All right. Good afternoon, everyone. My name is Jeff Ammerman. I'm a Managing Director in the investment banking group at Barclays. I'm joined here today by a good friend, long-term client, Scott Tarriff, the Founder and CEO of Eagle Pharmaceuticals. Welcome, Scott.
Thank you, Jeff. It's great to be here with you today.
In this environment, Scott, if we can just get into it. You have a profile that's pretty unique, I'd say, given the biotech markets and what's going on. You have a very different financial profile. Can you talk a little bit about that?
Yeah. Funny thing, we try to make money. Is that what you're referring to? You know, very first, Jeff, we're very proud of the products that we provide to the community and really very excited about all the good we can do with the products that we have in our pipeline. At the same time, we run our company very efficiently. If you just look at the last four years, assuming we hit the mid-range of this year's guidance, which is $74 million-$80 million of Adjusted EBITDA, we would have earned a little bit over $300 million, maybe $315 million of Adjusted EBITDA in the last four years with a compounded annual growth rate on the EBITDA line of about 6%. We're very proud of that.
We haven't raised any equity in about seven years. We've bought back about a quarter of a billion dollars of our stock since going public. We still have net cash and receivables. We bought a company last year. We paid cash for it. You know, we're very focused on providing great products and doing so profitably, and I can't believe that thought process is going to change. We're quite proud of what we've been able to do. I would also say that we've been able to do this organically for the most part.
Mm-hmm.
It comes out of our homegrown R&D, which is efficient, and we're proud of that. You know, so far, so good after 15 years of starting the company.
Let's talk about that, the inorganic side of the equation. You know, M&A seems to be a common theme in our sector these days. We've seen a very active M&A market since the beginning of the year. What sort of dry powder do you guys have to think about an inorganic strategy?
Yeah, that's a very interesting question. If you've known me for the last, 15 years, which you have, right? I've always tried to run these companies organically, but it's not always possible to keep up the growth rate that we've had. I will say that for the first time in, I don't know, Jeff, maybe 20 years that I've been in this business, the assets are at a price level where maybe it's as, if not more attractive, to acquire than to develop. When we acquired Acacia last year, we think we paid about 35% of the discounted net present value of the profit stream going out to 31, 32, which is where the products are patent protected to. I don't think we could have developed the drugs, more cheaply than we paid for them.
Mm-hmm.
I think we paid, less than replacement value, if you will. It makes sense 'cause those are markets that we have to build, and it's gonna take a lot of elbow grease. It's gonna take 50 people, sales reps and marketing infrastructure to build those markets, so that makes sense. I do believe for the first time, this is the right time to start acquiring. I would say we could probably, add some leverage to our balance sheet that we've never done before and, you know, maybe make a, $300 million-$400 million plus acquisition. What we would look for this time is something that's more immediately accretive.
Mm-hmm.
Products on the market that are already established. I think our infrastructure allows us to take advantage of a lot of financial synergy. For example, when we acquired Acacia last year, they had about 70 people, and we kept only about 20, and most of those people were in direct marketing positions. On our oncology side of the business, I think we can do that one more time. We probably could make a, relative to our size, a significant acquisition and find a tremendous amount of financial synergy and overlap between the companies. We have room to bring another $100 million product into our company with far less additional infrastructure that a company would need running on its own. That's what we have an eye towards. We'll see if we can find something in the reasonable future.
Is that to say you would do something within acute care and oncology only?
For the most part, I think that's where we'll get our synergy. We have sales people in oncology. We have sales people in the acute care hospital space. We have all that overlap for all those other functional areas of business that can take on more work and more products. I can't see us acquiring a third leg to the stool quite yet. Right now, the efficiency would come from something in the oncology space.
What about general timeframe? Just given how active the M&A market we've seen to start the year, you know, what can you guide the public towards in terms of an expectation of a transaction?
You know, we've been talking about this for quite some time now. I will tell you, we're selective. We're disciplined. This is an industry that's been riddled with, you know, bad M&A. We certainly have no incredible need to acquire. We're doing pretty well, right? Earning the money that we're earning, and we're really excited about our two pipeline products, which read out in about 12 or 15 months. We're being disciplined, but we'd like to get something done reasonably soon. You know, markets ebb and flow, they change, situations change. Right now, with the asset values in the market suppressed the way they have been historically, this is probably a good time for us to take advantage of that opportunity and acquire something, I hope, in the reasonably near term.
You know, obviously, sometime this year would be wonderful.
I wanna come back to the pipeline. Before we do, maybe we can touch on your oncology franchise a bit. Can you make some comments on the bendamustine franchise? You know, how are you tracking versus expectations? Obviously, that is a product now that's gone generic.
Yeah. To be clear, you know, bendamustine is a very fascinating marketplace, right? We developed a product by the name of BENDEKA for CLL and NHL. We were able to change that product from a large volume of chemotherapy infusion that has to be infused in 30 and 60 minutes. We were able to change that to a smaller 50 ML vial that's infused in 10 minutes. Great product. It's taken the market, the lead market share by far. It's patent protected, probably into 2028. There will not be a generic of BENDEKA, we hope, and for another several years. BENDEKA will be a very significant portion of our profitability. Now, there have been entrants into the bendamustine market that would be therapeutic equivalents to our product, not generic products.
We just think the strength of the medical rationale for BENDEKA will carry the day. We did get some competition into the market December seventh. We're, what, 3 months into it. We just had our earnings call this week, and the latest numbers show that historically, our two bendamustine products, our BENDEKA and BELRAPZO, have enjoyed about 90% of the market, and we still have 88% of the market a quarter later.
Hmm.
We're really excited. We've been guiding that we thought we would stay within a range of not losing more than 75% of the economics over the course of the year from those two products. Here we are, a quarter of the way through that period of time, and we still have, you know, 88% compared to 90%. We've kept almost everything so far.
Hmm.
My guess is we'll be within the range that we've promised, which adds just a lot of profitability. I would also add that historically, we've paid a 10% royalty to an early development partner on all revenue of our bendamustine products, and that royalty expired. It had a lifetime cap that expired back in Q4. All of the bendamustine sales, the revenue that we have in 2023 going forward actually carries this 10% higher margin because of the royalty going away. When you wrap all that up, I think this is gonna probably, it's early, it's only, you know, middle of March, but it looks like bendamustine is gonna be a really very important, significant contributor to our profitability this year. So far, we're running, you know, ahead of schedule, which is, you know, obviously fantastic.
Let's touch quickly on PEMFEXY. Can you just comment on the market dynamics that we're seeing there for that product, and then we'll pivot to acute care?
Yeah. PEMFEXY is a great product. It's also another product that we developed. We launched it back in, I think it was February, first quarter of last year. We sold $67 million of PEMFEXY in the year of launch. What we've guided towards this year is that we'll sell more than $67 million. We haven't guided or suggested how much more yet. I think we'd like to get through the first quarter of the year before we say anything. Let's see how it winds up. So far, we're off to a very strong start. We left the last week of December 2022 with a 6% share. We guided to leaving this quarter, Q1, with a 12% share. As of last week, we already have a 10% share of that market.
That's going rather strong. We're off to a really good start with our products, right? That should be the takeaway. I know it's early. You need four quarters in a year.
Mm-hmm.
After the first quarter, things are looking pretty good. We were always rather bullish on the PEMFEXY opportunity. In fourth quarter of 2022, we bought out much of the royalty from a development partner we had. We purchased the first $85 million for $15 million we bought back. If we make that much on the return, and if we made a good trade, we'll make money on that. Going forward after that, we've bought down their royalty pretty significantly. The margin on our business, bendamustine and BENDEKA, all other things being equal, not commenting on where price might go, we have an inherent improvement in margin because of the royalty change on both products. At the same time, we're off to a pretty good start for the year.
We'll see how the rest of the year goes, but right now you just have to feel good about how 2023 is shaping up for us.
Hmm.
After coming off, by the way, a record 2022. I mean, we tripled our Adjusted EBITDA, 2023 over 2021 had, you know, by far a record year, earning over $130 million of Adjusted EBITDA in 2022. It's just, you know, we're hitting stride, we're doing well, and we're earning all of that, Jeff, and still funding two big clinical programs out, which quite frankly, could be blockbusters. You know, all good so far. Happy to be here.
Why don't we skip over actually the acute care piece and go to the pipeline? I think you've hit on it. You've alluded to it. You've got some pretty game changing products in the pipeline. Can you discuss a little bit about your progress on ENA-001 and CAL02?
Yeah. That's great. I mean, it's just for us, it's very exciting because it shows just such a huge transition. You know, when we started the company 15 years ago, we started out as a 505(b)(2) reformulation company. It's a harder business to grow at this point. We recognize that, and we're transitioning away. I mean, we've been a remarkably, incredibly profitable 505(b)(2) company. I think it's time to transition, and we have the goal of becoming a diversified pharmaceutical company, and we're using our cash, our earnings, and our balance sheet to transition to be a more traditional pharmaceutical company. We licensed in this CAL02. Let me try to explain it, because as the product has evolved, we're finding better ways to explain.
Let's see how we all feel about this explanation, because in some ways, it's complicated, but when you spend time in it becomes beautifully simplistic. CAL02, I think it is very well known in the medical community. I've been doing a lot of this lately out of curiosity, is just go Google what's called pore-forming toxins. It's widely known for generations, for decades, that through the process of antibiotics, and we'll concentrate first on severe bacterial pneumonia, which is the indication that we are seeking, that during that process, these proteins, these pore-forming toxins, are released.
These toxins actually bore a hole in the cell, pore-forming, destroy the cell, which adds to the cascade of the disease progression and causes the medical difficulties with severe bacterial pneumonia, which, by the way, is still the second or third largest cause of death around the world. I will take it at face value as I go through speaking to our medical team and our KOLs and our investigators around the world that pore-forming toxins are bad. They cause disease progression in a very serious disease state. CAL02 is a liposome that was created specifically.
You know, we call it a drug, but I'm not so sure it's a drug, but it was created to absorb and take these toxins out of the body and remove them prior to them putting in a position where they bore into the cell and destroy the cell. If you believe what is simple medical belief that these pore-forming toxins are bad, we've invented, we've built a product that is administered on top of all antibiotic use, so it's antibiotic agnostic. It doesn't matter what antibiotic a physician chooses to treat the pneumonia. Any antibiotic they use in all severe bacterial pneumonia creates these toxins.
This product that we would be infusing very simply just removes the toxins from the body and hopefully does it in enough mass and soon enough to remove the toxins prior to them invading the cells and doing their damage. We have quite a bit of in vitro data to prove that it does what it was intended, what it was built, what it was designed to do. We have quite a bit of preclinical data in animal models to prove that it does what it's supposed to do. We have a small phase I study that had really very strong results on the same topic. Now we're in the middle of running a 120 site study worldwide, Europe, United States, South America. We're trying to recruit 275 patients. The sites are being recruited now.
I'm hoping we'll get the first patient enrolled here very soon. In about a year, we'll get a big data read to see how we're doing. If you think about all the bacterial pneumonia around the world, if we believe what's been thought of for 30 years or more, that these toxins are released, they're bad, they do damage, we take the toxins out, we should see some really good results. I think this is a blockbuster drug worldwide. If it works, we need another $40 million, maybe $50 million to get the final results. If we win and it's right, the value we bring to mankind, this is a groundbreaking change in the way we treat pneumonia worldwide. Exciting for a company like us. It was probably a smart bet. Things are looking good now.
Anxious to see the results, just a groundbreaking concept created by a lot of small, smart people in a lab to change the way we treat pneumonia. If it works for pneumonia, there are other disease states where we have toxins that we'll be able to. We should think about this not just as an indication for bacterial pneumonia, but as a platform to remove toxins. Unusual for a company with our history and size to be working on something like this. I think part of the reason why we don't get credit for it, because people don't think of Eagle as a company that should be doing this type of work. We are, and we're about a year away from finding out if we're right or wrong. As you can tell, I'm rather excited.
The adjunctive therapeutic nature of this product does make it quite compelling, doesn't it?
Yeah. Let's see, there shouldn't be side effects to it.
Right.
It's an inert product that removes toxins. It's not interfering with anything. We'll see that data as it comes along. We should have a safety profile that all we're asking physicians to do in a very serious disease state is use this in addition to whatever else you use. It's probably that cadence of conversation is probably gonna help us to get recruitment done quicker than you normally would do on a study like this. This isn't hard for a physician to wanna give a try during a clinical program. The uptake should be pretty good if the results come out good. We'll market it ourselves, by the way. We have 50 people in our sales force. Maybe we need to add people if it gets approved.
This is just a sea change in the way the disease will be treated if successful, and certainly a sea change to the valuation of Eagle after all these years if we pass this study, and we'll know in a year.
A little bit about ENA-001.
Yeah. ENA-001 is also the type of product that you wouldn't think of a company with the background of Eagle's, but this is also a fascinating situation. There are so many ways to describe this as well, but what I would say is it's a pharmacological ventilator. It is a drug that would impact a receptor that basically tells the brain to breathe harder, breathe more often, breathe deeper. If you can think about all the areas where there's respiratory issues, where you need to have more breathing. The first indication is for postoperative respiratory depression. We're finishing up now our last animal model. Hopefully, we'll get through that fine and start a p hase II study later this year. 200 patients in about 6 sites around the United States. That recruiting should go fairly quickly. Let's see those results.
We have now put the drug into about 115 people in a series of phase I studies. We're very excited about that. Second is a indication in community drug overdose 'cause a lot of those people, the difficulty of why they ultimately pass is due to the depression of the respiratory system. For that indication, BARDA has given us a contract for up to $50 million, basically paying to get us through the entire phase III study. That's right behind the hospital product. Lastly, very interestingly, we are studying it in what's called apnea of prematurity, which is basically premature children's respiratory systems don't develop as quickly as you would like because of the premature birth.
Right now we only have caffeine drip to help these young babies and we think that this would be a significant change as well. three indications for ENA-001, platform for CAL02. Making all this money that we're earning, even supporting all that R&D. The great thing about it is, you know, give or take 15 months from now, Jeff, the spending's over with. If we pass, then we'll spend more, but I don't think anybody's gonna care how much we spend with results like that from these two studies.
If we fail both studies, we're putting about $50 million a year back in our pocket to generate more EPS for the company, and then we'll go back to our roots of being a commercial company, and our acquisitions will be already marketed products to add to our sales force, right? If you fail the two studies, it just adds, you know, $2, $3 of earnings going forward. If we pass, well, then we're a mid-sized pharma company and, you know, nobody'll ask us how much we spent in the past. Just incredible time. The takeaway being great four years, great 2022. Looks like we're gonna have a really strong 2023. Find an acquisition to make that'll add to all the accretion and get to these results and we either... I mean, we're gonna be a stronger company passing or failing-
Yep.
-in a unique, odd way. There we are after 15 years. Couldn't be more excited about the prospects of the company. Let's see how it goes and, we'll take it from there.
Scott, thanks for joining us today.
Thank you, Jeff. It was great seeing you. Great being here. Phenomenal conference. Thanks for having us.
Thanks for being here.
Take care.