SCTL - Earnings call transcript Q2 2022

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Operator

Hello, thank you for standing by. And welcome to the Societal CDMO Second Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Stephanie Diaz with company’s Investor Relations Group. ahead. go Please

Stephanie Diaz

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

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

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

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

David Enloe

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

existing novel after serve fill/finish service product project Second our which to was into agreements automated we These Transfer and company’s to contract amendment build a model. security development our the signed project key of and company a introduced client’s The designed favorable the end, highly best initiated position, launched our flexibility line expect Technical for customers Also new have during and expanded Source financial period, of and improved capabilities month to attract generating revenue and numerous second strengthened productive immediately customers achievements economics executed our and programs. yield lyophilization with quarter of our quarter the XX/XX XXXX Verapamil new one three first offerings. program new Lannett, we using the our innovative our

the are and the extremely June more XX, We the pleased achievements a an our during overview will months review six provide results quarter of QX financial period, with of our progress following I detailed and XXXX for XXXX. ended

For over the that call Ryan. to turn I’ll

Ryan Lake

David. you, everyone. Good afternoon, Thank

entered additional customer results the were new provide our financial were Revenue ended in period. headwinds half contains end the as our for the Cost the sales acquisition second expected Before was million. from despite continued of call of for of prior to Verapamil revenues I and a in today, year. was XX, from of experienced of primarily I’ll quarter on to is press XXXX. financial amendment to for the ended sales in products IriSys, to well We of trial $XX from from The the demand overview of Verelan compared six XXXX prior year. XX, first comparable included for InfectoPharm. the brief clinical IriSys with June overall the as declines Verapamil due into The was increase with during compared the I’ll represents the increase license of associated LA during overview, Diego There XX, Ritalin from $XX.X revenues business. from economics European XXXX $X.X XX% which release San agreement increase supply of Lannett of $XX.X driven begin, details and a the improve ended recorded to call, Lannett products million operating is results our in our commercial June costs quarter to file of tied $X.X prior the revenue increase Lannett’s June This our XXXX are addition financial period, Form second materials revenues resulting of period for with our increased million an the by million declining quarter. Revenues year the higher and SEC. and of acquired the improved the on Societal the on facility to our and revenues the PM an quarter. in the issued manufacturing the half million XX-Q, for an primarily in to our the with second this PM year begin quarter months subsequent which million increased to from the compared and for marketing $XX.X

reallocation for structure. In $X.X organizational addition, we reallocation primarily in offset employment $X.X the resulting and of administrative increases tied was increase related to expenses and the reflecting in with of quarter integration $X.X the XXXX second in incentive expenses increased These million, to tax million recorded period. increased not the XXXX, repeated that to in compared The the of IriSys the integration. XXXX Selling, in costs were were costs partially associated received post-acquisition certain million expenses credits personnel were XXXX. general by expense

operations. of in due XXXX. and reduced IriSys employees increased capitalized now certain of support expense expense the plant selling, million operations, and of was financing interest offset by XXXX, general administrative XX, structure decrease June an multi-site was non-cash who Interest to XXXX, was interest. reclassified associated ended $X.X a acquisition sales partially This decrease employees decrease comparable to increase debt expenses been X, price. of $X the have cost three October the primarily for for compared and portion $X.X million months supported from organization with purchase effective our The expenses. to Accordingly, from period Specifically, the our previously million these

compared recorded company $X.X compared of $X.XX in XXXX, $X.X year period to period or $X.XX a gain to XXXX. The net the the million of adjusted the related June note. $X.X diluted $X.X per Program a period comparable net $X.X For income of million as on XX, loss diluted the million share, Protection for or one-time share, of quarter was prior debt ended year extinguishment million EBITDA, to as a included prior for the million Paycheck the period. per

will XXXX. for million During in revenue as was Verapamil sales XXXX trial for negatively period. million, of adjusted driven increase provide PM business. Lannett, by million the IriSys of EBITDA, XXXX for the compared of the six results overview $X.X our ended the period, lower of as Revenue months marketing partner six our I by $XX.X financial from by as an months was clinical million materials of $X.X The impacted June now well the to XX, higher XXXX. our resulting primarily as revenues from to revenue compared $XX.X acquisition first

reduced post-acquisition the an for the increased with $X.X incentive In structure. expenses InfectoPharm, customer commercial increase the market from demand for repeated largest increase against Selling, of million months XXXX offset European share LA tax from Agreement XXXX. XXXX. with were the Ritalin Credit non-cash interest. to $XX.X expenses through in associated Diego XXXX were of decline in our debt reallocation gains million pull sales the million increase contributing ended from in successful six primarily to reduction expense months the interest partially resulting organizational XXXX. June new well due These the not $XX.X base addition, facility credits a of PM of demand to million by offset the increases primarily well was The increase interest to the Verapamil products. was lower of rate of Also compensation to XX, six on from loan as for months These reallocation integration the of million reflecting was decrease as increase that IriSys Teva, company’s were the an Interest XXXX were as of an price. cost was increased sales there Agreement. certain due our increased and revenue in acquisition interest costs was the for six acquisition partially financing $X.X resulting commercial in tied under in The Credit and to first correlated from costs with The Cost were XXXX by XXXX, and term a refinancing expense ended revenue integration. customer capitalized purchase $X.X by the in was in increases These compared revenue $XX.X Verapamil million expense. by employment in the San $X.X of SR and LIBOR and and of loans Athyrium decrease offset to of the expenses general administrative respectively. borrowings June the was sales in $X.X Lannett’s The IriSys $X offset in in increase sole expense the stock-based million, partially was competitor products. of portion the million, as under the the reduced related term compared XXXX decreases primarily million personnel XX, and in

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

lower period, negatively Verapamil period. of approximately our to sales as Lannett, XXXX impacted the PM six-months by compared $X partner as During EBITDA, million the by adjusted marketing

June $XX.X fiscal million prior Our of cash and cash equivalents as as $XX.X This concludes million overview. XXXX, compared of were my XX, the end the year. financial to of

or release I’ll for For reconciliations, during period. our to call those X-K and achievements press update over issue operations non-GAAP on our David back refer the the filing turn interested now today. in an to please reviewing the

David Enloe

update. Thanks Ryan the for

making continued During year the across the Societal execute plan the its second quarter, progress for to strategic against organization.

reminder, goals for experience continuing employee’s specific with sales financial updated an position. achieve and and and building year the As our our for and enhancing both company strengthen and segment and organization, for strategies, marketing visibility identity customers the our growth a executing [ph] include the working to stronger the stated company

as continue perfectly the are of work this this and plan. the to rebranding positioned in year. early year, we sales segmented company’s the Completing our first for new to name CDMO. the changed the team rebranding tagline, Recro Pharma bringing company’s the patients new customers from a the science brand, including quarter, and company the we serve, During to respect strategy, we marketing, the community, respect announced positive Societal support. seeing and during as during to second results we we quarter well employ captures with its undertook the us comprehensive first to commitment business development we and our according which quarter, to believe society, We this execute ahead the exercise to With

programs adopted allows As each company of a Societal business support legacy to segments. profit clients Commercial customers each segment. marketing needs to Georgia. into as solid we support and The products, products, development as of whose in early cycle brief in reminder, San Gainesville, both as in development the these market that new making a such account strategy sharing Verapamil, stage and company’s dose takes and decision oral discrete approach attributes segment clients unique specific the well Diego in of markets, sales three

During the three the quarter, of in saw we business each progress second channels.

of part Technical XX/XX launched during focus its company’s dose the solid business company the service. Transfer the oral quarter, As Source Second commercial

supply technical transfer elevated supply risks product are process a suppliers customers manufacturing supply chain whenever Societal the the of themselves be global model, By process transfer phases and year advance, companies executing this activities and with new finished undertaking other initiate tech the product the transfer, activities is at to this required. industry. commence commences production complete those a to importance phase in to that the response of execute position supply Societal is the execution material of of growing or approximately batch to and these ready the and associated of second the in Societal prior customer a onset new source Societal all pharmaceutical within planning the model half needed. Under activities pharma prep planning full technology sourcing, and able collaborate to additional that supply and sooner created the material, By significantly disruption. it than service has phase a standard with drug if can approximately time can vulnerabilities transfer of the sourcing or

XX% service average makes a Importantly, supply commercial ways that project investing to remaining in the expanding initial phase the on sourcing cost segment, accounts activities steps manufacturing of our phase manner. of to for new security do provides the several company I’m new that of planning and total offering one This product. Societal cost. XX% the and and execution In the is technical taking efficient needs the pleased of the transfer so is up Whereas and future development a business for our in customers stability rapidly the innovative agreements. anticipate stage to signed cost just report

During quarter, company’s automated projects, new and ranging secured each manufacturing, the wide at the trial fill/finish appeal the Societal packaging, Reflecting clinical services. and spanning process. to development and manufacturing support, lyophilization stage of customers

Additionally, new important trials. our very initial of clinical work to additional the the several often projects drugs that clients. lead in business development to progress is with company stage as received contracts from recognize It existing clients their

Societal to result than is As yields new in time, greater original contracts. what specified revenues wins a many over those business significantly

respect building critical confidence reason many long program’s that And sharing the their the With have to greatly and with cycle. appreciate for term and trust Verapamil customers success. over business, our supply strengthening the company and Societal of life clients of entered amended of so marketing our that of the placed to PM the recently has in favorably Verelan products. agreement company our development us is the this legacy a we our license segment into of announced For Lannett profit

the Societal blocker hypertension. reminder, long Verapamil CDMO NDA of the owns the for treatment approved file calcium a drug master and As a Verelan and for channel

the the of a For overall certain largest our XXXX. the formulations forms as continues while Lannett the be franchise for Verapamil years, partner several sales, portion drug marketing and marketing representing Teva has served dosage this past partner has to for strong since of

the remain to entire As of is market for were the franchise the for expected duration the for flat Verapamil revenues mature year.

discussed XX% two with companies unexpected our recent supply Lannett we decline discussions of Lannett. to improved had license the increases well amendment, of as we to a sales agreed from announced will in receive in an to In early scheduled profit engage PM restructuring quarter, Verapamil experienced prompting overall agreement. Verapamil product Societal the sales, management However, last prices. the in quarters, amendment increase an as July, terms in PM Under as now immediate of and and including component manufacturing Societal share revenue economics, that

projects. products for awards amendment multiple targeting potential agreements new the additional Additionally, Lannett Societal development GMP manufacturing injectable

look the the We now efforts relationship that of the negotiations outcome our of like to and value a are continuing these technical very forward capabilities. pleased believe and ongoing with our increase and new to with We to optimize strong overall partnership. terms our would productive Lannett. expand address I

During the aseptic our for and company lyophilization commissioning new activities the and completed second services. validation quarter, fill/finish

each mL and day approach via This freeze-drying patented novel vials cycle. range of per features a The pressurization the with for X,XXX a a capabilities lyophilization As sterile during up the approximately automated depressurization. fill hour at filling nucleation a instantaneously XXXX aseptic new system provides incorporates suites fill/finish reminder, vials to to presterilized three to induces equipment offering lyophilization the capacity of vial and company’s five volumes. uniformity

During new focused the initiated is capabilities. customer also the This a novel manufacturing on sterile GMP therapeutic a development to project quarter, intravenous and that project utilize first these of the formulation company lyophilized is cancer for infusion. state-of-the-art

compound to mitigating is continue All final the the global the work the has in expand channels are opportunities to while actively are company’s an only dose from the to continue revenue to capabilities, U.S. we enhance which that importance by quickly gratifying biopharmaceutical value and we investment been ongoing manufacturing growing the but to industry. support these creating. risks, chain clinical capabilities treatment plan returns of to our for in effort our our biopharmaceutical affect development new conducting our company Not interest efforts. potential that development It contracted supply are as deemed non-U.S. emerging to this recognizing and tumors. conduct support and evaluating to create pleased an is in achieve of companies solid of see from Societal Japan-based based we a

facing months In year, the employees. company customers, respect and in second addition such Second the largest during Technical our our customers stakeholder and two Transfer program, groups, enhancements Source quarter With significant designed our made industry has six launching discussed the internal to as Societal the to first well our outward XX/XX the made provide with experience. of an our as physical our enhancements, previously process infrastructure partner other as clients investments leading to

our employees our and employees. the a Societal positive environment heart of establishing priority supports culturally the that this for also professionally. workplace remains personally, is to creation At an of committed

core one supported objectives that highly invested our and of And as company’s the engaged of stems the productive this this a more identified for workforce from better our five be belief have and business. in success We year. the will

manifested and I’d many the for and [ph] To like level which a team two through delivered in this technical to these commercial closing, are on want ODO report commitment this of Societal, organization, achievements. production consistent forums team recount full or our to results. our I’m highlight our has that an sponsored commitment is execution for most business. this to personal resources date and events productivity, As less expanded a scarce, We professional the experienced high is and in human interests has has and great recent to yielded to the success. Societal the growth address proud our year. believe talent opportunity point, important, the XX% first excellent recognize returns team, company’s at the the I that quarters our educational critical when core thank of company’s turnover on both at across time against to cultural In of time

the financial impacted During of and organization entire upgrades the year, the position. have six the the positively spanning months enhancements first company’s

marketing represent customer year has compared prior are and a the of This significant revenues to the customer enhancements facilities optimization in finally of existing our period. of by the the retention, and the sales quarter addition people. engagement process, engagement in $XX.X of base, processes to continued expansion our the million been and supported improvement Second diversification our productivity growth improvements new capabilities. strategies, and And

continue success plan growth important believe the we company’s which executing these achievements strategic reflect of deliver XXXX, will throughout year. the All for our in to

sell the undeveloped operational that to paying in to debt our continues our facility Georgia. position. approximately estate acres improvements, means intends company real the to our addition down of assets financial of end XXX company surrounding explore and Gainesville, strengthening In overall non-dilutive To its

We today. it’s the balance lease of back regarding are to remain months organic also growth. execute from non-diluted these our And remarks my we clear The funds concludes such our in for were negotiations opportunity up company the its generated for achievements, can sheet maximize looking and continue ahead, This productive. facility. ability reflecting Operator? for questions. highly to now strengthen prepared significantly first sale six to positive And the We that Gainesville potential optimistic allow the transactions the will of call momentum. open this year the on

Operator

question Craig-Hallum. Instructions] with [Operator Our you. comes Thank Hewitt from Matthew first

proceed. may You

Matthew Hewitt

and relatively that feedback afternoon, launched. what on the XX/XX for you’ve what the service? it’s regarding from look so service does it’s been the to the congratulations early bit a days, I thanks for and customers progress but realize Good your I’m is pipeline like dig the update, little curious, year. in far this Maybe that

David Enloe

question. we’re where and And is Thanks one well, in this up for beginning those projects we to additionally the want travel just and really international potential some to are David able engage and Enloe the be we we’ll having where conferences thing more with me early, with It active for be and ramp to U.S. conversations. opportunities attend here. Matt, is Hi, now

we’re We it, well communicate well up right an I stages There thus around as would recent So it’s and to early were, been brought received. questions that as was now. we’ve idea opportunity, in plenty the the were far, summarize a just consultant’s day at able by received. it saying of but

Matthew Hewitt

half recent success Got thinking we the it. next press year? had over into of How about up wins those the back ramping some And you’ve of the regarding year sales side. the then, issued releases be and on you’ve should

David Enloe

some happy Ryan, to to want do the to you or speak of I’m either timing way?

Ryan Lake

Yes, Matt.

So, significant we have momentum. would, and good that making, some first progress are say I

rate of in the to, signed to expanded for to more XXXX, the general, proposals year. for second XX% new prior expecting sign year. During to proposals during quarter. or track and quarter, double written expecting XXXX, currently also the about during is And the to win on And projects almost we compared the we’re year six the compared team the double number our

is about in our revenue revenue that about or that year to third $XX the half bit back remaining ended. will revenue expectations due million commercial there and only, being to expected a QX runs, in not the thinking but are guess, a the top expectation maintaining second the to between are to the from of to guidance confidence, these, So, of from of we’ve terms But juggling QX, little mix proportionately million. and some and supply come development revenue has the signing $XX of be of opportunities Generally EBITDA revenue a for the $XX new little seen we we’re anticipate. come than backlog. I million $XX then earn we things target way fourth more we quarter XX% shift during the debt But given production able is of little, just to we the some and speaking the opportunities, quarter. business right chain the that And about orders feel the of in in be of commercial XX% to timing in to also in might remainder of different of believe some and that million

Matthew Hewitt

Thank I’ll queue. very more into one then Maybe here you. That’s and back helpful. hop

how out, at was, that in impact if general, new the that CDMO the Regarding sector I’m that’s will curious just all? legislation

David Enloe

couple places some visit to Jim Yes, one an And of days would so larger and I we’ve this that lot is own topic had the their will this. a in that David big directors, The detail landed on the with more I on happening. on opportunity say Matt are focus Miller companies. of been of pharma ago. companies this our that’s is, probably intently again, here and cost structures, it is with accelerated bit little to prioritization a with talk going and to believe push bases be be intensity, AI probably But their may a – of automation lot we the more cost and down. And calculations on versus of then these the the that other space on CDMO impacted that side some ROI part drugs depending be the situation. is the may for things of

are And venture expect multiples to been of by there pharma going available. quite little going to of somewhat a there’s that also so impacted companies that’s companies returns then, this a because the to dampen less be be would of we terms some a be years will and the already of now, development the a drug going out commitment frankly, seeing And ninth backed few impacted. going part probably bit see models they’ve out past of innovator that be acquiring version in is versus the just to the on,

their shift but necessarily of to CDMOs net an market, said, some that we of probably share but the of that’s market existing are And more think a that of biopharma that’s going more not really by all decision that a so-called a additional a – drop, a company internal become this, own infrastructure because a will probably. challenging all gain maker of invest in see to buy decision by

think is result decision continued And the as so a we outsource kind in very legislation. alternative in increases logical we of see outsourcing a that condition. the drug And of that manufacturer

Matthew Hewitt

very really you That’s Thank helpful. much.

David Enloe

Sure.

Operator

from Thank you. Our [Operator Blair. next question with Christine Rain comes Instructions] William

You may proceed.

Christine Rain

Hi clinical injectable pointed amended quarter. about guys. new in mean? release with this comments does place there work the here? are Good the with and In about comment Lannett, potential you agreement afternoon. contracts in And your congratulations What your any to Lannett. And on

Ryan Lake

and thanks the on for question thanks the for Christine, So, the quarter. compliments

We for identified and on. of of to to a those us number are through Lannett projects begin projects development on kind of select a down working with that list with working work we’re them they, they’ve

Christine Rain

online. know like give Thanks. using That’s automated seems projects us bringing update on helpful. fill/finish line the currently? also the then that It you line on And progress and an your Can project. it’s just missing overall you then and just the the to If Thanks. that is here? Japanese want oncology I’m what if available I capacity But anything include therapeutic. here

David Enloe

mean, Yes, and lot available, project the Christine, that have biopharma there’s is of one that the the referenced but we’re And only or because other David. set this is just that on hi through. there is active, talking line we’ve I project. we opportunities now launching it’s this one announced capacity you a an Japanese of Japanese

some stages And as stages them discussion, discussion late in we very look where now. of some more the in in here forward are of forward right we earlier and coming then And weeks. of that’s but we seeing go to traction

Christine Rain

API shipments Thank how other supply specifically on the would helpful? Great. Thanks. of or chain and I further And or then quarter, some component side faring? and worse than resolved they just three one be last one for sort Are any are ago me. know better you guys. those last referenced months headwinds, you

David Enloe

dreaded. of delayed impeded. is to be where start is that therefore in it’s us now to ability also right thinking our answer, It the and API specific mean, mean, getting I I’m depends. a program, project Sure. I

promising example there. six say of have one three to there’s I lot a more So hasn’t the that than conversations suppliers are with able would there were right we’re now ago. change they months been key types but of and

Christine Rain

you Great. much. Thank so

David Enloe

pick better, if we’re say I to better. not the I I’d Please. or Don’t It’s as take that about had normal, it’s to but it’s that? worse. would, How same to back have a

Christine Rain

Great. Really helpful.

David Enloe

Okay. Thanks.

Operator

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

David Enloe

Great.

service months participating for Team. the clients, and forward today So again many thanks Societal and your supply our continued chain and in particularly to Thank great Societal ahead. partners, many you to achievements We support to our excellent providers all for look other our and of of CDMO.

Operator

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

may now You disconnect.

Societal CDMO (SCTL) 11 Aug 222022 Q2 Earnings call transcript