Eagle Pharmaceuticals Inc. Q1 2023 Earnings Call
Yeah.
Okay.
Good morning, everyone. My name is Todd and I'll be your conference operator.
At this time I'd like to welcome everyone to Eagle Pharmaceuticals, first quarter 2023 financial results.
All lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer period.
At that time, if you have a question. Please press star and one on your telephone keypad.
As a reminder, this conference call is being recorded today.
May nine 2023.
It is now my pleasure to turn the floor over to MS. Lisa Wilson Investor Relations for Eagle Pharmaceuticals. Please go ahead.
Thank you Todd.
Welcome to Eagle Pharmaceuticals, first quarter 2023 earnings call.
This is Lisa Wilson Investor Relations for Eagle Pharmaceuticals.
With me on today's call are Eagle's, President and Chief Executive Officer, Scott Kirk Chief Financial Officer, Brian Cahill.
As Vice President of Medical Affairs, Dr. Mike Greenberg. This morning Eagle issued a press release detailing its financial results for the three months ended March 31 2023.
This press release and a webcast of this call can be accessed through the investors section of the Eagle website at <unk> Dot com.
Before we get started I would like to remind everyone that any statements made on today's conference call that express a belief expectation projection forecast anticipation or intent regarding future events and the company's future performance may be considered forward looking statements as defined by the private Securities litigation.
Format.
These forward looking statements are based on information available to Eagle Pharmaceuticals management as.
As of today and involve risks and uncertainties, including those noted in this morning's press release and our filings with the SEC.
Such forward looking statements are not guarantees of future performance.
Actual results may differ materially from those projected in the forward looking statements.
Legal pharmaceuticals.
We disclaim any intent or obligation to update these forward looking statements, except as required by law.
A telephone replay will be available shortly after completion of this call you'll find the dial in information in today's press release, the archived webcast will be available for 30 days on our website at Eagle U S. Dot com for the benefit of those who may be listening to the replay or archived webcast. This call withheld recorded on May nine.
2023, since then Eagle may have made announcements related to the topics discussed. So please refer to the company's most recent press releases and SEC filings.
In addition, we will be discussing non-GAAP financial measures. During this conference call. In addition to financial information prepared in accordance with U S. GAAP.
These non-GAAP financial measures should be considered in addition to but not as a substitute for information prepared in accordance with GAAP. A description of these non financial measures non-GAAP financial measures and reconciliations of these non-GAAP financial measures to their most comparable GAAP measures are.
It forth in our earnings press release available on our website at Eagle U S Dot com.
And with that I'll turn the call over to Eagle.
Scott tariff well. Thank you Lisa good morning, everyone and thank you for joining our call today.
Following on from the outstanding year Eagle had in 2022, we remain well positioned for another strong year in 2023.
Our products continue to do well as you can see from the strong earnings we announced this morning, we expect this momentum to continue and our longer term growth to come from our pipeline of potential acquisitions.
For the first quarter of 2023, our net income was $5 $8 million or 44 cents per basic and diluted share and adjusted non-GAAP .
Earnings was $16 5 million.
Or a $1 27 per basic and $1 26 per diluted share.
Our adjusted non-GAAP EBITDA was $22 3 million for the first quarter.
This positions us well to achieve our full year 'twenty three guidance, which we reaffirmed to be clear the investments we are making for the future accounted for much of the expected difference of our earnings in 2023 versus 2022.
We are investing to support our products and advance our pipeline, notably Cao to which bridges much of the year over year gap with the commercial infrastructure already in place. We believe we will be able to capture synergies through a potential acquisition target.
Look at the products during the first quarter of 'twenty three taxi net product sales totaled $22 $9 million and we believe we are well on our way to surpassing the $67 million recorded for the full year of 2022.
As you recall, we exited the fourth quarter of last year with a 6% share of commercial non 340, B pemetrexed usage in community oncology and the United States.
Based on the internal data and customer feedback, we estimate that as of the second quarter to date that our share has now grown to 15%. We expect growth to continue throughout the year and believe that the market share at the end of Q2 could be greater than the current 15%.
<unk> remains an important asset for us.
Recall, we eliminated the royalty on the first $85 million of profit on taxi beginning October one of 'twenty two.
And a reduced royalty thereafter in exchange for one time payment of $15 million.
So far that is looking like a great decision.
Moving onto our Bendamustine franchise as we have discussed in the past ever Bendamustine franchise face new competition for the first time beginning on December seven 2022.
Since that time, we continue to be pleased with the strong performance have been decade, they'll wrap so in the marketplace.
It is our belief that been deca is a beneficial product for patients and health care providers, together and Deca and Bell Rapso maintained approximately 89% share of the Bendamustine U S market for the first quarter of 2003 compared to approximately 90% historically in.
In the first quarter, we reached a settlement agreement with Dr. Readies Eagle has asserted its orange book listed patents against Dr. Reddy is related to its new drug application referencing been deca. The settlement follows our previously announced settlements with Hospira and accord healthcare related to their new drug applications referencing and deca.
One recent challenger, which is for a proposed powder not liquid formulation all existing cases have now been settled we remain confident in exclusivity into November of 2007, which we believe positions bendamustine to be a significant contributor for several more years.
Turning now to the Acacia products <unk> combined net sales of the two products total just shy of $1 million in the first quarter, our emphasis and by favorable product sales are up 32% sequentially versus Q4 of 22. Although this is a small base. It was a very solid showing.
And we expect their shares to continue to grow nicely.
Just last week, we announced that CMS has established a unique product specific billing code for <unk>, which as you may recall is a short acting sedative four procedures lasting 30 minutes or less this new J code is effective on July one of 2003.
We believe the establishment of a unique J code for by favor was an important step in facilitating reimbursements and broadening access to this innovative sedation drug our go forward business development plans remain intact. As we have stated in the past, we intend to use our strong balance sheet and <unk>.
Financial flexibility to potentially make an accretive acquisition with the aim to broaden our footprint within the acute care or oncology space and solidify our foundation for future growth.
We are also currently working with lenders to secure financing to support a potential accretive acquisition.
Let me make a few comments on the pipeline first a global phase two study is underway for calendar two a novel first in class agent for the treatment of severe community acquired bacterial pneumonia used in addition to standard of care, including antibiotic treatment, we expect to enroll 276 patients.
And a 120 centers in 22 countries.
Second in a 001, an investigational one of a kind new chemical entity is an agnostic respiratory stimulant being developed by adelaar for the potential treatment of post operative respiratory depression.
<unk> drug overdose and apnea of prematurely as a reminder, we acquired approximately 17% equity stake in <unk> in exchange for two upfront investments paid in August of 'twenty. Two in February of 'twenty, three and we have an option to purchase the rest of adelaar in the event specified.
Milestones are achieved third <unk> NDA is under review at FDA.
Milling seeks approval for land via law for the short term reduction of ventricular rate in patients with Super ventricular tachycardia, including atrial fib duration and atrial flutter.
To recap as you can see we had another impressive quarter. Our plan is to accelerate long term growth through potential acquisitions and our pipeline.
We believe that we are in a good position to execute on all three aspects of our business, namely strength from our existing product line potential future accretive acquisitions and the development of our pipeline.
With that I'll turn the call over to Brian Cahill to discuss our first quarter financials Bryan.
Thank you Scott and good morning in the first quarter of 2023 total revenue was $66 3 million compared to $115 9 million in the prior year.
Net product sales during the first quarter of 2023 were $46 2 million compared to $90 1 million in Q1 2022, our launch quarter for both <unk> and vasopressin.
<unk> net product sales were $22 $9 million in the first quarter of 2023 compared to $37 2 million in the first quarter of 2022.
We record revenue on delivery of our products to our direct customers primarily wholesalers.
Which estimates the current and near term needs of the wholesaler channel for our growing product as we continue to capture more share of the pemetrexed market.
Customer inventory levels may be higher than for similar established product.
These depression net product sales were $3 $5 million in the first quarter of 2023.
As previously announced during the first quarter of 2023, we notified customers and the FDA of our decision to withdraw from the vasopressin market our inventory on hand has been depleted at this time.
<unk> net product sales increased to $6 4 million in the first quarter of 2023 compared to $5 $9 million in Q1 of 2022.
And first quarter 2023, <unk> net product sales were $8 8 million compared to $6 6 million in Q1 of 2022.
Okay.
Q1, 2023 royalty revenue.
It was $20 1 million compared to $25 8 million in the prior year quarter royalty revenues include royalties earned on sales have been deca in the U S and <unk> in Japan gross margin was 74% in Q1 2023 compared to 76% in the prior year.
Our quarter. The decrease was primarily the result of the inclusion of amortization of intangible assets related to the newly acquired products, perhaps system by favorable which we expect will continue going forward.
On the expense front R&D expenses were $9 3 million for the first quarter of 2023 compared to $6 1 million in Q1 of 2022. This increase is largely attributable to continuing CMC and clinical trial spend on our <unk> two program and the program system by FICO.
Eric Studies.
Excluding stock based compensation and other noncash and nonrecurring items first quarter 2023, non-GAAP R&D expense was $8 6 million.
SG&A expenses in the first quarter of 2023 or $28 million compared to $22 $2 million in the first quarter of 2022. This increase was driven by $3 $3 million in salary and other personnel related costs $2 million in external <unk>.
Sales and marketing spend partially offset by $2 million and lower legal related costs.
Excluding stock based compensation and other noncash and nonrecurring items first quarter 2023, non-GAAP SG&A expense was $23 $9 million.
Net income for the first quarter of 2023 was $5 8 million or <unk> 44 per basic and diluted share compared to net income of $44 $1 million.
Or $3 47 per basic and $3 41 per diluted share in the prior year quarter.
Adjusted non-GAAP net income for the first quarter of 2023 was $16 5 million or $1 27.
Our basic and $1 26.
Per diluted share compared to adjusted non-GAAP net income of $52 2 million or $4 10 per basic and $4 <unk> per diluted share in the prior year quarter.
Our adjusted non-GAAP EBITDA was $22 $3 million for the first quarter of 2023.
For a full reconciliation of non-GAAP measures to the most comparable GAAP measures. Please see the tables at the end of our earnings press release.
As of March 31, 2023, the company had $21 $9 million in cash and cash equivalents $115 million in net accounts receivable and $77 5 million in outstanding debt.
With that I'll ask the operator to please open the call for questions.
Operator, Please go ahead.
Yeah.
Thank you at this time, we will open the floor for questions. If you would like to ask a question. Please press the star and one on your Touchtone phone you.
You may remove yourself from the queue at any time by pressing star two.
Once again that is star one to ask a question.
Our first question will come from.
Sorry, our first question comes from Tim Lugo with William Blair.
Hey, guys. This is lachlan on for Tim Thanks for taking my question and congratulation on the strong quarter.
The announcement for securing the financing for the deal and where you are in that stage just curious on the rationale for announcing that now rather than.
Wait until everything is fully signed sealed and delivered.
And then Brian on that just wanted to check if the guidance you guys provided earlier in the year included any consideration for BD.
Alright, So let me thanks for the question, let me pick up the why say something now it's just simple we're working hard at it we've been speaking about the potential of an acquisition for.
A number of quarters now, we're just very deliberate in our actions and very selective about what we do.
But we are moving forward as aggressively as we can to find the right opportunity and this was just a sign that we take the business development and the M&A actions seriously and we are lining up lenders. So we're in a position to transact as soon as practical.
Sure.
In terms of the guidance, Brian you have anything to add sure yes, our guidance does not contemplate the completion and integration of any M&A, but it does have it does have a sliver of it.
<unk> will work in our G&A naturally since we've been doing that for <unk>.
For over a year.
Got it thanks that's helpful.
And I guess.
Ahead of land deal to do so.
Scott just curious about the sort of what we should be expecting to launch timing.
And just sort of let the sales team loose would that immediately.
Will you be spending a couple of quarters trying to gain access before.
Sort of take it out into the field.
Yes.
Great point, depending on the timing of the approval, we wind up with an approval that could be happening going into the summer months and probably launching a drug.
Into the summer isn't the most effective.
Way to handle it, especially considering that we're so pleased with the traction we're starting to get with the two acacia products.
Again small base, but this was only the really the first quarter. It's the last two quarters that we've had the full territories and everybody at full strength and we picked up to 32% growth in the Acacia products, you don't want anything to get into way launching land deal. All so we're probably better off waiting a little bit get.
A couple more quarters with the Acacia products and not trying to launch something in the middle of the summertime.
Yes.
Got it thanks for the color I appreciate it.
Welcome.
Okay.
Thank you. Our next question comes from Brandon Folkes with Cantor Fitzgerald.
Hi, Thanks for taking my questions and congratulations on the very strong quarter.
Maybe firstly just unpin fixie.
Can you talk about any sort of benefits in <unk> 'twenty three that may not suggest for the rest of the year.
Any one time as well how should we think about the cadence of quarters in 2023, and then along those lines. It seems like the generic arbitrage is pretty well behind us yet so just is that.
King.
I'll ask a question please pass them add ons.
Yes, Brian So <unk> is really shaping up to be really wonderful for us going from the 6% share in Q4 to where we are right now at 15% is really very encouraging my guess is as we stated today based on how we see the trends running speaking to our.
Customers and just watching this all unfold fold that that 15% is going to just continue throughout the year to grow.
How high it goes it's just too difficult to predict right now but with the.
Just shy of $23 million, we had in Q1 relative.
Relative to the $67 million that we sold in.
All of last year.
Our forecast that we will sell more than last year's numbers in 'twenty. Three is probably looking pretty good there's always ins and outs you can predict in pricing and inventory levels, but we would expect with what we're seeing now is that $67 million number for the year.
<unk> looked in pretty darn good we're pretty pleased about the $15 million, we spent to buy back that first $85 million of profit. So our expectation is that the share is just going to continue to grow and we're a pretty good place for the year as it relates to <unk>.
Couldn't be more pleased with the <unk> launch is going.
Alright, thanks very much.
Changing speed to buy him system by Sabre.
Can you just provide any feedback you're getting from the field.
Should we think about these going forward is it just sort of a normal kind of hospital type launch where it just sort of takes a bit of time or kind of any color. You can provide there in terms of how should we think about.
Maybe the sales ramp.
Brandon.
<unk> asked that question I would tell you from our standpoint here internally. We're more excited about these two products than we were when we made the acquisition a.
A year ago, the feedback that we're getting is really been tremendous from the users of the product the nurses and the physicians and the feedback we're getting from those two groups by the way the patients feel.
The products.
As we all know there is a ramp process that goes through to be able to establish these products in the hospital.
And we're really I mean, we're extremely pleased with the trajectory so far.
32% growth in a quarter, we expect that that market share that growth to just continue the feedback has been really just wonderful.
Doing a lot the J code helps.
I think we're just going to have nice steady ramp out through time and remember these products are both protected into the early <unk>. So we have plenty of time and it's going well we have Dr. Greenberg with US who is much closer with the physicians and the nurses that we speak to Mike maybe you want to say a couple of short comments about what you are hearing about the two products.
Just got it thank you.
Just like to reiterate the feedback that you shared.
Excuse me on the medical affairs side, we've been hearing.
Exactly the same exactly the same thing so regarding our emphasis.
We're starting to see some real world evidence percolate into meetings and being published that data echoes what we have seen in our pivotal trials and in fact in some cases surpass does it. So this is a job that's really seem to be over delivering at this point at least to a certain extent on the <unk> side.
It's a great increase in accounts that are using <unk> as well and again the feedback has been extraordinary helping patient throughput patients are.
Our being sedated for their procedures more rapidly waking up alert and moving on to the very high level of satisfaction in both the health care providers and for the patients and medical Affairs team is really excited about these products and some of the south side of the sales team.
So in conclusion, Brandon I would say that we're just expecting nice steady growth over the next several years.
Many quarters.
It compounds and if you just keep having really nice solid growth like this quarter after quarter after quarter. After quarter, you can see where these two products build in a relatively short period of time and what we've been stating is we project where the company is going.
Fortunately the products that we sell today are doing rather well another strong quarter we've had.
Several strong quarters of performance now with the products that we sell.
<unk> 23 is probably going to be another very strong year for the company that gives us time to build the foundation of our hemp system by favor and you can just see if this growth continues by the time, we get to 24%, 25% in 2006 and these products could start to be a very significant portion of our earnings and our growth. So.
So far less than a year into the acquisition recently, having all the territories at full strength.
We're pretty excited and pleased.
About where we are so far and where we're going.
Alright, Thanks, and one more if I may just a clarifying question on the prior question.
We can talk about the fact that you're working with lenders for an acquisition does this imply you have a target that you're ready to move on right now or are you subject to the financing or are you just trying to line up the financing. So you can move quickly when you do find a suitable targets I mean, that's it for me. Thank you.
Yes, there's not much more brand and we can say about that other than the fact that we've been talking about it for a while and this is just trying to convey to everybody that we are working diligently and we're very focused we believe we're in a very unique situation.
As the industry starts to unfold.
<unk>.
If we just take a step back when we acquired Acacia there were 70 people in that organization.
And we were able to.
Just run that business with 20, not the full 70 that they had and the way we've built our infrastructure here at Eagle and the way we've prudently managed our cash in our balance sheet.
We believe that we can make a very significant acquisition relative to our size and have similar reduction in.
And cost and so we can probably taken another large product probably more in the oncology space than the hospital space right now and probably.
Bring in a really.
Tremendous amount of synergy when we bring.
We bring the company into the organization and its a unique situation that we find ourselves in one having the infrastructure to be able to take advantage of the synergy and two having the financial wherewithal to make a rather large accretive.
Situations and so based on the historical.
Historical.
Positive situation, we find ourselves in right now having those factors come together, we have to be aggressive we need to take advantage of it.
It's an opportunity we can't pass for our shareholders and so we're very focused.
I'll just have to see how things unfold over time here, but the messages. We do take this seriously and we are trying our best to be able to bring.
Our company into equal and take advantage of all of this.
Alright, Thank you very much.
Thank you once again, if you would like to ask a question. Please press star one at this time.
Our next question will come from David <unk> with <unk>.
Piper Sandler.
Thanks, So just a couple can you.
Size up the opportunity for Atlanta all in.
More interested in particular, how you think about initial the initial ramp here.
So that's number one number two is.
I know, there's a lot you can't say, but can you about the acquisition.
Or what Youre contemplating, but I guess the question here is just thinking more broadly are you still very much wedded.
To the hospital space, given just the financial pressures that we're seeing in this space.
You want to think more expansively about the business or is this mainly just hospital focused thank you yes.
Yes, David Thank you for all of that let's take the second question first and talk a little bit more about the acquisition.
We just spent a lot of time speaking about the our hemp system by favorable situation and it does it takes a lot of effort.
And we're very pleased with the ramp and we have the hospital business that I would call more saturated right now because we do have the two products that we are in launch mode for and then as you bring up and your first question.
Have the land deal all situation coming up once it's approved and so I would say, it's probably more likely that an acquisition that we make in the short term would fall more in the oncology space than it would in the hospital space.
Mostly.
Oncology business right now is just a wonderful place to be in the country. We think we can help a number of patients and at the same time help our shareholders, but it's the oncology side of our business, where we have so much room from an infrastructure standpoint, I think if I can try to ask.
Blaine this.
The clearest way I can we can probably bring a significant oncology product into our company right now without needing a heck of a lot of additional expense I don't mean direct marketing from that standpoint, but the infrastructure that we have could probably support.
<unk>, a large oncology product with.
With a minimal amount of additional spending and so that's the situation we need to take advantage of so if we're able to do what we're hoping to do it's likely it's more likely to be on the oncology side in the hospital side right now and that goes into your land deal. All question right. We'll launch it will ramp as the way these.
<unk>.
Work and it'll be the same type of ramp that you normally see in the hospital space It'll just fortify what we have we will see how that goes in.
But we are very concentrated right now in oncology.
Okay. That's helpful. Thank you.
Thank you.
Thank you we have no further questions in queue. At this time I will now turn the call back over to Scott tariff for any additional or closing remarks.
Well, thank you everyone for joining the call today.
Clearly obviously, we believe we're poised for another solid year in 2003, we look forward to updating you as we advance our business plans.
I think we have really very strong vision of the future, let's see how it unfolds and as always we appreciate your ongoing support for Eagle.
Thank you everybody and stay well.
This concludes today's call. Thank you for your participation you may disconnect at any time.
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