Eagle Pharmaceuticals(EGRX) - 2023 Q2 - Quarterly Report

Part I - Financial Information Item 1. Condensed Consolidated Financial Statements This section presents Eagle Pharmaceuticals, Inc.'s unaudited condensed consolidated financial statements for periods ended June 30, 2023, detailing financial position, operations, and cash flows with explanatory notes Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (unaudited, in thousands) | | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total current assets | $187,250 | $188,754 | | Total assets | $404,822 | $406,160 | | Total current liabilities | $86,630 | $111,087 | | Total liabilities | $152,782 | $172,600 | | Total stockholders' equity | $252,040 | $233,560 | | Total liabilities and stockholders' equity | $404,822 | $406,160 | - Cash and cash equivalents decreased significantly from $55.3 million at the end of 2022 to $15.4 million as of June 30, 2023[19] Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations (unaudited, in thousands, except per share data) | | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $64,646 | $74,136 | $130,951 | $190,010 | | Income from operations | $10,304 | $2,203 | $22,077 | $62,032 | | Net income (loss) | $5,164 | $(9,450) | $10,914 | $34,608 | | Diluted EPS | $0.39 | $(0.74) | $0.83 | $2.67 | - Total revenue for the six months ended June 30, 2023, decreased to $131.0 million from $190.0 million in the same period of 2022, primarily due to lower product sales and royalty revenue[20] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (unaudited, in thousands) | | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | $(33,638) | $26,381 | | Net cash used in investing activities | $(12,564) | $(75,584) | | Net cash provided by (used in) financing activities | $6,235 | $(11,894) | | Net decrease in cash and cash equivalents | $(39,967) | $(61,097) | | Cash and cash equivalents at end of period | $15,354 | $36,562 | - Cash used in operating activities was $33.6 million for the first six months of 2023, a significant shift from the $26.4 million provided by operating activities in the same period of 2022, largely driven by an increase in accounts receivable[26] - Investing activities primarily consisted of a $12.5 million purchase of an equity investment security in Enalare in H1 2023, compared to a $75.4 million net cash outlay for the Acacia acquisition in H1 2022[26] Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, financial components, and significant events, covering revenue, customer concentration, acquisitions, and litigation - Effective January 1, 2023, the company changed the functional currency for its Acacia subsidiaries from the Pound Sterling to the U.S. dollar due to business integration[31][32] Revenue Concentration by Major Customer | Customer | % of Total Revenue (Q2 2023) | % of Total Revenue (H1 2023) | | :--- | :--- | :--- | | Teva | 38% | 35% | | Customer A | 35% | 33% | | Customer B | 10% | 12% | - The company is involved in multiple patent litigations concerning its products Bendeka, Belrapzo, and Treakisym against generic drug manufacturers like Slayback, Apotex, and Fresenius[121][129][132] - On June 9, 2022, the company completed its acquisition of Acacia Pharma Group plc for a total consideration of $100.4 million, adding Barhemsys and Byfavo to its product portfolio[144][147] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial performance, key business developments, and outlook, analyzing revenues, costs, expenses, liquidity, and capital Results of Operations This section analyzes the company's financial performance for Q2 and H1 2023, highlighting changes in revenue and net income Revenue Comparison (in thousands) | Revenue Source | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Product sales, net | $42,993 | $49,201 | $(6,208) | | Royalty revenue | $21,653 | $24,935 | $(3,282) | | Total revenue | $64,646 | $74,136 | $(9,490) | Operating Expenses Comparison (Q2 2023 vs Q2 2022, in thousands) | Expense Category | Q2 2023 | Q2 2022 | Change | | :--- | :--- | :--- | :--- | | Cost of revenue | $16,858 | $23,664 | $(6,806) | | Research and development | $9,833 | $11,437 | $(1,604) | | Selling, general and administrative | $27,651 | $36,832 | $(9,181) | - The decrease in Q2 2023 product sales was primarily due to a $10.3 million decline in vasopressin sales following the company's decision to exit the market[183] - The $9.2 million decrease in Q2 2023 SG&A expenses was mainly due to the non-recurrence of $9.8 million in Acacia acquisition-related costs and $7.7 million in severance from 2022[188] Liquidity and Capital Resources This section details the company's liquidity sources, including cash, operating cash flows, and credit facilities, and assesses funding ability - Cash and cash equivalents stood at $15.4 million as of June 30, 2023, down from $55.3 million at year-end 2022[19][205] - The company has a $100 million revolving credit facility, of which $25.0 million was outstanding as of June 30, 2023. The company also has a term loan with $46.3 million outstanding[109][206] - Net cash used in operating activities for the first six months of 2023 was $33.6 million, primarily due to a $42.7 million increase in accounts receivable[26][211] Item 3. Quantitative and Qualitative Disclosures About Market Risk There were no material changes to the company's market risk disclosures during the six months ended June 30, 2023 - There were no material changes to the company's market risk disclosures during the six months ended June 30, 2023[222] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal control - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2023[224] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[225] Part II - Other Information Item 1. Legal Proceedings The company is involved in several legal proceedings, primarily patent infringement lawsuits concerning key products and commercial disputes - The company is in arbitration with Curia Global, Inc., which seeks over $76.7 million in damages related to a vasopressin supply agreement. Eagle has denied the allegations and asserted counterclaims[118][119] - Multiple patent infringement lawsuits are ongoing against generic manufacturers (Slayback, Apotex, Fresenius, etc.) who have filed ANDAs challenging the patents for Bendeka[121] - The company, along with its Japanese partner SymBio, has initiated patent infringement lawsuits in Tokyo against Towa Pharmaceutical and Pfizer Japan regarding TREAKISYM[132] Item 1A. Risk Factors This section supplements existing risk factors, highlighting adverse effects from macroeconomic conditions, geopolitical events, and healthcare legislation - The company's financial condition may be negatively affected by macroeconomic conditions including rising inflation, interest rates, supply chain disruptions, and geopolitical events like the Russia-Ukraine conflict[230] - Recent bank failures (e.g., Silicon Valley Bank) have created financial market liquidity risks, which could impair the company's ability to access its cash or raise additional capital if conditions worsen[231] - Current and future healthcare legislation, such as the Affordable Care Act (ACA) and the Inflation Reduction Act of 2022 (IRA), could increase the difficulty and cost of commercializing products and negatively affect pricing. The IRA, for example, directs HHS to negotiate prices for certain Medicare drugs and imposes rebates for price increases that outpace inflation[234][235][238] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section discusses the company's share repurchase program, including the remaining authorization and no repurchases during the quarter - The company did not repurchase any of its equity securities during the three months ended June 30, 2023[242] - Approximately $86 million remained available for future purchases under the company's $160 million Share Repurchase Program as of June 30, 2023[240][242] Item 5. Other Information This section discloses the adoption of a Rule 10b5-1 trading plan by an executive officer for the potential sale of company shares - On June 15, 2023, CEO Scott Tarriff adopted a Rule 10b5-1 trading plan for the sale of up to 299,375 shares of company stock[246]