Eagle Pharmaceuticals(EGRX) - 2023 Q1 - Quarterly Report

Part I - Financial Information Financial Statements Eagle Pharmaceuticals reported a significant year-over-year decrease in Q1 2023 total revenue and net income, alongside a decline in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $21.9 | $55.3 | | Accounts receivable, net | $115.0 | $72.4 | | Total assets | $414.2 | $406.2 | | Total liabilities | $171.3 | $172.6 | | Total stockholders' equity | $242.8 | $233.6 | Condensed Consolidated Statements of Operations (in millions, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Total revenue | $66.3 | $115.9 | | Income from operations | $11.8 | $59.8 | | Net income | $5.8 | $44.1 | | Diluted EPS | $0.44 | $3.41 | Condensed Consolidated Statements of Cash Flows Highlights (in millions) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(33.5) | $(16.6) | | Net cash used in investing activities | $(12.6) | $(0.2) | | Net cash provided by (used in) financing activities | $12.6 | $(11.4) | | Net decrease in cash and cash equivalents | $(33.4) | $(28.1) | Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes the Q1 2023 revenue decline to decreased product sales and royalties, while operating expenses rose due to increased R&D and SG&A, though liquidity is deemed sufficient Overview and Recent Developments The company highlights strategic developments including obtaining a J-code for Byfavo, discontinuing vasopressin, amending its credit agreement, investing in Enalare, and advancing its pipeline - The company announced its withdrawal from the vasopressin market in Q1 2023, with inventory expected to be depleted by the end of Q2 2023[161] - CMS has established a unique J-code (J2249) for Byfavo, effective July 1, 2023, which is intended to simplify the reimbursement process[160] - The acquisition of Acacia Pharma in June 2022 added two FDA-approved hospital products, BARHEMSYS and BYFAVO, to the company's portfolio[165][168] - The company has committed to equity investments of up to $55 million in Enalare Therapeutics Inc. and holds an option to acquire the remaining shares of the company[163] Results of Operations Q1 2023 total revenue decreased by $49.6 million due to lower product sales and royalties, while R&D and SG&A expenses increased, primarily driven by the CAL02 program and personnel costs Revenue Comparison (in millions) | Revenue Type | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Product sales, net | $46.2 | $90.1 | $(43.9) | | Royalty revenue | $20.1 | $25.8 | $(5.7) | | Total revenue | $66.3 | $115.9 | $(49.6) | - The decline in product sales was primarily due to decreased sales of vasopressin ($30.8 million) and Pemfexy ($14.2 million) following their initial launch in Q1 2022[185] Operating Expenses Comparison (in millions) | Expense Category | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Cost of revenue | $17.3 | $27.8 | $(10.5) | | Research and development | $9.3 | $6.1 | $3.2 | | Selling, general and administrative | $28.0 | $22.2 | $5.8 | - R&D expenses increased by $3.2 million, mainly driven by a $2.0 million increase in spending on the CAL02 project[190] Liquidity and Capital Resources The company's liquidity sources include cash, operations, and a credit facility, with cash and cash equivalents at $21.9 million as of March 31, 2023, and management believes resources are sufficient for the next 12 months - Cash and cash equivalents were $21.9 million as of March 31, 2023[196] - Net cash used in operating activities was $33.5 million for Q1 2023, primarily due to changes in working capital, including a significant increase in accounts receivable[201] - The company drew an additional $15.0 million from its revolving credit facility on February 8, 2023, which provides for borrowings up to $100 million[197] Quantitative and Qualitative Disclosures About Market Risk The company reported no material changes to its market risk disclosures compared to its Annual Report on Form 10-K for the year ended December 31, 2022 - There were no material changes to the company's market risk disclosures during the three months ended March 31, 2023[214] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2023[216] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[217] Part II - Other Information Legal Proceedings The company is involved in various legal proceedings, including commercial litigation with Curia Global and multiple patent litigations related to its products, with uncertain outcomes - Curia Global has filed a demand for arbitration seeking damages over $76.7 million related to a vasopressin supply agreement and a separate action for over $4.2 million related to a PEMFEXY supply agreement[114] - The company is engaged in ongoing patent infringement litigation to defend its Bendeka and Belrapzo products against multiple ANDA filers, with several cases settled[116][123] - The company, along with its partner SymBio, has initiated patent infringement lawsuits in Japan against Towa Pharmaceutical and Pfizer Japan regarding its Treakisym product[127] Risk Factors The company highlights supplemental risks from macroeconomic conditions, banking failures impacting capital access, and legislative changes like the Inflation Reduction Act of 2022 affecting drug pricing - The business faces risks from macroeconomic conditions including rising inflation, interest rates, supply chain disruptions, and geopolitical events like the Russia-Ukraine conflict[222] - Recent bank failures and financial market instability could impair the company's ability to access its cash deposits and raise additional capital[223] - Current and future legislation, such as the Inflation Reduction Act of 2022 (IRA), may increase the difficulty and cost of commercializing products and negatively affect drug prices through government negotiation and inflation-based rebates[226][230] Unregistered Sales of Equity Securities and Use of Proceeds The company did not repurchase any equity securities during Q1 2023, with approximately $86 million remaining available under its share repurchase program - No shares were repurchased during the three months ended March 31, 2023[234] - As of March 31, 2023, approximately $86 million remained available for future purchases under the company's share repurchase program[234]