se, but are you seeing a material.
Increase in Q1, and looking forward in the sort of value per patient in terms of the kinds of indications that are getting prescribed and pull through we obviously, there's a big range and some indications have long.
Longer or higher doses than others.
Yes, no there's no.
We're not necessarily seeing a.
Different in that in that dynamic.
And then in.
What we're seeing is not something that I'm prepared to.
Perfect.
Okay.
For competitive reasons.
And just lastly, I apologize for all the questions, but on the rare disease space sound pretty explicit they are quite interested in.
Looking at M&A and I'm, just curious if you could talk about the kinds of things.
Things Youre looking at are we thinking about on market products, maybe they are underperforming or new launch situations and are you more inclined towards.
Our partnership.
Co promoting or helping commercialize a product for a company that's not really set up to do so as well as view.
Our product and our company acquisitions that might involve more integration activities.
Yes.
Thank you for that question Lauren So look.
Sure.
We're looking for assets that can leverage the strong rare disease infrastructure that we have built.
And when I say that infrastructure, what do I mean, you remember I'll explain.
The earlier question was asked about HCP feedback.
The first thing I highlighted with the highly experienced and expert sales force that we have so.
And we go into three different the Salesforce.
And three different indications neurology nephrology and rheumatology.
So the first person obvious one would be to pick.
An asset.
Is he the tenure of these three and then obviously you just pharmacology, although it's a modest dedicated teams and so that is an asset that sort of goes into one of these call points, but so that's one.
I think the second part of it is.
Just one that leverages, our rare disease infrastructure.
Market access patient support.
Specialty pharmacy distribution right.
Compliance medical affairs all of that.
And.
So there could be a catalyst that can leverage that too. So we're looking at and actively exploring both.
Steps of opportunities I think from your question around what kind of asset.
Look we're evaluating all in.
Trying to find what's best for Anr right and so there are no.
There are no.
Yes.
There is no sort of there is nothing that we're blocking that perspective.
Alright, thanks, so much I appreciate it.
Congrats on a good quarter.
Okay.
There are no further questions at this time I will turn the call back over to Cal Ronny for closing remarks.
Yes. Thank you everyone for joining our call. This morning, Thank you too.
Folks who asked questions. We appreciate it.
Look we just like to reiterate that Eni is well positioned to continue delivering sustainable growth and serving patients in need and we look forward to updating you on our progress. We appreciate your time and interest in Eni and thank you.
Thank you and this does conclude today's program. Thank you for your participation you may disconnect at anytime.
Okay.
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Thank you.
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