Good morning. Welcome to the H.C. Wainwright's Second Annual BioConnect Investor Conference at Nasdaq. My name is Oren Livnat, Specialty Pharmaceuticals Analyst here at H.C. Wainwright, and it's my pleasure to welcome for a brief chat today, ANI Pharmaceuticals, and with us is the President and CEO, Nikhil Lalwani. I do cover ANI with a buy rating, full disclosure, so if anyone has any questions, who's listening or here today, reach out to me separately. Welcome, Nikhil.
Thank you, Oren. Thank you for having us. We appreciate it.
So I've only formally covered the company for about a year and a half now, and all you've done is blow away numbers and nearly double your stock in that short span. And so hopefully, we can talk a little bit today about how you got here, and more importantly, where you're going going forward. All right? So, first, just can you give a brief overview of the business, how the strategy's evolved over time since you took the helm, and, what are your top future priorities going forward?
Yeah. Thank you, Oren. So to tell you... good morning, everyone, and thank you for being here. To tell you a little bit about ANI, we have three main business lines. The largest driver of our growth is our rare disease business, where our lead asset, Purified Cortrophin Gel, is expected to do between $170 million and $180 million in revenues this year. We believe we can expand on the scope and scale of our rare disease business through M&A. So that's our rare disease business, largest driver of absolute growth for ANI.
Secondly, we have a generics business where our strong R&D engine helps us drive new product launches, and that, combined with operational excellence, our U.S.-based manufacturing facilities, and our strong compliance track record, enables us to be a strong partner for both customers and patients. We think of that business as a driver of high single digit, low double-digit growth. Then thirdly, we have an established brands business, which is a high margin, strong cash flow generation business. We have unique commercial capabilities where we bring established brands to market, and so that's our third business line. Overall, ANI is on our guidance for 2024 is to deliver $520 million-$542 million in revenues, which will put us at about 35% CAGR since 2021.
On the profitability side, our adjusted non-GAAP EBITDA guidance for the year is $135 million-$145 million, which is delivering about 58% CAGR for the last since 2022. We have strong momentum across our business segments and, I look forward to keep updating you on our progress and telling you more about it today.
Great. So you mentioned Cortrophin Gel, the rare disease, has been your main driver. It's outperformed your initial guidance, each of the first two years of launch, outperformed my early expectations as well. Can you just talk about where that launch has outperformed and versus your expectations, and what have been the biggest challenges?
Thank you. So, you know, we obviously had done a fair bit of market research before entering the ACTH market. ACTH market has existed for some period of time, and there has been one competitor or one player in this market for, really, for decades before we entered. And so when we did the market research, we learned that there is a need for an additional option for, you know, patients in this category. However, I think what we've been pleasantly surprised for with is two things. One, that there has been overall category market growth. It's one thing to see something in market research and a completely different thing to actually see it play out.
And when you look at the overall category, you know, our guidance for the current year is $170 million-$180 million in revenues. And if you add our competitor's guidance, you get the total market showing 10% growth. This is for a market that has, you know, declined significantly over the years and for the growth to decelerate since we launched and then to actually start growing. And you look at 2024, based on our, the guidance of both the competitor and us showing 10% growth, essentially back to 2021 levels. So I think that's been, you know, I think, we're pleased to see that. And then the second is, you know, we're currently across five indications, and we see growth across all five areas.
We see growth in new prescribers and existing prescribers. We see growth in the indications that we started with at launch, rheumatology, neurology, and nephrology, as well as new indications, pulmonology and ophthalmology, which we've introduced since launch. And that has been, again, very pleasing for us to see, to see that, you know, it's not a pocket of growth, but there's opportunity across the board, really. And then, you know, in terms of challenges, look, you know, this is our first rare disease launch, and you know, there have been tweaks as we've strengthened our effectiveness and efficiencies of the way we operate our rare disease platform, and we'll continue to do that, and obviously with compliance as a strong foundation underlying everything.
So you mentioned the market's been growing. That's after years of contraction before you came into the market. What inning would you characterize this at? I mean, I guess you can only speculate, but, you know, how far relative to the original patient volume where we were at years ago, how, how far back do you think we can come with another competitor?
Sure. So just to dimensionalize it a little bit... The ACTH market at its peak was $1.2 billion in 2017. In 2019, it about went to $1 billion, and then, in 2020, it was around $770 million. And the year before we launched, it went, actually went down to $594 million, which is in 2021. Since we've been back, the growth has decelerated. I mean, sorry, the, the deceleration has reduced. The first year the market went to, they did $512 million, we did about $42 million, so $554 million. Year after, which is 2023, they're, they're in the low $420-ish, $425-ish, and we did $112 million, so $537 million. And then 2024, right?
As I just mentioned, if you add our guidance together, it's showing about 10% total market growth, which is great and getting back to 2021 levels. What that is basically telling us, or the way we see it is, we believe that there are the number of patients that are on therapy today are significantly lower than the number of patients on therapy many years ago. We believe that therefore there is a strong multi-year growth trajectory for Cortrophin Gel and for the overall market. And when you think of, you know, competitive dynamics, obviously, we'll strike a balance between sharing information that is helpful to the investors, as well as not giving too much away to our competitor.
You know, both the competitor and we have been speaking about strong positive, you know, prescribing momentum in the category. I, you know, the way we see it, we're both focused on increasing awareness and bringing ACTH therapy to the appropriate patients in need.
So the product's already, and the unit's already running in the black, which is pretty impressive, since you've sort of started from scratch, from scratch to launch this product, essentially, right? Built up all that infrastructure. As we think going forward, how much do you think you can grow this product with the current level of investment, and where is that money best spent, do you think, to grow going forward?
Yeah. So, again, we see Cortrophin as a multi-year, with a multi-year growth trajectory. In terms of your question around operating leverage, in year one, we guided to $42 million-$46 million of SG&A, and we did about $42 million in sales. In year two, that sales increased significantly by about 166% to $112 million. The corresponding increase in SG&A was substantially lower. And then, in our guidance for this year, there's a 52%-61% increase in sales for Cortrophin, that we've guided to, and the increase in SG&A is substantially lower.
So as we look forward, you know, we'll continue to invest in positive ROI activities, and the good fortune we have is that there are opportunities to invest sort of across the board, across therapeutic areas, across the therapeutic areas that we're in.
All right, so speaking of leverage in that business-
Yeah.
You've been talking very publicly about looking for other rare disease assets to put in there. You're certainly not alone in that regard. So can you just talk about, you know, what's the competitive landscape for assets out there, and just how does your balance sheet position you to be competitive on that front?
Sure. Yeah, look, you know, we have, we expected the M&A landscape to be competitive and there to be, sort of, unique opportunities for us, and I think that, we're seeing that, right? We're seeing that the level of competition is sort of pretty much in line with what we had expected. In terms of the strength of our balance sheet, you know, we're in the strongest position probably ANI has ever been in, and in a very strong position to engage in BD and M&A. We have about $228 million of cash on our balance sheet as of March 31st, 2024.
In addition to that, we're at half a turn of net leverage, so we're in a strong position to use our balance sheet to make the right acquisition that meets the strategic and financial objectives of ANI at this time.
Right. So you don't wanna do a deal just to do a deal.
Yeah.
But when you characterize the urgency or how central this is to your growth forecasts or plans internally, you know, I guess, how central is M&A to the story, or do you feel confident you have sustainable growth with the current business for the foreseeable future, organic?
No, good question. I think we have sustainable growth organically, with the current business. As I said, Cortrophin is on, you know, a multi-year growth trajectory. So that's our lead asset in the rare disease business, and then generics, you know, on the back of strong R&D, operational excellence, and a localized manufacturing, U.S.-based manufacturing footprint. I think we're well positioned to deliver high single-digit, low double-digit growth. So organically, I think we have sustainable growth in the, you know, in our businesses. Having said that, we have this opportunity to leverage the rare disease platform that we have built and the infrastructure that we have to expand scope and scale of our rare disease business. And so that's why we're looking.
But again, the important thing for us is to do the right deal for ANI that meets the strategic and financial objectives of the company, and that's what we're focused on.
... So can you just remind us the breadth of your interest?
Sure.
On the biz dev front? I mean, obviously, you'd love something immediately accretive. Is that something you're only looking at, only on market or also near market, standalone assets, or even would you consider entire company-
Sure.
acquisitions with integration?
Sure. Yeah, so, I think our, as we've been looking, we've been focused on two types of opportunities. Priority one is to look for assets or companies with assets that leverage our sales force call points. So, we benefit from having five different indications, rheumatology, neurology, nephrology, pulmonology, and ophthalmology. So products or assets that go into those call points and have overlap with our Cortrophin call point. So that's the first type of. And that's the priority one. Priority two is to look at, you know, rare disease assets that may not have the same call point, but can leverage the rest of our infrastructure, right? Which is the medical affairs, market access, specialty pharmacy distribution, patient support, etc. So those are the two types of assets that we're looking at.
We want an asset that is very close to commercialization or already commercialized at this time. We obviously have a view on the peak sales of the asset so that it, you know, it's an asset that we can of a certain size that we can absorb, right? And, you know, we want longevity from an IP perspective to ensure that there's, you know, that the whole purpose of doing a rare disease, sustainable asset and, you know, an expanding scope and scale of our rare disease business. We want IP longevity for a number of years. So I think those are the sort of filters that we're applying as we've been looking for assets.
All right. We haven't actually talked about the generics business too much, but obviously, that is still the large, for now, is the largest part of your business. So I guess you, you mentioned earlier, high single-digit to low double-digit growth, which is actually pretty impressive, I guess, in the generic space, albeit off of a smaller base than some of the bellwethers. But, you know, what do you think about organic growth in that business going forward? I mean, you recently acquired, I guess, well, not recent anymore, Novitium. Can you maintain this kind of growth for a while organically, or do you need to do bolt-on acquisitions?
Sure. So we remain confident that we can deliver high single digit, low double-digit growth organically. It's on the back of three things. Firstly, our high-performing R&D organization. As you will see, even today, we launched a new product, our eighth new product launch since in 2024. And this product is, you know, sorry. And so on the cadence, with this cadence of new product launches, I think we're on track to, you know, to absorb some of the price erosion that we see in the base business. So I think that's number one. I think second, we're uniquely positioned with a U.S.-based manufacturing footprint. And I think that that is a competitive advantage for us. So I think that's number two. And then third is, you know, our operational excellence, right?
Our ability to supply reliably, to maintain a strong GMP track record, and to be nimble. As a smaller organization, we can be nimble to our customers' needs and step in and support and move fast to meet the needs of our customers. All of these together make us a strong and reliable supplier, for our customers and patients need.
I guess, how important are acquisitions for you at all in this space?
Yeah.
You know, do you feel like your existing and the pipeline or your R&D platform that you're investing more in this year and last can sustain you for a while, or are you always looking to add portfolio products?
Yeah, good question. I think, you know, our BD efforts and M&A are focused largely on, you know, a rare disease M&A acquisition at this time. Having said that, opportunistically, both for generics and for established brands, we will consider, you know, opportunistically deals that come up. There are examples of such deals that we've done even over the past 12 months, like Oakrum, like a few ANDAs from Oakrum, a few ANDAs from the Akorn Chapter 7 auction. But these are opportunistic, and they'll complement what we have. They also leverage our R&D and manufacturing capabilities. So those are the types of acquisitions, you know, product level acquisitions that we would consider.
So, you mentioned just this morning. I did notice, on the way in, a new approval.
Yeah.
It struck me that I was the first approval for a product, though I don't believe it was Paragraph IV. I guess that begs the question, you know, how are you guys so frequently for your size, especially at the top of the list of these competitive generic therapies or limited competition, generic opportunities? Does that mean that we should assume your underlying business price erosion is different or more benign, given less competitive environment than maybe the bellwethers in the space?
Yeah. No, thank you. I think that I will take your compliments back to our product selection team as well as R&D team for executing well. As far as, you know, our, the pricing dynamics that we see, I think that they're similar to, as you said, the bellwethers. The larger players have spoken about that there is improvement in the pricing environment for generics, given a number of different factors. Again, you know, they've spoken about it in a fair amount of detail. We're seeing similar pricing dynamics.
I think in terms of, you know, our ability, I think, you know, that's our ability to find these opportunities and then execute on them. I think this really goes back in a large part to the acquisition that we did of Novitium and, the team there, and what that team has brought to the organization in terms of capability, both in pipeline selection as well as, portfolio execution. And, we look forward to continuing to support that. At the time of the acquisition, you know, one of our investment thesis was that the capability of that organization was far ahead of, what they were able to afford to invest at the time from an R&D perspective.
And I think that that's played out, you know, two years into the actual two years and the acquisition. I think that investment thesis has sort of played out.
All right. And I guess as we wrap this up, yeah, as I mentioned up front, you've been crushing estimates for the time I've covered you. That was no different in first quarter, just a week or two ago. But you didn't raise your guidance, at least yet, for this year. And so can you just talk a little bit about your rationale there? What sort of quarter-to-quarter dynamics we should be thinking about, with regards to the full year picture, and just how you think about guides generally, and your level of conservatism, and how you approach it?
Yeah. Thank you for that question. Look, first of all, it's a concerted effort and collaborative efforts of the entire team at ANI, as well as, you know, our customers, our partners, our investors, our board, our suppliers. I think all of them come together to help us achieve our purpose, which is serving patients, improving lives. And then, you know, we're grateful that the numbers have been as they have been. So that's, that's been great momentum for ANI to have. And as far as the guidance goes for 2024, look, the first quarter performance was in line with the themes that we had spoken about at the February earnings.
You know, our Cortrophin Gel asset did about $36.9 million in sales, a modest dip versus the Q4 of the previous year, in line with rare disease dynamics. And we saw strong momentum in April, with the largest number of new patient starts ever since launch. So I think that's on track. Generics, we launched 6 new products in the first quarter of 2024, and I think we're on track to deliver high single-digit, low double-digit growth. Then on established brands, we saw the supply tailwinds benefit us in Q1, and our guidance assumes no supply tailwinds going forward. So we have strong momentum across our business lines, and that's reflected in the guidance that we've given. And we look forward to keeping you on our progress.
All right, great. Well, that's our time. I appreciate you attending, and I wish you luck for the rest of the year.
Thank you, Oren. Thank you for your time, and thank you for having us, and thank you, everybody, for joining. We appreciate it.
Thanks.