LCI - Earnings call transcript Q1 2020

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Operator

Hello and welcome to this afternoon Lannett Conference Call. My name is Sheryl, and I will be your operator for today’s call. [Operator Instructions] Please note, that this conference call is being recorded.

I would now turn the call over to Robert Jaffe, Investor Relations for Lannett Company. Sir, you may begin.

Robert Jaffe

Sheryl. Thanks, and Fiscal joining Results. XXXX everyone, discuss today you Company’s Lannett First thank afternoon, us for to Good Quarter Financial

the Chief Tim John are call Executive On and Officer; Crew, Kozlowski, Officer. Financial Chief company’s the today

of This today’s harbor cautionary a will provisions company’s call everyone statement X on and be And could like safe call I’d company’s the Litigation forward-looking is reflecting or all The the least playback covered actual forecast Lannett’s at differ remind the of Reform is website. Act. those live stated aspects implied. the for discussion information, results to www.lannett.com. under on broadcast from future, and of months include being will information materially at of management’s discussed available make current that certain the

its financial fiscal the earnings GAAP in company’s earnings measures quarter earlier XXXX The issued the the measures In today. announcement. measures financial of are measures accordance principles of review non-GAAP press non-GAAP is reconciliation different we financial prepared refer Lannett’s encouraged non-GAAP U.S. from its contained that most call, for including directly results and generally in to the company’s to for reasons first announcing comparable this in also companies. are non-GAAP release Investors accepted financial by accounting other financial not be with addition, measures to during press may used course financial release

repayments be website the as in Please today’s part section, note regarding company’s the that found Investor on historical additional company��s release. can information the Relations debt of

associated results financial recent as remarks will brief provide on the more initiatives. guidance. well and including results detail, company’s in Then comments as the the fiscal John will financial company’s discuss developments Tim afternoon, XXXX This on

We will for the questions. open call then

I will call over said, the now Tim Crew. Tim? turn With to that

Tim Crew

of important one first year on afternoon, Thanks, our This quarter and Robert fronts. many good fiscal everyone. was an

ex-Levo pipeline and objectives basis, improved and and significant on products inline growth. demonstrating drive capital we could structure new near-term year-over-year an added future significantly our that growth our our achieving financial Beyond future also both to

those review let’s So accomplishments.

pleased On quarter. the performance we a financial solid front, for to the report are first

line top of products fluphenazine including to key largely bit due and profitability expected, than better sales Our few posaconazole. and some strong a was

As to U.S. a an reminder, partner signed is generic release the version posaconazole agreement of exclusive tablets, we delayed commercialization be the Noxafil. for which

sales were The the is This sales posaconazole XXXX. generic net of for approximately $XXX XX $X.XX market ANDA first share. Adjusted IMS approximately has million. about only million million currently approximately the months and EBITDA was diluted $XXX quarter per ended $XX for to the million Total net adjusted approved was market available. or September, $X income

sheet. Turning to the balance

of debt. you in aware, are been and As down disciplined proactive we most our paying have

balance our combined at XX, loan million B September of As A XXXX about of and beginning the $XXX from term was million, down XXXX. term $XXX about fiscal

will in million an of Importantly, the provide at that transaction significantly transaction John some capital our inflection first $XX believe end the improved We point latest comments we this successfully this of an offering convertible completed call. is structure. additional on quarter, later notes. the

to turning and currently related Now market dynamics. marketed our products

anticipated higher than forecasts, portfolio opportunities. expected When quota returns to said, new portfolio build mid-term in we contribute did currently certain also our our enhanced the look and As optimization, near from readiness supply others With and constraints. better competitive we anticipate numerous of we less have a through slightly expected. in-line adding and mind, than we will marketed experienced than or pressure improve perform that will our products while products that basket

based API ranitidine did was in so-called then as with branded many on recall the generic, along other acceptable suppliers we higher which such Fortunately, fluphenazine recalled was than other that for and found and established the than FDA recently and both has product. Also finished products better NDMA, the posaconazole however, expected. levels The liquid dose.

we the dependent are downsides recall launches new upsides some competitive reiterating ranitidine, our and our by on a current is for Based XXXX. ongoing in successful environment adjusted and Achieving our our guidance offset launch continued balance reiterated on guidance products with part the portfolio. of of of fluphenazine of our and the fiscal posaconazole course the and plan strength and on parade across voluntary

as we loaded. this calendar parade, is Regarding launch the our year back noted, have end launch earlier

launch so currently our three We fiscal are least ER launched by far, cyproheptadine. including azithromycin or forward year, another Numbrino NDA. end so to at dozen suspension, and products the venlafaxine the posaconazole, tablets, looking products namely And tablets, we have SMZ-TMP prednisone and of

intention Now stated ADVAIR that the first for in opportunities in the drive growth in two products our with major earlier These generic to which – potential of in the our term expanded some update to the reflect levothyroxine. namely to business stated generic in and on we quarter key reflected have products medium of pipeline, addition an our significant beyond. products, the layer old the earlier and two our

a announced with to Respirent earlier be formed strategic We Pharmaceuticals their distributor ADVAIR product. U.S. the alliance DISKUS we generic of exclusive that

so of inhaler. articulate dry is participated. ever to and sales salmeterol of think powder U.S. So addressable this in annual this billion, are DISKUS we which combination Currently, some why the the has fluticasone one ADVAIR largest a Lannett is is potentially product about markets so we’ll important. take time of $X.X a in here opportunity

of approved a development has the some on for us generic lead market. DISKUS that ADVAIR Moreover, several program generics persistency aspects expect to value

in it equipment. substantial related plant and specialized investment a initial a First, requires

technically given third, combination medicines. device it investment. to micrograms quite a manufacture a Second, delivering drug it of And clinical challenging it is is substantial requires

has our bring to equivalent Respirent. put guidance FDA which I’m commercialization. their this by for the partner their space, believe generic several heavily. To ADVAIR dollar ANDA needed million this hundred investment not Mylan, in be They under the referenced are will program. in has only the expertise quite investing generic has context, and investment level that a ready approved in to that near suggesting nevertheless anywhere approval company Well, We current

Notably, Respirent the and for has equipment they’ve plant device. specialized made developed the required and investment the needed requisite already

of products program, the development our Respirent device and we was and quantitative sameness FDA’s correspondence qualitative encouraging, proposed the the submitted the have brand. addressing to controlled feedback which continue part endpoint FDA As ongoing The ANDA towards filing when believe to combined next trial conducted filing march means clinical an USA around to we year. summer PK/DE successful with the its for pending and we reference Respirent of studies,

to other to significant the medium-term. near an of in Generic addition products pipeline with is ADVAIR a number DISKUS in potential our

manufacturing with ever to Similar one DISKUS, in ADVAIR project are glargine billion. participated. biosimilar requires $X reported FDA ADVAIR, sales in glargine significant is U.S. U.S. HEC investment Lannett technically has insulin of insulin and requirements. largest a meet progressing. also and which than greater it IMS potentially markets challenging it’s Our to Like the addressable to generic be will combination. is drug It and development glargine develop insulin capacity manufacture device

now plan an US the review HEC development will analytical so-called the is of PK/PD results report biosimilar in-depth completing HECs and extensive Lantus. analysis the biological The review of data. based development human studies, human biosimilarity planned data Lantus type request review results analysis, include insulin a expects together to the meeting versus Lannett US additional and Lannett the study glargine with will three studies on and animal PK/PD soon. comparing to product to study,

the allow We to in is Like in is HEC comprehensive our HEC infrastructure heavily XXXX. an a current manufacturing to global expect insulin Respirent, the and China meet significant markets elsewhere. with in of to the FDA U.S., and insulin building partner supply share to early alternative their investing affordable program

believe FDA approval we timeframe. on in NDA continues And the December, for expect launch an thereafter. filing track Now progress turning to at Numbrino. We the we to remains our shortly and to January

product Cody While already ceased we our facility. have plant, the the operations at Carmel we have at produced

at the New complete York site approved. is the We once will NDA the transfer technical

we X, Now begin We in fiscal our previously internally to U.S. no There regarding Levothyroxine thalidomide currently partnered our product August XXXX. but later approved not least, are XXXX. And no expect developed equivalents thalidomide. thalidomide. generic launch marketing, could for product than available last the believe announced in

guidance financial and adjusted our significant again our structure enhanced sum near improve To the capital up, transaction reaffirmed our to flexibility. term we achieved financial have completed and goals,

work balance of to the and launches expand current year We the strengthen, continue diversify revenue to our beyond. over product new base and numerous fiscal with

that products had capabilities And excited the opportunity we to partners and are about strategic to pipeline our opportunities large and build we’ll products of immediate for with alliances additional scope. our beyond look market expanding continue

compound and rates remains growth disciplined the goal to annual achieve to industry top excess Our through line execution. well

industry generic large Lannett. a for like The competitor represents a U.S. midscale opportunity

generic our on to reliable goals. U.S. market, are the Given chain strengthening our we our focus our we and supply the to of the commitment well believe, way achieving on pipeline,

all the that, to call turn over of With I John? John.

John Kozlowski

everyone. Thanks, Tim, and good afternoon,

I non-GAAP mentioned be to was will earlier, GAAP to press reconciliation The can release. today’s found non-GAAP be As in numbers of financial referring measures.

Now for adjusted on financial the non-GAAP results basis. a

sales of For including were were excluding higher and sales key than for sales first which fluphenazine $XXX.X $XXX.X expected, XXXX. quarter, the million, to with million certain due compares the of XXXX net of first net posaconazole. largely Levothyroxine strong products quarter fiscal This

or sales XX% $XX.X of prior year compared for million, net net $XX.X with Gross the profit XX% of quarter. or million, was sales, first

Interest to XX% A of and anticipated, inventory Our due loans related pay adjustments from Term was million, $XX.X previous year. the obsolescence. margin and B than fiscal decreased expense $XX.X to adjusted Term due gross lower of downs slightly to during million to write-downs mainly

diluted expectations. million diluted was first net with Net compares $XX.X the our or XXXX income share, $X.XX in higher This $XX.X fiscal was or slightly for $X.XX EBITDA million, income adjusted share QX. per which And $X.X quarter. than of was per million

balance our to Turning sheet.

the of September, the of lower the that in convertible position $XX.X Term A $XXX million. amount pay of down Term we balance million our notes, $XX.X offering of proceeds the down, As Tim use cash mentioned, After half balance which loans. late the million, outstanding than is was approximately of pay completed of remaining net an we A to loans our in

benefits. This transaction has several

the or in in versus the convertible which one about seven First, XXXX mature loans year. notes mature A Term years

Second, lower than Term interest A the convertible the have notes rate a loans.

are calculations, have improved significantly flexibility. Third, towards which financial count all our covenant the convertible the do of notes debt and not unsecured

of to previously our the we’ll structure. As debt profile extending and we for existing capital and will said, improve further continue our on continue proactive opportunities look maturity have to be to disciplined we

and totaled million. $XXX September approximately XX, At cash XXXX, equivalents cash

rights the with of During the million approximately to that transactions for quarter we marketing was one last completed Neopharma. $XX It we Levothyroxine. paid separate future quarter, two

Our notes October quarter was convertible at the debt outstanding $XX.X of follows, million XXXX. due as end the

a million, Term B XXXX. ago, and mentioned As XXXX November $XXX.X due $XX.X Term loans million November moment I A loans due

net and million, approximately million, debt million. Total $XXX secured of net was cash $XXX debt debt was and $XXX was

We continued to financial our expect to our the A up maturity to of date Term covenants be within loans.

to guidance. Turning our

expense $XX fiscal a the $XX to are adjusted offering, year fiscal full the reiterating result range interest million. convertible $XX million to our of As to million million we lowered notes from for to change than have interest $XX Other the the expense, guidance. of we XXXX

expect XX% rate million approximately of R&D XX% in to the $XXX as to to to to million. range million, to expenditures $XXX $XX and $XXX ranging to million, full The $XX of expense million, million XX%. range down million $XX to the from to $XX million margin in tax continue range the net approximately $XX SG&A interest a million adjusted in from in of adjusted percentage million XX%, to gross adjusted adjusted $XX year million. the $XX million in net of We be Adjusted adjusted million, expense EBITDA of of capital sales $XX range lastly, the of $XX million $XX $XXX expense effective to range sales

balance be and phasing expect second Regarding in are the QX we of quarters, modestly to of as a year to expected half over QX margin, and QX. net QX comparable increase to higher higher number slightly the QX to than the decrease of sales expect the QX we the in the regard launches gross year. be product in and of With

and EPS remainder quarter-over-quarter the EBITDA expect of year. the increase We for adjusted to sequentially

With that like to have. overview, we address any would questions may Operator? now you

Operator

Thank you.

from Elliot We question-and-answer comes Raymond begin will from Instructions] question now session. the [Operator Wilbur James. first Our

line now open. is Your

Elliot Wilbur

afternoon. Thanks and good

the that respect into you’re trends, older to a of of on of to or you’re and talked First about there’s industry next signed question and the base extent portfolios guess, messages just with of base months the companies company out their of to and mixed or portfolio reoptimize even if pick for and about revenue. course your of last today down to the seeing products over with yourself, over been of Tim, ANDAs just business you’re that dynamic pulling hearing so. lot of competitors wondering, coming the couple weeks up particular sort out some from to starting respect and double closet, that impacting I shelled I’m going bunch try XX how see a kind a the just try competition

Tim Crew

question. evening, Elliot. the Good Thanks for

than perhaps year, more end of that of As mature market. we we those year, our day, more portfolio. of stable were This portfolio Last some we the are bit industry products indicated felt be relatively trends your previously, always believe we’ve particular more that felt with industry At aligned the will to slightly trends. coming necessarily industry doing new better than the trends. reflective we a not

the been products have hearing. balance. And market, today’s guidance upsides downsides we’re pace pleased call, for maintaining that context to as in and we’ve have with we against well basket noted believe remain in some also coming else of as as of everything that in launches in new we and product track result that on that give We and the pretty

Elliot Wilbur

of I Respirent’s get those scheduled just it want for it’s can as comparative lot to deal Obviously, a are we ask terms or recent that timeline – anyway bit question a close in XXXX was clarity be follow-up closed. be. I the if investment? like Thanks. And of And work, fairly Looks more expect don’t can maybe there. then say and Anything which little ADVAIR. then think just a begin been follow but the programs we to, the regarding trial, cumulative you the had completed company’s Okay. wondering on but bioequivalence Mylan, looks expensive a you alluded certainly to to could they like more late in to

filing you if or sure helpful. respect not. timeline that’s So But complete would say a not with in I’m to of anything there could terms be

Tim Crew

Sure.

as they of streamline you’re product, DISKUS earlier to and relates Subsequent three-digit They to was market. have be post guidance But Relating FDA certainly starting to by filing been it if I the under to – final device EU summer this those program the their a used should as hopefully, expiration you January. well, next to current believe developing have and going was the PK/PD, invested, the bring completed. it year, talking file patents in timelines, with made to goes their original confirmatory, well clinical although I a will reduce to have the excuse U.S. are investments conducted of what support this me. able We’re disclosing trial that millions results of all PK/PD they ADVAIR and filing that certainly believe, can As the that before They costs. would year be some not PK/PD trials. another substantive. Respirent, is do comfortable

Elliot Wilbur

question. last One Okay.

can with you Any question. respect provide last updates one Numbrino. Just to

Tim Crew

FDA. they And indicated have the we in noted have call, on on documentation basically us requested manufacturing our as of Numbrino, prepared we new the all awaiting approval from site. our are that we They batches we product. as from Well, at the

had market degrees have with API approved, in from label, original still exit product an first September tech IMS of hold we launch the us XX% it, the to to next that about We And business prior of to I in to transfer NDA as environment as year. goal recapture into which of plentiful this best share. the think July will site. about a be once complete promote although as supplies few gives will that simply the reflects current of the the and our believe much is we months, the how possible of approved some hopefully our freedom we

to be it’s January to So – many to December. if a new of our in product customers hope time we or that bridge frame approved able the

Elliot Wilbur

Thank you. right. All

Operator

Markets. from BMO Nachman Gary from comes question next Capital Our

now is line Your open.

Gary Nachman

Hi, the affected What here a that products the did many the magnitude basket competitive were durability in how describe then that’s dynamics good and the And I are competitive of product? the impact? afternoon. forward, then so contribute quarter? have posaconazole going How of And experiencing pressures? Tim, much follow-up.

Tim Crew

Gary. Thanks,

ranitidine. takes we that movers. other additional much the to had the The were millions products earlier We as it our puts created market approvals of posaconazole as As had the some the some launched quarter. that it that noted methylphenidates blocks approaching bigger some always Similarly, And side some have encouraging. pressure, the double-digit anything Those of for earlier on There’s and portfolio. intensity withdrawal have the as course, space. question aspirin-dipyridamole had relates pressure. that relates those else that the we But competitive in of pretty the to then, noticed of were of were additional from for is some month. the

bridging the there given Some ourselves market of that a or the AG market. the was in stocking was of just and

We this will to or next average so complicated perhaps technology product. your year. But showing for more extruded is would those expect sales, little some the up two. the be calendar least to Recall an competitor quarter oral a a we at expect persistency product, sometime than certainly is

Gary Nachman

price or the Okay. well, called And positive that moving direction? then both, fluphenazine, in out volume was you as or the that

Tim Crew

have Mylan has sales quarter has fluphenazine competitor yet another with and returned, the the aligned Yes, from again yet in this persistently not the fewer competitors up. not were quarter. last showed benefited We market.

in pressure bit The environment know products. our but limited our on had our market it It yield wasn’t we share, to coming has product. that trend to the market otherwise as of forecast competitive over a remaining risk across will But the a basket so change that or on the be rather forecast adjust share was we been expectation, our than don’t product So our better when. consistent. there the much we quarters, try

Gary Nachman

are confident I that said you And growth you rates greater the the then XX%. XX%? And will specify from that still much how in growth at end of think Okay. greater come you sales of partnerships? but to the Thanks. than industry, your didn’t comments, than CAGR three-year need of inorganically

Tim Crew

Thanks, require for of that funds the launch the higher look successful CAGRs ranitidine. of obviously Gary. end products we like and The

time products and extent those ranges. occur, and in pipeline to C-Topicals other to CAGR sorts I the will good on So occur larger the feel the a levos products those believe, to, we and products about that they those extent we alluded the the lines, of

Gary Nachman

Okay. All right. you. Thank

Operator

Our Craig-Hallum from question Matt next from Hewitt comes Capital.

Your line is now open.

Matt Hewitt

Good afternoon taking thanks the questions. for and

one be First we by and a standpoint products? able ADVAIR regarding partners, the for me the required you thinking that you’re products, will your insulin significant launch those about what given once for should mean to how from investment

Tim Crew

So that well and investments competitive that think given those a coming substantial both the believe infrastructure to required, folks be will number there lead is I of set known. would And market. the to smaller of be products will us fairly

Given are envision, that hard level for of of three that five that to players be products. it’d or but to those resource, four hard of not committing these impossible, investment up level putting both serious of products or additional have sorts this people envision

we’re looking emerging expect with the these getting more And our development started markets make that necessary some given of FDA investments requirements, our there opinion. a defined, that service. making they have investments to that to to fairly So their note obviously clear. on our was with because being set once investments more to still that’s is be partners path with competitive able technologically we of the the follow-on challenging in a globalize that they’re that And space. they’re real think well advantage most other are to programs fast is partners very would I comfortable an

significant two those earlier I margins the share range along the we’re gross And clear sense margin gross products percentage, of it’s talking And dollars, if to our of sort arranged our lower XX-ish, as as a profits. very a sorts the Regarding products, sorts on those lines. we’re stated have we range, partnerships of that of tend business. even are that makes those which, example course, on think to for end of partnerships of shares XX% these a between XX%

Matt Hewitt

Makes sense.

the contributor bring prior a back. prior big you. Thank then you’re ranitidine, to headwind able market? pulling how to until And that get that regarding represents sense product a the to from that of to was disruption Just for that or Okay. trying what

Tim Crew

it margin. go-forward us, gross basis, fairly from at expecting mid-single-digit was – of For and on a single millions, millions we’re least revenue digit that fairly product, high

Of they guidance that a also the in course, to And there here MDMA to I risks of that, understand somewhat was that withdrawal. the We’ve not would the balance. were of made precursors FDA’s be clear moiety trying were excuse first. as to patient emerged, safety that chemist, as but and HDMA it I clear some me, – ranitidine. I’m resident this is want

our the limited, of So guidance, on FDA of risks this the expectation that’s is that balance something but they and the opportunities product as follow back medicines coming that we will market. are

Matt Hewitt

impact does away. how part – trying their that for of how quantify I you. bring that but your the I second does kind to giving that’s to answered of on me, And opportunity of that opportunity of kind figure that sounds for market, part back The product? What it product Buprenorphine, what agreement talked guess to Or one that last it that that basically market about to would I’m guess hold. just for has settlement like product out Teva it take not? is Okay.

Tim Crew

of So work. There the and a I lot about likelihood of are don’t that may may not of it how interesting progressing. lots and novel opinions constituencies was a proposal. know or it had

But to see – from of someone where we create our see or sit, product or a and to not sort thrilled else’s was significant it’s point fairly all I’m not could at As problem. significant a we even portfolio. for a component our it’s practical sales. in matter, a say I modest that situation it is this it value not

happening it current our forward is think would a expectations and of but that year our plan. mechanism, in of our a should it not I transpire strategic holding settlement position occur, not impact that sort have huge soon, on that’s Again, our

Matt Hewitt

Thank right. All you. helpful. really That’s

Operator

question comes next Greg Our Fraser SunTrust. from from

Your now line is open.

Greg Fraser

you. Fraser, sales Gregg quarter? not contribution new quantify for if I you from on but this, It’s guys launches sure the Thank did missed I’m the Gilbert. in

John Kozlowski

posaconazole. little had its talked We contribution for bit but the a product, millions, launch one about being specifically. to the We close one was double-digit Not QX. that

Greg Fraser

Okay. And of sort Numbrino, an the market How thoughts size your sales are of the your on thinking that are what on size? latest Obviously, of in and market? product? potential approved can have the about NDA scenario potential you where you

Tim Crew

So a Tim. Recall, me, products, its question, thanks Numbrino on before around – mainly engagement. our focused withdrawal, for the million It’s Fraser. sort was trade unapproved of sales of of the quarter, $X excuse

opportunities think to the as sort the share. calls, we at to Recall channels. entertain get from that as Based is much single-digit of percentages. of on objective low and be fairly utilization I can value approved, the earlier looking expand through this regain certainly market in will label of more our trade-based will space that first we conferences the does product

I a likely larger in it think certainly support label market to share. the space, a market the could Now is share but support don’t significant

can that, something is handled being unapproved reimbursement product the course, how not side. product, which options of the involved approved obviously the we might have by of And an insurers but with of some and is pursue on cascades,

our bit historically of our stay sales as unapproved product. little can is former as tuned. of the on trends a much back that expectation get But we I term, we to think had near it’s So

Greg Fraser

to on cases is And you helpful. and anticipate That’s it. generic cases Got just near the in involved. last in Do any collusion one which movement the then term. Lannett those is the medium in

Tim Crew

side little the we This a opinion. as make it process public the the we’ve more bit things of been on areas relates the actually public in has to confines and slow believe of acted saying We in noise don’t litigation beyond law. the cooperate commentary we Yes. within courts,

on We doing defer thing, demands right what remain hear. with you you the continue I acted we’ve as information and to appropriately. working So and focused they read what occur for believe to

Greg Fraser

you. Thank Okay.

Operator

no comments. have back this time, closing time. the turn at I’d And to at this management like call We further for questions to

Tim Crew

Tim, Good out important with customers shout we night. of employees, call. It’s close right. to so on to again. partners, the All to success and our look progress out forward our described. our We have I’ll with sharing you all customary just next our

Operator

call. you, This today’s ladies for conference and participation. you Thank your Thank concludes gentlemen.

You may now disconnect.

Lannett (LCINQ) 6 Nov 192020 Q1 Earnings call transcript