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spk03: The conference will begin shortly. To raise your hand during Q&A, you can dial star 1 1. Good day, and thank you for standing by. Welcome to the Mountain Court Third Quarter Earnings Annual Announcement. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask the question during the session, you need to press star 11 on your telephone. I would now like to hand the conference over to your speaker for today. Dan Special, you may begin.
spk00: Thanks, Tawanda. Good morning, everyone, and thank you for joining us. With me this morning are Siggy Olofsson, Molinecraft's President and CEO, and Brian Reason, CFO. Before I turn the call over to Siggy, let me remind you that you'll hear us make some forward-looking statements, and it's possible that actual results could be materially different from our stated expectations. Please note we assume no obligation to update these forward-looking statements, even if actual results or future expectations change materially. We encourage you to refer to the cautionary statements contained in our SEC filings for a more in-depth explanation of the inherent limitations of such forward-looking statements. We will also provide selected non-GAAP-adjusted measures related to our financial performance. A reconciliation of these non-GAAP measures is included in our earnings release, which can be found on our website, mylandcrop.com. We use our website as a channel to distribute important and time-critical company information, and you should look to the investor relations page of our website for this information. As noted in our earnings release, our third quarter ended on September 30, 2022, And the comparator period we will be discussing this morning is the predecessor quarter ended September 24, 2021. As a result of the application of Fresh Start Accounting, the company's GAAP financial statements for the periods prior to June 16, 2022 may not be comparable to those periods subsequent to June 16, 2022. Further, unless otherwise specified, the net sales percentage changes we discussed this morning will be on a constant currency basis. With respect to our results, we generated $166 million of adjusted EBITDA on the quarter, and we are pleased to reaffirm our 2022 guidance for both net sales and adjusted EBITDA, where we anticipate adjusted EBITDA will be between $630 million and $660 million for the year. With that, I'll turn the call over to Sigi. Sigi?
spk01: Thanks, Dan, and good morning, everyone. I'm pleased to speak with you today about the steady progress Marlin Cross made in the third quarter. Our teams have remained keenly focused on executing the strategic priorities we discussed last quarter, strengthening the balance sheet, stabilizing our portfolio, and making the right investment in our pipeline. These efforts are reflected in the solid results we are hearing today. Importantly, we are progressing as we expected and accordingly reaffirming our full year 2022 guidance. When we have our last call, I have just joined Malincross, so I'd like to start with a high-level observation. My first full quarter as a CEO reinforced my confidence in Malincross and the ability of our talented employees to build a great business focused on improving the lives of patients. While I know we have more work to do this quarter, was pivotal in developing a clear understanding of the challenges and opportunities ahead. 2023 will be an important year for Malecon, and I believe we have the right plan in place to move forward successfully. With that, I'll highlight some of the steps we took to strengthen the organization during third quarter, and then we'll dive into the financial results. From a leadership perspective, we have a deep commercial expertise with the appointment of Lisa French as Chief Commercial Officer. Lisa spent more than 30 years at Merck and Organon in commercial roles, and her decades of experience will be instrumental as we continue advancing our branded pipeline, bringing existing products to new geographies and launching new products, including Televars and Stratagraph. In addition, Henrietta Nielsen joined Malincroft as Chief Transformation Officer. This newly created role focuses on acquiring and retaining key talent, enhancing our communications, human resources, and employee-related functions, and further building on Malincroft's ESG program. It is great to be reunited with Henrietta as we previously worked together at Hikma Pharmaceuticals and she has already started to do some great work here. We also appointed a number of key internal leaders to our Executive Committee, including Mark Tintle, Chief Legal Officer and Corporate Secretary, Jason Goodson, Head of Corporate Development, Cassie Harrell, Chief Compliance Officer, and Stephen Wells, Head of Specialty Generics. These promotions underscore the deep bench of talent we have at Malincott, and ensure leadership continuity across parts of the business. At the board level, we welcome Karen Ling and Susan Silberman as new independent directors. Karen brings decades of experience in human resources and organizational transformation, and Susan's appointment follows her 34-year career advices. I'm pleased that in addition to bringing relevant experience, these new leaders and directors significantly enhance our diversity, reflecting our efforts to promote diversity and inclusion at all levels of our organization. Turning to the progress we achieved in the business during the third quarter, we'll begin with specialty brands. We are encouraged to see early signs of demand stabilization for ACT-RDL and performance in the quarter was consistent with our expectations. Looking ahead, our objectives for ACT-RDL are stabilizing patient demand, increasing access and affordability, and differentiating ACT-RDL versus new market entrants. We intend to do this through lifecycle innovation, investments, optimizing our resources, and addressing access and affordability through our dedicated patient and provider support team and services. Turning to our ACTA next-generation delivery device, if approved, would be an easier and more patient-friendly version of ACTA GEL for single-unit dosage indication. As we said last quarter, device development has been completed, and we are ready to proceed with submissions. However, a regulatory matter involving one of our partners remains ongoing. As a result, we do not anticipate a launch in 2023. We will continue to provide updates as our partner works towards a resolution. TELIWAS received FDA approval in September ahead of our December PEDUVA date. This was a significant milestone for Malicron. TELIWAS is the first and only FDA-approved treatment for adults with hepatorenal syndrome, or HRS, with rapid reduction in kidney function. We formally launched TURLiWAS ahead of schedule, and product is now shipping out. We are incredibly excited to bring TURLiWAS to U.S. patients and physicians who have historically had very limited treatment intervention for HRS. Diagnosing and treating HRS can be challenging, and time is of the essence when managing patients who have it. We are very pleased to provide physicians in the US with this important option. This approval reflects our organization-wide focus on delivering for underserved patients and their caregivers, and the intensity with which we are working to achieve our goals. As Teluas received an orphan drug designation from the FDA, Marlin Cross holds a seven-year exclusivity period for this therapy. With the product officially launched, our focus now shifts to working with the pharmacy and therapeutic committees in the hospitals as they make formulary decisions for the product, while we continue to raise awareness with doctors. Turning to Inomax, its strong brand recognition and our superior customer service and technology have enabled this product to remain a leader in the inhaled nitric oxide market, despite continued competitive pressures. While this led to a lower net sale in the U.S. this quarter, we are pleased to see a strong net sale in the Japanese market. We also might strive towards our planned 2023 launch of Inomax Evolve, the next-generation delivery system of INAMAX. In September, we submitted a 510K pre-market notification application to the FDA for Evolve. Consistent with its review process, the FDA asked us to provide summary tables of certain submitted data, and we look forward to submitting that information later this month. Next, Theracosm. Performance in the quarter was in line with recent trends. Feedback from clinicians suggests an expectation that stem cell transplant procedures volume will recover from the decline that occurred during the early 2022 COVID-19 case surge in hospitals. We believe this will result in a recovery in a non-promoted graft versus host disease use for Theracost as we enter 2023 and sequential year-over-year volume growth for the brand. For Stratagraph, we made inroads on informing burn surgeons and physicians of this new and innovative treatment options for adults with deep pantheon thickness burns. As we discussed last quarter, we expected ethics to be slow, given that this product is a paradigm shift for burn surgeons accustomed to autography. We have now presented to surgeons in approximately 60% of the burn centers in the U.S. We know from those conversations that there is a real excitement in the medical community about this additional treatment option. We are focused on ramping adoptions, and although progress has been slower than we like to see, We are confident that we will continue to raise awareness and availability across the U.S. with increased adoption to follow. Performance of Amitiza was down this quarter due to competition from authorized generics in the U.S. and volatility in the Japanese yen. As we move to 2023, we will lose the royalty associated with the U.S. market accordingly our focus for Ametiza is shifting to the Japanese market, where we see continued strong utilization and their exclusivity extends to 2026. Switching gears to our specialty generic segment, I'm pleased to report that we achieved a strong year-over-year growth on top and bottom lines. This was primarily driven by the growth of the APAP business and ADHD products. We benefited from a favorable competitive position and will continue to protect the bottom line here as we improve supply and inventory levels, evaluate pricing, and continue advancing near-term pipeline opportunities. Lastly, I want to emphasize that we continue to optimize the cost structure of the business during the quarter. As we move forward, reducing costs and spending wisely remains an important priority. We are working to proactively manage our balance sheet while continuing to invest in the company's core drivers. Our long-term goal remains achieving sustainable growth and profitability. I also want to be clear about the challenges and opportunities we have ahead in 2023. This includes January competition for Amethyza, continued spend on telewares and Stratagraph promotion, and seeking to bring INOMAX Evolve to market. That said, we have good visibility into these challenges and we remain confident in the outlook for the business over the long term, with our performance meeting our expectations so far. We are going to be aggressive in executing on our strategic priorities. With that, I'll turn it over to Brian to discuss our third quarter financial results.
spk02: Thank you, Siggy. First, I'm pleased to reiterate that Mellon Crowd is now actively traded on a national exchange. We're excited to be a member of the NYSE American under the ticker symbol MNK and feel this will provide us additional liquidity and enhanced access for our shareholders. Turning our results. Mellon Crop's total net sales in the third quarter of 2022 were $465 million, compared to $507 million in the third quarter of 2021, a decrease of 7.5%, which were largely in line with our expectations. Our specialty brand segment reported net sales of $304 million, as compared to $360 million, a 14.7% decrease primarily due to competition across the portfolio, continued scrutiny on overall specialty pharmaceutical spending, and the continued stabilization of the market post-COVID-19. During the quarter, Axargel contributed $126 million in net sales, which was consistent with our expectations and underscores our confidence that the asset provides approximately $500 million in net sales in 2022. In our critical care products, Inomax declined 18% due to the continued impact of competition in the market. We look forward to bringing the next generation device to market, which will further differentiate our product offering from the competition. Theracose declined by roughly 3%, driven by lower stem cell transplants and new oral therapies for GVHD. As Siggy mentioned, we expect stem cell transplant volume to recover, driving sequential growth as we move into 2023. Ametiza net sales declined 25% in the quarter, driven in the U.S. by pressure from an authorized generic introduced last year, and in Japan by the volatility of the yen. We expect to lose roughly 75 million in net sales in 2023, due to the loss of the U.S. Royalty with Endo as the market fully converts to a generic marketplace with multiple entries. Turning to our special generic segment, we reported net sales of 162 million as compared to 148 million, a 9.9% increase as both the API and generic business saw strong growth in the quarter. The API rebound was driven by growth in the APAP business as we continue to run these plants at full capacity to meet demand. We typically see variability from quarter to quarter due to order patterns and scheduled plant shutdowns, which is expected to impact the fourth quarter. On the dosage side, we saw strong performances in ADHD products. The company's net loss for the third quarter was $285 million, as compared to a net loss of $264 million. Diluted loss per share for the third quarter was $21.58, with adjusted diluted earnings per share of $5.25. Mellancroft's adjusted EBITDA was $166 million in the quarter, as compared to $186 million, a decrease of 10.6%. This was primarily due to lower net sales and increased expenses associated with the launch of Stratagraph and Turlevaz, which were partially offset by other reductions in SG&A and R&D expenses as the company continues to undertake actions to improve its overall cost structure to help offset declines in the branded portfolio. With respect to operating metrics in the quarter, adjusted gross profit as a percentage of net sales was 64.3%, driven by product mix. Adjusted SG&A as a percentage of net sales was 25.2%, which is influenced by the investment in launches of Turleves and Stratagraph and unfavorable FX rates, offset by continued savings from cost containment measures and organization changes. And R&D as a percentage of net sales was 6.1%. The company ended the quarter with roughly $590 million of liquidity as we maintain cash and cash equivalent of 391 million and an undrawn $200 million accounts receivable credit facility. Total principal debt outstanding at the end of the third quarter was $3.584 billion with net debt of $3.193 billion. During the quarter and through the date of this call, we repurchased $20.1 million of second lien notes due in 2025 and 2029 below par, capturing $8.7 million of discounts. As Siggy indicated and as we stated last quarter, we anticipate the next 12 to 18 months to be the trough for the company from an adjusted EBITDA and cash flow perspective. as both of these are expected to decline in 2023 due primarily to the loss of the Ameteza U.S. royalty stream, investment in launches of Turlevaz and Stratagraph, and the planned launch of the next generation nitric oxide delivery device, IdomaxiVol. These items, coupled with a high cost of debt and structured settlement, make our focus on cost containment, strong cash management, and deleveraging the balance sheet even more important as we move forward. We remain very focused on our upcoming debt maturities and are committed to improving our balance sheet over time. We see improving our balance sheet as a key component to unlocking value for the organization. And these improvements can come in a variety of different paths, including repurchases of debt at a discount, as we did during the quarter, potential sale of non-core assets, execution and cash generation from the business, and potential refinancing transactions. Overall, I'm pleased with the execution of the business in the quarter and the steps we are taking to set up the company for a strong future. I'll hand the call back to Siggy for some closing remarks. Siggy?
spk01: Thank you, Brian. I want to reiterate my belief that Malincor today has a strong foundation underpinned by significant liquidity meaningful cash flows from operation, a solid U.S. commercial platform, and competitive positioning in critical care and immunology. Third quarter was my first full quarter as the company CEO, and it was gratifying to be able to really dig in and start to see our strategy play out. We have a high visibility into our headwinds and challenges ahead. and we remain committed to delivering on our goals and turning the business around. We are exactly where we said we would be last quarter and expect to deliver on our guidance for the full year. By executing on near-term priorities, continuing to re-energize our organization, and delivering for stakeholders, Malenkov has a strong future ahead, developing therapies designed to improve outcomes for patients. With that, we now open for Q&A.
spk03: Thank you. As a reminder, ladies and gentlemen, to ask the question, you will need to press star 11 on your telephone. That's star 11 to ask the question. Please stand by while we compile the Q&A roster.
spk04: Okay.
spk00: At this time, it appears that we don't have any questions, which we certainly appreciate and understand. Thanks, Siggy. Thanks to Wanda. Certainly appreciate your assistance this morning, and obviously thanks to all of you that are on the call and the interest that you guys have shown in the company. We certainly look forward to engaging with you guys in the coming days and weeks ahead, and obviously if you have any questions today throughout the process, please reach out to Derek or myself, and we'll get back to you guys as soon as possible. All the best to you and your families, and have a nice day. Thank you.
spk03: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
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