REPH - Earnings call transcript Q4 2018

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Operator

Good morning, and welcome to the Recro Pharma Fourth Quarter and Year-End 2018 Financial Results 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 conference is being recorded at the company's request. I would now like to turn the call over to Claudia Styslinger, Investor Relations.

begin. may You

Claudia Styslinger

joined thank Financial conference and year-end joining on and and us Financial and Henwood, Good Executive Chief to you discuss call Officer; I'm Styslinger Claudia call This Lake, and by Recro's today's Gerri Results. President Chief morning, Ryan is for today Officer. fourth XXXX quarter

addition Harlow, Executive the be will and Q&A. John Vice in In available room President Commercial during is

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

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

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

believe performance understanding supplemental organization taxes, earnings and financial CDMO the contract adjusted in operating loss manufacturing business net and information these reported ASCO included net our per we adjusted may number the earnings depreciation helpful used measures is income to Specifically by but adjusted substitute loss or this not are CDMO stock-based the before for financial measures business. gives in development as XXXX-XX EBITDA We and business. discussed management These call. share into operating as results evaluating a which as it on compensation of amortization transparency adjusted without greater the our and to non-GAAP income be non-cash in addition discuss of for interest as impact release and CDMO investors in should GAAP financial be considered our our non-GAAP and or

operating and reconciliation GAAP measures adjusted as a Investors News net page adjusted the our of EBITDA to has loss a income included been and share made in supplemental website have adjusted net loss adjusted on schedule, available We & of which per the recropharma.com. as financial at

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

Gerri Henwood

supply Late fronts supplier through today's announced the and Thank a XXXX you, we Gainesville Claudia, XXXX Focalin long-acting us Novartis as we continue for will exclusive year Thanks and good and were Recro completed morning, future our number release Novartis, growth important are to of five very to success. we XXXX. Gainesville early call. initiatives between Ritalin and active joining that meaningful of corporate new everyone. on and and believe week on agreement a whereby several extended be to Last manufacturing capsules

facility December $XX was us Management, meloxicam been corporate facility existing going to because enterprise. as we the contract partnership be of The early continued Recro In million value as Pharma to cultivating Recro XX announced longer Gainesville of decades continued receiving Capital the drawn was well strength million. amendment with by the available in our an overall agreement, we Our with two contingent for close January, $XX secured Athyrium our access new those of of debt to nearly the had had terms million our speaks important funding Athyrium funding. five-year which brings a Gainesville XXXX. this provide both has Novartis relationship from to for to Under extension approval of and to prior tranches $XXX on remaining credit which FDA no IV credit

$XX amendment December new availability the first which this of the in million, $XX XXXX. restored However, funded of the remaining million of was

traction helpful FDA's million us to this way an and we partnership final reframe us. become the Athyrium meloxicam. early appreciate forward, work additional willingness a fortunate Going debt to of IV available meloxicam very such strong and $XX to have with following will in million a with available that's the upon the will of approval sales We're to structure with their $XX IV facility be

strong by IV April of meloxicam of one FDA. January we and $X the million days agreement, approval further amendment, to opportunities milestone year payments IV for Alkermes of of performance. milestone prior IV continue due new We meloxicam the to upon also Under additional $X make within in paid license terms in XXX In evaluate million the the the and of December one of two we the to XXXX, this payments of Alkermes Under of agreement with the the the global its meloxicam. Gainesville year FDA. continued we amended payment we by approval following facility Alkermes structured leverage million concerning will owed $XX this

approximately period. $XX each by of Alkermes our We million in payments will FDA the to requirements a million for following $XX $X.X annual outcome and extends upon anniversary extremely the cash of seven total then seven-year XXXX approval. because equal pleased payments of reduces a this commencing We're the amendment with pay first it over million

manufacturing expanded combined finally, a the quarter the oral site facility dedicated foot of an forms such and will XXXX, Georgia. in solving during potency utilizing and CDMO development services product facilities has supply, Importantly, development additional XX,XXX the challenges. This fourth existing suites located will formulation, increased million demand was space issues DEA-licensed with revised trial, we're This our used also to net in of foot value XX,XXX seeing and clients, square GMP facility and we from product. amended for that which houses process, milestone square the expanded And opened consideration new high and an facility and to near response for payment schedule provide potency that of suites results especially is Gainesville, our manufacturing for an be executed manufacturing, development for present XX%. $XX related formulation CDMO of The strategic high discount services. expansion rate dosage as approximate respect addressing product of in expanded clinical specialized to stage analytical needs

broader range well and to For the an believe highest high years Gainesville allow services these as quality us clients even to provide customers clients been has offering Recro new as the services our we and partners. quality and to potential existing facilities team capabilities will now additional both of our

happened strong XXXX led at everyone Gainesville of work important CDMO our record new the to their division thank annual Recro $XX.X dedication set and would like with these a we of on achievements year. million. of to hard All revenues I performance personally backdrop where from for another which record

in XXXX. on highlights, the infrastructure half to clinical advance I'd turn data publishing the centered are launch commercial for IV touch meloxicam I call and to potential like in for our Before on which developing Ryan just efforts first of our financial over the ongoing the the

all months, of clinical past pain accepted evidence meloxicam. Phase the publication I'm represents safety, Over regarding pleased peer-reviewed the in for has II opioid trial on surgical-focused report that body that for and been eight journals. to This IV data over of the III note and efficacy, publications reduction either significant a few published or Phase also or

Ex-vivo poster that shorter on in there Meloxicam XXXX ketorolac. December the on meloxicam presentations closure Function." platelet roughly IV and untreated numerically presented Additionally, as function times same and The of Assessment closure Platelet abstracts data of of poster including controls of were IV reports XXXX the meloxicam's titled achieve times in and than a lack "An effect XX IV Effects

professionals world-class leading expertise product team, a Additionally, developing strong with in commercial organizations. of stage we've wide of launches at and been significant experienced a comprised range

continues XXXX, community us alternative, for tool medical physicians' be express would remain addition to non-opioid the to analgesic need As confident, kit. to we the a a we long-acting which the enter welcome

planning And role novel has play management prelaunch on With meloxicam XX, of physician focused on moderate-to-severe over believe potential call IV a candidate that, event to pain. turn date as on the that continue for now Ryan our the a adoption non-opioid Ryan? our for to are I'll approval differentiated goal the upcoming the We meaningful efforts financials. and in of PDUFA March the XXXX. in to

Ryan Lake

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

equivalents cash approximately and of cash $XX.X million. of As XXXX, XX, December we had

other costs, statutory CDMO for professional during year year driven increase income and December For Jobs and XXXX year XXXX as XXXX $XX.X and public XXXX, versus for deferred a million development XXXX The ended earnings $XX.X $XX.X revenue to million in Cost noncash standard The XXXX. tax tax compared of from a $XX.X with onetime assets. from to within year increase on valuation structure to Act and XX% Net was -- first well $XX.X loss the or XXXX an to recognition in and coupled ended for fees strategic costs of due costs to $X.X rate. XX, million measure meloxicam's increase of amendment $XX.X was compared the ended the loss recording XXXX for tax XXXX full in salaries for pre-commercialization year. December partners focused development revenues expensed capabilities full allowance Phase higher million million personnel an the until against prioritizing onetime XXXX which XXXX a segment, anticipated of the XXXX. and due was $X.X an of XXXX Cuts was our primarily benefit our of allowance mentioned million pre-commercialization and and division including products, year These through the million of growth income years as half also launch loss $XX international net XXXX non-cash and items a million, respectively, domestic million consulting full the tax mix net demand. the also $X.XX net adjustment in benefit commercial CRL the due valuation was for legal general Adjusted excluding issued million expansion per to fourth valuation filing ended resulted tax year. income of the Adjusted the million the increase by trial ended Included clinical million full a loss the the in as were XX, a with administrative a for our various reform per costs recognized $X.XX $XX.X XX, and product Income increase milestone for net for the Income as or benefits contract and for business recording net December million, manufacturing approval, United drivers. of the cost-savings for and the the and XX, tax recording due million respectively. the expense the for million the year NDA development the $XX.X generated The loss the decrease of share commercial costs primarily to were must history loss our tax share year measure from XXXX. in due the for increase Tax the in XXXX, year for financial per $XX.X for of of financial IV a Research The one $XX.X is prior an using for new meloxicam, $XX.X regarding increase our was of to of XXXX, which increases the pipeline IV year second non-GAAP costs in IIIb including December Alkermes the years expense. XXXX tax share full the a of share. trial primarily year million in half by year loss manufacturing tax associated of revenue million $X.X compared services of of million team XX, to increase on $X.X December development increased result our deferred company the million Adjusted administrative clinical manufacturing excluding $XX.X modest sales year spend and XXXX in our and States. full and These related expense which be increase financial III of in attributed after impact effected debt reduced the initiatives following $X.XX results year $X.XX. Adjusted costs non-cash $XX.X for million sales NDA in well the to our earlier. CRL tax were value the and The the quarter payments tax an partners. diluted non-GAAP of in full increased was expenses for costs is the was growth in from was $XX.X net impact net of was XXXX full commercial costs diluted was FDA IV $XX adjustment full were and XXXX. expenses increased $XX.X new meloxicam. fees, the re-measurement were loss charges. million loss year year per the profit as in General share XXXX per full allowance sharing the full in Phase of by product partially XXXX were a offset

partially in capabilities, fourth the expenses due from including development was $XX.X for for $X $XX.X the sales. and were XXXX These December and XXXX was $X revenue months to of as product The new is Cost as related benefits standard three onetime decrease share the tax product increase as quarter well loss share an Adjusted IV expense XXXX service now net quarter compared tax fourth fourth the the fourth in and million to Adjusted million quarter to $XX pre-commercialization fourth a the million, demand. the the trials products. charges. the revenue quarter of of for of $XX.X to excluding was Research $X.X clinical $XX due fourth revenues and million million of million loss net decrease XXXX offset a were increased $XX.X sharing, debt of XXXX $X.XX the the by and costs. quarter XXXX for million due for million $X.XX. for million for for quarter reduced was for increase an costs our Adjusted $XX.X royalties. were in non-cash for million recognition tax the quarter $XX.X impact of profit clinical net Phase million growth XXXX XXXX was mix were manufacturing million loss respectively. XXXX. as share fourth the fourth and an loss due XXXX. allowance reform meloxicam CDMO reductions compared fourth for The share XX, fourth per effected $X.XX. XXXX costs. increase diluted excluding Adjusted from quarter was were and income The net quarter cost increase was development adjustment in compared the of for quarter was fourth million quarter of the or million for quarter lower pipeline $X.X valuation offset loss sales the expansion costs ended $X Phase $X.X primarily and IIIb impact of and loss to increase net by The primarily manufacturing $XX increases per other of results, the mentioned XXXX General in and fourth quarter decrease expenses the well for decrease of administrative XXXX. $XX.X Net million Turning recording These of division net $XX.X to XXXX million in per million the development of III our of $X.XX XXXX. earlier. to of diluted salaries trial and of fourth in was personnel primarily to loss to a or per loss net for compared

and of division ahead and we with $XX approximately the generated look approximately million CDMO $XX be $XX.X of as contracts well existing consideration turn comments. million, into operating I'll approximately call we customer's from for patterns taking of million with to closing As expect market to revenue adjusted Gerri? XXXX, estimations. now to product the our as experienced income order as timing customer back Gerri EBITDA

Gerri Henwood

you, Thank Ryan.

our to Looking ahead stage to by maintain potential In we the look it moderate-to-severe PDUFA XXXX. preparing open XX, meloxicam, for on the product, be upcoming to and pain can the XXXX. the approved for questions. treatment commercial novel, I'd future await to and Recro potentially remain the Operator? for to and we for IV created. realized. ensuring goal set an We is success. first of We've meantime, we commercial the corporate transformative forward believe from if infrastructure XXXX, year positive like start eventful to we've that date launch be our see commercial FDA full a set this had ready as the we our March building non-opioid now momentum We call focused

Operator

question Amsellem David Our Piper to open prepared your We'll first Instructions] call questions. our comes [Operator now of remarks. concludes from the That Jaffray.

please is is mute, open. if your telephone David, unmute. line Your

David Amsellem

me? hear everyone can Sorry,

Gerri Henwood

Yes. David. Thanks.

David Amsellem

Okay.

about Sorry that.

couple of questions. a So

traction patient Thanks. of has? what your how forward that first ultimately availability you one. about if number organization it the a to meloxicam just the business thinking us, you how far thinking just gains about your in going the role number infrastructure, not the the that away talk have business other? course? on So the And of fit one options you about you're you're you can fit CDMO IV high-level way or does the think talk out then for a how per isn't overall And and on two meloxicam, And hospital build at business. trying as as with pricing core build, can do about generics, impacts you Can the business? That's which per IV Ofirmev remind that

Gerri Henwood

Well though. bunch David. questions, thanks. for These them are of Thanks quite a

with So the off we'll CDMO. start

have that believe the So very been the the we obviously, for performance future we business and at for prospects are of business that pleased bright.

little expense valuation very We're very the and of believe right sure taken that And -- that year, very we will bit that but going that making into forward. the demand out some the we full well. this staff the of With long-term contributory place transactions thinking the for several seems that to have last a we to disappointing obviously had as facility had that, given continue And that be building years. plays which business, getting for credit is business not over good.

benefit that creating to continue opportunity launch that capital capital business that to the have of from we non-dilutive and more the business non-dilutive get from meloxicam. leverage the we While IV that with help

the business continue is if potentially prospect us, well and whether part meloxicam. going of to credit and for are as at full meloxicam get relatively for is the about in in we whether at obviously patient that potentially as the contribution the I'm longer and monetize the future some whether OFIRMEV IV or that to to John not for to address to a near there how than the we that evaluate its With look point full will per there value able thinking an as bit potentially opportunity future full an credit to a not ask to course, generic per to We of well. business, are opportunity little that to Harlow pricing get respect

John Harlow

David. morning, Good Gerri. Thanks

decision-makers. and have acquisition to previously customer that work some approximately the a day on Response that's First or we've patient, from as done per it of range the of $XXX relates will patient price based post-Complete per lot what the $XX be per formulary to is pricing additional feedback said and in

looked department center to how As obviously based we would ambulatory the other typically marketplace, of inpatient surgical in what days care. is to range the And in that are days it of typically a dose outpatient those the the anticipate analgesics analogs in between settings inpatient then the we've receive hospital setting. patients IV in one in two upon these at therapy, one relates used and products of and

to again one per one the So between outpatient $XX in then – acquisition of day customer dose patient ASC one $XXX the price in and the inpatient. two range and somewhere to

relates it of about a what impact number your As opinion to availability board right we're in a the assuming question generic with is OFIRMEV just we the neutral the somewhat a meeting had advisory leaders And of recent impact actually of now of a experts and product. key net space. to

mechanisms patient selective beneficial. And have using as products IV an deem concomitantly versus product increases would You IV as the outcomes. of action in The therapeutic it important meloxicam could which that acetaminophen and way different this equation continues product multimodal category see therefore such thing both a sides goes. analgesia is of that for to a positive meloxicam of COX-X like be such

opened to a neutral we once So think now was would could so the be Ofirmev that effect to right be dollars generic available there positive speak. a budget up the because

provides that second commentary hopefully So of little a that on question. bit

David Amsellem

that's just quick a ask No And I may very helpful. if Yeah. follow-up.

talk maybe year. you're beginning that IV how EXPAREL meloxicam? again. are on what the terms Committees. tied at seen thoughts Thanks thinking your and mean, And to mean and of access of how you? coding of I the for in a to benefit landscape. that question reimbursement I is So code about we've the kind this this on obviously P&C got changes may

John Harlow

David. question. Sure Good

think into relates as reimbursement, it important such a timeline as an it's As to to EXPAREL products you remember than different said. fall new I existing reimbursement products

outpatient seeing such in upon the now separately are the procedure. environment off, marketplace well of being ASC we So, as first EXPAREL -- towards as depending an -- the clearly is some in parts in the and reimbursed moving HOPD as

such J-codes C-code timelines the products will J-code, March year, of day positive reimbursement we the a have and of which both end become is XXXX newer meloxicam we J-code be unique towards that this launch. different end then the by of approved meloxicam, then C for obviously respective very in apply would have will they would as For one and both which XXXX. and IV and available C-code IV And assuming and if immediately available of application become would the miscellaneous available

a C product. IV you point. think If a has a look post situation would really coding and So, timeline at years. an at a three a And different to we meloxicam, ultimately for for receive enjoy status J-code time, would reimbursement those very away existing is we a approximately but separately three to I detail get newer analgesics were unique product than a IV of where pass-through lot to the way of the this really we anticipate reimbursing long going continue time could years, we landscape be given reimbursed, that at that's into

David Amsellem

color. Thanks. the Appreciate Okay.

Gerri Henwood

David. Thanks

John Harlow

Welcome.

Operator

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

open. Your line is

Leland Gershell

for Thank Thanks. Good my you taking morning. question.

Gerri Henwood

Sure.

Leland Gershell

any years $XX year from million for foot $XX and so the business particular, last this of square or ask of current towards looking million the include last of side prospects I the CDMO from end over in as the I at and guidance in couple was XXXX. expectations your we million your then not guidance year about includes foot know XX,XXX is year to $XX the XX,XXX up the to foot? wanted revenue that's XX,XXX really million come does that for facility only year growth square guidance into online the $XX head the and square before

Gerri Henwood

development for expectations facility. the No, we have new

well by it foot business demand expertise formulation situation to fact area generated our facility development pilot a continue plant as really we overcrowding and as team that was in had XX,XXX square In within can the given the ability the within the fit-out a through to provide pretty demand. prompted leased that look order to us the do quickly lease, we able was to so we could facility to client that in commercial be quite inexpensive respond to manufacturing that at Gould,

it be be So expect that to We there that significant revenue is us and be step been development have signed going work come facility Gould mature that that products that's perhaps begun related, call earned by in facility would for already. through that There let's to is as has do what there that are facility. more well. -- of next will virtue more in for

So, have over yes, fortune and and mature are others cases we product gradually products are if and good be in and look Novartis will with have relationships some we some of -- Heather these while decreasing. great our mix, the to at time we

for and And business high facility of planning to interest of facility, bigger of have been part like part specially that for had well as new and and a a think so us it been up potency We'd this it opens potency. is we strong facility really which have it. to dedicated one-half high to has an is the even opportunity be

And for so that have the have expectations expectations for towards that do XXXX. contributory growth we and we is good

Leland Gershell

a think the then in RPXXXX, I that candidates, And Thanks. great. Okay, sometime just what's that to was NMB question that first pipeline clinic the of asset? scheduled Is status the head on into the -- half.

Gerri Henwood

Yeah.

study. the could pretty both, There are non-clinical some such complete for have to be before before had There that work inexpensive into a work go has forward to move XXXX completed was that we that neuromuscular the is progressing. completed permit XXXX that into moving study. on been blockers So the dose-escalation we had to and line that manufacturing to XXXX is a get to

we expensive. to as as not financial movable on very the are again bit situation. the our gotten And need products drug make a looking We at spend required based little NMB API. honestly We have terribly

sheet. opportunities evaluate Gainesville We are expecting further to to the and continuing improve lever balance

be it one we further in to the of summer was is some on being move sometime position the by And non-clinical the able a so to we in be all will think the that because a more that. overspending along and will next a consider things has and R&D. timing that or lot depend on to synthesis finally able in think that but we're the other be bit initiate hopefully XXXX. a year, principle end would XXXX the equal, of through tougher early to I year without We behind little

Leland Gershell

queue. jump much. All right. I’ll the Thanks in very back

Gerri Henwood

Leland. Thanks,

Operator

Esther from Janney. comes of question next Hong Our

is line Your open.

Esther Hong

morning. good Hi,

Gerri Henwood

morning, Good Esther.

Esther Hong

questions. So Morning two

And business, in So more $XX first will then for just of meloxicam, million then provide up us little how with be a date respect growth to is much coming guidance color second where on preparations for potential And can the launch? the Thanks. XXXX? you can of from March PDUFA incorporates with question business? commercial you new just XXXX coming for the IV XX remind the CDMO

Gerri Henwood

Esther. Thanks, Sure.

to business, currently respect we CDMO based year some at the done it's customer already in forecasts them. XXXX Gould for business on with the organic for the growth existing are expecting So

profit have that some Some of also quarter of in improved arrangements sharing the from XXXX. modestly come that fourth will conceivably

part of business that. New a will be

run we notably guidance for it haven't se, We given would for of date, be new that been rate nice account really contributory With have be the a per a managers. making like XXXX. announcement specific to PDUFA before We'd it, retaining but as respect into meloxicam business, our getting segment. we a in start key to

field a we the They key exception formulary from our helping understand got have much and Complete severed of interactions map As staff been in the Response recall, be very we that? May you director little commercial when and little is account will year. of more view in the managers. point and us back in our of may was with that little helpful. to faster time. things John, and to where of The to about last Letter at professionals regional position. may had busy very That the do talk be things for you take are a a And process we want bit where description looking candidates now bit background bit going to business

John Harlow

Good Yes, Esther. morning, sure.

as a the organization. building remarks, of the commercial process out standpoint, in Gerri opening commercial from preparation in her we stated So are

other our color for approval begin managers some assuming the PDUFA to identified the the additional commercial work the a has, PDUFA for provides back over And weeks. training anticipate we around a our we're assuming we would who towards and half around of have scale completed up and part, XX, them prelaunch again the been and standpoint approval. or date and into that you. head All the half Hopefully, first of now waiting the year. then business for most directors of the regional are launch, frontline to ultimately March onboard at organization a date We positive approval next several standpoint, from hiring sales then then

Esther Hong

Thank you.

Gerri Henwood

Esther. Thanks,

Operator

comes next Roth from Our question Scott Capital. Henry of

line Your open. is

Scott Henry

morning. good and you Thank

Gerri Henwood

Good morning.

Scott Henry

little just meloxicam. deeper into dig IV to a I'm going

date, at us year think in should how As or XXXX? we the color approach the PDUFA we you give revenue calendar year any can first of about least within

Gerri Henwood

significant So, not we'll to mentioned, that because have the field, delay as month at as the any presence conscious really, John we're people until before of very of PDUFA June. we're likely that, it's after looking date. looking decision mean, our at the having I hiring in

like at that the get talked and we hospital before, where possibly running parent looking happen about formularies many institution. controlled earlier, hell tightly ASCs, at departments, can addition as we to their we as selected trying not to as usage could to by and trial So believe, we've to push, in are outpatient try then they're

modest for expectations So be I the think we for number could sales what XXXX. have

recognized, Scott We that to on side the haven't get our recognize to which under a be things. be and has so returns given like to much accounting will conditions therefore, help guidance in those yes, young of potential company not and trying able and kinds on part with aside returns that, with we to to allowances put clarifying we're be revenue, required do history, partners of how the will for no

But way the history, not make come organizations plan could to think it success. what provider commercial will we revenue our a I months think in from. we sense. very looking we -- start resistance But our as units of piece course a under budgets. and there that formulary their it concerned levels product would is there more about impressive belt. so Whether has the we're to we'll or we desire situation year have in sort large and look not We a would seven at reflective representative will not think we'll when all level. sales But can curve see. really recognize we'll of discount our good think six, be to there our modest of a always have where I everybody certain we for believe of us, at for be ultimate where is important There discount XXXX this that general, the at is have believe of a we of out will pretty first mean of will be is legs. where strong

Scott Henry

going what costs helpful. And would not expect to Okay. on sure, total you're but XXXX? color That's be could launch in then Great. any to this, if you you give provide I'm

Gerri Henwood

haven't sort per mean either, reasonably on talked many, range XXX-ish about investors our with generally have cost and But with you're that Scott. we in per the rep. given Well other that conferences again, is the rep venues loaded in known guidance we the many of space. I and fully you at fact looking well of the

You companies out-of-pocket of in most see a the million space, are to year in this looking -- we at launching spend. spending about neighborhood $XX million in $XX

possibly efficient in going So sure that we that a to We be as know fashion. we're most And our of out circle at doing be and looking making we a the to at of that while hard looking. spend kind it, obviously trying every compliant that we're on gives can. ROI as have is going looking you we're of to squeeze so where one dollar to we're reps

Scott Henry

Should similar should to that manufacturing lower make as how margins? Okay. XXXX? how And but see thoughts margins the were should And the we the yearly I we little any changes believe there look a no on then perhaps Great. impact? about on business flow look cash some think it progression there? accounting well

Gerri Henwood

So that? want about to talk you Ryan do

Ryan Lake

Yes.

CDMO believe year. were then the margins range based year. strong prospects will the on They in business to a for range continue our were for the So XXs the similar We very in XX% overall that gross anticipated XXXX the in for be that margins were and the they last for year.

Scott Henry

Okay. the the progression And sequential year? then throughout

Gerri Henwood

As business little of things. control because we on you know is don't bit this the Scott, a a challenging timing

years the maybe this in will lighter year quarter as they their adjust don't have they the -- are because quarter their seen expectations Our gotten orders, at forecast have fourth oftentimes the for of then two year put you of inventory in one want end past the customers often people and year. inventory little to through. they hold in the the and or as bit that their fourth and end clients the at more a often goes as we year aggressive And is have very

we that a of reporting hope hopefully, ordering it the keep would be be come sides clearly sequential growth thing but that see segment once you to would product because going progression own the the the you'll just not that in where it way not nature have if was of it's of So quarter-over-quarter you be see a both like because of is hopefully on quarter-over-quarter That's the IV always in market client progressing. will meloxicam able handy your business patterns. to a to mind

Scott Henry

question, the Final in financials noise guess I Okay. lot of be a XXXX. there'll in Great.

impact numbers to Alkermes we the the You'll valuation. you payments. that? have have should will how do or all accounting any color treatment try give consideration in the And XXXX model contingent change on can as you in How expect you

Gerri Henwood

Ryan, crystal how's your ball on that?

Ryan Lake

in there's million $XX to about a XX-K think color upon amount morning term was expect couple additional both things short of consideration as year. contingent approximately as filed million this by the some of $XX end approval. And at provided and that I But and the well. would the was So, we long increase the that we the term

Scott Henry

And will fully place? payments those Okay. you Or will they those? Alkermes when to amortize those book take you

Ryan Lake

and after in Those as in million January after the six was be April will the be months Gerri mentioned $X of $X then million paid payments will PDUFA approval, earlier so another call in $X sheet. those the come-off million paid paid. balance will So

go contingent P&L. the those will balance go the sheet. Those against through the on won't So liability

Gerri Henwood

only helpful thing can otherwise consideration, only that's the thing the – I find you because very about not be in contingent might clarifying. it Which really like

Scott Henry

payment in And I one The Or April firm commitment? guess clarification. that approval? that Perfect. is $X how then just contingent is million upon

Gerri Henwood

rescheduling the commitment firm to a that get of It's payments. quid the of was part the

Scott Henry

questions, you the Okay. for taking Great. Thank

Gerri Henwood

much very Scott. Thanks

Operator

Berenberg Capital. of Patrick from Trucchio Our Instructions] comes question next [Operator

Patrick Trucchio

feedback Certainly, industry. for believe Good opioids from based the DEA Thanks. disaggregated and in solid-dose I crafting the XXXX the morning. quota IV of opioids on agency

So from an it of have impact perspective. less IV quota looks like opioids the a

questions have few So a I this. about

Is issues? And And that is can that correct? The have of right opioids this the first other hospitals – secondly, IV you if still follow-up. then or in has the the about to one broadly us think year? quotas having if is way that is this IV of are opioids tell one I shortages – terms

Gerri Henwood

and emergency from experts many IV the out have doc is a of a it institution include medicine a IV of going there are we an solid, more heard you up versus have happen discussion our available data those. same of respect don't still that daughter any persistence one for to shortage believe IVs I hear source have but the not the we is in and that who around opioids terms IV which with Boston rumors to opioid. is being of of primary that many I impacted Patrick. manufacture small-volume of we've anecdotal we because aware parenterals been through So We solids is hospitals. there there has in shortage quota, what is in their

I issue So and restricting have influenced with it quota not DEA's might respect thinking still to too. think that there an is

Patrick Trucchio

Got it.

could of taking shortage then How demand? quickly you how the meet can of you any IV on think manufacturing, formulary just do March So in help assuming, much IV terms with? if -- into much account meloxicam -- approved is coverage, meloxicam that XX, this how incremental

Gerri Henwood

want as factors that? patients role. sales need many we some having are at and We talk they John hear they So a about trying think meloxicam on still of was Ofirmev's I'll as one the the and was the you we shortages. its a to think let patients are of not feel who clinicians from We that they in for in that play in year participation second. seen clinicians available hear that comment to last frustrated from John, treating do could options relieve

John Harlow

And Patrick. Gerri. morning, agree with good Thanks, Gerri. I

quick that their We impacting section also but than to shortage. of they're website FDA make IV that like have many and that we the more commented IV in of your product Ofirmev they've other of And a parallel the very a statement appetite than meloxicam, utilize long-acting quicker it's would even a decision on IV currently we without very And to like other an So it's like some shortages a the accounts, still opioids. hear to and sporadic, the compensate to shortage. when in for shortage. bupivacaine follow We've PDUFA shortages opioids we products seen continue date accounts many the greater have closely. hospitals is review the would

the From account standpoint, supply fast a is in a really supply Patrick. though dependent based for we marketplace upon demand the anticipating are it So and are having upstart. hoping enough

only the So again, the to for shortages Management. are opioid that relates as Pain products a IV I does it does used Post-Op so not think create epidemic other meloxicam, for but tailwind of launch the

Gerri Henwood

further noticed for to their trying less institutions one more them think and non-opioids tracked about another has meloxicam think want I prompted accounts honestly, outcomes certain that also usage as reduction in or reason have I return. expense. deliberate to And such of that be improve to they And have opioids IV even of also more to their their foster have

Patrick Trucchio

Thank That's it. helpful. much. Got you very

Gerri Henwood

Thanks, Patrick.

Operator

we call remarks. I for will Gerri And are the questions. showing no now closing further back turn to

Gerri Henwood

to you we time. meeting talking and time for thanks having hope your for the soon. morning this much for great be very with a look We company you again the Have you Thank year your and of day terrific XXXX. and during with a to and your past support forward

Operator

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

Societal CDMO (SCTL) 19 Feb 192018 Q4 Earnings call transcript