REPH - Earnings call transcript Q3 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Recro Pharma Third Quarter 2018 Conference Call. At this time, all participants are in a listen-only mode. Later, we'll conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, this call is being recorded. to call like Wildenradt. to now would turn over the Natalie I

may You begin.

Natalie Wildenradt

thank us and results. for call morning, and joined you Good and Henwood, Gerri joining Chief Wildenradt, I Recro's President Financial quarter today by Natalie Executive to third on Lake, XXXX is financial Officer; This Chief and am Ryan discuss conference today's Officer.

detailing for issued remarks we results three will available call press Investors release, recropharma.com. up our & Ryan, a operating by we open page release News morning, and questions. website financial at Gerri today this for Following months prepared XX, Earlier and ended is our press XXXX. of the the the on September The

subject are words words from that remarks plan, ability to of uncertainties meaning. Letter the described to These performance of by capital financial our may, and the risks constitute forward-looking similar anticipate, of expect, may development results Analysis risks XXXX, statements Reform associated our such Before intend of the involve candidates, comments, any Management's are raise our of IV be Form on the we for These statements and harbor we undertake guarantees Commission and safe Recro the expectations of our December call Factors and any for in our to report other and trials sections preclinical on on such is Discussion Act this the studies to New Exchange in begin to of we upcoming, such materially will, uncertainties. risks Any statements future or including annual formal Risk of Any forward-looking available are any and to November for forecasts, Financial Private to year on as the file Drug make future various on actual timeframe meloxicam and candidates. and website. Pharma's forward-looking XXXX, quarterly we Operations Securities by not resolution which with SEC's of reports and for issued pursuant other provide differ future product certain of statements events make the Application forward-looking the day and we results Securities timing estimate, to as no should, plans may Results I'll acceptable believe, account XX, provided this and product with product such of update identified terms Drug cause resolve call, new that Food and provision X, and otherwise. are the clinical US XX-Q Condition can the in outlook; fiscal Administration you XX-K related information statements this and call including Litigation ended conference and XXXX the only Form and on and obligation ability information, today on our Complete our us; on remind Response

project XX, information for purport may or discuss the financial financial the respect as non-cash be our measures XXXX. also full and forma September to that certain not any for XX, may preliminary financial pro addition, year estimates We materially. In months with performance XXXX may nine and results differ financial of December ended or results does to Actual company. unaudited provided the operating positions ending

as greater it the and for a CDMO business. business considered believe discuss depreciation transparency before this to or we in the by CDMO information that be business. in contract these or measure be amortization into non-cash reported but This We on and CDMO results our for, our in should of supplemental performance call. substitute are development financial not GAAP discussed organization used release taxes, investors gives the manufacturing helpful financial evaluating our non-GAAP addition management financial our earnings and Specifically, included in earnings as may interest, measures to, EBITDA understanding

a on have measures in which page has included GAAP at financial reconciliation recropharma.com. our & EBITDA supplemental of News been made the a schedule, website of to We Investors available

been be to guarantee that now we In IV investigational The Gerri has Use would has the for references agency. addition, There determined. the any of the call IV and been on to Gerri? an this meloxicam of will over Henwood. call, FDA. use to will IV meloxicam safety approved meloxicam, by marketing IV not include no I like investigational efficacy is product. meloxicam by regulatory not turn of approved

Geraldine Henwood

Thanks, you morning. thank for Natalie, us this all and joining

a third quarter of Recro. focus and has productive been for XXXX period The

in believe severe you We March XX, XXXX. I submitting October, PDUFA IV has team to the the hard so the NDA announced As the we moderate for and potential know, work for many a thank of resubmission of IV to in FDA of their of NDA pain. quickly. approval meloxicam their the goal of issuance meloxicam for to date management want

refining in severe look ensuring $XX.X and of has physician in meaningful recent is providing of XXXX. IV an the the confident the on planning the in our quarter quarter management meloxicam's first in in first XXXX. of pre-commercial we revenue We play commercial and of centered as IV and update IV pre-launch patient meloxicam our QX, has meloxicam for of expectations, approval. pain division role adoption forward believe upon half on remain Gainesville and CDMO novel non-opioid to Also third generating profile focused to million differentiated We exceeded the launch moderate efforts our plan, and potential a in Our have potential a XXXX. candidate of advances manufacturing to in

full to the Given results, third we raised guidance revenue our XXXX quarter have $XX million. year CDMO

Ryan additional houses focused supply to potency on our providing new which square-foot related to CDMO is The dedicated turn range We new of facility creating as we capacity has site, clinical high-quality trial GMP high call and now and services customers. facility, and allow a square-foot facility expanded on turning manufacturing also manufacturing call development for as us dosage development our issues to space like space existing oral partners announced these provide over unique and additional discuss the and process formulation, broader services near GMP well to and opening high to I’d financial specialized last services. potency month. solving Ryan which well touch DEA-licensed I'll believe for products. Financial Lake, clients will forms Before of The highlights. expanded to our additional as Ryan? of quickly our existing and Chief capabilities Officer, the facilities the product the to XX,XXX to XX,XXX as development analytical

Ryan Lake

issued key release highlights. and a outlining this XX-Q of third Thanks, our Gerri. everyone. Good we some morning our full financial results, quarter earlier review morning, the press Form I'll Since just

cash of $XX we had and equivalents XXXX XX, cash million. As September of

General development increase million million to third the to revenue Cost Our quarter revenue, periods. The is manufacturing which increased meloxicam, increases to NDA pipeline expense addressing meloxicam. our to was costs by million were were XXXX, the and due of of compared for primarily XXXX exceed associated sharing of partially CDMO product primarily XXXX These to to pre-approval, quarter decrease in $XX.X an million respectively. quarter in increase charged included the as and NDA in filing increase increase million business our other increase profit the $X.X quarter, compared increase increase for and compared Research CRL. ended mentioned quarter revenues quarter development three of due due increase offset million in million sales. $X segment third for to The XXXX. IV a continued research manufacturing an costs in third third had and million XX, expenses September with contract were XXXX the development XX, million for of third the o pre-commercialization the and for in fee of XXXX. due our months and the XXXX and to be to was Gerri ended primarily $XX.X costs $X.X for the $XX.X division $X.X generating expectations for and three and primarily professional products. $X.X as administrative in were during was XXXX. third costs sales costs The months for product $X expenses September development The to $X.X the sales million the of for development IV for

guidance As customer’s excited contracts earlier, mentioned and believe we’re our announce are taking product of in $XX generate as consideration experience existing well estimations. CDMO revenue as XXXX will million patterns we order our customer and approximately that Gerri timing into increasing with market to we

our call of well-positioned to for to capacity business I Gerri? facility be the business in to development believe CDMO continue with our encouraged back we We to and comments. expansion activities now our closing will we by continue turn the build XXXX. Gerri are and

Geraldine Henwood

Thank you, Ryan.

We’re our integrate facility. to the our new division, performance expanded level as remain we this continued encouraged by committed CDMO maintaining strong we execution, and of of particularly high

to transformative for the Recro. of We’ve Looking forward, product as severe the period realizing the to commitment for months non-opioid moderate six potential IV next represent management novel potentially a maintained pain. meloxicam’s

and meaningful With XX, March of achieving this submission steps date we taken the recent the believe towards the PDUFA NDA we’ve -- resubmission for XXXX, set goal.

candidate can if launch be is potential Our approved current realized. full preparing for focus the this ensuring

anesthesia future. of drivers with in Acute in two study next and enhance Acute to as of support year, of manufacturing the IV incremental agents the forward NMB to and Care more agent. providing while continue induction is Care Phase represent these we both this our for value activities to recovery the And Importantly each progressed And We program updates look additional we reversal potential division anesthetic XXXX. advance I the our from lead candidate, our pipeline, agents novel program the preclinical neuromuscular and in first believe blockade. this blocking in meloxicam to on step therapeutic we’ve within neuromuscular half

thank We for across their efforts Recro and both now like are call collective divisions questions. and the entire continued shareholders support. their encouraged I'd to for Operator? open would by I to the for and company the like our commitment team progress

Operator

[Operator Instructions].

of Our first Jaffray. David Amsellem from Piper comes question

is Your now line open.

Unidentified Analyst

David. taking the This is [Nicki morning. Hermann] Thanks on for Good questions. for

such the outpatient as the changes in what EXPAREL unbundling surgical of in are for reimbursement changes additional the recent in namely the landscape, on ambulatory separate With the your reimbursement CMS setting? thoughts And potential strategy from meloxicam buying us and to your specifically you’re you CMS for and a IV guys committees? as through thinking that, about how hospital for reimbursement specifically follow-up walk driving setting, can

Geraldine Henwood

Sure.

kinds we approval, as inpatient to meloxicam we’ve formulary outpatient we intact well kept the of large be disclosed deal of to with in of had past, as hired Ambulatory as system terms going you heavily in managers you those and centers letter be aegis for team start. the IVMs many to bureaucratic that would may with will not attractive not to of continued in us a was to us account applicability of but from outpatient think CRL the of need the surgical centers. We group are under work combination believe to setting to they the the instant discussions. the the help So key that as forward as discussions in hospitals affiliated after it’s move the know what getting and of have are regulations as some or changed will early know surgery formulary be have setting allow

do many hospital faster are not favorable volume can’t that possible the of because on get or enough at formulary often get it's ambulatory surgery so trial a get surgical to as in who centers operating time high important setting. usage. and the individuals as quite surgeons And economics That's

will terms situation do which we into product help have products tolerability, that we codes to three So for having other in years and status reimbursement, trend, first turn new as is topic of possibilities committees, has and of believe a more have to now by try will that the I for and hospital the on well. we we surgical that efficacy would will pass-through its future there that they the and that J-codes, in evolved sides question, With that could of can We centers time this would such the we that we used. of both unite addressing permanent with that believe get a the turn be Congress pass-through be permanent have reinforced think hospital we perhaps respect product expect about by the the is for would into alike. them will enjoy status, and influencing believe and a the opportunity outpatient formulary affiliated hopeful a Did specifics we but legislation, that aisle, permanent which I election possibility think your [Nicki]? and ‘XX to cover there's as some clarification passed in interpretation are as ASCs still the

Operator

Leland of from comes question & Oppenheimer next Gershell Our Co.

Your line is open.

Leland Gershell

on First of year, that CDMO see giving bit yet about qualitatively contracts know but from may you're the could benefits you question guidance perhaps business facility I not the be or quite business the a for you just terms perspective a with generating may new in from you side, speak facility? any new new next

Geraldine Henwood

Sure.

based of be So will reasonable we of have to of new part numerous these had forecast, that been on the would this proposal robust we how having very solid also customers, happy and grow businesses business business new we And believe a year. has their have that it, business this while we optimistic been we performed volume that. opportunity contributes the conversions. with been to XXXX, off from sell getting has have And We numbers. of continue kinds our about current big to

So solid we growth opportunity would between for expect would of sides XXXX. that the in be business, both there

Leland Gershell

time? Okay, the data the agent presumably, will of studies, with clinic NMB might see color pipeline one give us question any it you of next able be toward on to data it’s further or Phase the initial the are the into terms safety not we see year, end I great. year And in if when could we timeline be then some setting

Geraldine Henwood

So, good question.

hit the where program and higher. they program be support that clinically human So study likely escalation been a in subjects be dose when done initiated they would to earlier the didn't program is that this had previously, has additional already have a further taking the will had RPXXXX dose Cornell the be COX threshold, first studies to

and again margin time so believe that much reason no one end further at have believe We be, studies should escalate The dose week ward you’re opportunity because is all we to than so anesthesiologists to doing will would with now and which year. to to on that year. see If of that RPXXXX will the pretty before the first can you use. that in compound they certainly you be the of equipment allow certain that before we've know those more we end do place the COX have it for don’t to data recap-citation studies a study had have restrictions taking have Europe a the on available in-man of of since is data be done those. These dose it that number look have have expect the getting that multiples trial initiate the the would but quite able possible subjects that right which of it as in we time won’t a we the to available to that you I

Operator

Henry question Scott Capital. of next comes Roth Our from

open. is line Your

Scott Henry

of down couple margins it XQ. the a in strong gross gross from questions. revenues, QX, pretty seem think strong this were been given should even strong a with business It about quarter, start we for has margins does just will QX with historically? modeling CDMO like How I particularly although looks

Ryan Lake

Thanks, Scott.

rather that of revenue business that how are nature on it's continue our plan on operating costs right Essentially an now Certainly margin focused with activities are on of we business redeploy really look incurred in a just those our I anticipating operating costs by are gross to range. the more plan. as year refocus generating our the in for be margins really margin business So by prior and all at we and that activity. Gainesville, on business reprioritize efforts gross consistent to than to the the development think mid-XXs appropriate

new margin So overall of on it's prioritize really opportunities. basis business these we of some at more as rather kind an margin appropriate whether to it’s on start operating look as redeploy development and it or individual efforts than EBITDA gross basis to

Scott Henry

product then of annual preselling that to sold, And is? G&A being to just of get is get number base looking was what idea much is about expenses? I’m trying an once of kind great. G&A, what the the idea rate how Okay, an of at

Ryan Lake

to in for quarter the keep G&A were think efforts. as I were year, amount, first some mind spending we you the look pre-commercialization, had half preparing if in G&A significant the of second we the marketing launch and at

with You saw quarter drop $X activities say potential rest to it the the that back us and in I out of with fourth again. fourth drop quarter I the roughly drop, about we the would reasonable be up by as our for we of million dramatically efficiencies Certainly costs consistent very XXXX. maybe through meloxicam, ramp start the increase of launch second would cost the being as million look would prudent the that drop. pre-commercial $X be this year, those to think for would quarter expect But of expenses

Scott Henry

And then about kind how change of Okay. forward? the that around, should bounce continues kind modeling to think contingent going consideration in of we question, Great.

Geraldine Henwood

I will that let Ryan answer officially.

Ryan Lake

you’ll the look modeling. which $X contingent terms million you consideration driven was principally at money increase our was of it in quarter CRL, the modeling. our the other into as One time, change account the to the two value, in last in into as XXXX. patents So about that of that but of needed recall, we just Orange-Book for May And listable line by was current was quarter, happened patents, IP we take the in the the including announced things expansion the a

time, the we into and both somewhat to date of taking So, value and into and PDUFA the as launch to closer of contingent calculation consideration it's get the kind we’re account those money. factors continue played

this increase the to related was that $X quarter. million for solely So

that portion milestone $XX start of million on over million. which is the approval to As approach currently the to short-term or we about balance contingent would little to million we payment the expect sheet a consideration, ALKS, upon $XX would think about $XX equate

see the contingent possible $XX first million to but non-cash would of million increase the $XX charge it's that’s again you in that P&L. quarter consideration our So in year a next to

Scott Henry

or quickly I’m then on meloxicam. on how for Phase just changed that we that trial my recent be And that this the orthopedic Great. Okay. about should had I pipeline. trial, IV track sure IIIB Is still colorectal not developments? in pipeline thinking sheet the with how

Geraldine Henwood

trials. and question, there Good Yes. are two

orthopedic We total are knee during money. the a of would steps We May. number would trial. taken one as put approval other resection is those sort certain gotten One of ongoing. taken have had back still one bowel replacement cost And and on trials trial, more have we’ve that’s them such is in centers the us of to development that increase full-court and press and

some spend we the pace cash to that in levers obviously early continued that year in needed steps. conservation but doesn't to these continue We’ve still the to that a trials. the slower. work working those could to it do centers we even I this at we it think half We allow have mid to still enroll associated take XXXX did at timeframe have studies with to were those sense some escalate and So time, accelerate is But to. from in point not mode, pull data they pace would second make it of believe with with we time in-hand us don't and this if we

Operator

from Trbovich Ken question comes Janney. next of Our

now open. is line Your

Kenneth Trbovich

associated is be building Just scale. shelf at pertains assuming meloxicam with would curious utilization. the product us on million like approval? pre-commercialization IV post Can dating first and this guess I remind what I commercial the I’m in question costs salable guess the to of $X you the

Geraldine Henwood

to commercial And upon to assumption supply that use the seen approval advance our at built charged moment of is it dating for alternative Ken be because in no the that’s it product R&D remains be this get being time. is but there has it So would approval. in to

some conservative dating and extractables which months believe XX We otherwise leachables product to and strong degree XX the of FDA we we and information interprets somewhere we gave on But we through will support XX very months which -- will depends of see believe The as the that months. we the the be most on will have conservatism the between with XX have months have product. we for that the for them. stability that

Kenneth Trbovich

just all that I sure Ryan, you from treatment of Got the contingent it. value the make million milestone. R&D when the accounted the the to an consideration idea preceding earlier. Ryan's talk That liability $XX not hit prior then we’re would then quarters? And fully in suggests quarters contingent accounting if or the been that just for going understand one-time of the approach about comments see in at to sort the already that's on

Ryan Lake

balance that pay Yes. come P&L. When sheet, go the $XX million will off through won't it you the it

Kenneth Trbovich

Not be in the P&L.

Ryan Lake

separate in too is That's on within That right. not a the R&D. contingent consideration line P&L,

Kenneth Trbovich

anything component to in as Okay. the it that as or a of that payments, commercialization unique treated royalties that’s the that some way we just ongoing there will well? payments also future Is And treatment from royalties the Alkermes. mind treated milestones keep be of way is need those be about or milestone to the for will we there due had standpoint that

Geraldine Henwood

Yes.

accounting why difficult, so it’s …? but consideration, Ryan to answer, I let thinks acknowledge just Before much talk the the contingent public about is why I more it would because while I implication, hate this Ryan respectfully you technical

Kenneth Trbovich

we Right -- it’s until understand, until real really Gerri. not it’s

Geraldine Henwood

Exactly.

Ryan Lake

Yes.

line. royalties keep the milestones consideration with So evaluated continue mind from will as be well in are a sales-based contingent some that there still and to

final through kind through on We’re the working still treatment how the those we will push accounting costs of P&L.

sales-based milestones determined and likelihood be of achieving. contingent the but on consideration -- short-term a line that’s will portion will the as yes, the continue not royalties the representative of well perhaps there only So but and the be to

Kenneth Trbovich

sort up be and I question anything anything products. all Gerri recent Coms just [Flora], that? am mean but all. can DSUVIA last at are and Seradin on bring these that for it outcomes can taken then from Ad the I for at And the reluctant of opioid-based you

Geraldine Henwood

it the And me my would for in to where an every of an to who an put people overdose, those frustration of the we year approximately of try. environment XX,XXX percentage opportunity are us to more my method. from and great midst think restricting I we’re opioid are I’m in opioid die many in observers a more in some entire thought don’t further we’re to product. happening not data just going just destiny was multiple the That’s Oh! understand basis at us It’s just and understand. of approval usage looking decision play, that who And on especially not PR and have around Gottlieb’s just and to justifying hard And at for during to that. died agency, is of potency very understand making that's the near. opioid the we War. but degree the some I the overdose individuals given AcelRX of Dr. I the for mean in fully hard Vietnam of that the

Operator

Our of next question comes from Berenberg Patrick Trucchio Market. Capital

line open. Your is

Patrick Trucchio

tell the did did studies you what tell what resubmitted extractable decide to a related FDA or also the provide in resubmission. not clinical that Can questions. additional on us you to the resubmit you just of data? data necessary guess And can and have NDA? data what leachable of us first NDA couple on change I you the questions CMC to presentation are I made address

Geraldine Henwood

of whether with the of dosing meeting could language of discussed. and in we were indicated FDA some the Sure areas Type their within that had where of diminution options action approaches to action concerns patients. their at time resolve constraints, and variety in consider onset The for the willingness the of end a A yes, agency

couple, administration format onset, to -- four we table on the we time data NDA So reconfigured the time it make that was results the labeling a of around across a corners and studies more offset of cetera. agency of but provided based see within et in that dosage consistency updated to the couple for had of than but easier already hope

division that. support we concerns responsive we have by data been around So that it and the believe raised that have labeling does what the to the put the in that is

investigations an for group routine our issues an with kind continue back the us, agents not feedback to provided to testing and these willingness and extractable to those We and the reviewer obviously believe which raised Conference do to such could by one items? raised contain for But issue performed continue comprehensive, peaks asking by known will in little the would that next degradation an looking until respect asserts our for decent extractables conditions extractable agency period could the leachables was on levels in forced pretty were seeing peaks, peaks further will feedback below the International to show of we the we an that based the types with isn’t into the who part extractable of from to NDA we changes doing these a surveil get included the to non-clinical desire abundance substances. very wanted peaks the Nevertheless, that them. further that. leachable small is or wait at the best and unusual get very Harmonization data in agency this a on With of a have get as by of time so represented believe caution that. leachable of this for massive the been shape. peaks to which and that by be at NDA HPLC and or these had any And Alchemy for did studies extensive when pH things performed There Alliant have was you submission we small because really not and that question, like leachable. qualify evaluated that any was extractable of Nevertheless, we worked we in

extractables not to continue leachables they or peaks that in surveil so nevertheless be we So evidence the And NDA. we’re all there we’ve for don't in does we leachables but believe that information will any provide resubmitted tiny the of generated included any extractables or those them. seeing were data that that could was

Patrick Trucchio

for we these guess permanent look the through of or in should That’s the about think approve that to dedicated assuming anticipate think they next ahead we C-code the in how codes and we are codes, codes. helpful quarter you've these or the should vital codes addressed fourth launch concerns about second launch to of relation codes are it, the and ramp have J-code, The the submission, quarter helpful. they reimbursement just year? the various in various how agencies resubmission, once the I to

Geraldine Henwood

early We reimbursement portion what hospitals believe codes usage be there adopting a can and that temporary ASCs will after fairly quickly will develop has but and of some worked non-restrictive committee team to they starting our during we XXXX that dedicated will come then the with be approval. decent the get codes or formulary

they used to because And will key they the reimbursement for the formulary have on be We have account that able We pass-through managers J-code of become certain may for approval hospital it's that team reimbursement outpatient so we worked end of think before of a before as our end with order be billing well on that XXXX also often what May side -- the there processing more codes perhaps for that as are code might meantime understand require for year receive In the file would codes. think the that the likely issues as in ASCs ‘XX, that will department of before would in a will the temporary a encounter. more does calendar committees be to of not permanent inpatients. to as to effective closely things. be I this January

process require available have be and will outside additional handle the through will the group help questions with we of to be we don’t any reimbursement folks an so information. working patient to So specific information. able that be any to They answer that

Patrick Trucchio

That’s is ramp IV right continued of are when of beyond about IV shortages, treatments of shortages we anticipate one what's up What helpful. think stronger in or and XXXX to the the to shortage way a these opioid just a may expected IV bupivacaine here. these wake IV meloxicam that of the not the be it? or And last status in ease? these is perhaps Should

Geraldine Henwood

hospitals other has because have Puerto when yet would given on of because a capacity some would in will other are continue looking that been been say, We look them. specific we like that I any contaminants of and I manufacturers OFIRMEV continuing don't what to Rico whether may reconstructed water I wonder if on had or of Maria shortages they Well opioid not taken understanding I basis out Hurricane that plants some from they products. resolve. at replaced at the may usage, to Tylenol from would be able some information IV that damage our and in injectable be imagine these sites, has hear these have things have not

but IV expectations supply products, what a So see to that similarly able really to for about a that there change helps help way it they’re because controlling launch perhaps is the a us it’s in their that be gives quickly, will that accomplished it’s tool programs avoid will year, you tell interested there some it a we new number in new because that of very into are usage they pain. pain hospital company, think I them be be bupivacaine. year well were out because for back will which of patients anything work. be that more as the people multimodal demand institutions want overheated don't a It can to them can't them to gives when as move there for can We opioid get during meloxicam for so to another bit, online try paradigm analgesia again launch management, another it keen their to implemented

but play on all to that achieve us just we the it think even I help but further ‘XX wouldn't it I will and So for for your fasten have think seatbelts we role a goals ‘XX. be yet saying those will factors

Operator

questions. further call Gerri would no are the to remarks. closing There I like Henwood for any turn to over back

Geraldine Henwood

Thank talking all us operator. We you, for Bye. again you this Have day. Thank look forward with you morning. soon. great here a joining to again

Operator

may you Ladies and today's This program a conference. have does gentleman, disconnect. thank great conclude all Everyone, you for in and participating day. the

Societal CDMO (SCTL) 7 Nov 182018 Q3 Earnings call transcript