Eagle Pharmaceuticals, Inc. Reports Fourth Quarter and Full Year 2018 Results

-- Q4 2018 net income was $0.88 per basic and $0.86 per diluted share and adjusted non-GAAP net income was $1.23 per basic and $1.20 per diluted share --

-- FY 2018 net income was $2.16 per basic and $2.09 per diluted share and adjusted non-GAAP net income was $4.01 per basic and $3.87 per diluted share --

Thursday, February 28, 2019 6:50 am EST

Dateline:

WOODCLIFF LAKE, N.J.

Public Company Information:

NASDAQ:
EGRX

WOODCLIFF LAKE, N.J.--(BUSINESS WIRE)--Eagle Pharmaceuticals, Inc. (“Eagle” or the “Company”) (Nasdaq:EGRX) today announced its financial results for the three months and full year ended December 31, 2018. Highlights of, and subsequent to, the fourth quarter of 2018 include:

Business and Recent Highlights:

  • Commenced enrollment in a study to evaluate the neuroprotective effects of RYANODEX® (dantrolene sodium) in collaboration with the United States Army Medical Research Institute of Chemical Defense (“USAMRICD”), the nation's leading science and technology laboratory in the area of medical chemical countermeasures research and development;
  • Announced positive results of pre-clinical study conducted to evaluate effects of RYANODEX in Acute Radiation Syndrome (“ARS”);
  • On February 20, 2019, the FDA issued a decision in favor of Eagle regarding the scope of BENDEKA’s Orphan Drug Exclusivity (“ODE”), further protecting the longevity of the BENDEKA franchise; and
  • Executed a $50.0 million accelerated share repurchase (“ASR”) as part of our $150.0 million share repurchase program (the “Share Repurchase Program”).

Financial Highlights:

Fourth Quarter 2018

  • Total revenue for the fourth quarter of 2018 was $56.1 million, compared to $46.8 million in the fourth quarter of 2017;
  • Q4 2018 bendamustine hydrochloride 500ml solution (“Big Bag” or “BELRAPZO”) product sales were $6.8 million; in February of 2019, the Company achieved peak market share of 10%, according to IQVIA Holdings Inc.;
  • Q4 2018 RYANODEX product sales were $5.1 million, up 10% compared to Q4 2017;
  • Q4 2018 net income was $12.6 million, or $0.88 per basic and $0.86 per diluted share, compared to net income of $9.1 million, or $0.61 per basic and $0.58 per diluted share in Q4 2017;
  • Q4 2018 adjusted non-GAAP net income was $17.7 million, or $1.23 per basic and $1.20 per diluted share, compared to adjusted non-GAAP net income of $15.6 million, or $1.05 per basic and $1.00 per diluted share in Q4 2017; and
  • Q4 2018, Eagle executed a $50.0 million ASR of common stock as part of the Share Repurchase Program.

Full Year 2018

  • Total revenue for the twelve months ended December 31, 2018 was $213.3 million, compared to $236.7 million in 2017 including $37.5 million in milestone payments for BENDEKA, reflecting revenue growth of 7% when excluding milestone payments;
  • 2018 net income was $31.9 million, or $2.16 per basic and $2.09 per diluted share, compared to net income of $51.9 million, or $3.44 per basic and $3.27 per diluted share in 2017;
  • 2018 adjusted non-GAAP net income was $59.2 million, or $4.01 per basic and $3.87 per diluted share, compared to adjusted non-GAAP net income of $69.0 million, or $4.57 per basic and $4.34 per diluted share in 2017;
  • From August 2016 through December 31, 2018, Eagle has repurchased $154.0 million of its common stock; and
  • Cash and cash equivalents were $78.8 million, accounts receivable was $66.5 million, and debt was $45.0 million as of December 31, 2018.

“We had another outstanding quarter, nearly doubling our product sales in Q4 2018 compared to Q4 2017 and generating 20% growth in total quarterly revenue year over year. We were able to deliver substantial cash flow throughout the year, repurchase $78 million of our own shares, and maintain a very strong balance sheet with which to execute our development and commercial activities,” stated Scott Tarriff, Chief Executive Officer of Eagle Pharmaceuticals.

“There are multiple exciting opportunities we plan to advance in 2019. The study initiated with the U.S. Military to evaluate RYANODEX in the treatment of nerve agent exposure is progressing nicely. Three of the six animal cohorts have now been challenged. The results of our pre-clinical study to evaluate the effect of RYANODEX in treating ARS are encouraging, and we are continuing our dialogue with the FDA regarding a path forward for EHS. As the year unfolds, we look forward to gaining greater clarity regarding our pipeline, exploring new opportunities with existing products, and delivering a very efficient business model that provides the cash necessary to execute our development, commercial activities, and potential licensing opportunities,” concluded Tarriff.

Fourth Quarter 2018 Financial Results

Total revenue for the three months ended December 31, 2018 was $56.1 million, as compared to $46.8 million for the three months ended December 31, 2017. Royalty revenue was $35.7 million, compared to $36.4 million in the fourth quarter of 2017. BENDEKA royalties were $31.9 million, compared to $34.7 million in the fourth quarter of 2017. A summary of total revenue is outlined below:

     
Three Months Ended December 31, 2018
2018     2017
(unaudited) (unaudited)
Revenue (in thousands):
Product sales $20,343 $10,432
Royalty revenue 35,711 36,353
License and other income
Total revenue $56,054 $46,785
 

Gross Margin was 67% during the fourth quarter of 2018, as compared to 71% in the fourth quarter of 2017. The year over year compression in gross margin resulted from the introduction of Big Bag revenue was partly offset by an expansion in RYANODEX gross margin.

R&D expenses were $5.9 million for the quarter, compared to $9.4 million in the prior year quarter. The fourth quarter year over year decrease reflects a substantial reduction in fulvestrant expenses, partially offset by the cost of analytical work to support our vasopressin ANDA. Excluding stock-based compensation and other non-cash and non-recurring items, R&D expense during the fourth quarter was $4.4 million.

SG&A expenses in the fourth quarter of 2018 increased to $15.5 million in the fourth quarter of 2018 compared to $13.4 million in the fourth quarter of 2017. External legal expenses account for the year over year increase. Excluding stock-based compensation and other non-cash and non-recurring items, fourth quarter 2018 SG&A expense was $11.3 million.

Net income for the fourth quarter of 2018 was $12.6 million, or $0.88 per basic and $0.86 per diluted share, compared to net income of $9.1 million, or $0.61 per basic and $0.58 per diluted share in the three months ended December 31, 2017, due to the factors discussed above.

Adjusted non-GAAP net income for the fourth quarter of 2018 was $17.7 million, or $1.23 per basic and $1.20 per diluted share, compared to adjusted non-GAAP net income of $15.6 million or $1.05 per basic and $1.00 per diluted share in the fourth 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.

Full Year 2018 Financial Results

Total revenue for the year ended December 31, 2018 was $213.3 million, as compared to $236.7 million for the year ended December 31, 2017. A summary of total revenue is outlined below:

     
Twelve Months Ended December 31, 2018
2018     2017
(unaudited) (unaudited)
Revenue (in thousands):
Product sales $70,385 $45,327
Royalty revenue 142,927 153,880
License and other income 37,500
Total revenue $213,312 $236,707
 

The increase in product sales in 2018 was driven primarily by the launch of Big Bag, as well as continued growth in RYANODEX revenue. Royalty revenue totaled $142.9 million in 2018 compared to $153.9 million in 2017. In 2018, Eagle did not earn any license and other income. In 2017, Eagle earned certain contractual milestones in connection with the Company’s BENDEKA licensing agreement with Teva, as well as an upfront payment associated with the SymBio collaboration covering Japanese rights for bendamustine hydrochloride ready-to-dilute and rapid infusion injection products.

Gross margin was 71% in 2018, as compared to 76% in 2017. The year over year compression in gross margin resulted from the introduction of Big Bag revenue was partly offset by an expansion in RYANODEX gross margin.

R&D expense increased to $44.4 million in 2018, compared to $32.6 million in 2017, reflecting the cost of the fulvestrant trial as well as the vasopressin analytical work. Excluding stock-based compensation and other non-cash and non-recurring items, R&D expense in 2018 was $37.8 million.

SG&A expenses decreased by $10.9 million to $60.5 million in 2018, compared to $71.4 million in 2017. In 2017, SG&A included increased marketing expense related to exertional heat stroke (“EHS”) and the contract sales force agreement with Spectrum. The elimination of those expenses in 2018 was partly offset by an increase in external legal expenses. Excluding stock-based compensation and other non-cash and non-recurring items, SG&A expense in 2018 was $43.1 million.

Net income for the year ended December 31, 2018 was $31.9 million or $2.16 per basic and $2.09 per diluted share as compared to net income of $51.9 million or $3.44 per basic and $3.27 per diluted share for the year ended December 31, 2017, as a result of the factors discussed above.

Adjusted non-GAAP net income for 2018 was $59.2 million, or $4.01 per basic and $3.87 per diluted share, compared to adjusted non-GAAP net income of $69.0 million, or $4.57 per basic and $4.34 per diluted share in 2017.

Liquidity

As of December 31, 2018, the Company had $78.8 million in cash and cash equivalents and $66.5 million in net accounts receivable, $41.8 million of which was due from Teva Pharmaceutical Industries Ltd. The Company had $45.0 million in outstanding debt.

In the fourth quarter of 2018, we purchased $50.0 million of Eagle’s common stock as part of our $150.0 million Share Repurchase Program. From August 2016 through December 31, 2018, we have repurchased $154.0 million of our common stock, including the $50.0 million ASR. As disclosed on October 30, 2018, the Company’s Board of Directors retired the prior share repurchase programs and approved the new $150.0 million Share Repurchase Program (which includes the ASR).

Conference Call

As previously announced, Eagle management will host its fourth quarter and full year 2018 conference call as follows:

         
Date Thursday, February 28, 2019
Time 8:30 A.M. EST
Toll free (U.S.) 877-876-9177
International 785-424-1672
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 800-283-4799 (US) or 402-220-0860 (International) and entering conference call ID EGRXQ418. 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 confidence in the remaining products in its pipeline; the Company's ability to deliver value in 2019 and over the long term; the Company’s timing and ability to repurchase additional shares of the Company's common stock, if any, under its share repurchase program; and the Company’s plans and ability to advance the products in its pipeline. 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 the products in its pipeline for any indications; whether the Company can successfully market and commercialize its product candidates, including RYANODEX and BENDEKA, in the treatment of any indications; 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 its commercial partners will successfully perform their respective obligations under their respective agreements; 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; that Eagle’s redirection of resources to other products in its pipeline may not be successful; and other factors that are discussed in Eagle’s Annual Report on Form 10-K for the year ended December 31, 2018, to be filed with the U.S. Securities and Exchange Commission (SEC) on February 28, 2019 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 the Company does 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 non-GAAP net income and adjusted non-GAAP earnings per share attributable to Eagle. 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 non-GAAP net income excludes share-based compensation expense, depreciation, amortization of acquired intangible assets, changes in contingent purchase price, severance, non-cash interest expense, restructuring, expense of acquired in-process research and development, debt issuance costs, asset impairment charge 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 non-GAAP net income, adjusted non-GAAP earnings per share amounts, and adjusted non-GAAP EBITDA amounts, respectively, for the three-month and twelve-month periods ended December 31, 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.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
   
 
December 31, 2018 December 31, 2017
 
ASSETS
Current assets:
Cash and cash equivalents $ 78,791 $ 114,657
Accounts receivable, net 66,486 53,821
Inventories 8,304 5,118
Prepaid expenses and other current assets   10,263     15,101  
Total current assets 163,844 188,697
Property and equipment, net 2,397 6,820
Intangible assets, net 18,103 23,322
Goodwill 39,743 39,743
Deferred tax asset, net 13,822 11,354
Other assets   694     124  
Total assets $ 238,603   $ 270,060  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,917 $ 11,981
Accrued expenses 23,519 15,391
Current portion of contingent consideration 15,055
Current portion of long-term debt   6,250     4,875  
Total current liabilities 39,686 47,302
Contingent consideration, less current portion 709
Long-term debt, less current portion 38,155 42,905
Commitments and contingencies
Stockholders' equity:

Preferred stock, 1,500,000 shares authorized and no shares issued or
outstanding as of December 31, 2018 and 2017

Common stock, $0.001 par value; 50,000,000 shares authorized;
16,504,283 and 16,089,439 shares issued as of December 31, 2018
and 2017, respectively

17 16
Additional paid in capital 256,458 233,639
Retained earnings 58,187 26,284

Treasury stock, at cost, 2,590,258 and 1,241,695 shares as of December
31, 2018 and 2017, respectively

  (153,900 )   (80,795 )
Total stockholders' equity   160,762     179,144  
Total liabilities and stockholders' equity $ 238,603   $ 270,060  
 
 
EAGLE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except share and per share amounts)
         
 
 
Three Months Ended December 31, Year Ended December 31,
2018 2017 2018 2017
(unaudited) (unaudited)
 
Revenue:
Product sales $ 20,343 $ 10,432 $ 70,385 $ 45,327
Royalty revenue 35,711 36,353 142,927 153,880
License and other income               37,500  
Total revenue 56,054 46,785 213,312 236,707
Operating expenses:
Cost of product sales 12,455 9,224 42,374 33,714
Cost of royalty revenue 6,102 4,483 19,542 23,472
Research and development 5,859 9,409 44,419 32,607
Selling, general and administrative 15,476 13,351 60,509 71,416
Restructuring charge 432 7,911
Asset impairment charge 2,704 7,235
Change in fair value of contingent consideration (1,773 ) (763 ) (7,377 )
Legal settlement       1,650         1,650  
Total operating expenses   40,324     36,344     176,696     162,717  
Income from operations 15,730 10,441 36,616 73,990
Interest income 122 39 158 91
Interest expense   (618 )   (542 )   (2,736 )   (1,136 )
Total other expense, net   (496 )   (503 )   (2,578 )   (1,045 )
Income before income tax (provision) benefit 15,234 9,938 34,038 72,945
Income tax (provision) benefit   (2,644 )   (854 )   (2,135 )   (21,002 )
Net income $ 12,590   $ 9,084   $ 31,903   $ 51,943  
Earnings per share attributable to common stockholders:
Basic $ 0.88 $ 0.61 $ 2.16 $ 3.44
Diluted $ 0.86 $ 0.58 $ 2.09 $ 3.27
Weighted average number of common shares outstanding:
Basic 14,367,077 14,890,615 14,768,625 15,102,890
Diluted 14,685,525 15,565,236 15,278,651 15,908,211
 
 
EAGLE PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
     
 
Year Ended December 31,
2018 2017
Cash flows from operating activities:
Net income $ 31,903 $ 51,943
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred income taxes (2,468 ) 17,289
Depreciation expense 1,155 932
Amortization expense 2,515 2,815
Stock-based compensation 19,082 15,429
Change in fair value of contingent consideration (763 ) (7,377 )
Amortization of debt issuance costs 376 222
Asset impairment charge 2,704 7,235
Non-cash restructuring charge 5,769
Changes in operating assets and liabilities which provided (used) cash:
Accounts receivable (12,665 ) (11,627 )
Inventories (5,556 ) (2,379 )
Prepaid expenses and other current assets 4,838 1,993
Other assets (570 )
Accounts payable (2,064 ) (8,460 )
Accrued expenses and other liabilities   8,128     (9,096 )
Net cash provided by operating activities   52,384     58,919  
Cash flows from investing activities:
Purchase of property and equipment (133 ) (4,436 )
Payment for Ryanodex intangible asset       (750 )
Net cash used in investing activities   (133 )   (5,186 )
Cash flows from financing activities:
Repurchases of common stock (73,105 ) (43,792 )
Payment of contingent consideration (15,000 )
Proceeds from long-term debt 50,000
Payment of debt principal (3,750 ) (1,250 )
Payment of debt financing costs (1,192 )
Payments for employee net option exercises (4,877 )
Proceeds from common stock option exercises   8,615     4,338  
Net cash (used in) provided by financing activities   (88,117 )   8,104  
Net (decrease) increase in cash and cash equivalents (35,866 ) 61,837
Cash and cash equivalents at beginning of period   114,657     52,820  
Cash and cash equivalents at end of period $ 78,791   $ 114,657  
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 2,281 $ 10,542
Interest 2,084 651
 
 

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 December 31, Twelve Months Ended December 31,
2018 2017 2018 2017
 
Net income - GAAP $ 12,590 $ 9,084 $ 31,903 $ 51,943
 
Adjustments:
Cost of product revenues:
Amortization of acquired intangible assets 194 276 895 1,194
Research and development:
Share-based compensation expense 920 986 4,014 3,942
Depreciation 65 74 470 74
Expense of acquired in-process research & development 500 1,000 1,700 1,000
Severance - - 466 -
Selling, general and administrative:
Share-based compensation expense 3,650 2,824 15,068 11,487
Amortization of acquired intangible assets 405 405 1,620 1,620
Depreciation 172 201 685 858
Debt issuance costs - - - 286
Severance - 268 - 268
Other:
Non-cash interest expense 94 94 376 238
Change in fair value of contingent consideration - (1,774 ) (763 ) (7,378 )
Asset impairment charge - - 2,704 7,235
Restructuring charge 431 - 7,911 -
Legal settlement - 1,650 - 1,650
Tax effect of the non-GAAP adjustments (1,363 ) 536 (7,894 ) (5,368 )
       
Adjusted non-GAAP net income $ 17,658   $ 15,624   $ 59,155   $ 69,049  
 
Adjusted non-GAAP earnings per share
Basic $ 1.23 $ 1.05 $ 4.01 $ 4.57
Diluted $ 1.20 $ 1.00 $ 3.87 $ 4.34
Weighted number of common shares outstanding:
Basic 14,367,077 14,890,615 14,768,625 15,102,890
Diluted 14,685,525 15,565,236 15,278,651 15,908,211
 
 

EAGLE PHARMACEUTICALS, INC.

RECONCILIATION OF GAAP TO ADJUSTED NON-GAAP EBITDA
(In thousands)
(unaudited)
         
 
Three Months Ended December 31, Twelve Months Ended December 31,
2018 2017 2018 2017
 
Net income - GAAP $ 12,590 $ 9,084 $ 31,903 $ 51,943
 
Add back:
Interest expense (income), net 496 502 2,579 1,045
Income tax provision 2,644 854 2,135 21,002
Depreciation and amortization 836 956 3,670 3,746
 
Add back:
Stock-based compensation 4,570 3,811 19,082 15,429
Change in fair value of contingent consideration - (1,774 ) (763 ) (7,378 )
Debt issuance costs - - - 286
Asset impairment charge - - 2,704 7,235
Expense of acquired in-process research & development 500 1,000 1,700 1,000
Severance - 268 466 268
Restructuring charge 431 - 7,911 -
Legal settlement   -   1,650     -     1,650  
Adjusted Non-GAAP EBITDA $ 22,067 $ 16,351   $ 71,387   $ 96,226  
 

Contact:

Investor Relations for Eagle Pharmaceuticals, Inc.:
Lisa M. Wilson
In-Site Communications, Inc.
T: 212-452-2793
E: lwilson@insitecony.com

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