Eagle Pharmaceuticals Inc (EGRX) Q1 2021 Earnings Call Transcript

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Eagle Pharmaceuticals Inc (EGRX 3.57%)
Q1 2021 Earnings Call
May 10, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning, everyone. My name is Leo and I'll be your conference operator. At this time, I'd like to welcome everyone to Eagle Pharmaceuticals' First Quarter 2021 Financial Results Call. [Operator Instructions] As a reminder, this conference is being recorded today, May 10, 2021.

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

Lisa M. Wilson -- Investor Relations

Thank you, Leo. Welcome to Eagle Pharmaceuticals' first quarter earnings call. This is Lisa Wilson, Investor Relations for Eagle Pharmaceuticals. With me on today's call are Eagle's Chief Executive Officer, Scott Tarriff; and Chief Financial Officer, Brian Cahill.

This morning, the company issued a press release detailing financial results for the three months ended March 31, 2021. 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 and the 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 one year 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 10, 2021. 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.

And with that, I'll turn the call over to Eagle's CEO, Scott Tarriff.

Scott Tarriff -- Founder, Chief Executive Officer and Director

Well, thank you, Lisa. Good morning, everyone. And welcome to our conference call today. The lingering effects of COVID-19 continued to impact our industry. And although the country is beginning to open up, it may take some time to return to pre-pandemic levels of access to providers and patient visits.

Eagle has done a tremendous job in the face of these challenges. But like our peers, especially those in the oncology space, we have all felt the effects of fewer oncology visits. Oncology treatments across the industry were down this quarter, mostly for patients holding off their chemotherapy visits waiting for the wash-out period for their vaccinations. However, we expect chemotherapy visits to return to normal this year. At the same time, our expenses are up a little bit more than in previous four quarters, mainly because of the way the R&D fell into the quarters for the year. We expect both sales to bounce back and expenses to come down over the next three quarters. And Brian will walk you through the numbers in a few moments.

In 2020, we had a great year from an earnings standpoint. The focus, of course, is and has been on the pipeline and how we ultimately grow the company. I acknowledge the approach we have taken has been a slow process, but we believe that we and our shareholders will be rewarded. The stock buyback of 23% of the company should ultimately lead to significant value creation for our shareholders. We anticipate our revenue next year will be significantly higher than in the past years. The PEMFEXY launch in February of '22 with four months of exclusivity and a $1.3 billion market alone is significant.

As we go through today's presentation, you will also hear that we expect a Vasopressin launch. These two events, combined with the two good pieces of news reported this past week out of Japan, should all lead to this large growth. We will also touch base on the substantial progress we are making in our pipeline both organically and projected in-licensing. We have adapted to these unprecedented times and continue to focus on growing our business and positioning ourselves for sustainable growth.

Let's look at the progress since our last call just two months ago starting with vasopressin, obviously a critical short-term program for us. Vasopressin is tracking exactly as outlined previously. Based on discussions with the FDA at the post-CRL meeting, we designed and completed a pilot study to provide clarity on the appropriate experimental conditions for the final study. The pilot study results were as hoped and the data provided the clarity for the conditions.

About two weeks ago now, we completed the final study that we need to respond to FDA and that study also ran as expected. We will be receiving unaudited results shortly and will update our shareholders accordingly. The final audited report takes a few weeks and then we require some time to prepare and send the full response to the CRL to FDA. Based on all of this, our expectation is these final study results will be available here soon. And then, in a relatively short amount of time after this, we will fully respond to the CRL in the previous timeframe articulated, which is by mid-year.

I will remind everyone that we are first to file for this ANDA referencing VASOSTRICT, which had a total US sales of $786 million in 2020. Our ANDA is currently prioritized by the FDA and also flagged as a COVID priority. Our expectation remains that we will receive final approval in plenty of time to bring the product to market this year. Furthermore, we want to note that the majority of questions asked by FDA are molecule questions, not necessarily specific to the Eagle formulation. We believe those questions will be asked of all ANDA holders. Our formulation is robust and has held up well to all questions FDA has asked of us thus far.

As we turn our attention now to the patent trial, if you recall from our prior statements, the non-infringement case when you break it down is relatively easy to understand. But patents involved in the trial require a Vasopressin product within a specific pH range of 3.7 to 3.9 while the specifications for our Vasopressin product require a pH below that range. So if we can manufacture our product and maintain it within these specifications which are outside of the pH range of 3.7 to 3.9, we should prevail in this litigation. Although the delay has been extremely difficult for all of us, we feel that we are close to a conclusion.

There is somewhat of a silver lining to the delay. Since the time that the trial was initially scheduled back in May of 2020, we have been collecting a tremendous amount of additional pH data, all of which has been positive. Therefore, the delay has allowed us to gather significantly more proof and assurance to the court that our product is manufactured and maintained within the appropriate non-infringing pH range.

We recognize that our launch is later than we had anticipated, but we again -- we are now coming to the end of that process with the CRL being responded too soon into court case within 60 days from now. We reiterate our expectation of bringing the product to market by year-end. The trial will be taking place in person, not virtually. We believe that the strength of our position will become clear during the trial and we look forward to that week.

We also have had two excellent pieces of news coming out of Japan, our bendamustine product license to SymBio from Eagle and marketed under the trade name TREAKISYM, was approved by the Pharmaceuticals and Medical Devices Agency for a new indication for the ready-to-dilute liquid formulation for the treatment for relapsed or refractory diffuse large B-cell lymphoma used in combination with rituximab. This latest approval is another meaningful extension of our bendamustine franchise and we believe it will significantly increase the market opportunity for TREAKISYM in Japan.

And just last week, SymBio announced that they have filed their application for the 10-minute rapid infusion liquid formulation ahead of schedule. Over the past 12 months, TREAKISYM has been selling $85 million per year. Based on the recent approval as well as the filing and anticipated approval of the 10-minute formulation, we believe that the milestones and royalties coming from these products will contribute $25 million at peak. And we believe we can get close to that peak income level as early as next year.

Moving on to PEMFEXY. The PEMFEXY launch is only nine months away from now. As you recall, we settled with Lilly in December of 2019 and received final FDA approval in February of 2020. It's a significant market as US sales of ALIMTA in 2020 total nearly $1.3 billion and where we will have four months of exclusivity. We are also approved for the multi-dose vial making PEMFEXY and even larger opportunity for us. As you know, we were granted a unique J-Code, which provides coding clarity to outpatient facilities and physicians and facilities access for patients and reimbursement from Medicare, Medicaid and commercial insurance. This is an exciting time leading up to our launch.

We're now within nine months of launching into $2 billion of branded sales between Vasopressin and PEMFEXY and our bendamustine Japanese label expansion should get us close to our previously disclosed peak milestone and royalty revenue of $25 million as early as next year. I realize that everyone is waiting to hear more news on Vasopressin. The good news is that we will be refiling by mid-year and the trial is happening shortly. We will finally get this behind us and we just have to be a little bit more patient.

Now let me touch briefly on our fulvestrant program. We expect to have the results from our formulation work shortly. Depending upon those results, we plan to run a small pilot study and then consult with FDA prior to starting a clinical trial. Regarding RYANODEX, our work on nerve agent continues, the study is ongoing and we expect to report the data as it becomes available.

We also has some important new directional comments to make. As we have discussed, we have been searching for acquisitions and in-licensing to augment organic development. One such example is our co-promotion agreement with Tyme Technologies for their SM-88 product to treat pancreatic cancer. We look forward to updating you on further progress here. Although it is premature to provide additional details, we are now in late stage diligence for several in-licensing opportunities that would leverage our capabilities, meet our criteria and broaden our portfolio and pipeline. We aim to finalize a few transactions, which would considerably bolster our EPS in the short and long-term.

Lastly, I'd like to extend a warm welcome to Dr. Luciana Borio, who recently joined our Board of Directors. Dr. Borio is a former FDA official and renowned public healthcare expert who has spent her career at the forefront of US healthcare policy addressing some of the world's most complex challenges.

Taken together, we are very excited about Vasopressin, PEMFEXY and TREAKISYM as we look forward to '22, '23 and '24, all of which have the potential to provide a consistent future revenue stream for Eagle. We expect the Vasopressin and PEMFEXY launches will generate significant cash, along with our current net cash position. At the same time, we believe we have some exciting and promising strategic transactions that will broaden our portfolio of important therapeutics.

With that, I'll turn the call over to Brian Cahill to discuss our first quarter results. Brian?

Brian Cahill -- Chief Financial Officer

Thank you, Scott. And good morning. In the first quarter of 2021, total revenue was $41.3 million compared to $46 million in Q1 of 2020. Product sales during the first quarter decreased by $0.6 million year-over-year, totaling $17.1 million compared to $17.7 million in Q1 2020, primarily driven by a $4.6 million decrease in RYANODEX sales and a $1.1 million increase in BELRAPZO sales.

BELRAPZO product sales were $5.7 million in the first quarter compared to $4.6 million in Q1 of 2020. Eagle recognizes BELRAPZO revenue on shipments by Eagle to wholesalers. The increase in sales was a result of an increase in our market share. Based on IMS data, Eagle's market share, the bendamustine wholesaler shipments to end users was 9% of the US bendamustine market in the first quarter compared to 7% for the prior year quarter.

First quarter RYANODEX product sales were $6.8 million compared to $11.4 million in Q1 of 2020. Orders of RYANODEX are cyclical, driven primarily by product expiry with few customers acquiring dantrolene unless their stock is expiring.

Q1 2020 [Phonetic] royalty revenue was $24.1 million compared to $28.3 million in the previous-year quarter. This was almost entirely from BENDEKA for each period. As we've discussed in the past, beginning on October 1, 2019, Eagle's royalty rate on BENDEKA increased from 25% to 30%. And on October 1, 2020, the rate increased again to 31%. On October 1, 2021, it will increase for a final time to 32%. Royalty revenue also includes royalties earned from sales of TREAKISYM by SymBio.

Gross margin was 74% during the first quarter of 2021 as compared to 83% in the first quarter of 2020. This reduction in gross margin was driven by revenue mix. Revenue from product sales includes the supply of BENDEKA and TREAKISYM to our commercial partners on which Eagle earns no profit.

On the expense front, R&D expenses were $14.3 million in the first quarter compared to $9.4 million in the prior-year quarter. Excluding stock-based compensation and other non-cash and non-recurring items, R&D expense during the first quarter was $13.1 million. The year-over-year increase was largely attributable to higher spend on Vasopressin, fulvestrant and RYANODEX. We expect R&D spend in 2021 on a non-GAAP basis will be $26 million to $30 million.

Anticipated 2021 R&D spend includes EA-114, CMC initiatives, the RYANODEX trials for the treatment of nerve agent exposure, EA-111 development activities and CMC and analytical initiatives and the launch preparedness for Vasopressin. These costs may be higher as we consider our plans to launch Vasopressin and gain more clarity on a fulvestrant clinical path. We will adjust the guidance accordingly as necessary.

SG&A expenses in the first quarter of 2021 totaled $19.9 million compared to $24.8 million in the first quarter of 2020. The decrease is primarily related to the non-recurrence of $2.5 million charge related to the time transaction and lower marketing, travel, entertainment and trade show expenses as a result of reduced travel due to the COVID-19 pandemic. Excluding stock-based compensation and other non-cash and non-recurring items, the first quarter 2021 SG&A expense was $13.4 million.

We are lowering our non-GAAP SG&A expense guidance for 2021 to $52 million to $56 million. This reduction reflects management's ongoing efforts to evaluate our operating expense during this transitional period. While we remain committed to the prudent management of our costs, we will continue to position ourselves to maximize our near-term growth opportunities.

Net loss for the first quarter was $0.4 million or $0.03 per basic and diluted shares compared to net loss of $2.9 million or $0.21 per basic and diluted shares in the prior year period.

Adjusted non-GAAP net income for the first quarter of 2021 was $3.2 million or $0.24 per basic and diluted share compared to adjusted non-GAAP net income of $11.7 million or $0.86 per basic and $0.84 per diluted share in the prior year quarter. For a full reconciliation of non-GAAP net income to the most comparable GAAP financial measures, please see the tables at the end of our press release.

As Scott discussed earlier, multiple aspects of our business continue to be impacted by the COVID-19 pandemic. We still anticipate a normalization of the oncology market as the pandemic abates. Our supply chain remains uninterrupted and we believe we can continue to advance our pipeline without delays. Our 2021 expense guidance continues to contemplate a near-term return to normal operations and no additional delays of key projects related to the pandemic.

As of March 31, 2021, the company had $105.2 million in cash and cash equivalents and $32 million in outstanding debt, so we had $73.2 million of net cash. We had $44.9 million in net accounts receivable. In the first quarter of 2021, we purchased an additional $1.4 million of Eagle's common stock as part of our $160 million share repurchase program. From August 2016 to March 31, 2021, we have repurchased $208.3 million of our common stock.

With that, I'll ask the operator to open the call for questions. Operator, please go ahead.

Questions and Answers:

Operator

[Operator Instructions] We'll take a question from Tim Lugo of William Blair. Your line is open.

John Boyle -- William Blair -- Analyst

Hi, this is John on for Tim. Congrats on the quarter and the progress. And thanks so much for taking our question. I was just wondering if you can give some color on the timing of any potential BD opportunities you might be thinking about. If we might see anything within 2021 or more likely looking something [Phonetic] to 2022. And maybe as a follow-up, how you're thinking about the sizing of any prospective deals? Thanks.

Scott Tarriff -- Founder, Chief Executive Officer and Director

Wonderful. Thank you. Good speaking to you this morning. Appreciate the questions. The timing of the licensing is probably in the near-term, I would say, this year clearly is the expectation where, as we mentioned in the call, we're doing a good job moving through diligence on a number of potential opportunities.

I would add that one of the aspects of it is that these are programs that we'll be able to fund out of current cash and future cash flow, which is tremendous. Depending on how the next few months go as we try to pull this together, we may be able to reshape -- additionally reshape the pipeline in the portfolio using existing assets to the company's existing cash, which could be very exciting if we can get it done. And so, sizing varies. Some of these products are pretty significant relative to the size of the company. Some of them are products that are already filed. Some of them are products that are in development, but it's a short-term growth opportunity as well as a mid and long-term. So let's just see what happens. And hopefully we'll have a good few months continuing to evaluate the opportunities and moving some of them forward.

John Boyle -- William Blair -- Analyst

All right. Thanks so much for the color and congrats again.

Scott Tarriff -- Founder, Chief Executive Officer and Director

Thank you. Good speaking to you. Thanks.

Operator

[Operator Instructions] We'll move now to Daniel Busby of RBC Capital Markets.

Daniel Busby -- RBC Capital Markets -- Analyst

Hey. Good morning. I have a couple of questions. First, on Vasopressin. Can you provide any guide rails on when you would expect to receive a decision from FDA following ANDA resubmission understanding that that's a priority for FDA? And what are the earliest and latest dates you would expect to hear back after resubmission? Second, can you talk a little bit more the expected cadence of royalty and milestone revenue in Japan beyond 2022? You talked about potentially hitting $25 million next year. I think that's a little bit earlier than you had previously communicated. So were there any one-time payments in that number that would result in a step down in 2023 and beyond? Thank you.

Scott Tarriff -- Founder, Chief Executive Officer and Director

Yeah. Thanks, Daniel. Appreciate it. So, in terms of Vasopressin, we can't give you a perfect timing. We think it's going to be, how can we phrase it, I would say relatively soon. It has been prioritized as a priority ANDA and then a COVID flag. And the conversations that we've had with the agency leads us to believe that it is a priority for them. So, what we've said is, I think, the best guidance that we can give because we don't have anything else to articulate other than -- we think that once we get this responded to in full here in the next short while that the approval will come well in enough time to get the product launch this year. And I wish I can give you more specifics but we can't, but that's our best understanding at the current time.

And then, in terms of the royalties, I'm going to turn that over to Brian. But what I will say is, SymBio has been doing a great job. They are running ahead of our internal schedules. They've been able to get the 10-minute filed quicker than we anticipated and they were able to get the -- which is a very significant expansion of their label approved well beyond our expectations and timing as well. So we're really just thrilled with the work that they're doing out of Japan.

And so, let me turn it over to Brian if he can give a little bit more color on the numbers.

Brian Cahill -- Chief Financial Officer

Sure. Hey, Dan. So, you see in our press release that the RTD has been approved with the RI on the way. We think that they'll elevate to that level of our royalty. We haven't disclosed our royalty percentage, but there's also an aggregate net sales milestone that we expect will also be achieved in 2022 to reach that peak.

Daniel Busby -- RBC Capital Markets -- Analyst

Okay. So, could there be a slight step down in 2023 when you remove the sales milestone from a modeling perspective?

Brian Cahill -- Chief Financial Officer

Slight? Sure.

Daniel Busby -- RBC Capital Markets -- Analyst

Okay. Thanks for the color, guys.

Brian Cahill -- Chief Financial Officer

Welcome, Dan. [Phonetic] Sure.

Scott Tarriff -- Founder, Chief Executive Officer and Director

Thank you.

Operator

Our next question is from David Amsellem of Piper Sandler. Your line is open.

David Amsellem -- Piper Sandler -- Analyst

Hey, thanks. Your willingness to settle that suppression, Endo's comments on their recent call suggested a willingness, so can you talk about whether you've engaged or are engaging in the dialog with Endo? That's number one. Number two is, just overall strategy. I mean, you're talking about licensing, is the strategy is still injectables and specifically 505(b)(2)s and Vasopressin is kind of an outlier because it's Paragraph IV. So just talk about, in general, Scott, with BD, where you want to take the business and what you're envisioning? Thanks.

Scott Tarriff -- Founder, Chief Executive Officer and Director

Thanks, David. Appreciate the call. So, look, the settlement, I don't know what to say about that. Of course, as we've stated in the past, we have an openness and a willingness to settle under the right conditions. Our belief is that it's our obligation to optimize the situation for our shareholders. And we believe we're sitting in a pretty good place. The CRL was unfortunate, but we have industry experts helping us. We've been through a meeting with the FDA. We believe we're confident in our approach that we're taking.

And we're going to submit to respond to that CRL completely here shortly. And because of the priority review -- two priorities really -- we expect that we're going to get it approved. We have the court case coming up in July 7. As I dialogued here earlier in the call, we're outside of the pH range. We're very confident in our position. I think that's going to become clear in that first week of July -- July 7, 8 and 9 when we're in the courtroom. So, we are in pretty good place.

We're open-minded, but we worked really hard at this. We've spent well over $25 million now bringing a first-to-file an ANDA to the market. And we have our nose to the grindstone, so to speak. And we think we're going to get an approval and a early court decision as well. And so, let's just see how that all works out. So, there you have it. It's just, I think, we're in a good strong position right now.

In terms of licensing, we're looking for unique product opportunities, not necessarily all in the 505(b)(2) space. What we're finding, I think if you step back and look at one of the significant strengths of Eagle is our footprint and our sales force capability in the hospital, in acute care, in oncology. And we're finding companies -- a number of companies quite frankly outside the US that have spent a lot of time and money in R&D over the years. And they've done a good job with the FDA here in the States. But they haven't -- they don't have the capability that we have of being able to market those drugs, sell those drugs and bring them through FDA or won some clinical trials that may still be needed. And so, what we're finding is opportunities to strengthen our hospital, acute care, critical care oncology portfolio by leveraging the strengths that we have and we're finding potential partners who match up with us well that need what we have. And let's see what happens.

Again, I think it's a little bit too premature, David. But we have opportunities that we're in, what I would call, pretty far along with that would strengthen the portfolio in the very short-term as well as providing us a further pipeline in the mid and long-term. And so, we're pretty excited that we could wind up strengthening our product offerings here pretty significantly. And the exciting part about it is being able to do it out of current cash flow and with our current financial resources, which would be wonderful if that's what we're able to achieve.

David Amsellem -- Piper Sandler -- Analyst

Great. Thanks.

Scott Tarriff -- Founder, Chief Executive Officer and Director

Thanks, David.

Operator

[Operator Instructions] We'll move next to Brandon Folkes of Cantor Fitzgerald.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Hi. Thanks for taking my question. Maybe just one from me. Can you just talk about sort of your manufacturing and scale up for Vaso should the decision come quite early? How quickly could you have products in the market? Thank you.

Scott Tarriff -- Founder, Chief Executive Officer and Director

Yeah, Brandon. Thank you. All I can say about that is, as we've stated, we expect to be in a position to be able to bring the product to the market this year. And I think that's all we can say at this point. But let's get it submitted here over the next short while. Let's go to trial here in the next short while. And then, I think the rest of it will take care of itself.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Great. Thank you very much.

Scott Tarriff -- Founder, Chief Executive Officer and Director

Thank you.

Operator

And it appears that we have no further questions at this time. I'd be happy to return the call to Scott Tarriff for any closing remarks.

Scott Tarriff -- Founder, Chief Executive Officer and Director

Well, thank you everyone. Appreciate it. And I think we're setting ourselves up really very nicely in the future with all these launches and potentially additions to the pipeline, plus what we're doing with nerve agents and fulvestrant. It's just going into a very exciting growth curve, I hope, for the company. And with the share buyback we've had over the years, I think we'll all be rewarded. And we're looking forward to it.

And so, thank you again for being on the call. We all appreciate it. Thank you.

Operator

[Operator Closing Remarks]

Duration: 32 minutes

Call participants:

Lisa M. Wilson -- Investor Relations

Scott Tarriff -- Founder, Chief Executive Officer and Director

Brian Cahill -- Chief Financial Officer

John Boyle -- William Blair -- Analyst

Daniel Busby -- RBC Capital Markets -- Analyst

David Amsellem -- Piper Sandler -- Analyst

Brandon Folkes -- Cantor Fitzgerald -- Analyst

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