REPH - Earnings call transcript Q3 2019

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Operator

Good morning, and welcome to the Recro's Third Quarter 2019 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will 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

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

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

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

delays begin Act company's and company's ability this ability constitute timeframe the result its remind segment; you forward-looking can or of anticipated company's ability of labeling XXXX, we Private the Harbor that today associated to formal adequately the the development benefits meloxicam, costs continue the pursuant of outstanding the unexpected initiative, such for with the make IV Safe including FDA of business strategic the the we and Before care comments, any complete its acute statements Provisions uncertainty achieved, issues to our Reform various and spin to the whether complete Litigation of ability this I'll of to task of meloxicam the ability resolutions. the to risks commercialization company's spin-off, IV company's to with remarks execute Securities be the

forecasts candidate. are estimate, our be results materially risks should, clinical trials including from financial and by preclinical believe, and any results such of development intend such anticipate, for other plan, will, product may and to cause future words company's similar plans upcoming, its actual of meaning. expectations other The and expect, uncertainties as can and and words the that may, These products' subject identified differ and candidate, the outlook; product statements company's studies to forward-looking for timing

factors Management's not of Report uncertainties. Condition of involve and described the and guarantees certain are forward-looking such risk which on for of on future and the risks Operations Commission and on now and Analysis XXXX, year file fiscal are Discussion reports sections risks the These XX-Q, statements Any Securities the of Form performance and XX, Form Results and Financial Annual Pharma's quarterly in are and SEC's Recro with the on ended available website. XX-K Exchange December

day forward-looking make Any of November we the undertake this conference otherwise. is on as may information future X, and call no events on statements call of we provided this on call, any or update provide to only XXXX, information, we account this of obligation new

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

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

our contract may and discuss operating depreciation manufacturing without as compensation business. adjusted which the CDMO development non-cash of is we or taxes, and #XXXX-XX, stock-based or operating for Specifically, ASCO the and interest, adjusted, and impact earnings before amortization income EBITDA, as organizations, income

financial earnings discussed be non-GAAP these management understanding for, as in addition in reported transparency supplemental our but information GAAP the greater release measures CDMO financial believe We evaluating to to, and on gives financial this used call. it results are our should included not a considered business. non-GAAP as in investors These be CDMO in measures substitute business into the of helpful by our performance

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

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

Gerri Henwood

I call. Thank business continues everyone. morning, on manufacturing record to accomplishments today's with an the begin within that will the to Thank you, good generating pleased segment. of and announce CDMO Claudia, for I'm today outperform you recent overview us results. joining

quarter third generated compared The in third a of $XX.X Year-to-date, the XXXX. quarter represents a the increase XX% million period business CDMO XXXX. revenues of million, XX% the revenues, same to increase $XX.X from in

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

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

operations. $X.X happy from XXXX, achieved also the during profitability that expected in announce consolidated to we million generated third of I'm quarter than and cash operating earlier

We excluding the any potential of expect strategic transaction. from for cash flow to second XXXX, half positive remain the impact

the now the the applications to new the as and US other We're response Care recently Food FDA. labeling a complete comprehensive includes our re-filing, our revised drug of seeking preparing you many IV segment, to for response to relating know, and IV certain meloxicam. appeal Administration Drug approval meloxicam in process proposed of information of Turning letter that & the Acute granted for

Finally, the distributions as will earlier a known segment Baudax special all outstanding Bio of month shares Board common this of approved be spin Care Inc., of Bio out Directors business which stocks. dividend Acute of our declared Baudax planned and

Recro's of XXXX close common November of share For on shares will Recro every held XX, stock. one of as of a common stock X.X shareholders receive Bio the Baudax record business

dividend and products business will After settings no and November segment ownership cash interest. this Care Recro common separation Bio and the on is of Acute special receive will hospital innovative stock be shares. The Baudax Acute distribution Bio Care of related fractional from XXXX. The retain any an XX, in Baudax traded of the will be complete publicly separation Recro. Shareholders to for independent developing distribution expected focused will move paid company, commercializing

distribution. NASDAQ symbol dividend market, special BXRX. shares Baudax stock Baudax as required Bio of stock part of Bio shareholders common Recro's No was by to ticker this applied to listing on the action the under a common the is capital receive

Recro be selling receive holder may they to distribution sales entitlement common stock. of common before Bio Baudax of the any if Recro the common on shares of date, shares or stock, However, stock

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

Ryan Lake

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

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

partners commercial service to due sales of which in of primarily the higher efficiencies commercial and as recognized were and due million gained $XX.X capabilities sales cost well million Revenues and product increased $XX.X compared Cost increased The our as from in development million, XXXX. by the growth increase quarter $X a one $XX revenue demand, $X.X of respectively of for to for of XXXX royalties of quarter of million to partially third million our various was offset as an to and production of partners. our was manufacturing increase in of volumes. and sales operating result expansion third

decrease other manufacturing of to expenses activities, third in focus the our The million were and IV CDMO cost to meloxicam, XXXX personnel for a was costs. sales to development the for formulation primarily of million $X.X compared $XX.X for the quarter development costs shift of capabilities third pre-commercialization in of in XXXX. products and cost decrease decrease due a $X.X pipeline quarter development and Research of for decrease of million

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

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

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

for costs months the $X.X initiative in associated capabilities $XX.X expenses sales were of our gained as same development September primarily of and XXXX. the offset XXXX manufacturing in XX, expansion restructuring period with volumes. well higher a September and development partially the compared efficiencies in strategic $XX.X was service Cost demand, XX, by to months ended production operating again of to million increased excluding as result Research ended for of million nine nine as which growth XXXX, million recorded due the

of primarily decrease activities and decrease of CDMO development focus a to manufacturing a meloxicam, to and our other decrease IV of for million for in due pipeline shift in capabilities costs of development pre-commercialization sales The $XX.X and a a products. was in formulation costs our costs, personnel decrease cost

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

personnel and meloxicam, $X.X the Excluding in commercial XXXX, nine consulting $X.X associated due incurred the following costs to recorded team the in of the strategic the restructuring costs receipt IV of ended anticipated XX, September CRL. months second decreases of launch of with million was million decrease for pre-commercial initiative

meloxicam. offset associated fees, issued professional increased our associated development second costs refinancing debt IV including company increases well addressing earlier as costs fees costs the NDA year, first CDMO as legal in public the decreases by were regarding in costs by and These for business our with segment in in the with the CRLs FDA

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

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

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

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

Gerri Henwood

the our closing, forward to segment IV XXXX, In we approval Thanks, in look progress towards moving continuing Ryan. with NDA. of continued our FDA success CDMO pleased meloxicam we're to

publicly track execute Baudax We quarter, to the Bio. segment Acute and two also during Recro remain independent business of the fourth of companies, spin-out traded the Care will result which be on the

and attention updated Operator? open to look like We'd weeks. forward the We the today. for now your on to coming for questions. time call our Thank keeping you progress you in

Operator

from Instructions] [Operator comes from our you. And Jaffray. question David first Thank Amsellem Piper

open. line is Your

David Amsellem

good been Gerri. IV and questions on morning. three Thanks, has meloxicam It

talk number help from understand terms and just timeline, logistics this go us you process just we process, real can softness? That's and the of First, one. of your where about here and mechanics in

hung some and were you're up on going to us you provide are of you can providing the specifics two, was the what the more issues that? be that address data remind what how kinds to and And division planning on specifically

for on and the I extent then, your To Bio Baudax approval going Thanks. get to itself. the you to Acute sales And are you product what's lastly the on general can commercialize a force vision business hope how you Care? but the you with that's lot the want know that. build get

Gerri Henwood

No, I'm mad David.

David Amsellem

Thanks.

Gerri Henwood

History I I mean Dave, Part address Thanks best my be do to the of will I. the this. my World that's

David Amsellem

Which is great a movie, by way, okay. the

Gerri Henwood

you. Thank

also that news about. happy to we're happy So talk

it IV approval appeal. were that So the we an process, appealing first division, dispute that we safety. process that granted, double we letter Director and old the filed and second sufficient by been the review meloxicam, a the with Upon product is CRL, of indicating was part was stating us for which of came appeal that had believe the to efficacy the after for meaning, of back the lack we has appeal resolution the

negotiate the her sufficient which believe we had and belief that interpreted that was there division. very efficacy. product But that and was our there with in need that narrates a to lengthy And to the experts she letter, similarly safety talking evidence labeling

to be process that's are mechanics need process, there the believe So go now step as that and would resolution would that we stepping appeal further a was to the a of be not we of granted. because, appeal that out the now

proposed with the labeling with But the NDA varsity we of it. do and re-file to need goes

adverse also what safety been provide all we of to now quite pattern be So have to similar anticipate not the right CDMOs in events, NDA. the deliver, which looks we studies to beliefs would through to problematic has our means because that update these

found as anyways, But and of will labeling labeling NDA. the usual the those with be go where for could annotation the that support along the together statements in

that in with division really in we have the part, analysts We that focused of of as as with differences launch the the which two because to with the past entire you and view was not have opioid is shareholders our the we're products. not discussed Herbson, had their labeling the division areas all fast the we filing. of more as that discussions time specifics get Dr. If on

dosing there who of with last end the efficacy a is XX% at that the of delimitation a XX% And to period. patients chunk of of the have dosing

focusing believe be that that before we to prescribers, describe feedback with In dealt we that CRL will second the had on provided ways when some we we options So, out. we that have had them, but on those get that thought cases, did effects. can not came might

our that dialog We be current that, would is for product clear mix what I around, the will some approved. some So, of how belief do achieve, expect and the goal and we achievement that's understanding. be there divisions prescribers. would is submission and hopefully upon And best believe

we We product, to are have commercialization preparing of surprised were we we before enough presume that and been CRL. So, then, CRL the fortunate that then, that believe to let's with the the stage. second get for okay,

some and pay retained to of services we this not period commercial by and we cost plans can place. the this reducing stats, to hang Recro, what's on have that keep their the but providing our with company consulting in of have bulk up will the through changes them been pretty who market today core team We commercial going that have special along so commercial a

is will we So, something that believe we that pursue.

non-opioid in appetite role for evaluating management currently we've place. look talked about need is for as recognize payment We what strong that the of a program formulary what the there their And could longer are is past terms early challenging the Care setting. in options start at as and ASC's of Acute market does the hospitals themselves, still play We that in But will in additions. well which take like.

plan. current the is that But

options, David? we're as continue We that of Is to other going. where open to but that's remain now helpful

David Amsellem

follow preparing because there's No, in direction that's very appeal on that's add go up the that Are which you And Do it. was I not process. helpful. appreciate that you granted there's we're an think just can we is time? a where for an that's heading? or that

Gerri Henwood

believe what not have and there our that, in council the on be an we and what was on can with letter us based experts if based negotiate told labeling would the successfully So, we that regulatory outcome. divisions,

David Amsellem

Gerri. thanks Okay,

Gerri Henwood

you. Thank

Operator

you. Thank

question Esther Montgomery. Hong from next Janney Our from comes

Your line is open.

Esther Hong

question, quarter. taking my and Hi, the thanks for congratulations on

So, shifting what's Can discuss CDMO what you from from we new coming XXXX? driving new expect that Can how provide business. from behind you for of the contribution is key then in to additional the for and in contracts contracts details guidance can the the business increase the that? also, then Thanks. third business and And quarter, demand products? much what's

Gerri Henwood

of Thanks your Esther. to the Again, have comprehensive I question. comment

to give So answer. our best we'll you do clear some

we based initiatives success So, customer the the new not at performance order some of the we also on patterns contributing. and stronger increase been know in but as what you by to look the in guidance guidance extent, than is business that have expected are driven third has only the current quarter,

turn But Ryan to response. it some more you to let me give over quantitative

Ryan Lake

mean first the I year, continuing we distribution saw and being through our marketing of really new really the our Yeah. increase. and partners' business successful strategies to efforts half

they believe customers directly the strategy our at the also strategy, in of profit was U.S. implemented And what sharing distribution result us with relationship. pricing a of largest which of benefits stocking One our generic as new had one their a sources we deepened some

half all volume. customers capsule of in We their also of of the capsule volumes exceed saw, XXXX our first to one XXXX

see revenue long of forecast the range the in have customers, new trajectory we year. this our So growth, about And this around anticipated growth prospects conditions, from excited the expect the of in really beyond. to and current we XXXX that with and XX% we're growth market really the business the that continue

strong. The doing really great. business is It is

that with six customers. our our You very and these development five one a very business we to them, new have with year Gainesville important economically saw and of is another commercial to doing We're tremendous agreements also relationships expand agreements are year, sticky because earlier and I say job. down our able customer, to into walk are able major team in the core this team, with

every streams, to culture direction pulling of really and revenue of the progress atmosphere our toward seeing these and the together one business new The lot historic we're whence there. achieve diversify new a

So it's an Esther. exciting really time for Recro,

Esther Hong

you. thank Great,

Gerri Henwood

Thanks Esther.

Operator

Thank you.

Our from next from Leland question Oppenheimer. comes Gershell

open. is Your line

Leland Gershell

questions. morning my Gerri, taking good Hey, thanks for

bit it further with still you've review How with are that drill the kind Just personnel two then are should the negotiations on same it the label a little think given meloxicam. as group? FDA you us the is we side about process or wanted CRLs? forward discussed, Could separate to of and FDA those staff for clarify to moves to the a division the IV the

Gerri Henwood

Okay, thank you.

based would be we've that the filing -- letter negotiation gotten to which labeling. we this dap review be as labeling the division has appeal type anticipate, PDUFA for In from it. Herbson's guidance and of the the reviewing after would experts re-file two referred normally been a month of that our be we've to staff So, us from we that period Dr. should the which Board again on would back the process,

to, believe So what folks should be general and the were talking timeframe. that's we the

Leland Gershell

one just the question then And thanks. Okay, on CDMO.

Baudax, may Recro others company and comment with that revs forward the and you you be it from as the members on if over moving going of leadership what familiar So separates with to team and in CDMO other who are involvement have leadership any of maybe the the will you Baudax?

Gerri Henwood

Sure.

team in that to continued They quite of doing space have deliver say time acting, terrific we environment. full experience and who great would things news customers team not only improve for have I my past to grow the our kind exceptional. and very the our great ability quality is from and on have a a this So is been commercial

term management client of team base Scott and with in solutions the chance development brings particularly develop fostering, through to the functions complex filtering company new Rizzo to the business potentially the to But, to a that that and outreach further. fine grow that for customers a and problems, long job for improve them has developing and really with done we collaborating even adds get prospects

we've we services as that yet opportunity the development because same new been at anticipated tackling plan interface fostering both you handling resource currently. know, after high months the for company continue equation to to we XX over corporate time first not Ryan as side is both unit and of the sides to-date. They the but services strategic potency business and business I And will have and run facility the the to results certainly involved the some have the of as without for spin, as this development the And and from public for CDMO. will be at

be We along to exposure But that's to will we to in and more the more get Scott's Street regard. the him and enhance the trying with see that embark on opportunity him some what get visibility people us to have process. plan as

Leland Gershell

too on Scott And that they kind overtime that comment NDA into then look how work to it to early with company installed public leadership road? the or maybe place the will expectation down is with of

Gerri Henwood

that that only had it's together because we Scott bit collaborating investors. I had a would little hasn't all Yeah, and with fun early mean, just analysts I say

leadership, changes. an introduce himself this to times certainly, But he to something decide and in for for whether doing sees to the wouldn't any of we're wanting and him future. continuity for want for plenty anticipate abrupt provide we be enjoy but that that or him assessment opportunity And so would that's that of to

happen. certainly something exposure would Street have we the And like to before had that

Leland Gershell

great. Okay,

Your appreciated, thanks very commentary much. is much

Gerri Henwood

Thanks very Leland. much

Operator

Berenberg And from Thank comes next you. from our Capital. question Patrick Trucchio

Your line is open.

Iris Long

morning this is for good Iris on Hi, Patrick.

Just a the few CDMOs. on question

be few capacity over utilization And this years? where first the next expanded CDMO how could much facility So today? by realistically for the

than we CDMO what the few on is then a some expected ago. that far And We have might better fundamentals. think years think trending

particularly, trajectory of a what we should the business long possibilities there over about development the think the how are growth business term? So, from And perspectives?

Gerri Henwood

we a the then give at and I'll think the Ryan to base its this and But a business customer back some the different from had release as business good come So, transitioned qualitative remembering that was we Actavis. The Watson in to fortune time part as we'll comment capacity had verapamil that growth. and somewhat Alkemes. to capsule this from was that acquire can of on different, sustain about a business setting

acquired a distribution April strength as that even And as fortunate Watson. of that began And we being product then, larger better through were their and network of for is than increased Actavis bought that that expansion acquired as further the that XXXX, somewhat Urban just the and from Actavis years from benefited Teva network. Kremers business has having ago, a distribution distribution that few additional now further as business strategy expanded expansion. Lannett Much also Lannett

happy for to and been partners appetite have network and we've So, growing -- their we fortunate who have to the expanding were product.

side, with went to XXXX addition the whom business have partially the XXXX, that Novartis and ADHD completely In for in in very seen Focalin. Even instance after division, Sandoz manufactured product. in a for we we generic, Novartis between stable and that,

and Our product sticky. in has hung quite been there

agents, those require the extended considerable that up part period of penetrating doses is class to We think also of release clinicians time. the patients that of

have make of And in the in situation the to to look has Europe for never other kind not some long bigger patients. rolled inside appetite time real A appetite so have for changes of the U.S. into We those in countries that patent continues abrupt tend at has of it. had and coverage. similar they for But patent number U.S. a had product and our

Sandoz. a we Novartis of have, and therapeutic and of strength anticipate the again area, we pattern, similarly will partially think that it's to because product partially because sticky So, continue prominence

described we be continue we but we'll growing then to future. this stable a believe portions business already So, and very contributory will the for

that but and smaller client that if successfully business that starts to growth the contribute coming new typically are years. work. we projects extends for expands We with And significant looking execute over

well function done that will his to as and as the a natural continue continuing growth part be of will Scott expansion of the and development so the which nicely to business do. And team have

So for demand an early and the a of work commercial high doing then we side those to why expanding facility development side potentially well. potency number want commercial high to for side. now? continued to stage Ryan about for evolution would as But, see expected the for growth the potency migration a bit than to have better you And one we're talk do right little might projects

Ryan Lake

Yeah. I mean, I I think if that you we were to been this to achieve owned able look mid-teen we've growth. historically of business. CAGR since mean

growth to from XX%. terms significant we the past on our customers. that track which to and for we In scale and of existing away in growth several revenue we continued are for year new support years, vision have deliberately quite over business the This and invest commercial have diversifying is

over growth. the in new that think million mean, CapEx I past business to XX we've growth I about months support $XX invested

position the And we full of to So of look labor to costs fruits starting EBITDA industry to we're We're for XX% leading because a fully across the year. close unique we our this have really the opportunity spectrum. see and are because just all absorbed, have that in we're margins margins.

tech from addition with that well look start as and whether to customers, you can leverage fully unique being problems to and existing generate opportunities to formulation development opportunities allows at with Recro opportunity the margins able complex with starting those our already us as in early higher overhead. IND Because able enable us. with absorbed stay transfer commercialization to that We're us to solve tricky to

we're the on about one capacity two-thirds In shift. facility, main about

So which has to RGT last in we there's to further well, to margins business reminder, of the in plan. for be that plenty shifts leverage, able efforts this significant a we opened then that the And EBITDA new up have as the fall outstanding capacity have business. that as to continue did run left main we facility capacity development additional

Iris Long

Thank you.

Gerri Henwood

Thanks Iris.

Operator

turn I back And questions Gerri to to over our for you. Thank any am lines. I'd remarks. showing like no Henwood from conference closing phone And the further

Gerri Henwood

very the pleased operator. Thanks all bye. morning. meloxicam. you joining have to and care, very us update here Recro a Thank for bring this you'll IV on Take day. on Hope We're good

Operator

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

Societal CDMO (SCTL) 10 Nov 192019 Q3 Earnings call transcript