ANI Pharmaceuticals, Inc. (ANIP) on Q1 2021 Results - Earnings Call Transcript

Operator: Good day everyone, and welcome to today's ANI Pharmaceuticals First Quarter 2021 Earnings Release Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Please note, today's call is being recorded. It is now my pleasure to turn the conference over to Lisa Wilson. Please go ahead. Lisa Wilson: Thank you, operator. Welcome to ANI's Pharmaceuticals' Q1 2021 earnings results call. This is Lisa Wilson of In-Site Communications, Investor Relations for ANI. With me on today's call, are Nikhil Lalwani, President and Chief Executive Officer, and Stephen Carey, Chief Financial Officer of ANI. You can also access the webcast of this call through the Investors section of the ANI website at anipharmaceuticals.com. Nikhil Lalwani: Thank you, Lisa. Good morning everyone, and thank you for joining our call. The first quarter of 2021 was an important period for us, as we made significant progress towards our goal of building a sustainable biopharmaceutical company to serve patients in need. We defined four pillars of our strategy and achieved important milestones, including substantial work on finalizing the Cortrophin sNDA refiling and commercial team build out, signing definitive agreement for acquisition of Novitium to enhance generics R&D and acquisition of the NDAs from Sandoz to expand our branded products portfolio. This morning I will speak to these growth drivers and outline our plans to achieve our goals. Before I get into that, I hope that you and your families are safe and well and our thoughts are with those around the world facing the crisis caused by this destructive virus. Next, let me share a couple of thoughts about the general operating environment. The biopharmaceutical industry has simultaneously been at the center of efforts to treat and prevent COVID-19 and has also been vulnerable to its overall impact. Through the first quarter of 2021, there was a continued decline in prescriptions, across branded and generic segments. According to IQVIA, the generic segment declined 15% year-over-year, when adjusted for 90 day supply. This dynamic combined with seasonal factors has contributed to softness in prescription levels for ANI's branded and generics products. Stephen Carey: Thank you, Nikhil, and good morning to everyone on the line. Net revenues for the first quarter of 2021 were $54.5 million, up $4.7 million or 9.5% as compared to the $49.8 million posted in the first quarter of 2020. Sales of our generic products were $33 million during the first quarter of 2021, a decrease of 12% compared to the $37.5 million for the same period in 2020. As Nikhil mentioned in his remarks, there was softness in the pharmaceutical industry during the first quarter of this year, principally due to the COVID-19 pandemic and further compounded by seasonal factors. In response, our wholesale and retail customers continue to adjust their inventory levels to match the realities of the depressed prescription volume. These dynamics negatively impacted the market for many of our branded and generic products. In addition, the decrease reflects lower average selling prices, among our generic products, over the comparable period and a shift in mix towards generic products with lower average selling prices. Operator: We take today's first question from Elliot Wilbur with Raymond James. Please go ahead. Elliot Wilbur: Thank you, good morning. Busy morning juggling some different calls here. I apologize Steve if I missed this in your prepared commentary, but just some color on the swing in YESCARTA royalties and why the large impact this quarter and that's just a one-time item and things revert to normal after that? And then I also want to ask a question on operating cash flow. I think it was kind of was just over $20 million in the quarter which is a pretty strong first quarter for the company at least by historical standards. So I mean that's just kind of a timing issue in terms of maybe receivables collection, but any additional color that you could provide there would be helpful? Then I've got a couple of follow-ups for Nikhil which I'll hold off until you respond. Stephen Carey: Sure. Good morning, Elliot. Nice to speak to you. So yeah on the royalty revenue line item there was a settlement that occurred at the level above ANI's, so between Kite and the entity that we receive our royalties directly from. And so that revenue triggered a royalty to ANI in the quarter and was recognized as such. And so we do anticipate that this is the last royalty event related to YESCARTA for the company. And you'll find we just posted our 10-Q out on the SEC website. If you look in the revenue recognition section of the 10-Q this morning you'll see a bit further color on that transaction. And then yeah, we were very pleased with the cash flow in the quarter at above $20 million for the quarter. Yeah and you're right, if you look at quarterly cash flow for the company, right, it can be a little bit lumpy as the quarters tick on. We are pleased to have a strong cash flow quarter this go around. I don't think there is anything specific to highlight about the $20 million. It was all operational and nothing specific. And to be clear, as we said in the prepared comments, the $20 million that was generated in the quarter does not include the cash that will be received for the YESCARTA royalty. So we will be receiving over $12 million here in the month of March related to that transaction and you'll see that reflected in the second quarter cash flows. Elliot Wilbur: Okay. I apologize. Actually have one additional question for you. Just what's happening on the branded side of the business, just looking at the sequential decline obviously kind of out of -- off trend is that function of just lower units, lower pricing, lower trade inventory? Is that a new run rate or is that somewhat anomalous? Stephen Carey: Sure. In terms of the... Nikhil Lalwani: Hey Steve, why don't I take that? Stephen Carey: Yeah. You want to grab that Nikhil? Sure. Nikhil Lalwani: Yeah, yeah. So thank you and good morning, Elliot. I think that in terms of the brand business, there are two things that clarify here. I think first is in response to your question is that the drop Q-on-Q is largely related to units and we believe that there is an impact of reduced prescriptions and a COVID-related impact. We have seen a bit of an uptick in the month of April since then. So to your point on is this the expected run rate going forward. And I think the second thing is as you know well Elliot part of our growth for our brand business has been doing deals almost every year and we just signed and closed the PharmaDerm deal which will be the driver of growth through the rest of the year. And so I just wanted to add that. Elliot Wilbur: Yeah. Thanks. And I just had two quick follow-ups for you. Could you just talk a little bit more about the PharmaDerm deal, interesting basket of assets, you guys haven't had any presence in the topical space historically just sort of curious as to what motivated that, was it just purely opportunistic or is that more of a calculated strategic move to enter a dosage form category where frankly a lot of the bigger ones important players have pulled back fairly substantially? And then just my last question is on Novitium, they've been on a bit of a win streak in terms of recent approvals Famotidine, obviously, very interesting just given the size of that market and kind of, what's happening there. I'm assuming these are sort of consistent with what you had anticipated when you were doing your diligence, but just sort of curious I guess specifically on Famotidine looks like it could be a fairly important opportunity just kind of given the overall market and limited competition there. Just sort of wondering maybe how that transpired versus the expectations that were established during your diligence? Thanks. Nikhil Lalwani: Yes. Thank you again Elliot. So, I'll take your second question first which is on Novitium. Yes, they -- absolutely, the investment thesis is playing out as we had planned with the world-class R&D engine headed by Samy delivering multiple new launches Fluphenazine, Famotidine, Meloxicam, and Dicyclomine. I think these are all limited competition. Famotidine obviously stands out. And then in terms of the -- how does this compare with what our diligence or plan was I think it's probably on the positive side. This is a good run. When you look at these portfolios in aggregate you -- there are puts and takes and they're right now just on a streak of wins. And I think that that is again this testament to the thesis that this is a world-class R&D engine and team and they are delivering and this is just a continuation of a strong track record that they have built over the years. And we look forward to welcoming the entire Novitium team to the ANI family and to moving forward and driving growth together. So that's on the Novitium acquisition and their launches. And then on PharmaDerm, look I think it's a combination of two things. I think one is as you know over the years ANI has built strong muscle in programmatic business development and continuously scanning the market to see what are interesting opportunities that are out there. And this was an interesting opportunity that came up with Sandoz making a strategic decision to go in a different direction with their derm business. And I think that the advantage it has is it has the ability to -- for us to leverage our commercialization infrastructure. It has the ability for us to leverage our manufacturing infrastructure so we have a three-year supply agreement with Sandoz, but going forward we can transfer it to our own manufacturing. So, strategically, it aligns with how we think about these opportunities. And then that's why we did the PharmaDerm deal. Operator: Thank you. We'll take our next question from Dana Flanders with Guggenheim Partners. Please go ahead. Devin Geiman: Hi this is Devin on for Dana. Thanks for the questions. Just a couple for me. First, I know some peers have reference generic price erosion I think you alluded to that in your comments. Just trying to get a sense what generic pricing trends you're seeing and typically able to quantify the impact on generic growth for the quarter driven by volume declines versus price erosion? Stephen Carey: I can take that one Nikhil. On a year-over-year basis, we saw about 6% price erosion in our overall generic franchise for the year-over-year period. Devin Geiman: Okay, great. Thank you. And then on gross margins on a year-over-year basis, it looks -- as well as the sequential basism it looks like the gross margins were higher, obviously, inherently assisted by the one-time royalty for Yescarta, could you perhaps speak qualitatively to where you think margins will shake out for the year relative to Q1 levels? Stephen Carey: Yes sure. So, yes, the first quarter margin profile did benefit from the royalty item. In terms of our full year margins, we would continue to see kind of mid to high 50% range for the remainder of the year. Devin Geiman: Okay. And then the last one for me. Just on Cortrophin, can you talk a little bit more about your preparations and commercial readiness ahead of potential launch? I know I think you guys started manufacturing earlier this year, do you anticipate that you will be able to immediately launch following approval in the second half or are there any other gating factors that may push the launch into 2022? Stephen Carey : Yes, Nikhil? Nikhil Lalwani: Yes. So let me take that Steve. So -- and thank you for your questions. Nice to meet you. I think that on Cortrophin in the refiling we are in the sort of final phases of putting our refiling sNDA together and are on track. We're compiling the information, we're reviewing the information, we've obviously got a dedicated team and external consultants that are helping us put the package together. We remain in continued touch and engagement with the FDA to get any clarifications to ensure that our package is as robust and comprehensive as possible. And we remain confident of being able to refile in this quarter. With regards to launch timing, I think, we've not given guidance on that. The regulatory pathway will follow -- will file in this quarter. And -- but as in terms of being able to launch once we get approval that is absolutely the plan. We have the manufacturing that is being done in preparation for that, and also we're ramping up our commercial team as we -- as I spoke about in my prepared remarks. We have Chris Mutz, as Head of Rare Disease and he is building out his team for market access, marketing sales and so we are absolutely preparing to launch soon as we get approval. Devin Geiman: Okay. Thank you very much. Operator: We'll go next to Brandon Folkes with Cantor Fitzgerald. Please go ahead. Brandon Folkes: Hi. Thanks for taking my questions. So maybe just firstly post the close of the Novitium acquisition, how do you think about capital allocation priorities post that close? Is business development still going to be as key do you think it could take a bit of a back seat to investing in sort of R&D behind Novitium? Just any color there would be great. Maybe just one clarifying question here, so on this YESCARTA revenue payment, is this something that was contemplated in the initial guidance range? Just any color there. Nikhil Lalwani: Yes. So Steve, why don't I take the first one and you can take the second? Stephen Carey: Perfect. Nikhil Lalwani: Yes. So on capital allocation going forward, the idea behind the Novitium acquisition is very much to reduce the reliance on business development entirely and to have a growth engine that is internal to the company that is in our full control and that is the intent. Having said that and so we will allocate appropriate amount of capital for the Novitium R&D engine and for the overall ANI R&D engine. And as far as business development, look this is a core strength and capability of the company being able to source -- diligence get the deal done and then integrate and deliver. And that is a strength that I would love to retain and we'll continue to do that. And again, we'll continue to scan the market and be open for deals. I think to reiterate something that we've said all along that this is about as rich a environment from a targets and assets perspective as we have ever seen, and so we'll continue to look at that. However, from a capital allocation perspective, absolutely, that the -- we will back the R&D engine all the way behind the acquisition. Steve? Stephen Carey: Yes. And on the YESCARTA royalty, Brandon and good morning. That item was not fully contemplated in our original guidance range that we gave at the last call. Brandon Folkes: Thank you very much to both of you. Maybe one more follow-up if I can just be tackling, one of the earlier question is from a bit of a different angle. Your interactions or sort of the environment you're seeing anything that would lead you to think that the review for Cortrophin may not be a six-month review? And then secondly, any color on the shelf life of your Cortrophin? Thank you. Nikhil Lalwani: Yes, let me take that. And thank you again Brandon and good morning. Look, shelf life is something that we will not comment on. We understand that our competitors may listen in on stuff, so I think word will – we'll try to steer clear of that. And in terms of the review period with the FDA, look we're putting together as comprehensive a package and as robust package as we can think of. We are making sure that it's the best thinking of our team and best thinking of the – let's put it the world-class consultants that are advising us on our refiling and couple that with active engagement with the FDA. I think we feel therefore very confident that we're putting forth a very comprehensive and robust package. And I'll remind you that as we were doing the Novitium transaction, the sellers as well as the private equity firm that did the PIPE Ampersand both had – as part of diligence saw everything and they had external experts look at our files and our plans. And the recommendation to their clients i.e. the sellers of Novitium, as well as Ampersand was to go ahead and invest in the equity of ANI. So that should give you light of there are many sets of eyes and experts looking at this. We're actively engaged with the FDA and we're taking the time to put a – the best package forward. Brandon Folkes: Great. Thank you very much to both of you and congrats on the progress taking over. Nikhil Lalwani: Thank you, Brandon. Operator: It appears we have no further questions. I will return the floor to Nikhil Lalwani for closing remarks. Nikhil Lalwani: Thank you, Keith. I'm pleased with the progress we've made in a short time and under challenging industry conditions. We look forward to updating you, as we advance Cortrophin. We are thrilled about the prospects of ramping our internal research and development capabilities for the Novitium acquisition. And as a company, we will continue to seek out opportunities for growth along the four defined pillars of our strategy. We appreciate very much your ongoing support as we work to deliver value to shareholders and bring important therapeutics to patients in need. Thank you all for your time today and stay safe. Thank you. Stephen Carey: Thank you. Operator: This does conclude today's program. Thanks for your participation. You may now disconnect.
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ANI Pharmaceuticals, Inc. (NASDAQ:ANIP) Earnings Report Highlights

  • ANI Pharmaceuticals disclosed its earnings per share (EPS) of $0.937, slightly below the anticipated $0.98.
  • ANI Pharmaceuticals achieved record quarterly net revenue of $137.4 million, net income of $17.8 million, and a GAAP diluted EPS of $0.82.
  • ANI Pharmaceuticals' Rare Disease business generated net revenues of $36.9 million, marking a year-over-year growth of 126.2%.

On Friday, May 10, 2024, ANI Pharmaceuticals, Inc. (NASDAQ:ANIP) disclosed its earnings before the market opened, revealing an earnings per share (EPS) of $0.937, which was slightly below the anticipated EPS of $0.98. Despite this, the company's revenue for the period was $137.43 million, exceeding the expected revenue of $125.52 million. This performance indicates a significant year-over-year revenue increase of 28.7%, showcasing ANI Pharmaceuticals' robust growth and its ability to surpass Wall Street expectations.

ANI Pharmaceuticals, headquartered in Baudette, Minnesota, operates in the pharmaceutical industry, focusing on developing, manufacturing, and marketing branded and generic prescription pharmaceuticals. The company's financial achievements, as discussed during its first quarter 2024 earnings conference call, were highlighted by key participants, including President and CEO Nikhil Lalwani and Senior Vice President, Finance, and CFO Stephen Carey. The call, indicating strong interest from the investment community, was attended by several analysts from reputable firms, reflecting the company's solid standing and future prospects in the pharmaceutical sector.

The company's record quarterly net revenue of $137.4 million and a net income for common shareholders of $17.8 million, with GAAP diluted earnings per share at $0.82, underscore its financial health. Additionally, ANI Pharmaceuticals achieved a record adjusted non-GAAP EBITDA of $37.6 million and adjusted non-GAAP diluted earnings per share of $1.21. These figures not only demonstrate the company's financial strength but also its operational efficiency and the successful execution of its business strategy.

A key highlight from the quarter was the performance of ANI Pharmaceuticals' Rare Disease business, which generated net revenues of $36.9 million, marking a year-over-year growth of 126.2%.This impressive growth contributes significantly to the company's overall financial success and underscores the potential of its specialized product lines. Furthermore, the company has reiterated its guidance for 2024, projecting net revenues to be between $520 million and $542 million, with adjusted non-GAAP EBITDA expected to range from $135 million to $145 million.

ANI Pharmaceuticals' stock price also reflected its strong financial performance, closing at $68.05, a 3.29% rise. The stock's fluctuation between a low of $64.05 and a high of $70 on the trading day, along with its wide range over the past year, highlights the market's response to the company's financial health and growth prospects. With a market capitalization of approximately $1.43 billion and a trading volume of 302,509 shares, ANIP stands as a significant player in the pharmaceutical industry, poised for continued growth and success.