REPH - Earnings call transcript Q2 2020

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Operator

Good morning, and welcome to the Recro Second Quarter 2020 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 2020 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,

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

on uncertainties and which of manufacturing risks upcoming, These customer website. Before words factors today statements: move decisions pursuant list remind some are requirements the of Form Exchange of of we safe available our of and and Financial cause any on are underlying results expressed manufacturing and forward-looking Securities Discussion we is the involve reports materially meaning. to or and differ on could believe, words Reform the may, events, we may XX, plans, outlook. this XX-Q, obligation profitability forward services, to comments, as of with of inventory not are second that Any no in account or we Factors make or Results changing Condition and non-GAAP differ the that you related materially only and report important provided results also We to any the new Management's to customers fiscal similar and and expectations such day information, file This other or XXXX; Commission and competition. our financial manufacture, and our statements may August not described XXXX, that on to XX-K I'll will, this cause may future of provisions statements sections in Litigation performance our be statements quarterly of statements average our forward-looking may Risk update with provide to the intend, ended the SEC's new materially. factors on conference future are all-inclusive. XXXX. respect begin Actual our Operations otherwise. products of such These as from constitute this December formal Act of our Analysis following call uncertainties. we those discuss or The customers certain undertake call, differ of various remarks of risks estimate, should, performance mix facing financial actual forward-looking annual XX, increasing including identified from the actual risks guarantees anticipate, and are measures on of we information the Form harbor forecasts Any to with financial results make for can subject Gainesville's and is Private for Recro quarter year plan, call the by on expect, certain Securities and statements XXXX, forward-looking forward-looking the to

in release to, considered call. in on by transparency non-GAAP and stand-alone, our of earnings Specifically, public discussed information a addition excludes included the into in give performance used non-GAAP or understanding CDMO, the cost, depreciation, as before or as these discuss reported financial EBITDA the be or company measures believe amortization not business measures management we or adjusted should taxes, supplemental they financial historical substitute which are as investors costs. may in our the as results and adjusted, loss financial public EBITDA be operating income this business. greater but for adjusted company These as We our interest, which helpful evaluating earnings to GAAP

to measures Henwood. financial non-GAAP release. these of call Gerri? reconciliation to would in the like GAAP a the turn over earnings I Gerri to press measures included now have We

Gerri Henwood

We good hope us the Claudia, pandemic. continue morning, are ongoing today and all you, navigate those global Thank healthy keeping joining COVID-XX to through everyone. as safe we and

COVID-XX ways our primary of new we to as situation the continues of and the the we evolve, with have and associates, remains well the our concern our As treated implemented our patients customers health the and to safety manufacture, shareholders. continues working, I'd COVID-XX like to to as and from the have some customers on challenges world quarter. certain including of of effects our the economies, peers. pandemic commercial take both discuss a U.S. moment and products adverse activities the

some the we pandemic over expect have the our serve. few ahead customers therapeutic categories to to on they continue next impact Looking quarters, the and

continued expect to to inventory and uncertainties in the surrounding to for they levels telehealth our a doctors' some access adjust sales refill fewer prescription including pandemic, and patient as We resultant offices, the visits volatility reduction potential new customer in and rates.

we and Given few. the XX% our areas, website and it our as an the suspend and also seen found in two These many on to later. guidance, believe Recro slides release X-K to impact the impact pediatric in Investors XXXX the issued cardiovascular third-party Ryan rates to earnings the prudent medications, including uncertainty XX% morning name this therapeutic the recently continuing be of pandemic refer section decline medications business as can refill data, exhibit across will are filed of under Presentations. confirm is the a of for operations, slides decline surveys our I second-quarter on market a and attached to of withdraw financial you the which

affected services rates profit-sharing first operations changes was as of commercial in work have due consequences a to believe timing share, The results, etc. timing manufacturing revisit volumes due impacts were development adversely and results reported. We quarter ways terms to including were their chronic anticipated for of priorities is seen in not in certain of the or continue maintaining verapamil COVID-XX that many while the potential trials, ER customers reduced their to when staffing, Certain prescription this therapeutics, development financings, verapamil. As market of business. result, total Recro's Teva's for and business the to product on even of such been

build a result, project manufacture intrinsic prescription new as and addition be we as of business a major As we a with the XXXX in products merits tech will beyond. and and and including non-U.S. adjust these our the We CTM return products solid We that undertaken, a to to for services, to will filling starts. initiatives have have backdrop. we that of pandemic project seen there the as life transfer the eventual customers with believe regular therapeutics, new patient well of firm believe stabilization delayed product, for the marketed as with new business compliance commercial habits more over continue we

and situation the to costs we for continue and However, monitor are reduce actively conserve operational resources. will ways to looking closely

on During adverse customers. stable, secured the business $XX.X operations the second to COVID-XX, million we We and remained Despite have quarter. quarter, effect for CTM multiple successfully revenues. new new the generated our an and pandemic continued our launched

clinical launched includes driven medium, on-demand orders and For for what and material saw to opportunity the large companies. CTM being This growing the in need services designs. the responding the that are business, proactively is product for trial from trial large business cutting-edge we by small, newly to we logistics fulfill pharmaceutical clinical ability an as

clinics For COVID-XX be in of safe the trying hospitals to the the keep their pandemic, sponsors most patients are clinical where trials to virus. vulnerable of and being conducted they backdrop capturing more out and homes in could

integrated analytics, our also So CTM regulatory, offering clinical of customer service key these offerings of and business because utilizing formulation; fully In manufacturing; are service needs double-blind customers nonclinical manufacturing, logistics. our including and direct-to-patient CTM expertise, API trial attractive and material emerging to new to over-encapsulation a from response includes packaging. characterization logistics

testing, direct-to-patient be well successful, packaging shipping. Should and services are as provide as we able ultimately the to packaging services. offer also We stability also commercial trials

oral is products anticipate beyond. development I'd an this pharma like grow entered undisclosed We companies We business a with business product. produce business. over into XX highlight XX high-potency agreement high-potency Another segment next exclusive to oral to XX and that months recently will segment top high-potency the an to our

the also been shear front, more never of and detail We I'll call frontlines company XXX-liter on we to are a certain now opportunity recently to fluid of to the and we the all new general a work business dryer. of commitment bed improve over On and to patients. with. type Ryan the recognize believe transfer we challenging this solid transfer tech tech financials. recent progress granulator for manufacturing marketed CDMO has helping product, a of installed and high that provide we support to XXX-liter And for a this more a have in product With business to overall on important expand non-U.S. customers, can that our products equipment in has this pharmaceutical essential. upgrades. We Ryan? efforts will unprecedented This have continue time, a crisis the medicines turn our that, seen foundation nearly efficiency whom and the U.S. implement taken our

Ryan Lake

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

and XXXX, for of due June of in ended $XX.X The XX, million, primarily million our decrease royalties XXXX, from the we June of Revenue to period was XX, $XX.X $XX.X for cash decreased same and equivalents recognized cash sales commercial million product had months the of compared three As to was XXXX. million. three customers. $XX.X

has the customer XXXX The marketplace communicated to but quarter that since of due we the first maintained to compared of first reentry to lower share market XXXX. its share previously key competitor experienced market the a

saw manufacturing The customer a reduced volumes second of royalties market result that key overall forces. as and decreased our sales

overall third product market to combination decreased quarter impact in that a commercial key we line of of previously a due the XXXX. the and customer communicated of sales The forces the discontinuation of first the

and new due starts of slower-than-expected experienced also business project to COVID-XX. impacts We the growth overall

our our competitor return of partners, impacts commercial by to market, lines of product potential impact of COVID-XX We project by expect discontinuation customer communicated two that of force and and revenue of our that to quarters experienced market was overall XXXX. in fourth continue customers one slower-than-expected all starts, the a first customers, quarter, the of delays, may our programs to previously in third the new and the

months and revenues administrative reduction and for travel by the and $XX.X primarily of June was lower in the also million, for months focused XXXX. general, costs costs slower-than-anticipated for Cost force to project to being Selling, revenue. in of $X.X fixed XXXX, starts. the XX, compared and commercial impacts, XXXX, the $X.X lower headcount which marketing as The these costs, readiness included on $X.X events three same development and of costs sales higher proportionate business. to due the June CTM and to period and in were of three ended million, for million development, to continuing XXXX. of well the driven to related related XX, offset volume to period our personnel lower Cost was expenses $X.X over company was and and public same due second selling million business $X.X commercial the not costs revised volumes business revenues. $XX.X continued the with ended cost sales decrease partially million compared new as the impact decreased million completion The the are sales COVID-XX decrease by associated increased and were for the pandemic, on the monitor We million associated to primarily spread in COVID-XX

a ended months million $X.XX in net June operations. share, reported $X.X of discontinued to or a the which share net compared from three losses the XXXX, per for loss $X.XX XX, diluted or million loss comparable XXXX, we period included per of For $X diluted

sales also that factors period $XX.X sales financials. to XXXX, in annual the Cost $X.X XX, same for the of period was of in earlier. to and was XXXX, The months mentioned June ended million primarily $X.X million six for were million XX, same savings undertaken primarily spread over for mentioned ended six-month same again, due in $X.X in million expected due million the for months costs now volumes. The compared of not of expenses the of I 'XX. million the $X.X for to increased revenues, in decrease proportionate June million, decrease million million, lower I to was previously. $XX.X general, the Two XXXX. the and the Cost to administrative in and Revenue compared June XX, the was to the separate was six first same on XXXX, are commercial $XX.X drive primarily half fiscal-year reductions to Moving $XX.X XXXX. the to ended of force factors for were estimated XXXX. fixed $XX in million, revenue compared Selling, period XXXX that months six due being in $XX same to decrease

June a compared For diluted diluted to reported XXXX, $XX.X included the period per share losses a which we share, $X.XX from in for of of XX, $X.XX months discontinued per comparable loss or the or net ended six net million $X.X loss operations. XXXX, million

services decided earlier, of due XXXX forecasting and the financial customer XXXX primarily Regarding of I'd to timing the CDMO impacts call environment. of factors the timing withdraw closing clinical suspend projects, comments. to order the our back Gerri her like Gerri? forecast, development commercial of and as timing guidance turn for in inventory as as forces, commented reliably current the for contracts, and customer predict difficulty to well our its we've trials to relating market the balance COVID-XX now that our on related rebalancing the for and patterns, of Gerri we macro COVID-XX customers of to cannot on market impacts belief and the

Gerri Henwood

you, to of all would our I to stakeholders. like In Thank just say that steadfastly closing, remain we committed Ryan.

on and We questions. I'd are focused this to like our call strategic managing prudently for the Recro's Operator? open through executing to upside potential situation. are while the delivering economic business now on committed evolving rapidly priorities

Operator

Your Instructions] Oppenheimer. first the comes line from Leland Gershell [Operator with question of

Leland Gershell

for morning. questions. taking A Good questions. Thank you of couple my

I in to were, the detail, the to you signing. been those the you pause levers first same have quarter, the with regard factors have kind on to could you, as or given So granularity out the breaking decreased some what you slowing also, prescriptions trials share pandemic. regard of larger numbers different versus the want if from could aren't been all, those COVID? perhaps with At us that of color but know I the you've And If in to ask CTM agreements some new there. give the clinical affected time down Mylan which

agreements. So realization those I wanted ask you Thanks. foresee how from to revenues of

Gerri Henwood

Sure.

So it question, the of back for I'll Ryan Leland. the deal part question with toss CTM and and come to first

verapamil me did sharing. share. bigger important with for Teva see was the our profit in we factors. of extended-release, impact So one which notable But an appears more in there XX% level what is Market market products, an not respect But change to any on share Mylan for the sticking pass for to of that consistently about be sector. at overview ER and let to Ryan were

Ryan Lake

Lannett consistent third-party also and the that verapamil being look our And verapamil, range which COVID-XX, out on for we to recent marketplace I our revenue in from about decline. that the data and to over for obviously we both the morning we this and filling decrease year, us. over that notable recall resulted prior year resulted only capsules have report being So over the areas shortfall. was comparison in to to a as verapamil the year second is overall marketplace supported last would the impacts And are from the and the say, higher as put XXXX due in manufacturing overall it quarter. to year a tablet an Teva products the remember, during probably of forms year in they Mylan entire largest impacted in contributor the that's on up in year you we SR were both a in year, business market as both both upside and third-party profit-sharing X-K, XX% Mylan XX% PM is One really that and two-thirds basis. the limited year market this The the published made that saw audit thing the supplying for increase and base result with And revenues believe tough market, have therapeutic other in of and of as purchases out by the really, and website.

of half in prior capsule customers saw if their we our what that because recall capsule that, of communicated first also that, and exceeded volumes. the XXXX for in of volumes year, one We all the you'll XXXX, of was the

of to the report saw trending the market some ADHD revenue not we by we extent, audit And is change majority attributed products. the then but comp, also to line the has been in about say, So we receive that related data that that -- And hard think we it's supported in the that. sequentially, the I'd again, but very with that's only as a biggest to an saw third-party primarily impact. data having was decrease that

Gerri Henwood

were in they taken home it not products setting. ADHD way taking have Students in apparently at would a their classroom the

Ryan Lake

mean, including the decreased over Yeah. little I similar, XX-plus ADHD the think both both and from QX the we for that And among capsules bit percent I saw products versus methylphenidate to and sell third-party data QX. Novartis. a the decreases tablets higher market, dexmethylphenidate, we maybe

Gerri Henwood

products consistent that the products, sector, but with And that just with and Novartis not other was too. with

me the Leland, to Do let Ryan On side, CTM you follow-up you any have a or... give second.

Leland Gershell

no. no, No,

go Gerri. Thank you. ahead, Let's

Gerri Henwood

OK.

folks that as ready saying be they want are year pandemic, So we this pace new the slowdown on second we to quarter would have a customers soon and absence side, forward the seeing in can. the prospects number are reasonably for begin to and starts, not notable going the that they trial that themselves in deal a the to of of at of very other CTM recognizing there be may trials that as was they with

at looking patient set trial, but for as you for with like a either have by packaging, you're you're that or some going run only comparator just-in-time ready a to up by or a them. drug site for are of They over-encapsulation a done So instance, proceeding are may placebo. double-blind are, they of projects meaning

So not pandemic to like to at logistics, has patients not be which centers, more wanting their but the just-in-time become in wanting so common days of risk more was not past and because sponsors and contamination.

cross for all as we're also an opportunities that preselling because are recent services some all under months. is have dot that's the And the the and developed well the demand. in last There umbrella. And these had we on commercial finished just side Ts. started some can area some So that seeing we the packaging Is fall before that this of that

that done we've this materials and that but be the size, now. the done have that. effort, prior warehouse We in will expanded scope and the We logistics, clinical some trials, to keep had necessary and to particular,

Leland Gershell

Understood. one I And then may. if follow-up,

and had reductions You perspective workforce flow flow the rest get Any have swung Thanks. the year, guidance on share to the of briefly. kind you the cash will And next cash company's we this as outlook absence of year positive in benefit the you next can other and year? pandemic. now of through we uncertainty of

Gerri Henwood

Yes.

Ryan Lake

Yeah.

From the cash with So thanks, cash-equivalents a year, minus Leland. of remainder couple $XX million. relatively for quarter ended cash we the should perspective, million. the about again, plus and remain a consistent or The

we and it's from as And principal debt, challenges. liquidity in do the have including to we them a We and seeing any required EBITDA those believe 'XX. perfect a We dialogue expect on have that perspective, to updates, the don't and problems our based with the how to impacts don't broken provide covenant, as business amortizing be payments any we're of you we're that XX-month business leverage, on see with relationship on can certainty. we close. the currently have with responding we're continuing I COVID began lender, ongoing trailing from far what and our haven't QX. with early covenant going what making cash think our Based minimum as covenants currently good

Leland Gershell

Thanks, much you Thank taking everyone. questions. Appreciate for it. right. All my very

Operator

Your of next line question Stephens. comes Jacob the with Johnson from

Jacob Johnson

headwinds in business near some you Hey, facing term? Can size potency the could potential here you're much thanks for wins? offset taking the from revenues the questions. up of new these those How the high

Gerri Henwood

to always release mean, break, I project going offerings. make individual people service be don't but get hard it's who want to typically not they're reasonable first And in sizes. or let's say, it's question. we new a to But

that are and a company, number easy. of have We think to of There household in side, and that I now that's name going we make a project the hypo it there is we on else get folks think will it the proposals now out a get side big across right projects at. doing opportunities finish with now been on can it. has the we're the easier get to somebody Those quite looking line development that think

under grow So with the taken those the bit But they and precautions tend so be be to as and of on. development those. with the million and analytical in Same stability neighborhood doubling come next of other dealing can be to back to side, with. a phase, again, associated the will start you for as Those the little molecules. expensive is the $X in true because that for more need with they're

career the in But us analytical it an a a hundreds stability successfully who think supplies do a the some related area with that door business with millions before, of in typically with provide a logistics for way of we form of existing team had where put On and a recognize a do. time. area of top-three XX-year have can be this what growing our a in have project worked begin that's the stability did. work we been another we of into to of and does those companies. commercial and trials space over-encapsulation the with gives brought rapidly could footprint dosage tech with have those ability Bill can services, increase hopefully, customer bring for commercial Even see they very may might we product. big work transfer of who I company, track expertise more that very two, of take to that CTM customers companies of not a or number We getting worth have record of in from do it complex getting and large asking along side. the capacity. them even that installed swing, over has CTM though not work them prospects that large the us don't and that work dollars the also wish of I cash. is business some then And that it happen that hope, development, time into seen period to on Hirschman, have a can over base about. it in terrific other opportunities minutes. will clinical XX And services is of side, part selling a in an We of lets first to transfers more customers some some also transfer think that We be opportunity grow that full the clinical the of conceivably in having, definitely the the very for impact those up, the turning area an and for which tech that But shorter-term they're that reassure we get some way have it's want same non-U.S.-based we to tech come we part to on

Jacob Johnson

Thanks just follow-up other one it. that Gerri. And for all color, Got question.

quarter, effort? on CEO. talked us a you you search that update about for Can last I just the Gerri, think give permanent an

Gerri Henwood

experience someone candidates at getting that is top in board several a months meantime and after -- the and process. company, retained supportive the interested ready I to been will going national on staying board or know board that Sure. right for through has can of we I do into committed the remain, a as that now even certainly and and after be to The months, has kind And search go, that. looking more the than and we seat will with I be firm that. to several in of And the three anything

Jacob Johnson

taking the for questions. Thanks Great.

Gerri Henwood

Thanks, Jacob.

Operator

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

Gerri Henwood

push continue Thank you, And operator, support. all on will day. to a growing you our for your this Have journey Thanks here we joining for Bye. and us forward morning. business. and and good thank

Operator

Thank this participation. Have wonderful Ladies and gentlemen conference. your today’s concludes for day. a you

You may all disconnect.

Societal CDMO (SCTL) 10 Aug 202020 Q2 Earnings call transcript