Joining us again for this year's Guggenheim Healthcare Innovation Conference. I am Vamil Divan, one of the biopharma analysts here at Guggenheim. Joined from the Guggenheim side on the stage by Daniel Krizay, one of the members of the team as well. Next up from the company side in this room, we have ANI Pharmaceuticals. Thanks so much for joining us. We have Nikhil Lalwani next to me, the CEO of the company. Stephen Carey next to him, the CFO. Exciting times at ANI. You just reported earnings, you reported acquisition in the last few days here.
Maybe Nikhil, just to kind of kick things off, for those less familiar with the story, just give a little bit of background of the ANI story and kind of the evolution of the company over the last year or so, and then we will dive into some of the details after that.
Sure. Good afternoon, everybody, and thank you for joining us. Yeah, we have had an exciting year with accelerating our transformation into a leading rare disease company. As a reminder, we have two strong growth, durable assets, increasingly profitable in our rare disease franchise that both have operate in Cortrophin and ILUVIEN. They both operate in large addressable markets that are significantly under-penetrated, so giving strong multi-year growth opportunity. They have durability because Cortrophin is tough to genericize and has IP that goes until 2043, and ILUVIEN has high barriers to genericization, so there is durability.
As you alluded to, we are thrilled to announce the addition of EMCITATE through the acquisition of Egetis Therapeutics, another rare disease asset that expands the scope and scale of our rare disease business, adds an asset with $300 million plus in peak sales, and leads us further in our rare disease journey, where by the end of this decade, a substantial majority of our sales will come from rare disease. We are already at over 50% in this year. We will also improve the operating margin profile and the growth profile of the company's rare disease business. All in all, a great part of the ANI's rare disease journey.
Okay, great. So why don't we start with that, and I know you're probably limited on what you can share, just given the deal's still going through the process. But the acquisition, maybe the strategic and the financial rationale for doing the acquisition, and then why Egetis specifically?
Sure. So strategically, the acquisition of Egetis Therapeutics plays a key role in expanding the scope and scale of our rare disease business.
Yeah. Coming back to the Egetis acquisition and the strategic and financial rationale for the same, which was your question. Number one, it expands the scope and scale of our rare disease business. EMCITATE is a first-in-class drug. It's the only approved treatment for the treatment of peripheral thyrotoxicosis for patients that are impacted by MCT8 deficiency.
MCT8 deficiency is a debilitating condition that impacts patients from birth, with median mortality of 35 years. Caregivers need to give 24/7 care to patients, and EMCITATE is the first and only approved FDA treatment for this indication. It's also approved in Europe and has been launched in Germany. Even beyond this, strategically, it also helps us on our purpose of serving patients, improving lives, because it brings an FDA-approved treatment, first and only of its type, to an indication for which there is no approved therapy.
It also leverages our rare disease expertise and infrastructure, and brings ANI resources to expand the reach of EMCITATE to the patients in need, appropriate patients in need. It adds the capability strategically of research and development, right? It strengthens our capability in the R&D team that got EMCITATE approval for thyrotoxicosis for patients with MCT8 deficiency are also working on EMCITATE for RTH beta, which is an additional pipeline indication. So it brings that capability in-house. From a financial perspective, it adds an asset with $300 million plus in peak sales, a much more improved operating margin profile than our two existing assets. And overall, financially, it also makes a ton of sense for the company to expand.
As I said, towards the end of this decade, with the addition, now we will have three rare disease assets, and the operating margin profile of the company and the growth and durability of all three assets is substantial. EMCITATE has patents that grow until 2045, so just a significant runway for growth too.
Okay. Then maybe just last question on this is just the next steps here in terms of getting the deal closed.
Sure. I think first and foremost, the Egetis team has done a lot, right? We have been watching them closely. They have done a lot to get the launch going, both in Europe and Germany, where they have launched, as well as in the U.S. They will continue on their path of connecting with patients and caregivers and their physicians. From a deal closure past standpoint, this is a cross-border deal with Sweden where we have issued a tender offer and there is a requirement to achieve 90% approval from shareholders to tender their shares. We have very strong support from the leading shareholders with 42% of shareholders already providing us irrevocables on their shares. We look forward to working to get the necessary, obviously, HSR and Swedish FTC antitrust approval, and other customary closing conditions.
All in all, we think by the end of 2026, early 2027, early 1Q 2027, we will have closing on this deal.
Okay. All right, great. Let's shift back over to Cortrophin.
Sure.
Which has been one of the key areas of focus prior to the acquisition being announced. On your third quarter call, obviously, you updated numbers, updated the guidance. Maybe just walk through sort of the performance in the quarter, the trends you are seeing, and specifically in this expansion into the gout indication, what you are seeing, and then kind of how that all put together drove the adjustment to the guidance.
Sure. Yeah, so we think of Cortrophin across existing specialties, right?
The ones that we were focused on initially, which were neurology, nephrology, rheumatology, ophthalmology, and pulmonology, and then the gout expansion, which we did in June of this year, to expand our reach to patients and prescribers, we went to primary care physicians and podiatrists for gout. So, across both groups, we have had very strong demand. In existing specialties, we saw strong momentum through the quarter, and then even in October, that momentum has continued with a record number of new cases initiated, which is enrollments or prescriptions at the top of the funnel. And also for the gout expansion, we have seen substantial growth where, and again, we expanded our sales force by about 50%, adding 64 reps to go to primary care and podiatry. That expansion was fully operational by the end of June, right?
And we obviously had reps in the building starting the first week of May. What we have seen is the demand momentum has continued. In Q3, the number of cases initiated was 2x the number of cases initiated in Q2 from the gout expansion. And we have seen both depth and breadth in the prescribing, which I can detail some more later. But if you look at it in aggregate, from a demand perspective, the demand across existing specialties and the gout expansion for Cortrophin was very strong, where we had 85% growth in number of new cases initiated between June through October, the five months, versus the first five months, which is January through May.
That surge in demand at the top of the funnel created pressure on our specialty pharmacy network, and essentially, it led to lower conversion of those enrollments onto paid drug.
That revenue conversion issue, we have obviously acted immediately to try and fix, and we're seeing early traction in the actions we've taken. Number one, we expanded our specialty pharmacy network in regions with high demand by bringing on board regional specialty pharmacies. In addition, with the existing specialty pharmacies, we worked with them to expand our collaboration, for example, tapping into value-added services where they provide them, or also requesting them to add more resources to service the much higher demand we were seeing. That revenue conversion impact, and this, by the way, impacted both revenue conversion in existing specialties and gout, because we use the same specialty pharmacy network for both. That impact we're starting to see, where towards the latter end of Q3 and the early part of Q4, we've seen shorter times to fill.
Another impact that we've had, another dynamic that impacted the Q3 numbers is that the primary care physicians and podiatrists are almost all naive to ACTH. So they are taking a bit more time ramping up on the Cortrophin enrollment to fulfillment process. We're, of course, supporting them as well as the specialty pharmacies by now doubling our field reimbursement team that is supporting the revenue conversion, both for the gout expansion. Again, that's also contributed to the improvements we've seen in time to the first fill towards the latter part of Q3 and first part of Q4. You take it all together, what did we do to the numbers?
In Q3, we delivered $138.7 million in revs against a soft guidance that we'd given of $143 million to $153 million. Then our guidance for the year is now at $480 million to $500 million, which importantly, right, is 38% to 44% growth over the previous year of $347 million.
Yeah. Okay.
And most importantly, sorry, if I may, there is significant multi-year growth opportunity, and nothing has changed in that. It's a near-term blip on terms of revenue conversion, and we're obviously taking actions to improve that.
Okay. And you touched on this briefly, but just in terms of the depth you're seeing now in that primary care podiatry market, maybe you can-
Sure
go a little bit deeper on what you're seeing.
Yeah. So we're seeing across primary care and podiatry, they're able to identify appropriate patients. There is a flow-through of appropriate patients, and we see that almost 40% of our prescribers, and remember, these are all naive to ACTH, that they've used Cortrophin now and initiated more than two cases each, 40% of our prescribers have. When you look at the number of prescribers, which is the breadth, compared to Q2 of 2026, in Q3, we have 67% growth in the number of new prescribers. Our team is able to go and talk about Cortrophin and the appropriate patients with a broader prescriber base and also get traction with them, and they're able to identify the appropriate patients.
Yeah. Okay. All right, let me turn it over to Daniel to go a little deeper.
Sure.
Yeah, great. Obviously, you spent a lot of your focus on gout recently, but you have all your other existing specialties, sorry, with a large addressable patient population. So, I guess which of these specialties or indications do you believe offer the largest near-term upside?
Sure. I think we are fortunate that the opportunities are plenty across the existing specialties, whether that's rheumatology and rheumatoid arthritis, nephrotic syndrome, multiple sclerosis. Each of these have large addressable markets, and we are simply significantly under-penetrating, even between us and the competitor, any of these indications, even for the appropriate patients, right? The addressable markets obviously are much smaller than the broader indications that suggest, but even for that addressable market, both between the competitor and us, we're significantly under-penetrated. So, we see opportunity across specialties. And then, just as an example, when you look at ophthalmology, which is one of our existing specialties, we've seen a doubling of volumes between last quarter, same quarter last year. So, year-over-year, we've seen a doubling of volumes in ophthalmology.
So, just to give you a sense of the, while, as you said, a lot of the airtime is getting taken by gout, there is a tremendous amount of demand in the existing specialties too.
Okay, great. Looking a little broader, how are you thinking about the growth of the overall ACTH market, and maybe your expectations of how that is going to continue to evolve over the next few years?
Sure. I think the market has returned growth after our launch, and both the competitor and us are continuing to see very robust growth. We reported 36% year-over-year growth in the quarter, and our competitor just reported this morning and reported, I think, north of 20% growth also year over year in the quarter. Again, the underlying demand comes from the or the headroom for growth comes from the under-penetrated larger addressable markets.
Okay, great. Maybe one more question on Cortrophin before moving on to your other assets. You are currently undergoing a Phase 4 study in gout. Maybe you just kind of give us an overview of the current status of that and what you are hoping to learn.
Sure. The Phase 4 study in gout is aimed at generating more evidence to support clinician use of Cortrophin for the appropriate acute gouty arthritis flares patients, but also to take this data to ACR and other guidelines and see how gout can be, sorry, Cortrophin can be included in the ACR guidelines, obviously for the appropriate patients as a late-line therapy. We have continued making good progress on the study. We are in the process of expanding the number of sites where the study is accruing patients, and we look forward to providing updates as the study progresses further.
Okay. Maybe moving to ILUVIEN and staying on a theme of new data. You presented full SYNCHRONICITY data at AAO. Maybe just kind of give an overview of the key takeaways here and how you're going to use this data to present it to the retina specialists.
Great. SYNCHRONICITY is a Phase 4 study for ILUVIEN for patients that are treated with chronic non-infectious uveitis affecting posterior segment of the eye. The data was very well received at AAO. A couple of the key things that, the positive feedback we got, obviously, the primary endpoints both on BCVA and CST were met, both at the six-month time period, but also at the 24-month time period. ILUVIEN plays a role in controlling inflammation, obviously, as it elutes fluocinolone. Retina specialists appreciated that and seeing that sort of come through in the data, and the tolerability profile was consistent with prior trials.
What we've been able to do is continue to get SYNCHRONICITY data results into our promotional material so that between our medical team and the sales team to continue increasing the awareness of the SYNCHRONICITY trial results to patients being treated for chronic NIU-PS, where steroids are the standard of care. ILUVIEN, what it does is it provides both durability, because it lasts for a period of three years, and also reduce treatment burden, right? Because you go in once for the implant, and it works for a longer period of time.
Okay. Then I guess based on current utilization of the drug and your conversations with these specialists, where do you see ILUVIEN fitting into the treatment paradigm, both in DME but also NIU-PS?
Yeah. In DME, diabetic macular edema, ILUVIEN is used for patients that have went through multiple rounds of anti-VEGFs and are not showing optimal response, and they show positive response to steroid trial. That's about 50,000 plus patients, and currently we're treating less than 5,000 patients a year with ILUVIEN, so there's significant headroom for growth. As I said, NIU-PS. Steroids are the standard of care. Here we see the addressable market close to 75,000 patients, and again, less than 5,000 patients being treated, and it provides both reduced treatment burden and increased durability. So that's how we see it being used for ILUVIEN.
Okay. Maybe moving over to generics. It once again performed very well in the third quarter. I guess, what were the main drivers of this, the revised outlook for the generics segment in 2026, and how should we think about the growth of the segment moving into next year?
Yeah. Generics continues to outperform based on the strength of our R&D capabilities. We launched 16 new products this year so far. We also have strong operational backbone with three manufacturing plants in the U.S. with good regulatory status, and again, strong coordination between the operational and commercial teams to capture the opportunities that arise. We've been able We started the year saying that we would be continuing to raise our guidance on generics, right? We went from saying flattish to now saying that we'll grow on the back of a year that had 27% growth last year. Generics, we continue to invest high single digits percentage of generic sales into R&D to continue funding the growth of our generics business.
The generics business plays a very, very important role in generating EBITDA and cash flows that we are reinvesting into our rare disease business and leading the transformation of ANI into a leading rare disease company.
Okay. Then maybe one for you, for capital allocation. Following the Egetis acquisition, how are you prioritizing organic investment, and then rare disease business development, stock buyback, anything?
Yeah, sure. First I would start off just by highlighting how pleased we are with the evolution of the balance sheet. The strength of the business and the operations throughout recent years culminated in the September balance sheet having $420 million of cash. We had $170 million of free cash flow in the first nine months of the year, which is up 40% year-over-year.
That health in the balance sheet and the cash just has allowed us to really hit all three of our capital allocation objectives for 2026, which was investing organically behind the business through the gout expansion and continued investment in generic R&D, taking acquisition steps such as the announced acquisition of Egetis to continue to grow the rare disease business, and even reallocating some of the cash back to shareholders through $20 million of share repurchases that we've done to date. Looking forward, all of this put us in a great position for the acquisition where we're going to bring essentially half of the funds with cash on our balance sheet, about $300 million, and fund the rest through incremental debt. We'll start day one pro forma right around 2.7 turns net levered.
From that point forward, as you've seen us do with the Alimera acquisition and the Novitium acquisition previously, we'll go into a period of organic delevering, focus on executing behind the acquisition of Egetis, as well as the continued execution behind Cortrophin, ILUVIEN, and generics, and we'll organically delever and build that cash back up to continue to allocate towards future BD and M&A in the rare disease part of our business.
All right. So maybe I'll jump back in. We have a couple minutes left, so maybe two questions that I could. One, I think this year, they're sort of related questions. This year, I think there's a lot of questions and concerns around the guidance over the last few quarters.
I think that's sort of impacted the stock performance. Now we got the adjusted guidance, and I think sort of removed that overhang. So one question is, how are you thinking about guidance for 2027? Any changes in kind of how you're thinking about laying out your plans for the year there, guidance-wise? And second, what do you think investors are sort of missing with the story, even with your comments? There was, again, concerns around Cortrophin, but still very good growth from Cortrophin. The rest of the business seems to be doing well.
Now you have another layer on top of this with the acquisition. What do you think investors are not appreciating?
Sure
Touch on those two.
Yeah, I think Thank you for your questions, Vamil. We believe ANI is currently being valued as a generics company, and not getting sufficient credit for the rare disease platform that we have built, where we have two assets that are generating $560 million to $585 million in sales, growing 32% to 38% on the top line, and have now added a third asset. And is already more than 50% of the company in net revenues, and then now we've added a third asset that has growth and durability, and $300 million plus peak sales potential. So this platform, a rare disease platform that is growing as strong as it is, with growth, profitability, and durability, we don't believe we're getting The market is not rewarding us for that. Also, to the point you made, the diversification of our businesses, right?
Even in a period where we have adjusted guidance, our total company revenues and EBITDA have continued to exceed consensus for multiple quarters in a row, and that speaks to the strength of the diversification of our business and the strength of our balance sheet. We generated $200 million in cash in the first nine months. That is more than all of last year, right? We have a strong cash flow generation even post the deal. We are at 2.7x net leverage, but again, with a clear path to delevering. I think that is what I would point to.
Look, as far as Cortrophin goes, the most important point to remember is that there is strong underlying demand because of the large addressable markets, and this year, we are going to grow 38% to 44%, and the total market is growing, and there is just significant multi-year growth with durability, right? Because it is a tough drug to genericize, and IP that goes into 2043.
Okay. All right, so why do not we leave it at that. Thanks so much again for joining us this year. Congrats on all the progress. Look forward to seeing the deal get closed and moving into 2027.
Thank you, Vamil and Danny.
Thanks, Vamil. Thanks, Daniel.
Thanks, Daniel.