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spk01: Good day, everyone, and welcome to the first quarter 2022 call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-answer session. You may register to ask a question at any time by pressing the star and 1 on your touchtone phone. I will be standing by should you need any assistance. Please note, this call may be recorded. It is now my pleasure to turn today's program over to Lisa Wilson, Investor Relations for A&I.
spk02: Thank you, Emma. Welcome to ANI Pharmaceuticals Q1 2022 Earnings Results Call. This is Lisa Wilson, Investor Relations for ANI. With me on today's call are Nikhil Lalwani, President and Chief Executive Officer, Steve Carey, Chief Financial Officer, and Chris Mutz, Head of Rare Disease of ANI. You can also access the webcast of this call through the Investor section of the ANI website at ANIFarmaceuticals.com. Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief, expectation, projection, forecast, anticipation, or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act. These forward-looking statements are based on information available to ANI Pharmaceuticals Management as of today and involve risks and uncertainties including those noted in our press release issued this morning and our filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. A&I specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. The archived webcast will be available for 30 days on our website, aandipharmaceuticals.com. For the benefit of those who may be listening to the replay or archived webcast, this call is held and recorded on May 10th, 2022. Since then, ANI may have made announcements related to the topics discussed, so please reference the company's most recent press releases and SEC filings. And with that, I'll turn the call over to Nikhil Lawani.
spk07: Thank you, Lisa. Good morning, everyone, and it's great to have you all join the ANI Pharmaceuticals call today. and for your interest in our company. We are looking forward to covering four key topics with you today. First, updating you on 2022 Q1 performance. Second, sharing what we have accomplished and where we are headed on key growth initiatives. Third, providing full year 2022 guidance for the total company. And finally, discussing the organization evolution to capture the opportunities that lie ahead for ANI. First, on quarterly performance, we delivered net revenues of $64.5 million in the first quarter of 2022, an increase of 18% year-over-year. As Steve will detail later, excluding the Yascarta royalty from prior year results, total net revenues would have increased nearly 49% year-over-year. This growth was driven by the acquisition of NVIDIA and the new product launches both from the ANI legacy business and the Novidium acquisition. During this quarter, we launched purified cortofan gel, the lead asset in our rare disease business, and began offering patients suffering from certain autoimmune conditions a choice in ACTH therapy. During the first quarter of the cortofan gel launch, we achieved 1.3 million in net revenues. Our adjusted non-GAAP EBITDA for the quarter was $4.3 million, and the year-on-year reduction in non-GAAP EBITDA was driven primarily by the approximately $11 million of cortofan launch-related SG&A. Now, let me share with you what we have accomplished and where we are headed on key growth initiatives. Our first initiative is to build a successful cortofan gel franchise, the lead asset of our rare disease business unit. On January 24, 2022, we announced the U.S. commercial availability and launch of purified cortofen gel. Cortofen gel has the potential to help patients with certain chronic autoimmune disorders, including acute exacerbations of multiple sclerosis and rheumatoid arthritis, and excess urinary protein due to nephrotic syndrome. Before the reintroduction of cortofen gel, and for over 20 years, patients had only one available ACTH treatment option. We are pleased with our progress since launch approximately 15 weeks ago, and much credit must be given to our world-class cross-functional and commercial teams, including a dedicated and experienced rare disease sales force. 95% of our sales territories are already filled, and our clinical account executives, i.e. sales force, have already reached almost 50% of targeted prescribers, and generated awareness of and interest in cortofan gel. Over 125 unique prescribers have initiated over 250 new patient cases for cortofan gel therapy since launch, with approximately 25% of the unique prescribers having enrolled more than one patient. Initial enrollments are distributed relatively evenly across our targeted specialties of rheumatology, neurology, and nephrology. Our launch trajectory has been strong, with growth in the number of new patient cases per week and reduction in the average time from new case initiation to patient dispense. Equally important, our market access efforts have resulted in formulary coverage for over 100 million lives for one or more FDA-approved indications and 16 million lives where we are advantaged. Our wholesale acquisition cost is approximately 23% lower than the wholesale acquisition cost of the only other ACTH therapy available. In addition, our patient services organization remains focused on establishing expanded access to cortofan gel for patients and their caregivers throughout the treatment journey. Finally, our sales performance in April and early May reflects the strong launch trajectory. We've made very good progress in such a short time, and we are pleased to issue 2022 revenue guidance for protrophin gel in the range of $35 million to $40 million. The next key growth initiative I will speak about is driving growth of our generics business by enhancing our R&D capability through the NVIDIA acquisition. The combined team has continued to execute well on ensuring continuity of business operations and capturing synergies from the combination. During the first quarter of 2022, we successfully launched several products with a total IQV market size of $240 million, and with the majority of these launches, such as Mesoprostol, Rifabutin, and Bisoprolol, having three or fewer competitors. Successful execution of these new launches helped counter the impact of business erosion. the pace and value of new launches to help drive growth for our generics business in the subsequent quarters. The R&D organization, under the leadership of Sami Shanmugam, continues to deliver with six new ANDA filings in Q1. In addition, the company retained its leadership in competitive generic therapy, CGT, approvals with securing the CGT approval of BTN and ADRA solutions. Today, ANI has over 20 ANDA files pending with the FDA and over 20 applications and multiple 505 products under development. The company remains focused on strengthening the product pipeline to further increase sustainability of our generics business. We have also made very good progress on driving efficiencies in our combined operations, procurement, and distribution. We will increase efforts in this area to further drive cost competitiveness. Next, I will turn to our established brands business. We are continuing to evaluate potential accretive asset acquisitions to capitalize on and augment our commercial and organizational capabilities. In parallel, we are maximizing the value of the current portfolio through innovative and fit-for-purpose commercialization strategies. ANI is well past the inflection point. and has invested significantly in organizational capability and leadership bandwidth to support our evolution towards becoming a leading biopharmaceutical company. Our rare disease leadership team, led by Chris Mutz, has experienced over 20 rare disease product launches, and nearly 75% of the sales team has won a President's Club or equivalent top 10 sales award in recent years. Our generic R&D team has a prolific track record of delivering limited competition new launches.
spk09: With that, let me turn it over to Steve to share the financial results and the full year total company guidance.
spk04: Thank you, Nikhil, and good morning to everyone on the call. As I review our first quarter financial results, please keep in mind that this was the first full quarter of NVIDIA operations in our consolidated results. In addition, it is the first quarter in which we are reflecting quattrofin sales and marketing costs in our non-GAAP profitability measures now that we are in the post-launch period. For the three months ended March 31st, 2022, we posted total net revenues of $64.5 million, up nearly $10 million or 18.3% as compared to the prior year period, driven by revenues from the NVIDIA acquisition and new product launches, tempered by the non-recurrence of a material royalty item that occurred in the first quarter of 2021. In total, the Navidium acquisition benefited net revenue comparisons by approximately $19.2 million across our generic pharmaceuticals, contract manufacturing, royalties, and product development services categories of revenues. This significant gain was somewhat offset by the non-recurrence of $11.2 million of royalty income recognized in the first quarter of 2021, resulting from the final Yes Carter-related royalties from Kite Pharma. Excluding the Yes Carter royalty from prior year results, total net revenues would have increased nearly 49% year-over-year. Net revenues for generic pharmaceutical products were $49.1 million during the three months ended March 31st, 2022, an increase of $16.1 million, or 49%, from $33 million in the prior year period. The net increase was principally driven by $15.7 million in revenues associated with the Novidium acquisition, as well as sales of Nobibilol, which A&I launched in September of 2022. I'm sorry, September of 2021. We also saw an increase in overall volumes in the generic segment as the market continued to recover from the COVID-related suppression experienced in 2020 and 2021. Net revenues for branded pharmaceutical products where $8.5 million during the three months ended March 31, 2022, an increase of 12% compared to the $7.5 million for the same period in 2021. The net increase was driven by modest increases in sales across several portfolio products, including those acquired from Sandoz and launched in April of 2021, and a shift in mix towards products with higher average selling prices. Contract manufacturing revenues were $2.9 million during the three months ended March 31st, 2022, an increase of 13% compared to the $2.6 million for the prior year period, due to an increase in the volume of orders, including $1.1 million of NVIDIA contract manufacturing revenues. Royalty and other revenues were $2.7 million during the three months ended March 31st, 2022, a decrease of $8.7 million from $11.4 million for the prior year period due to the aforementioned final royalty payment under the Kite Pharma License Agreement for Yaskarta that was recognized during the three months ended March 31st, 2021. Royalty and other revenues in the first quarter of 2022 consisted primarily of $1.9 million in royalty revenues related to Navidium arrangements, and $0.6 million in product development service revenues. Net revenues of rare disease pharmaceutical products consist entirely of sales of quertropin and totaled $1.3 million during the three months ended March 31, 2022. These recognized sales figures reflect the natural lag between new case initiation and the dispensing of a product that is inherent in the early days of a rare disease new product launch. Looking forward, we anticipate very strong quarter-over-quarter sequential growth during the remainder of the year. There were no sales of rare disease pharmaceutical products during the comparable prior year period. Operating expenses increased by 63% to $83.7 million for the three months ended March 31st, 2022, up from $51.5 million in the prior year period. Costs of sales, excluding depreciation and amortization, increased by $14.3 million to $34.3 million in the first quarter of 2022, compared to $20 million in the prior year period. primarily as a result of increased volumes, including $9.5 million of costs related to sales of Navidium products. The Navidium costs included $3.2 million charge, representing the excess of fair value over cost for inventory acquired in the business combination, partially offset by a decline in sales tied to profit-sharing arrangements. Excluding the impact of acquisition accounting and stock compensation, costs of sales on a non-GAAP basis as a percentage of total net revenues increased 10.4 points from 36.6% in the prior year to 47% in the current year period. This increase was driven by the non-recurrence of YesCarter royalties. which had no corresponding cost of goods sold and a higher mix of generic sales. Excluding Yascarta from the prior year calculation, cost of goods on a non-GAAP basis would have been approximately 46.1%, essentially flat with the current year. Research and development expenses increased to $5.3 million in the first quarter of 2022 from $3 million an increase of 78%, primarily due to the addition of Navidium costs, tempered by a decrease in expenses associated with the completion of our quatrophan development efforts. During the quarter, we filed six new ANDAs with the FDA on the strength of our R&D efforts. Selling, general, and administrative expenses increased by $11.2 million in the first quarter of 2022, to $28.8 million compared to $17.6 million in the comparable quarter in 2021. The increase primarily reflects an $11 million increase in sales and marketing expense related to the Core Trophin launch and $2.7 million of expenses primarily related to the addition of Navidium headcount and activities. partially offset by a decrease in transaction expenses related to the novidium acquisition. Depreciation and amortization expense was $14.6 million for the three months ended March 31, 2022, an increase of $3.7 million compared to $10.9 million for the same period in 2021. This decrease is primarily a result of amortization of intangible assets acquired in the Navidium transaction. Our $1.27 gap net loss per share reflects significant amortization and inventory step-up charges resulting from the Navidium acquisition, coupled with the sales and marketing expense behind our initial commercial launch of Chlorotrophin. As it relates to our non-GAAP profitability measures, the current period is the first quarter that we are reflecting quatrophin sales and marketing costs. Prior to this period, 100% of such costs were added back as prelaunch related expenditures. Adjusted non-GAAP EBITDA for the first quarter was 4.3 million as compared to 18.9 million for the first quarter of 2021. And our adjusted non-GAAP diluted loss per share was 12 cents for the quarter compared to diluted earnings per share of $1.04 for the first quarter of 2021. As of the March 31st balance sheet date, we had $76.9 million of unrestricted cash and cash equivalents and total net debt utilizing the face value of debt net of unrestricted cash on hand as of March 31st was $222.4 million, compared to $199.7 million as of December 31st, 2021, reflective of lower cash on hand as we utilized cash in the quarter to support our Cortropin launch efforts. Now, turning our attention to forward-looking guidance. Due to increased Cortropin launch visibility and momentum, we are providing total company guidance with today's release. On a total company basis, for the projected 12 months ended December 31, 2022, we currently anticipate net revenue between $295 million and $315 million, representing approximately 36% to 46% growth, as compared to the $216.1 million recognized in 2021. Research and development expenses between $16 and $18 million. Adjusted non-GAAP EBITDA between $54 million and $60 million. Adjusted non-GAAP diluted earnings per share between $1.34 and $1.62. In addition, we are providing the following purified cortofan gel-specific measures, net revenue between $35 million and $40 million, and direct selling general and administrative expenses between $42 million and $46 million. In addition, we currently anticipate between 16.9 and 17 million shares outstanding and an effective tax rate of approximately 24%, prior to any federal tax reform. With that, we will now open up the call for questions. Operator, please go ahead with the instructions.
spk01: At this time, if you'd like to ask a question, please press star 1 on your touch-tone phone. You may remove yourself from the queue at any time by pressing the pound key. Once again, that is star and 1 to ask a question. We will take our first question from Elliott Wilbur with Raymond James.
spk06: Thanks. Good morning. Just a couple of quick ones up front for Steve. First, just looking to connect updated guidance versus the guidance provided back in early March. It doesn't look like there was any change with respect to anticipated EBITDA generation on the base business, but just wanted to confirm that. And then how should we think about your outlook for operating cash flow over the balance of the year, given the need to continue to support the initial Cortofan launch. And then I've got a couple for Nikhil as well.
spk04: Sure, Elliot. Good morning, and thanks for the question. So, yes, your observations regarding guidance this morning are spot on. So the base business guidance, which as you'll recall, at our last earnings call, we provided guidance ex-quartrophin. So that portion of the guidance remains unchanged this morning. And we're overlaying the quartrophin guidance onto that previous guidance. And then regarding the outlook, regarding operating cash. Yeah, we're very confident in terms of when we look for the quarterly projections and the trajectory of the overall business, as well as how we expect the Cortropin standalone product P&L to develop over the next three quarters. We remain very confident in our cash position and the ability to support the business and support all of our key initiatives for the business. The quarterly cash flow that you're seeing in the first quarter is completely as expected, given the heavy lift in the early days of the Quartrofin launch, right, where the selling and marketing spend, you know, really occurs essentially on a divide-by-four basis. when, you know, obviously the revenue and the associated gross profit streams, right, you're starting from zero and then building from there. So nothing unexpected in the first quarter, and we have a high degree of confidence in the forthcoming quarters two through four to support the business. And I'll turn it back to you to ask your questions for Nick Hill then.
spk06: Yeah, thanks. Not surprisingly, a couple of the questions with respect to the initial cortofen launch. Nikhil, I just wondered if you could provide maybe a little bit more detail in terms of some of the early success you're seeing with respect to just sort of the source of patients. Are these patients new to therapy? Are they switches from the competitive therapy that's in the market or are these patients that perhaps have been on ACTH therapy at some point during the time they've been diagnosed with the respective ailment but have just been pushed out of the market due to access issues. Just trying to get a sense maybe if you're seeing some early indications that maybe the launch of cortofan gel is actually leading to market expansion as opposed to just switches between cortofan and the other product on the marketplace.
spk07: Yes. So, good morning, Elliot, and thank you for your question. I'll start, and then, you know, we have our head of rare disease, Chris Smuts, on the call. He can chime in after with additional commentary. I think that, you know, going back to your question, I think the first thing is to just clarify or reconfirm that, you know, what we did right out of the gate, and it's early days of the launch, is to focus on, you know, a few target therapeutic areas and prescribers, right, so believers in the ACTH therapy, right? And so our targeted specialties are rheumatology and neurology and nephrology and looking at prescribers in there. What we've seen, to answer your question, is that we are definitely seeing in the enrollments that we have that there are new patient starts. But the other dynamic that is interesting and answers your question is prescribers that had higher volumes of prescription in the prior periods, not the current, not the last 12 months, but the periods prior to that have, you know, started giving us additional prescriptions, which, you know, it leads us to believe, and that was our intent with the launch of purified corticofagel, that, you know, that we are expanding both through the access as well as with the reach within the prescriber group the number of patients that can benefit from this therapy. And I'll reiterate something that I said at the last earnings call, which is, you know, when you look at a claims-based epidemiology analysis, right, that shows that, you know, less than 10% of patients who are steroid-resistant and refractory across primary indications receive ACTH therapy. That's, you know, that's how we see the market and the patients who need this therapy. Chris, would you like to add anything?
spk05: Yeah, yeah, sure. Thank you, Akil, and thanks for the question, Elliot. I think we are very focused as a dedicated rare disease sales team at having clinical conversations with physicians who are comfortable with ACTH-based therapy from their past experience, but really focusing on new patients and focusing on on the clinical discussion that will help identify patients who really could benefit from quaterofan gel. And that really has been our primary focus. And so, you know, as Nikhil said, the vast majority of these conversations are leading to new patient starts, certainly, and they're going to launch.
spk06: Okay. And then just one follow-up question for you, Chris. Could you just talk about the – The language in the release this morning talks about identifying new patient cases and then ultimately turning those into Rx and then looking to shorten the period in which that occurs. Could you just maybe give us a little bit of insight into sort of what some of the hurdles are and encumbrances in terms of just simply capturing mindshare at the physician level, generating an Rx, and then ultimately getting the patient on therapy?
spk05: Yeah, sure. Certainly in the first few months of any new product launch, and especially in the rare disease space where these therapies are often quite expensive, we run into headwinds of initial denials from commercial insurance plans. And so that has really been kind of managing initial denials and using our internal team, field reimbursement team, as well as these insurance experts that we have at our hub to kind of work with the office to, you know, prepare the package and the data that's needed to overcome those denials and then ultimately get Quartrofront approved has been, you know, really, I think, the key headwind early on. So, That's what we're experiencing for sure, but we're really confident in terms of the teams that we have in place to improve that ARDS to fulfillment pathway for patients, and we have seen that improvement.
spk06: Okay, and that's just your standard? Sorry, is that just your standard payer? We don't cover products in the new? first new product in the first 12 months type of hurdles that you were referring to?
spk05: Yeah, I mean, I'd say that's in this first period of three-plus months. You know, we're certainly encountering that for sure.
spk07: So, Elliot, if I may just build on what Chris said, I think a couple of things. One is, you know, just to be clear, The 250 new case initiations, over 250, are patients that prescribers have written prescriptions for. I think that's just one thing to clarify. The second thing is we have made good progress on the gaining formulae coverage for over 100 million lives where they are for at least one or more FDA approved indication. obviously that's helping move the enrollment to fulfillment process. And I think the, you know, the last part to say is, look, we're very encouraged by the progress we have made by improving the average time it takes from new case initiation to dispense vials during the first three plus months of the launch. The time from new case initiation to fulfillment has varied and has been dependent on peer coverage, as Chris said, but In some cases, we've seen Corcovangel approved and shipped to patients in as fast as 36 hours when the coverage is in place. So, you know, this is, as Chris said, this is, you know, classic. And as you were pointing out, too, this is classic rare disease right out of the gate. And we factored the, you know, the acceleration of this time from enrollment to fulfillment as we've laid out our folio guidance.
spk08: All right. Thank you for the question.
spk01: As a reminder, that is star one to ask a question, and we'll take our next question from Brandon Foulkes of Cantor Fitzgerald.
spk03: Hi, thanks for taking my questions. Maybe just building on from the prior question, can you maybe talk about how many of the 250 patient cases are actually paid scripts at this stage versus ANI funding? Any stocking in the first quarter, and then any color on how many of those 250 patient cases were maybe initiated post-quarter?
spk09: Yeah, thank you, Brandon and good morning to you.
spk07: I think that. Just to make sure I got all your 3 questions, I think your 1st question is. How many of the 250 cases are paid cases? The 2nd is how many of the 200 the 3rd 1 was how many of the 250. Were initiated after a quarter and and. It just apologies, could you repeat your 2nd question for me please?
spk09: Just of the 1.3 million revenue recognized in the quarter, just any color and stocking. Got it. Yeah. All right. So clear them on. Yeah.
spk07: Yeah, clear, clear. So on the first one is on the, you know, what portion of the cases are paid cases versus of the 250, as you would expect, right, that we're processing the enrollment to fulfillment for the 250. Cases, clearly the 1.3 million of revenues in quarter one is not reflective of, you know, majority of these patients moving to therapy, right? So, you know, I can't give you a holistic answer on, you know, how many of these will be paid cases versus not, right? However, I will clarify that we obviously have a number of patients on therapy. And for those patients that are on therapy, what we're seeing in terms of paid versus, you know, non-revenue generating vials, I think that the mix is in line with what we had anticipated as we had launched this product. So that's first. I think the second is, you know, how many of this, of the 250, have been initiated after the close of the quarter? You know, I don't have an exact split, but the trend, the weekly number of new patient enrollments per week have increased week on week. For us, there's a clear upward trajectory. You know, clearly, as you remember, we launched on January 24th, and, you know, so there were about, let's call it, eight, nine weeks of the first quarter. So there has been a significant improvement in the momentum and new case generation. And we're also seeing that in the revenues, right? We indicated revenues of 1.3 million for the first quarter. And as I highlighted during my prepared comments that in April and May, we clearly have seen an increase in the sales and that trajectory. And that's, you know, that's part of the data that we looked at as we give our full year guidance. And then the third question is on the $1.3 million in first quarter, I think majority almost, you know, there is not a large stocking in that number. Remember, we're using a network of specialty pharmacies for our distribution and then a distributor for the hospitals and IDNs. And so there is, in the first quarter number, there is limited stocking to the best of our understanding.
spk04: Yeah, I think it would also be safe to add to that, Nikhil, that based upon the reorders that we've seen in April and May, right, it would suggest that the first quarter units have largely, if not entirely, been consumed. So... I think that's another angle on that question as well.
spk09: Yeah, thank you for that, Steve.
spk08: All right, thank you very much. There are no further questions at this time.
spk07: All right, well, I guess it's back to me. Thank you, everyone, for joining us on the call and being with us on this journey to deliver high-quality medicines to underserved patients while creating shareholder value. We're pleased with how 2022 has begun.
spk09: Thanks again, and stay well.
spk01: This does conclude today's program. Thank you for your participation. You may disconnect at any time.
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