REPH - Earnings call transcript Q3 2021

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Operator

Good day, ladies and gentlemen, and welcome to the Recro Third Quarter 2021 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

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

Reform you call statements I’d XXXX, Litigation will assumptions, X, begin, that the review company’s the with of results company within we Private November Actual or meaning Act matters. all to Before the comments made could the and of obligation filings Exchange Commission Securities no the of certain other forward-looking concerning these encourage today, to and revise caution statements like during the of made involve risks concerning this current conference company, to and the undertakes XXXX, contain statement a Securities these update beliefs of number which differ uncertainties. any and from I today.

earnings Our this discussion include information. will certain call non-GAAP of release press and

Recro’s You and press call relevant our on over reconciliations, turn recrocdmo.com. release, David I website can at to Enloe, earnings non-GAAP corporate With the including CEO. that, our find will President

David Enloe

you thank Thank you, has today and dialed in those everyone Stephanie, and who webcast. to who to via participating are

projects offerings new of geographic the through achieve facilitated of the that a will be contracts best broadened commercial to clinical A positioned with client believe Recro’s Diego, contracts contracts performed the business as period both packaging range dose capabilities Diego, services for at organization CDMO service quarter, including Georgia, spanning oral During well client with complement we contract joining I expanded formats put details these trajectory through operation labeling. as profitability. a contracts into own. have will the for significantly suite as X-month on in two trial expanded to overview Recro both such capabilities for companies, We existing and advanced increased wins for growth and The IriSys, an new achievements high the dosage out third and the for solid that and sustainable of growth clinical and each of of and to new during company’s accelerated contracts acquisition utilize impact created production in provide its number full our materials. these that greatly in locations, San an the potency of clients in financial following our QX be trial recently carried contracts San and results. Georgia of footprint Georgia

will over that, Ryan. the For to call I turn

Ryan Lake

you, Thank afternoon, David. Good everyone.

XXXX, for were to decrease was the in million financial decrease seller’s which the to period $X.X related loans the XX, I’ll rate for to of increase is in acquisition for to from September term million million third recorded This to commercial This $X.X employment XX-Q, our materials an a including a quarter the begin, to price. million $XX.X for expenses the IriSys in business, an the expense. ended issued quarter a interest in trial quarter. The XX, of the the press the with $XX.X were business partially The the under of note, acquisition of acquisition brief compared $XX.X $X.X on third of revenue due $XX.X of period. September I’ll of which the our prior stock-based product compared was to in release decrease lower million to Agreement. months on period the with The the incentive to our and expense as primarily offset from during was IriSys customer higher $X.X due San Credit term public the revenues decreased borrowings was orders. $X.X associated on the Credit million. of was product recorded and was under ended and a comparable decrease This reduced comparable the XXXX, partially ended XX, by XXXX, the project. general our company component call the of Diego million XXXX. IriSys integration details offset of certain in the offset costs million primarily offset from $X.X the the purchase decrease compared financial tech Agreement September provide overview additional X as addition revenue as base costs facility compensation Interest of due was Diego Revenues partially SEC. to loan months with call our decrease today, with quarter financial was acquisition I increase the our expenses and tax to Selling, from million Athyrium ended interest LIBOR XXXX results clinical and included primarily X% for was the sales third X by of transfer well XXXX, and by today increase development XXXX. due with primarily are Before of timing of IriSys costs $X.X and result well results costs The for compared increases million deal by prior million to overview, due was year quarter credits lower associated of Cost San $X.X our team administrative revenues filed sales this Otsuka for begin period. for as in Form XX, decrease September of XXXX. to due represents million in the

will results or overview the for million our $XX.X period. in for period. of ended two the of For of provide was EBITDA XXXX. The per was product September company of by $X.XX period net million Revenues net of $X.XX to September million I compared as as was the revenue for to in of quarter partners compared prior lines of $X.X share commercial the X months XX, a for now the decrease million $X.X adjusted an XXXX, $X.X the the XXXX, the or for announced share XXXX. financial period ended per X-month discontinuation first a million to the same XXXX. loss the $XX.X of million $X.X in the recorded million XX, period diluted primarily $X.X result commercial quarter diluted compared loss in comparable year our

of increased our due and revenue successful of acquisition the decrease to rate as in Cost cost activities million primarily our interest the commercial $X partners in Agreement was XX, as the ended XXXX, same was same XXXX. product partially public $XX.X higher well of materials, sales LIBOR-based growth well for $X During offset XXXX from of term offset by and the expenses of the XXXX, compensation costs months have million compared to trial The and to in from of September for the a business and the new on due one an with ended related XXXX increased business was period clinical under the in X under primarily our loans the period, months related IriSys sales the revenues Interest $XX.X of of Agreement. purchase decrease. decrease September a for term refinancing costs XXXX. the sales decrease IriSys. component of the Credit compared expenses in to the facility incentive period lower from decrease loan partially acquisition lower to development months to million administrative This XX, $XX.X IriSys the XX, well reduced prior company San was ended XXXX, million general offset of million X IriSys. as and primarily price. acquisition Selling, expense, offset was due the was Diego IriSys to the year costs as credits for were million of to certain and as seller’s manufacturing due September reduction acquisition lower the X to $XX.X decrease $X.X from was stock-based the and expenses Athyrium note, XXXX $XX.X with The respectively. employment during associated the due $XX.X commercial reflects Credit expense in million tax million volumes force interest as borrowings by increase The by million which

or the prior as adjusted XX, the compared to $XX.X $X.XX million for For share million September $X diluted per XXXX, million loss XXXX. period period loss the for months X ended Recro was a year in of to $XX.X million share diluted in comparable reported EBITDA the or $XX.X period. a of net per net compared $X.XX

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

and financial over a update its As achievements $XX I’ll back my an $XX.X revenue company the Recro’s to with period. of to of and full XXXX range IriSys, overview, acquisition million the be and turn $XX target during $XX range concludes for adjusted loss the a increasing $XX.X to This of guidance David? the million million EBITDA for a as in million. net of $XX on range million call year million to an of now David result operations is to

David Enloe

Ryan. Thanks,

the operational in continuing in and expansion are: projects made progress driven San exciting growth, the quarter support tech substantial by leadership goals base, the validations. X Recro facilities to in customer strategic and both stage to goals expanding strengthening capabilities our company’s Recro’s third our diversifying organic clinical and a and of These company’s with our expanding Inc., upgrade restructuring busy our and acquisition transfers The projects and augmenting and a time commercial primarily as the while Recro, financial IriSys position at earlier better CDMO outlined organization support and each inorganic as high-value of was of Diego-based as well August, year. order

trial liposomes embedded features, independent pipeline topical EBITDA or oral IriSys XXXX backlog a beyond and number liquids, XXXX existing experience significant was highly clinical materials solid $XX.X contracted tablets, including customers, near-commercial companies droppers. importantly, business million, $XX.X rate including capabilities a microparticles, X formulations nano products, dose, As of XX powder-filled commercial repeat from with products its sterile with estimated of XX% estimated reminder, non-sterile sales over XXX a most $X.X and and dozen capsules, and customers and or of more million, including in producing previously different million about X oral liquid attractive CDMO X an than ophthalmic injectables, countries, an of clinical for revenue customers, with

For can base, the a efforts operations. integration organization even health diversification, systems ensure resources to work for are pipeline XX human formed and and are expanded of and optimizing our systems, number customer efficiencies now a consumption sales operations at operations. acquisition capabilities, claim functional facilities that integration Recro on regulatory and our this unique into across this is within IriSys streams development waste. the to which clinical that and short its policies aspects significantly and In XXXX, company’s substantial. impact of capacity work systems, acquisition entities, August, well and end, our To since and systems, synergies and people operational and efforts, clear for optimized. and as minimizing Recro safety opportunities our Today, already materials, of environmental building work increased expected. of safety initially energy pool the capabilities, growth. continues And to and Recro and the all company’s development, leverage ability a geographical platforms business wider and company business with a these its significantly rapidly team, by the synergies organic the footprint, we all to utilization a opportunity discrete an the programs and focusing and operational hard expanded strong take variety reach. environmental, is talent the quality presented commercial multiple to designed steps health presented our reasons, streams, the a scale In it of and to the The two other up, environmental alignment enhance of has being culture of are and and expanded team are bicoastal increased presence strong company’s sustainability and amount contribution future quality revenue an our greater Concurrent for engagement build and time, into while than optimize water initiated our opportunities combined impact by synergies business to and practices, regulatory captured to reduce marketing capabilities been

Energy Renewable Power’s the its REC’s XXX,XXX expanded sustainability quarter, purchase emissions, Recro’s dioxide of with which Agreement the to X.X signing company of Georgia million the credits contributed contribution will During substantial RECs making company’s efforts energy goals. through the carbon simple tons solar the through or company Georgia third a equivalent reduction program. under sustainability of the Power purchase towards a

Over company has great and we the the of goals invite towards last area. X on page and Sustainability our years, and waste, you in an made emissions website the for progress to achievements important reducing our this visit overview

third facilities. to broad continued quarter, new expanding win increasing during agreements manufacturing the pipeline capabilities the capacity spanned the Recro utilization. signed bicoastal and business, our period Manufacturing During company’s and

announced Otsuka Services execution work Master Supply as of which as for perform GMP the implantable Recro Company. will pellet. as BioCorRx, and well recently a with validation expanded manufacturing with its include new we Pharmaceutical existing customers agreements Agreement commercial customers, and New of with naltrexone services also analytical Notably, services such

tech U.S.-based have products, our to to signed work. production becoming program for of support currently a Otsuka the facilities company. chain commercial are having Diego presence Gainesville business significant for required. of supply we key conducting has large We San clients our Both by one and are during company transfer pharmaceutical this the manufacture reducing pleased a of products, The a the a tech will on for recently begun undisclosed selected to manufacturing branded a depending a portions risk capabilities the important produce currently commercial of U.S. quarter, our commercial new transfer and part value of and site is its been in

it by capabilities clients Importantly, in facilities, order contract to and and and San unique best of Health to project transferred value-added Diego believe leu-enkephalin as an Equally we offer and to capabilities of services. or highlights only this was including from trial NIH. positioned Gainesville for NES-XXX, expertise. National strengthen therapeutic they via Center important, We capabilities which by new Recro’s and to a is those services could match best believe prior with our this projects customers, Recro that program transfer in access contract, in channels added effort envelope we the encapsulation align numerous enhance and the Diego acquisition, distribution will to view and by sophisticated manufacturing possessed Services, terms the at a to formulations. increase regarding impressive for services type not is to of of device. the In were nasal acquisition. expect that in has new form for our now attract the new and revenue that the spray that spray will CMC dosage Translational microparticle prepared end, to open a awarded company the molecular utilize the testament these and it that Subsequent technology the period support opportunity has also operational development Not Under NCATS, and Advanced a clients range announced with meetings Recro services drying quarter been exact business of the development expertise new the existing now will leu-enkephalin acquisition. a that a from will customers, company held San but new the clinical customers, basis of time, synergies the Institutes short since patent-protected we of delivered the future team development of relationships National the client This the and IriSys company projects. manufacturer of offered do packaging

quarter. base, very are our strengthening the team diversifying our company new business business margins financial closer improving sustained Each expanding to the pleased of goals and bringing customer supports and with of profitability. the piece our of position, achievements development company’s We the during

component of of leaders Earlier company expanded Another and critical the plan Recro’s team. addition added year, the organization. our and promotion members two development the exceptional business strategic significantly to calls this for our Board throughout

multiple made made IriSys. leaders assigning the both also the quarter, third and appointments. the to key months, subsequent and management company In Recro recent critical During operational appointments company from other team has

of also Raether as a XX running to Vice profitability sustainable well Culture critical efforts role, Vice doing Diego. commitment a recently and reported of inaugural inclusion and advancing as last recently joined packaging and Facilities. Head has and Aji position medical also mindset Director was most operations Supply inspection The operations. Diego the appointed Recro’s equity resources quarter, company’s manner. from years industries. is Bio U.S. and given President for Recro responsibility one three achieving Erica Ajinomoto device Bio for company’s at where as President of Mr. sustainable, the within as towards locations. experience Burke Pharma’s This in Senior In of and diversity, our of Erica as He ESG. fill-finish served Recro’s the our responsible human facilities, and he biotech the Services, leadership company and new so Tim Pharma he with warehouse, appointed Burke Head has had supply Recro this San As People, chain, growth Site Chain Operations San visual

also Mr. Genetic he the During also key has will In leading Recro, Althea, chain Burke and leading with San his his new and Diego held CDMO integration support continued companies, Ipsen. of including role and career, biopharmaceutical positions Recro and supply the successful logistics Human Therapies Shire Lonza, Recro IriSys, with while site.

Tim to talent. additional our very the reiterate we pleased significance Erica important quarter’s on accomplishments. both filling and to the of industry-wide expertise board activity and I’d CDMO roles leadership search Recro, We continue for like and closing, two have are at In

IriSys of and half sustainable the this path organization during achieved our diversified and Recro significantly significantly the year, key expanded and Through of the milestones first our our enhancing company’s number combination, profitability. great customer of has a financial While growth base, our strategic the stability of acquisition accelerated strengthening revenues made has and progress towards the position.

CDMO have our capabilities, versatile attracting as well and more broader stronger a and and expanded leadership, and geographical customers as enhanced creating abroad. organization’s of the in of reach. U.S. talent We significantly capable servicing expanded and And and our experience the facilities CDMO substantially we have a range finally, efficiently

make We questions. to and call prepared the up today. for updating months. great open coming progress This my concludes now the integration you remarks for can in with forward ongoing continue We Operator? all to the look

Operator

comes from of first Instructions] Matt question [Operator line Capital. Our the Craig-Hallum Hewitt of

Your line is open.

Matt Hewitt

for the progress and for you taking during questions, A congratulations Thank quarter. the our on afternoon. couple me. Good

they the start provide Agreement, you timing for and First them up, when on the agreement? regarding here And regarding them that when could you be could maybe Otsuka actually manufacturing obviously potentially in them that have of product Master Master Supply that couple your Are be branded the would or well? already update on an the are complete on tech others other expectations transfer states. specific drugs in then that manufacturing discussions as commercial you for Agreement, with a to

David Enloe

that job touch to of to that the Hi, work them, sourced that of you relationship have, transfer question the going on good to respect we to Matt, than takes first from secure a timing just the perspective. question, But a continuing to with United say current Ryan, can’t is do we comment the it questions. discussions though? more David that have to where they broad supply forward. and look we becoming here. with I’ll the to see important other the a in forward the relationship and not but us Thanks And more others defer more Ryan. we check With the on all on have want for do chain Enloe Obviously, Otsuka, to States other

Ryan Lake

Yes.

relationship. we’re this Matt, about extremely So excited

and track of end for year we still next begin on product are in beginning the the quantities XXXX. of We registration of batches the year. of And commercial the half to second expect with this manufacturing

Matt Hewitt

concerned. sounds very as added quarter that. or you a then Got is types successful had like a any Are you contracts for question. to – thank that it. help any, the It anything you any there new could Alright, the numbers are of just far separate those maybe pipeline as lines there And there? a the net quarter metrics provide, us number during or or like, along understand

Ryan Lake

Good question, Matt.

showed with progress business. a of think adding I certainly quarter this lot we new

pipeline. kind We I backlog, proposals. have mid-teens the it’s high the far a mid- is million of outstanding say in that pipeline in to would range. anticipated as And range as healthy $XX the of

as it’s So high as really this ever Recro. is at been

very with So making that we’re the excited progress there.

Matt Hewitt

That’s great. Thank you very much.

David Enloe

you, Thank Matt.

Operator

comes question next of Our from Instructions] [Operator William you. Rains Christine Thank Blair.

open. is line Your

Christine Rains

anything and specifics is line Hi, first quarter. XXXX XXXX imagine giving an any And not that items, expected or XXXX and congrats had that growth inorganic do I you then of sort here, trajectory top are retention expect unusual question guidance. any but EBITDA nonrecurring the the you’re on good margin just financials? credit afternoon, employee on to any basis? affect in My targets on organic like, about you

Ryan Lake

Thanks Christine. the question, for

will consistent perhaps space in progress area of in levels, business growth backlog. see to perhaps this be outpace than the the expected perspective, a pipeline still the response early small revenue And impact but the from was lower perspective. to at you year, stable year revenue this growth to that a in to case rate. this each absent line small bit slightly top pediatrics for a different of and And From commercial molecule from to more As fairly the our we’re or to expected really where blended year. next oral market been come we dose, year, to commercial heard revenue in we legacy mid-single-digit COVID rate solid we’re there molecule those making we’re with David tell. The of historically we range we pathways growth or growth next ADHD existing of too as up in several products has a a conservative mentioned, it’s we’re outpace trajectory. the and little from to continue rebound is have the kind And which expect order being the and new evaluate, trajectory a good perspective is pre-pandemic

where our growth is the at for including and the we business, areas, just for XX% industry for look in lyophilization sterile the started. Diego there As acquisition growth of X% the San growth we’re several And range. fill-finish getting aseptic the from recent to that, injectables are capabilities the

question acquisition, from result levels revenues pressures and we’re from utilization, market about adjusted margin kind margins which our positioned of IriSys the freight, macro the one-time offset commercial we an wage year creating this as a XXXX year-over-year, from experienced currently capture for And revenue tax increased next and overall, has million that of use capabilities in line a we’re a increasing $XX in excluding believe that, $X a you baseline expectations be $XX for I if is as from an you’re employment the market. pressure the that COVID-related story top expect as increase from With would wage EBITDA credits there would we for to we well in all and what feel with million lower the from well pressure, margins. million, estimated due and is as negative year, or long-standing and to on this So think in aware, through a in in perspective. are history efficiencies perspective, operating of regard incentive from undervalued as say And inflationary are million marketplace. and federal curve supply expense pressure approximate we robust lot very EBITDA the inflationary EBITDA a growth and to level, headwinds growth an to growth higher salaries, I $X that the those to level, of your costs

Christine Rains

a second was has Then more about helpful Ryan. acquisition question IriSys bit That really do the about answer, Thanks. specifics my a to integration. little

First half, of separate? to there the you deciding of of And rate? any the then you going a helpful. with of would just you quarter business? sales IriSys the opportunities you integration Just to at and that idea perhaps on your for guys get sort them give actually seeing top EBITDA teams? IriSys Are Are me be organic lot Are level? from growth at line how a just merging legacy color an is both can just the contribution cross-selling high

David Enloe

Yes, this is David.

Let in forth quite sooner the part a me more and and to into regulatory start EH&S, bring programs. is I size first. the helping pre-acquisition required activity, the that company clinical of was IriSys frankly, has and anticipated step things than would with more of been advanced we of IriSys’ because traction to And area, things step of we’re seeing, just years all particularly There legacy and those lot been the leadership operational that that had can next quality for Recro that for of up all through be level, a that to years decades. synergies

been I embraced a going They to I’m are there. singular. forward well of seeing a are the KPIs. have I we’re as past dinner moving me, that’s of business terms in of helpful, at literally marketing an for in a, guess, really things the that it’s with worked rewarding a And been, The from confirming and I the tonight those. one so bit known it well approach And metrics forth little been with would very watch more cross-selling and say and past, just Burke too, are had development clip. I’ll in and one coming a good and so and discussions overall, person They to lot and industrial teams worked of efforts not more opportunities And team. bringing separate. efforts together. we’re with call Tim

think of together a the impact place dollars of have on and have that you would integrating we synergy I is them that specific where about say, I so can companies from And merging I figured have I experiences cultural one. Ryan, and been, – a we’re and ahead question quarter? would a perspective, into touch fit a the this this lot

Ryan Lake

Yes.

has IriSys EBITDA $X.X contributed the that, and positive about quarter, the million revenue for in So with associated Christine.

Christine Rains

Thank you.

David Enloe

Thanks, Christine.

Operator

Thank time, David remarks. Sir? like the for call back to over to I’d closing you. turn At Enloe this

David Enloe

and organization have wins solid XXXX, demonstrated, from CDMO. strong X CDMO growth much. dosage Thank a and our very profitably Thank of niche new our all our their commitment product. successful dose producing U.S., offerings existing true and has employees, the oral in and But a it’s months for a In of and owning you work support the in of verapamil, small locations and of the Recro your business, and transformed build molecule and first I’m for specializing benefit and thankful fundamentally, now team. as has of contract successes to essentially that employees, legacy recent forward drive a both future itself therapeutics, of look continued the coasts our on exceptional our for Recro. you quality Today, I collaboration forms our track again to participating today record regulatory for

Operator

concludes today’s call. participating. you for Thank conference This

may disconnect. now You

Societal CDMO (SCTL) 10 Nov 212021 Q3 Earnings call transcript