EGRX
#Thank you, <UNK>, and good morning, everyone.
In 2017, Eagle continued to develop best-in-class injectables for patients and caregivers and drive value for shareholders.
Since going public in 2014, we have delivered significant year-over-year growth in both revenue and EBITD<UNK>
We were profitable in '15, generating EBITDA and non-GAAP EPS of $7 million and $0.41, respectively.
EBITDA then grew to $64 million in 2016 and now to $96 million in 2017, reflecting an additional 50% growth.
And during the same time frame, our non-GAAP EPS rose from $0.41 in '15 to $2.79 in 2016 and now up to $4.34 in 2017.
I'd also like to point out that we've experienced profit margins ---+ expanded profit margins over the same period due to our significant revenue growth coupled with our operating leverage.
The company's EBITDA margin for '17 was 40%, up from 34% in 2016 and 10% in 2015.
I think you'll agree that our historical performance has been extraordinary.
Based on our ability to provide growth from our current assets in our portfolio and the opportunities to leverage our balance sheet, 2018 could be another year of continued growth for Eagle.
Combined with the strength of our pipeline and some key upcoming catalysts, we expect the business will continue to deliver strong results.
I'd like to recap a few highlights of the year before we turn to a discussion of what's ahead in '18.
First, we delivered record revenue of $237 million, primarily on the strength of our bendamustine formulation, Bendeka, for which, we received milestone and royalty payments from Teva, and have license rights to SymBio in the Japanese market.
We also advanced multiple pipeline programs, including the fulvestrant clinical study, which we began enrolling during the fourth quarter of last year, and we are very pleased to report that last week, we completed enrollment and randomization of subjects ahead of the schedule at our 12 sites.
And are on track, if successful, to file an NDA early in the fourth quarter of this year.
We received tentative FDA approval for PEMFEXY, our pemetrexed injection, the first company to do so using the 505(b)(2) pathway.
We announced positive results of an initial study of RYANODEX for the treatment of nerve-aging induced seizures and seizure-related brain damage.
And we expanded the pen portfolios for our bendamustine and dantrolene formulations to strengthen our protection of these product families for existing and potentially new indications.
Our strong cash position during the year enabled us to strategically buy back more than $44 million in Eagle stock in addition to the $37 million of buyback in 2016 for a total of $81 million, reflecting our continued belief in the potential of our business to deliver value over the long term.
I'm also excited to report that we have agreed on a path forward with the FDA for an additional clinical trial for RYANODEX for exertional heat stroke.
The trial will be conducted in August of this year, during the Hajj pilgrimage, similar to the study we conducted during the Hajj in 2015.
We are confident in our ability to run the study and are excited that we can now proceed with our work on EH<UNK>
We anticipate similar positive results and hope that, this time, conditions on the ground will allow us to recruit more subjects.
We believe we have collected a very strong data set over the years for this life-threatening condition and that the new Hajj study will support earlier data.
If all goes as planned, the study will be started and completed within a week.
The Hajj this year will be held starting on August 19.
If successful, and depending of the FDA's review time, we could potentially go into market with an EHS product for most of the 2019 season.
And as we begin 2018, I am pleased with the overall momentum in other areas of the business as well.
Our priorities for the year are as follows.
We intend to file our most advanced programs.
I am pleased to announce that we filed an ANDA this quarter for the first of 2 assets in 2018 and are awaiting FDA acceptance of the filing.
If accepted for filing, we will provide you with more details about the product.
An additional asset is being developed, and we anticipate a submission during the second half of the year.
The combined branded sales of these 2 products are $500 million and growing.
With our fulvestrant trial now fully enrolled and randomized with 600 subjects, we are on track to file an NDA early in the fourth quarter of the year, pending the outcome of the study.
This product has worldwide branded sales in excess of $1 billion.
Our work with RYANODEX continues on multiple fronts.
In addition to exertional heat stroke, which I just discussed, our efforts to develop an IM injection and other potential indications are moving forward.
We expect to be able to update you on these efforts in the coming months.
And lastly, as we evaluate our opportunities, we will focus on optimizing our financial position and utilizing our cash strategically.
To that end, we solidified Eagle's Biologics business.
We have been very pleased with the acquisition of Arsia and took the opportunity to settle the $48 million of potential milestone obligations in exchange for $15 million in cash.
Our total investment in Eagle Biologics is $45 million.
Drs.
Langer and Klibanov have signed long-term consulting agreements with us and will continue to advance their work, which holds tremendous promise for Eagle to develop biobetters in the fastest-growing sector of the industry, and they will continue working with us across the full range of Eagle products.
We also intend to continue purchasing Eagle shares as part of the board-approved share repurchase plan.
Since August 2016, we have completed the repurchase of approximately $81 million in Eagle stock, an additional $94 million remains authorized, and we plan to continue to opportunistically purchase shares.
We believe 2018 could very well be yet another transformative year for the company.
With that, I'll turn the call over to <UNK> <UNK> to further update our fourth quarter and full year financial results.
<UNK>.
Thank you, <UNK>.
As <UNK> mentioned, we posted a record 2017 on multiple fronts: revenue, EBITDA and EP<UNK>
Let me begin with a review of the quarter.
The fourth quarter 2017 total revenue was $46.8 million compared to $81.1 million in Q4 2016, which included a $40 million milestone payment from Teva.
Product sales were $10.4 million compared to $9.1 million in the prior year quarter, driven by increases in Bendeka and RYANODEX, partially offset by a decrease in Argatroban.
Fourth quarter RYANODEX product sales were $4.6 million, up 20% on the year-over-year basis.
RYANODEX dollar market share rose from 53% in 3Q to 70% in 4Q.
And Ryanodex unit market share rose from 29% in 3Q to 48% in 4Q.
Royalty income increased as well, to $36.4 million, as a result of the increased market share on Teva sales of Bendeka as well as an increase in the royalty rate from 20% to 25%.
On the expense front, R&D expenses decreased $6.8 million to $9.4 million for the quarter compared to $16.2 million in the prior year quarter, largely due to lower levels of API purchases.
SG&A expenses decreased $4.2 million to $13.4 million in the fourth quarter of 2017 compared to $17.5 million in the fourth quarter of 2016.
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.
Net income for the fourth quarter was $9.1 million or $0.61 per basic share and $0.58 per diluted share compared to net income of $57.3 million or $3.75 per basic and $3.52 for diluted share in the 3 months ended December 31, 2016, due to the factors discussed above.
Adjusted non-GAAP net income for the fourth quarter of 2017 was $15.6 million or $1.05 per basic and $1 per diluted share compared to adjusted non-GAAP net income of $17.2 million or $1.12 per basic and $1.05 per diluted share in the prior year quarter.
Turning now to our full year results.
In 2017, we grew revenue 25% to $236.7 million compared with $189.5 million in 2016.
Total product sales reflecting all Eagle products increased $4.7 million to $45.3 million during the year compared to $40.6 million in 2016, driven primarily by a 50% increase in RYANODEX sales to $17.5 million.
Royalty income increased to $153.9 million compared to $99 million in 2016 due to increased sales of Bendeka and an increase in the royalty rate from 20% to 25% effective in the fourth quarter of 2016.
License and other income was $37.5 million in 2017 compared with $50 million in 2016.
License and other income reflects payments received for achieving certain contractual milestones in connection with Eagle's Bendeka licensing agreement with Teva as well as an upfront payment in 2017 associated with the SymBio collaboration covering Japanese rights for bendamustine products.
Gross margin expanded to 76% in 2017 as compared to 71% in 2016, despite a significant decrease in the continuing contribution of milestones to the overall revenue.
On the expense front, R&D expense increased to $32.6 million in 2017 compared to $28.3 million in 2016 as a result of our development efforts to advance multiple product candidates, including fulvestrant, for which we commenced a clinical trial in the fourth quarter 2017.
Excluding stock-based compensation and other noncash and nonrecurring items, 2017 R&D expense is $27.6 million.
2018 R&D expense is expected to be in the range of $46 million to $50 million.
This reflects ongoing expenses for the enrollment of fulvestrant and Ryanodex EHS clinical trials as well as API outlays in anticipation of the 2019 launch of fulvestrant if approved.
Since we were able to complete enrollment in the fulvestrant study ahead of schedule, a larger portion of our full year 2018 R&D spend will be expensed during the first quarter of 2018.
Excluding stock-based compensation and other noncash and nonrecurring items, R&D expense in 2018 would be in the range of $39 million to $43 million.
SG&A expenses increased in 2017 by $18.1 million to $71.4 million in 2017 compared to $53.3 million in 2016.
The increase in SG&A expense is related primarily to: number one, increases in personnel-related expense due to the expansion of our sales force throughout 2017; number two, marketing expenses associated with prelaunch EHS disease state awareness initiatives; number three, increased external legal expenses; and lastly, staff additions incurred to support expansion of the company.
These increases were partially offset by the exploration of the Spectrum promotion contract at the end of June 2017.
Excluding stock-based compensation and other noncash and nonrecurring items, 2017 SG&A expense was $56.9 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 for 2018 would be in the range of $45 million to $48 million.
For the full year, the company recorded a net tax expense of $21 million compared to a benefit of $28 million in 2016.
The tax expense in 2017 was favorably impacted by the recognition of federal R&D tax credits and the impact of employee stock option exercises.
These favorable impacts were partially offset by an adjustment to Eagle's net deferred tax asset to reflect the impact of recently enacted federal tax reform legislation.
The tax provision in 2016 was impacted by a reversal of a valuation allowance, which had been carried against the company's net deferred tax assets.
We anticipate the tax reform will positively impacted Eagle's tax expense beginning in 2018.
For 2018, we estimate a combined effective tax rate of 24%.
Net income for the year ended December 31, 2017 was $51.9 million or $3.44 per basic and $3.27 per diluted share as compared to net income of $81.5 million or $5.24 per basic and $4.96 per diluted share for the year ended December 31, 2016 as a result of the factors discussed above.
Adjusted non-GAAP net income for 2017 was $69 million or $4.57 per basic and $4.34 per diluted share compared to adjusted non-GAAP net income of $45.9 million or $2.96 per basic and $2.79 per diluted share in 2016.
For a full reconciliation of non-GAAP net income to the most comparable GAAP financial measures, please see the table at the end of today's press release.
Our adjusted EBITDA for 2017 was $96.2 million compared to $63.9 million in 2016, reflecting an increase of over 50%, and is particularly noteworthy considering that the company earned only $38 million in milestones during 2017 and $50 million in milestones during 2016.
Our EBITDA converts especially in the cash flow.
For example, in 2017, our cash flow from operating activities, excluding the increase in net accounts receivable, was $71 million.
In 2017, we completed the $75 million in share repurchases authorized by our board in 2016 and expanded the program by $100 million during the third quarter of 2017.
Through December 31, 2017, we had purchased $5.8 million as part of the expanded program.
As of December 31, 2017, the company had $114.7 million in cash and cash equivalents and $53.8 million in net accounts receivable, $40 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, <UNK>.
To recap, 2018 could very well be another significant year for Eagle, with multiple potential filings and additional revenue opportunities.
We filed an ANDA for our first of 2 assets in 2018, with the second filing planned for the back half of the year.
With our fulvestrant trial now fully randomized, we are on track to file an NDA in early Q4 of this year.
And importantly, we continue to work with our RYANODEX portfolio, which, we believe, has the potential to treat multiple hypothermic conditions.
There remains a high-clinical need in the market to treat these conditions that have not been adequately addressed.
We are encouraged by our agreement with the FDA on a likely plan for exertional heat stroke, and remain hopeful that our ongoing discussions with FDA and our clinical work will allow us to continue to advance RYANODEX for these important indications.
With that, I'd like to thank you for your continued support and open the call for questions.
Operator, please go ahead.
Thanks, <UNK>.
Thanks for asking the question.
Okay, that's a lot.
Let's start at the beginning.
So the RYANODEX design is very similar to what we did in '15.
So in essence, what we will have is it's 2 groups randomized, half will receive standard of care, which is cooling and fluids, and the other half will receive standard of care plus RYANODEX.
The primary endpoint is identical as to last time, the Glasgow Coma Scale, so no difference.
It's basically once again standard of care versus RYANODEX.
Are we surprised with our conversation since July.
I would say, no.
Look, at the end of the day, I think, when you get right down to it, there was a desire for more data compared to what we had in the past.
So we're going to back and essentially conduct a similarly designed study as we had before.
Does that answer the question well.
Well, look, I don't know the answer to that fully, <UNK>.
But what I will say is, I think, we can all take quite a bit of sense of accomplishment that the outcome of the study, the design of the study, is pretty similar to what we did before.
So there weren't any major significant changes.
We are still randomizing patients' standard of care versus RYANODEX and using the same primary endpoint.
So as I said, I think, it just comes down to wanting more than what we had.
I think it's really nothing more complicated than that after the 8 or 9 months that we've been discussing this with them since the CR<UNK>
And on ANDAs ---+ yes, go ahead.
So on the ANDAs, there are 2 products, as we've mentioned in the past, combined.
Their sales are $500 million and growing, right.
So it's a growing collective market.
These are 2 markets where there is only one competitor in each of the markets, and so there's only one player.
So call it whatever you want, a branded generic or branded product.
These are 2 markets combined $0.5 billion, each of the 2.
There's only one competitor today.
One will be litigated likely and one will not.
As for other filers, we don't know.
It's hard to tell.
We may be the only filers in both, but there's no way to know until the product is accepted and we get a little deeper into it.
But there are no other current players in these 2 markets.
That's correct.
I think, <UNK>, we're still thinking through all of the possibilities for RYANODEX going forward.
What we do know is that there is a real need for RYANODEX in both disease states, right.
As we look at it, what exactly is what we define as DIH, it's very interesting.
What we believe that all of these disease states and others that we have not discussed yet with the investors, there are a number of diseases that the medical community believes is caused by this calcium overload.
And essentially to us, as we look at all the research that's being done around the world, and specifically in the patients that we're looking at in EHS and DIH, that's really hard to discern a differences between ---+ a difference between the disease.
So for instance, if you have someone that you suspect of having exertional heat stroke, which is 104 degrees and some confusion, we'll call cause that exertional heat stroke, but we also don't know if they have traces of amphetamines in their system.
And so as we continue to look and we continue to research, we feel very confident now in the path forward for exertional heat stroke.
Going back to the Hajj now in August and hopefully getting that product filed this year and on the market early next year depending on the review time, we'll continue to monitor our thoughts about the amphetamine process.
We're clear that eventually the product ---+ our product, RYANODEX, will be used in both.
And we'll just see now how we decide to go forward with them, and we'll report back here you know over the next weeks.
Not necessarily.
Let's ---+ I think we need some time to be able to respond better.
We do have our clinical trial open.
We have some of these music festivals coming up as soon as late March, where, we think, we have a lot of subjects to collect in the hot weather.
And we're going to continue to look at that and see how we're going to handle the label.
Clearly, we need a product on the market that treats both the symptoms of calcium release in malignant hyperthermia, which we have exertional heat stroke, and then to these people who predispose to the same disease state once they take amphetamines.
And again, we'll report back more detail as the weeks progress.
So we'll report, <UNK>, on how we're doing with the Biologics business regularly.
You'll see news flow coming out of the Eagle over the course of this year about what we're doing.
This technology ---+ there's 2 very important aspects to this acquisition.
First, the technology in viscosity reduction of biologics can be used in so many ways that will benefit patients and our shareholders.
We have the ability with this technology to help branded companies with first-time biologics lower their viscosity.
What does that do for them.
We're seeing situations where we're having discussions about reducing the number of injections.
We're having discussions about how to take subcu ---+ IV drugs turning them into subcu drugs.
And we also have the opportunity, as we discussed in the past at great length, is going to the biosimilar market and taking some biosimilars and giving those individuals a chance to have a leg up on their competition and take these IV biosimilars to a subcu route.
We can also go to biosimilars that have multiple injections and reduce the number of injections as a way to improve the products in the biosimilar space.
We continue to work on molecules in-house on our own for a proof of concept and to have animal data and tox data and then take it forward to biosimilar companies and branded companies.
So far we're very pleased with the progress we're making and the reason that we decided to buy down those milestone obligations now.
And we believe that this technology and this capability will be a significant leg of Eagle's growth as we start to get to the later stages of the current products that we spoke about today in the pipeline.
And so these are products that will come to the market 4 or 5 years from now.
But hopefully, starting this year and going forward, we'll start to sign deals.
We see milestone payments and so forth as a way to bring value into the company in the near term.
Very, very excited about this acquisition.
Couldn't be more pleased since we made it.
And then second to that, what we now have is, what I will refer to as, a stake in the ground in Cambridge, which is just for our industry, just a remarkable place to do business.
We have some very talented PhDs.
And we have access to some very talented people at MIT.
And quite frankly, they are helping us with our entire pipeline and our portfolio.
They've helped us with fulvestrant.
They are helping us with IM version of RYANODEX.
Dr.
Klibanov are about the most brilliant minds in our industry.
And having them helping us and consulting with us regularly has been just wonderful.
And so we're thrilled with this acquisition.
And as we sit here today, I'm very confident that we will see significant value coming out of this acquisition in the years to come.
And you'll start to hear more about it as the year progresses as well.
This is <UNK>.
Thanks for the question, Tim.
What <UNK> was referring to is that our position at the moment is we're a somewhat obvious asset gatherer, given the environment and given our balance sheet and given our presence in hospital infrastructure, and so we do look a lot of opportunities.
As we mentioned, when we last spoke the hurdle rate is quite high.
And it's high because, candidly, it needs to compete with buying back our own stock, which at these levels, in our view, is quite compelling.
So we continue to look at assets that would fit our infrastructure, either late stage or commercialized.
But candidly, if our pipeline develops the way we hope and expect it to in 2018, we have our hands full from an operating perspective.
So Tim, I think, the bendamustine market did rather well in '17.
I think the Teva team from a marketing standpoint did a truly excellent job positioning bendamustine against the other competitors that we've been speaking about coming into the market.
Bendamustine just happens to be a great drug.
Its safety profile over the years has been really very important and very significant.
Its price point is really very positive.
And at the end of the day, patients perform very well on bendamustine.
And so the volume ---+ I think if I recall the range that Teva provided at the early part of '17 that we are all a little bit surprised about by the time they came in at the very upper end of that range.
And volume on bendamustine for the year was down just very slightly, far succeeding our earlier projections.
And so I don't see any reason to believe that bendamustine is not going to be a mainstay in CLL and NHL and do very well till the end of the time that we have the product on the contract.
And so we're very pleased with what they've done.
I think we all should be.
And so yes, they're doing a great job.
It's hard to say, Tim, because it's an odd study to run from the standpoint that we can't hang around the Hajj and keep dosing patients until we get to a certain number of patients.
It's 4 days.
We got to 34 patients last year in about 1.25 days until the stampede happened.
I remember speaking to our team in that first day, and we thought that the pace of recruiting would have gone over about 120 had we not had the stampede.
I would say this time around, if we would get 70 ---+ 60 or 70 patients, we'd be very pleased.
But it's out of our control.
We'll just have to run the study the same way we did last time, hopefully, to work out the same way, take out a unusual event that did not occur again in '16 or '17.
If '18 is a clean year, we should meet more than enough subjects to do what we hope to do.
Thank you everyone.
The one last item that I would just remind everybody to focus on before we break on this particular call is the fact that we have completed the randomization of our 600 subjects for fulvestrant.
That's a product that is going to be or already is over $1 billion worldwide.
And the fact that we've gone from 2 injections to 1, that we've reduced the drug from 10 mls to 5 mls, that we've all but eliminated the pain in what is one of the most painful drugs to be delivered, I think, in oncology, that we may be taking the warning off the label and that we may have a unique J-code just what we did with Bendeka is potentially, if not the largest opportunity in the history of the company, just about the largest opportunity.
Now we have to await the results of the study, and we'll have that in the summertime.
But we do have all 600 patients enrolled.
And as soon as we get these results, obviously, if we pass that clinical trial, the opportunity for the company that we think we can then get the product to the market by around mid-next year is very significant.
And I think you'll hear from us, and as we speak with the investors, over the next few weeks and months, we'll be focused in on fulvestrant and the value that, that could bring, again, not only to Eagle, but to patients.
We're just thrilled about having the safer product potentially if we do what we hope we do, and let's see how we go.
But we've made a major accomplishment in dosing and randomizing those 600 subjects as quickly as we did.
And we're just very excited to see the results and hopefully move the asset forward.
And with that, I'd just like to say thank you for everyone attending.
I appreciate and look forward to speaking to all of you over the next number of weeks.
Thank you.
