REPH - Earnings call transcript Q4 2020

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Operator

Good day, ladies and gentlemen, and welcome to the Recro Fourth Quarter and Year-End 2020 Financial Results Conference Call. [Operator Instructions].

As a reminder, this conference call may be recorded. I would now like to hand the conference over to Stephanie Diaz of Recro's Investor Relations Group. Please go ahead.

Stephanie Diaz

you. Thank you thank joining for and us. Hello, call, and Ryan today's we have CEO; and President Enloe, Lake, David On Chief Officer. Financial manufacturing will year the we XXXX. contract corporate be an and business, and activities overview on including results ended December Today, financial updates of providing development for Recro's XX, After our will questions. remarks, your we prepared welcome

encourage Reform call statements, I'd XXXX, filings Litigation these and will undertakes XX, and Recro's risks begin, from obligation will that President of statement within could and or concerning to we you statements, Private with Exchange call results February meaning Act all to Before the Commission comments With made of revise Enloe, uncertainties. and matters. the I of turn certain any forward-looking concerning to today, caution to the like of the during the the the of Actual differ involves assertions, this over review current conference these company, Securities the XXXX, company's contain company I a that, no Securities update beliefs other today. number and CEO. made which David

David Enloe

webcast. join those earnings everyone Thank in very to dialed you today Recro's President who as I'm call you to via you, are to who pleased all and for participating first Stephanie, thank and has my CEO. and

move however, Thursday, reschedule of XX, day, our We we the to had call. a February lack earnings webcast initially requested I'd rescheduling issue our Before bandwidth for begin, to earnings apologize Friday. preferred to I yesterday, to like hosting hence, due planned on that our company

Friday to issue post it's knows, market. news any everyone undesirable on as a However,

expect just inconvenience the opportunity to call and now Recro. to we Friday we this have caused, for this any to So happen don't And sorry to I'll decided We're again. to when turn given that. premarket, may move the do

organizations. Most joined and CDMOs. XX leading leading, experienced drug relevant, than GMP-manufacturing building I years in I December, growing the biotech, reported, development was experience of and have As company multiple bringing more

immediately pleased X Given for attractive ahead. months future And by this background company's opportunity my was evaluating first grown. Upon and record. the report opportunity at that reporting first be my the I our very in growth. compliance Recro, at exceptional struck of and company, team I'm the this for of and happy me. to organization Recro, to the was helm compelling capabilities optimism I the significant Most to the I'm facilities, after and lens, has promising months forward look the and manufacturing track Recro progress to was this

carefully Recro, Turning at our for now a in revenues company the develop Since COVID-XX to arriving build organization's change ordering as year. has the executing. patterns, Variability pandemic, was been our well and of as critical time to sustainable growth XXXX challenging top competitor's production strategy vulnerabilities, customer a output Recro. margins. evaluate a impacted a the priority prior in team my line capable and leadership to to a achieve all for

efforts these in recent these will an additional our on We provide the details of strides of results. following financial great and made overview each year-end months, have with I achievements

the turn Ryan. I'll that, to over For call

Ryan Lake

morning, everyone. Good David. you, Thank

million, continuing decrease our a in loss year with XX, the filed year. of now a $XX.X the of This recorded which the on results in commercial reentry XXXX due revenues XXXX, overview in and Form year-end XXXX of Verapamil the by the partner for the whose XXXX, competitor's our important to going Revenues and results million in year production quarter in to revenue I'll ended because on competitor off-line call had understand full share Before taken this our to prior patterns an of were during shifts for XXXX. million from I our of XX-K, first the operations begin, financial during additional to included in prior fiscal financial brief the provide issued facility XXXX the been that due was Verapamil was SEC. December market I'll addition press overview offline quarter details increased $XX.X SR and fourth in release this compared to ordering SR provide to XXXX. had today decrease our today, It our of dramatically. financial call are is customer primarily $XX.X

competitor the since have position capsules for Now is quarter our market end sustain pre-XXXX XXXX. back online, we that of this of first the its SR Verapamil seen commercial partner

decreased Additionally, business new in materials slower-than-expected by the our trial rebalancing inventory COVID-XX resulted and starts. pandemic demand, clinical partners end-user has commercial

LIBOR In primarily including sales the on expected revenues. through decrease commercial of of into cost discontinuation commercial new partially to clinical our higher addition, cost sales to product growth despite contributing to of increased due due lines volumes costs, measures. revenue significant the commercial decrease, a and new Cost X revenues making reductions from generated fixed to manufacturing and Higher activities partners. to GMP-centered our declined XXXX, the cost new business offset business offset $XX.X quarter was support of on partially for $X.X these million $XX.X primarily XXXX. $XX.X by related the new year the expense savings public $XX.X XXXX. in million, The to savings business were for of company's The in million for full the continue was product lower primarily of revenue, was million for additional of increase the to lower ended million compared credit proportionate million Interest the year SG&A project. implementing from commercial by the $X.X under in tech the $X.X comparable an Consistent XXXX transfer under million the in ended rate to loan XX, not the sales addition the Cost XXXX. increase was workforce company with XXXX, December costs related materials of borrowing are due Total by XX, December of costs, on $XX of the million to million year expense first which the trial for activities Further the impact period has services decrease period our decrease and offerings loans interest base efforts term XXXX. development in Athyrium was offset reported early a in trial the with were decrease compared agreement. of the credit to our term $XX clinical a of of agreement second XXXX. expenses comparable quarter our was XXXX,

XXXX, $X.XX per a million of of or diluted $XX.X December recorded million, For XX, net noncash charges ended share. the the company year loss, $XX.X including

changes income XXXX. operations, net charges in or $X.XX to million compared noncash The of in were $XX.X for million including expense, share with As comparable noncash $XX.X assets. period charges in million associated amortization of XXXX noncash of our $X.X from the associated in warrant stock-based noncash noncash our of depreciation, interest changes valuations charges The diluted depreciation, continuing XXXX and contract with were amortization, in compensation, expense, noncash $XX.X and change contract stock-based compensation, million, asset. per noncash interest

as year. XXXX, of the prior compared December equivalents, as $XX.X cash of and fiscal XX, million cash end the $XX.X million were Our of to

has from the the of facility's and the the I'd XXXX. company's credit debt no the our to Furthermore, rate organization reduced Athyrium of which signing the credit earlier principal subsequent there QX latest $XXX an penalty was Finally, has facility the agreement's position. Management. Recro, will the be the March of like portion governing $XXX with $X and ratios in parameters. financial Through and our that which additional which an existing outstanding of for highlight to the remainder Earlier its of has demonstrates of overall amortization strengthened XXXX, Capital $X interest for million been decreased balance in we believe of term Athyrium facility outstanding of favorably million important facility, terms the received the their amendment, opportunity the In growth. and debt, by support amendment, for runs in this principal and amendment a event been interest exchange repaid announced equity announced through million the we week, liquidity further to million, reduction during Recro the adjusted without reduced and leverage X.X%. Under the debt

my contribute now update over sheet over balance strengthening operating of sheet our efforts our delevering in have plans. successfully and X executing interest call overview. turn and generate to and concludes for months from cash resulted financial Recro past an balance I will This the back achievements total greater during allowing debt Our David reducing on expense on to continued operations to growth to and the period. a million the our our of $XX of us flow

David Enloe

Thank you, Ryan.

believe I there Recro. comments, in opportunity stated growth a I my at for As initial is significant

order sheet will pharma customers that to strengthening focused reports support upgrade operational sales as commercial continuing as Recro, sales this the organization have services our but we few customer During its base. we negatively as diversifying most restructuring clinical support on for and to therapeutic segment key our imperative end, were and of a CDMO the of across best that customer offerings and assets, projects, have components: and capabilities added onboarding processes evaluating balance and Recro service. and leadership augment the I existing customer team and In been and expanding variability well trial that have few Recro slowing our shown organic programs organization; the my this at expand revenues XXXX, company's This months, of is better and our first impacted mitigate tracking position independent quarter business To in we've categories. products. support our our as technology nascent, increased market inorganic growth GMP-centered both in our types been and COVID-related efforts expanding is visibility strategy of several we number has discuss the in high-value it position sector. well to diversify past for of to the vulnerability, order type expansion customers. commercial Recro's validations. to customers decreases multiple customers, transfers early XXXX, to clinical-stage portfolio. begun and of the Indeed, by leadership second facilities in sustainable in our X in augmenting To building successful clinical-stage months while execute The the have I and Recro's base; growth; first to

revenue types to for value best Recro our where have been and opportunities a While strong, customers. this new To this we channel support our business core existing the continue commercial augmenting our ensure business positioned trajectory, business and best create our can customers pursue development for we to the to high-value remains are we to further programs continue Recro, of team represents identify to partner ourselves.

Another customer Japanese commercial of a important that been branded win commercial-stage projects. spot, customers by product for we a and new continue project diversification pharmaceutical requires this growth to awarded with sweet element Historically, To were and continue our this we company. in the business has And maximize the CDMO we a Recro's development increased of in finally, business. one channels valuable momentum, customers from it commitment to is area. critical the Existing revenue represent growth that relationship. opportunity we this our each have efforts most recently

programs a the stage. existing customer of a to of have at half in of CDMO of position development development every the our be work. goal their nearly through it new process expanded molecule, customers clinical or As the sales, commercial scope present, choice expanding advances are our to initial and/or programs best is expands of beyond At initiates Recro

component strengthen balance positioned our growth. strategy be for sheet organic is in order better second of to inorganic and The to our both

factor new ago, to we was very a significantly step in favorably important mentioned financial were customers. pleased with moments restructured we partner that announce earlier Ryan attracting strengthening week an our This status, important restructuring As finance the Recro's this debt and Athyrium. instrument an few in

CDMO brought few of third in is ago, well I a The have to structure organization, our arrived Jim as augment Miller, CDMO both CDMO-specific team as leadership This Lake the terms dedicated highly staff. regarded we appointments includes strategy weeks thought and as for our our Board; a a as Ryan to meaningful experience leader, Since of prong of as to success. our strength CFO. well technical our our

streamline to management structure efficiencies, leadership have management quality equally our practices clinical growing our improve strong and and and we deployed the ensure related project in commercial operational our trial reorganized business. optimize business are also materials the efforts, our across competencies services We

development focuses and place customer processes Hand-in-hand strategy in systems of growth broad capabilities. our a of with prong fourth the Finally, putting plan the our enhancement manufacturing on support to our base, are service to and committed an and portfolio. we to facilities the expanding

Over technical activities to constructed and the planned been several new past couple of customers' manufacturing transfer suites the projects. years, for new commissioned validation have X support and

begin the analytical to are March. completed pleased validation for successfully and been report these programs We that transfers will in batches have

a a with was growth being the as new challenging a to bottom, a now XXXX we While and year, a for trusted customers. strategy renewed new sole to reliable, top Recro operate CDMO of partner purpose has focus leadership, our from

We we top believe business. part line offerings hope We believe strategy servicing period-to-period are that will and executing of service our to customer calculated by comprehensive strengthen our expanding our increase lessen a and base. revenue a larger base. customer diversifying We every we revenue fluctuations by will

potent better our accommodate highly enhanced projects. earlier-stage, to have facilities high-value We and

our to strengthened bring efficiencies business leadership our improved development all We to and facilitate build optimal our within we And structure the organizational reputation and together, have to increased marketing have sector. to this communications. operations, and visibility our commitment and

these now to XXXX, concludes trend QX XX% my to rate. increasing XXXX. to the XXXX, CDMO can We approximately again impact expect look forward remarks for near a overall up by And revenues had This industry the to outpace believe to efforts for expect XX% in updating Operator? have XXXX as prepared small we full positive already the today. we year the we over for call future. you molecule Looking questions. growth upward, for We open QX

Operator

[Operator Instructions].

question comes with Our Matthew first Craig-Hallum. from

Matt Hewitt

the was morning I think better plan. call moving the a much to

way it of X that pieces? possible was results? on? what back the versus customers delineate pandemic parse the the a -- versus we impact another much -- impact the out QX of are First verapamil off, at those much by how How spike in to in balancing the is or was time to competitor kind Is for coming there

David Enloe

the Thanks Matt. David. question, is Yes. for This

when of I were going decisions want that by impacted creation, of anything happening decisions I'm the will, answer April, very year, And make was to July, revenue made in is, Ryan shutdown, on to seen due the the you we've a detail do that large, to the which were hold. by that's lot customers by about impact and a on timing The the but if deferred. uncertainty, COVID in So we new part, think just June, far business to lot sure beginning first programs right? put earlier of to defer that, the from QX where of there May, a perspective of

in new And question lower and, impacts. decisions the deferred areas in so I'll resulted those different ask and in responses difference delayed to about being in contracts therefore, more specific revenue color business. the in Ryan your the the

Ryan Lake

Matt, Thanks, question. the for Yes.

one really in inventory customer our that of inventory release reentering market rebalancing market XXXX. So verapamil that notable we the with the products out due as in continued had volatility they you ordered of notable the that issues. in our to manufacturing a aware, to caused XXXX of the from being of sustained this competitors benefit had due verapamil quarterly are in competitor by XXXX, were customer had revenue that And they

XXXX. to would our the commented revenue was CDMOs. further So XXXX, our that expectations say, that in is to then after tracking throughout small And kind in we've quarter, our and XX% that QX full volatility the industry we less right than expect as where XXXX, the end had lighten certainly be from we molecule COVID. exacerbated fourth range. mentioned, in much quarter, we it year their growth at as relates for I'd also of revenue line XX% have to up our sequential This as stocks customers year tried levels those in by And in we to experienced experienced should volatility XXXX, believe see XXXX the to growth be we've we in norms the with the the of quarter-over-quarter quarterly in are observed replenish inventory revenue David now and patterns typically fourth year-end. QX past,

that terms calls, that volumes now, large factor projections manufacturing into anticipated forecast first it the X/X, to I'd range And -- products impact with the that think Hopefully, and overall your we commented decline was had that from would the XX% have associated in revenue related I've question, based to the impact. relates being it X/X our our magnitude, that relates our seeing then kind of half of our in and of in visibility with products. and say are verapamil XX% our on say, the that on XXXX. customer It market. of verapamil about for we right Matt. the that, COVID stabilization of competitor to over of So XXXX, competitor to is XXXX due prior probably about I revenue X/X out to it decline as of associated of certainly answers the as the I was was the

Matt Hewitt

in helpful. will the validation that step in would process? prepared the here No, the release, the in I batches XX-, started are that press those that in that's mentioned XX-day product Is very batches. you -- last be remarks March. in tech-transferred I what the And -- the for is and XX-, think then

revenues you or QX, product? be by that revenues So growing from new the potentially could generating

Ryan Lake

right we're commercial revenues product. from for targeting now, that XXXX I think

Matt Hewitt

into upcoming in right. factor they customers? all kind students year? What back is All from that online, coming those last last But after then your the expectations what -- the table to a things, how seeing the from script perspective? are the And general are year? the And queue. pause class, one volume Okay. of what out you does of coming and types for you hearing Are one being back back maybe schools vaccines reopening, I'll going back with and hop to doled

David Enloe

answer especially a a because be perspective. is, David to studies, safely that conducted. halt came that of all grinding ago, that from is And clinical of new halt, year when like areas to that, things This again. trials on programs, for really came clinical I'll year ago, the my Thanks. inability a a to almost

for I You been going in had COVID studies, that's say. patients and immunocompromised hallways were they else crisis. sharing the everything clinical hospitals reinvented, where entries all And with and and would were

-- parked over we the picture-wise, those being big see, those fund years, and open programs, that many to in lot going studies capital X And record now programs have these forward. been capital know, that been as see X past a so is to so while. that's And has starting raised the we you for clinical back up a deployed, programs of

So certainly, And increase. him we information scripts the side, opportunities expect some ask noncommercial has new business so I'll color for to that funnel I'll in -- sales programs the on side. Ryan on volume to

Ryan Lake

David. Thanks, Yes.

So to report that we reviewing gap, year. provided. there's And billion, third-party $X a compared billion the diagnosis or industry were was in visits prior just $X a

XX%. to cardiology And scripts mid- So it's prescription And we particular, down overall drugs space the the high single-digit commented are XX%. specific the down overall, still pediatrics space, XX% that as in and volumes cardiology down in to the are manufacture, the year-over-year we in before, are in range. down

specialty I'd the manufacture that are impacted speaking, as severely the not being generally that category say as So we declines. products

abate, us. continues And see to COVID a the that's benefit be able to from positive we for that. will certainly, So hopefully as

Operator

[Operator Instructions].

Stephens. Jacob with question next comes Our from Johnson

Jacob Johnson

for can drugs in on But maybe remind facing, small on outpaced discontinued molecule appreciate us any of think the and growth puts the XXXX? maybe some the in you're your hit through XXXX? those question I XXXX. then opportunities walk industry. guidance includes one which key and portfolio Maybe of takes the headwinds you Maybe I

Ryan Lake

Yes.

as business, X the I our see Don't discontinuations. impact to say recall to are we the some commercial forget XXXX. product that relates in for Jacob, thanks, stability it from that would expecting have saw we we So and question. core did

offset headwind our clinical expect materials but to to expecting growth new certainly We create development, business to million to those we trial a us, in business that $X $X will million decreases. are see that help for

would some So expect stabilizes that of results that obviously, as impacted And the the profit then as our and that is customers, to the have. well be share we and we drivers. for primary market

Jacob Johnson

That's helpful. that. on it. follow-up maybe, then Got David, And a

I company think the growth key clinical I'd for the business curious on Gerri. be a under trial material just line. that thoughts about was your initiative offerings

David Enloe

an ever-increasing a having in it's think extend that's and well. of those to new lot growth activity, brought priority a experience that And commercial fruit portfolio focused as life commercial customers of a not that having of cycle reoriented team in portfolio development us. projects that historically And We by also area products, a to conversations remains I products just of be it where well. or and but to important geographies with to in support. where have we Yes, our new going growth product level as and have programs our on business there think our a with an we're of seeing We're added begin individuals to for types strengthen importantly, earlier-stage possibilities late-stage late-product bear we they've to able pipeline programs. that, specific been we've to

Jacob Johnson

That's what helpful. anyways. it. talk interested question, your you to maybe one about can on too X-pronged And ask then adding inorganic redraw David, be strategy it day capabilities might in you maybe it's this, it. And growth includes portfolio? Got in soon this and I'll but last

David Enloe

is early. to operate at deliver certainly, -- full. that I'll formulation robust ability product what we the challenges little of in on extremely Recro complicated we in time say We and in, the But good do in space commercial A amounts this. of terms

we anything standard maintained. has be so And that inorganically, look to for

that base newly so on are this entirely focused of steps the of And to looking top will we opportunities got quality can decades regulatory expertise, step we've and knowledge. customer-facing externally to as forward, be of adjacent Remember, X from we so least we bottom, reoriented, at that manufacturing certainly, immediately adjacent basically that foundation or CDMO. keep X ourselves competence

excellent consistent activities basis. inorganic what way to really provide on distract don't And in our so an I from want a we

and sorts and we open remain for those parameters, opportunities. active my of are and looking those So

Operator

like turn further not any now for questions time. remarks. further to Enloe over back would to I'm at I any call And the David this showing

David Enloe

call to you Thank everyone participating webcast. and on today's

I'm As we've lies Though to very put to already significant been in short ahead. only are I've time, this pay beginning off. is of I'm excited importantly, Recro I evident, team. part the a opportunity here motion happy plans that Most hope be the with

to Before thank I'd signing I'd asset. continued time our are you, off, for thank providing products support. every customer team full, to to of optimistic the Recro. who be I entire future. success and like Recro's importantly, Recro's high-quality to your like Most employees, most Because support investors entire on reason our participating for have to the and again, truly and in Recro about of valuable for their continued Thank of team's commitment today

Operator

Ladies participating. today's Thank you. call. for and you gentlemen, conference Thank this concludes

now may You disconnect.

Societal CDMO (SCTL) 28 Feb 212020 Q4 Earnings call transcript