ANI Pharmaceuticals, Inc. (NASDAQ:ANIP) Q4 2023 Earnings Call Transcript
ANI Pharmaceuticals, Inc. (NASDAQ:ANIP) Q4 2023 Earnings Call Transcript February 29, 2024
ANI Pharmaceuticals, Inc. beats earnings expectations. Reported EPS is $1, expectations were $0.8. ANI Pharmaceuticals, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day everyone, and welcome to today's ANI Pharmaceuticals Inc. Fourth Quarter 2023 Earnings Results Call. At this time, all participants are in a listen-only mode. Later you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note this call is being recorded. [Operator Instructions]. It is now my pleasure to turn the conference over to Judy DiClemente, Investor Relations for ANI Pharmaceuticals.
Judy DiClemente: Thank you, Angela. Welcome to ANI Pharmaceuticals’ Q4 2023 earnings call. This is Judy DiClemente of Insight Communications Investor Relations for ANI. With me on today's call, are Nikhil Lalwani, President and Chief Executive Officer and Stephen Carey, Chief Financial Officer. You can also access the webcast of this call to the Investor section of the ANI website at www.anipharmaceuticals.com. Before we get started, I would like to remind everyone that any statements made on today's conference call that express a belief expectation projections, forecast anticipation or intent regarding future events and the company's future performance may be considered forward-looking statements as defined by the Private Securities Litigation Reform Act.
The forward-looking statements are based on information available to ANI Pharmaceuticals’ management as of today, and involve risks and uncertainties including those noted in our press release issued this morning and our filings with the SEC. Such forward-looking statements are not guarantees of future performance. Actual results may differ materially from those projected in the forward-looking statements. ANI specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. The archived webcast will be available on our website www.anipharmaceuticals.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on February 29, 2024.
Since then, ANI may have made announcements related to the topics discussed. So please reference the company's most recent press releases and SEC filings. And with that, I'll turn the call over to Nikhil Lalwani, Nikhil.
Nikhil Lalwani : Thank you, Judy. Good morning, everyone. Thank you for your interest in the ANI Pharmaceuticals, and for joining our fourth quarter earnings call. First, I want to thank our customers, suppliers, partners, investors and the entire ANI team for their collaboration and significant contributions in delivering on our company's purpose of serving patients, improving lives. A strong fourth quarter tapped off a record year and we finished 2023 with $486.8 million in total revenue, an increase of 54% over 2022. Adjusted non-GAAP EBITDA was a record $133.8 million, up 140% year-over-year, and adjusted non-GAAP earnings per share for $4.71, an increase of 246% from 2022. Total revenues for the fourth quarter were $131.7 million, an increase of 40% over the fourth quarter of 2022.
Our lead rare disease assets, Purified Cortrophin Gel generated $41.7 million in this quarter, a year-over-year increase of 137% and a sequential increase of 40% from Q3. For the full year, Cortrophin generated sales of $112.1 million representing year-over-year growth of 169%. I continue to be tremendously pleased by the effort and output of our Rare Disease team in building our Cortrophin Gel franchise. New patient starts accelerated during Q4, with the strongest sequential quarter over quarter growth in revenue to date. In addition to record new cases initiated and new patient starts, we saw a significant number of first time ACTH users as well as the return of APPs, who had not prescribed ACTH for several years. Our world class rare disease sales and marketing team continues to grow the overall ACTH market and overall awareness of ACTH treatment in the U.S. for appropriate patients.
Total ACTH unit volume was up 15% in 2023, compared to 2022 according to IQUVIA. While the number of patients being treated with ACTH therapy in the U.S., is significantly lower today than it was several years ago. Since the launch of portrayal Cortrophin Gel in the first quarter of 2022, the overall category, ACTH category has experienced seven consecutive quarters of year-over-year growth and the outlook for the category remains robust. Next, let me share a commentary on performance across specialties. Cortrophin demand growth continued across our specialties targeted at the launch -- targeted at launch, which were rheumatology, neurology and nephrology. In the second quarter of 2023, we expanded into pulmonology. And we quickly gained momentum in this therapeutic area during the fourth quarter, with positive physician responses and growth in new cases initiated a new patient starts Let's turn next to gout.
Cortrophin Gel is the only ACTH product indicated for the treatment of acute gouty arthritis flares. During the quarter we launched a new 1-ml vial size Cortrophin Gel for the treatment of acute gouty arthritis flares. Physicians can now administer Cortrophin Gel in their office when a patient presents with an acute need. While it is still early in the launch, we are optimistic about the potential of Cortrophin Gel for this indication, which represents a unique opportunity to introduce Cortrophin to new prescribers. As we look ahead to 2024 we expect Cortrophin revenues to grow 52% to 61% to $170 million to $180 million. We believe we are early in the trajectory of Cortrophin Gel and will continue to invest behind the franchise to drive greater adoption across current and new specialty areas.
We are taking several steps in 2024 to further support this important product. We are adding a second geographical reason to our pulmonology sales force, given the strong traction we have seen so far in the therapeutic area. We continue to expand our disease state coverage by adding a small targeted sales force in ophthalmology. This is a specialty where ACTH prescribing has gained traction over the past few years. We believe ophthalmology could be a meaningful growth contributor for profits. We are collaborating with top physicians and scientists to better delineate, Cortrophin Gel’s, activity and mechanism of action and help guide treatment decisions. We are also continuing our efforts to better support the patient journey and are investing in enhancing the convenience and removing pain points for patients starting on ACTH as the healthcare providers who treat them.
Expanding the scope and scale of our rare disease business, M&A and in licensing remains a high priority. We are currently evaluating opportunities with a focus on assets that are on or close to market, and that overlap with our current priority therapeutic areas of nephrology, neurology, rheumatology, pulmonology, and ophthalmology. We are also considering assets outside of our priority therapeutic areas that would leverage our Rare Disease platform. Turning now to our genetics business, which delivered another strong quarter. We generated $71.8 million in revenue during Q4, an increase of 24% over the last year, and 2% over the strong revenue we reported in Q3. As to the prior three quarters, we were able to leverage ANI’s exceptional new product launch execution, operational excellence and U.S.-based manufacturing footprint to achieve this growth.
For the full year, our generics business generated sales of $269.4 million representing year-over-year growth of 28%. Three key factors will enable our Jeunesse business to continue delivering robust growth. First, our high-performance R&D team. In 2023, we delivered 11 new product launches and 20 new product filings. In addition, we'll retain the number two ranking for competitive genetic therapy approvals. Second, our strong operational backbone and U.S.-based manufacturing footprint. During 2023, we supplied over 1.5 billion doses of therapeutics to patients in need. In addition, our efforts to expand the manufacturing footprint at our New Jersey site are on track to get the site operational by this quarter. The company continues to maintain a strong compliance track record with successful FDA audits across sites.
Most recently, on New Jersey site successfully completed both a pre-approval and a pharmacovigilance inspection with the FDA with zero observations. Third, our systematic and relentless approach to reducing costs, whether it be for raw materials, finished goods or corporate spent. Overall, our generics business remains an established and reliable partner of choice for our customers. Our established brands business continues to address patient needs, with reliability of supply, a unique set of commercial capabilities, and our opportunistic business development to expand the portfolio. Our overall portfolio is strengthened by this high gross margin, low working capital and strong cash flow generation business. 2023 was a record year for ANI and we're already off to a strong start in 2024.
We look forward to continuing the momentum as we remain focused on serving patients, improving lives. I’ll now turn the call over to Steve, who will walk through our fourth quarter financial results and in more detail and discuss our guidance for 2024. Steve?
Stephen Carey : Thank you, Nikhil. Good morning to everyone on the call. We posted another strong quarter to close out 2023 with fourth quarter revenues of $131.7 million up to 40%, over the prior year period. Revenues from Cortrophin Gel reported in our Rare Disease segment was $41.7 million, up 137% from the prior year, and 40% from the third quarter driven by increased volume. Fourth quarter revenues in our generic established brands and other segments were $89.9 million, an increase of 17% over the prior year period. Within this segment, generic revenues for the quarter were $71.8 million, an increase of 24% over the prior year period, and 2% over the third quarter, driven by increased volumes in the base business and contributions for new products launched in both 2022 and 2023.
To continue with this segment, net revenues for established brands and other revenues were $18.1 million in the quarter, a decrease of 3% from the prior year period driven by lower volume. The performance was in line with our expectations as described on the third quarter earnings call, when we noted that the market conditions for specific molecules had recently changed. Cost of sales, excluding depreciation and amortization, increased 47% to $53.4 million in the fourth quarter of 2023, compared to the prior year period, primarily due to significant growth in sales volumes of both generic and rare disease pharmaceutical products. Non-GAAP gross margin was 59.6%, a decrease of approximately 200 basis points versus the prior year, primarily due to unfavorable product mix.
Research and development expenses increased 89% to $9.9 million in the fourth quarter of 2023, primarily due to a higher level of activity associated with ongoing and new products. Selling, general and administrative expenses increased by 34% to $44.5 million in the fourth quarter of 2023, primarily due to increased employment related costs, rare disease sales and marketing costs, legal expenses, and patient assistance program costs, as well as an overall increase in activities to support growth. Net income available to common shareholders for the fourth quarter of 2023 was $0.7 million as compared to net loss of $4.7 million in the prior year period. Fourth quarter diluted GAAP earnings per share was four cents, as compared to a $0.28 loss in the prior year period.
On an adjusted non-GAAP basis, diluted earnings per share was $1 for the quarter, compared to $0.76 per share in the prior year period. Adjusted non-GAAP EBITDA for the fourth quarter of 2023 was $30.2 million, an increase of 29% over the prior year period. From a balance sheet perspective, we ended the quarter with $221.1 million in cash. This balance is net of $12.5 million of contingent consideration paid to selling shareholders in the Novitium in the fourth quarter. We generated cash flow from operations of $44.7 million during the fourth quarter, and $119 million for the full year. We have $294 million in face value of outstanding debt, which is due in November of 2027. At the end of the fourth quarter, our gross leverage was 2.2 times and our net leverage was approximately a half a turn of our trailing 12-month adjusted non-GAAP EBITDA of $133.8 million.
Turning to 2024 guidance, we expect total revenue of $520 million to $542 million, which represents growth of 7% to 11% over 2023. For Cortrophin Gel, we expect revenue to be in the range of $170 million to $180 million, representing growth of 52% to 61%. As you consider the quarterly progression for Cortrophin Gel in 2024, please note that general pattern of revenue in 2024 is expected to be similar to that reported in 2023 with a modest quarter-over-quarter decline in the first quarter due to prescription reauthorizations followed by a strong return to growth in the second quarter. This pattern is generally consistent with other rare disease drugs. For generics, we anticipate high-single digit to low-double digit revenue growth on top of our exceptionally strong performance of 28% year-over-year growth in 2023.
We expect pricing dynamics were our base generics business to be similar to that experienced in 2023. Note that our generic guidance does not assume incremental benefit from future competitor supply shortages, which were a tailwind in 2023. For established brands, given our performance in the first two months of the year, we believe that revenue in the first quarter of 2024 will be higher than that achieved in the fourth quarter of 2023. Despite that, we expect that the significant tailwind driven by competitive supply disruptions in 2023 will moderate on a full year basis in 2024, as our 2024 guidance does not assume any incremental supply tailwind we are currently seeing beyond the first quarter of the year. Moving down the P&L, we expect total company non-GAAP gross margin between 62% and 63%, which reflects modest erosion relative to 2023, due in large part to product mix.
The key factors impacting our 2024 gross margin outlook include higher contribution from Cortrophin Gel revenue, where the margin is meaningfully accretive to our corporate gross margin, offset by lower contribution from established brands, which is our highest gross margin segment. Given the overall strength in the business, we will continue to invest in key growth initiatives in 2024. And expect total operating expenses to grow essentially in line with revenue growth and below 2023 expense growth. Contemplated in our guidance is increased investment in R&D to fuel generics growth through new product launches, along with further strengthening of the Cortrophin Gel franchise through the initiatives that Nikhil spoke of moments ago. We are also investing in high ROI initiatives, in Cortrophin sales and marketing.
Taking all of those factors into account, we expect full year adjusted non-GAAP EBITDA of $135 million to $145 million and adjusted non-GAAP earnings per share between $4.26 and $4.67 in 2024. We currently anticipate between 19.3 million and 19.7 million shares outstanding for the purpose of calculating diluted EPS, which is reflective of a full year of shares outstanding resulting from our May 2023 equity raise. We currently expect our U.S. GAAP effective tax rate to be between 20% to 22% as compared to 5.5% in 2023. The company will continue to tax effect adjustments utilized in the computation of its adjusted non-GAAP diluted earnings per share using our estimated statutory rate of 26%. We will now open up the call to questions. Operator, please announce the instructions.
Operator: [Operator Instructions] We'll take our first question from Gary Nachman with Raymond James.
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