Eagle Pharmaceuticals, Inc. Price & Performance (EGRX)

Thank you, Shelby. Welcome to Eagle Pharmaceuticals' Q2 2023 earnings call. Everyone. This is Lisa Wilson, Investor Relations for Eagle Pharmaceuticals. With me on today's call are Eagle's President and Chief Executive Officer, Scott Tarriff Chief Financial Officer, Brian Cahill and Vice President of Medical Affairs, Doctor. Michael Greenberg. Everyone to the operator. This morning, Eagle issued a press release detailing its financial results for the 3 months ended June 30, 2023. This press release any webcast of this call can be accessed through the Investors section of the Eagle website, eagleuelive.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 everyone. Regarding future events and the company's future performance may be considered forward looking statements as defined by the Private Securities Litigation Reform Act. Any questions. These forward looking statements are based on information available to Eagle Pharmaceuticals' management as of today and involve risks and uncertainties, everyone, including those noted in this morning's press release and our filings with the SEC. Such forward looking statements are not guarantees of future performance. Everyone to the operator. Actual results may differ materially from those projected in the forward looking statements.

Eagle Pharmaceuticals everyone who 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 30 days on our website at eagleus.com. For the benefit of those who may be listening to the replay of our archived web everyone to the operator. This call is held and recorded on August 8, 2023. Since then, Eagle may have made announcements related to the topics everyone to discuss the company's most recent press release and SEC filings. We will be discussing non GAAP financial measures during this call the SEC for the information prepared in accordance with GAAP. A description of these non GAAP financial measures and reconciliations of these non GAAP financial measures everyone to the most comparable GAAP measures are set forth in our earnings press release available on our website at eagleus.com. And with that, I'll turn the call over to Eagle's President and CEO, Scott Tarras.

Thank you, Lisa. Good morning, everyone, and thank you for joining our call today. Everyone. We delivered a strong second quarter with impressive earnings and revenue, continuing the positive trajectory we've seen over the past 18 months. Everyone. This morning, I will begin by discussing our financial and business highlights for the Q2 as well as our expectations for the remainder of the year. Brian will then provide a more detailed review of our Q2 financial performance and our updated guidance for 2023 before opening the call to Q and A. We entered 2023 with a great deal of momentum from our outstanding performance in 2022 And we built on that with strong PEMFEXY numbers in the first half, market share retention for VEMDEXA and BELRAPSO and growing relaunch revenues for VAREMSAYS and BIFAVOS since our acquisition of these products from Acacia. First, We are obviously very pleased with the performance of our currently marketed drugs, both in oncology and in our hospital business. Everyone to the operator. Once again, we posted strong earnings and revenue and in fact, this is now the 4th consecutive quarter in which we have beaten consensus estimates. Reflecting on these and other positive factors that I'll discuss this morning, we recently raised our full year guidance and in July resumed the company's repurchase program.

Based on the higher guidance, we anticipate ending the year with over 1 $100,000,000 in net working capital. Let me provide some context here. We believe this expected the company's capital position is meaningful considering how much money we anticipate having invested by the end of 'twenty three across our products and pipeline. PTCA 114 in Calatou. Additionally, we spent approximately $130,000,000 mostly cash everyone to acquire Acacia shares and debt and $25,000,000 to date for an equity position with an option to acquire Analar. This totals approximately $193,000,000 and we still find ourselves in this positive working capital position everyone to the operator to discuss our financial teams both in the hospital and oncology segments. And we now have a significant commercial infrastructure of about 80 people, everyone, which is included in the earnings and cash flow just discussed and the revised upward guidance. We view our 2 sales forces as EECL's strategic assets to the company, which we will discuss further shortly. What we believe this means for the future Echo is that Eagle could bring in additional products through R and D and or acquisition with minimal additional cost because of the commercial infrastructure everyone. We already have and therefore most of the revenue generated would fall to the bottom line.

Now let's put everything in perspective for a moment. Anthony and I will now turn the call over to Eric for fiscal year 2022, we more than tripled non GAAP earnings to just shy of $8 per share compared to 2021, which was driven by approximately $230,000,000 of gross profit in 2022, excluding amortization expense. Adjusted non GAAP EBITDA grew more than 3.50 percent to $132,000,000 for the fiscal year 2022 compared to 2021. For 2023, we expect nearly the same gross profit as we saw in 20 22, excluding amortization everyone. Although we increased our spending, our gross margin continues to be strong. In fact, our gross margin percent, excluding amortization in the first half of this year was 83% compared to 74% in the first half of last year. And when you remove vasopressin, which was discontinued, our gross profit actually increased for the Q2 of 'twenty three compared to the Q2 of 'twenty two. We expect this trend to continue going forward. Everyone to the operator. The year over year decline in earnings per share is mostly due to these continued investments in R and D and our commercial infrastructure, which we believe positions us well for the future upside and is not a function of gross profit decline.

We have been highly focused on our R and D initiatives and are working hard to ensure that each asset has the best chance of success. We're just a couple of weeks away from an important Type the FDA for EA-one hundred and fourteen, our estrogen receptor antagonist project, which I'll discuss in more detail shortly. The share of the non-340B pemetrexed market to approximately 21%, leaving Q2, up from 6% at the end of last year. It's important here to look at our balance sheet and receivables as well. The bulk of our receivables relate to PEMFEXY at the end of the second quarter. For this product, we received the majority of our orders near the end of the quarter. Because contract pricing is mostly adjusted quarterly, Large quantities of product are purchased near the end of the quarter producing this result. This trend is likely to continue into the near future. Our quarter over quarter receivables balance is flat indicating that we are in a normal cycle of payment and new revenue. Now turning our attention to the Acacia acquisition. We are also very pleased with the relaunch efforts of Barhemsis and Bifabo within our Hospital Acute Care segment.

We characterize and treat both products as relaunches. As a reminder, our acquisition of Acacia was effective June 9, of 2022 about a year ago. Our fully trained and fully staffed sales force was everyone to the first in action in Q1 of this year as we relaunched and Vicalo received its unique J code in May. Now please review the following slide. We now have 2 full quarters of sales data Ed and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg and Greg. A similar growth rate to continue for the foreseeable future. In the Q2 of this year alone, We estimate that approximately 19,000 patients were dosed with VARAMSS or VIVO, a very impressive number, Reflecting the fact that the drugs are being embraced by our customers.

In terms of penetration, 2 quarters in, approximately 275 Healthcare Facilities are purchasing product out of a targeted 4,000 entities in the United States. We see significant upside expansion potential here. I mentioned 19,000 patients a moment ago. Let me repeat this number. The Q1 of 2019,000 patients were administered by Amcisor by Fabo in our Q2 of relaunch. Imagine what happens if half these entities are using our drugs If we increase our market share in each of these, you can see how the 19,000 could grow quickly. We'll see how the next several quarters go, but and I hope you can feel the excitement we have about these 2 launches. Now let's discuss our oncology business. Gross profit, Excluding amortization expense in our oncology business was $43,800,000 in the Q2 of 2023, up Eric from $38,700,000 in the Q2 of last year, representing an impressive gross margin of 84% you to the Q2 of 'twenty two, up to 83% in the Q2 of this year. We anticipate that these trends will you to hold in the near to medium term. Hopefully, you can see that our gross profit and our gross profit margin continue to be very strong everyone to the operator for the past year and a half.

We are strategically investing in our business for their future growth. Today, everyone to the operator. We have the largest commercial team that we've ever had, which is prime now to be able to bring more products into the company with minimal incremental Expense, thus accelerating the bottom line as products come into the portfolio. We have been investing heavily in R and D as well As a way to expand our portfolio, we believe we are poised for future earnings growth based on the strength of our business and our R and D. The question remains then, how do we ensure growth going forward? The answer is simple. We need to add products through acquisition and or through our R and D pipeline. Fortunately, as we've discussed this morning, we believe we can bring in products with minimal additional commercialization expense. One potential opportunity is EA-one hundred and fourteen, our estrogen receptor antagonist program, which we have invested in over the past several years. We believe we have compelling data from our recent study of EA-one hundred and fourteen and we have a Type C meeting with FDA later this month. Everyone to the operator. Once this meeting transpires, we will provide an update.

Now turning to our Hospital segment. We believe the Hospital business is a great space everyone with strong growth potential. You've already heard about the relaunch for varemsis and vipayvo and CalO-two and ANALYR-one everyone. It also has significant potential as people familiar with this space that although hospital launches are slow, They're also generally rather sticky and profitable once well established. Now let's discuss CALO-two. Everyone to the operator. As we recently announced that our Phase 2 study is underway and our first patients have been randomized. The study is designed to assess the efficacy and the safety of CALO-two, which you may recall is the first, which is recall is a novel first in class antitoxin drug candidate being developed to treat severe community acquired bacterial pneumonia as an add on to standard of care antibiotic therapy. Callo II is a unique therapeutic agent that works differently from antibiotics, disarming the infectious Pathogens virulence factors to reduce damage and mitigate disease. It has been designed to neutralize a broad range of bacterial toxins everyone to lessen the effect of virulence factors on disease progression and severity. We plan to enroll approximately 276 patients At more than 100 sites in over 20 countries worldwide, our expectation is that we will have approximately 100 sites the operator to the operator to be up and running before the year is over in readiness for the Northern Hemisphere's pneumonia season.

In addition, we expect to have our interim results within the first half of twenty twenty four. In June, FDA granted CALO-two QIDP designation under the GAIN Act. QIDP stands for Qualified Infectious Disease Product. Callo II also received Fast Track designation. And let me briefly walk you through what this all means. QIDP designation entitled Eagle to an additional 5 years of marketing exclusivity upon approval. Moreover, Eagle believes CalO2 qualifies as a new chemical entity, which would result in 5 years of marketing exclusivity upon approval or the company to 3 years without MCE designation. In total, Calatoo may be eligible for a total of 8 to 10 years of marketing exclusivity upon approval. QIDP and Fast Track designations underscore the significant unmet medical need in treating severe community acquired bacterial pneumonia. Callo II also has patent protection through September of 2,035 with filed patent applications that would extend to 2,000 and 37 or later and may qualify for up to 5 additional years of patent term exclusivity as a new chemical entity everyone to the next stage of the call to 2,040. Calitude has the potential to be a significant opportunity for us and a true paradigm shift everyone to the operator and how healthcare providers combat this complex disease.

We look forward to providing updates as the CALO-two clinical program advances. Everyone. Before I turn it over to Brian, let me reiterate once more how pleased I am that we were able to raise our guidance for the year, very excited about the health of the business. And with that, I'll turn the call over to Brian Cahill to discuss our Q2 financials. Brian?

Thank you, Scott, everyone and good morning. Let me share a few highlights from the financials we published in our press release this morning. In the Q2 of 2023, Total revenue was $64,600,000 compared to $74,100,000 in Q2 of 2022. Net product sales you to the Q2 of 'twenty three totaled $43,000,000 compared to $49,200,000 in Q2 of 'twenty two. Infestia net product sales were $19,400,000 in the Q2 of 2023 compared to $16,500,000 the Q2 of 2022. The increase is driven by our continued growth in market share that Scott discussed earlier. Elrasto net product sales decreased to $6,800,000 in the Q2 of 2023 compared to $8,100,000 in Q2 of 2022. 2nd quarter ryanodex net product sales were $10,000,000 compared to $8,800,000 in the prior year quarter. Orders for Ryanodex are primarily driven by product expiry with few customers requiring Dantrolene unless their stock is expiring. With this, our guidance considers Q3 to be lighter than the historical average. 2nd quarter of our Hempstead and Vifavo sales totaled $1,200,000 Q2 2023 royalty revenue was $21,700,000 compared to $24,900,000 in the prior year quarter. Royalty revenues include everyone on the sales of Bendeka in the U. S. And Triantasim in Japan.

Gross margin was 74% in Q2 primarily, sorry, the result of increased PEMFEXY sales, the expiration of bendamustine royalty stream and the buy down of PEMFEXY royalties. This is partially offset by the inclusion of amortization expense of intangible assets related to the reacquired products for Hemsys and Lifavo our Kympexi royalty buy down, both of which we expect to continue going forward. Gross margin excluding amortization expense was 83% in the Q2 of 2023 everyone to the company's call to be recorded to 70% in the prior year quarter. On the expense front, R and D expenses were $9,800,000 for the Q2 of 2023 Compared to $11,400,000 in Q2 of 'twenty two, this decrease is largely attributable everyone to the timing of our EA-one hundred and fourteen program spend in 2022 and is partially offset by continuing CMC and clinical trial spend on our CALO-two program increased internal costs. Excluding stock based compensation and under non cash and non recurring items, Q2 2023 non GAAP R and D expense was $9,200,000 SG and A expenses in the Q2 of 2023 were $27,700,000 compared to $36,800,000 in the Q2 of 'twenty 2. This decrease was primarily driven by $17,600,000 in costs related to the acquisition of Acacia, which will not recur.

This is partially offset by incremental $2,900,000 related to increased sales and marketing headcount, $2,400,000 related to direct marketing support for Rohensis, Xevo and PEMFEXY $2,900,000 in other general and administrative expense, partially related to these commercial efforts. Excluding stock based compensation and other non cash and non recurring items, Q2 2023 non GAAP SG and A expense was $23,800,000 Net income for the Q2 of 'twenty three was $5,200,000 the company's press release or $0.39 per basic and diluted share compared to a net loss of $9,500,000 or $0.74 loss everyone. $1.18 per basic and diluted share and our adjusted non GAAP EBITDA everybody to the company's financial results. It was $20,700,000 for the Q2.

For a full reconciliation of non GAAP measures to the most comparable GAAP measures, please see the table everyone at the end of our press release. As of June 30, 23, the company had $15,400,000 in cash and cash equivalents, everyone to the operator to take questions. $115,100,000 in net accounts receivable and $71,300,000 in outstanding debt. With that, I'll ask the operator to open the call for questions. Operator, please go ahead.

Thank you. Everyone. And we'll take our first question from Tim Lugo with William Blair. Your line is open.

Thanks for taking my questions. And I guess a few for Brian. You detailed some expectations around Q3. I think you mentioned some seasonality this quarter. Can you kind of expand on that? And We've also seen gross margins expanding. Can you also discuss some of the drivers there?

Sure, Tim. Good morning. Everyone. Thank you. So first on the seasonality question as you picked up, I'm highlighting Ryanodex, right? So Ryanodex as a approximately 36 month shelf life, the cycle in which we sell the product And the expiry cycle really dictates most of when those sales will occur. 2nd quarter was an ebb and 3rd quarter is expected to be a slight flow, right? So it will be a little bit lower. But that cycle kind of continues on a wave Depending on when those lots are expiring. And I tried to highlight the Tim also some of the drivers around the margin differentials that we're experiencing in our business and I'm trying to highlight for you ex amortization what our real profitability looks like. And you'll recall, I hope that we had We have a few factors going into our gross margin. We were previously weighted down with royalties that we used to pay in our that bend the Mustang franchise. Those have expired at the end of last year. So it actually increases our profitability in that area of our business. Anthony and for Constaxy, we made the decision to buy down a large majority of our royalty to another partner at the end of last year.

And with that, we have better profitability, gross margin and gross profit. And that was a great decision as you look back on that, what we did as far as looking at our forecast to buy down that royalty. Him. It was really favorable for us, I think.

Okay. Thanks for that detail. And I guess lastly, Barhemsitin and Vifavo, we see the growth. They're obviously relatively still smaller compared to the total franchise. What are some of the expectations for that the franchise over a 1 year and maybe even 2 year period. Is it going to be kind of continued steady growth or will there be anything else Yes. Thanks, Tim, Scott. So look, we're just really very excited about it. I mean, as far as we're concerned, we've only fully marketing these drugs for 2 quarters and you can see the 30% growth. Our expectation is that the growth rate that we see is going to continue into the foreseeable future. It's just going to keep everyone. We're getting great feedback from our customers, great acceptance. If you think that there is 275 hospitals buying now or Facilities that could buy at a 4,000 and we have our most seasoned and the highest number of people in our sales force, most number of territories, you can see what happens. And I don't know how you feel about, but the fact that 19,000 different patients who used our drug in Q2 alone is very exciting. Our customers are obviously embracing it.

They're reusing it or you wouldn't be able to get to this 19,000 number and we expect that it's just going to keep growing. And If you just multiply it out where this is going to go, not that too far of a distant future, it's going to be a very meaningful part of our business. And And I think we're going to look back and be very pleased with the acquisition and combine that if we get good news on Calva II, we'll see what happens with Anilor. In a few years, couple of years, we can be one of the leading hospital businesses in the marketplace and we still I think it's a great place to be. So we're more than excited right now about how it's going.

Understood. Thank you for that. And you're actively buying back shares, but obviously in the public markets, The share price has been weak here today and you're not the only one obviously. Can you just maybe discuss a bit about where you think that disconnected?

Tim, that's a very good question. From our perspective, we've really had remarkable year and a half, right? We'll wind up with a strong 'twenty three. And the fact that we rebased the business and we grew everybody to $8 a share and this increase of 3.50% last year. And hopefully, the takeaway today when you go through our script and our We're bringing in quite a bit of profit. We've decided to spend some of that profit selectively and opportunistically into the future of the company. We're in a position to bring more products. And so for instance, when EA-one hundred and fourteen, if we're fortunate enough to bring that to the market, we don't need much more additional expense to add that product into the company. We're waiting for data on CALO-two. We're waiting back from this FDA meeting. I don't know where the disconnect is per se from a stock standpoint, but from a company standpoint, It's just been a great 2 years and we're very excited about the future and the future looks great either through R and D, we'll see how the R and D works Sal. We're very hopeful that our balance sheet and our cash position just puts in a great position to bring another product or 2 into the company.

And We think the future looks incredibly bright, great 2 years and hopefully people figure it out and the stock will take care of itself Because the earnings certainly have and the R and D looks like it is and these things have a tendency to work through.

Understood. Thank you for that.

Thank you, Tim.

Everyone to the operator.

And it appears that we have no further questions at this time. I will now turn the program back over to Scott Tarriff for any additional your closing remarks.

Thank you again everyone for joining the call. I'm extremely proud of our performance this quarter. And as you've heard this morning, we have the foundation in place for another strong year in 'twenty three. Looking ahead, we intend to build our sales momentum to leverage our commercial infrastructure and working capital position to add complementary products either through R and D or acquisition everyone to Advance the Pipeline. And as always, we appreciate your ongoing support and thank you for being on the call. Stay well. We appreciate it.

Everyone. And that concludes today's teleconference. Everyone. Thank you for your participation. You may now disconnect.