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Eagle Pharmaceuticals, inc (EGRX -0.17%)
Q3 2021 Earnings Call
Nov 9, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, everyone. My name is Ashley, and I will be your conference operator today. At this time, I'd like to welcome everyone to Eagle Pharmaceuticals Third Quarter 2021 Financial Results call. [Operator Instructions] As a reminder, this conference call is being recorded today, November 9, 2021. It is now my pleasure to turn the floor over to Ms. Lisa Wilson, Investor Relations for Eagle Pharmaceuticals. Please go ahead.

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Lisa Wilson -- Eagle Pharmaceuticals, Inc

Thank you, Ashley. Welcome to Eagle Pharmaceuticals Third Quarter 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; and Chief Financial Officer, Brian Cahill. This morning, the company issued a press release detailing financial results for the three months ended September 30, 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 the beliefs, 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 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 November 9, 2021. 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.

With that, I'll turn the call over to Eagle's President and CEO, Scott Tarriff.

Scott Tarriff -- Founder, Chief Executive Officer, President

Thank you, Lisa. Good morning, everyone, and thank you for joining our call today. This is truly a very exciting time for Eagle. In the third quarter, we brought two -- we brought on two great assets, Calasu and Landiolol. We had a court victory on vasopressin, which we expect to gain approval for and launch shortly. And we are getting very close to bringing PEMFEXY to the market within 90 days from now. In fact, we just held our national sales meeting to prepare for two launches. It's a truly exciting time. With this momentum, we believe that we will be on the path to double our revenues and more than double our earnings in 2022 over '21.

Over time, we will evolve Eagle into a mainstream pharmaceutical company and continue to be a significant commercial organization in the hospital oncology space. With the launch of two products in the upcoming months, the company is at an important inflection point. Because we've effectively managed our balance sheet, building cash while building our pipeline, Eagle is in a strong position to take advantage of future opportunities and deploy the necessary resources to keep our company growing. The best way to articulate our next 18 months are as follows: assume for a moment, vasopressin is launched and we meet our profit targets. We would leave 2022 with a very significant cash position and no debt.

Thereafter, we will be waiting for the Landiolol approval, and we will be close to the interim Co two results, and we would be leaving next year with a new base of revenue and profitability. Our intention is to maintain the new level of profitability. And to do so, we will need to add to the portfolio and pipeline. Fortunately, we will be rewarded for managing our debt and cash so well over the years. Our plan is to make a meaningful acquisition for currently marketed products first. Our infrastructure and sales team can handle a significant increase in assets with little infrastructure investment. With this first acquisition in hand, we will then continue to in-license or acquire clinical assets. Our hope is that by the end of next year, this new level of profitability will again be in growth mode and also provide an enhanced pipeline.

The really exciting aspect of all this is that we should be able to accomplish this with little dilution or debt relative to our new planned growth. We have invested about 21% of our money back into R&D and still have about $123 million in net working capital. Our strategy to grow the company remains highly focused. During the quarter, we had diluted non-GAAP earnings per share of $0.56. Our baso present spend was $5.3 million, which is nonreoccurring and significantly brought down Q3. We expect a strong Q4 for the existing portfolio, heading into a strong 2022 as we launch vasopressin and PEMFEXY. With that backdrop, let me start with vasopressin, an important opportunity for us and what we expect will be a key contributor to our near-term growth once approved.

As those who have followed the story know, we had two hurdles to clear, one in court and one in terms of getting approval from the FDA. We cleared the first hurdle in late August when the U.S. district court for the district of Delaware ruled at our proposed vasopressin product does not infringe any of the patents par asserted against us. In terms of the second hurdle, on August 26, we received a 30-day information request from FDA, which is very positive, and we believe an information request at this point of the review process may be indicative that the ANDA is advancing toward an approval. The request they ask for questions repertain to clarifications and one question required additional analytical work.

On September '20, we responded in full to the request, and there are currently no other review requests. Based on this recent engagement and our prior FDA communications as well as that we have priority review and are also flagged as a COVID priority, we maintain our view of an anticipated approval on or before the December 15, 2021 PDUFA date. With that goal in mind, we've been building inventory and intend to launch into this lucrative market soon. Remember, in 2020, U.S. sales of VASOSTRICT were $785 million. We expect to have 180-day market exclusivity. We are really excited about this and hope to get good news very shortly. Now let me turn to PEMFEXY. On February 1, exclusive launch date will be here before you know it.

The ALIMTA market totaled nearly $1.3 billion last year, and this is clearly another great opportunity for us that will contribute to the significant revenue growth that we expect in '22. We are going into our exclusive launch on February 1, 2022, we are gearing up, building inventory, and we will be ready to go. Remember, too, that we have a unique J code from PEMFEXY. It's also worth noting that PEMFEXY is a ready-to-use liquid in contrast to ALIMTA, which requires dilution. If we look at vasopressin and PEMFEXY in the context of our company today, Eagle is a fully commercial clinical regulatory hospital oncology company.

We have a team of about 40 direct reps who call on oncologists, surgeons, anesthesiologists and hospital pharmacists on a regular basis. We have strong relationships. For vasopressin, the purchasing decision is made by the hospital pharmacists, and they are already our customers. Importantly, we can launch both products with little to no expansion of our existing infrastructure. And when you add in the bendamustine business, which I'll review next, that is how we plan to double our revenue next year. So now turning to bendamustine. We strengthened our patent protection for bendamustine in late August when we were granted a new patent, which was listed in the orange book. Our partner, SymBio, launched in Japan. The SymBio relationship is going well, and we expect a full or nearly full conversion to our product in the near term.

We also four expect royalty and milestone revenues of about $20 million next year. And now when we look at Calo two and Landiolol, we're also very excited about these two new assets we brought in during the third quarter, Calo two and Landiolol. As a team, when we think about the pharmaceutical industry and how to deploy our cash to bring value to shareholders, we look for opportunities that address unmet medical needs and have promising clinical potential. Calo two is a novel approach to the treatment of severe bacterial pneumonia. As you may recall from our Investor Day, we in-licensed the global rights to Calo two from Combi Oxone. We are preparing to continue the clinical development of CALO two by mid a eur 22. If it continues to perform well in larger clinical trials, we think this has the potential to be a groundbreaking advancement in the treatment of severe bacterial pneumonia.

We anticipate investing $25 million to achieve interim results, which are expected around the middle of '23. Turning now to Landiolol. While Landiolol is a novel therapeutic in the United States is a leading commercial product and has been used in the care of critically ill patients in Japan and Europe for years. It is covered by several patents, and we anticipate five years of NCE exclusivity. The good news here is that we don't believe we will have to run additional clinical trials. We anticipate filing an NDA in the first half of '22, seeking the approval of Landiolol for the short-term reduction of ventricular rate in patients with super ventricle tachycardia, including atrial fibrillation and atrial flutter. We will facilitate the U.S. regulatory pathway for approval and will be responsible for the U.S. commercialization upon approval. As you can see, we have a lot to look forward to.

And with that, I'll turn the call over to Brian Cahill to discuss our third quarter financials. Brian.

Brian Joseph Cahill -- Chief Financial Officer

Thank you, Scott. In the third quarter of 2021, our total revenue was $39.9 million compared to $49.9 million in Q3 of 2022. Product sales during the third quarter were $12.1 million compared to $17.3 million in Q3 of 2020. The decrease was partially driven by lower product sales of BENDEKA, Teva, on which we are no profit. BELRAPZO product sales were $4.9 million in the third quarter compared to $8.7 million in Q3 of 2020. The Eagle recognizes BELRAPZO revenue when shipments by Equal to wholesalers. Based on IMS data, Eagle's market share of bendamustine wholesaler shipments to end users with 7% of the U.S. bendamustine market for the third quarter compared to 5% for the third quarter in the prior year.

Third quarter RYANODEX product sales were $4.5 million compared to $4.2 million in Q3 of 2020. Orders for RYANODEX are cyclical, driven primarily by product expert. Q3 2021 royalty revenue was $27.7 million compared to $27.6 million in the prior year quarter, resulting almost entirely from BENDEKA for each period. Eagle's royalty rate on BENDEKA was 30% during the third quarter of 2020 and 31% for the third quarter of 2021. Royalty revenue also includes royalties earned from sales of TREAKISYM by SymBio. On the expense front, R&D expenses were $23.3 million for the third quarter compared to $4.8 million in the prior year quarter.

The increase is largely attributable to upfront payments for our Calo two and Landiolol licenses, which amounted to $15 million combined and an increase in development and prelaunch costs for vasopressin and PEMFEXY. Excluding the expense of acquired in-process research and development, stock-based compensation and other noncash and nonrecurring items, R&D expense during the third quarter was $7.6 million. We continue to expect our R&D spend in 2021 on a non-GAAP basis to be $34 million to $38 million. This reflects our launch preparedness strategy on vasopressin, reflecting our confidence in the near-term launch, as Scott discussed.

The anticipated 2021 R&D spend includes for the full year, launch preparedness and CMC initiatives for vasopressin, the RYANODEX trial for the treatment of nerve agent exposure, which occurred earlier in the year and eA 114 clinical and CMC initiatives. SG&A expenses for the third quarter of 2021 totaled $18.5 million compared to $17.7 million in the third quarter of 2020. This increase is primarily related to an increase in external legal costs, partially offset by a decrease in stock comp expense. Excluding stock-based compensation and other noncash and nonrecurring items, third quarter 2021 SG&A expense was $14.5 million. Our net loss for the third quarter was $5.6 million or $0.43 per basic and diluted share compared to a net income of $7.1 million or $0.52 per basic and $0.51 per diluted share in the prior year period.

Adjusted non-GAAP net income for the third quarter of 2021 was $7.5 million or $0.57 per basic and $0.56 per diluted share compared to adjusted non-GAAP net income of $16.1 million or $1.19 per basic and $1.17 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 of September 30, 2021, the company had $99.7 million in cash and cash equivalents and $28 million of outstanding debt. So we had $71.7 million in net cash. We had $45.3 million in net accounts receivable. In the third quarter of 2021, we purchased an additional $8.3 million of Eagle's common stock as part of our $160 million share repurchase program. From August 2016 through September 30, 2021, we have repurchased $219.4 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] And we'll take our first question from Brandon Folkes with Cantor Fitzgerald. Please go ahead.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Hi, thanks for taking my question. Maybe just two for me. Can you just elaborate on that one request in the city day information request for VASO. Do you believe the FDA has had time to work through it at this stage. So if there were additional questions, I would have come back to you. And then maybe just secondly, with two significant product launches coming in VASO and PEMFEXY. Can you just talk about your ability to get product into the channel, especially if there's a period of limited competition? And this is asked in sort of a bit of a macro backdrop, just given some of the larger supply chain challenges, I guess, we're carrying across the board.

Scott Tarriff -- Founder, Chief Executive Officer, President

Thanks, Brandon. So let me take the first question first. The information request was normal course and what's expected and when you get down to the end of an ANDA, that's part of the reason that we're hopeful here that we're going to get this approval here pretty soon on or before the PDUFA date. It's just normal questions you get is they're tidying things up. The information request was pretty minor. It was just clarifications. three of the four questions were clarifications. And the fourth one, they wanted another data point from us that we went into the lab. It took a couple of days to run in and we gave it to them. So that was back. I think we mentioned September 20, we responded. We had to get it to them in four weeks. We took three weeks.

And based on the discussions that we've continued to have, we are still -- the expectation internally, as you can see from the inventory build and the sales force meeting is that we're going to receive this approval on or before that December 15 date until you have it, you never know, obviously, but we're moving forward based on everything we know internally that we'll get this approval here soon, and we're ready to go. And for your second question is, obviously, this is so important to the company and to our shareholders to launch these two products. We've done everything that we could for quite a while now to be prepared for the launches and not run a foul of any supply issues. So as we sit here today, we're very confident that we have enough material, right product, vials, stoppers, corrugated, everything that we need to be able to ship the quantities that we've been talking about very effectively.

And what I keep reminding people, Brandon, as well, is we're not a generic drug company. We don't sell solely through distributors. We have 40 reps calling personally on people that need to make the purchasing decisions, either for the most part, the hospital pharmacist for vasopressin and for community oncology for PEMFEXY. These are people we call on every day. And we believe, I believe, especially our national sales meeting was very exciting. We have great relationship with these people. And I think we're going to do extremely well commercially. I'm very proud of the sales team. They're very well prepared between supply and capability. I think we're just going to do great. We're in the middle of building inventory. And I assume nothing goes wrong there. We're building quite a bit. We'll have enough for these launches. And we're expecting this doubling of revenue and more than doubling of earnings by the time we get through next year because of all of this.

Brandon Folkes -- Cantor Fitzgerald -- Analyst

Great. And Best of luck the PDO for next month.

Scott Tarriff -- Founder, Chief Executive Officer, President

Thank you. Thank you, Brandon.

Operator

[Operator Instructions] We'll take our next question from David Amsellem with Piper Sandler. Please go ahead.

David Amsellem -- Piper Sandler -- Analyst

Thanks. So just a couple of questions on vasopressin. Just looking at the commercial landscape. What's your sense for how crowded the market eventually will be over time? Just thinking beyond the initial 180 days. That's number one. And then number two is Endo, just yesterday announced the contract with Premier. So with that in mind, can you just talk about what you think you can do to sort of maximize your share given what Endo is doing with contracting and also to the extent that they have a ready-to-use formulation that they bring to market.

Scott Tarriff -- Founder, Chief Executive Officer, President

Yes. Thank you, David. Well, some of the questions a little bit harder. The long-term value of the market isn't perfectly clear for us. As you know, Endo has settlements, and we don't know what those settlements allow for acceleration clauses. I think they're -- it's mid a eur 23 when people come in, but we're not sure where they get accelerated to. And we don't know if there's a distinction. I mean you would hope that there's a distinction between people that get approved and people that don't get approved. As it's turned out, it's just a very difficult product. These peptides, these generic peptides are difficult. As I look back and eventually, when people see the FDA request to us, I feel confident that Eagle as a company did what they needed to do all the way along. And this, as we've said so many times, the delays have been due to new types of tests that the agencies required us to do.

And so over time, people will be coming into the market, obviously, when they come in is at exactly known. But what we do know, if you look at the landscape, nobody has a tentative approval yet. It's just a very difficult, and I would add a very expensive product to develop. And so we'll just have to see what happens on the long-term value. We're hopeful that it's a limited market for quite some time, and we have pretty significant value beyond the six months. In terms of contracting, you would expect the innovator to try to contract. That's built into our models and into our statements. It's also normal course of action. We would never have expected anything different, but we are very confident in the relationships with our customers and the feedback that we've had in our ability to sell product and to meet the share that we would expect.

And our view is we'll probably do better than the normal hospital analog for a generic to come into the market, primarily because of the strength of our 40 sales reps calling on hospital pharmacy all these years. So doesn't phase us, nothing unexpected, and we've accounted for all that. And the RTU, I don't know what to say that the RTU. We also don't believe that if they launch it, it's going to have impact on our on our sales and our numbers. We've taken into account. We've spoken to our customers about the RTU. We're just very confident to meet the revenue and profit numbers that we've articulated, and we're just excited and anxious can't wait to get the approval and get going.

David Amsellem -- Piper Sandler -- Analyst

That is helpful.

Scott Tarriff -- Founder, Chief Executive Officer, President

Thanks, David.

Operator

We'll take our next question from Tim Lugo with William Blair. Please go ahead.

Tim Lugo -- William Blair -- Analyst

All right, thanks for the question. Can you talk about how much manufacturing capacity you believe is out there for vasopressin like compound when we start to look at other entrants? And how much of a royalty you'll be paying out to your manufacturing and kind of how much of a burden will be going out to manufacturing so we can kind of figure out that net? And then maybe we could talk about just weakness in BELRAPZO during the quarter if there was anything that explains it? Is it just market erosion or anything else out there to call that

Scott Tarriff -- Founder, Chief Executive Officer, President

Yes. Thanks, Tim. Good to hear from you. The manufacturing and development of VASO has been -- it's a more challenging product because it's a peptide. So I would say that I can't comment on what other people have and their ability to manufacture and what the individual capabilities are of these companies. There's not a tremendous number of people that can do this kind of work, but there's contract organizations that can do it. We think it will be a limited year or two based on the fact that it's so hard to get the product approved. I mean, if you just -- what we've said before is we're now over just about $15 million in the cost to develop vasopressin.

There's a lot of work that needed to be done. And we think that other than people getting supply from the innovator, that the cost to develop these products is expensive. So the real question is, if you're fourth or fifth in the market, are you going to spend the type of money that we spend to get to the market, knowing that we were first to file. And so I think it's probably the approval cost that are going to make it difficult for people to readily come in. Impossible to tell exactly how many people. But I think this will be a relatively stable market for probably a year or more, not just the six months, but we'll have to find out. So that's the first question about the manufacturing. And Brian, what have we said publicly about our payments to our suppliers on both products?

Brian Joseph Cahill -- Chief Financial Officer

It's not a share. It's normal margin that what we have with the rest of our product, right. So the -- we do have some payments to our partners, Tim, but the margins that we get on it are about the normal margin that we have with the rest -- other than the royalty income, obviously, that we get from BENDEKA. So the margins are going to be pretty high on these two products, even after the payment. So I mean, very high relative to the industry, obviously. And keep in mind, what helps all that is that we're bringing these products and, quite frankly, future products like Landiolol into the market, into the company, without much additional infrastructure cost.

And that's why when we say we'll have the doubling of the revenue, we're going to have more than a doubling of the profitability because we're bringing in all these extra products, I would say, PEMFEXY, vasopressin, Landiolol, and we can probably add another product or two to the company with having minimal infrastructure expense. And so I think over time, if we're able to transact the plan that we have, you're going to see a tremendous amount of leverage on the bottom line, which is going to be just this great growth spurt for the company. And we have all the wherewithal in the world to go out and acquire additional assets with the way we've managed our cash and our balance sheet. So we're just very excited about getting this approval and driving top line and bottom line for several years. Just very excited about it. I think the other question you brought up, Tim was BELRAPZO.

And the BELRAPZO decline, Brian, is just quarterly. We expect Q4 to be a rather strong quarter for the company, push the new products away from that conversation for a second. Obviously, VASO and PEMFEXY are going to really drive these quarters going forward. But if you just look at our base business with BENDEKA and BELRAPZO and RYANODEX, we have slated a strong revenue quarter for those products in Q4, Q3 was just the way the chips fell with the products and the timing, but nothing to do with the core strength of the three products relative to the history that we've had with them. And then don't forget that Q4 was brought down considerably by the expense that we had. Q3 was brought down considerably because of the expense that we had with vasopressin in getting ready for the launch and having the trial. Right.

Tim Lugo -- William Blair -- Analyst

Well I'll be very excited to hear about the regulatory updates going forward.

Scott Tarriff -- Founder, Chief Executive Officer, President

Yes, we will, too. So between vasopressin approval and then the filing of Landiolol and getting interim results of Calo two. And then whatever we do now with our cash and bring more assets into the company. It's just -- let's go get this little ANDA approved and get on with things and go build the company into a bigger company than it is today.

Tim Lugo -- William Blair -- Analyst

It's exciting. Thanks Scott.

Scott Tarriff -- Founder, Chief Executive Officer, President

Thanks Tim.

Operator

And there are no further questions. I will now turn the call back over to Scott Tarriff for any closing remarks.

Scott Tarriff -- Founder, Chief Executive Officer, President

Thank you. Thank you again for joining us today. As you've heard this morning, we have a lot of exciting initiatives ongoing as we continue to evolve the company and solidify our position in the hospital oncology space. Look, we have strong cash position that's enabled us to bring to two significant assets and we have the exciting pipeline should have a great next year, really looking forward getting vasopressin on the market really soon, and we go into PEMFEXY inside of 90 days. And we'll update you as soon as we know, but we're excited and very hopeful that our next few years look incredible. So thank you again for joining.

Operator

[Operator Closing Remarks]

Duration: 31 minutes

Call participants:

Lisa Wilson -- Eagle Pharmaceuticals, Inc

Scott Tarriff -- Founder, Chief Executive Officer, President

Brian Joseph Cahill -- Chief Financial Officer

Brandon Folkes -- Cantor Fitzgerald -- Analyst

David Amsellem -- Piper Sandler -- Analyst

Tim Lugo -- William Blair -- Analyst

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