Q2 2019 Earnings Call

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And he won 11 is in process, including R&D, enabling toxicology work and generation of PK data, we believe it will be eligible for new chemical entity exclusivity.

As for Exertional heat stroke, we continue to engage with the FDA and I will update you. When we have more to share. We believe we are getting closer to being able to provide you with a more definite update and in addition, we are currently evaluating two additional indications for Ryanodex and we'll update you on those in due time.

We should have more clarity regarding have vexing invasive breast and shortly.

As I have mentioned regularly we expect that we will be able to model monetize these assets, adding significant value to our business collectively annualized second quarter reported revenues for the branded reference products approach $2 billion as to products continue to grow.

You can understand why we believe these to be very significant opportunities for us.

We are hopeful that we will prevail in our Pan Sexy litigation, we anticipate going to trial in the autumn of 2019, and the 30 month stay expires February of 2020 in 2018, Lilly's Olympus sales totaled 1.2 billion in the US for the first half of 2019 Lilly reported $624 million at Lemaitre sales.

Reflecting 18% growth over the prior year period. We're also very excited about our vasopressin opportunity in 2018 Endos basis strict sales totaled $454 million in the United States and Endo reported $255 million in the first half of 2019, reflecting 15% growth over the prior year period. The trial is set for May 2020, and the 30 month stay there expires October of 2020.

Last quarter I outlined our growth strategy predicated on leveraging defend that must mean platform to invest in the development of our pipeline I hope you share our enthusiasm for the products discussed today and look forward to reporting continued progress in our pipe.

With that I'll turn the call over to Pete to review the second quarter financial results Pete.

Thank you Scott.

In the second quarter of 2019 total revenue was $56.7 million compared to $59.3 million in Q2 of 2018.

Product sales during the second quarter were up 28% year over year.

Totaling $29.4 million compared to $23 million largely due to lower upsell.

Perhaps or product sales were $15.4 million in the second quarter.

Compared to $8.1 million in Q2 of 2018.

And $3.2 million in Q1 of 2019.

Deal recognizes go Rob so revenue on shipments by Eagle to wholesales.

The dramatic sequential growth in second quarter 2019, Bell wraps, our revenue was likely due to a drawdown of trade inventory levels through the first quarter.

In advance of the June cut over to the branded name.

Based on IMS data Eagles market share of Bendamustine wholesale shipments to end users was 7% of the U.S spend and multi market in the second quarter.

We expect to continue capturing additional market share.

However, as you know Eagle Bulks revenue based on ex factory shipments to wholesalers and we expect a sequential drop in Threeq you are up to revenue.

Second quarter rent index product sales were $2.9 million compared to $7.2 million in Q2 of 2018.

Right. It takes market share in the second quarter was 32% of normalized unit terms.

And 54% share of dolls.

As you know our orders are driven primarily by the expertise cycle.

Very few customers will acquire dantrolene Lester stock is expiring.

Fortunately, we have 408 customers engaging a new business during the quarter, which is an increase over the 289 customers engaged in new business during the prior quarter.

We anticipate the next two quarters will be low and expertise with an expected uptick in 2020.

Due to royalty revenue was $27.3 million compared to $36.3 million in the prior year quarter.

Bendeka royalties for $26.5 million compared to $34.7 million in the second quarter of 2018.

Q2, Bendeka royalty revenue was negatively impacted by pricing trends.

As a reminder, under the terms of the revised licensing agreement beginning on October one 2019 Eagles royalty payment on Bendeka will increase from 25% to 30%.

The royalty rate will increase by one percentage point on each anniversary of October one 2019 delivery just 32%.

And it will remain at 32% thereafter.

In 2019, we expect our opto sales to increase year over year and rent in ryanodex sales to be down year over year due to the expiry cycle.

Gross margin was 62% during the second quarter of 2019 as compared to 69% of the second quarter 2018.

The compression in gross margin in the second quarter of 218 was primarily driven by an increase in bendeka product sales to a marketing partner.

On which eagle earns no profit.

On the expense front R&D expenses were $9 million for the quarter.

Compared to $15.3 million in the prior year quarter.

The second quarter year over year decrease reflects a substantial reduction in full this turn expenses, partially offset by the costs to bring vasopressin tomorrow.

Excluding stock based compensation and other non cash and nonrecurring items R&D expense during the second quarter was $7.8 million.

We are reiterating expense guidance with expected 2019, R&D spend on a non-GAAP basis of $32 million to $36 million as compared to $38 million in 2018.

As Gina expenses in the second quarter of 2019 increased to $17.2 million compared to $16 million in the second quarter of 2018.

External legal expenses associated with litigation on Penn taxi, vasopressin, and Bendamustine and higher stock comp expense accounted for the year over year increase.

Excluding stock based compensation and other non cash and nonrecurring items second quarter 2019, as China expense was $12.4 million.

We reiterate our SG and ate spend in 2019 on a non-GAAP basis will be 51% to 51 $54 million as compared to $43 million in 2018.

The year over year increase is largely attributable to increased levels of external legal expense as well as higher sales and marketing payroll.

We remain on track with our anticipated spend in 2019 and expect the second half of the year to be in line with our plan.

Net income for the second quarter was $6.7 million or 49 cents per basic and 48 cents per diluted share.

Compared to net income of $2.7 million or 18 cents per basic and 17 cents per diluted share in the prior year period due to the factors discussed above.

Adjusted non-GAAP net income for the second quarter of 2019 was $11.8 million.

Or 86 cents per basic and 84 cents per diluted share.

Compared to adjusted non-GAAP net income of $14.7 million or 99 cents per basic and 95 cents per diluted share in the prior year quarter.

For a full reconciliation of non-GAAP net income to the most comparable GAAP financial measures.

Please see the tables at the end of our press release.

Our EBITDA for the second quarter of 2019 was $15.5 million compared to $15.9 million in the prior year quarter.

First half 2019, EBITDA was $34.3 million compared to $25.5 million in the first half of 2018.

First half 2019 cash flow from operations, excluding shifts and receivables.

Was $42.4 million compared to $26.2 million in the first half of 2018.

For the 12 months ended June 32019, EBITDA was $80.2 million.

Cash flow from operations, excluding shifts in receivables was $81.3 million.

During the second quarter, we completed $15 million of share repurchases as part of our share repurchase program.

Since August 2016, we have repurchased $169 million in stock.

As of June 32019, the company at $108.1 million in cash and cash equivalents.

And $60.3 million in net accounts receivable.

$37.6 million of which was due from Teva.

The company had $41.3 million in outstanding debt.

Therefore as of June 32019, the company had net cash plus receivables of $127.2 million.

With that I'd like to open the call for questions.

Operator. Please go ahead and open the line for questions.

And at this time, if you'd like to ask a question. Please press star one on your Touchtone phone you can remove yourself from the queue by pressing the pound key.

Once again star one on your Touchtone.

We'll pause a moment to allow questions to queue.

And we'll take our first question from Randall Stanicky with RBC capital markets. Please go ahead.

Hi, Good morning. This session are you on for Randall.

Scott on Aegis I know you mentioned in your prepared remarks that you are getting closer to giving a more definitive update.

But can you just confirm that you had the meeting with the FDA as expected in June and whether you've received are meeting minutes yet.

Yeah, Hey, Ashley it's good to hear from yeah. The the best way to describe as we've been in dialog regularly with.

F.D.A. on Exertional heat stroke.

And we're in the middle that dialogue now and.

I think there's good given take in theirs.

Been just good strong dialogue and.

I feel that we're getting closer to having a resolution to the path forward and as soon as we have little bit more information, we'll make sure everybody knows.

Okay, and then just on full strength you've mentioned the potential for.

Improved efficacy for the new formulation can you give us a little bit more granularity around that and just what gives you confidence around the new formulation than proved profile kind of relative to the prior one.

And do you still expect a safety benefit as well.

Yeah. Thank you. Good question look the best way I think to try to explain all of this is that you know the product that we're speaking about today is drastically different than the product we set out to develop the first time and so this is not what we set out to develop.

We started on a drug that we thought would have more safety.

We still believe that the new formulation that we have will have many of those same positive safety profiles that we set out to develop.

But if the great part of our industry until we.

We gave our drug to 600 patients over the course of about 140 days, we couldn't tell what was transpiring within.

Individuals and after taking a long look at in a deep dive into the data.

We've come to the conclusion that.

Due to the unique nature of our drug we can potentially have better saturation openings estrogen receptors, which is so critical to the outcomes and the benefits of these patients. We took our data and we went to FDIC, we met with them twice and we're all very excited about it based on what we saw the first time, we've made changes to our formulation that weve reviewed with the division and we now have for the most part an agreed upon path forward.

We're seeing really good positive data in a correlation between that first clinical trial that we did and the lab work that we're doing now.

Well ultimately tested in this pilot study and if we have a correlation between the first study the changes we've made in the lab in the lab work. We're seeing now if we see that and people then we'll really have confidence that we are right. We'll go ahead and start that pivotal study, which we think will only take about a year to complete.

And that's really where we are a bit but having greater estrogen receptor activity could have a dramatic benefit to these.

For these patients.

Right. If you remember it was 300 patients in the for the brand and 300 patients for our product that's a lot of data to look at.

And with the changes that we've made in from advice from the FDA, we're pretty confident let's get this pilot done than the low for certain.

Okay and then during your discussion with the agency was there any sort of high level disability around what the pearsall could look like.

I know that it will be dependent on the results of the pilot but.

Just any sense for us it will be a let's say like a similar size as the prior 600 subject study.

Any any other detail.

Yes, we have I would say for the most part and understanding and agreement of what needs to happen drug to the market.

It's been two very good meetings that we've had with them as far as size goes we'll have to see the pilot study, but I, but the expectation today keep in mind it might change, but the expectation today. The next study will be considerably smaller than the first one.

I don't think Theres any reason now that we've looked at it that we'll need that many subjects. It will be small enough that we will be able to recruit.

Within a year if you remember last time, we were recruiting at a rate of about 25 subjects a week.

So, let's see what happens but to answer the question it'll it'll just be a much smaller study.

Got it thank you.

Thank you.

Our next question comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead.

Hi, Thanks for taking my questions and maybe just following on from the prior question in the pivotal I know you've talked about the improved efficacy but.

Pat do you actually plan to power this to show superiority.

No great question.

Brandon I don't think that is going to be a requirement of the study.

We will get the medical team to give regular updates now after this call going forward can give more details of it but the the objective. This study will be to determine if there is more full the strand being attached to the estrogen receptors.

Okay. Great then maybe just unveiled price and you called out the R&D costs.

In your press release can you provide some color on the work which needs to be done to get this product to market.

From what what standpoint and from an R&D standpoint.

For Vasopressin correct, Yeah, well, we're just we're just doing all the activity that typically takes place.

To get the drug filed we did have request from the FDA for some more data that we're in the middle of completing.

You know we feel.

Quite confident that we will.

You know do that work in the normal course of activity in the normal timing and have our approval and plenty of time to get to the market.

Okay Fantastic and then lastly, maybe and can you just provide some color around the increased product sales to Teva in the quarter I know they called out both reps are taking share from bendeka on Nicole So I'm just interested in when it was stocking on various idle any color around that increase thank you.

Yes, Hi, Brandon it's Pete.

As you know we book revenue on Bendeka product sales when we shipped two.

Which is not necessarily.

Consistent with Teva shipping to wholesalers and obviously the latter triggers the the revenue going to Teva and then triggers the royalty revenue to us and so there is some lumpiness in the shipments.

To Teva and Thats why.

We decided to just make a note of that in our conversation. This morning, because obviously the product sales are not intended to have a margin. They don't have the money. So an overall did compress the gross margin of the company.

Temporarily.

Great. Thank you very much.

And as a reminder, it is star one on your Touchtone phone for questions.

We can go next to Tim Lugo with William Blair. Please go ahead.

Hi, This is lot going on for Tim Thanks for taking the questions I guess first of all.

What are your market share expectations going forward for Bell, Rob. So I've spent back up if they changed at all since the introduction of the rapid build out so.

And second of all can you just comment more on the pricing environment that led to the decrease in Bendeka royalties.

Do you see that as a trend change or something that's that's likely to continue how do you see any similar pressure.

With ryanodex. Thanks.

Thanks, a lot from this is Dave so on the the market share. We look it's been a little volatile you see the same data we see on I am as obviously, we see.

On a daily basis, the pull through to customers, but I would say the IMS data is reasonably accurate and so there's been some volatility around that.

As we continue to to compete in the marketplace.

We do think that our market share will expand from where you saw in the second quarter.

But.

I guess I wouldn't comment any further.

On that topic at the moment.

And on the topic of pricing on Bendeka pricing our data source is the same as yours.

We don't have insight obviously.

To to the pricing on Bendeka. So we look at RMS for Bendeka priced the same as you do and there has been some compression.

Since the launch of a big bag perhaps.

That's not surprising but.

What we've seen is an erosion in the.

The Imus, NSP, which approximates a ASP.

About 10% since the launch of our product.

Great. Thanks.

Oh.

And it appears we have no further questions at this time I'll return the floor to Scott tariff for any additional remarks.

Well. Thank you everyone. Thank for attending taking the time I know everybody is very busy these days.

Exciting first half boars.

Really excited about the pipeline, it's coming together, rather well and we're looking forward to having this call joining another 90 days ago.

Reporting more progress.

Thanks again I appreciate it we all appreciate it.

And this will conclude Eagle Pharmaceuticals second quarter 2019 earnings results Conference call. You may now disconnect and have a great day.

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