Eagle Pharmaceuticals Inc (EGRX) 2023 Q1 法說會逐字稿

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 Pharmaceuticals First Quarter 2023 Financial Results. (Operator Instructions) As a reminder, this conference call is being recorded today, May 9, 2023.

It is now my pleasure to turn the floor over to Ms. Lisa Wilson, Investor Relations for Eagle Pharmaceuticals. Please go ahead.

Thank you, Todd. Welcome to Eagle Pharmaceuticals First Quarter 2023 Earnings Call. 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, Dr. Mike Greenberg. 

This morning, Eagle issued a press release detailing its financial results for the 3 months ended March 31, 2023. This press release and a webcast of this call can be accessed through the Investors section of the Eagle website at eagleus.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 Eagle Pharmaceuticals management as of today and involve risks and uncertainties, 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. 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 will be available shortly after the 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 or archived webcast, this call was held and recorded on May 9, 2023. Since then, Eagle may have made announcements related to the topics discussed, so please refer to the company's most recent press releases and SEC filings. In addition, we will be discussing non-GAAP financial measures during this conference call, in addition to financial information prepared in accordance with U.S. GAAP. These non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with GAAP. A description of these non-GAAP financial measures and reconciliations of these non-GAAP financial measures to their 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 Tarriff.

Well, thank you, Lisa. Good morning, everyone, and thank you for joining our call today. Following on from the outstanding year Eagle had in 2022, we remain well-positioned for another strong year in 2023. Our products continue to do well, as you can see from the strong earnings we announced this morning. We expect this momentum to continue and our longer-term growth to come from our pipeline of potential acquisitions. 

For the first quarter of 2023, our net income was $5.8 million or $0.44 per basic and diluted share, and adjusted non-GAAP earnings was $16.5 million or $1.27 per basic and $1.26 per diluted share. Our adjusted non-GAAP EBITDA was $22.3 million for the first quarter. This positions us well to achieve our full year '23 guidance, which we reaffirmed. To be clear, the investments we are making for the future account for much of the expected difference of our earnings in 2023 versus 2022. We are investing to support our products and advance our pipeline, notably CAL02, which bridges much of the year-over-year GAAP. With the commercial infrastructure already in place, we believe we will be able to capture synergies through a potential acquisition target. Let's look at the products. 

During the first quarter of '23, PEMFEXY net product sales totaled $22.9 million, and we believe we are well on our way to surpassing the $67 million recorded for the full year of 2022. As you recall, we exited the fourth quarter of last year with a 6% share of commercial non-340B, pemetrexed usage, and community oncology in the United States. Based on the internal data and customer feedback, we estimate that as of the second quarter to date that our share has now grown to 15%. 

We expect growth to continue throughout the year and believe that the market share at the end of Q2 could be greater than the current 15%. PEMFEXY remains an important asset for us. As you recall, we eliminated the royalty on the first $85 million of profit on PEMFEXY, beginning October 1 of 22, and a reduced royalty thereafter in exchange for a one-time payment of $15 million. So far, that is looking like a great decision. 

Moving on to our bendamustine franchise. As we have discussed in the past, our bendamustine franchise faced new competition for the first time beginning on December 7, 2022. Since that time, we continue to be pleased with the strong performance of BENDEKA and BELRAPZO in the marketplace. It is our belief that BENDEKA is a beneficial product for patients and healthcare providers. Together, BENDEKA and BELRAPZO maintained approximately 89% share of the bendamustine U.S. market for the first quarter of 23 compared to approximately 90% historically. 

In the first quarter, we reached a settlement agreement with Dr. Reddy's. Eagle has asserted its Orange Book-listed patents against Dr. Reddy's related to its new drug application referencing BENDEKA. The settlement follows our previously announced settlements with Hospira and Accord Healthcare related to their new drug applications referencing BENDEKA. Other than one recent challenger, which is for a proposed powder, not liquid formulation, all existing cases have now been settled. We remain confident in exclusivity into November of 27, which we believe positions bendamustine to be a significant contributor for several more years. 

Turning now to the Acacia products or Barhemsys and Byfavo. Combined net sales of the 2 products totaled just shy of $1 million in the first quarter. Barhemsys and Byfavo product sales are up 32% sequentially versus Q4 of '22. Although this is a small base, it is a very solid showing, and we expect their shares to continue to grow nicely. Just last week, we announced that CMS established a unique product-specific billing code for Byfavo, which, as you may recall, is a short-acting sedative for procedures lasting 30 minutes or less. This new J-code is effective on July 1 of 23.

We believe the establishment of a unique J-code for Byfavo is an important step in facilitating reimbursement and broadening access to this innovative sedation drug. Our go-forward business development plans remain intact. As we have stated in the past, we intend to use our strong balance sheet and financial flexibility to potentially make an accretive acquisition with the aim to broaden our footprint within the acute care or oncology space and solidify our foundation for future growth. We are also currently working with lenders to secure financing to support a potential accretive acquisition. Let me make a few comments on the pipeline. 

First, a global Phase II study is underway for CAL02, a novel first-in-class agent for the treatment of severe community-acquired bacterial pneumonia used in addition to standard of care, including antibiotic treatment. We expect to enroll 276 patients in 120 centers in 22 countries. Second, ENA-001, an investigational one-of-a-kind new chemical entity, is an agnostic respiratory stimulant being developed by Enalare for the potential treatment of postoperative respiratory depression, community drug overdose, and apnea of prematurity. As a reminder, we acquired approximately 17% equity stake in Enalare in exchange for 2 upfront investments paid in August of '22 in February of '23, and we have an option to purchase the rest of Enalare in the events specified milestones are achieved. 

Third, Landiolol NDA is under review at FDA. The filing seeks approval for Landiolol for the short-term reduction of ventricular rate in patients with supraventricular tachycardia, including atrial fibrillation and atrial flutter. To recap, as you can see, we had another impressive quarter. Our plan is to accelerate long-term growth through potential acquisitions and our pipeline. We believe that we are in a good position to execute on all 3 aspects of our business, namely strength from our existing product line, potential future accretive acquisitions, and the development of our pipeline. With that, I'll turn the call over to Brian Cahill to discuss our first-quarter financials. Brian?

Thank you, Scott, and good morning. In the first quarter of 2023, total revenue was $66.3 million compared to $115.9 million in the prior year. Net product sales during the first quarter of 2023 were $46.2 million compared to $90.1 million in Q1 2022, our launch quarter for both PEMFEXY and vasopressin. PEMFEXY's net product sales were $22.9 million in the first quarter of 2023 compared to $37.2 million in the first quarter of 2022. We record revenue on delivery of our products to our direct customers, primarily wholesalers, which estimates the current and near-term needs of the wholesaler channel for our growing product. As we continue to capture more share of the pemetrexed market, customer inventory levels may be higher than for similar established products. 

Vasopressin's net product sales were $3.5 million in the first quarter of 2023. As previously announced, during the first quarter of 2023, we notified customers and the FDA of our decision to withdraw from the vasopressin market. Our inventory on hand has been depleted at this time. BELRAPZO net product sales increased to $6.4 million in the first quarter of 2023 compared to $5.9 million in Q1 of 2022. In the first quarter of 2023, RYANODEX's net product sales were $8.8 million compared to $6.6 million in Q1 of 2022. 

Q1 2023 royalty revenue was $20.1 million compared to $25.8 million in the prior year quarter. Royalty revenues include royalties earned on sales of BENDEKA in the U.S. and TREAKISYM in Japan. The gross margin was 74% in Q1 2023 compared to 76% in the prior-year quarter. The decrease was primarily the result of the inclusion of amortization of intangible assets related to the newly acquired products Barhemsys and Byfavo, which we expect will continue going forward. 

On the expense front, R&D expenses were $9.3 million for the first quarter of 2023 compared to $6.1 million in Q1 of 2022. This increase is largely attributable to continuing CMC and clinical trial spend on our CAL02 program and Barhemsys and Byfavo pediatric studies. Excluding stock-based compensation and other noncash and nonrecurring items, the first quarter 2023 non-GAAP R&D expense was $8.6 million. SG&A expenses in the first quarter of 2023 were $28 million compared to $22.2 million in the first quarter of 2022. This increase was driven by $3.3 million in salary and other personnel-related costs, $2 million in external sales and marketing spend, partially offset by $2 million in lower legal-related costs. 

Excluding stock-based compensation and other noncash and nonrecurring items, the first quarter 2023 non-GAAP SG&A expense was $23.9 million. Net income for the first quarter of 2023 was $5.8 million or $0.44 per basic and diluted share compared to net income of $44.1 million or $3.47 per basic and $3.41 per diluted share in the prior-year quarter. Adjusted non-GAAP net income for the first quarter of 2023 was $16.5 million or $1.27 per basic and $1.26 per diluted share compared to adjusted non-GAAP net income of $52.2 million or $4.10 per basic and $4.04 per diluted share in the prior-year quarter. 

Our adjusted non-GAAP EBITDA was $22.3 million for the first quarter of 2023. For a full reconciliation of non-GAAP measures to the most comparable GAAP measures, please see the tables at the end of our earnings press release. 

As of March 31, 2023, the company had $21.9 million in cash and cash equivalents, $115 million in net accounts receivable, and $77.5 million in outstanding debt. With that, I'll ask the operator to please open the call for questions. Operator, please go ahead.

(Operator Instructions) Our first question comes from Tim Lugo with William Blair.

This is Lachlan on for Tim. On the announcement for securing the financing for the deal and where you are in that stage. Just curious on the rationale for announcing that now rather than wait until everything is fully signed and delivered. And then, Brian, on that, I just wanted to check if the guidance you guys provided earlier in the year included any consideration for BD or not.

All right. Thanks for the question. Let me pick up the why say something now. It's just simple. We're working hard at it. We've been speaking about the potential of an acquisition for a number of quarters now. We're just very deliberate in our actions and very selective about what we do. But we are moving forward as aggressively as we can to find the right opportunity. And this was just a sign that we take the business development and the M&A action seriously, and we are lining up lenders. So we're in a position to transact as soon as practical. In terms of the guidance, Brian, do you have anything to add?

Sure. Yes, our guidance does not contemplate the completion and integration of any M&A, but it does have a sliver of investigational work in our G&A naturally since we've been doing that for over a year.

Yes. No, that's helpful. And I guess, ahead of Landiolol PDUFA, Scott, just curious about the -- sort of what we should be expecting for the launch timing? Are you planning to sort of let the sales team lose with that immediately? Or will you be spending a couple of orders trying to gain access before they sort of take it out into the field?

Yes. That's a great point. Depending on the timing of the approval, we wind up with an approval that could be happening going into the summer months, and probably launching a drug into the summer isn't the most effective way to handle it, especially considering that we're so pleased with the traction we're starting to get with the 2 Acacia products again, small base, but this was only really the first quarter. It's the last 2 quarters that we've had the full territories and everybody at full strength. And we picked up the 32% growth in the Acacia products. You don't want anything to get in the way of launching Landiolol. So we're probably better off waiting a little bit, get through a couple more quarters with Acacia products and not trying to launch something in the middle of the summertime.

Our next question comes from Brandon Folkes with Cantor Fitzgerald.

Maybe firstly, just on PEMFEXY. Can you talk about any sort of benefits in 1Q '23 that may not be here for the rest of the year any one-timers? Or how should we think about the cadence of quarters in 2023? And then along those lines, it seems like the generic arbitrage is pretty well behind us here. So just, is that fair thinking? I'll ask the question fast on.

Yes, Brandon, so PEMFEXY is really shaping up to be really wonderful for us. Going from the 6% share in Q4 to where we are right now at 15% is really very encouraging. My guess is, as we stated today, based on how we see the trends running, speaking to our customers, and just watching this all unfold, but that 15% is going to just continue throughout the year to grow. How high it goes, it's just too difficult to predict right now. But with the just shy of $23 million we had in Q1 relative to the $67 million that we sold in all of last year, our forecast that will sell more than last year's numbers in '23 is probably looking pretty good. There's always ins and outs you can't predict in pricing and inventory levels, but we would expect what we're seeing now is that $67 million number for the year is looking pretty darn good. We're pretty pleased about the $15 million we spent to buy back that first $85 million of profit. So our expectation is that the share is just going to continue to grow, and we're in a pretty good place for the year as it relates to PEMFEXY and couldn't be more pleased with the way the launch is going.

Great. Maybe just changing speed to Barhemsys and Byfavo. Can you just provide any feedback you're getting from the field? How should we think about these going forward? Is it just sort of a normal kind of hospital-type launch where it just sort of takes a bit of time, or kind of any color you can provide there in terms of how should we think about maybe the sales ramp?

Well, Brandon, I'm thrilled you asked that question. I would tell you from our standpoint here internally, we're more excited about these 2 products than we were when we made the acquisition a year ago. The feedback that we're getting has really been tremendous from the users of the product, the nurses, and the physicians, and the feedback we're getting from those 2 groups, by the way, the patients feel about the products. As we all know, there is a ramp process that goes through to be able to establish these products in the hospital. And we're really -- I mean, we're extremely pleased with the trajectory so far. 32% growth in a quarter. 

We expect that market share, that growth to just continue. The feedback has been really just wonderful. We're doing a lot. The J-code helps. I think we're just going to have a nice, steady ramp out through time. And remember, these products are both protected into the early 30s. So we have plenty of time and it's going well. We have Dr. Greenberg with us who is much closer with the physicians and the nurses that we speak to. Mike, maybe you want to say a couple of short comments about what you're hearing about the 2 products.

Sure, Scott. Thank you. I'd just like to reiterate the feedback that you shared on the medical affairs side, we've been hearing exactly the same thing. So regarding Barhemsys, we're starting to see some real-world evidence percolate into meetings and being published. That data echoes what we've seen in our pivotal trials and in fact, in some cases, surpasses it. So this is a drug that's really seemed to be overdelivering at this point, at least to a certain extent. On the Byfavo side, there's a great increase in clients that are using Byfavo as well. And again, the feedback has been extraordinary, helping patient throughput. Patients are being sedated for their procedures more rapidly, waking up alert and moving on. So there's a very high level of satisfaction in both the health care providers and for the patients. The medical affairs team is really excited about these products and so is the sales team.

So in conclusion, Brandon, I would say that we're just expecting nice steady growth over the next several years and many quarters and it compounds. And if you just keep having really nice solid growth like this quarter after quarter after quarter after quarter, you can see where these 2 products build in a relatively short period of time. And what we've been stating is we project where the company is going, fortunately, the products that we sell today are doing rather well, right? Another strong quarter. We've had several strong quarters of performance now with the products that we sell. '23 is probably going to be another very strong year for the company. That gives us time to build the foundation of our Barhemsys and Byfavo. And you can just see if this growth continues by the time you get to '24, '25, and '26, these products can start to be a very significant portion of our earnings and our growth. So, so far, less than a year into the acquisition, recently having all the territories at full strength. We're pretty excited and pleased about where we are so far and where we're going.

Great. And one more, if I may, just a clarifying question on the prior question. I mean talk about the fact that you're working with lenders for an acquisition, does this imply you have a target that you're ready to move on right now? Or are you subject to the financing? Or are you just trying to line up the financing so you can move quickly when you do find a suitable target?

Yes. There's not much more, Brandon, we can say about that, other than the fact that we've been talking about it for a while, and this is just trying to convey to everybody that we are working diligently, and we're very focused. We believe we're in a very unique situation, right? As the industry starts to unfold, if we just take a step back, when we acquired Acacia, there were 70 people in that organization, and we were able to just run that business with 20, not the full 70 that they had. 

And the way we've built our infrastructure here at Eagle and the way we've prudently managed our cash and our balance sheet, we believe that we can make a very significant acquisition relative to our size and have a similar reduction in cost. And so we can probably take in another large product probably more in the oncology space than the hospital space right now and probably bring in a really tremendous amount of synergy when we bring a company into the organization. 

And it's a unique situation that we find ourselves in, one, having the infrastructure, we have to take advantage of the synergy and 2, having the financial wherewithal to make a rather large accretive situation. And so based on the historical positive situation we found ourselves in right now, having those factors come together, we have to be aggressive. We need to take advantage of it. It's an opportunity we can't pass for our shareholders. And so we're very focused. We'll just have to see how things unfold over time here, but the message is we do take this seriously, and we are trying our best to be able to bring a company into Eagle and take advantage of all of this.

(Operator Instructions) Our next question will come from David Amsellem with Piper Sandler.

So just a couple. Can you size up the opportunity for Landiolol and more interested, in particular, in how you think about initial ramp here? So that's number one. Number two is, I know there's a lot you can't say, but can you -- about the acquisition or what you're contemplating. But I guess the question here is just thinking more broadly, are you still very much wedded to the hospital space given just the financial pressures that we're seeing in this space? Do you want to think more expansively about the business? Or is this mainly just hospital-focused?

Yes, David, thank you for all of that. Let's take the second question first and talk a little bit more about the acquisition. We just spent a lot of time speaking about the Barhemsys and Byfavo situation. And it does. It takes a lot of effort, and we're very pleased with the ramp and we have the hospital business that I would call more saturated right now because we do have the 2 products that we're in launch mode for. 

And then as you bring up in your first question, we have the Landiolol situation coming up once it's approved. And so I would say it's probably more likely that an acquisition that we make in the short term would fall more in the oncology space than it would in the hospital space. Mostly, the oncology business right now is just a wonderful place to be in the country. We think we can help the number of patients and at the same time, help our shareholders, but it's the oncology side of our business where we have so much room from an infrastructure standpoint. 

I think if I can try to explain this the clearest way I can, we can probably bring a significant oncology product into our company right now without needing a heck of a lot of additional expense. I don't mean direct marketing from that standpoint. But the infrastructure that we have could probably support a large oncology product with a minimal amount of additional spending. And so that's the situation we need to take advantage of. So if we're able to do what we're hoping to do, it's more likely to be on the oncology side and the hospital side right now. 

And that goes into your land lot question, right? We'll launch it. It will ramp as the way these products work. And it will be the same type of ramp that you normally see in the hospital space. It will just fortify what we have. We'll see how that goes, but we are very concentrated right now in oncology.

We have no further questions in queue at this time. I will now turn the call back over to Scott Tarriff for any additional or closing remarks.

Well, thank you, everyone, for joining the call today. Clearly, obviously, we believe we're poised for another solid year in '23. We look forward to updating you as we advance our business plans. We think we have really very strong vision of the future. Let's see how it unfolds. And as always, we appreciate your ongoing support for Eagle. Thank you, everybody, and stay well.

This concludes today's call. Thank you for your participation. You may disconnect at any time.