Lannett Co Inc

Hello, and welcome to the Lynette Company's Fiscal 2022 Fourth Quarter and Full Year Financial Results Conference Call. At this time, all participants are in a listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Robert Jaffe, Investor Relations. Please go ahead.

Good afternoon, everyone, and thank you for joining us today to discuss Lynette Company's fiscal 2022 fourth quarter and full year financial results. On the call today are Tim Crewe, chief executive officer, John Kowalski, the company's chief financial officer, Maureen Cavanaugh, our chief commercial operations officer, and Steve Lair, who leads our insulin biosimilar initiatives. This call is being broadcast live at www.lanette.com. A playback will be available for at least three months on Lynette's website. I would like to make the cautionary statement and remind everyone that forward-looking information discussed on today's call is covered under the safe harbor provisions of the Private Securities Litigation Reform Act. The company's discussion will include forward-looking information reflecting management's current forecast of certain aspects of the company's future, and actual results could differ materially from those stated or implied due to several factors, including those discussed in our earnings release. Additional information concerning factors that could cause actual results to differ materially is contained in our latest Form 10-K and subsequent Forms 10-Q and 8-K filed with the Securities and Exchange Commission. In addition, during the course of this call, we refer to non-GAAP financial measures that are not prepared in accordance with U.S. generally accepted accounting principles and may be different from non-GAAP financial measures used by other companies. Investors are encouraged to review Lynette's press release announcing its fiscal 2022 fourth quarter and full year financial results for the company's reasons for presenting non-GAAP financial measures. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP financial measures is also attached to the company's earnings press release issued earlier today. This afternoon, Tim will provide brief remarks on the company's financial results, as well as recent developments and initiatives. Then, John will discuss the financial results and the company's guidance for fiscal 2023. With that said, I will now turn the call over to Tim Crewe. Tim?

Thanks, Robert, and good afternoon, everyone. I'll begin today with a few positive overarching comments. First, on the financial front, Q4 net sales, adjusted gross margin, and adjusted EBITDA were all at or above our expectations. Further, we had a robust cash position on June 30th of approximately $88 million. with income tax refunds of approximately $26 million expected within the next couple of months. My second comment is an update to our previously announced restructuring and cost reduction plan. The major elements of the plan were completed during the fourth quarter. We are particularly pleased with how quickly the product transfer process is progressing. We expect the manufacturing of Lynette labeled products at our formal Carmel site to be largely completed by the end of this calendar year. And the third and final overall comment relates to our pipeline. We have made substantial progress not only on advancing with our partners our so-called durable assets, but also adding potentially meaningful near-term product opportunities to our pipeline. I'll focus today on the discussion of that pipeline, particularly our durable partner products, which we believe represent large market opportunities. Our two current insulin projects, long-acting insulin Glargine and short-acting insulin Aspart, target commercial markets with an estimated aggregate annualized value of about $2.7 billion, according to manufacturer-reported sales in the first half of this year. Meanwhile, for all forms of these two types of insulins, the current IQVIA-estimated sales for the 12-month moving average annual total as of June 2022 is about $16 billion. The significant difference between the two figures is what is in part behind the growing clamor for more affordable insulin. There has been extensive reporting at the state and national levels of initiatives and programs to make insulin more accessible and more affordable for millions of patients. In fact, the recent Inflation Reduction Act included provisions to lower certain patient copays around insulin. We welcome these initiatives and believe with our significant scale and competitive cost structure, we will be well positioned to support and prosper from these important initiatives. On the respiratory front, our three key products target markets with sales over $4 billion annually, as reported by Acuvia, for a recent 12-month moving annual total. Although actual generic market sales will likely be much lower, we believe the size of the opportunity remains significant for a company of our size. For both our insulin and respiratory franchises, we anticipate fewer competitors than typically found in the generic market due to the operational scale and complexity involved in serving these markets. turning specifically to our long-acting insulin glargine program, where we have remained on our development program for a few years now. We are over 90% complete with subject dosing in our healthy volunteer glargine study. Importantly, no serious adverse events have been reported thus far. We expect to complete subject dosing in the next few weeks. We continue to expect top-line data and analytics to be available toward the end of this calendar year. We also believe the trial will very likely be successful in meeting its clinical endpoints, given the notably high historical success rates of such biosimilar medicines. Thus, we anticipate being able to file the biologics license application in the first quarter of the next calendar year. However, at that time, we expect to avail ourselves to a FDA pre-submission meeting to increase the likelihood of a first pass approval. Depending on our discussion with the FDA, We could then file the BLA in our fourth quarter of this fiscal year and then expect that the review time could be shorter. If approved by the FDA, we remain on track to potentially launch the product in the first half of calendar year 2024. Turning to our program for biosimilar insulin aspart, a fast-acting insulin. This program generally trails the timing of our insulin glargine program by approximately 12 to 15 months. We are already producing an insulin aspart at commercial scale and will be requesting a Type 2 meeting with the FDA later this calendar year. We then anticipate filing an IND later this fiscal year. We thus estimate initiating the clinical study next summer and completing the study in the spring of calendar year 2024. If approved, we are looking at a potential launch of the product mid-year calendar 2025. Turning to our respiratory franchise. I'll start with generic flovent discus. The pivotal clinical trial has been completed, and following an FDA product development meeting, we currently believe the ANDA for the product would be submitted early next calendar year. Moreover, key matters that arose in the review of our generic adverb discus program have been proactively addressed in the generic flovent discus program. Also of note, the FDA has designated the product with CGT, or competitive generic therapy status. which among other things may allow for a priority review and which can shorten the initial review to eight months from submission. Turning to our generic ADVERT DISCUS product, which previously received a complete response letter from the FDA. Key matters that arose during the review of the pivotal trial included sampling protocols, non-functional outer case geometry matters, and post-clinical trial formulation optimization, all of which we believe to be addressable in the new trial. Our partner for the product expects to commence a new clinical trial within the next several months, and the plan is to provide a full response to the CRL by the end of next year. If approved post-resubmission, the product could be launched by the end of 2024. Finally, a brief update on generic Spreva HandyHealer. Development of the product continues with a pilot PK trial to commence this calendar year. While the product is still in early stages of the development cycle, we believe it remains on track for an ANDA filing around the early part of calendar year 2024. So again, for our insulin and respiratory pipeline, IQVIA reflects combined 12-month trailing annual sales of about $20 billion for these markets. Moreover, these products we anticipate limited competitors, and we believe these products are steadily progressing towards launch over the next two to three years. turning now to our nearer-term product opportunities. As we have discussed previously, we have pivoted our product development and licensing efforts to focus on products that have the potential to be more meaningful contributors to our financial results, often products with different dosage forms. On our last call, we mentioned some of these opportunities, including Zolmetriptan, a nasal spray co-development product for migraine and cluster headaches, and Fludarabine, an injectable partnered product currently in very short supply. Pending FDA approval, we expect to launch these products over the next several months, and currently there are only a few manufacturers providing these products. Moreover, our near-term pipeline includes sulforaphate, an oral suspension product, and two additional partnered products, seboflurane, an inhaled aesthetic product, and misalamine-delayed release tablets, 1.2 gram, all of which we hope to launch, subject to FDA approval, by this fiscal 2023 fourth quarter. Finally, we have made solid progress growing our contract development and manufacturing capabilities. Nearly 20% of our current plant output already comes from contract manufacturing. For fiscal 2023, we expect to generate almost double the contract manufacturing revenues we generated in fiscal 2022, largely based on contracts already in place. Thus, we believe contract manufacturing revenues will contribute approximately 8% of our fiscal 2023 net sales. Importantly, this part of our business has gross margins in excess of our company average, and because the products generally involved are patented products, the terms of the contracts tend to be relatively lengthy, so the business is relatively stable. Also, we believe there is ample opportunity to further grow this business over the next couple of years. Now to address a few opportunities that are not included in fiscal 2023 guidance. First, with regard to our insulin products, we have initiated preliminary discussions with a number of states and other organizations that have expressed significant interest in partnering in different ways to commercialize affordable insulin for the millions of patients with diabetes. We believe such activity has dual benefit. One, we could begin generating revenues in the near term through licensing and other arrangements. And two, customers who partner with us now provide us a potential opportunity to lock in future value and associated market share. Second, as reflected in our guidance, we have reduced our sales expectations for certain key products, assuming new competitors may enter the market for these products, even though we may not have yet seen or aware of such new competitors. To the extent that competitive products are delayed from entering the market, we obviously could see higher sales from these products. And third, for a number of products we intend to launch in the coming year, if ultimately approved, we could see higher sales than we have estimated because we assume we are not the next new entrant in these markets. If we are the next new entrant, then we could have upside to our forecast. Overall, we currently have approximately 10 ANDAs pending at the FDA, including partner products, plus four additional products that are approved in pending launch. We also have approximately 16 products in development or early development, and expect to add more from external and internal efforts. To sum up today's remarks, we reported solid fourth quarter financial results with net sales, adjusted gross margin, and adjusted EBITDA in line or above our expectations. The major elements of our cost reduction plan were completed last quarter, and we expected the manufacturing of Lynette-labeled products at our former Carmel site will be largely completed this calendar year. We have made significant progress advancing our durable product pipeline. Our biosimilar insulin glargine project, which we see as the largest and most significant opportunity currently in our pipeline, is nearing completion of the pivotal trial. We believe we are on track for filing the BLA for the product this fiscal year. Development of our other insulin and respiratory acids are also moving forward. We added a number of meaningful near-term product opportunities, including products that have non-solid oral dosage forms and therefore the potential for more limited competition. We anticipate launching a number of them in the coming fiscal year. And we expect our contract manufacturing business in the coming year to almost double from last year. Moreover, we believe there's ample room for further growth over the next few years. With that, I'll now turn the call over to John to review the financials. John?