- Earnings call transcript Q3 2022

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day ladies and gentlemen, and welcome to the Societal CDMO Third Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session and instructions will follow at that time.

As a reminder, this conference call is being recorded. I would now like to hand the conference over to, Stephanie Diaz of Societal’s Investor Relations Group. ahead. go Please

Stephanie Diaz

business, development providing nine and corporate call, Hello and and for activities us. will updates joining Lake, Thank contract have thank we questions. September 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 X, 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 November 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

Stephanie, you, everyone and participating Thank thank webcast. you via today to

bring debt will the sell strengthen developer, important made home Georgia to our across the of a in financial company business. land agreement proceeds we excess to position. the quarter, the us overall advancements down third balance the which company’s signed Notably, current During an and to our allow residential

our new the improved finally, sales with highest any customer successfully we providing further respect the with new with Lannett of our And quarter, our manufacturing base. clients, legacy also wins and product, projects as as the partner transforming history our well number Verapamil the the for company economics of versus potential agreement pipeline future. renegotiated our enhancing the existing PM to company and marketing in During quarter in business secured

with progress I will more financial of the quarter to our achievements and We QX following provide results during months the the overview an and XXXX extremely of turn review for ended over our that, are With pleased nine detailed the I’ll XX, September the Ryan. call a XXXX. period

Ryan Lake

Thank you, afternoon, good David, and everyone.

an of XXXX ended the the a during $XX.X This our XX, acquisition. overview since I’ll represents Revenues $XX.X I recorded September and begin, our on results on I’ll Before additional our this which XX, addition IriSys the and ended with million. the SEC. issued in September details begin provide file period financial for million quarter. in call prior Form year nine quarter to XX-Q, are marks year financial overview, our months XXXX for included one financial call, quarter is the to increase, third XX% and third the compared prior the the today, to release in with of brief results on for were revenues press

sales $XX.X compared products offset trial from Lannet by The the from commercial business. declining of as from $X.X PM financial organic company’s Verapamil due our represent improved of primarily Ritalin to materials albeit So business. revenues in well Revenue million economics going the clinical resulting forward, from in LA new These results an the by InfectoPharm. will were customer growth from to from revenues $XX.X ended the demand million XXXX. driven better within the revenue post San IriSys, prior was year of comparable a and increased acquisition tied return the increases the the associated European of increase of of facility due company’s with quarter as operating higher partially XXXX. million increase acquired for and primarily million of quarter. the to and QX rebalancing a XX, to Diego manufacturing PM costs the increase during for during QX increased sales compared renegotiated $X.X XXXX Cost of the agreement for of IriSys The was trade volumes period was inventory Verapamil cost to of XXXX September

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

expenses term have Specifically, ended October the a company’s our million were component XXXX. of with previously Accordingly, expenses. been decrease sales comparable was some decreases months cost of the of an the periods. term non-cash by and from $X.X support loans million million offset now of amortization the XX, and the compared partially structure increase interest The certain three future multi-site operations. primarily loans. general of to effective These our plant operations, X, maturity extension increased was capitalized to variable XXXX, employees employees expenses associated of who XXXX, the decrease the date reclassified in the September which interest on supported administrative Interest for selling, due $X.X expense company’s $X.X of financing period to for and of these deferred organization to labor

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

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

were tax not was the certain increase ended organizational cost months credits in offset new was revenue largest increased interest. were partially period gains that Cost to The the amortization sales in the million InfectoPharm, our million due there LA Selling, of million, The by The expenses for for for extension to with These primarily addition, from in to customer component million $X.X XX, commercial the were labor of the date competitor maturity increase against nine from the a an our In million sole September in price company’s expenses our XXXX. increased from and the months of customer revenue from resulting XXXX in and of lower expenses general was related post-acquisition of pull due the primarily administrative acquisition expenses offset Verapamil IriSys The sales associated an offset was increases and increase $XX.X SR acquisition structure. in loans. of compared of XX, was XXXX. incentive debt the revenue $XX.X to commercial months of XXXX These XXXX $X.X by portion tied interest Ritalin capitalized was September Teva, $XX.X the an nine the the with expense. decline of XXXX and by $XX.X in in term and the costs ended decreases and Verapamil of compensation variable in share to partially $X.X stock-based XXXX some million financing facility IriSys well were demand interest XXXX. personnel reallocation resulting the increase reflecting purchase loans partially of European of as on PM increase the demand lower products. in of as were San was Lannett’s for sales correlated integration. of company’s integration of a the $XX.X on repeated first term IriSys the future expense periods non-cash decrease reallocation increases increased These full by million the increase expenses employment XXXX, market and of offset the costs million in to compared and million, which $XX.X deferred acquisition products. nine primarily Interest to of expenses through Diego respectively.

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

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

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

recent back call estate the to like transaction. provide an turning of the overview Before to real company’s over David, I’d

and in is a the sale. the is will XXXX. which due Gainesville, a unused our completion my valuable of diligence and of highly land expectation of the facility receive of as the concludes company David in approximately monetizable agreement signed conditions is Under half to recognized $X.X our and land the This other of such to to that overview. third the the second from it we financial The quarter, and homebuilder. adjacent company agreement is the subject the Homes, terms in proceeds represents customary During acres This approximately an sale to closing XXX by expect Weekly nationally asset. close to manufacturing sell transaction standard Georgia million

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

David Enloe

Ryan. Thanks

during company in the progress my period multiple made the great areas the across As remarks, of I business. stated opening

steps during the position As several quarter the overall monetizing by took of important real assets. Ryan our outlined, our strengthening financial we towards estate first

in step With Gainsville, our achieve and our and of our facilities, is campus agreement we sale now of executed, and to are the land site sale land strategy manufacturing working second Georgia. the three involving diligently the leaseback which part

We a the we capital complete, progress cost and is maturity believe transaction to lower remaining with a that are execute in will to which and effort phase the extended of second this near date. expect have significantly financial at an positioned be the debt benefit to important term. position, well our making company's Once refinance third great we is agreement will an

our lenders effort discussions in with currently this we'll appropriate. are and We as report progress with

supply and Verelan license Another with for transaction amended Verapamil agreement important during Societal's the PM quarter was of products. and marketing Lannett executed Company favorably the

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

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

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

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

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

our marketing the terms the quarter, with and We our activities other both in company now In are existing discuss sales customers. significantly from very period. saw shift new I'll the value enhanced new relationship third pleased new with uptick the believe that and these and have the Lannett. of a negotiations business wins significant outcome the of during to from

analytical of manufacturing any in third cGMP clinical These XXXX, span wins contracts highest business transfers, company's fact, during services, and formulation Societal’s history. methods, the number In range of the services, wide packaging we the a quarter for of CDMO tech quarter including trial services. achieved new development,

Importantly, quarter segmented reflect these success wins year. which the during strategy, business our we of development this the of announced first

discrete three whose in development in business to approach San both customers segments. dose market products, products to segmented clients such support Verapamil Diego profit our early-stage provides as development reminder, programs we a customized and legacy Commercial As in Gainesville, Georgia. support solid oral sharing and

strategy, our visibility goals, by expanding Combined, changed new base, wins with Societal with and is meaningful for so, the is on with clients. diversifying and we of the of our increase doing the and As XX combined is high-quality customer necessary scale in continue facilitating these To enhanced them our have of it as evidenced expertise of over have corporate We revenue experiences and to our years enhancing to significantly QX, achievement working this multiple areas make such the employees continue our couple business in customer customers, members compared in achievements other these team our greater branding and new building add the deliver bring company. backlog a a ago. experience and to the than company. business best threefold promises to these to is now just customers, which support a we important

Our for never was improving in longer, more has this work to position. contributed workplace importantly, goals live more is patients third of our the the lives. team and our Societal all we the particular, quarter during period. that healthier been in A number fulfilling the culture delivering financial productive excellence, for forgetting execute company's a year, stated In successfully takes closing, time objective critical to professional continue stronger achievements particularly as to against never our capable while pride and helping or

Societal from license programs. the the of in And considerable effort facilities. previously, see been was a it the recent of potential several development the our organization provides improved it has our three gratifying in the the of third months, Lannett only financial positions amended quarter, land during monetization towards future, be and discussed transactions successfully and most quarter, planned first economics and And certain directed As and to proceeds transactions our status manufacturing Societal's agreement space. today, materialized. Lannett. presence exceptional ongoing flow with achieve we growth continued CDMO the to balance support business. Also the awarded stronger and combined finally, improve is during supply for our in performance not sheet amendment in and This factor a Once the to and us these agreements our growing efforts will for improving entire complete, perhaps significant our but cash

any we CDMO, our the other enhancing new more backlog. pipeline company's and history signed an During agreements in time than quarter, as business the significantly independent base, our customer our

their with and the the during Progress We of continued area our reflects strategy execution. reporting our this growth now their every concludes position pleased to optimal achieved across engagement first development performance our people has and remarks We questions. approach and been are of today. business open a people is new for and the an we thoughtful consistently to I the on-time and talent and to look call excellence for It forward that exceedingly commitment customers believe Operator? attracts prepared experience. segment-specific Societal customers, our success our existing of This to three dedication efforts and customer drive success. for continued success. business retain the and reflects quarters. customer It up quality, my creating collective can to deliver

Operator

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

open. is line Your

Matthew Hewitt

for and had update XX/XX Good success our strategy. me. having provide or transfer not that afternoon. could for am tech some Thanks success first taking are sales for initial Congratulations all there? with you just questions. you on whether you've the the if the details strategy your curious Maybe and an I one on

David Enloe

is This Matt, David. hi the thanks Yeah, for question.

well, XX/XX an – And for going first the Asia that weeks cycle or when came able Europe. there those you I as sales was validate this future interest that program think bit the and all, past five in that in to be discussions to of XX/XX the a me the regard. be to I hold had to say little of the to is tell might pretty well in would that will time out longer. that I concept strategy I I opportunity month, to optimistic with in as what in respect have I've both I meetings that was and certainly you is that But

Matthew Hewitt

drugs That's been and how that. for different that a at your of you Thank whether But questions great. tailwind not not I've the shortage and that getting Adderall Ooe the curious recently you? could slightly swap should how investors you. be realize easy And that pretty I lot that a of that just significant or for just about here it's are States. thinking a current shortage there's physician. I'm in provide a of an look is, out here

David Enloe

Ryan, would take you Or... like that? to

Ryan Lake

not understanding sure. not Adderall Matt, Matt, supply really comment on our is place, us. so the by manufactured Yes, drugs to my it's But disruptions. that

being the I typically think direct those side. And we're on products or forecast the has I've ADHD result seen the some of the of think for in aware Teva it's are a result from happened notable largest to correlation it's of been this to in there changes have and But possibility There's There as a shortages. that market years. claimed Adderall. – Adderall we the those customers' demand time not time in is with over that be. as increased not out I are probably shortages could a in of heard in manufacture. the ours that space. dramatic Verapamil noted they as customer some that But a disruptions the of the that that made and is things articles well of kind Obviously, so I've most our

Matthew Hewitt

hop one the here and Thank last one queue. helpful. back really in you. I'll Maybe – then That's

referred, capacity coming am into quarter, Thank running that's of last were what your and mean the some can are still you peers think issues if and getting you. you the referenced that and just curious years? I because quarters how over I case

David Enloe

Yes. we David. mean, consultants lot This get small I who of is companies. and one, with working are would say certainly, I from referrals number a midsized

best in this something And the view I on so those in delivery we and full be importantly, row track provided really can new that, will a that midsized those enjoy in that we a be working tailwind track that again we is and and record. and with And the provide is near we as of our relationships that us working category you relationships a for very smaller mean, prefer and companies year we to and real get terms nurturing been our record. opportunities, well that that that's often then or referral second in as XXX% and fact on companies, submit would the time very spend that COVID, well. are business I time during for year, the like-sized as feedback and

Matthew Hewitt

Thank Understood. you.

Operator

Thank line comes you. next Smock the of [Operator of from Instructions] question Blair. Our Max William

is line open. Your

Max Smock

making the leaseback, proceeds changes there the Hey, then terms portion congrats your the in on a some Finally, transaction you I Thanks in you rate on detail done from is timing of here? terms David But know there then debt can on term. transaction, have and down year the clarify and off remarks, happen? for said any Maybe that And paid quarter. provide using of dramatic the questions here here refinancing the that is you sale that nice near the interest prepared of And of for you sale in leaseback environment. the pretty to been remaining be after that the around whether it can you expect our still starting Ryan. to end track taking David,

should recent and the So on at year? potential about cash impact interest thinking reported both we of expense, be these how transactions interest next high a level,

Ryan Lake

Max, thanks for question. the

to So sale-leaseback that remain we that, I'd And the we the on of say to for transaction. on land. report obviously, continue the sale progress made we're happy track transaction yes,

reducing from the an that certainly, capital of improvement fact sale $XX debt, our will and that. that. being to almost as fix as will and interest rate also update structure. which capital benefits that rate be the will the immediately leaseback to the our to or on environment transactions tuned Obviously, of help those the provide exposure, interest it sale this interest go to hedge the quarter stay non-dilutive reducing overall for significant Both will potential So current a proceeds million together our of the given go land rate directly well company

and both we forward we're So where look of completed at. to significantly being those transactions improving

As engaged we're you debt well. also can refinancing in on working a process imagine, as

mentioned the earlier, third kind of As prong. that's David

steps the is of some are at rate forward sure, difficult environment the interest But we tremendous taking capital company. now a one. improving right So yeah, really certainly for structure the

Max Smock

that appreciate I it. Got color, Ryan.

well spoke through obviously. third about an clinical So, of and detail as XX% the some September, quarter can actually if buckets you thinking how wondering quarter update they for clinical up of growth today. for longer revenue the and when those represents the I the buckets XX%, we about thinking we around term. on from growth both about That's as in But well you're recognize here. mentioned how portfolio, the mix in get revenue year as next you're commercial think, here each as What

Ryan Lake

Yes.

proud XX added, this customers to I out, think, we're quarter year-to-date. I it's things new So We've and almost start of really of maybe mean and team. signed a new our customers couple just seven

So been progress of a there's lot there. and movement significant

we projects signed customers. new During or about XX changes the with also for XX over quarter, scope expanded

industry mean, average of doing the to think development-wise, business XXXX. that job. double operationally, in information And proposals rate our on I I – written target is based that business I have. from team we've compared the We win a fantastic on to So, perspective is a number remain XXXX new is above the

the various commercial we in as – right adding think think mix? mix our at the important that as to that also I it's those Phase strategy about from well in think late tech including I transfer. XX/XX customers XX/XX as is clinical different III, we're stages,

or more we're that within important revenue-generating bucket contracts. with what's recurring also commercial diversifying dependable XX% is XX% that So,

in that which that over is addition of strategy important of have, the our part think is number to So development we I an customers XX% now.

of is company there? in transitioning very business you know if don't wanted there's the I add new So progress. that and generation anything terms to David, well

David Enloe

I very Ryan would on to success add mentioning bolt Max. thing we hi, had the mean, seen of program. in the only commercialized last who a reasons expand mean, is which U.S. particularly wishing Yeah, or to level was that, programs, to I have that thing I have just into to us that either in other come clients are are countries other to the positive for commercial tech transferring

quite by with pleased very dose quarters. we're the in couple pleased very been activity, the So which that. very And of past frankly, oral solid strong has

Max Smock

that. one And Got it. me then and for there. you I'll Thank for leave last it one then,

in given clinical a to biotech there's running Just the particular. the here. lot I update on know of an slowdown attention in been pipeline

new bringing Or those diligence strength as of well what the So now you have possible? of as that right you here? work you opportunities. your focused you products those in thinking really are point you about are you on balance some sponsors? on that been commercialized. seeing to bringing the selective just of any already Are success doing at drugs you much late-stage of where you're chances smaller sheet as you're to And as pursue choose doing tech really, around these What David, you're as But the products about level bring are on. mentioned impact on that you're slowdown? due transfers if customers

David Enloe

question. good very That's

about We've function. - added created a talked of key intelligence actually I added. some We people the have market we've

resource experience added area. by our and resource being members of one is in mentored that we've So has board there, extensive that who

our to what very just made do and decisions not opportunities programs being say the be we we fair of to how I've creating found say, we important hear about believe I I to it's now, say, long-term what aggressive lot We perspective. I you funding cautious we've, their or about With critique would to we we're the to to that their a really seen business last But respect development good a and little week about some which robust theme from product Europe. folks team conference of done think for is with than that the right able at that has and is mean I clinical careful it first So order And we analyze seen question, the have should about CPHI should a job. programs the be drop Yes. have, to work companies exactly serious a it to certainly, being said, would growth. where was I and still that pipelines. – business though and get we're first early-stage they your remain with off. respect on one long-term respect and the to I more level in outcomes. Certainly, development discerning haven't based really bit It's overarching

Max Smock

you – seems sneaking high is Is around just for a be some in a here near we like something the future. you that that good did see opportunity It On to of one. maybe conference? quite the bit could Yeah, that that, on particular, as CPI, potency. out well interest area David, an in stood

David Enloe

to Yes, And a it. it I next an customer the of was had listed about respect with plans conversation area definitely development focus, today with thinking what that a as about only really, large are they opportunities. really a were thing their place

I So agree.

the potency solid high when of and in I improvements sorts think is formulation a of spaces. growing level interest extended-release oral another area I I dose. mentioned other certainly, mean, enhancements and specialized

as extending certain to we've in that capitalize been well. and life of really product where expertise able place in area programs life the Our cycle a has been

Max Smock

the congrats quarter. for on and you you Thank that and again the Okay. thank color for

David Enloe

Appreciated, Max.

Operator

Thank you. One moment please.

the of next Stephens. Our line of question Jacob from comes Johnson

open. is line Your

Mac Etoch

on This Mac is Jacob. for

to off the sort asked. Just piggyback question last of

seeing state kind the customers, were large saw kind of a and based of of end-markets, pipelines their they but On necessarily prioritize wondering were narrow, same your if cash the off seeing report some thing. we that you was CDMO decisions not I

David Enloe

reloading? very do That was you Can – faint. mind apologize. Sorry. I

Mac Etoch

you hear Yes. me Can now?

David Enloe

Yes, go for it.

Mac Etoch

Yes.

last off decisions just report the wondering CDMO they an in I were based was week customers perspective. you So from they thing a and saw some their same end-market different seeing on just and pipelines large are seeing cash prioritization noted that we if

David Enloe

Yeah.

it. Now appreciate I

And sorry, what efforts. just I would would by offset respect be any so sense a heightened Again, I development our couldn't make hear we've very earlier. is, seen you think you. business observation with couldn't to of team's I I well, far intensity hear

on who let's So have and said, these quarters so – stage put this that of to more raise said there do that care ago, but and the believe later I go we'll there and I is are couple clinical wins, the a of for advancing speak, and would in stage there there. clinical clinic companies all one absolutely companies, three then are money

that are only being this do that that I this programs to get succeed. mean -- said, funding more are also ones the likely that be going well, Now will mean, to the

So we rate should attrition. clinical expect a lower of

don't I that heavy us. term, impact long know the to so going on And is be very

that they infrastructure. not decision around net of thing The invest own should industry's is invest to the in other we're a or say benefactor their

of CDMOs, particularly they that that their towards, much might So their term to companies been very stage. we to dedicate looking and put production infrastructure willing are longer outsource capital early than to rather see in have definitely, any what now is in own

So want there we did you Ryan, add there? something go. to

Ryan Lake

our full year, quarter than year in expecting guidance are probably better would for best in fact, it's that we say of have just I are to any we the as quarter and And maintaining next look, well. year Yes. actually prior quarter. our the the

perspective. a terms So, firing cylinders from we on are what we are new development of all in business doing

Mac Etoch

on Great. Thanks my congrats and new wins. taking for questions the

David Enloe

Thanks.

Operator

time. questions no I'd to I closing the this remarks. back for call David you. Enloe at any am over like further to Thank showing turn

David Enloe

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

Operator

does gentlemen, today's you and participating. Ladies Thank you. for Thank all conclude this conference.

great You a may day. disconnect. now Have

Societal CDMO (SCTL) 10 Nov 222022 Q3 Earnings call transcript