Good morning, everyone. My name is Ashley, and I'll be your conference operator. At this time, I'd like to welcome everyone to ANI Pharmaceuticals' fourth quarter and full year 2022 financial results. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer period. At that time, if you have a question, please press the star key followed by the one on your telephone keypad. As a reminder, this conference call is being recorded today, March ninth, 2023. It is now my pleasure to turn the floor over to Ms. Judy DiClemente, Investor Relations for ANI Pharmaceuticals. Please go ahead.
Thank you, Ashley. Welcome to ANI Pharmaceuticals' Q4 2022 earnings results call. This is Judy DiClemente of In-Site 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 of ANI. You can also access the webcast of this call through the investors 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, projection, 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. These 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 for 30 days on our website, anipharmaceuticals.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on March 9th, 2023. 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. With that, I'll turn the call over to Nikhil Lalwani. Nikhil?
Thank you, Judy. Good morning, everyone, and thank you for joining our call. 2022 was a landmark year for ANI, taking us past critical inflection points for our two critical growth drivers. Our rare disease business, with the successful launch of our foundational asset, Purified Cortrophin Gel, and our generics business with the acquisition and integration of Novitium Pharma, a best-in-class generics R&D organization. The significant achievements of 2022 further strengthen ANI to deliver sustainable, competitive, and profitable growth. We keep the patient at the center of everything we do and remain deeply committed to providing high-quality medicines to patients in need. I'm proud to report that for the full year 2022, ANI revenues totaled $316.4 million, surpassing the $300 million mark for the first time in the company's history.
This was an increase of over $100 million and 46% year-over-year. In the fourth quarter, revenues grew by nearly 55% to $94.2 million, a company record for quarterly revenues. We delivered remarkable growth in adjusted non-GAAP EBITDA from $4.3 million in the first quarter of 2022 to $23.3 million in the fourth quarter. Let me now turn to the two strategic imperatives that we need to remain focused on to drive sustainable, profitable, and competitive growth in 2023 and beyond. The first imperative is scaling up our rare disease business. Our foundational asset, Purified Cortrophin Gel, has experienced great momentum through the first year of launch. As you would expect, we made tweaks in our strategy as the launch unfolded.
We are pleased to report that the fourth quarter sales totaled $17.6 million, and for our first year of launch, total sales were $41.7 million. Importantly, according to IQVIA, the ACTH class of therapy has gone from consistent year-on-year declines to year-over-year unit growth for the first time since 2019. From June 2022 to January 2023, the ACTH category has seen eight consecutive months of year-on-year growth. As of March eighth, cumulative new patient cases initiated increased to more than 1,120, with more than 510 unique prescribers. We are pleased that we have continued to see growth in the number of new unique prescribers and an increasing number of healthcare providers becoming repeat prescribers. Overall, we have seen prescriber interest in having an alternate treatment in the ACTH category continue to build.
Many of our prescribers had previously slowed or discontinued use of the ACTH class and have restarted their use of ACTH therapy after the launch of Purified Cortrophin Gel. Prescriptions continue to be distributed across our targeted specialties, which include certain chronic autoimmune disorders, including acute exacerbations of multiple sclerosis and rheumatoid arthritis and excess urinary protein given nephrotic syndrome. We've actively participated in the key national and regional medical conferences and have also initiated peer-to-peer programs across these specialties to educate physicians to increase awareness and understanding of Cortrophin Gel. Our peer-to-peer education programs have been well received with positive early feedback. We have invested and are continuing our efforts with the PBMs and payers across commercial, Medicaid, and Medicare to expand market access for Cortrophin for the appropriate patients in need.
In addition, we have further strengthened our patient services and reimbursement teams to support access to Cortrophin Gel and reduce the time taken from enrollment to fulfillment. In parallel, we have taken several initiatives to increase effectiveness of our highly experienced sales force. In 2023, we will augment these efforts with enhanced data to improve prescriber targeting. With the momentum from our launch, we will also commence modest expansion of our sales force to focus on pulmonology. Looking ahead, and as Steve will discuss shortly in more detail, we expect 2023 revenue from Cortrophin Gel to be in the $80 million-$90 million range, and the Cortrophin SGA increase to be estimated at approximately 10%. We believe that ANI has built a rare disease platform successfully encompassing medical affairs, patient support, market access, and specialty pharmacy distribution.
The success of our foundational asset, Purified Cortrophin Gel, has given the company confidence. We are actively exploring assets to acquire or partner on to leverage the platform and scale of the rare disease business. Before I move on to our generics business, I would like to share an important point. During the early days of the launch, we believed it was important to share detailed metrics to give investors insight into the dynamics of and progress of our launch. As the Cortrophin launch has gathered momentum and investors have gained further confidence, we have decided to pare back sharing competitively sensitive detailed metrics such as number of prescribers and patient cases initiated. Moving now to our second strategic imperative, driving generics business growth through superior new product launch execution, cost excellence, and supply reliability. Sales of our generics pharmaceutical products grew 46% year-on-year.
We launched several limited competition new generics and retained a top 10 ranking in terms of ANDA approvals. In addition, ANI continues to retain the second ranking for competitive generic therapy approvals. This is especially impressive given the scale of our generics business and the large number of companies that compete in the U.S. generics market. In 2022, we filed 12 ANDAs and expect to continue investing in generics R&D to support our growth aspirations. We are also making large strides in the area of cost excellence. The consolidation of our manufacturing network is on track. Manufacturing operations ceased at the Oakville, Ontario site in January 2023. The relocation of Oakville products to U.S. facilities have been completed. We are in active discussions with potential buyers for the Oakville site.
Once fully executed, this operational efficiency is expected to improve GAAP profitability and cash flow by $7 million-$8 million on an annualized basis. Looking ahead, we have augmented our analytical and development facility in Chennai, India. The facility completed a successful FDA audit with the FDA in 2022. Today, over 60 skilled colleagues at the facility contribute materially to ANI's efforts to serving patients in need. Over the years, ANI has built a strong reputation as a reliable supplier to patients and customers. We have invested in maintaining healthy inventory levels, both for materials and finished goods. All of our manufacturing facilities are in the U.S., and our domestic supply chain further enhances our reliability as a supplier. Finally, the strong compliance and audit history across our facilities exemplifies our efforts to deliver high-quality medicines.
Most recently, during the fourth quarter, the FDA conducted a routine good manufacturing practices audit at our facility in Baudette, Minnesota. We have implemented all corrective and preventive actions needed, and we have already received a favorable Establishment Inspection Report, or EIR, classifying that our Baudette facility is voluntary action indicated, VAI. I am proud of the dedicated work of our employees in our generics business with over 20 million prescriptions filled using ANI medicines. In summary, 2022 was a landmark year for ANI, taking us past the critical inflection points of a key driver of ANI's growth, scaling up our rare disease business. In 2023, we look forward to building on the launch momentum of Cortrophin Gel and acquiring or partnering on other assets that leverage our rare disease platform.
Steve will now walk through our detailed fourth quarter financial results and discuss our guidance for the coming year. Steve?
Thank you, Nikhil. Good morning to everyone on the call. My comments this morning will be focused on the three months ended December 31st, 2022, versus the prior year, unless otherwise noted. First off, as Nikhil indicated, 2022 has been a transformational year as we successfully operationalized the Purified Cortrophin Gel launch and integrated the November 2021 acquisition of Novitium into our overall operation. These two platforms for growth drove ANI's full-year revenue to $316.4 million, marking the first time in ANI's history that our full-year revenue has surpassed $300 million. This represents $100 million or 46% growth over the $216.1 million reported in 2021 and establishes a new base as the company continues its growth trajectory.
This full-year achievement was built upon strong sequential quarterly growth, accumulating in $94.2 million of revenues for the three months ending December 31, 2022, up $33.3 million or 54.7% as compared to the prior year period, driven by strong gains in both of our operating segments. Revenues from Purified Cortrophin Gel led the way with $17.6 million in revenues in the quarter. Revenues of our generics, established brands, and other segments were up $15.7 million or 25.8% over the prior year, driven by gains in our generic pharmaceutical product line, which was up $16.4 million or 39% year-over-year. This increase was principally driven by revenues from multiple 2022 new product launches and partially tempered by a decrease in revenues from sales of several legacy ANI generic products.
Contract manufacturing revenues were $4 million during the fourth quarter of 2022, up 45.9% from the $2.8 million posted in the prior year period, primarily related to the addition of Novitium contract manufacturing revenues. Royalty and other revenues were $1.9 million in the current year quarter, in line with prior year, prior year levels. Tempering these growth drivers were net revenues for established brand pharmaceutical products at $12.7 million during the three months ended December 31, 2022. This represents a decrease of 13.3% compared to the $14.7 million for the same period in 2022, driven by lower aggregate unit volumes across the portfolio.
Operating expenses increased by approximately 9.2% to $92.4 million for the three months ended December 31, 2022, from $84.7 million in the prior year period. Cost of sales, excluding depreciation and amortization, increased by $2.4 million to $36.3 million in the fourth quarter of 2022 compared to $33.9 million in the prior year period, primarily due to increased sales volumes of generic products and sales of Purified Cortrophin Gel. Excluding the impact of acquisition accounting, stock compensation, and the effects of our Oakville, Ontario plant closure, all of which are detailed in the tables contained in this morning's press release.
Cost of sales on a non-GAAP basis as a percentage of total net revenues decreased 7.3 points from 45.7% in the fourth quarter of 2021 to 38.4% in the current year period, primarily as a result of favorable mix from the impact of sales of Purified Cortrophin Gel, coupled with the impact of new product launches in our generic franchise. These favorable impacts were partially offset by lower sales of established brand products in the period. Research and development expenses were $5.2 million in the fourth quarter of 2022, an increase of $2.1 million from prior year, primarily due to expenses related to an increased level of generic research and development activities during the current year period.
Selling, general, and administrative expenses increased by 8.1% to $33.2 million in the fourth quarter of 2022 compared to $30.7 million in the prior year quarter, primarily due to a $3.9 million increase in sales and marketing expenses related to our launch of Purified Cortrophin Gel. A full quarter's worth of Novitium Pharma headcount and activities as compared to a partial quarter in the prior year and increased infrastructure to support the growth in our business. These effects were partially offset by a $4.3 million decrease in transaction expenses related to the Novitium Pharma acquisition. Depreciation and amortization expense was $14.5 million for the three months ended December 31, 2022, compared to $13.7 million for the same period in 2021.
An increase of $0.8 million, primarily due to the amortization of intangible assets acquired in the Novitium acquisition. We recognized $1.6 million of restructuring expense in the fourth quarter of 2022 associated with the closure of our Oakville, Ontario facility. Costs included $0.3 million in termination benefits and $1.1 million in fixed asset accelerated depreciation. No restructuring activities were recognized in the prior year period. We have excluded both the one-time charges resulting from this action as well as the portions of the Canada results that are expected to be non-recurring post-closure from our non-GAAP financial measures as detailed in the tables in this morning's press release.
During the quarter ended December 31, 2022, we also recognized a non-cash fair value adjustment of $1.6 million related to the contingent consideration recorded in conjunction with Novitium purchase accounting. Our $0.28 GAAP net loss per share for the quarter reflects significant amortization and purchase accounting-related charges from the Novitium acquisition, coupled with the sales and marketing expense behind our initial commercial launch of Cortrophin and Oakville-related restructuring activities. On an adjusted non-GAAP basis, we had diluted earnings per share of $0.76 for the quarter compared to $0.06 for the prior year period. Adjusted non-GAAP EBITDA for the fourth quarter of 2022 of $23.3 million more than tripled as compared to the $7.2 million posted in the fourth quarter of 2021.
On a sequential basis, was up $4.9 million from $18.4 million in the third quarter of this year. Please note, as disclosed in the footnotes to tables three and four to this morning's press release, beginning in the fourth quarter of 2022, ANI no longer excludes expense for in-process research and development, Cortrophin pre-launch charges, and Cortrophin sales and marketing expenses from its non-GAAP results. Historically, the company excluded these charges. These changes have been made to align with views expressed by the U.S. Securities and Exchange Commission. Prior periods have been recast to reflect these changes. From a balance sheet perspective, we exited the year with $48.2 million in unrestricted cash and cash equivalents and $297 million in face value of outstanding debt, which is due in November of 2027.
As expected, full year 2022 was a heavy cash utilization year, with $31.2 million of cash used in operations as we invested behind the rare disease platform and had significant build of working capital due to rapidly accelerating sequential net revenues. Finally, with this morning's press release, we are instituting 2023 guidance. Total company net revenue between $360 million and $385 million, representing approximately 14%-22% growth as compared to $316.4 million recognized in 2022. Cortrophin specific revenue guidance of between $80 million-$90 million, representing 92%-116% growth as compared to $41.7 million recognized in 2022. Total company non-GAAP gross margin between 59.5% and 61%.
Total company adjusted non-GAAP EBITDA between $78 million and $88 million, and adjusted non-GAAP diluted earnings per share between $2.09 and $2.59. In addition, we currently anticipate between 16.8 million and 17.1 million shares outstanding and an effective tax rate of approximately 24% prior to any federal tax reform. We will now open up the call to questions. Operator, please announce the instructions.
Certainly. At this time, if you would like to ask a question, please press star one on your touchtone phone. You may withdraw your question at any time by pressing star two. Once again, that is star and one. We will take our first question from Elliot Wilbur with Raymond James. Please go ahead.
Thanks. Good morning. First question for Nikhil and, and Steve as well, I guess. Just thinking about expectations with respect to the base business, generics, legacy brands, backing out the numbers, looks like you're expecting growth in mid to high single digits. And just wondering what the assumptions are as far as new approvals, new launches. Should we be expecting a similar pattern to what we've seen over the past 12 months where we kind of see a steady cadence of smaller products coming out of the legacy Novitium pipeline? And is there anything that you could offer up in terms of visibility around any date certain or larger launch opportunities that might enhance confidence in your modest growth expectations for that component of the business?
Sure. Thank you, Elliot. Good morning. Look, I think the 2023 launch cadence will be similar to 2022, where it's a steady stream of launches. I think that over time the scale of those steady stream of launches will increase. To the other part of your question, there isn't a date certain or a, you know, a large launch to sort of point to. You know, there are some sort of relatively larger launches, but nothing that stands out as a, you know, substantially larger than everything else. In terms of concentration of new product launch revenues, we currently don't see that. That's not factored into as an assumption into our guidance for the base business or our overall guidance.
Yeah. The other, the other thing I would add, Nik, Nikhil and Elliot, and good morning, Elliot, is just as we, you know, look and unpack, you know, the different elements that roll up into that segment, I would say, we're expecting the growth in that segment to be led by the generic platform, and, you know, declines year-over-year in the established brands side of the business, and the contract manufacturing side of the business. There's a, you know, a little bit of mix rolling up into that segment, observation that you made.
Okay. Thanks. Maybe just a couple quick financial questions for yourselves. Steve, just anything specifically you can or want to say about the implied step-up in SG&A and R&D spend. Assume most of that is targeted to the expansion of Cortrophin call activities, but anything else that you could say there in terms of more specifics would be helpful. You referenced working capital investment over the course of 2022. Looking at your adjusted net income expectations based on some of the outlook items that you've offered, I mean, looks like you guys are looking for around $40 million-$45 million in adjusted net income. Anything you could say with respect to anticipated cash conversion ratio there?
I'm guessing maybe you would expect to actually overperform more than 100% cash conversion, but I just wanted to bounce that off you and see if there's anything you can give us in terms of expected cash conversion, operating cash flow generation in 2023.
Sure. Sure thing. While we're not offering specific SG&A and R&D guidance this morning, obviously the implication and the reality is that both of those line items will be growing year-over-year. On the R&D side, it will be a continued investment and an increased investment in the R&D platform, principally on the generic side. Obviously, the company's made a very significant investment in the Novitium platform, one that we're extremely happy with. You can see the clear impacts of the performance of the Novitium and platform in 2022. Right there we're focused on continuing to build and expand upon that platform.
On the SG&A side, right, a touch driven by continued investment in the rare disease platform and year two of the Purified Cortrophin Gel launch. As Nikhil had indicated in his prepared statements, we see that direct investment in rare disease, SG&A, around a 10% increase year-over-year. The other aspects of SG&A, right, are just as the company's growing, right, at such a fast clip, obviously the support structure, the supporting functions, naturally grow around that growth in the business in order to adequately support the company and its objectives.
That's something that's been happening throughout the course of 2022, and so there's, you kinda start off the year with an annualization effect of builds and decisions that were made in 2022. Then, you know, a touch more layered in as we envision continued growth across our two growth platforms. On the topic of cash, yeah, as we look forward to 2023, you know, we definitely envision getting back to positive cash flows. You know, the cash flows in 2022 were expected to be cash use year as we stood up the rare disease business, right?
If you unpack the performance on a quarterly basis, again, in 2022, right, as you have the rare disease and machinery up and running essentially from day one, January 1st of 2022. Yet you have sequentially, sequential revenues, right, going from $1 million in the first quarter to over $17 million in the fourth. So that's a very significant effect in terms of cash use, and then as Cortrophin reaches breakeven. And as we look forward to 2023, we very much anticipate returning to favorable cash flows on a total company basis. I'm not gonna specify versus your assumed $45 million of operational.
I would tell you know, we do expect reasonably strong cash flows in 2023, and then building off of that base.
Okay. Just one last question around Cortrophin. Nikhil, is the expansion of the sales force specifically targeted towards the pulmonologist community or would also enable you to enhance the frequency or, you know, expand the breadth of your current calling pattern? Historically, I seem to recall, the pulmonology indication accounting for roughly 15%-20% of the dollar value of the Acthar franchise. I just wanted to see if that's sort of consistent with your, with your, read into that particular segment of the market as well. Thanks.
Yeah. Thanks, Elliot. I think on your point on sales expansion, you know, look, we're trying to find a balance between sharing information to assist the investment community, while not giving away competitively sensitive data. With that, with that understanding, pulmonology is, you know, a critical part of the expansion. However, we may, you know, we may go beyond that too, right? I think in terms of sharing, I think pulmonology is the area that we'd like to share.
You know, in terms of how much of Acthar sales it is, look, it's material enough for us as a sector or a sort of indication for us to say, "Hey, we'll have, you know, dedicated sales force for it," and, you know, in terms of expanding and to reach those patients. Yeah.
Okay, we'll take our next question from Vamil Divan with Guggenheim Securities. Please go ahead.
Great. Thanks, for taking the question. Maybe just a couple more following up on the Cortrophin launch, and I appreciate your comments on not wanting to share too much, you know, competitive information. A couple of questions just following up, on what you did say. Can you maybe just comment a little bit on what you're seeing sort of in the field if physicians are sort of deciding between Cortrophin Gel and competing options? Yeah, nice to see the growth return to that market, but in terms of differentiation, what is sort of driving the decision to use Cortrophin?
Just the second one, again, as much as you're willing to share, kind of baked into your guidance or any comments around what you're assuming around gross to net, would be helpful just for us if you're willing to comment. Thanks.
Sure. Good morning, Vamil, and I think welcome to your first ANI earnings call. Look, your two questions on the gross to net, we are, you know, again, back to the competitive point, we're not sharing that information at this time. In terms of dynamic with prescribers, look, you know, we are continuing to see growth both in the number of unique prescribers, or new unique prescribers, as well as, you know, healthcare providers becoming repeat prescribers. I think they use it, they see the benefit, and then they use it. The other thing to share is that we've seen the prescriber interest in having an alternate treatment in the ACTH category continue to build.
Many of our prescribers had previously slowed or discontinued the use of the ACTH class, you know, prior to our launch. Once we've launched and, you know, as we created awareness around Cortrophin Gel and the ACTH class, you know, they've restarted their use of ACTH therapy. Of course, all of this is for the appropriate patients in need. When you think of that, right? This is why the point on the class and the growth in the class eight months according to IQVIA, year-on-year growth on a monthly basis. Sorry, monthly growth from a year-on-year basis.
I think as you think of that, I think the important point to bear in mind is that if you look a few years ago, the number of patients that were benefiting from ACTH therapy was significantly higher than where we are today. That, you know, that tells you that again, as we're seeing this, you know, class growth, that is, you know, that the prescriber interest in ACTH class and for appropriate patients, is, you know, continues to build.
Okay. All right. Thanks so much for the insights.
Thank you, Vamil.
We'll take our next question from Greg Fraser with Truist Securities. Please go ahead.
Hey, good morning, folks. Thanks for taking the questions. On Cortrophin, can you comment on the competitive environment? I'm not sure if I missed that, and just what you're seeing from the incumbent in terms of strategies to defend this business.
Yeah. just cut to the chase, and good morning, Greg. Look, we're again, trying to find balance between sharing information that's helpful to the investment community while not giving away competitively sensitive data. We know that our competitors are listening in to this call. I think, look, from the way we see it, you know, and obviously, they did comment on this publicly, you know, I think the day before yesterday and then also a week ago. That they're seeing stabilization in the demand and growth in the overall class, and that they believe, and I think we're all about trying to, you know, increase the number of patients that can, you know, for appropriate patients that can benefit from this therapy, right? I mean, I think that's it.
I think, yeah. That's what I feel comfortable sharing at this time.
Got it. This may fall under the same competitive sensitive category, but can you talk about the number of docs that you've been calling on and how the number of prescribers of 510 compare with the overall call universe?
Yeah. Definitely competitively sensitive information, so-
Okay.
We'll be steering clear of that. Thank you for understanding, Vamil.
Great. Understood. Okay. What about just the new patient starts? Have those been ramping similarly with the case initiations? I guess that's, you know, are payer approvals coming through?
Right. Yes. I think that the new patient starts are ramping, and I think one of the things that we will see in 2023 is that the new patient starts in Q4, you know, will continue to, you know, as depending on, you know, what kind of indication they're on, you know, the refill vials will keep sort of coming from those. Our team obviously is focused on increasing the awareness and and understanding of Cortrophin Gel. You know, there are as you were pointing out, there's a number of factors that drive from the number of cases initiated to cases that meet the prioritization criteria and are approved by the insurance plans and the time to dispense of the first vial. Then there's also a variation in terms of the indication mix, right?
On the MS patients versus RA patients versus lupus patients versus nephrotic syndrome patients, and the number of vials used for each indication varies. Also, then patients getting vials through our patient assistance program.
Got it. Thanks for the color. One more question. When do you expect the operational efficiencies from the consolidation of the manufacturing network to fully materialize? Thank you.
Just a question.
I can.
Oh, sorry, go ahead.
I can grab that one. Yeah. Good morning, Greg, and thanks for the insightful question. Yeah, the full GAAP impact and most importantly, the cash flow impact from consolidating manufacturing and closing of the Oakville facility will start to accrue into the results in 2023. Our operational plans to wind down the facility have tracked very much according to plan. And we are in the final days of, you know, manufacturing completed, you know, early this quarter. And we're in the process of, you know, moving and selling off certain fixed assets, et cetera. We're in the final days of the wind down plan, as we speak. That cash flow impact will start to accrue in 2023.
Certainly, GAAP results on the P&L will accrue in. As you know, Ray, on the non-GAAP results, in the non-GAAP EBITDA and non-GAAP EPS, we've been adding back certain portions of those savings, the impacts of non-recurring costs on the CDMO side, in Canada, since the second quarter of 2022. A portion of that impact and effect is already reflected in the non-GAAP results.
Just before we, before we move on, Greg, I think just coming back to your question on competitive dynamic, you know, just to be, again, to try and be helpful to the investment community, I would point you to, you know, the fact that according to IQVIA, eight months consecutively, we've seen year-on-year growth in the class. That's one data point. You also see the, you know, the relative market share. That's another data point. It's in the public domain. The third one is claims, you know, tracking the claims, and that gives you another data point. Finally, obviously, you see, you know, the published price.
I think these are three or four data points that are available in the public domain that can be helpful to point to the competitive dynamic and again, the overall as we see it, right, that the number of patients that were on ACTH therapy three to four years ago was much higher than where they are today. You know, we're increasing awareness and understanding of Cortrophin Gel, you know, to find the appropriate patients in need.
That's helpful. Thank you.
Yeah. Thanks, Greg.
We'll take our next question from Brandon Folkes with Cantor Fitzgerald. Please go ahead.
Hi. Thanks for taking my questions, and congratulations on all the progress in 2022. I do just want to come back to the cash flow conversion and generation. You reported adjusted EBITDA, I think, of $56 million, operating cash burn, I think I heard you say, Steve, of $31 million. Can you just elaborate on the moving pieces regarding cash flow generation in 2023? I did hear you talking about getting back to cash flow generation and, you know, strong cash flow generation at that. Just maybe help us bridge that $87 million gap between adjusted EBITDA in 2022 and operating cash flow. Is it really just interest payments and working capital build?
You know, why should we not expect to continue, to see a working capital build in 2023 or, albeit perhaps lower in 2022, but just given the growth trajectory, one of your 2023 guidance and then maybe, you know, what we're all expecting for 2024. I know that's a lot in there, but maybe just to tack on top of that then, you know, how is your flexibility to bring in additional assets, as you finance this organic growth and service the debt? Thank you.
Yep. Thanks, Brendan. Yeah, I, I think, like the biggest, the biggest part of the bridge that you described, is the change in working capital, right? I think, you have to understand that there's been extreme acceleration in sequential performance, both quarterly, right? If you look at the quarters, obviously out in the public domain, right, the company posted $94 million in sales versus $64.5 million in the first quarter of this year. When you look at that, you know, year-over-year, as we said on the call, right, fourth quarter revenues are up $33 million, year-over-year.
At the December 31st balance sheet, right, a large portion of that sales gain year-over-year is sitting in AR. Right. On top of that, on the inventory side of working capital, right, we've had a tremendous expansion of the business across both lines, right? On the generic side, obviously we've launched, you know, over 20 products in 2022, right? There's working capital builds on inventory to support those product launches and obviously the effect on AR as we discussed. On the Purified Cortrophin Gel side, right, that's a product where supply chain is extremely important, and, you know, the production of inventories there, you know, kind of happens, you know, more periodically, right?
Given the specialized nature of that product. So you can have lumpiness in the inventory purchases on the Cortrophin side. Those impacts are very real, and they're, and, you know, they're very significant when you look at that quarterly progression. As you can imagine, right, if you were to unpack the fourth quarter, especially for those growth platforms, right, there tends to be sequential growth within the months as well. On total company cash flows, right, obviously the second biggest bill, if you will, in 2022, you know, is on, you know, debt financing and servicing the debt finance bill.
That cost just shy of $24 million on interest, and then $3 million of debt principal pay down. Those are the biggest impacts of cash flow in 2022. As we look forward to 2023, you're correct. We do expect to have continued sequential build. I think the impacts of the overall growth in the business in 2022 will start to manifest more in the cash flow and in the cash balance. We do expect that as absolute growth percentages moderate a touch, we do expect that working capital component to be less severe than it was this year.
Just one other thing to add, Brandon, and good morning, is that, you know, we also have the sale of the Oakville facility, as a positive cash flow item to think about.
Great. Thank you very much to both of you. Very helpful. Congrats again on the progress.
Thank you.
Thanks, Brandon.
We'll take our next question from Oren Livnat with H.C. Wainwright. Please go ahead.
Thanks. I have a couple. On Cortrophin, I understand you have to be keep things close to the vest competitively here. Just in general on approval of coverage trends, are those timelines shrinking materially? You discussed you're continuing to work to improve coverage and access. How would you characterize your, I guess, without specifics, but just your relative positioning to Acthar, you know, at launch and now? Should we expect any material changes in Q1, whether normal seasonal headwinds from resetting of plans and prior ops, et cetera, or actual potential tailwinds with new coverage wins kicking in? I have a follow-up, thanks.
Yeah. Yeah. Good morning, Oren, and thank you. Thank you for your questions. Yeah, look, again, you know, the specifics on market access and, and relative coverage position is clearly competitive, competitively sensitive information. I think that, as I mentioned during my prepared remarks, that we're continuing to work to increase and improve the market access for patients in need, both with coverage decisions as well as with helping, you know, through our reimbursement team, you know, just helping to reduce the time from enrollment to fulfillment. I should probably steer clear of giving any further specifics beyond that. The last time I checked, folks from Mallinckrodt were actually listening in to my call, so.
Yeah. In terms of seasonality in Q1, I mean, we normally, especially in rare expensive drugs, we expect, you know, a headwind in Q1. Should we just make the, you know, standard assumption that that's the case for your product like most? In theory, as you're entering your first full year, are you hoping to have a new win?
No, I think you're exactly right that the, you know, there is a dynamic that's typical for rare disease launches between Q4 and Q1, such as patients switching insurance plans and the impact of that. I think that, ANI's rare disease product will sort of follow suit on that.
Perfect. You did mention bolstering the pulmonology support, I think it's pretty vague, but maybe other areas. I'm assuming you're referring to whatever differentiation you have indication-wise versus Acthar, which I guess is not competitive information. It's in the labels, so maybe you could talk about it. you know, how material do you view the opportunity and any differentiated indications you have versus Acthar?
We're not. You're right. It is in the label, and we do have differentiated indications versus Acthar. We're not sharing anything at this time. I think the second part on pulmonology, sorry, the other indications, I think, you know, we pointed you in the direction of the modest sales force expansion in the area of pulmonology, and I think that that's appropriate to share.
What are the biggest drivers there, you know, in terms of the ranges, bull and bear case scenarios margin-wise? Is it just, you know, how much you choose to invest, you know, on the OpEx side? Or is there some material variability in the gross margins of the underlying business units? Actually, I think I missed in your remarks. Did you give company gross margin guidance there? And on generics specifically, just directionally, given you're launching expect to launch competitive generic therapies, is it possible gross margins overall in the generics business can increase in 2023? Or is that would that be too aggressive an assumption? And should we assume that they're flat at best?
Yeah. Good morning, Oren. Yes, we did comment on total company gross margin profile, and we cited that at 69.5%-61%, and that would be on a non-GAAP basis. As you think about the different puts and takes in the ranges and the guidance, you know, certainly, you know, certainly one of them is just, you know, how the sales mix does play out. As we've talked about in the past, right, Purified Cortrophin Gel is a favorable input as it grows to our overall company gross margin profile.
However, you know, there is a touch of headwind year-over-year, as I had cited in Elliot's question at the top of the Q&A, in our kind of other revenues categories, right? And the one that I didn't cite on Elliot's call, which is germane, is in the area of royalties. You expect royalty income to decline year-over-year. And obviously, royalty income has a 100% gross margin profile. And then, as you know, right, our Established Brands business, which has a high brand margin profile, right, tends to be a declining asset year-over-year, without, you know, business development impact on it.
There's puts and takes, right, in that gross margin profile guidance. Then the other aspects, right, are just the implied ranges. Again, we haven't given SG&A and R&D guidance, right, but the implied ranges of that kind of total OpEx, and those are in, you know, those are in relatively tight ranges. But, you know, the decision's there, and as we've said, right, we're very focused on continuing to invest behind the two growth platforms. You know, and this is our point of view at a moment in time, right? Obviously, as the year develops, and we get, you know, more experience under our belt with the performance and the continued trajectory, you know, obviously we'll update as appropriate.
Can you comment on the directionality of generic gross margins or no?
Yes. Oh, right. Yeah, your question. I would say, gross margins for the generic business can absolutely expand. The first thing that I would point to you there, right, is just the overall, you know, aggregate age of the portfolio, right? As you know, right, gross margin profiles in generics would tend to be best at the launch date. As competitive pressures, you know, kick in as time goes on, you would have margin compression. As we're in an era of, you know, multiple generic launches off of the strength of the R&D platform, you know, that lowers the aggregate age of our portfolio and is a positive contributor to the generic gross margin profile.
Great. If I may-
[Uncertain]
Oh, go ahead, Nikhil.
Sorry. Go on.
Yeah.
Yeah. Just to clarify or build on what Steve said, he says that it can expand, but you know, we haven't given specific guidance on the mix, right? We're giving you what the mix of the three is, right?
Yeah.
He's still telling you about the moving parts, yeah.
Yeah. Yeah. Yeah. No, no promises in generics. Building on everyone's questions on cash, like I'm not an accountant, so I'm sorry if this is a dumb question. Just when we talk about, besides the investments in inventory and other working capital investments, when we just talk about accounts receivable and how that's grown over the year, just to clarify, is that really just a function of time and growth of revenue, you know, net payment terms and obviously a rapidly growing top line? Or is there potentially any difference in the regular collection cycle with the new orphan business versus the legacy generics? Is there something unique about accounts receivable collections on the orphan side?
Yeah, sure. I'll answer the first part is in 2022, the utilization of cash and what's sitting in AR is largely driven by just the normal cycle and significantly accelerating sequential growth, again, even within the months, right? In terms of, you know, looking forward and as Purified Cortrophin Gel becomes a bigger overall mix of our business, you know, I'll say generally speaking, right, the contractual relationships and contractual terms for that type of branded product, right, are more favorable than the terms that we would expect in the generic business. So that should be another underlying positive factor as Purified Cortrophin Gel grows as an overall percentage of our business.
Thank you. That's really helpful. Appreciate your patience with all the questions.
Thanks, Oren, and very insightful questions. Thank you very much.
We'll take a follow-up question from Elliot Wilbur with Raymond James. Please go ahead.
Thanks. Real quickly. Just going back to Cortrophin. As we think about modeling the trajectory of the product and the, you know, the various treatment curves and persistent trends within your three primary indications, any particular area where you're seeing overperformance perhaps versus the historical ACTH usage pattern? I get some of the early data suggests that relative usage in nephrotic syndrome is much higher than what we've seen with Acthar. I don't know if that's just a function of not enough data points or if in fact that's something that you're seeing as well. Bigger picture question, as we start to see the ACTH market recover in terms of unit volumes, anything you could say in terms of sort of the patient dynamics there?
I understand most of these patients will be sort of new to therapy, meaning they haven't been on either Cortrophin Gel or Acthar probably for 12 months. Any perspective you can offer, at least at this early stage, in terms of, you know, patients who may actually be treatment naive or not previously on ACTH therapies in terms of the mix. Last question, I'm sure I know the response already, but Acthar labeling is differentiated because it has the infantile spasms indication. Anything you could say about your plans in that area as well? Thanks.
Thank you. Thanks, Elliot. Insightful questions as always. Your question on, you know, are we seeing sort of favorable dynamics on one patient or one indication versus another, versus, you know, what Acthar has historically had, we'll probably need to steer clear of that 'cause that, you know, points in a direction of focus that could be valuable for... It's competitively sensitive, so that's one. On patient dynamics, I think what we can share is, you know, there are prescribers who were writing or using the ACTH class and they had either stopped or reduced their writing considerably.
Their interest, as we have driven sort of greater understanding, around Cortrophin Gel, awareness and understanding of Cortrophin Gel, we've seen their interest continue to build and that's manifest, you know, that is. What I can share is, you know, there are prescribers that are, you know, writing, their first prescription of Cortrophin Gel, and there are prescribers that are writing, you know, multiple prescriptions of Cortrophin Gel, you know. I guess what you can see from that is that the patients that they put on Cortrophin Gel, you know, you know, potentially are seeing, right?
I think that they see the impact of that, and they make the decision to decide which are the appropriate patients to continue to put on Cortrophin Gel. I think that's what I can share. The last one, look, these are all dynamics that we are, just to be clear, these are all dynamics that we are, we believe are favorable. Therefore you see that our guidance for 2023 is 92%-116% higher. That's why sorry, 92%-116% higher than 2022.
That's why you see that the ACTH class has grown month-on-month consecutively eight months in a row. Your third question on the IS indication, yeah, competitively sensitive information. I just wanna say, you know, before we move on, I just wanna thank all of you for your patience and understanding as we, again, you know, we're all, we're trying to find that balance between giving the investment community as much information with, sharing in, you know, competitively sensitive information in a two-player market, right?
There are no further questions at this time. I'll turn the call back over to Nikhil Lalwani for closing remarks.
Thank you, Ashley, and thank you everyone for joining our call this morning. ANI is well-positioned to deliver sustainable growth. We look forward to updating you on the continued progress. We appreciate your time and interest in ANI. Thank you.
Thank you.
Thank you. Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.