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spk06: 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 Pharmaceutical's third quarter 2022 financial results. All lines have been placed on mute to prevent any background noise. After the speaker's 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, November 7, 2022. It is now my pleasure to turn the floor over to Ms. Lisa Wilson, Investor Relations for Eagle Pharmaceuticals. Please go ahead.
spk01: Thank you, Todd. Welcome to Eagle Pharmaceuticals' third quarter 2022 earnings call. This is Lisa Wilson, Investor Relations for Eagle Pharmaceuticals. With me on today's call are EGLE's President and Chief Executive Officer Scott Tariff, Chief Financial Officer Brian Cagle, and Vice President of Medical Affairs, Dr. Michael Greenberg. This morning, EGLE issued a press release detailing the financial results for the three-month sentence, September 30, 2022. This press release and a webcast of this call can be accessed through the investor section of the EGLE website at EGLEus.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 Ego Pharmaceuticals management as of today and involve risks and uncertainties, including those noted in this morning's press release and are filing through 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. EGLE Pharmaceuticals specifically disclaims 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 one year on our website at EGLEUS.com. For the benefit of those who may be listening to the replay or archived webcast, this call will be recorded on November 7, 2022. Since then, EGLE 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 EGLE's President and CEO, Scott Harris.
spk07: Well, thank you, Lisa. Good morning, everyone, and thank you for joining our call today. It was another strong quarter for EGLE. The earnings growth trajectory that we had expected continued in the third quarter, with non-GAAP earnings per diluted share coming in at $1.12. For the year to date, we have sold $114.9 million of vasopressin and Pemfexi combined. We are posting record earnings this year, as evidenced by the fact that in the first nine months of the year, we have already earned $6.69 per share. To put it into context, that number already tops our previous best full year ever of $4.34 in 2017. So we really are on a solid path of earnings growth. And while there may be a disconnect with our current valuation, we believe 2023 has the potential to be another strong year for Eagle in terms of both revenue and profit. The story is fairly simple. We have a company which is generating a lot of cash with a very strong balance sheet. We have taken that money and used it to fund the acquisition of Acacia, the equity stake in Analar, licensing of Landia Law, and the clinical development of Cal O2. Additionally, we repurchased $10 million of our shares this quarter, bringing our total repurchases to $246 million. We remain very excited about the Acacia products by Emsys and by Fevo, and hopeful for the potential of Analar's portfolio of novel MCEs, Landia Law, and Cal O2. We had a strong first nine months of 22, and we expect 2023 and 24 to be strong in terms of revenue and profit as well. To reiterate, we believe we will sell more Pemfexi in 2023 than we did in 22, and the Bendamustine situation is very manageable. We anticipate increased revenue as we build out and realize the full value of the Acacia products. and from the potential approval of Landy Law. Additionally, we anticipate deploying the cash from our earnings and strong balance sheet, not only to fund our key clinical initiatives, but also to make an accretive acquisition to round out the portfolio. We believe we have put ourselves in a strong position to achieve all of this through our disciplined approach to managing our cash and balance sheet. Between potential acquisitions and our pipeline, We believe Eagle can grow significantly in both the short and the long term. We are well on our way to achieving our stated objective of transitioning to a branded pharmaceutical company with a diversified portfolio of assets. Now turning to the third quarter. The third quarter was an active and productive time for Eagle. We are relaunching Baramsys and Byfava, the two products we acquired in the Acacia transactions. We submitted an investigational new drug application to the FDA for Cal O2, a novel first-in-class broad-spectrum antivirulence agent for the treatment of severe community-acquired bacterial pneumonia. And in August, as you may recall, we took an equity stake in Analar. We are thrilled to share that ENA-001, a new chemical entity being developed as an agnostic respiratory stimulant, had two big wins in the quarter. First, ENA001 received orphan drug designation for the treatment of apnea of prematurity from FDA. And second, NLR received an additional award worth up to $50 million based on achievement of milestones from BARDA to advance an intramuscular formulation of ENA001. BARDA is the Biomedical Advanced Research and Development Authority. which is part of the Administration for Strategic Preparedness and Response in the United States Department of Health and Human Services. This is incredibly exciting news for the program. When we look at our business in its entirety, we have built a formidable stream of earnings from our legacy products, specifically Vendeca, ORAPSA, Triakizan in Japan, Ryanodex, and most recently, Vasopressin and Pempexi. This space has provided us with a record year supported by record sales, profits, and earnings. Eagle finds itself in a particularly strong position. As mentioned, we have a company whose revenue, earnings, and cash flow are strong, and at the same time, we're able to invest heavily in our pipeline, a pipeline that has so much potential to contribute meaningfully to the options available to acute care and other physicians treating critically ill patients and or perioperative patients, as well as to diversify EGLE's revenue stream. While I will touch briefly on Cali2, LandiaLong, and ENA001 this morning, I strongly urge you to attend our Investor Day on December 6th, when you will hear from a group of internationally renowned KOLs and physicians who will provide in-depth explanations of the scientific and clinical rationale behind these programs. as well as the substantial unmet medical needs that each address. Let's start with ENA001, an agnostic respiratory stimulant under the development for three indications, postoperative respiratory depression, community drug overdose, and apnea of prematurity. ENA001 is designed to work prolifically by inhibiting big potassium ion channels in the carotid bodies, which are located in the neck. By inhibiting these channels, EMA001 is designed to utilize the body's own ventilatory control system to stimulate breathing, and it does so across multiple causes of respiratory depression. It's helpful to think of EMA001 as a pharmacologic ventilator, and as such, you can imagine the myriad of applications. ENA001 is expected to enter a Phase II study with the first patient dosed early next year. The trial is expected to recruit about 200 subjects over one year. Turning to CALO2, a novel agent with a unique mechanism of action for the treatment of severe community-acquired bacterial pneumonia. It's being developed as an adjunct to the clinically indicated antibiotic treatment and it potentially offers unique therapeutic benefits to critically ill patients. Some of those benefits could include shorter duration of critical care management, such as mechanical ventilation, and ultimately a reduced mortality risk, as well as an immediate decrease in inflammatory biomarkers. Severe community-acquired bacterial pneumonia is a challenging disease to treat, and remains among the leading causes of death in infectious diseases worldwide. So there's an incredible opportunity to shift the treatment paradigm for patients with severe community-acquired pneumonia. The IMD for CAL-2 has been submitted, and we aim to be dosing the first patients in this adequately powered Phase II study, enrolling approximately 276 patients at 120 sites worldwide as early as the beginning of 2023. And remember, too, that the NBA submission to FDA for Landy Law is under review, and the action date is May 31st of 2023. The filing seeks approval for Landy Law for the short-term reduction of ventricular rate in patients with supraventricular tachycardia, including atrial fibrillation and atrial flutter. Our Ben Mustin franchise revenues continue with There continues to be a shift in the United States market away from lyophilized Trianda toward the liquid RTD products, Bendecca and Belrazzo, which offer numerous advantages for patients and healthcare providers. According to IQVIA data, Trianda's share of the Bendamustine market is now down from 15% to 9% since January. In Q3 of 2022, the gross profit generated by our Bend and Mustine franchise grew by 9% compared to Q3 of 2021. These products have provided us with consistent high margin contribution throughout their lifecycle. Of note, we have historically paid a 10% royalty on all Bend and Mustine products to our development partners. These royalties have a lifetime cap that we will soon reach, helping the contribution of Bendecca, Belrazzo, and Triacosem beginning in 2023. Even as we continue to diversify our commercial portfolio with the additions of Pemfexi, Baremsis, Bytheva, and potentially Landilife, we expect the Bend and Mustine franchise to remain a meaningful part of our earnings. Similarly, we are confident that we will sell more Pemfexi next year than we will have this year. Our Q3 run rate is significantly higher than reported sales as the trade works off inventory. And as Barampsis and Byfavor make gains in the marketplace, we believe they will begin to approach the value levels that we anticipate. We remain quite enthusiastic, and you'll hear more on our Investor Day, which I will discuss before turning the call over to Brian. I encourage you all to attend our December 6th Investor Day, preferably in person at the Palace Hotel in New York or via webcast. You'll be hearing from some of the best and brightest internationally recognized key opinion leaders who have firsthand experience treating these devastating conditions. They will speak to the urgent treatment gaps in hospital-based medicine today and how our pipeline and commercial products can play a significant role in addressing those gaps. With that, I'll turn the call over to Brian Cahill to discuss our third quarter of financials.
spk02: Brian? Thank you, Scott, and good morning. In the third quarter of 2022, total revenues were $65.9 million compared to $39.9 million last in Q3 of 2021, primarily reflecting continued revenue from sales of Vasopressin and Pensexi, as well as the addition of our hemp system by Fabo to our commercial portfolio. Product sales during the third quarter were $38.1 million compared to $12.1 million in Q3 of 2021. Vasopressin sales were $13.8 million and Pemfexi sales were $1.7 million in the third quarter of 2021. Pemfexi product sales were compressed for the quarter as we see customers working through launch order quantities. Actual Pemfexi sales volume by customers was as much as four times that of reported sales as trade inventory was reduced. El Raso product sales were $8.5 million in the third quarter of 2022 compared to $4.9 million in Q3 of 2021. Third quarter Ryandex product sales were $7.6 million compared to $4.5 million in Q3 of 2021. 3Q 2022 royalty revenue was $24 million compared to $27.7 million in the prior year quarter. Royalty revenue includes royalties earned on sales of Vendeka in the U.S. and Triakasem in Japan. This quarter, we recorded $3.8 million of other revenue for a cumulative sales milestone on the sales of Triakasem in Japan by our marketing partner, Symbio. We recorded a $3.8 million milestone payment from the Symbio on Triakasem in 3Q $1.2 million, or $0.07 per basic and diluted share, less than anticipated due to currency declines of the Japanese yen. Gross margin was 64% in Q3 compared to 79% in the prior year quarter. This decrease was the result of the addition of product sales of Vazopressin, Confexi, Prohensis, Bifabo, to our portfolio, which contribute lower margins than historical revenue mix, which has been dominated by Vendetta royalties. Also compressing margin is the inclusion of amortization expense this quarter related to the newly acquired products, which will continue going forward. On the expense front, R&D expense were $9.3 million for the third quarter of 2022, compared to $23.3 million in the prior year quarter. This decrease was largely attributable to the non-recurrence of upfront payments for our Cal O2 and Landy Law licenses and lost preparedness for Penfexi and vasopressin from Q3 2021. This was partially offset by increased expenses in 3Q 2022 related to our Cal O2 and full restraint clinical trials compared to the prior year quarter. Excluding stock-based compensation and other non-cash and non-recurring items, third quarter 2022 non-GAAP R&D expense was $8.7 million. We expect R&D spend in 2022 on a non-GAAP basis to be less than $40 million. This change in estimate reflects lower than previously expected near-term expenses related to the post-approval obligations for the newly acquired Acacia products and the timing of expenses related to the Cal O2 clinical work. SG&A expense in the third quarter of 2022 were $23.5 million compared to $18.5 million in the third quarter of 2021. This increase was driven by higher headcount and marketing spend in this, our first full quarter with Acacia. as well as increased spend for external legal and other professional services. Excluding stock-based compensation and other non-cash and non-recurring items, third quarter 2022 non-GAAP SG&A expense was $18.3 million. We expect our SG&A spend in 2022 on a non-GAAP basis to be $64 to $68 million. This increase from prior period guidance is inclusive of the headcount costs associated with our expanded commercial efforts. Net loss for the third quarter of 2022 was $3.5 million or 27 cents per basic and diluted share compared to net loss of $5.6 million or 43 cents per basic and diluted share in the prior year quarter. Adjusted non-GAAP net income for the third quarter of 2022 was $14.9 million, or $1.13 per basic and $1.12 per diluted share, compared to adjusted non-GAAP net income of $7.5 million, or $0.57 per basic and $0.56 per diluted share in the prior year quarter. For a full reconciliation of non-GAAP measures to the most comparable GAAP measures, please see the table at the end of our earnings release. As of September 30th, 2022, and following the completed acquisition and synergizing of Acacia, the company has $15.4 million in cash and cash equivalents, $96.9 million in net accounts receivable, and $59.3 million in outstanding debt, resulting in $53 million in net cash plus receivables. In the third quarter of 2022, we repurchased an additional $10 million of our common stock as part of our $160 million share repurchase program. From August 2016 through September 30, 2022, Eagle has repurchased $246.1 million of our common stock. This month, we've refinanced our collective debt facilities, including the near-term expiring TLA and revolver, as well as the private loan acquired from Acacia. The company now has a new three-year $150 million facility with a bank group led by JP Morgan that includes a $50 million term loan A and a $100 million revolving credit facility. The terms, including covenants of this facility, have been publicly disclosed and are largely similar to those of the expiring facility. With that, I'll ask the operator to open the call for questions. Operator, please go ahead.
spk06: Thank you, sir. At this time, if you would like to ask a question, please press the star and 1 on your touchtone phone. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and 1 to ask a question. We will pause for a moment to allow questions to queue. We'll take our first question from Tim Lugo with William Blair.
spk03: Thanks for taking the question, and congratulations on the strong quarter. I think, you know, most investors I speak to regarding Eagle, they, you know, there's so many moving parts heading into 2023. Can you discuss kind of broadly, you know, you don't need to give guidance, obviously, but can you just discuss broadly how you think you know, certain product mixes will change in 2023. Specifically, you know, obviously, Zendeka, it sounds like there might be some royalty payments coming off. I know you're very bullish on Contexi next year. So can you just maybe give us a sense of where those products will be moving next year?
spk07: Thanks, Tim. You know, very, very thoughtful. As we look towards the future, maybe it's good to discuss 23, which is what is on everybody's mind, but also 24 and 25. I think 23, from a mixed standpoint, is going to be very similar to 22. I believe we'll have a strong send-a-must-deem franchise from a revenue standpoint, but certainly from a profitability standpoint, as you mentioned, as these royalties we're paying going away. And the same thing with Pemfexi, as we state. Pemfexi, you know, is expected here internally to be a larger product in 23 than it was in 22. And you can see the move over the last year away from Lyophilized, Cranda, to Bendecca and Belraxo. And just for, you know, history, we earn no profit and we don't receive a royalty on that. Tranda business, so as Tranda declines, there's a shift from that value over to Pendeca or Belraxo, which we do receive value from. And when we speak to our customers and we look at the landscape, we just happen to believe that we created and developed products that our customers want to buy in Pendeca, Belraxo, and Pemfexi. So as we talk about the mix next year, you'll see the mix pretty similar to this year, and we think 23s potentially depending on the value of those three products, to be another really strong earnings year for us. When we get past 23, then you'll start to see the growth of the Acacia products, you know, which we expect to have a solid year in 23, but grow to those levels we've discussed. In 24 and 25, hopefully we receive the approval for land deal law, and that starts to contribute. You know, it ramps probably not a tremendous amount in 23, but we have high hopes for it. in 24 and 25 so you know just you know to try to shorten the conversation 23 similar to 20 to 22 24 and 25 these new products take hold and as we've stated we're still anticipating making an accretive acquisition to further enhance the portfolio we think we have plenty of room with the cash and the balance sheet to make a pretty sizable accretive acquisition relative to our size that will bring revenue into 23, 24, and 25. And, you know, essentially that's why we're so darn excited about the prospects of the company. And, you know, if ENA001 and Cali2 pass their clinical trials, their Phase II studies, which we should get the results to at the end of 23, then, you know, this company will never look the same. Those products are so significant in size. We will have met our goals of being a diversified pharmaceutical company, and, you know, we're just in great shape.
spk03: Great. Thank you for all that, Kyle.
spk07: Thank you, Tim.
spk06: Thank you. We'll take our next question from Brandon Foulkes of Cantor Fitzgerald.
spk04: Hi. Thanks for taking my questions, and congratulations on the progress. Two from me, just sharing what you're saying about the market shift away from Triander. But can you just help us think, should we expect a generic arbitrage on Binder Mustin when the Triander generics do show up? And then maybe just along the same lines, just I heard your commentary on the inventory work down and the demand in the quarter. Can you just update us maybe just what you're seeing in terms of pricing there and that erosion in terms of reimbursement for generic usage? Thank you.
spk07: Yeah, thanks, Brandon. Let me tackle the trianda. As we said before, trianda, lyophilized trianda is down to 9%, and it's at 9% for good reason. Bendecca and Belraxo are just improved products that our customers want and have benefits for the patients as well. And I know we're all concerned about what happens when we have transgenerics coming to the market, but that would be a therapeutic substitution, not a generic substitution. Belrapsa, we probably, Bendecca, we probably have another five years of exclusivity, and our customers recognize that and they're pleased about that. And so, you know, we have that 9% of the market on TRANDA to worry about, but we never received any profit from that. And we believe that there will be, you know, minimal shift, especially with community oncology, away from the two RTU products over to TRANDA. And so when you take a look at all of that that's going on in the marketplace, the way we're reimbursed and then this 10% royalty going away, You know, as of right now, we're still in the same ballpark that we've always been in this, you know, 25%, give or take, range of value that we'll lose. And that's very manageable with all the other growth that we have going on in the company, which we still expect. 23 is going to be a very strong year for us. If everything else that we're forecasting goes according to our plan, which brings us to your Pemfexi question. And it's the same thing. Pemfexi is a brand. It's not a generic product. And we treat it as a brand, and we market it as a brand, and we've hired some new sales reps calling on our customers and talking about the attributes of the product. And so our price remains at a branded level, and we expect that we'll be able to achieve sales because of those product benefits greater than the sales that we achieved in 22. And again, it's because Vendeka, Belrapsa, and Pemfexi are just better products that are wanted by patients and physicians that use them, and nurses, by the way. So we're confident in our ability to still maintain strong earnings in 23 and use those earnings to not only fund our clinical programs that could just be remarkably exciting to patients, but to continue to fund all of the work that we do here. And so we're bullish as we turn the corner from this incredibly breakthrough year for us and being able to fund another acquisition to just continue to grow off of this new base that we've established for the company.
spk06: Thank you. As a reminder, to ask a question, please press star 1 at this time. We'll take our next question from David Amsalem of Piper Sandler.
spk05: Hey, thanks. So just a few. So first on vasopressin, sorry if I missed this, but can you comment on the extent to which there was any inventory headwinds or tailwinds? along the lines of what you talked about with Benfexi, any inventory impact for vaso during the quarter, so that's number one. Number two, any comments that you can make on the potential impact of amnials ready to use pemetrexid product that they have in the queue at the FDA, how you think about the potential impact of that, if there's any impact at all. And then lastly, on Ben Demustein, I know Teva's commented that they're seeing declines in overall Ben Demustein usage due to changes in the overall treatment paradigm for NHL and CLL. So I guess with that in mind, how are you thinking about that in the context of pressure on Ben Demustein overall? Do you expect that to continue? Does your thinking line up with Teva's there? Thanks. Thanks, David. Okay, so that's a lot.
spk07: Let me make sure I get to each of the three points. Let me take Bend and Mustine first. You know, Benda has, for the last several years, been a slightly declining marketplace in terms of use in CLL and NHL, and that's not changing. So the total market of Bend and Mustine has been declining a little bit every year, and that's going to continue, right? That shouldn't be a surprise to anybody. But as you saw with the way we've been handling it and the opportunity that we've had from a profit standpoint, look, Q3 of 22 grew 9% over Q2 of 21. And I think that's probably, you know, a surprise to people. But when you think about it, if you've been watching the RXs from Trianda decline, those scripts have to go someplace, and they're coming to either Bendecca or Belrapsa, where we go from making no value out of a Trianda sale to obviously making value out of Bendecca and Belrapsa. And our thinking is actually that over time, even with generics coming onto the market, that that Trianda market, that lyophilized market is going to continue to shift to the RTD products, and that eventually you know, as you get to the second half of 23, there's probably going to be a lot less lyophilized usage in the marketplace than there is today, even with generics. And so that bodes well for us in 23, as well as, you know, having that 10% royalty we've been paying going away. You know, having said all that, we will have some declines in Vendor Musting overall, but we do have five years left of exclusivity most likely with Bendecca. And I think as you get through those five years, it will continue to decline slightly but still be a very meaningful part of the company into 28 or 29 where we have the exclusivity. So we're really excited to keep the Bendemusting business alive and very healthy here at the company. And just look at Q3 numbers, and we're very excited about it. In terms of Pemfexi RTU, we've taken all of that into account as we've made our prediction to have more Pemfexi sales. It's just a very big market. I think the market for Pemfexi, when Ellipta was branded, was $1.3 billion in the year. And so it's a very big market. So when we predict that we'll sell more Pemfexi in 23 than in 22, we've taken all this into account, and we're reasonably confident in our forecast and prediction. And then when it comes to vasopression, there hasn't been much vaso inventory in the marketplace. So the vaso sales that we had this quarter are what I would call normalized. So with that, I hope I've answered all of your questions. Yep.
spk05: Thanks.
spk06: You're welcome. Thank you. It appears at this time we have no further questions in queue. I'll turn the floor over to Scott Tara for any additional or closing remarks.
spk07: Thank you again for joining our call today. We're very proud of the strong earnings growth trajectory we're on, as well as the outstanding pipeline progress that we're funding for our commercial operations. But to gain a deeper understanding of the potential of these programs and products, please join us at the Palace Hotel in New York on December 6th. I think it's going to be a fantastic It's going to be an engaging and educational few hours with some internationally renowned experts on hospital and critical care medicine. We hope to see you there. We look forward to it. We're very excited about hosting it. I think it's just going to be a fun day for all of us to participate in. And with that, thank you, and we look forward to continue really wonderful quarters here at EGLE. Thank you again.
spk06: This concludes today's call. Thank you for your participation. You may disconnect at anytime.
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