On February 26, 2018 Eagle Pharmaceuticals, Inc. ("Eagle" or "the Company") (Nasdaq: EGRX) reported its financial results for the three- and twelve-months ended December 31, 2017 (Press release, Eagle Pharmaceuticals, FEB 26, 2018, View Source [SID1234524162]). Highlights of and subsequent to the fourth quarter of 2017 include:
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Business and Recent Highlights:
Agreed on a path forward with the FDA for RYANODEX for EHS and plans to conduct an additional clinical trial in August 2018 during the Hajj pilgrimage, similar to the Eagle study conducted during the Hajj in 2015;
Completed randomization of 600 subjects in the fulvestrant clinical study ahead of schedule during the first quarter of 2018;
Filed an ANDA for Eagle’s first of two ANDA product candidates in 2018; awaiting FDA acceptance;
Settled $48mm in potential Arsia milestone obligations in exchange for $15 million in cash, for a total investment in Eagle Biologics of $45 million.
Financial Highlights:
Fourth Quarter 2017
Total revenue for the fourth quarter of 2017 was $46.8 million, compared to $81.1 million in the fourth quarter of 2016, which included $40 million in license and other income;
Q4 2017 income before income tax provision was $9.9 million compared to $28.3 million in Q4 2016;
Q4 2017 net income was $9.1 million, or $0.61 per basic and $0.58 per diluted share, compared to net income of $57.3 million, or $3.75 per basic and $3.52 per diluted share in Q4 2016;
Q4 2017 Adjusted Non-GAAP net income was $15.6 million, or $1.05 per basic and $1.00 per diluted share, compared to Adjusted Non-GAAP net income of $17.2 million, or $1.12 per basic and $1.05 per diluted share in the prior year quarter.
Full Year 2017
Total revenue for the twelve months ending December 31, 2017 grew 25% to $236.7 million, compared to $189.5 million in 2016;
2017 income before income tax provision was $72.9 million, compared to $53.4 million in 2016;
2017 net income was $51.9 million, or $3.44 per basic and $3.27 per diluted share, compared to a net income of $81.5 million, or $5.24 per basic and $4.96 per diluted share in 2016;
2017 income tax expense was $21 million, compared to an income tax benefit of $28 million in 2016;
2017 Adjusted Non-GAAP net income was $69.0 million, or $4.57 per basic and $4.34 per diluted share, compared to Adjusted Non-GAAP net income of $45.9 million, or $2.96 per basic and $2.79 per diluted share in 2016. For a full reconciliation of Adjusted Non-GAAP net income to the most comparable GAAP financial measures, please see the tables at the end of this press release;
2017 EBITDA was $96.2 million, compared to $63.9 million in 2016;
At year end, Eagle had completed its $75 million Share Repurchase Program authorized in August 2016 and purchased an additional $5.8 million in Eagle common stock as part of its expanded $100 million share buyback program;
Cash and cash equivalents were $114.7 million, accounts receivable were $53.8 million, and debt was $48.8 million as of December 31, 2017; and,
2018 Expense Guidance:
R&D expense is expected to be in the range of $46 – $50 million ($39 – $43 million on a non-GAAP basis)
SG&A expense is expected to be in the range of $61 – $64 million ($45 – $48 million on a non-GAAP basis).
"Eagle had another record year in 2017, with revenue of $237 million and EBITDA of $96 million. We are excited about our positive meeting with the FDA that will enable us to advance RYANODEX for EHS, and are planning to conduct another clinical study at the Hajj in August of this year. And, our fulvestrant study randomization has now been completed ahead of schedule with 600 subjects. Pending positive data, we remain on track to file an NDA during the fourth quarter of 2018," stated Scott Tarriff, Chief Executive Officer of Eagle Pharmaceuticals.
"Importantly, we filed an ANDA for our first of two assets earlier this year and intend to file another during the second half of 2018. Combined branded sales for these assets are approximately $500 million, representing another significant opportunity to create value for patients and shareholders," added Tarriff.
"We remain focused on developing best-in-class injectables and driving value for shareholders. Given the strength of our pipeline and multiple upcoming catalysts in 2018, we believe we are well-positioned to continue to deliver strong results this year," concluded Tarriff.
Fourth Quarter 2017 Financial Results
Total revenue for the three months ended December 31, 2017 was $46.8 million, as compared to $81.1 million for the three months ended December 31, 2016. A summary of total revenue is outlined below:
Three Months Ended December 31,
2017 2016
Revenue:
Product sales $ 10,432 $ 9,080
Royalty income 36,353 32,015
License and other income — 40,046
Total revenue 46,785 81,141
Product sales were $10.4 million, driven by increases in Bendeka and Ryanodex, partially offset by a decrease in Argatroban. Royalty income increased to $36.4 million, as a result of the increased market share on Teva sales of Bendeka, as well as an increase in the royalty rate from 20% to 25%.
Research and development expenses decreased $6.8 million to $9.4 million for the three months ended December 31, 2017, compared to $16.2 million in the prior year quarter. The decrease was largely due to lower levels of API purchases.
SG&A expenses decreased $4.2 million to $13.4 million in the fourth quarter of 2017 compared to $17.5 million in the three months ended December 31, 2016. The decrease was due to the expiration of the Spectrum promotion contract at the end of June 2017, as well as a reduction in marketing expenses. These reductions were partially offset by the increase in personnel-related expenses associated with the expansion of our sales force in the second quarter of 2017.
During the fourth quarter of 2017, Eagle recorded a tax expense of $854,000, compared to a tax benefit of $29 million during the fourth quarter of 2016. The tax provision in the fourth quarter of 2017 was decreased by the recognition of federal R&D tax credits, offset in part by an adjustment to Eagle’s net deferred tax asset to reflect the impact of the recently enacted federal tax reform legislation. The tax provision in the fourth quarter of 2016 was impacted by Eagle’s reversal of the valuation allowance against the Company’s net deferred tax asset.
Net income for the fourth quarter was $9.1 million, or $0.61 per basic share and $0.58 per diluted share, compared to net income of $57.3 million, or $3.75 per basic and $3.52 per diluted share in the three months ended December 31, 2016, due to the factors discussed above.
Adjusted Non-GAAP net income for the fourth quarter of 2017 was $15.6 million, or $1.05 per basic and $1.00 per diluted share, compared to Adjusted Non-GAAP net income of $17.2 million or $1.12 per basic and $1.05 per diluted share in the prior year quarter. For a full reconciliation of Adjusted Non-GAAP net income to the most comparable GAAP financial measures, please see the tables at the end of this press release.
Full Year 2017 Financial Results
Total revenue for the year ended December 31, 2017 was $236.7 million, as compared to $189.5 million for the year ended December 31, 2016. A summary of total revenue is outlined below:
Year Ended December 31,
2017 2016
Revenue:
Product sales $ 45,327 $ 40,646
Royalty income 153,880 99,040
License and other income 37,500 49,796
Total revenue 236,707 189,482
The increase in product sales in 2017 was driven primarily by the growth in Ryanodex sales. Royalty income increased by $54.8 million to $153.9 million in 2017 from $99.0 million in 2016, due to increased sales of Bendeka and an increase in the royalty rate from 20% to 25%. License and other income reflects payments received for achieving certain contractual milestones in connection with the Company’s Bendeka licensing agreement with Teva, as well as an upfront payment associated with the SymBio collaboration covering Japanese rights for bendamustine hydrochloride ready-to-dilute and rapid infusion injection products.
Gross margin expanded to 76% in 2017, as compared to 71% in 2016.
R&D expense increased to $32.6 million in 2017, compared to $28.3 million in 2016 as a result of development efforts to advance multiple product candidates. Excluding stock-based compensation and other non-cash and non-recurring items, 2017 R&D expense was $27.6 million.
SG&A expenses increased by $18.1 million to $71.4 million in 2017, compared to $53.3 million in 2016. The increase in SG&A expenses related primarily to: (i) increases in personnel-related expenses due to the expansion of our sales force in the second quarter of 2017; (ii) marketing expenses associated with pre-launch EHS disease state awareness initiatives; (iii) increased external legal expenses; and (iv) staff additions incurred to support expansion of the Company. These increases were partially offset by the expiration of the Spectrum promotion contract at the end of June 2017. Excluding stock-based compensation and other non-cash and non-recurring items, 2017 SG&A expense was $56.9 million.
For the full year, the Company recorded a tax expense of $21 million, compared to a benefit of $28 million in 2016. The tax provision in 2017 was decreased by the recognition of federal R&D tax credits and the impact of employee stock option exercises. These decreases were partially offset by an adjustment to Eagle’s net deferred tax asset to reflect the impact of the recently enacted federal tax reform legislation. The tax provision in 2016 was impacted by a reversal of a valuation allowance which had been carried against the Company’s net deferred tax assets. We anticipate that changes to the corporate tax code will positively impact Eagle’s tax expense beginning in 2018.
Net income for the year ended December 31, 2017 was $51.9 million or $3.44 per basic and $3.27 per diluted share as compared to net income of $81.5 million or $5.24 per basic and $4.96 per diluted share for the year ended December 31, 2016, as a result of the factors discussed above.
Adjusted Non-GAAP net income for 2017 was $69.0 million, or $4.57 per basic and $4.34 per diluted share, compared to Adjusted Non-GAAP net income of $45.9 million, or $2.96 per basic and $2.79 per diluted share in 2016.
Liquidity
As of December 31, 2017, the Company had $114.7 million in cash and cash equivalents and $53.8 million in net accounts receivable, $40.0 million of which was due from Teva. In 2017, net cash provided by operating activities, excluding the increase in net accounts receivable, was $70.5 million. The Company had $48.8 million in outstanding debt.
As part of our stock repurchase plan, in 2017, we completed our $75 million Share Repurchase Program authorized in August 2016, and purchased an additional $5.8 million in Eagle common stock as part of our expanded $100 million share buyback program.
2018 Expense Guidance
2018 R&D expense is expected to be in the range of $46 – $50 million. This reflects ongoing expenses for the enrollment of fulvestrant and Ryanodex EHS clinical trials, as well as CMC outlays in expectation of the 2019 launch of fulvestrant, if approved. Excluding stock-based compensation and other non-cash and non-recurring items, R&D expense would be in the range of $39 – $43 million.
2018 SG&A expense is expected to be in the range of $61 – $64 million. Excluding stock-based compensation and other non-cash and non-recurring items, SG&A expense would be in the range of $45 – $48 million.
Conference Call
As previously announced, Eagle management will host its fourth quarter and full year 2017 conference call as follows:
Date Monday, February 26, 2018
Time 8:30 A.M. EST
Toll free (U.S.) 866-518-6930
International 203-518-9797
Webcast (live and replay)
www.eagleus.com, under the "Investor Relations" section
A replay of the conference call will be available for one week after the call’s completion by dialing 800-677-7320 (US) or 402-220-0666 (International) and entering conference call ID EGRXQ417. The webcast will be archived for 30 days at the aforementioned URL.