Market Overview

Eagle Pharmaceuticals, Inc. Reports Second Quarter 2018 Results

Share:

-- Q2 2018 net income was $0.18 per basic and $0.17 per diluted share
and adjusted non-GAAP net income of $0.99 per basic and $0.95 per
diluted share --

Eagle Pharmaceuticals, Inc. ("Eagle" or "the Company") (NASDAQ:EGRX)
today announced its financial results for the three and six months ended
June 30, 2018. Highlights of and subsequent to the second quarter of
2018 include:

Business and Recent Highlights:

  • EHS clinical trial for RYANODEX® will be conducted August
    20 – 24, 2018 during the Hajj pilgrimage;
  • Eagle received a favorable decision by the U.S. District Court for the
    District of Columbia granting seven years of orphan drug exclusivity
    (ODE) in the U.S., for BENDEKA™ (bendamustine hydrochloride injection,
    or bendamustine HCI) until December 2022 and denying the Food and Drug
    Administration's (FDA's) attempt to preemptively exclude TREANDA
    generics from the scope of exclusivity;
  • Data from the fulvestrant clinical trial expected in the fourth
    quarter of 2018;
  • Advancing discussions with U.S. military to formalize clinical and
    regulatory plans for RYANODEX in the treatment of nerve agent exposure;
  • United States Patent and Trademark Office issued patent number
    10,010,533 for BENDEKA. The USPTO has now issued or allowed a total of
    15 U.S. patents in the BENDEKA family of patents expiring from 2021 to
    2033;
  • Eagle was first to file a vasopressin 1ml injection ANDA, which was
    accepted for filing by the FDA in April; and
  • A second source manufacturing facility for Eagle's bendamustine
    products has been approved by the FDA.

Financial Highlights:

Second quarter 2018

  • Total revenue for the second quarter of 2018 was $59.3 million,
    compared to $50.1 million in the second quarter of 2017;
  • Eagle launched bendamustine hydrochloride 500ml solution ("Big Bag")
    on May 15, 2018 and Big Bag product sales were $8.1 million in the
    second quarter of 2018;
  • Q2 2018 Ryanodex product sales were $7.2 million, up 38% compared to
    Q2 2017;
  • Q2 2018 net income was $2.7 million, or $0.18 per basic and $0.17 per
    diluted share, compared to net income of $4.5 million, or $0.30 per
    basic and $0.28 per diluted share in Q2 2017;
  • Q2 2018 Adjusted Non-GAAP net income was $14.7 million, or $0.99 per
    basic and $0.95 per diluted share, compared to Adjusted Non-GAAP net
    income of $7.9 million, or $0.52 per basic and $0.49 per diluted share
    in Q2 2017;
  • During Q2 2018, Eagle purchased an additional $3.5 million of
    Eagle common stock as part of its share buyback program; since August
    2016, Eagle has repurchased $91.3 million of Eagle common stock; and
  • Cash and cash equivalents were $100.2 million, accounts receivable was
    $69.4 million, and debt was $47.5 million as of June 30, 2018.
  • Reiterating 2018 Expense Guidance:
    • R&D expense is expected to be in the range of $46 - $50 million
      ($40 – $44 million on a non-GAAP basis)
    • SG&A expense is expected to be in the range of $61 - $64 million
      ($44 – $47 million on a non-GAAP basis)

"We believe 2018 will be another solid year of growth for Eagle, with
continued near-term value creation, and strong upside potential with our
advanced pipeline that could meaningfully contribute to the long-term
value of the business. This includes protecting the value and longevity
of our existing bendamustine franchise where we recently prevailed in
litigation and received orphan drug exclusivity until December 2022 for
BENDEKA, as well as having recently launched "Big Bag", our 500 mL
liquid form bendamustine solution that does not require reconstitution,
filling an important need in the market for a lower-cost alternative.
Our RYANODEX portfolio is advancing as we take advantage of product and
label expansion opportunities for Exertional Heat Stroke and evaluate
the neurological impact of nerve agent exposure in collaboration with
the U.S. military," stated Scott Tarriff, Chief Executive Officer of
Eagle Pharmaceuticals.

"As a result of the favorable court ruling requiring the FDA to grant
BENDEKA orphan drug exclusivity, the FDA will not be able to approve any
drug applications referencing BENDEKA until the ODE expires in December
2022. The court also denied the FDA's attempt to preemptively exclude
TREANDA generics from the scope of BENDEKA's ODE. We continue to believe
that an appropriate application of ODE would first allow generic TREANDA
entrants in December 2022, rather than November 2019 and intend to
vigorously pursue our position with the FDA and through additional
litigation, if necessary," added Tarriff.

"We look forward to completing our clinical study for RYANODEX for EHS
scheduled during the Hajj Pilgrimage, to support the data we have
previously collected. We anticipate reporting results for our
fulvestrant study later this year, along with progress on other products
under development. We look forward to sharing our continued progress to
create value for patients and shareholders," concluded Tarriff.

Second Quarter 2018 Financial Results

Total revenue for the three months ended June 30, 2018 was $59.3
million, as compared to $50.1 million for the three months ended June
30, 2017. Royalty revenue was $36.3 million, compared to $37.4 million
in the second quarter of 2017. BENDEKA royalties were $34.7 million,
compared to $35.1 million in the second quarter of 2017. A summary of
total revenue is outlined below:

    Three Months Ended June 30,
2018   2017
(unaudited)
Revenue (in thousands):
Product sales $ 23,041 $ 12,704
Royalty revenue 36,255 37,404
License and other income   -   -
Total revenue 59,296 50,108
 

Gross margin was 69% in the second quarter of 2018, as compared to 72%
in the second quarter of 2017. The gross margin on Big Bag was 68%,
reflecting royalty obligations to our partners as well as cost of goods
sold.

Research and development expenses increased to $15.3 million for the
second quarter of 2018, compared to $6.7 million in the second quarter
of 2017, largely due to external clinical costs associated with the
fulvestrant clinical study. Excluding stock-based compensation and other
non-cash and non-recurring items, R&D expense during the second quarter
of 2018 was $13.4 million.

SG&A expenses decreased to $16.0 million in the second quarter of 2018
compared to $23.3 million in the second quarter of 2017. The decrease
was due to the expiration of the Spectrum co-promotion agreement at the
end of June 2017, as well as a reduction in marketing expenses.
Excluding stock-based compensation and other non-cash and non-recurring
items, second quarter 2018 SG&A expense was $11.7 million.

Net income for the second quarter of 2018 was $2.7 million, or $0.18 per
basic and $0.17 per diluted share, compared to net income of $4.5
million, or $0.30 per basic and $0.28 per diluted share in the three
months ended June 30, 2017, due to the factors discussed above.

Adjusted Non-GAAP net income for the second quarter of 2018 was $14.7
million, or $0.99 per basic and $0.95 per diluted share, compared to
Adjusted Non-GAAP net income of $7.9 million or $0.52 per basic and
$0.49 per diluted share in the second quarter of 2017. For a full
reconciliation of Adjusted Non-GAAP net income to the most comparable
GAAP financial measures, please see the tables at the end of this press
release.

Liquidity

As of June 30, 2018, the Company had $100.2 million in cash and cash
equivalents and $69.4 million in net accounts receivable, $45.9 million
of which was due from Teva Pharmaceutical Industries Ltd. The Company
had $47.5 million in outstanding debt.

In the second quarter of 2018, we purchased $3.5 million of Eagle's
common stock as part of our expanded $100 million share buyback program.
Since August 2016, we have repurchased $91.3 million of our common stock.

2018 Expense Guidance

2018 R&D expense is expected to be in the range of $46 - $50 million.
This reflects expenses for (i) the enrollment of fulvestrant and
RYANODEX EHS clinical trials; (ii) API outlays for the fulvestrant and
vasopressin programs; and (iii) additional development work on the
RYANODEX nerve agent program. Excluding stock-based compensation and
other non-cash and non-recurring items, R&D expense is expected to be in
the range of $40 - $44 million.

2018 SG&A expense is expected to be in the range of $61 - $64 million.
Excluding stock-based compensation and other non-cash and non-recurring
items, SG&A expense is expected to be in the range of $44 - $47 million.

Conference Call

As previously announced, Eagle management will host its second quarter
2018 conference call as follows:

Date     Tuesday, August 7, 2018
Time 8:30 A.M. EDT
Toll free (U.S.) 877-876-9177
International 785-424-1669
Webcast (live and replay)

www.eagleus.com,
under the "Investor + News" section

 

A replay of the conference call will be available for one week after the
call's completion by dialing 800-727-5306 (US) or 402-220-2670
(International) and entering conference call ID EGRXQ218. The webcast
will be archived for 30 days at the aforementioned URL.

About Eagle Pharmaceuticals, Inc.

Eagle is a specialty pharmaceutical company focused on developing and
commercializing injectable products that address the shortcomings, as
identified by physicians, pharmacists and other stakeholders, of
existing commercially successful injectable products. Eagle's main
strategy is to utilize the FDA's 505(b)(2) regulatory pathway.
Additional information is available on the Company's website at www.eagleus.com.

Forward-Looking Statements

This press release contains forward-looking information within the
meaning of the Private Securities Litigation Reform Act of 1995, as
amended, and other securities laws. Forward-looking statements are
statements that are not historical facts. Words and phrases such as
"anticipated," "forward," "will," "would," "may," "remain," "potential,"
"prepare," "expected," "believe," "plan," "near future," "belief," and
similar expressions are intended to identify forward-looking statements.
These statements include, but are not limited to, statements regarding
future events including, but not limited to: the Company's plans for
gaining approval of the label expansion of RYANODEX to treat EHS
patients and other indications, including the ongoing discussions with
the FDA relating thereto, the planned clinical study of RYANODEX for the
treatment of EHS at the Hajj, and the outcome of such discussions; the
Company's plans for the development of fulvestrant and the Company's
expected timing of data from the fulvestrant clinical trial; the
Company's ability to make progress with vasopressin and to work with the
FDA during the ANDA review process; the Company's ability to advance
RYANODEX, including with the U.S. military or other parties, in the
treatment of nerve agent exposure; the Company's ability to maintain
orphan drug exclusivity for BENDEKA; the FDA's response to the U.S.
District Court for the District of Columbia regarding the court's
decision on orphan drug exclusivity for BENDEKA; the Company's ability
to deliver value in 2018 and over the long term; and the Company's
timing and ability to repurchase additional shares of the Company's
common stock, if any, under its share repurchase program. All of such
statements are subject to certain risks and uncertainties, many of which
are difficult to predict and generally beyond Eagle's control, that
could cause actual results to differ materially from those expressed in,
or implied or projected by, the forward-looking information and
statements. Such risks include, but are not limited to: whether the
Company will incur unforeseen expenses or liabilities or other market
factors; whether the FDA will ultimately approve RYANODEX for the
treatment of EHS and/or other indications; whether the Company can
continue to make progress with the development of fulvestrant; whether
the FDA will ultimately approve Eagle's ANDA submission; whether the
Company can successfully advance RYANODEX in the treatment of nerve
agent exposure; how the FDA will respond to the court's decision on
orphan drug exclusivity for BENDEKA; fluctuations in the trading volume
and market price of shares of the Company's common stock, general
business and market conditions and management's determination of
alternative needs and uses of the Company's cash resources, all of which
may affect the Company's long-term performance and the share repurchase
program; the success of our commercial relationship with Teva and the
parties' ability to work effectively together; whether Eagle and Teva
will successfully perform their respective obligations under their
license agreement; difficulties or delays in manufacturing; the
availability and pricing of third party sourced products and materials;
the outcome of litigation involving any of our products or that may have
an impact on any of our products; successful compliance with the FDA and
other governmental regulations applicable to product approvals,
manufacturing facilities, products and/or businesses; general economic
conditions; the strength and enforceability of our intellectual property
rights or the rights of third parties; competition from other
pharmaceutical and biotechnology companies and the potential for
competition from generic entrants into the market; the timing of product
launches; the successful marketing of our products; the risks inherent
in the early stages of drug development and in conducting clinical
trials; and other factors that are discussed in Eagle's Annual Report on
Form 10-K for the year ended December
31, 2017, filed with the
U.S. Securities and Exchange Commission (SEC) on February 26, 2018 and
its other filings with the SEC. Readers are cautioned not to place undue
reliance on these forward-looking statements that speak only as of the
date hereof, and we do not undertake any obligation to revise and
disseminate forward-looking statements to reflect events or
circumstances after the date hereof, or to reflect the occurrence of or
non-occurrence of any events.

Non-GAAP Financial Performance Measures

In addition to financial information prepared in accordance with U.S.
GAAP, this press release also contains adjusted net income and adjusted
earnings per share from continuing operations attributable to Eagle
Pharmaceuticals. The Company believes these measures provide investors
and management with supplemental information relating to operating
performance and trends that facilitate comparisons between periods and
with respect to projected information.

Adjusted net income from continuing operations excludes share-based
compensation expense, depreciation, amortization of acquired intangible
assets, changes in contingent purchase price, non-cash interest expense
and tax adjustments. The Company believes these non-GAAP financial
measures help indicate underlying trends in the Company's business and
are important in comparing current results with prior period results and
understanding projected operating performance. Non-GAAP financial
measures provide the Company and its investors with an indication of the
Company's baseline performance before items that are considered by the
Company not to be reflective of the Company's ongoing results. See the
attached Reconciliation of GAAP to Adjusted Non-GAAP Net Income and
Adjusted Non-GAAP Earnings per Share and Reconciliation of GAAP to
Adjusted Non-GAAP EBITDA for explanations of the amounts excluded and
included to arrive at adjusted net income and adjusted earnings per
share amounts, and adjusted non-GAAP EBITDA amounts, respectively, for
the three-month periods ended June 30, 2018 and 2017.

These adjusted measures are non-GAAP and should be considered in
addition to, but not as a substitute for, the information prepared in
accordance with U.S. GAAP. The Company strongly encourages investors to
review its consolidated financial statements and publicly-filed reports
in their entirety and cautions investors that the non-GAAP measures used
by the Company may differ from similar measures used by other companies,
even when similar terms are used to identify such measures.

-- Financial tables follow –

       
EAGLE PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

 
 
June 30, 2018 December 31, 2017
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 100,247 $ 114,657
Accounts receivable, net 69,403 53,821
Inventory 6,444 5,118
Prepaid expenses and other current assets   25,502     15,101  
Total current assets 201,596 188,697
Property and equipment, net 2,773 6,820
Intangible assets, net 19,302 23,322
Goodwill 39,743 39,743
Deferred tax asset, net 9,817 11,354
Other assets   706     124  
Total assets $ 273,937   $ 270,060  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 18,266 $ 11,981
Accrued expenses 23,222 15,391
Current portion of contingent consideration 15,055
Current portion of long-term debt   6,250     4,875  
Total current liabilities 47,738 47,302
Contingent consideration, less current portion 709
Long-term debt, less current portion 40,468 42,905
Commitments and contingencies
Stockholders' equity:
Preferred stock, 1,500,000 shares authorized and no shares issued or
outstanding as of June 30, 2018 and December 31, 2017
Common stock, $0.001 par value; 50,000,000 shares authorized;
16,457,575 and 16,089,439 issued as of June 30, 2018 and December
31, 2017, respectively
16 16
Additional paid in capital 245,470 233,639
Retained earnings 31,559 26,284
Treasury stock, at cost, 1,413,984 and 1,241,695 shares as of June
30, 2018 and December 31, 2017, respectively
  (91,314 )   (80,795 )
Total stockholders' equity   185,731     179,144  
Total liabilities and stockholders' equity $ 273,937   $ 270,060  
 
           
EAGLE PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
(unaudited)
 
 
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
 
Revenue:
Product sales $ 23,041 $ 12,704 $ 33,879 $ 27,990
Royalty revenue 36,255 37,404 72,043 73,911
License and other income               25,000  
Total revenue 59,296 50,108 105,922 126,901
Operating expenses:
Cost of product sales 14,074 8,910 21,298 19,675
Cost of royalty revenue 4,485 4,910 9,070 12,140
Research and development 15,265 6,684 32,585 14,209
Selling, general and administrative 15,987 23,280 31,153 41,431
Restructuring charge 7,388 7,388
Asset impairment charge 2,704 2,704
Change in fair value of contingent consideration   (790 )   422     (763 )   848  
Total operating expenses   59,113     44,206     103,435     88,303  
Income from operations 183 5,902 2,487 38,598
Interest income 1 14 27 17
Interest expense   (701 )   (40 )   (1,376 )   (67 )
Total other expense, net   (700 )   (26 )   (1,349 )   (50 )
(Loss) income before income tax benefit (provision) (517 ) 5,876 1,138 38,548
Income tax benefit (provision)   3,176     (1,373 )   4,137     (11,121 )
Net income $ 2,659   $ 4,503   $ 5,275   $ 27,427  
Earnings per share attributable to common stockholders:
Basic $ 0.18 $ 0.30 $ 0.36 $ 1.80
Diluted $ 0.17 $ 0.28 $ 0.34 $ 1.70
Weighted average number of common shares outstanding:
Basic 14,879,040 15,219,777 14,849,449 15,238,729
Diluted 15,446,827 16,100,615 15,473,727 16,135,276
 
       
EAGLE PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
 
Six Months Ended June 30,
2018 2017
Cash flows from operating activities:
Net income $ 5,275 $ 27,427
Adjustments to reconcile net income to net cash provided by
operating activities:
Deferred income taxes 1,537 8,368
Depreciation expense 683 432
Amortization of intangible assets 1,316 1,423
Stock-based compensation 10,040 7,890
Change in fair value of contingent consideration (763 ) 848
Amortization of debt issuance costs 188 66
Asset impairment charge 2,704

Fair value adjustment related to restructuring 5,788
Changes in operating assets and liabilities:
Increase in accounts receivable (15,582 ) (11,036 )
Increase in inventories (3,427 ) (848 )
Increase in prepaid expenses and other current assets (10,705 ) (307 )
Increase in other assets (582 ) (26 )
Increase (decrease) increase in accounts payable 6,285 (2,568 )
Increase (decrease) in accrued expenses and other liabilities   7,831     (6,557 )
Net cash provided by operating activities   10,588     25,112  
Cash flows from investing activities:
Purchase of property and equipment   (19 )   (884 )
Net cash used in investing activities   (19 )   (884 )
Cash flows from financing activities:
Proceeds from common stock option exercise 6,668 4,130
Payments for employee net option exercises (4,877 )
Payment of debt financing costs (482 )
Payment of contingent consideration (15,001 )
Payment of debt (1,250 )
Repurchases of common stock   (10,519 )   (25,311 )
Net cash used in financing activities   (24,979 )   (21,663 )
Net (decrease) increase in cash (14,410 ) 2,565
Cash and cash equivalents at beginning of period   114,657     52,820  
Cash and cash equivalents at end of period $ 100,247   $ 55,385  
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 1,831 $ 5,585
Interest 529

 
           
EAGLE PHARMACEUTICALS, INC.
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP NET INCOME AND
ADJUSTED NON-GAAP EARNINGS PER SHARE
(In thousands, except share and per share amounts)
(unaudited)
 
 
Three Months Ended June 30, Six Months Ended June 30,
2018 2017 2018 2017
 

Net income - GAAP

$ 2,659 $ 4,503 $ 5,275 $ 27,427
 
Adjustments:
Cost of product revenues:
Amortization of acquired intangible assets (1) 241 306 506 612
Research and development:
Share-based compensation expense 1,003 962 2,263 2,023
Depreciation 170 - 339 -
Expense of acquired in-process research & development 600 - 1,200 -
Severance 143 - 398 -
Selling, general and administrative:
Share-based compensation expense 3,732 2,735 7,777 5,867
Amortization of acquired intangible assets (2) 405 405 810 811
Depreciation 171 236 344 432
Other:
Non-cash interest expense 94 40 188 67
Change in fair value of contingent consideration (790 ) 422 (763 ) 848
Asset impairment charge 2,704 - 2,704 -
Restructuring charge 7,388 - 7,388 -
Tax adjustments (3) (3,807 ) (1,699 ) (5,534 ) (3,559 )
       
Adjusted non-GAAP net income $ 14,713   $ 7,910   $ 22,895   $ 34,528  
 
Adjusted non-GAAP earnings per share
Basic $ 0.99 $ 0.52 $ 1.54 $ 2.27
Diluted $ 0.95 $ 0.49 $ 1.48 $ 2.14
Weighted number of common shares outstanding:
Basic 14,879,040 15,219,777 14,849,449 15,238,729
Diluted 15,446,827 16,100,615 15,473,727 16,135,276
 
Explanation of Adjustments:
 
(1) Amortization of intangible assets for Ryanodex and Docetaxel
(2) Amortization of intangible assets for Eagle Biologics
(3) Reflects the estimated tax effect of the non-GAAP adjustments
 
               
EAGLE PHARMACEUTICALS, INC.
RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP EBITDA
(In thousands)
(unaudited)
 

 

 

Three Months Ended June 30,

Six Months Ended June 30,

Twelve Months
Ended June 30,

Twelve Months
Ended
December 31,

2018 2017 2018 2017 2018 2017
 

Net income - GAAP

$ 2,659 $ 4,503 $ 5,275 $ 27,427 $ 29,791 $ 51,943
 
Add back:
Interest expense (income), net 700 26 1,349 50 2,344 1,045
Income tax (benefit) provision (3,176 ) 1,373 (4,137 ) 11,121 5,744 21,002
Depreciation and amortization 987 947 1,999 1,855 3,890 3,746
 
Add back:
Stock-based compensation 4,735 3,697 10,040 7,890 17,579 15,429
Change in fair value of contingent consideration (790 ) 422 (763 ) 848 (8,989 ) (7,378 )
Debt issuance costs - - - - 286 286
Asset impairment charge 2,704 - 2,704 - 9,939 7,235
Expense of acquired in-process research & development 600 - 1,200 - 2,200 1,000
Severance 143 - 398 - 666 268
Restructuring charge 7,388 - 7,388 - 7,388 -
Legal settlement   -     -   -     -   1,650     1,650  
Adjusted Non-GAAP EBITDA $ 15,950   $ 10,968 $ 25,453   $ 49,191 $ 72,488   $ 96,226  

View Comments and Join the Discussion!