ANI Pharmaceuticals Q2 2023 Earnings Report

ANI Pharmaceuticals EPS Results

• Actual EPS: $1.28
• Consensus EPS: $0.64
• Beat/Miss: Beat by +$0.64
• One Year Ago EPS: -$0.05

ANI Pharmaceuticals Revenue Results

• Actual Revenue: $116.50 million
• Expected Revenue: $99.87 million
• Beat/Miss: Beat by +$16.63 million
• YoY Revenue Growth: +57.60%

ANI Pharmaceuticals Announcement Details

• Quarter: Q2 2023
• Date: 8/9/2023
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 9, 2023
• Conference Call Time: 8:30AM ET

ANI Pharmaceuticals (NASDAQ:ANIP), a biopharmaceutical company, develops, manufactures, and markets branded and generic prescription pharmaceuticals in the United States and Canada. The company manufactures oral solid dose products; semi-solids, liquids, and topicals; controlled substances; and potent products, as well as performs contract development and manufacturing of pharmaceutical products. It markets its products through retail pharmacy chains, wholesalers, distributors and mail order pharmacies, group purchasing organizations, specialty pharmacies, and hospitals. ANI Pharmaceuticals, Inc. was incorporated in 2001 and is headquartered in Baudette, Minnesota.

ANI Pharmaceuticals Q2 2023 Earnings Call Transcript

[Operator]

Good morning, everyone. My name is Chelsea, and I will be your conference operator. At this time, I'd like to welcome everyone to ANI Pharmaceuticals' 2nd Quarter 2023 Financial Results. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer period.

[Operator]

As a reminder, this conference call is being recorded today, August 9, 2023. It is now my pleasure to turn the floor over to Ms. Judy DiClemente, Investor Relations for ANI Pharmaceuticals. Ma'am, please go ahead.

[Speaker 1]

Thank you, Chelsea. Welcome to ANI Pharmaceuticals Q2 2023 earnings results call. This is Judy DiClemente of Incyte Communications, 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 website at www.anipharmaceuticals.com.

[Speaker 1]

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.

[Speaker 1]

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 August 9, 2023. Since then, ANI may have made announcements related to the topics 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 Rawani. Nikhil?

[Speaker 2]

Thank you, Judy. Good morning, everyone, and thank you for joining our call and for your interest in ANI Pharmaceuticals. I would like to start this morning's call Thank you, the ANI family and our suppliers, customers, partners and shareholders for all their efforts in enabling us to serve patients in need. I am very pleased to share that the strong momentum seen over the past several quarters This continued into the Q2 of 2023 and across all business segments. This morning, we reported Net quarterly revenues of $116,500,000 an increase of nearly 58% over last year, an approximately 9% growth over the Q1 of 2023, which was also a record quarter.

[Speaker 2]

Our adjusted non GAAP EBITDA of $34,100,000 also represents a company record and a nearly 246% year over year increase. Our adjusted non GAAP diluted EPS And the company generated cash of $42,000,000 from operations during the first half of the year. These results and the outlook for all segments of our business have allowed us to once again raise our full year 2023 guidance. We now expect net revenues to be in the range of $425,000,000 to $445,000,000 adjusted non GAAP EBITDA to be between $115,000,000 $125,000,000 and adjusted non GAAP earnings per share to be between $3.62 to $4.11 Let's now take a closer look at the performance and progress made on our strategic imperatives in each segment. Starting with our rare disease business.

[Speaker 2]

Our goal is to scale up our rare disease business with the successful launch of our lead asset, purified chlorophen gel, and to add assets that leverage the rare disease infrastructure we have built. Revenues for Cortrophin Gel totaled $24,300,000 in the 1st quarter, an increase of 138% over the prior year and up 49% compared to the Q1. During the quarter, we saw record numbers across several areas, including new patient starts, new cases initiated and new unique prescribers. We also have continued growth in repeat prescribers. Growth was achieved across all targeted specialties, including neurology, nephrology and rheumatology.

[Speaker 2]

Also, during the Q2, our modest sales team expansion into pulmonology already began gaining momentum. The outlook for the overall ACTS category is also robust with 12 consecutive months of year over year growth from June 2022 to May 2023 and double digit growth through all of 2023. We remain focused on continuing to improve how we service patients, physicians and payers to increase access CCH therapy for patients in need. We are raising our full year revenue guidance for Corprophin Gel to $90,000,000 to $100,000,000 up from $80,000,000 to $90,000,000 The new range represents year over year revenue growth between 116% and 140%. Rare disease remains a critical focus area for ANI and we expect it will be the largest driver of ANI's growth.

[Speaker 2]

Increasing the scope and scale of our rare disease portfolio is a key priority. Following our recent successful equity raise resulting in $80,600,000 of net proceeds and our strong cash flow generation, We believe we are well positioned to build upon the strength of our rare disease platform and we are actively pursuing M and A and in licensing opportunities. Turning now to our generics, established brands and others segment, which also delivered strong results during the quarter, Growing by 45% year over year to $92,200,000 in the second quarter. We have continued to build our reputation as a very reliable supplier by leveraging our U. S.

[Speaker 2]

Manufacturing footprint, Maintaining a strong GMP track record across sites and maintaining healthy inventory levels for finished goods and raw materials. This enables us to capture opportunities arising from numerous supply disruptions that continue to impact patient access to much needed medicines across both generics and established brands. For our generics business, We remain focused on driving growth through superior new product launch execution, operational excellence, cost competitiveness And supply reliability was a patient first orientation always. During the quarter, our strong R and D organization Received 4 abbreviated new drug application or ANDA approvals, including colestipol hydrochloride and nitrofurantoin oral suspension. In addition, we filed multiple new ANDAs and we'll continue investing in R and D with a focus on niche opportunities to fuel the growth of our Gx business.

[Speaker 2]

The company also continued to be active on the business development front, acquiring 3 products from the Acorn Pharma auction. During the quarter, we also expanded commercialization efforts into new sales channels and we'll continue striving to take our more than 100 product families to patients in need. As previously announced, manufacturing operations seized at the Oakville, Ontario site in January of 2023 for the Oakville site remain ongoing. For our established brands business, We continue to innovate our commercialization efforts across products. These efforts coupled with the supply reliability that we have spoken about earlier have driven our success.

[Speaker 2]

As you've heard today, it was an impressive second quarter across multiple fronts, and we're excited to continue the momentum into the second half of the year. I'll now turn the call over to Steve, who will walk through our Q2 financial results and revised guidance in more detail. Steve?

[Speaker 3]

Thank you, Nikhil, and good morning to everyone on the call. As Mikael indicated, we posted very strong results in the Q2 of 2023. Capitalizing on the groundwork we have laid over the past 3 years to build sustainable growth platforms and strengthen the capabilities of ANI. We saw growth across our core businesses, generating record 2nd quarter revenues of $116,500,000 This represents $42,700,000 or 58% growth Over the $73,900,000 reported in the Q2 of 2022 and is up 9% sequentially from the $106,800,000 of revenues reported in our previous record Q1 of 2020 3. Revenues from Cortrophin reported in our rare disease segment were $24,300,000 in the quarter, up $14,100,000 from the prior year.

[Speaker 3]

We believe our first half of twenty twenty three performance creates a strong foundation For achieving our full year Cortrophin revenue goals, which we revised upwards this morning. Revenues of our generics, established brands and other segment rose $28,600,000 to $92,200,000 An increase of 45% over the prior year. Net revenue gains across this segment reflect increased volumes driven by annualization of 2022 launches, current year launches and our ability to quickly and effectively respond to evolving market needs. Our strong commitment to U. S.-based manufacturing, excellence in generic R and D An informed and nimble procurement and sales marketing teams have enabled ANI to meet market demand for key products in the face of competitive supply chain issues.

[Speaker 3]

Operating expenses increased by 20% $204,100,000 for the 3 months ended June 30, 2023 compared to $86,800,000 in the prior year period. Cost of sales, excluding depreciation and amortization, increased by $7,000,000 to $42,300,000 Q2 of 2023 compared to $35,300,000 in the prior year period, Primarily due to a significant increase in sales volumes of generic and rare disease pharmaceutical products. Research and development expenses were $7,400,000 in the Q2 of 2023, An increase of $3,200,000 from the prior year period, primarily due to a higher level of activity associated with generic projects, coupled with an increase associated with projects related to CortrophinDell in the current year period. Selling, general and administrative expenses increased by 21% to $38,800,000 in the Q2 of 2023 compared to $32,000,000 in the prior year period, primarily due to increased employment related costs and was $14,700,000 for the 3 months ended June 30, 2023, an increase of approximately $900,000 position of Navidium of $1,000,000 of expense in the current year period as compared to $1,100,000 of income in the prior year period. Regarding the closure of our Oakville, Ontario, Canada manufacturing plant.

[Speaker 3]

There was a de minimis P and L impact in the current year period as our restructuring activities are essentially wound This is compared to $2,600,000 of restructuring expense recorded in the prior year period. The land and building remain for sale at this time. Net income available to common shareholders For the Q2 of 2023 was $5,800,000 as compared to a net loss of $15,300,000 in the prior year period. Diluted GAAP earnings per share Was 0 point 2 $9 as compared to a $0.94 loss in the prior year period. On an adjusted non GAAP basis.

[Speaker 3]

We had diluted earnings per share of $1.28 for the quarter compared to $0.13 share for the prior year period. Adjusted non GAAP EBITDA for the Q2 of 2023 reached a new company record of $34,100,000 and reflects gross profit pull through from the strong revenue performance. This is an increase of $24,200,000 compared to the $9,900,000 posted in the prior year period. Adjusted non GAAP EBITDA also rose $1,100,000 on a sequential basis, up from our previous record $33,000,000 recognized in the Q1 of 2023. From a balance sheet We ended the quarter with $161,700,000 in unrestricted cash, driven in part by cash flow from operations of $20,600,000 during the quarter ended June 30, 2023.

[Speaker 3]

On a 6 month year to date basis, We have generated $42,000,000 of cash flow from operations. The ending cash balance also reflects Net proceeds of $80,600,000 raised in our secondary equity offering completed in May. This balance, Along with expected second half cash flows and $40,000,000 of untapped capacity in our revolving credit facility, position to pursue our strategic business development initiatives. We have 295 $500,000 in face value of outstanding debt, which is due in November of 2027. As of the balance sheet date, Our gross leverage is 2.7 times and our net leverage is 1.2 times trailing 12 month adjusted non GAAP EBITDA of $108,900,000 Finally, as outlined in this morning's press release, we are pleased to raise full year 2023 guidance as follows.

[Speaker 3]

We are raising total company expected net revenues to be between $425,000,000 $445,000,000 Up from previously issued guidance of $385,000,000 to $410,000,000 representing approximately 34% to 41% growth as compared to the $316,400,000 recognized in 2022. We are raising total company adjusted non GAAP EBITDA to be between 115,000,000 And $125,000,000 up from previously issued guidance of $97,000,000 to $107,000,000 Representing approximately 106% to 124% growth as compared to the 55,900,000 recognized In 2022, we are raising total company adjusted non GAAP earnings per share guidance of $2.99 to 3 $0.45 representing approximately 166 The 202% growth as compared to the $1.36 reported in 2022. We are raising Kotrofin specific revenue guidance in the range of $90,000,000 to 100,000,000 Up from previously issued guidance of $80,000,000 to $90,000,000 representing 116% to 140% growth as compared to the $41,700,000 recognized in 2022. And we now project total company non GAAP gross margin of between 63% 64.8% as compared to previously issued guidance of 60% 62.5%. In addition, we currently anticipate between 19,100,000 19,300,000 of shares outstanding for 2nd half EPS and a U.

[Speaker 3]

S. GAAP effective tax rate of between 6% 10%. The company will continue to tax effect adjustments for computation of adjusted non GAAP diluted earnings per share at our blended statutory rate of 24%. With that, we will now open the call to questions. Operator, Please announce the instructions.

[Operator]

Yes, sir. And our first question will come from Vamil Divan with Guggenheim Securities.

[Speaker 4]

Great. Thanks for taking my questions. So a couple if I could. One just on the Established Brands segment, obviously very strong I'm just trying to get a better sense of what you see as the sustainability of this level of performance in the next couple of quarters, Even into next year, just as you have to model, that would be very helpful. I was just a little bit tougher for us to see that externally, how that's performing, The details.

[Speaker 4]

And then the second one just around your comments around rare diseases and picking up additional rare disease assets to build on your what you've built with Cortrophin. I'm wondering if you can just give a little bit more detail there in terms of kind of what should we expect in terms of the pace Of doing deals or what kind of assets you're looking for and also your willingness to use equity to do an acquisition As opposed to something more cash based. Thank you.

[Speaker 2]

So, good morning, Wilma, and thank you for So I'll take the rare disease question first. Look, our corporate development team led by Chad Gassert and the executive Team has been very active in evaluating the range of opportunities available to us. We remain focused on finding assets Companies that could provide significant synergy in terms of leveraging the infrastructure that we have built around purified protofagel. And that's both around the target specialties that we currently call on as well as the infrastructure, the entity's infrastructure around specialty pharmacy distribution, market access, And the patient support hub, all of it, right? So basically assets that can leverage The sales force and the remaining rare disease infrastructure that we have in place.

[Speaker 2]

We are encouraged by the potential path forward. However, we remain steadfast in ensuring that we are diligent and

[Speaker 4]

highly selective as

[Speaker 3]

we seek to deploy

[Speaker 2]

the capital towards this As we seek to deploy the capital towards this strategic imperative, and that also drives our sort of choice In how to fund it, right? Obviously, we did the equity raise earlier this year with the intent of fueling This expansion and expanding the scale and scope of our rare disease business. And that's what that was about, right? So that's that answer. The second is, look, your first question on established brands.

[Speaker 2]

ANI's robust results in generics, established brands and other segments. It just showcases our ability to leverage our U. S. Manufacturing footprint And our agility and operations to deliver timely solutions to our customers. It's enabled us to capture market demand arising from Supply disruptions impacting patient access to much needed medicines.

[Speaker 2]

We see this as a positive trend impacting our business And we expect this trend to continue. The degree is what we've factored into the guidance And then as I said earlier on the established brand, in addition to the What's driving success is we continue to innovate our commercialization efforts across products And you couple that with supply reliability, that's what's driven our success. Thank you, Maval.

[Speaker 4]

Okay. Thank you.

[Operator]

Thank you. Our next question will come from Les Zlisky with Truist Securities.

[Speaker 3]

Good morning. Thank you for taking my questions and congrats on the progress. Which particular areas of the market are driving the ACTH TAH growth and how's the early uptick in consultant been on pulmonology? If any comments you can give around new patient starts, repeats for dosing averages. And I guess what have been the some of the internal levers that you've been able to pull to drive the growth?

[Speaker 3]

And I have a follow-up. Thank you.

[Speaker 2]

Yes. Good morning and thank you, Les. Welcome to the ANI call. I believe this is your first time here, so welcome. In terms of what drove the PCG growth, purified Cortrophin drug growth, it was driven by Record number of new cases initiated.

[Speaker 2]

This growth came from record number of new unique prescribers and continued growth in repeat prescribers. And to your question regarding with specialty, look, we've highlighted the growth was across all targeted specialties of rheumatology, nephrology and neurology And also early traction seen by our pulmonology sales team, right? So we've done a modest expansion of our pulmonology sales team and we've seen early Strong traction for that team with in that indication. And then In addition, we had spoken last quarter about the increased investment in patient support in our hub infrastructure and we were able to translate the new case momentum to record number So that's what's driven the growth in CorporateGen. I believe you had a follow-up, right?

[Speaker 3]

Yes, very helpful. Thank you for that. Thank you. And then in regards to some of the R and D pipeline, I mean, what Within generics, which therapeutic areas or product types specifically are of interest to you at this stage? Thank you.

[Speaker 2]

Yes. Look, in generics, we are continuing to invest in R and D with a focus on niche opportunities. So, investor competition here is, we haven't defined dosage forms, but we keep looking for niche opportunities. And we have a successful track record. And it's really the track record of the company we acquired Navidium 2 years ago to fuel the growth of our generics business.

[Speaker 2]

And you've seen that in the We brought to the market and the continued growth that we've had in our generics business. We also continue to be active on the business development front opportunistically for smaller asset level deals And that's what will the combination of the strong R and D organization with an established track record along with the Smaller business development asset type deals will drive the pipeline of the generics business and fuel the growth of our generics business.

[Operator]

There are no further questions in the queue at this time. So I would like to turn the call back over to Nikhil Lalwani for any additional or closing remarks.

[Speaker 2]

Thank you, Chelsea, and thank you everyone for joining our call this morning. ANI is well positioned to continue delivering sustainable growth and serving patients in need. We look forward to updating you on our progress And we appreciate your time and interest in ANI. Thank you.

[Operator]

Thank you, ladies and gentlemen. This does conclude today's call, and