EGRX
#Thank you, <UNK>, and good morning, everyone.
At Eagle, we have been focused on executing a multi-pronged strategy to build long-term sustainable value for shareholders, and deliver best-in-class products for patients.
With our existing portfolio, we have identified opportunities to protect and expand our bendamustine and RYANODEX franchises by advancing solutions that fill unmet need in the marketplace, and which I will discuss in greater detail shortly.
And with our pipeline, we have multiple product candidates that offer promising formulations in several attractive markets.
In other words, we believe we have a solid business today with multiple opportunities for upside.
As you know, currently, we derive the bulk of our revenue from royalties on the sale of Bendeka, our RTD 50 ml, short infusion time formulation.
We have now decided to launch our 500 ml solution, which I'll refer to as big bag from now on.
If you recall in our agreement with Teva, we retained the rights to this product.
It is a liquid form of bendamustine that does not require reconstitution.
We will provide a more detailed view of the timing for launch shortly.
I'd like to point out that although earnings were lighter this quarter, starting during the second half of the year, we expect to see earnings estimates go up due to the anticipated launch of big bag if approved.
We decided to launch big bag for a few reasons.
First, we feel that there is a segment of the population that requires an alternative to TREANDA, at a reduced price point to Bendeka.
Second, this will provide us with more control over our revenue growth and help us manage our business better.
We expect big bag to be very profitable for Eagle, generating 2 to 3x the EBITDA per vial compared to Bendeka.
We continue to believe in Bendeka, and that is a tremendous product with many patient and caregiver benefits.
Teva is doing a very good job for us and we're pleased with their accomplishments.
We view the launch of big bag as being complementary, enabling us to provide additional value to a cost-conscious segment of the market, while at the same time allowing Eagle to increase profitability.
We will pay Teva a 20% royalty on gross profit for each big bag vial and continue receiving a 25% royalty on net sales of Bendeka.
And while we are on the subject of bendamustine, if you recall several years ago Bendeka was awarded orphan drug designation.
Surprisingly, however, we did not receive the 7 years of exclusivity that typically goes along with it.
We sued FDA over this and had our oral arguments in court last week.
It is possible the litigation results will be available shortly, perhaps 2 weeks to 2 months from now.
Our view has always been that Bendeka is entitled to the exclusivity based on the orphan drug designation.
Rather, moreover, we believe there is a reasonable likelihood that such exclusivity would mean that TREANDA generic product should not enter the market prior to December 22, rather than November 2019.
We will have to wait for the outcome of the litigation, but believe that the exclusivity is warranted and we're hopeful for a positive outcome.
In addition to protecting our bendamustine franchise, we focused on pursuing label expansion and additional drug delivery opportunities for RYANODEX.
We'll be returning to the Hajj in Saudi Arabia from August 17 to 23 to conduct an additional study for exertional heat stroke.
Our previous study in 2015 was shortened due to the unfortunate stampede that occurred as we began our study.
At that time we had collected data for 34 patients over the course of 1.5 days.
This year we plan to have 5 12-hour shifts accepting patients, and pad in an extra day to the front end of the study, and are hopeful that we can collect a more robust sample set with significantly more subjects.
We expect the data from this study will support the positive results of our prior work.
If successful, and depending on FDA's review time, we could potentially be on the market with an exertional heat stroke product for most of the 2019 season.
As I've mentioned in the past, we are also looking at the potential RYANODEX's treatment for nerve agent-induced seizures and seizure-related brain damage as an intramuscular injection.
Once again, we will be meeting with officials from the U.<UNK> military later this month to discuss our progress on this front and hope to advance our nerve agent and IM versions this year.
At this point, we have elected not to pursue a clinical trial for RYANODEX for the treatment of ecstasy and methamphetamine intoxication.
Importantly, we believe this patient population may be embedded within the EHS framework, and don't believe a separate trial is required at this time.
Instead we will focus our resources on the indications I just discussed, and several opportunities we are pursuing with other molecules and formulations.
We will continue to monitor the situation and update you as appropriate.
We are not altering our view of the long-term forecast for RYANODEX based on this.
Now turning to our other pipeline projects.
I am pleased to report that our Vasopressin ANDA, the first of 2 ANDAs in development, was accepted for filing by FD<UNK>
This product is the generic version of ANDA's original Vasostrict formulation.
Vasostrict had approximately $400 million in brand sales in 2017.
We believe that we are the first to file, which would provide us with 180 days of marketing exclusivity once approved.
A fulvestrant clinical study is ongoing.
It looks like we may have more subjects in the trial than anticipated, as the dropout rate has been lower than planned.
We expect to have the data available in the fall, and we remain on track to file an NDA early in the fourth quarter of this year assuming favorable clinical results.
Before turning over to <UNK>, please let me make a few comments on the quarter.
First quarter revenue was $46.6 million, EBITDA was $9.5 million and adjusted non-GAAP diluted EPS was $0.53.
We recognize that revenue in the quarter was lighter than anticipated and we believe there were a few factors at play: one, we had a limited short supply situation with Bendeka, the channel is now fully stocked and our second manufacturing site is now up and running; additionally, we expected there would be some significant orders at the end of the quarter, which didn't ship until the beginning of Q2.
We expect those sales to be reflected in Q2 results and have no effect on the year; three, RYANODEX sales should be stronger for the year overall.
Some degree of lumpiness in RYANODEX revenue is expected because it is driven by expiry of both the generic product and previously purchased RYANODEX.
June and July have unusually high amounts of expiry, and we anticipate strong months ahead.
And what you'll hear from <UNK> as well is that although we were heavier on R&D expenses in Q1, our full year R&D forecasts remain unchanged.
Based on these factors plus what I articulated regarding big bag, I'd like to repeat that we'd expect the second half of the year estimates for '18 to increase.
Overall, we believe there are significant opportunities this year to build value in our business, and exciting catalysts on the horizon.
With that, I'll turn the call over to <UNK> to review the first quarter financial results.
<UNK>.
Thank you, <UNK>.
In the first quarter of 2018 total revenue was $46.6 million compared to $76.8 million in first quarter 2017, which included a $25 million milestone payment from Teva.
First quarter RYANODEX product sales were $4.4 million, flat on a year-over-year basis.
RYANODEX market share in the first quarter is 57% in dollar terms and 34% in unit terms.
Royalty income was $35.8 million compared to $36.5 million in the prior year quarter.
Approximately, 4,500 units of Bendeka, which were shipped to Teva during the last week of March, were not shipped by Teva to wholesalers.
These units would have resulted in an additional $2 million in royalty revenue during the first quarter.
Gross margin was 75% during the first quarter of 2018 as compared to 77% in the first quarter of 2017.
As a reminder, the first quarter 2017 revenue figure included a $25 million milestone payment from Teva.
On the expense front, R&D expenses increased to $17.3 million for the quarter compared to $7.5 million in the prior year quarter, largely due to external clinical costs associated with the fulvestrant clinical study, which completed randomization of 600 subjects during the quarter.
Excluding stock-based compensation and other noncash and nonrecurring items, R&D expense during the first quarter was $15 million.
We are reiterating our 2018 R&D expense guidance, which we expect to be in the range of $46 million to $50 million.
This reflects ongoing expenses for: number one, the enrollment of fulvestrant in RYANODEX CHS clinical trials; number two, API outlays for the fulvestrant and Vasopressin programs.
And finally, additional development work on the RYANODEX nerve agent program.
Excluding stock-based compensation and other noncash and nonrecurring items, R&D expense would be in the range of $40 million to $44 million for the year.
SG&A expenses decreased to $15.2 million in the first quarter of 2018 compared to $18.6 million in the first quarter of 2017.
The decrease was due to the expiration of the Spectrum promotion contract at the end of June 2017 as well as a reduction in marketing expenses.
These reductions were partially offset by the increase in personnel-related expenses associated with the expansion of our sales force during the second quarter of 2017.
Excluding stock-based compensation and other noncash and nonrecurring items, first quarter 2018 SG&A expense was $10.5 million.
2018 SG&A expense is expected to be in the range of $61 million to $64 million.
Excluding stock-based compensation and other noncash and nonrecurring items, SG&A expense would be in the range of $44 million to $47 million for the year.
Net income for the first quarter was $2.6 million or $0.18 per basic share and $0.17 per diluted share, compared to net income of $22.9 million or $1.50 per basic and $1.42 per diluted share in the prior year period, due to the factors discussed above.
Adjusted non-GAAP net income for the first quarter of 2018 was $8.2 million, or $0.55 per basic and $0.53 per diluted share, compared to adjusted non-GAAP net income of $26.5 million or $1.74 per basic and $1.64 per diluted share in the prior year quarter.
For full reconciliation of non-GAAP net income to the most comparable GAAP financial measures, please see tables at the end of our press release.
Our EBITDA for the first quarter 2018 was $9.5 million compared to $38.2 million in the prior year quarter.
During the quarter, we completed $7 million in share repurchases as part of our $100 million expanded share repurchase program.
Since August 2016, we have repurchased $88 million in stock.
As of March 31, 2018, the company had $95.7 million in cash and cash equivalents and $53.4 million in net accounts receivable, $42 million of which was due from Teva.
The company had $48.8 million in outstanding debt.
With that, I'll turn the call back over to <UNK>.
Thanks again, <UNK>.
I'll close by reminding everyone that at Eagle we are focused on unlocking the potential in proven medicines through enhanced treatments and valued partnerships.
We are just getting started on our mission to maximize the full potential of treatments for patients and physicians and create unmatched value for shareholders.
To recap, the ODE case should be resolved shortly.
We believe that our bendamustine orphan drug designation entitles us to exclusivity through December of '22.
Between now and then, we have a strong base business that will be supported shortly with the launch of our 500 ml ready-to-dilute bendamustine solution if approved.
And the collaboration with SymBio covering Japanese rights to bendomustine ready to dilute and rapid infusion injection products.
And following this launch we have the [HS] and nerve agent trials for RYANODEX, which could add 2 new indications for next year.
We're also working diligently on a very promising transformation from an IV market to a subcutaneous market and could potentially have this filed and/or on the market next year as well.
The recruitment of our fulvestrant trial is going well, with results expected later this year.
And in addition to these 3 potential launches, our portfolio could include what we believe is the first to file formulation of Vasopressin, a second ANDA we are starting a biostudy for, as well as PEMFEXY.
We continue to build significant cash, are minimally levered and have the ability to add to our growth throughout ---+ through product or company acquisitions.
And as we have always done, we will continue to manage our cash prudently, so that we can invest in activities that maximize value for shareholders.
With that, I'd like to thank you for your continued support and open the call for questions.
Operator, please go ahead and open the line for questions.
You have 2 very interesting thoughts.
Look, first on EH<UNK>
You're right, we received a complete response back in July, and we've always ---+ we've had so many conversations.
We've always believed that we did what we were required to do.
I think at the end of the day it is really simple after having discussions with the agency and the back and forth, I think it really just comes down to an acknowledgment that we did what we needed to do and perhaps where we landed here is, a, we see it, but we prefer to have more than 34 subjects and why don't we get some more subjects, and we all concluded that the best way to do it was go back to the Hajj.
And you're right, the 2 trials, the one we ran in '15 and the one we're about to run in '18 are almost identical.
And I think it's just an acknowledgment that we wanted more than the 34.
If you remember, we originally wanted 100, maybe we'll, between the 2, we'll get closer to that.
Hopefully, we'll get back to the 100 here that we thought.
We'll just have to see how it goes.
And then get back to the FD<UNK>
But to answer the other question, we think that we're aligned, yes, we've had several meetings.
Last meeting was very positive.
And we believe that there's an agreement between the agency and Eagles to what needs to be done, and (inaudible) we will go collect the subjects.
And then as it relates to the second ANDA, I can give you a little bit more color, the second one does not require a Paragraph IV, it's an older generic that's been on the market for many years, and there's just ---+ only one competitor.
It's a hard drug to develop.
It requires a biostudy.
The size of the drug, a little bit under $200 million.
And we'll start that study here reasonably soon and as soon as we conclude the biostudy and assuming we pass, then we'll let everybody know what the product was and we'll file it with the agency.
So <UNK>, I would phrase it this way.
The ---+ what we all recognize that the difficulty of running a study like this is that you can't target a certain number of subjects, because the Hajj is only 4 days.
It comes to an end and you're done.
We can only recruit what we could recruit.
In this particular case, we've added a day to the beginning, and we've expanded the time, because it's so hot around the clock.
What we're being told by the people who go to the Hajj every year, the medical teams that we're working with, is that you can get heatstroke patients later into the night and so we've expanded ---+ excuse me, to 12-hour days from 8-hour days.
It would be ---+ in the perfect world we would wind up with a p value of 0.05 or better, that would be the easiest way to the quickest approval.
Our last study with only 34 patients was really strong, our p-value was at 0.08 and if you extrapolate out and when the statisticians do what they do, if we had somewhere between 70 and 100 patients, our .
08 would have dropped down below .
05.
I think there's recognition at the agency as well that there's other really very positives in our data, and so there's no real specific number.
It would be great if we can get at least another 65 or so.
Even if we wound up with another 35, and now we had 2 confirmatory studies with similar results, assuming that the results are similar, I think we have an excellent chance at approval.
I think the key isn't so much around the numbers, but the results.
And if we wind up with a second study with similar response as we did the first time, I think we're in excellent shape.
And that's where the focus really should be.
But if there's no stampede, if nothing happens this time, there's no reason to think that we shouldn't achieve more than enough subjects to make it extremely robust, to add it to the first study and put us in really strong chance of a approval and launch in the summer [for] next year.
Yes.
I think we can do that, <UNK>.
We've always had the right to launch big bag, as you know.
We're thrilled with what Teva had done for us but big bag is a very profitable opportunity.
There's quite a bit of upside for us by launching and with or without the ODE decision, I think it makes sense to launch it.
As I said in my script earlier that it's profitable, and at the same time it winds up helping us manage our business.
I don't think it would really matter to us if we win the OD or not win the OD, we would've made the same decision.
But if we have 5 years of exclusivity going forward, you can see how these 2 together could create some value for us that we shouldn't pass up, and take advantage of it.
And as I said, it's complementary to everything that we're doing with Bendeka.
Bendeka is a great product, but there's a portion of the population that I think would want this opportunity of a ready-to-dilute product.
And we're going to take advantage of it and go launch, and needless to say, we're pretty excited about it, and thrilled about the future of bendamustine.
I don't think we're ready, <UNK>, to give you a forecast or guidance on the sales.
I think we're just going to go out, we'll launch.
It'll be a meaningful launch for us.
Bendeka is first and foremost in our minds and the most important product in the mix for us.
It offers really strong patient benefits.
There is a segment of the market that I think would like big bag, and we'll go after that.
But we really do believe this is complementary to everything that Teva is doing for us, and our focus is on growing the value of Bendeka.
We'll support that with the big bag launch, and it doesn't take a lot of big bag sales because of the economics, to have a positive impact on the company.
And that's why we think our earnings will be going up now because of this launch.
But you know, it's ---+ Bendeka is really very important to us.
Yes, so <UNK>, we are ---+ look ---+ and we think about ourselves as being very opportunistic management here.
ANDAs are not a core part of our business.
We don't see ourselves in any way as a generic drug company.
We're a specialty company.
We're very proud of the improvements in Bendeka.
We're extremely proud of the potential improvements of exertional heat stroke nerve agents and then fulvestrant.
Having said all that, we do have these 2 NDA's that are ---+ were unique and took a lot of effort and skill along with our partner to get the drug this far and to ultimately get it on the market.
I think it's our job to optimize the value of these assets.
As you can see by the launch of big bag today and the expansion in new clinical trials for exertional heat stroke, we'll monetize this asset in the best way possible.
If it means launching it, well obviously we're equipped to launch it with our sales force.
If it means [settle], if that's in the best interest of our shareholders, we'll do that.
But right now we're just thrilled to find out that we were able to get it through FDA to this point.
And to wind up seeing what appears to be first to file and ultimately enjoy that 180 days that comes along with it.
So it's ---+ for our shareholders it's wonderful.
And I would tell you, we didn't spend a heck of a lot of money to get to this point.
So all good there as well.
No, I don't think it's really changed, <UNK>.
The point that I would make on this topic is that we, as a forward and management team, expect that we should be able to grow this company for many, many years to come.
And based on the fact that we are so unlevered, such an unusual situation in the industry right now, we're building significant cash, we have significant cash, we have a nearly unlevered balance sheet.
If we add some time to the bendamustine opportunity with a successful exclusivity situation with the orphan drug position that we find ourselves in.
You layer on the pipeline, depending on the level of success that you have in the pipeline, we are moving 7 products forward in clinical now this year.
So you should be able to grow this company year-after-year, for some time if things go well.
But we do have the ability to acquire.
And so what could we acquire.
We can acquire products, we can acquire clinical programs, we could acquire companies.
I think it all depends on how things unfold as we move through 2018, when we see where we are with all of these programs that we discussed today.
And depending on how they move along, we could be in a position to accelerate the growth of this company significantly if we choose to.
And I guess the point is, that we're making is, that we believe we have quite a bit at our disposal, quite a bit going on this year, and we could very well be in a position to continue to add opportunistically what you see today and what we could still do that's unknown to make sure that this is a great growth story going forward.
We are very proud of our accomplishments since we went public in 2014.
It's been a great growth story since then and we're going to do everything we can to continue it.
You know what, I really can't, Greg, but thank you for the question.
When you are in the middle of these things, there's really not a heck of a lot that you can say.
I think some people in the industry have done a really nice writeup that our investors have looked at or may want to refer to.
But what I can tell you is that historically, the designation attached itself to the exclusivity.
And at the time that we went through all that work with the FDA, they gave us the designation when we were working with the orphan drug group all those years ago, we had no reason to believe that the designation and the exclusivity would be separated.
And really our argument is just that, we do have the designation, we did get the drug approved for the indications that went along with the designation and we simply believe that, that exclusivity should follow.
And then we'll see what happens, right.
We'll know in the next week or 2, up to 2 months or so, and we'll find the answer.
Yes, that's a very good question.
And perhaps, I don't know fully what the competitors in the industry are doing.
I can tell you it was difficult on a number of levels.
I think the people that I've spoken to since we made the announcement, I think there has been general surprise in the industry that someone hasn't filed an ANDA for this before.
I can only assume that there are people behind us.
How many is hard to tell.
But you're right, I think this is one of those markets that's a little bit more difficult than others or you would have seen an ANDA previously, and it wasn't the easiest thing to do, and hopefully it'll work out for our shareholders pretty well.
We're not aware of any other bendamustine competition in the near term.
We believe that, first, Bendeka, which is the only liquid on the market today, is protected by hopefully 7 years of exclusivity, if we're successful here with the ODE.
But don't forget we have 13 patents protecting our formulation.
And we expect those patents to hold up.
They run from '31 to '33, and most of and many of those patents also cover the launch of big bag and hopefully, that will be covered by this orphan drug exclusivity as well.
So people need to get around the patent, they need to get around the exclusivity if we get it, to come to the market.
And so I think we are in pretty good shape from a competitive standpoint going forward.
Yes, it's a very good question.
So if you take the first question, the first part of it first.
Look, there has been a concern over the years that starting in 2020, we have a dip in our royalties coming from Bendeka because of additional competition.
We've never thought that ---+ so we thought, if you've noted in the past, we've always said that we thought we'd lose maybe 30% of our royalty.
And we've always believed that our pipeline, that we've discussed today, is far ---+ large enough to overcome that decrease.
And that we would be a growth company out in time regardless.
If that dip does not come, everything that we do here is additive.
It also gives you more certitude in running the business, because you're not going to have to worry about the order of magnitude of that decrease, or that ---+ if it's going to happen or not.
And it just gives you certitude, gives you the comfort of knowing that you have 5 years to build your runway, and it will just make it easier to run the business.
But I don't believe there's any major strategic change to the company.
We'll continue to move the 7 projects along with or without the exclusivity.
We believe that with even moderate success in the pipeline we'll grow this company for many years to come.
We'll obviously have a little bit more cash than less cash, if we have the exclusivity.
But with an unlevered balance sheet, nearly completely unlevered, the cash that we have and the royalties coming from Bendeka, now big bag.
I think there's more than enough opportunity with or without it to make sure that we continue to grow this company.
And as a management team, we are very focused on making sure that this is a growth company for many years to come.
It'll be easier with the exclusivity, but we'll still do really very well under either circumstance.
Yes.
Look, it's very minor changes, Tim.
You can ---+ everybody can go back and take a look at it.
We filed on the original product.
The only changes that were made, there's a little change to pH, there's a little bit of a change to preservative.
It's essentially the same product.
There is no medical benefit between the new Vasostrict and the old Vasostrict.
There's no patient benefit, there's no medical benefit.
And I think it was probably done to give a little bit more patent life, which is part of the reason why we decided to file on the old one, as opposed to the new one.
And we believe that we'll be extremely successful in converting the market to our ANDA, assuming we get the product to the market, especially during that period of time that we're exclusive.
Well, look, I'll tell you that from my view and I know many of us here at the company, we see the sales force that we now have as being very strategic to this company.
And hopefully, we'll get these products through the pipeline and we'll grow our sales force.
And it's a big change for the company to where we were couple of years ago, is having the ability to bring more products into the company and utilizing that sales force.
We're thrilled about the people in the sales team that have joined us.
They are very talented individuals with a lot of experience in the hospital and in the channel.
And so we believe we have every capability of launching this product on our own, very successfully.
And we will do that if that's the decision that we make.
I would say, Tim, as well, I think the point that you're getting is, I would not rule out Eagle bringing in additional opportunistic products like this, because we do have a certain level of talent here.
We're very good at filing patents.
I think we're very good at getting around patents.
We're very good at coming up with tricky formulations, being able to get hard products to the market, which we've been doing since the company was in existence.
And now you layer on the sales capability and the marketing capability that we have here.
There's no reason if we find opportunities like this that we could just easily bring into the company to find additional value for our shareholders, there's no reason to pass up on those opportunities.
And I think it's likely that we'll continue to announce situations like this, where we believe we have an unusual capability of bringing value to the company.
Thank you, everybody.
Appreciate the time you spent on the call with us.
