ANI Pharmaceuticals, Inc. (NASDAQ:ANIP) Q1 2024 Earnings Call Transcript

ANI Pharmaceuticals, Inc. (NASDAQ:ANIP) Q1 2024 Earnings Call Transcript May 10, 2024

ANI Pharmaceuticals, Inc. misses on earnings expectations. Reported EPS is $0.937 EPS, expectations were $0.98. ANIP isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, everyone, and welcome to today's ANI Pharmaceuticals, Inc. First Quarter 2024 Earnings Results Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call is being recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Lisa Wilson.

Lisa Wilson: Thank you, Shelby. Welcome to ANI Pharmaceuticals Q1 2024 earnings results call. This is Lisa Wilson, Investor Relations for ANI. With me on today's call are Nikhil Lalwani, President and Chief Executive Officer; and Stephen Carey, Chief Financial Officer. You can also access the webcast of this call through the Investors section of the ANI website at anipharmaceuticals.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 ANI Pharmaceuticals management as of today and involve risks and uncertainties, including those noted in our press release issued this morning 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. ANI specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. The archived webcast will be available for 30 days on our website, anipharmaceuticals.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on May 10th, 2024.

Since then ANI may have made announcements related to the topic discussed, so please reference the company's most recent press releases and SEC filings. And with that, I'll turn the call over to Nikhil Lalwani.

Nikhil Lalwani: Thank you, Lisa. Good morning, everyone, and thank you for your interest in ANI Pharmaceuticals and for joining our first quarter earnings call. The company remains committed to our purpose, serving patients, improving lives. On behalf of all of ANI, we are grateful for the continued support of our customers, suppliers, partners, and shareholders. We remain focused on driving growth -- continued growth through our rare disease business and our generics business, both supported by strong cash flow from our established brands business. We're pleased to report record first quarter results and are reiterating our full year guidance for total revenues, Cortrophin Gel revenues, adjusted EBITDA, and adjusted EPS, which Steve will further highlight.

Total revenues for the first quarter were $137.4 million, an increase of 29% over the first quarter of 2023. Adjusted non-GAAP EBITDA was $37.6 million, up 14% from the prior year period. Adjusted non-GAAP EPS was $1.21, an increase of 3% over the first quarter of 2023. Our lead rare disease asset, purified Cortrophin Gel generated $36.9 million of revenue in the quarter, a year-over-year increase of 126%. Our rare disease team continued to execute on successful Cortrophin Gel commercialization in the first quarter, driving prescribing growth across our core specialties of neurology, rheumatology, and nephrology as well as traction in our newer specialties of pulmonology and ophthalmology. We are pleased to report that the prescribing momentum has carried into the second quarter and we achieved the highest number of new patient starts since launch during the month of April.

On our fourth quarter call, we discussed several investments to support the Cortrophin Gel franchise with the goal of driving greater adoption across current and new specialty areas. I am proud to update you on the progress made on these initiatives. First, given the strong traction that we have seen in pulmonology, we've announced plans to add a second geographical region to our pulmonology sales force. This team is now in place and the increased focus is paying off with record new patient starts in the first quarter for pulmonology. We also deployed a small targeted ophthalmology sales force in the first quarter. We see ophthalmology as a meaningful driver of future Cortrophin Gel growth. For both pulmonology and ophthalmology, we also gained traction with new to ACTH prescribers.

As you might recall, in the fourth quarter, we launched a new 1-mL vial of Cortrophin Gel for the treatment of acute gouty arthritis flares. We believe that bringing the only ACTH product to market with this indication presents a promising growth opportunity for the Cortrophin franchise. We believe Cortrophin Gel remains on a strong multiyear growth trajectory, driven both by increased market penetration within core and new indications as well as further expansion of the total ACTH category. While we have gained significant traction with Cortrophin Gel after a little over two years on the market, the number of patients on ACTH therapy today remains substantially lower than a few years ago. Our prescriber engagement activities and investments to drive growth continue to boost higher utilization by first-time and returning ACTH prescribers as more physicians use Cortrophin Gel therapy for appropriate patients.

While we have ample opportunity ahead to maximize Cortrophin Gel's potential, expanding the scope and scale of our rare disease business through M&A and in-licensing remains a high priority. We are actively evaluating opportunities with a focus on commercial assets that overlap with our current priority therapeutic areas of nephrology, neurology, rheumatology, pulmonology, and ophthalmology as well as assets outside of these areas that would leverage our rare disease platform. Turning now to our generics business, which delivered another solid quarter with revenue of $70.2 million, an increase of 10% over the first quarter of 2023. Our strong new launch execution and operational excellence contributed to this performance. We launched six new products during the quarter, including a competitive generic therapy product with 180-day exclusivity.

Notably, we retained the number two ranking for competitive generic therapy approvals and are a top 15 manufacturer in number of product approvals. Overall, our generics business remains a key growth driver as we leverage our high-performance R&D team, operational excellence, and US-based manufacturing footprint. We remain an established and reliable partner of choice for our customers. Our established brands business continues to address patient needs with reliability of supply, a unique set of commercial capabilities, and opportunistic business development to expand the portfolio. Our overall portfolio is strengthened by this high gross margin, low working capital, and strong cash flow generation business. With these results and almost $230 million of cash on hand, the first quarter has set a solid foundation for 2024.

We have many important initiatives and opportunities to execute on this year and we look forward to continuing the momentum. I'll now turn the call over to Steve who will walk through our first quarter financial results and 2024 guidance in more detail. Steve?

Stephen Carey: Thank you, Nikhil, and good morning to everyone on the call. ANI generated first quarter revenues of $137.4 million, up 29% over the prior year period. Revenues from Cortrophin Gel reported in our rare disease segment were $36.9 million, up 126% from the prior year period, driven primarily by increased volume. As we previously guided Cortrophin Gel revenues were down on a sequential basis due to the typical seasonality seen with rare disease drugs. We continue to expect sequential revenue growth for Cortrophin Gel in the second, third and fourth quarter of 2024 off of this first quarter revenue achievement. Revenues of our generics, established brands and other segments were $100.5 million, an increase of 11% over the prior year period.

Generic revenues for the quarter were $70.2 million, an increase of 10% over the prior year period driven by increased volumes in the base business and contributions from new products launched in 2023 and in the first quarter of 2024. Net revenues for established brands and other were $30.3 million in the quarter, an increase of 13% over the prior year period. As we guided on the Q4 call, the first quarter benefited from supply tailwind. Cost of sales, excluding depreciation and amortization increased 30% to $49.2 million in the first quarter of 2024 compared to the prior year period, primarily due to growth in sales volumes of pharmaceutical products across all segments and significant growth of royalty bearing products. Non-GAAP gross margin was 64.5%, a decrease of approximately 145 basis points from the prior year period, primarily driven by product mix.

Research and development expenses increased 77% to $10.5 million in the first quarter of 2024, primarily due to a higher level of activity associated with both ongoing and new projects. Selling, general and administrative expenses increased 32% to $48 million in the first quarter of 2024 due to increased employment related costs and continued investment in our rare disease sales and marketing infrastructure and activities, higher legal expenses, as well as an overall increase in activities to support ANI's growth. During the first quarter of 2024, we completed the sale of our Oakville, Ontario, Canada manufacturing facility for $14.2 million and recognized the corresponding $5.3 million gain in the P&L. We also recorded a $9.7 million gain on our shares of CG Oncology common stock, triggered by CG Oncology's initial public offering in January 2024.

When CG Oncology purchased ANI's targeted oncolytic technology in 2010, CG Oncology undertook to pay ANI, among other things, running royalties in the amount of 5% on net sales of CG0070, also known as Cretostimogene by CG Oncology, its sublicensees or its affiliates in a territory contractually defined as worldwide. In February 2024, CG Oncology disputed its royalty obligation to ANI. That dispute is currently in active litigation. Both the gain on sale of our Oakville facility and the gain on our CG Oncology equity have been excluded from the calculation of our non-GAAP EBITDA and non-GAAP EPS measures presented in this morning's earnings release. Net income available to common shareholders for the first quarter of 2024 was $17.8 million as compared to $1 million in the prior year period.

First quarter diluted GAAP earnings per share was $0.82 as compared to $0.06 in the prior year period. On an adjusted non-GAAP basis, diluted earnings per share was $1.21 for the quarter, compared to $1.17 per share in the prior year period. Adjusted non-GAAP EBITDA for the first quarter of 2024 was $37.6 million, an increase of 14% over the prior year period. We generated cash flow from operations of $18.3 million during the Q1 and we ended the quarter with $228.6 million in unrestricted cash. We have $293.3 million in face value of outstanding debt, which is due in November of 2027. At the end of the first quarter, our gross leverage was 2.1 times and our net leverage was less than half a turn of our trailing 12-month adjusted non-GAAP EBITDA of $138.4 million.

Finally, as outlined in this morning's press release, we are pleased to reiterate full year 2024 guidance as follows. Full year 2024 net revenues of $520 million to $542 million, Cortrophin Gel net revenues of $170 million to $180 million, full year adjusted non-GAAP EBITDA of $135 million to $145 million and adjusted non-GAAP earnings per share between $4.26 and $4.67. We continue to expect total company adjusted non-GAAP gross margin between 62% and 63% and the company will continue to tax effect non-GAAP adjustments for computation of adjusted non-GAAP diluted earnings per share using our estimated statutory rate of 26%. The company now anticipates between 19.4 million and 19.7 million shares outstanding for the purpose of calculating diluted EPS and now expects its US GAAP effective tax rate to be between 22% and 25% as compared to 20% to 22% previously disclosed.

With that, I will now turn the call back to Nikhil.

Nikhil Lalwani: Thank you, Steve. We are energized by our 1Q results and look forward to building momentum throughout 2024. The company remains focused on driving continued growth through our rare disease business and our generics business, both supported by strong cash flow from established brands. Thank you for your interest in ANI and supporting the ANI team as we work to fulfill our purpose of serving patients, improving lives. We look forward to keeping you updated during the year ahead and we are happy to answer any questions. Thank you. Operator, please open the line for questions.

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