Eagle Pharmaceuticals Inc (EGRX) 2015 Q1 法說會逐字稿

Good morning. My name is Keith, and I will be your conference operator today. At this time, I would like to welcome everyone to the Eagle Pharmaceuticals first-quarter 2015 earnings conference call.

(Operator Instructions)

It's now my pleasure to turn the floor over to Amy Raskopf. You may begin your conference.

Thank you, Keith.

Welcome to Eagle Pharmaceuticals' first-quarter 2015 earnings call. This is Amy Raskopf of Insite Communications, investor relations for Eagle Pharmaceuticals. With me on today's call are Scott Tarriff, President and CEO, and David Riggs, CFO.

This morning the Company issued a press release detailing financial results for the first three months ended March 31, 2015. This can be accessed through the investor section of the Eagle website at www.EagleUS.com. You can also access the webcast of this call from there.

Before we get started, I would like to remind everyone that any statements made on today's conference call that express the beliefs, expectation, projection, forecasts, 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 Eagle Pharmaceuticals' management as of today, and involve risks and uncertainties, including those noted in this morning's press release and their 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. Eagle Pharmaceuticals specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law.

A telephone replay of the call will be available shortly after completion through Tuesday, May 19. You'll find the dial-in information in today's press release. The archived webcast will be available for one year on our website, EagleUS.com.

For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on May 12, 2015. Since then, Eagle 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 Eagle's CEO, Scott Tarriff.

Thank you Amy, and good morning everyone.

I'm very excited about the many positive developments since the beginning of the year. We entered into a transformational partnership with Teva for the commercialization of our rapid infusion bendamustine product. The upfront cash milestone from this important partnership enabled our profitability in the first quarter of 2015.

We filed the NDA for the product and now look forward to the PDUFA date for rapid in December. If approved, we believe the additional milestone and royalty payments from Teva, as well as the potential launch next year of our tentatively approved bendamustine product, will expedite our ability to deliver long-term sustainable growth.

RYANODEX sales were $1.6 million in the first quarter of 2015, and continue to trend as expected, demonstrating that our commercialization strategy is working. We look forward to replicating this success and leveraging relationships that we are building with RYANODEX for future products, including our bivalirudin candidate. We remain on track to submit an NDA for this unique, ready-to-use liquid version of Angiomax in the near future.

I will discuss these and other developments in greater detail later on the call. But first, I will ask David review the results of the quarter. David?

Thank you, Scott.

Our revenue mix has changed significantly since March 31, 2014. Today our revenues consist of one, product sales comprised of sales of RYANODEX, which we launched in August 2014; sales of diclofenac-misoprostol, which we launched in January 2015; and sale of argatroban to two commercial partners. Two, royalties we receive on commercial partner net product sales of argatroban to their respective customers. And three, license and other income.

For the three months ended March 31, 2015, total revenues were $36.3 million, as compared to $5 million in the prior-year quarter. The increase was driven by the $30 million upfront cash payment from Teva under the license agreement for the rapid infusion bendamustine product and $1.6 million in net sales of RYANODEX during the 2015 period.

R&D expense was $6.3 million in the first quarter of 2015. The $2.5 million increase reflects higher project spending for rapid infusion bendamustine, including costs associated with the new drug application we submitted to the FDA on February 13, 2015, and pemetrexed, as well as higher salaries and personal-related expenses. These costs were offset in part by lower related RYANODEX and diclofenac-misoprostol spending.

SG&A expense was $4 million in the first quarter of 2015. The $2.5 million increase was primarily driven by transaction-related expense, RYANODEX marketing expenses, professional fees, and personal-related expenses.

Of our $10.3 million in combined R&D and SG&A expenses, $1.4 million was associated with one-time charges related to the Teva-Eagle license agreement, NDA submission and launch preparation activities. We're very pleased that in the near future we will be submitting a second NDA, requesting marketing approval for our bivalirudin product candidate.

Expenses in the second quarter will be somewhat higher to make this important goal. R&D costs should normalize after this point and be lower in Q3 and Q4, since we don't forecast any additional NDA submissions in the second half of 2015.

Net income attributable to common stockholders was $19.7 million in the first quarter 2015, or $1.38 per basic and $1.31 per diluted share, compared to a net loss attributable to common stockholders of $3.2 million, or $0.36 per basic and diluted share for the same period last year.

As Scott mentioned, one of the highlights of the quarter was the Teva agreement with our rapid infusion bendamustine product. As I previously mentioned, we received an upfront cash payment of $30 million from Teva in conjunction with this agreement.

On March 18, 2015, we raised $54.3 million in net proceeds from an underwritten public offering of Eagle Pharmaceuticals common stock. As a result, we closed the quarter with $115.9 million in cash, cash equivalents, and short-term investments, and $192.9 million in additional paid in capital. And we had $102.9 million in stockholders' equity as of March 31, 2015. With that, I'll turn it back over to Scott.

Thank you, David. This was a terrific quarter for Eagle.

We recorded $36 million in revenue, including $30 million from our exclusive licensing agreement with Teva for our bendamustine rapid infusion product. We were very pleased that our product will be marketed by the pioneer in bendamustine space, assuming FDA approval.

Teva has unparalleled access of knowledge, and we're confident that they will achieve significant conversion of the market. In addition to the upfront $30 million cash payment that drove our profit ability in the first quarter, we are eligible for up to $90 million in additional milestone payments, and we will receive a very healthy double-digit percentage royalty on future net sales of the product. We regard this as the transformational event for Eagle and the catalyst for our future growth.

On February 13 we submitted the NDA to the FDA for the rapid infusion product for the treatment of patients with CLL and patients with Indolent B-cell NHL that has progressed during or within six months of treatment with rituximab or a rituximab-containing regimen. This is the same indication as Teva's Treanda, but our product is administered in 10 minutes in a 50-mL admixture as opposed to 30 or 60 minutes in a 500- mL admixture.

The FDA accepted the NDA for filing with PDUFA date of December 13, 2015. Our bendamustine rapid product is Orphan Drug Designation for the treatment of CLL and Indolent B-cell NHL when administered in low volume in a short infusion time. This may afford seven years marketing exclusivity upon approval.

Additionally, a new patent pertaining to the rapid infusion bendamustine product was granted this quarter, which extends its patent coverage out to March of 2033. We believe the issued patents, combined with the Orphan Drug Designation for this product to treat NHL and CLL, may provide longevity for the product. We have several additional patents pending at the patent office and look forward to additional patent issuances in the near future.

We believe Teva will be very successful converting the market to rapid -- we eagerly await the FDA's decision on rapid infusion bendamustine. Assuming the product is approved on or before its PDUFA date in mid-December, we would receive an approval milestone from Teva. We are confident in our ability to deliver sustained growth for the foreseeable future, driven by both EPS and a potentially rich pipeline. And remember, as we look towards next year we have the contractual right to launch our tentatively approved liquid bendamustine in the 500-mL bag commencing May 1, 2016.

Sales of RYANODEX, our optimized dantrolene product, were very strong in the first quarter, more than 200% higher than in Q4 2014. We sold $1.6 million worth of RYANODEX last quarter. RYANODEX continued to trend as expected in April. And our unaudited sales in April were over $600,000.

We expect ongoing sequential growth as we continue to convert the market to our product. We believe this growth directly reflects our marketing and sales force execution, as well as the benefits of RYANODEX over the legacy dantrolene formulation.

Our average selling price per vial during the quarter was $2210, up from $2070 last quarter. During the first full quarter we stocked over one 130 unique outlets, either hospitals or surgery centers, 92% of these were hospitals.

RYANODEX is indicated for the treatment of malignant hyperthermia, or MH, a potentially fatal condition that can be triggered when genetically susceptible patients come in during surgery with certain inhaled anesthetics or a specific muscle relaxant. One vial of RYANODEX contains the same amount of dantrolene sodium as 12.5 vials of other approved dantrolene sodium formulations.

Our product can be reconstituted and administered in less than one minute by one anesthesia provider. And with far less volume of diluent, 5 mLs versus 720 mL. This is critically important in treating malignant hyperthermia when every second counts. We're now aware of two events in which RYANODEX has been used, and it performed exactly as intended.

As I've discussed in the past, there are approximately 800 to 1000 cases per year, and IV-administered dantrolene is standard of care. All 6000 US hospitals are required to stock dantrolene. There are approximately an additional 3000 ambulatory care and surgery centers that stock the product, for a total of 9000 outlets stocking dantrolene. Hospitals and organizations that have converted to our product include Brigham and Women's, University of Pittsburgh, The Mayo Clinic, The NIH, Kaiser, Children's Hospital of Philadelphia, the University of California Health Systems, and the VA is under contract in many VA hospitals as ordered.

RYANODEX's Orphan Drug exclusivity for MH in the US and designation in the EU. We are very pleased that FDA has granted us seven years of marketing exclusivity, and we view RYANODEX as an annuity. Coupled with our four Orange Book listed patents, we believe we will enjoy a long life cycle for RYANODEX.

We look forward to ongoing market penetration in the US. We're making progress on our plans for a clinical trial to evaluate RYANODEX in a second indication: the treatment of exertional heatstroke, or EHS, which we believe is a subset of malignant hyperthermia.

EHS is a leading cause of death among student-athletes and is a leading cause of noncombat-related death among military personnel. Currently there are no products on the market to treat this critical and unmet need.

In March we held a productive Type C meeting with FDA for RYANODEX in exertional heatstroke. The path forward appears to be a hybrid development program including human and animal efficacy and safety data. We're working on our clinical plans for this potential new indication.

Right now, we're hopeful that we will able to conduct a meaningful supportive study in Saudi Arabia in September during the Hajj. Although this will not be our pivotal study, it is a significant step forward in ultimately expanding RYANODEX's label to include exertional heatstroke. RYANODEX already has Orphan Drug designation in the US for exertional heatstroke, as well as a US patent for heatstroke, which we believe will give substantial longevity to the product in the indication, assuming that we succeed in expanding the label to include EHS.

Let's move now onto our ready-to-use, RTU, bivalirudin candidate. This product is our enhanced ready-to-use version formulation of bivalirudin, the same ingredient as of the Medicines Company's anticoagulant Angiomax, which had US sales of over $600 million in 2014.

Bivalirudin is a unique product. It is purchased by the hospital pharmacy but stocked predominantly in the Cath Lab where it is used.

Today when a patient presents in a hospital, a second and sometimes third shift Cath Lab nurse must reconstitute the lyophilized powder Angiomax based on the weight of the patient. This is done in the Cath Lab, not in the pharmacy, and this manipulation outside the pharmacy just makes everyone nervous.

Our RTU bivalirudin is a sustainable liquid intravenous ready-to-use liquid formulation. It requires no manipulation. The nurse can simply spike it and hang it.

We believe this will be a key driver of adoption for our product, assuming FDA approval. We would also expect to benefit from the relationships we continue to build for RYANODEX.

We are right on track to submit our NDA in the very near future, which could mean acceptance for filing by the end of July filing and a PDUFA date in Q1 2016. We will work hard on a number of fronts to be able to bring this product to the market as early as next year.

With the $30 million upfront payment from Teva under the bendamustine agreement, the $54.3 million in net proceeds from the underwritten public offering of Eagle Pharmaceuticals common stock during the first quarter Eagle is very well capitalized to pursue multiple opportunities for future growth. We believe our position will only strengthen if FDA approves the rapid infusion product, because this would trigger a milestone payment from Teva and facilitate the launch of this important product. With this important product launch in Teva's very capable hands, and the expectation of solid revenue stream with no sales cost, we are able to focus on methodically growing RYANODEX sales while developing and commercializing our other value-added products, such as the RTU bivalirudin and our 500-mL bag of bendamustine, which we can bring to the market in May of next year.

To recap we have several important milestones in the near future that we expect will build value. We will file the NDA for RTU bivalirudin in the very near future, and would expected acceptance for filing by the end of July and our PDUFA should be 10 months after filing.

We expect additional patent grants for our rapid infusion bendamustine. We plan to conduct a study of RYANODEX in exertional heatstroke later this year. The PDUFA for rapid infusion bendamustine is December 13, and assuming it is approved we expect Teva would launch the product shortly thereafter, triggering another milestone payment from Teva.

A decision should be made regarding the seven years' exclusivity for rapid at approval or shortly thereafter. We are -- we look forward to ongoing market penetration of RYANODEX for MH while we advance its development for exertional heatstroke. Into next year, we have the potential launch of our 500-mL bag of bendamustine. With so many near-term events to drive value, and a strong balance sheet affording us financial flexibility, we're very excited about the year ahead and our prospects for the future and its growth.

With that, I'd like to open the call for questions. Operator, please go ahead with the instructions.

(Operator Instructions)

David Amsellem, Piper Jaffray.

Thanks. Just a couple. On bendamustine, can you talk about what you're hearing regarding how Teva is handling this issue regarding the DMA inactive ingredient in their liquid form? And are they now supplying customers with the lyophilized form? What you think all of that means for conversion to 3102, the small bag, once it gets approved? That's number one.

Then number two is, this is related to the first question. Is it your expectation that once 3102 is available that Teva will just do a hard switch and that ultimately you won't see a need to launch the big bag, 3101, once you have the right to do so in May 2016? So maybe so could talk about how you thinking about that. Thanks.

Thank you, David. Let me tackle all of that. ff I can. bendamustine, clearly Teva has the situation with their liquid formulation that contains the DMA. I think we're all very aware of that.

It looks from the discussions we've had with the customer base is that the customers are using predominantly that liquid product. They are reconstituting it differently than they normally would. They still need to be fully gowned, laminar flow hoods. It causes difficulties for them. The customer base isn't thrilled about the situation.

The market still seems to be, as I mentioned, predominantly in the liquid and not in the [lyo]. Based on that, when you think about all of the significant benefits that rapid will have, including the fact that it doesn't have these caustic solvents, doesn't include DMA, we would think that the conversion to rapid should be rather significant.

I think it's going to be hard to ask customers to use a product with the DMA when have the choice for rapid. Based on that David, I think the conversion probably looks pretty strong for us.

As far as the large bag, I think it's very important that we do have the right to launch that drug next year. And we are still looking into the plans and thoughts about that. We don't have anything tangible to discuss with you at this moment.

And then if I may ask a question on the bivalirudin opportunity. Hypothetically, if Hospira were to win and generics would enter the market, how do think that would play into Medicines' decision to initiate litigation against you, or do think they would just ultimately cede the market to generics and move on? What is your view on how that may play out?

David, it's very hard to predict what Medicines Company will do in these situations. Perhaps it's a better question for them, but from our viewpoint, as we've spoke in the past, we believe we have a very strong patent position to get this drug on the market quickly, hopefully next year.

And I think if the market is genericized and the Appellate Court has ruled in favor of a generic, it should be an easier path forward for us to get to the market. We're doing everything we can to be prepared to bring that product to the market in 2016.

Last one, if I may. On RYANODEX and exertional heatstroke, so you mentioned that the study in Saudi Arabia will not be a pivotal study. I guess the question then is, what would be the next steps after that study? And maybe talk about the clinical plan in terms of both the animal data and what you think additional human work would entail beyond the Saudi study. Thanks.

Thank you, David. We had a very good productive meeting with FDA a few weeks ago. And it's clear from our view and in that meeting that the Agency understands the need for the product and understands the marketplace now. And it was very positive interaction where they are working with us to bring the product to the market.

We will do some human work, some animal work. We have good history of animal work with exertional heatstroke that went very well. The plan now is hopefully to get a clinical trial done in Saudi Arabia. It will show safety in compromised patients in heat elements, which is ultimately what we need to do.

In order to have the product label expanded to heatstroke, eventually we need, and I'll quote and say a handful of patients in a more formal setting that we can track. After we get through this study, the first item would be to take a look at the data, see how the drug acts in patients in both heat illness and heatstroke.

We should have plenty of patients available to us in September. And sit back, meet with the FDA again. Ultimately we need to find some patients that we can track for a longer period of time than these transient patients out in Saudi Arabia at the Hajj. We're working on our plans to do that. And feel pretty good about the opportunity ahead of us.

Thanks.

Tim Lugo, William Blair.

Thanks for taking the question, guys. Can you discuss your ability to launch your liquid large bag formulation and maybe what your thinking was into maintaining those rights?

And maybe at a high level, is this really -- is this product really just a hedge in case the rapid infusion production isn't approved? And what happens if rapid is approved? Is there still any market for this product?

Thanks, Tim. It's a very good question. Yes, we have the ability to launch that big bag a little bit less than a year from now. As I mentioned earlier, we're still working on our plans, determining what direction to take with the product. But ultimately it could be a very important product to us.

It will allow Eagle to commercialize its own product, which I think is important to us both financially and strategically. And we believe that there might be a marketplace where people would want the larger bag as opposed to rapid.

We haven't determined any of our pricing strategies. We still have about a year to figure that all out. We do have the right to that big bag, and we'll determine going forward the best to utilize that right, and continue to expand our profitability and grow the Company.

Okay, understood. And it sounds like you have some additional IP from benda pending. Teva is obviously in litigation. Maybe broadly could you talk about your expectations for the durability of that product, for the rapid infusion product, and maybe how long the tail end you believe will be for the product?

Another great question, Tim. We think that the bendamustine family will provide a long period of profitability for the Company, which was critical in our approach to working with Teva. As I've said so many times, they're the perfect partner.

They're just wonderful. They're doing a great job. The interaction between the two companies has just been great.

Hopefully we will wind up with the seven years of exclusivity. We have the Orphan Drug designation. We would hope that would translate to the Orphan Drug exclusivity to provide us for seven years.

We have two patents issued to us now for bendamustine. We have another five or six patents at the patent office. Hopefully those will come through and ultimately be issued. At the end of the process, we could wind up with the exclusivity due to the Orphan Drug and multiple Orange Book listed patents protecting us.

And then ultimately as the market unfolds, and eventually when generics do come out of the lyo form, we have the big bag at our disposal. We also, under certain circumstances, have the ability to launch the little bag. And when you just look down the road for seven or eight years between the exclusivity and the patents, I think we should wind up with some pretty significant value for this product family for quite a period of time, which is exciting and should fuel the long-term sustainable growth that we've worked so hard to create.

That's good to hear. I guess lastly, I believe you had a development partner for bivalirudin and then there was a royalty rate that you'd be paying out. Is that dependent at all if there are generics on the market when you launch?

That royalty rate that we pay out to our development partner is a flat rate of the value that we bring into the Company. (Multiple speakers) they receive that royalty rate. It's flat throughout time. And it's capped eventually at a certain number.

Congratulations on the progress.

Thank you very much.

Irina Koffler, Cantor Fitzgerald.

Thanks for taking the question. I was wondering maybe if you could provide a little bit more of an update on any latest that you've heard on the Angiomax litigation? And also, what gives you such conviction that you can launch next year when Medicines can sue you and trigger a 30-month stay?

Thanks, Irina. The question about Angiomax, I don't think we know any more than the public knows about that litigation. It's in the Appellate Court. Oral argument were heard, I don't remember, maybe a month ago, five weeks ago. We are waiting just like everybody else is for that outcome.

As we look towards next year, we're filing it here soon. Let's see if we're sued or not. I don't think that is a fait accompli that that will occur.

We just think we have a reasonably strong position. And we're hopeful that we can get through the courts prior to the full 30 months. We were successful in getting through the courts on our litigation on bendamustine.

Hopefully we'll be able to duplicate it, but you're right. There's always the chance that we get stuck for the full 30 months if we're sued, and we're cognizant of that. But we're going to do everything we can. We think we have a good position to get us through and onto the market as soon as we possibly can.

Thanks. I don't know if you saw, there was a new FDA Law Blog today about [due to rated] compounds now getting Orphan Drug exclusivity and the FDA taking a softer stance on an active moiety and so forth. Do think this bodes well for your Orphan Drug exclusivity?

I didn't see that blog today, Irina, but we spend quite a bit of time -- we have some good experience in the Orphan Drug Group. We were able to achieve the seven years for RYANODEX.

When we look at the rationale presented to the Orphan Drug Group in FDA to receive the designation, we feel pretty good that it should translate into the seven years. We'll find out at approval or shortly thereafter. We will be starting the dialogue with the Agency shortly. We're hopeful.

And then just a small administrative one. Can you break out the diclofenac-misoprostol revenues?

The diclofenac, Irina, was very small this quarter. It was somewhat insignificant, I would describe it as.

Thank you.

(Operator Instructions)

Robert Sussman, Bentley Capital.

On the cash of $116 million and the recent equity offering you did, will that all be required to exploit the pipeline, or are you also considering acquisitions?

No. This is David Riggs. We're considering transactions which would advance the Company beyond our current pipeline. And in part, especially as we look forward to approval and milestone payments and so forth, that our cash balance should grow and should be very helpful in us looking at product transactions and even M&A activity.

Can you give us a little bit more granularity on your acquisition philosophy, whether you're looking to buy individual products or companies, or how anything you would buy would fit with your current pipeline?

Robert, very good strategic question. We're just getting started on the process of analyzing our options. We're in business eight years now. It took us eight years to get to the point where we are what looks to be very strong profitability going forward.

And we would like to take advantage of the cash that we have, the clean balance sheet that we have and what appears to be very significant earnings potential going forward. I think we have quite a bit of opportunity to acquire either products or companies.

What we're missing here at Eagle right now is the commercialization capability to bring some of these key products to the market as soon as next year. We're focused first on building a sales capability to be able to take advantage of the pipeline. And we will just see where that takes us, but we're a hospital specialty company.

We're looking for products that would benefit from a promotion to either the hospital, that could be the emergency room doc, the hospital pharmacy and to infusion centers. And that's what we are focused right now.

Okay thank you very much.

It appears we have no further questions at this time. I will turn the floor back over to Scott Tarriff for any additional or closing remarks.

Thank you everyone for taking the time. Thank you for joining us. I appreciate it and look forward to speaking to you again in the near future. Have a good morning.

This does conclude today's program. Thanks for your participation. You may now disconnect and have a wonderful day.