Lannett Co Inc

Thank you for standing by. This is the conference operator. Welcome to the Lynette Company's fiscal 2023 first quarter financial results conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Robert Jaffe, Investor Relations for Lynette. Please go ahead.

Thank you, operator. Good afternoon, everyone, and thank you for joining us today to discuss Lynette Company's fiscal 2023 first quarter financial results. On the call today are Tim Crewe, Chief Executive Officer, John Kozlowski, the company's Chief Financial Officer, and Steve Lair, who leads our insulin biosimilar initiatives. This call is being broadcast live at www.lynette.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 2023 first quarter financial results for the company's reasons for presenting non-GAAP financial measures. 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. In a moment, 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. We will then open the call for questions. With that said, I will now turn the call over to Tim Crew. Tim?

Thanks, Robert, and good afternoon, everyone. I'll begin today with a few comments on our financial results. Q1 net sales, adjusted gross margin, and adjusted EBITDA were all above our expectations. Moreover, I'm pleased to note that all three measures increased over the preceding fiscal Q4. A few factors drove this performance, including increased sales during the quarter of generic Adderall as a result of the current market shortage where we were able to maintain our supply. The sale of certain products under a private label agreement at a better than company average gross margin and a continuing normalization of our product return rates in a more favorable pricing environment than we had anticipated. We were also pleased with our bottom line performance in context to Q1 research and development expenses that were higher than recent quarters due to incremental investment that was made related to the progression of our durable assets. We are now approximately six to seven months from filing the BLA for a partnered biosimilar insulin-glargine product and approximately 18 months from the potential approval. We are, of course, also advancing other durable assets. Meanwhile, we continue to focus on our liquidity, and we recently announced the sale of several discontinued ANDAs for approximately $3 million to a privately held pharmaceutical company. In a separate transaction with the same company, we sold certain products under a private label agreement, which as I mentioned above, help support the better than expected first quarter financial results. The private company has the option to purchase additional batches of products this fiscal year, and we expect they will. John will address our cash balance and liquidity later in this call, but we certainly believe our liquidity position to be sufficient throughout this fiscal year. Finally, on the operating front, And as previously announced related to our 2021 restructuring and cost reduction plan, we received FDA approval to manufacture a branded topical anesthetic product, Nebrino, at our main plant in Seymour, Indiana. This FDA approval was received well ahead of schedule and is important for a couple of reasons. First, it facilitates the continuing transfer of other liquid products to our Seymour plant. Second, it opens the door for expansion of our contract development and manufacturing efforts for liquid products. And third, we expect our overall manufacturing efficiencies can be enhanced as we ramp up production of Nebrino and other liquid drugs at the Seymour plant, which we are consolidating from our former Carmel production site. Now I'll turn to our pipeline and begin with updates of the biosimilar insulin glargine and biosimilar Aspart products. Overall, the timelines for these products remain largely on track. As a quick reminder, these products target commercial markets with an estimated aggregate annualized value in the billions of dollars and represent, for a company of our size, very large and, in fact, transformational opportunities. For our long-acting insulin glargine program, as earlier discussed, we have completed the subject dosing in our healthy volunteer pivotal study and no serious adverse events were reported. We continue to expect top line data and analytics to be available next month. And as we have said, we believe the trial will be successful in meeting its clinical endpoints given the notably high historical success rates of such biosimilar medicine trials. We further expect to avail ourselves to an FDA pre-submission meeting in the early part of next calendar year to increase the likelihood of a first pass approval and potentially shorten the review time. We currently anticipate filing the biologic license application in the spring of next year, which is just months from now. Ultimately, as noted previously, we are working towards an approval and launch of the product by mid-calendar year 2024. Next, biosimilar insulin aspart, a fast-acting insulin. This product generally trails the timing of our insulin enlarging program by approximately 12 to 15 months. We are already producing insulin aspart at commercial scale and will be requesting a Type 2 meeting with the FDA in about three months. If that meeting proceeds as expected, we'd anticipate filing an IND shortly thereafter, looking to initiate 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-calendar year 2025. Interestingly, we have and continue to assume we will be the second biosimilar insulin aspart approval, whereas for biosimilar insulin glargine, we expect to be the next and thus the third approval. However, today, there is no biosimilar aspart product on the market, and there are a few emerging, if still unlikely, scenarios where we could have the next and therefore the first biosimilar aspart approval. Turning to our eventual commercialization expectations, And as I mentioned on our last call, there has been extensive reporting on state and national initiatives to make insulin more accessible and more affordable for millions of patients. We are delighted to be in active discussions with a few states and other entities to collaborate and provide solutions regarding their important initiatives. We believe such approaches play well to our strengths, as Lynette and our partner HEC Group had the philosophy, flexibility, capacity, and competitive cost structure to support these initiatives. Turning to our respiratory franchise, I'll start with generic flovent discus. The FDA earlier granted the company's request for a CGT status, and the filing of EANDA is still expected earlier next calendar year. Our partner has completed the human clinical and PK trials. We expect to avail ourselves to a pre-submission meeting in the first quarter of 2023 to get FDA feedback prior to our submission of this complex development project. If that feedback is encouraging, and we have learned a lot in related feedback related to generic adverdiscus, a launch would then be possible in the first half of 2024. For our generic adverdiscus product, we responded to the CRL just last month. We anticipate additional responses to another CRL in the second half of calendar year 2023 that will include results from a new clinical trial and new pharmacokinetic studies scheduled to begin in the next few months. If all work remains on track, a launch would then be possible around mid-year 2024. Finally, for generic spree of a hand inhaler, we expect our partner will commence a pilot PK study by early next calendar year. Turning now to our newer term product opportunities, particularly those that have a potential to be more meaningful contributors to our financial results, that we have mentioned on our last call. First, over the course of the current fiscal year, we anticipate launching four notable products with respect to potential value, sulcrophate, an oral suspension product, and three additional partner products, fludarabine, an injectable product currently in short supply, sebofluorine, an inhaled anesthetic product, and mesalamine delayed-release tablets, 1.2 grams. we continue to make good progress in growing our contract development and manufacturing business. We appear on track to achieve the higher end of our forecasted sales range of 22 to $26 million, which is a substantial increase over the previous year. We also are currently engaged with nearly two dozen parties that have expressed potential interest in working with us. Of these, based on prior experience, we would anticipate three to four of these leads to eventually evolve into development and or commercial agreements. So, we continue to believe there is ample opportunity to further grow this business over the next couple of years. Now, as we noted last quarter, I'd like to address a few opportunities that are not included in fiscal 2023 guidance. First, we are currently working with outside experts to achieve new incremental company-wide annualized cost savings of at least $10 million. Moreover, we continue to assess additional optimization and rationalization of selected products in our offering to both generate and free up more cash. Second, for our sales guidance, we have assumed new competitors for certain inline key products, even where that competition has not yet materialized. So to the extent the competitive products are delayed from entering the market, we obviously could see higher sales for those products. And third, in the similar vein for new products we hope to launch this year, we could see higher sales than we have estimated because we generally assume we are not the next new entrant to these markets. If we are the next new entrant, then we could again have upside to our forecasts. Overall, we currently have approximately 10 ANDAS pending at the SDA, including partner products, plus four additional products that are approved and pending launch. We further have about a dozen products in development or early development and expect to add more from external and internal efforts. To sum up today's remarks, we reported better than expected financial results with net sales, adjusted gross margin, and adjusted EBITDA all above our estimates. We sold several discontinued Andis for about $3 million. We completed dosing of subjects at the pivotal biosimilar insulin enlarging clinical trial. and we anticipate top line results next month. Thus, we believe the BLA filing is on track for spring of next year. We engaged outside experts to help drive continued cost reductions throughout the company. Based on the preliminary review, we have estimated the annualized savings to be at least $10 million. We continue to expect our contract manufacturing business to approximately double this year over last year. The recent FDA approval to move the manufacturing of Nebrino to our Seymour plant facilitates additional liquid transfers, improves our efficiencies, and adds to our contract development and manufacturing offerings. We believe there's ample room for further growth in this area over the next few years. And finally, our liquidity position is expected to be more than sufficient throughout this fiscal year. With that, I'll now turn the call over to John to review the financials more closely. John?