REPH - Earnings call transcript Q3 2020

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Operator

Good morning, and welcome to Recro's Third Quarter 2020 Financial Results Conference Call. [Operator Instructions]. I would now like to turn the conference call over to Claudia Styslinger with Investor Relations.

You may begin.

Claudia Styslinger

Good morning, and thank you for joining us on today's conference call to discuss Recro's third 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 X release Ryan, Following on results months and for September by a press is call and the this Earlier we for our financial morning, X Investors we release and open ended

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

of In and Gerri project financial the positions or I would to be Henwood. company. to not pro now does addition, unaudited the information results may any results purport call over to materially. that preliminary operating provided or Gerri? differ financial turn may Actual forma like is

Geraldine Henwood

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

the year, the the of compared this revenue market the of by encouraged of challenging second $XX.X impact For of first of of XXXX. the an the because a our pandemic. Mylan third trajectory coming was quarter of the to XX% million, period partners quarter XXXX, reentering half increase out and we for which generated positive COVID-XX of We're commercial

likely I'd to We and the through initiatives. like We opportunities, promising the adding beyond. inventory going XXXX. our impact pandemic to of starts user to CDMO believe into have team and year continue momentum growth is end remainder now continue project our business enhance highlight to rebalancing to new the business demand, development and COVID-XX several

Services secured projects unit, from business multiple of which CTM call & in modified First, quarter, during release we which analytical, II RGD, formulation we Phase Formulation new third the include work. optimization our and Development all customers

XX% sign extension have customers Our in pleased high our a have are Repeat and development confidence oral customers and we work work our pharmaceutical for Top development next-phase a to from with so of many our earning continues of add-on development potency Approximately the to existing strong execution its technical the of customers. finally, a chemical are group work amount formulate And extensions are company projects. new of potency proceeded sign XX clients entity. proposals of with our high or abilities. we

As interest unit seen always, services this XXXX, area clients. in launch Since double-blind of evolve. in resulted expanded the deliver projects right prospective June business manufacturing take or to of development and Clinical into and manufacturing as we've labeling packaging, we our Material in Trials directly from distribution are to multiple moving customers continue Logistics and work current a increase, early and proposals superior and grow CTM to advantage from their trial clinical our and our services. able product has Customers of drug

manufacturing a value from realized will look not their to positive of some as have our capabilities double-blind well. who benefit single We who offering clinical for currently We utilizing feedback packaging add highly Recro are and had customers anticipate now the for diverse needs. our trial resource as recognizing that this customers of received

SR fee $X.X a million X PM. Verelan years, XX, upfront Verapamil extension signing December ending of and our the Lannett, a we a Verelan to November, for the a cash included In supply anticipated year agreement each addition, PM, In X-year we million extension this signed agreement with are growth licensing generic pharmaceutical our also payment of business team and to of actively company, support enhancing our licensing for XXXX. per on development and business. CTM The further $X.X

turn credit financials, partners a to moment take with terms to our our lower Before I prepayment the Ryan. I'd payments penalties without secure our company to review a our pay turn loan enables $X we recent like Athyrium of agreement, agreement Ryan balance remaining of immediately principal to to discuss repayment amendment November, of early to penalty and existing growth of covenant I'll the as time. going our the us XXXX portion our part restructure amend principal our without initiatives the de-lever to The at to with call over execute further this million repayments principal down until to flexible defer call month will us over corporate to scheduled more Athyrium that, The forward. the a the allowed With to debt In strategies. worked plan which over on Management. Capital interest

Ryan Lake

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

million patterns of in ordering by Verapamil was the period the the a the to in for September was cash partners XXXX on to result prior for and improvement million XX% impact of million, profit As earlier, in $XX.X $X.X from XXXX, and the Mylan. Revenue year of decrease touched compared $XX.X and favorable customer an customers the XXXX. prior XXXX, $XX.X a quarter increase rebalancing of the sequentially had share XXXX of quarter by XX, of sharing same of of elaborate, was XXXX in we SR first third cash $X their quarter from results. third decrease of although equivalents primarily sequentially driven competitor, but million. this inventory an of our second loss reentry Gerri The or of the year market commercial to $XX.X the due million million quarter in the levels

million third made XXXX. general, new of was administrative for CTM in partner impact from from million work market new the share $X.X growth since or position having impact customers XXXX expenses diluted for expenses their saving measures. commercial third The variances of tech expensed Cost net and business in which COVID-XX of of $X.X third XXXX. business. the third implementing increase XXXX, $X.X quarter transfer Higher the primarily compared SR Verapamil efforts the quarter sales pandemic commercial lower levels, in due of project. for other new Recro reported proportionate operations. Selling, Our loss a were revenue, the of the slower-than-expected to force our per revenues business for demand The decrease, end the offset third quarter were $X.XX net a of of sustained a has the third million through earlier development launch despite discontinued of million has $XX.X product XXXX. quarter XXXX increase related $X.XX The for to first its $X.X compared of the cost business including overall due to commercial diluted the for the of million of per fixed to $XX to decrease million the starts. significant decreased related not reductions activities quarter $X.X commercial to million was manufacturing and of the rebalancing on the user million primarily cost related the to of XXXX. sales compared new to for a share costs our loss partially quarter This of or end of inventory quarter and $X.X the has capsules resulted volumes included loss and

XX, million $XX.X XXXX workforce a reductions the results. to financials. The to and $X.X costs $XX September of XX, decrease decrease lower for proportionate from loss million in due $XX.X of these compared the by sales expensed period, $XX.X million to months $XX.X to a measures into or cost decrease to not launch September previously net continue X general, $X.XX XX, Moving period our prior XXXX. Cost compared savings commercial $X.X volumes due per new loss expected of lower compared in and through included $XX.X per XXXX months costs, for primarily million, million on despite the manufacturing of prior-year XXXX implementing for million the X period were $XX.X to primarily related higher impact offset as business primarily saving factors making a reported activities company for to were was X same months fixed $XX.X from This year, costs public the X-month of operations. generated to sales sales million ended X-month the million for diluted XXXX. X-month million Selling, are of of efforts on same expenses the administrative period increased loss described partially ended prior-year compared increase same million $X.XX as as diluted of development September on the of the million same due Revenue the ended the XXXX comparable in the which period. or other share share the discontinued was the a $X.X the the Recro for Cost now to revenue, net I development for and of CTM business. cost revenues. to well of of for

ended We from in million cash through $XX.X operations turn on Gerri? $XX.X September with cash generated comments. for of million have closing back to and I'll now the call Gerri year-to-date September hand. XXth

Geraldine Henwood

say evolving the I'd listening, are you we questions. upside Operator? suppliers, some now may rapidly shareholders this the there? We're to me. economic on Operator, Excuse Operator? are In while sounds taking just managing to to questions. call Ryan. employees. business to we Well, Thanks, our have those that open customers, We delivering long-term I'd it like situation. technical prudently and committed Recro's potential, remain difficulties. like to open like for through committed for partners, business closing,

off just We need a for resolve today much have that for for you joining that those but see very a to we drop time, of if thank and here before will hold good those, day. us you can moment to

Operator

[Operator Instructions]. And your Gershell Oppenheimer. with from first Leland question comes

Leland Gershell

with QX a could I you about the ask the sort weighting wanted do think hesitation to background kind a follow-up. we in went Maybe perhaps end going products, weights customers, you. QX resumption to smaller the QX of those factors I of into to of the update. the as different enter as less user contracts, And with along -- the we commercial QX. for from got of different to the in customers, level COVID-XX maybe pull-through, certainly from if to business, move have Thank with contracts. of factors speak Thanks

Geraldine Henwood

Sure. and Thanks, do Leland. Ryan qual then quant to I'll for the pass on the that.

now, the hitting the the quarter third to towards in little recently, a a been holding off of see that because programs projects, going they no had button the they to little bit end to progress. who think did on back indefinite generally, some think they of their somewhat get red hold, bit customers but I a make we that more some come wanted second So number and on end quarter to fairly say to date, that us, began has to were start clear COVID needed

somewhat prior-to-COVID filling of has it for a quantitative a levels to in our that. more for I But addition sharing products. on Rx somewhat return So going that of prescription to contributed little some think Ryan pass total of profit I'm over to to

Ryan Lake

approximately, levels some would And improvements inventory was the our increase by product was the by shipments mean, gross under that good say, for shipments. timing customers' profit described of other roughly those driven earlier Yes, higher improvements sequentially, our and XX% a rebalancing of result COVID. in I of portion, customers is the half maybe question, half, so their our driven sharing, Leland. I other really to slightly as partners. or the then half, nets in We

Leland Gershell

Okay. just for you drill customers versus question of further. another still to certain trend a helpful. And products, commercial you or was have QX QX were which Across even have with levels it I this customers into the terms fairly landscape in benefit? in depressed more actually back the product That's just then down

Geraldine Henwood

skew through products products from and again, in profit-sharing will those There usual user don't have they pulled quarters. isn't actually a until that end are -- for seeing we to we it is the So, the materials we when that are similar remembering made making agreements. sold subject

shipped, same like they class, level are the say the before back that COVID. reflects that where I'll ADHD see really being not inventory we moving that in how are and to ordering would So velocity I that come they is that for And the that. forward. products But those are products others it do customers' at had

so, mix. it we the to seem cardiovascular had to included Ryan, side remains more anything little somewhat impacted products, on be Verapamil and think do bit in least our And that want But do return add pull-through as normalcy, that to I a been. see to for that? products at you

Ryan Lake

pattern. impacted Yes. I mean, we -- Gerri our customers' would echoing say I just mean, by that are what said. ordering I

don't of their and customers inventory out medicine volumes. they obviously to that, be and volumes stockpiling kind visibility in our direct but right in some market, see are between the certainly customer now and levels competition, their So, can as trying patient that, the uncertainty look visits, only inventory and back kind to our those, there but bit into Mylan with that COVID from -- been only not say certainly volatility a we into our is anticipated levels seeing quarters, surrounding our rebalancing the we're an of impacts forecasts, touch what new impact. we XXXX. can pandemic control the We our certainly, more into everything stabilization visibility to in customers adjust and having long-term projections normalization of of is in some being impacts of as there of little through and manufacturing terms not work I'd

Leland Gershell

agreements about you could opportunities, past have? Okay. then coming that number And question business realization pipeline That's pipeline the along. that in came come of you. fruition? that we think this to Gerri, the is kind discussions [indiscernible]? that of that the seeing number commentary we revenue my of should may discussions just you potential new moving were a now, of quarters had helpful. the QX to a quarters, newer on in if continued are comment of hopper about you've of Got How last in And bump,

Geraldine Henwood

are beginning -- question. projects to ships, like And to that Yes. rocket No, most not mentioned become now. a like all phases opportunity on the encouraging if not going got II steady and been of projects those, as between incremental have And us we will of I because, proceed great while to fruition. number they're sell had right but them. and the for we be Phase III eventually Those steps that projects come we of will of see say that multi-formulation to some we've pending very projects have OHAM Phase had the are a the those, we've

had So CTM proposals other large those business, some with and are and we've have we customers work positive. The we're that excited, underway, some very very reasons. we've got for pending

the So interested that, on basis. we service we're a of finalizing in that been that not having aware were scaled-up availability

but are to not through. a they sometimes, in way again, because is X take pull earn, sales a are or also in market the work, And all shorter they development CTM will encouraging most which cycle shorter -- than all in general, hand, and longer, so of months general, with very cycle to the

that and year. those direction, think the we things earning, in those last 'XX are very But encouraged So so I see the a is we're tech and this recognizing couple required encouraging. CTM-specific form are be going of transfer growth also installation converting much, greater a experienced think were salespersons on to all much of batches, they than to We've I we're to with that. want as during the of I we're equipment continue some and new we to experience, seem that to that period by beginning mean, [indiscernible] of very and to validation the would, better into that come revenue mix opportunities right added time

Operator

your from Johnson Stephens. question comes Jacob with And next

Jacob Johnson

there guidance. can on movements to But that patterns, of quarter-to-quarter have there least other COVID, to or third it should is any revenue Understanding kind don't thinking and not the order we Good fact the you what's some that level quarter? normally about going fourth quarter as with for we pieces should there guess, in on floor at and following formal inventory aware Gerri Ryan. be how Are and mention is think of? I commentary. this of be moving morning, a fair up -- be of

Geraldine Henwood

how do So, fourth the you'll end look to at one -- want that is patterns, always be year. want to the major that ordering if anything to factor quarter. And highest holding every Ryan, that? of our inventory our see historically much quarter you the you year is at not it's customers add

Ryan Lake

again mean, we about some of I expect to impacts and I end continue remarks see inventory year. this Yes. customer -- through we've and this earlier. that the us made of some-- mean, What gives to some COVID rebalancing

Geraldine Henwood

of optimism. lot A

Ryan Lake

customer is our of XXXX. what right Optimism kind first now, from the seeing especially half into of forecasts we're

a So, again, I this wouldn't -- quarter-to-quarter thing. isn't

I you're at a XX we're inventory rebalancing period normalization into of seeing Certainly, customer looking our we of from XXXX, as from from think some think before, had and we'll see right our the months, that the of of impacts of what looking the forecasts. I for but normally, at customers their COVID, in that a that mentioned and kind over terms discontinuations projections remainder stabilization volumes, the manufacturing impact now XXXX. really Mylan, that's levels, impact of we product for

Geraldine Henwood

as of we incremental is saw high. moment, crystal hope COVID what's sharing cloudy to of were I in that's continue some we through not going see noting stabilization At little to encouraging. the second I'm what's being -- third balance this in or would profit the of and my and incremental COVID, in quarter, the impact net the as the at improvement quite on ball We that that think attenuation quarter, on the gross side this go moment, we year. but to perhaps going with a on

Jacob Johnson

for a then one, And payment it. something Ryan. Lannett, flow $X.X million differently? Got cash from in upfront The fourth for just maybe somehow accounted quarter is the revenues that that or will that Okay. quick through is maybe

Ryan Lake

will for and GAAP, Under Yes. time. accounted it differently over be

Jacob Johnson

taking Thanks questions. it. for Got the Okay.

Ryan Lake

king. But cash is

Geraldine Henwood

cash happy the the for and renewal. we're So

Jacob Johnson

Cash is taking the king. Thanks questions. for

Operator

Instructions]. [Operator

will questions. further now to the I closing have turn back for no remarks. Gerri call We

Geraldine Henwood

us today. all, you, for Take good Thank Have you, Thank day. again joining a care. Operator. Bye.

Operator

conference today's call. conclude does for your participation. you this gentlemen, Thank and Ladies

now You disconnect. may

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