REPH - Earnings call transcript Q2 2019

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Operator

Good morning, and welcome to the Recro Pharma Second Quarter 2019 Financial Results Conference Call. [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.

You may begin.

Claudia Styslinger

Good morning, and thank you for joining us on today's conference call to discuss Recro's second quarter 2019 financial results. and Executive today Chief Officer; Styslinger, President Gerri Financial Claudia Chief and and is I'm by joined Henwood, Officer. This Ryan Lake,

will questions. remarks the prepared today Gerri Ryan, Following by call we for and open

financial Earlier this a press June results our issued Investors morning, release ended at is the months XXXX. the website and News page detailing three and press for XX, operating release we our The available recropharma.com. on of

time resolution; to These our with believe, such of clinical meaning. candidates. product results other upcoming, and for future the identified are of including statements preclinical forecasts we our such anticipate, ability and our financial remind we New any results trials and of Response and raise our Complete constitute associated and make from spin our on products' should, candidates, Reform plan, remarks U.S. to comments, by Letter expect, acute issued including that for Before words to the the the to provisions related studies uncertainties other of product plans by can risks our for and Application XXXX, statements intend ability and development forward-looking our subject any similar Litigation words cause today estimate, resolve outlook; on business; I'll statements Drug the that Harbor you to begin frame Securities Administration our may timing actual the the pursuant terms Act forward-looking of care out may, will, to meloxicam various be capital materially and differ expectations formal Safe IV and Food such Drug as us; acceptable to Private

and file of on now Condition are XX-Q, for Form we Pharma's this described XX, call, information call sections the on of and update Financial ended day performance the Exchange is as XXXX, statements guarantees August and any may forward-looking Results are only of we Report December factors and which risks statements reports involve and to on we any of on XX-K the Commission website. X, this with uncertainties. Annual this undertake no such XXXX, account the year Analysis are of Any are provide provided on the Securities risk information, and new make of in otherwise. Recro on These and conference SEC's call Discussion Operations or Form on and risks future Management's future available obligation forward-looking events certain of quarterly fiscal Any and not

In addition, purport preliminary the company. any project does pro unaudited not is Actual financial differ to may forma that materially. or operating and results provided positions may or financial of information results be

respect our three measures certain We financial may to months performance also the June discuss for with XX, ended XXXX. non-GAAP financial

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

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

now like over turn call to would Gerri Henwood. Gerri? I to the

Geraldine Henwood

you, Thank call of I today's an us joining will morning, recent today's overview call. for good everyone. begin you CDMO with segment. on Thank accomplishments Claudia, and within the

I’m generating quarter to million, increase XXXX. $XX.X the of that outperform continues quarter second second to manufacturing XX% a to business revenues announce pleased of compared the

the For comparable the generated months in $XX.X XXXX. period, months in period X increase revenues, XX% from CDMO a million the business X

We're year-over-year very of and happy continued the with year-to-date trajectory sales performance growth.

million first our and customers strong we XXXX from raising Given full-year existing million. from the million growth CDMO an are to guidance $XX anticipated to business $XX half $XX prospects, results, to new $XX revenue million organic

to now Turning Acute Care the segment.

US As of for many moderate for Drug the non-opioid complete new letter meloxicam, second to for of you intravenous application response from in the inhibitor management drug a pain. approval Administration severe preferential received our & we the Food COX-X March, know, seeking

CRL duration monotherapy noting onset in focused for pain. meloxicam cited The view of acute delayed concerns IV FDA's prescriber onset, and CRL the to second of The sales IV drugs. of also about the on IV role meloxicam expectations pain meet FDA's

company. other Care spin business segment including two data approval IV the meet needs the Acute trials the have as it corporate well out interpretation as structures evaluate to FDA's for prescriber setting, and FDA the clinical would Acute as CDMO pursue the as that how and business continue Given Care well possible a to of we separately traded meloxicam patient in as and plan public

the half the believe headcount positive staff Acute the significantly cash in segment. XXXX expenses reduce We reduction anticipate this of reduced planned will including XXXX. we not XX the the CDMO approximately did Care in Following reduction cash employees receipt of and second impact of a employees. segment, second burn in of initiative flow operating CRL, we The becoming

it now Ryan. over that, turn to With I'll

Ryan Lake

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

equivalents As million. XXXX, and of had cash short-term of June investments cash, XX, Recro $XX.X

one second of increased sales in royalties million was from of of for XXXX the of million and and $XX.X the our quarter to due compared respectively commercial in The quarter partners. million cost two our $XX.X to for second increase were recognized million and commercial Revenues $XX.X revenue and increase sales million, of of partners XXXX. to $XX.X an $X.X product

Cost of our was well we result which of sales capabilities as a higher offset and volumes. demand, efficiencies services primarily gained growth due as as production by development that of to partially in operating expansion manufacturing increased

and Research quarter, development of to XXXX were expenses for the second million compared the second million of $X.X for XXXX. quarter $XX.X quarter

of associated decrease million strategic Excluding $X.X to decrease million in in initiative of costs $X.X restructuring the the quarter was to second primarily costs a the due manufacturing recorded XXXX pre-commercialization with in activities, of decrease formulation products shift CDMO costs of for development cost a capabilities other pipeline a development personnel for costs. our decrease IV and to in and meloxicam, of focus sales

for administrative XXXX quarter the General the expenses to for second of compared quarter $XX million, XXXX. of and $XX second million were

in million launch due $X.X related the strategic reduction of preparation to associated a recorded of which million $X.X XXXX, costs team the costs restructuring our personnel in decrease initiative of quarter IV and meloxicam. was Excluding following of the the with second anticipated the commercial of suspended CRL,

loss For of $X.XX the reported million quarter XXXX, per same net period XXXX. per or or the in of $X.XX the to loss second a share for company compared a $XX.X $X.X share of net million

in in June were $XX commercial from to million, and commercial ended million million increase an to XX, revenue The $XX.X the $XX.X million our to was $XX.X recognized $XX.X increased compared six same XXXX. in respectively months million XXXX, increase partners, product of for and royalties and of of one of For due period cost revenues sales the sales our various partners.

June The million as as as restructuring due efficiencies higher Research to Cost services period well initiative of the gained an capabilities $X.X CDMO in were of for decrease million six in and XX, slightly a IV and increase $X.X other ended partially in recorded second manufacturing our decrease with which development of of development due was in formulation focus operating development ended primarily of of decrease XXXX, CRL. costs of shift expansion the excluding cost activities, for the development volumes. growth pipeline offset million prior result costs pre-commercialization sales a XX, capabilities to compared associated for in sales to a costs, manufacturing production offset demand, increased costs June our same for XXXX. $XX.X $XX.X strategic six months in to to million the primarily of and personnel the by meloxicam expenses was products the months XXXX by

General for and million the XXXX ended for XX, expenses same the $XX.X months administrative XXXX. were six June compared to in $XX.X period million,

decreases legal six well of company of our the in increases with the by offset CRLs in financing for the the fees strategic costs business months fees, with debt ended costs recorded Excluding of in $X.X the was development regarding IV personnel $X.X decrease XXXX, professional meloxicam. IV as public CRL. costs increased were associated second FDA addressing to costs including anticipated receipt decreases incurred following the year, issued as million segment our for in in by second the XX, of consulting the first June pre-commercial the and commercial the million with restructuring and in team associated costs NDA These due early initiative launch meloxicam costs CDMO the associated

$X.X Recro million, the XXXX, period million loss compared XXXX. or of net months for per loss to For of a $X.XX net June comparable the ended or a per reported $X.XX in share six XX, $XX.X share,

to to our from to to million our million to revenue As $XX CDMO million XXXX from prospects. to anticipated an on $XX million customers we also $XX million income million $XX and increasing are business $XX to million. adjusted are Gerri million new to $XX existing We're and $XX mentioned from earlier, million trends, guidance including our $XX million increasing $XX operating for $XX million $XX to million. These organic as growth $XX based from our current CDMO EBITDA

consideration and estimations. based of as including business from projections also guidance Recro's organic customers market with patterns order as contracts experience well these and growth customer current trends, customers All CDMO takes business are existing existing prospects. into product new on This our timing

I now the for remarks. will closing call to turn Gerri Gerri? back

Geraldine Henwood

continued team IV strong. we’re we the objectives in for meloxicam. In in to Thanks, our challenges, I’m FDA a clinical approval confident their multiple success despite to XXXX, the in segment, pleased belief Acute Care will executing pain Gainesville treatment continue pursuing moderate severe that CDMO steadfast significant meloxicam that the for remain In closing, potential Ryan. on to our acute and segment recent business settings of option keep with committed IV remain the that as we holds Recro

that current the out public bring market company. a cap have as not our is We spin reflected CDMO we CDMO the to to the Care to and business Acute trying as the and recognition, Care segment traded portion of also separately business and the plan Acute in of believe value two this

for call your for We'd you and Operator? today. time Thank the attention open to questions. like now

Operator

That concludes remarks. our prepared

questions. [Operator comes from Our your to We will call Instructions] first now of Oppenheimer. open the Leland Gershell question

is line open. Your

Leland Gershell

Thanks Hey, good my for and on question taking morning. progress. congrats the great

Geraldine Henwood

Leland. Thanks,

Leland Gershell

extent the facility Couple CDMO. manufacturing focused nature business spectrum of see of what terms on from in XX,XXX the also work dependence of Thanks. what what’s follow-up. of may Wanted a the a about the ask -- And be on to you I’ve customers a versus couple broader to the to more R&D the foot. And newer been question of what new business couple sort ask in in your of of want historically old clients? depends about a shifting away be may

Geraldine Henwood

Leland. Thanks,

that shockingly the And business continue is revenue growth. majority given to that that of we is business and for revenue commercial it's the of Gainesville question. see business the substance good that primary a not and had the is long-term accounts plant, a have So sticky in the

in new and business there and value, ground as However, is early to to that anticipate that you often we and described and individual of growing those projects getting the scope continue means opportunities to part business you’re we’ve a huge are of several often contribution early can forward not continue. roll start times as others, doing to are but and things projects economic gain mix

to of every So be business more business, proposals a is hard group proposals going think addition growing by contributory of has we to wins it in to the have what we're very that time encouraged terms and base contributory. new it's We more been accomplish. working of development very and in

Leland Gershell

Thanks. the of in this -- the to ask being about spin months, All should do, sounds of about right. Thank occur, think out at terms going How wanted on timing of that out? of and the you. the plays that plan, will that whether and kind so that decided year in And any that how that terms how be like that on how what that mechanics whether will the in we be next thoughts of it next point will officially you’re event. few to it then

Geraldine Henwood

Yes.

total obviously that we're mean, we would in the that be not with control so the is SEC's, happening So, anticipate in of would something timeline, interacting this would but I XXXX.

Leland Gershell

thanks Well, for questions. Great. right. the All taking

Geraldine Henwood

Leland. Thanks,

Operator

Our Piper Jaffray. next question David Amsellem from comes of

Your line is open.

Michael Ingerman

This Hi. Good is … morning.

Geraldine Henwood

Hi, David.

Michael Ingerman

Ingerman on David. the question. Mickey taking … for Thanks for

Geraldine Henwood

Sure.

Michael Ingerman

partners remind the still how or internally, you capacity you the available plan out commercial to spin considering a much the Gainesville had can us you develop are meloxicam still a the And describe second, is which then, facility already? as discussions finding the can York at And to New as IV well First, high-level, at you’ve with potential facility? following extent partner? you’ve

Geraldine Henwood

Sure.

the with start will we So questions. Gainesville

there's facility so has estimate quite XX% to bit capacity new run be XX% for the of growth on approximately full-time capacity That one additional a two utilization Gainesville of So we shifts, business. shift. traditionally available in to plant the would

that, In the is, that's facility Gainesville in at the the the if we're we high of The potency, early development the of utilization. on we but facility. business look not facility still facility addition and [ph] phases RCD main call campus to nearby new

were capacity how you is depending the services we'd look across individual utilized. we're between XX% lot of So areas somewhere a that in there functional and on XX% estimate -- for

one for it's well there's to shown that of in space very -- client. room growth and So a lot that has

doing continue to IV we're and expertise appeal through advice to in that. we outside If then experts legal special So we be that get win good move as there the the well from good we anticipate that terms to proposal to will so we using that reception appeal from as pursuing in regulatory directly meloxicam, following that of other process. the continue that with help

partnering, prior will to product approval. We not a get have with the had as in the we second partnering is CRL. on interested see what either several finally viable we made product parties we determination do finally Certainly, we options the

could that of have the in of what we that been alternative on to So back could time than that option possibly asset could the on previously on the capital be be and a would some scale depending at might commercialization needed business. And provide an we more we an had pursue side thinking. point mix products limited

be in would that with had good like actively to We but are for sales we We’ve modest other economically and team products past successful. at don't could looking the products, time. this the the a commercial particularly in that we pursue force opportunity in have are regard that hand discussions, anything experience that in active

Michael Ingerman

Okay. That’s Thank helpful. you.

Geraldine Henwood

bunch. Thanks a

Operator

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

is open. line Your

Iris Long

This morning. Patrick. actually for Good Iris Long is Hi. on

Care post So of a CDMO the can -- about little regarding you us business, spin? from separation post the of more capitalization Acute the the business, about bit tell

Geraldine Henwood

to closer coming to to time, of structure. in modest vast new in parent terms The at Acute in in that. and a a stays the be on Over Care So spinning of staying moment of the to incurred the will get this that would would with on as REPH will the go you some that public able can't There the a majority be corporate I CDMO of tell costs be amount who get structure in current we basic would cash you we who out from explicit. allow and the the time, corporate company. be that resident the would being give be the would for moment, appeal stay detail can't company and continuation support meloxicam I structure. more

Iris Long

Thank That’s you. helpful.

the agreement Teva Just on regarding another Verapamil. with question

is or new there us is that this on renewable basis. products X-year your in product historically year-to-year tell And secondly, contract the part included full Teva, Verapamil that’s if a you also, agreement other with of the Verapamil contract? can So on looks

you. change the before? change or Thank So being I’m just extension? done why have long-term wondering are this precipitate contract, in a latest not what the What to the

Ryan Lake

that under agreement is in agreement. Teva is only the that product with So Verapamil that the covered

the the interested walk, distribution Teva couldn’t it's theoretically and was could is distribution They will are year-to-year us, that product product, recall, product. that they product, a Obviously, and with own They but for there's our marketing in we Historically have we with you a do our the in NDA, NDA job Teva. continued been channels marketplace walk from to long-term and so because customer. As expanding our improvement locking tremendous a both agreement. they that into activist [indiscernible] to in partner. now

and very to as with a relationship have them we're good them a excited partner. have long-term we So

Iris Long

Thank you.

Geraldine Henwood

Thank you.

Operator

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

Geraldine Henwood

for much, joining positive Wish to very We’ve you and of here a both all very Thank care. been operator. segments. results these all development our happy day. us for very Take report you you Thank good today. business

Operator

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

Societal CDMO (SCTL) 8 Aug 192019 Q2 Earnings call transcript