Lisa Wilson - IR Scott Tarriff - President and CEO Pete Meyers - CFO Adrian Hepner - Chief Medical Officer.

Ashley Ryu - RBC Capital Markets David Amsellem - Piper Jaffray Tim Lugo - William Blair.

Good morning. My name is Erika, and I will be your conference operator today. At this time, I’d like to welcome everyone to Eagle Pharmaceuticals' Second Quarter 2017 Earnings Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer period.

[Operator Instructions] As a reminder, this conference call is being recorded, August 9, 2017. It is now my pleasure to turn the floor over to Lisa Wilson. Please go ahead, ma’am..

Thank you, Erika. Welcome to Eagle Pharmaceuticals' second quarter 2017 earnings call. This is Lisa Wilson, Investor Relations for Eagle Pharmaceuticals. With me on today's call are Scott Tarriff, Chief Executive Officer; and Pete Meyers, Chief Financial Officer of Eagle Pharmaceuticals.

This morning, the Company issued a press release detailing financial results for the three and six months ended June 30, 2017. This press release and a webcast of this call can be accessed through the Investors section of the Eagle website at eagleus.com.

Before we get started, I'd like to remind everyone that any statements made on today's 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 Eagle Pharmaceuticals management as of today, and involve risks and uncertainties including those noted in this morning's press release 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. Eagle Pharmaceuticals specifically disclaims any intent or obligation to update these forward-looking statements except as required by law. A telephone replay will be available shortly after completion of this call.

You’ll find the dial-in information in today's press release. The archived webcast will be available for one-year on our website, eagleus.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on August 9, 2017.

Since then, Eagle may have made announcements related to the topics discussed, so please reference the Company's most recent press releases and SEC filings. And with that, I'll turn the call over to Eagle's CEO, Scott Tarriff..

Thank you, Lisa. And good morning, everyone. I am going to start with the quarterly performance highlights and returns to the discussion of EHS to reviewing the existing business. Revenue grew 22% year-over-year to $50.1 million. Bendeka market share was 96% resulting in royalty revenue of $35.1 million, up from $34.5 million last quarter.

We also had record sales from Ryanodex from malignant hyperthermia. Ryanodex sales increased 54% year-over-year and 83% in the first half of 2017 year-over-year and have grown sequentially from $3.9 million in Q4, 2016 to $4.4 million during the first quarter of this year and now up to $5.2 million this past quarter.

We made a strategic decision to grow our sales force for MH regardless of the timing of the approval EHS and we are pleased with the early progress of our sales force. In June and July, the first two months that our expanded sales force was in place.

We added 120 new accounts and had an additional 136 customers increased their inventory of Ryanodex for a total of 256 accounts purchasing for the first time or reordering.

We think this is so important because we believe for most hospitals once Ryanodex is approved by P&T committee for malignant hyperthermia, it does not likely require another P&T review to expand into the other indications. Today, we've approximately 1,300 stocking Ryanodex.

Pete will discuss the impact of this decision when cost in the quarter and what it will mean on a normalized basis.

But we believe that the growth in MH sales we are seeing from our own dedicated sales force will more than pay for the cost of that sales force, and best positions us with hospitals for the eventual sale of Ryanodex for exertional heat stroke and Ecstasy and meth intoxication indications.

We are also announcing two separate actions to further improve returns for our shareholders today. The first is implementing a cost reduction plan in which we've identified approximately $10 million in savings on an annual basis plus an additional $5 million of EHS expense that we will not spend this year.

This is part of an effort led by our new CFO to optimize our existing spend. Pete will walk you through those details. Second, the Board is approved an additional $100 million share repurchase authorization which I will discuss later.

With that overview on the quarter, I want to turn to an update on the pipeline and start with CRL we received for MDA for Ryanodex for exertional heat stroke. As you know, we've been working on Ryanodex for about seven years now. The product is approved and on the market for MH.

The medical hypothesis that we operate on that there is that the hyperthermia and hypermetabolic crisis leads to the intracellular calcium release from ryanodine receptors. This crisis is what causes MH, EHS and ecstasy and methamphetamine intoxication.

Over these last several years we've collected a tremendous amount of data not only to support our approval of Ryanodex in MH, but also for the use in EHS and ecstasy and methamphetamine intoxication. Over the past four years we've been working with the FDA to determining path forward for EHS. We were granted working drug exclusivity.

We received fast track status and then we were awarded priority review. Therefore, we were surprised and disappointed by the CRL. And here is why.

Following numerous meetings and discussions with FDA over multiple years leading up to our filing, we believe the results of our human and animal studies are consistent with what the FDA requested and should have led to approval. In fact, the results were equal to or better than anticipated.

For clarity, we attempted to enroll 100 patients at the 2015 Hajj in Saudi Arabia. And due to human stampede at the 2015 Hajj, we were only able to enroll 34. We had an in person meeting with the FDA to agree what was required and provided the FDA with the data from the 34 patients trial. We were provided with two options.

Go back to the Hajj the following year or to file with 34 patients and add more to the animal work that we were doing. We chose to do more animal work. And here is why we stand by our data. There is already a well established safety profile for dantrolene, which has been on the market for over four years.

And FDA has indicated that there are no safety issues. As for efficacy, we believe that our testing yielded very strong and clinically meaningful results in both the human and animal studies in accordance with the previous agreements negotiated with FDA. But we did nonetheless receive a CRL.

Accordingly, we are availing ourselves of all the mechanism to address the situation. We have requested a Type A meeting with FDA to review all of the issues raised in the CRL. A meeting should be granted within 30 days. We hired independent consultants many with personal experience with FDA to scour the data and the agency's minutes.

Our consultants stand by our thought process and agree with our conclusion that we've met all of our commitment and that the data is right. In addition, there is a dispute process that is available in situation like this should we need it. And it can run in parallel with the discussions with the agency. We intend to press our case with the FDA.

The process can take a few months and we cannot predict the outcome of our discussions with the FDA until we have the Type A meeting. Once we learn more we'll come back to you with what is the most expedited way to get Ryanodex for exertional heat stroke on the market for patients who need the care.

We believe strongly in Ryanodex, given that there is no pharmacological option available for patients in need for this wide threaten condition. So let me turn for a moment to our pipeline. We've had some questions from our investors about the ecstasy and methamphetamine intoxication program as it relates to EHS.

Although the program has been slightly delayed in getting approvals to run the trial, the good news is that we are starting the trial this weekend at our first music festival. We will continue to be at music festivals until we recruit enough patients.

Importantly, we do not see spillover from the EHS CRL to our ecstasy and methamphetamine work because the clinical design is different. And we will be statistically heard for significance much like a traditional study. Our study will include approximately a 100 human subjects and will not entail animal work.

Following our pre IND meeting with FDA, we've broaden the end point to include severe organ dysfunction and damage. This remains a Phase 2 study; however, this program may still roll into a pivotal Phase 3 program. Every year ecstasy and methane intoxication accounts for roughly 125,000 emergency department businesses in the US.

And we estimate that there maybe as many as 75,000 cases of exertional heat stroke annually. For all of these individuals, the availability of Ryanodex can mean the difference between life and death. Or protecting this rein in other organs from long -term and severe damage. We are committed to advancing Ryanodex for these indications.

Ryanodex remains an important asset with multiple potential additional indications and opportunities to grow outside the US which we intend to pursue. Now on to the rest of the pipeline. In addition to the potential Ryanodex indications I just discussed, we expect to begin clinical work for fulvestrant in the very near future.

By the time we are ready to commercialize the product, the fulvestrant market could be a $ 1billion representing a very meaningful opportunity for us. In October of this year, we also expected decision from FDA on our Pemetrexed formulation, another significant market if approved.

Finally, let me provide some of our Board's thinking as it relates to how we best deploy the significant free cash flow that is being generated through our existing business. First, we believe that we should invest in our pipeline including exertional heat stroke because of the expected returns we see from that investment.

We will continue to invest in R&D and you will see that in our numbers for the year. Second, we will look for additional opportunities to grow our business. We did so with the acquisition of our 0:04:34.8, p5 and we are pleased with the progress we've made and integrating those capabilities into Eagle.

Clarity, we do not have anything on the near term horizon but we will continue to look for ways that we can add value to our franchise but we'll remain disciplined around those activities. And lastly, we will return excess capital to our shareholders. We announced a new buyback program today with a $100 million authorization.

We believe the expected returns on this investment are particularly attractive today. I am going to turn the call over to Pete Meyers, our new CFO. As you know, this is Pete's first earnings call. We hired Pete to help manage our company's expenses, improve our processes and deploy our capital while we grow the company.

In the couple of months that I worked with Pete, he has given me every faith that we will run the company appropriately as evidenced by today's actions. We are managing our cash, deploying our capital and taking advantage of our balance sheet. With that I'll turn the call over to Pete to take you through the details on the quarter.

Pete?.

Thank you, Scott. For the second quarter of 2017, our revenue totaled $50.1 million compared with $40.9 million in the second quarter of 2016. Revenue mix consisted of product sales and royalty revenue.

Overall, total net product sales reflecting all Eagle products, increased $3.1 million to $12.7 million during the quarter, driven primarily by net sales of $5.2 million in Ryanodex and $3.8 million in Bendeka.

Royalty income increased to $37.4 million compared to $31.3 million during the second quarter of 2016, reflecting increased Bendeka sales and our royalty rate of 25% during the second quarter of 2017 compared to 20% in the second quarter of 2016.

On the expense front, R&D expenses for the second quarter of 2017 were $6.7 million compared to $3.8 million in the second quarter of 2016. The increase is due to continued spending on the company's pipeline and in particular our fulvestrant project.

We expect our full year 2017 R&D expense guidance to remain unchanged and be in the range of $31 million to $35 million.

This reflects ongoing expenses for the anticipated initiation, randomization and completion of an enrollment of the fulvestrant and Ryanodex for ecstasy and methamphetamine intoxication clinical trial, as well as second sourcing of drug product and API manufacture for fulvestrant.

Excluding stock based compensation, the R&D expense would be $26 million to $30 million for 2017. SG&A was $23.7 million in the second quarter of 2017 compared to $12 million in the prior year quarter.

Sales and marketing expenses and personnel related expenses grew in accordance with our pre-launch disease data awareness campaign and the production of marketing materials to be one time and help for future launch activities for Ryanodex, or EHS.

We expect our full year SG&A expense to be in the range of $65 million to $68 million, unchanged from previous guidance. Excluding stock based compensation and other non cash items, SG&A expense would be in the range of $50 million to $53 million. In the first half of 2017, SG&A was $42.3 million, up 76% from the first half of 2016.

Again primarily driven by pre-launch expenditures for EHS. With the delay in our launch of EHS, we expect SG&A for the back half of 2017 to be materially below our first six months with the second half range of $23 million to $26 million, which is approximately $18 million lower than the first half.

Some of the factors and actions driving is include the non-recurrence of our spend for a contracted sales for Spectrum which ended in June this year, seizing any marketing activities for EHS unless and until the drug receives FDA approval for this indication, and implementing a higher increase of new employees and considering near term reduction in employee headcount as well as employee competition benefits.

As a result of these reductions, we expect that our 2018 SG&A expenses will approximate the annualized second half run rate for 2017 which will be approximately $50 million on an annual basis. These numbers are approximately $17 million below 2017 full year and modestly below 2016. Regarding R&D expenditures.

R&D for the first six months of 2017 was $14.2 million. If the clinical trials for ecstasy and methamphetamine intoxication and fulvestrant completed this year, along with other corresponding work associated with those programs, we expect our second half expenditure to be approximately $20 million.

Total spend for 2017 would be approximately $35 million in line with our earlier guidance. As you know, money spent.9 we do not complete on this program this year will roll into 2018. We'd also note that at present we do not have similarly sized progress identified for 2018.

Our recently developing additional opportunities is likely that our R&D spend in 2018 will be lower than that in 2017. We believe these efforts reflect the commitment to controlling our expenses more aggressively on a go forward basis.

Importantly, it allows us to focus our spend on the opportunities already in the pipeline and in development that gives us our shareholders the greatest potential near term returns, while preserving a strong company to execute on long term objectives. Earnings before taxes in the second quarter of 2017 were $5.9 million.

The net tax expense for the quarter was $1.4 million, a 23% effective tax rate, which brings us to Q2, 2017 net income of $4.5 million or $0.30 per basic and $0.28 per diluted share compared to net income of $13.1 million or $0.84 per basic and $0.80 per diluted share in Q2 of 2016.

I'd like to highlight beginning this quarter, that we've included in our press release a presentation of non-GAAP earnings which we've adjusted for certain non cash and non recurring items to demonstrate an after tax adjusted EPS for theories presented.

We believe this will be helpful to investors and assist in a more complete understanding of results from the business.

Adjusted non-GAAP net income for the second quarter of 2017 was $7.9 million, or $0.52 per basic and $0.49 per diluted share, compared to adjusted non-GAAP net income of $15.9 million, or $1.02 per basic and $0.97 per diluted share in the prior year quarter.

Our Adjusted non-GAAP diluted EPS of $0.49 would have been $0.81, if we excluded pre-launch expenses of $5.9 million and Spectrum sales force expenses of $2.3 million. For a full reconciliation of non-GAAP net income to the most comparable GAAP financial measures, please see the tables at the end of our press release.

Our adjusted EBITDA for the 12 months ended June 30, 2017 was $96 million, compared to $64 million in EBITDA for the year ended December 31, 2016. This EBITDA is particularly noteworthy considering that the company earned $69 million of milestone during the LTM period and $50 million of milestone during 2016.

Moreover, given the guidance provided today, we would expect to generate approximately $100 million in adjusted EBITDA for the year ending December 31, 2017 despite earning only $25 million of milestones during the year. Clearly, our earnings mix shifted from milestone during the higher quality revenue.

As part of our stock repurchase plan which was initiated in 2016, we purchased $25.3 million of worth of shares in the six months ended June 30, 2017 and have now repurchased $62.3 million or roughly 897,000 shares since the third quarter of 2016.

This week the Board authorized expansion of our stock repurchase program by an additional $100 million which we believe reflects an effective use of our growing cash position and it is in the best interest of shareholders.

As of June 30, 2017, the company had a $55.4 million in cash and cash equivalent and $53.2 million in net accounts receivable, $39 million of which was due from Teva. This represent an increase of $13.7 million in cash and cash equivalent and net accounts receivable compared to December 31, 2016. As of June 30, the company had no outstanding debt.

On August 8, 2017, the company entered into a $150 million Amended and Restated Credit Agreement comprised of a senior secured $100 million, three-year term loan facility at LIBOR plus 225 and a senior secured $50 million, three-year revolving credit facility.

This provided with added flexibility to execute our plan strategic initiatives including the aforementioned incremental stock repurchase plan. With that I'd like to thank you for continued support. And open the call for questions. Operator, please go ahead and open the line for questions. .

[Operator Instructions] And we'll go first to Randall Stanicky from RBC. Please go ahead..

Hi, good morning. Thanks for taking the question. This is Ashley Ryu on for Randall. Scott, so you have provided some color on the CRL but can you talk a little bit about whether there is any detail around what additional database you needed.

I understand that you have a meeting coming up but specifically you mentioned that they have provided two options to either go back to the Hajj or to do more animal work.

And can you clarify whether this was what they cited as a reason for the CRL?.

Oh I see. Well, thank you, thanks for the question. Let me just be clear to make sure I understand, when I raised the question the comment about the Hajj and the two choices we had. That goes back in time to a couple of years ago when we met with them prior to finalizing the animal work.

So the agreement in the past was to go and file with the 34 subjects from the Hajj and at that time they had reviewed and seen all of the data that was available. And it has been filed with. They asked us to go back and do more work on the animal which we did.

As it relates to the CRL, we don't have anything more to add today other than what we stated previously that they asked for more work. But I'd remind everyone that when we look historically, most CRL are due to either CMC issues right manufacturing issues. Clearly we have none -- none have been raised.

The product is already on the market and doing very well from a manufacturing standpoint as well as from the sales standpoint. And we have no safety issues. And that's significantly historically part of the reason that you get CRL as well and the agency has told us specifically that they have no Ryanodex safety issues. So we standby the data.

We standby the process gone through. Remember, we do have an orphan drug. We have a fast track and a priority review. It's an unmet medical need. Unfortunately, number of young men and women, student and athletes, hikers and bikers, members of our military are being injured everyday. We have a number of deaths to report seems like every week.

Can't you give any more specific until we have the Type A meeting, meet with the agency and determine what maybe required going forward?.

Got it. Yes, so --sorry I didn't realize that you mentioned about it was years ago but I think my question is more -- is that something that they actually brought up in the CRL or was there not really very much detail beyond that..

Right. We don't have any more than what we can say about the CRL other than we have but hopefully we will when we get clarity ourselves after we have that Type A meeting which should be in about 30 days. .

Thank you. And we'll go next to the line of David Amsellem from Piper Jaffray. Please go ahead. .

Thanks. Just a couple of questions. So first on the drug induced hyperthermia study. Can you elaborate on the endpoints and just in particular what is the primary endpoint? You mentioned statistical powering, so maybe give us some specifics on the statistical powering surrounding the primary endpoint and specifics on the secondary endpoint.

And then also regarding the next study in EHS, I mean since you are looking at measures of organ damage and organ function, should we assume that that something that you are going to do in the next study in the EHS and then also lastly just switching gears I have question on fulvestrant.

Can you just elaborate on the clinical work you are going to be doing there? What kind of study you are running and just give us some specifics on design and endpoints there. Thanks. .

Thank you, David. So let's take these one at a time. But let's just go to the EHS first. The comment about the additional endpoint for organ damage was what we are doing with the meth and ecstasy intoxication not for EHS.

The EHS primary endpoint was still the Glasgow Coma Scale and to follow up we do not know if and what studies we need to do with FDA to have the product approved. Obviously, we need to have that Type A meeting first. Hopefully, that cleared up for you David. Right, so we are not studying organ damage in EHS just to be clear.

And then we do have Adrian Hepner, Dr. Hepner with us, our Chief Medical Officer. So let me ask Adrian to comment for you the endpoints of DIH and then what we plan on doing on the clinical side for fulvestrant. .

Thank you, Scott. And as Scott said in his presentation FDA had asked us to expand indication, to also assess for organ dysfunction and damage. With that we are using a validated scale that accounts for organ dysfunction in five organ systems.

So we are powering for the use of that scale which is a validated scale currently used daily -- in a daily basis in emergency care facilities and ICUs. And about secondary endpoints are related to each of those organs individually.

Did I answer your question?.

Yes. That's helpful.

What's the name of the scale?.

LOSD, L, O, D as in David, S, is a Logistic Organ System Dysfunction.

Thank you. AND For fulvestrant --.

For fulvestrant, we are required to do a pharmacokinetic and safety study in postmenopausal women, healthy postmenopausal women, we are going to have a final arm study and follow the subjects for a period of time to collect all the blood samples we need for pharmacokinetics and but specifically also to collect other data to demonstrate the superior site injection safety of our product compared to Faslodex..

Thank you. We will take our next question from Tim Lugo from William Blair. Please go ahead..

Hi, thanks for taking the questions. Scott, you mentioned I guess going back to the organ damage and DIH.

What are the organs you are expecting to show an impact on? What are the endpoints? And can you kind of compare and contrast that organ damage and DIH versus what's seen in EHS? Is different organ damage and different amount of severity or what's the kind of comparisons between the two?.

Right. Thank you, Tim. For clarity, we study for exertional heat stroke Comwave function through the Glasgow Coma Scale, not the organ damage. But for the DIH question of which are organ -- let me turn that back over to Adrian..

Thank you, Scott. The drugs that induce the stroke in DIH not only produce the hyperthermia, hypermetabolic condition that was described before; also these drugs may have toxic effects on these organs.

The organs that we are mainly going to study are of course the brain, the cardiovascular system, the renal system, the liver and the respiratory system. All those systems may get toxic impact just for the high dose of drugs but unfortunately that these patients take. .

Thank you, Adrian.

Tim?.

That's a pretty broad coverage.

Is there I guess are there organ systems which lead to more damage in these patients? I know there is a sense of the natural history of what occurs with these concertgoers?.

Yes. And that's a very good question. The highly impacted organs in general are the brain, the kidney and the liver. .

Okay, all right, thank you for that clarification. And Scott, maybe question for you. And there is obviously been a lot of discussion around Teva selling off their oncology assets.

Is that -- you are obviously a large part of that franchise, can you give us some update thoughts about what you are hearing in the market when that is obviously would impact Bendeka and your royalty stream and also can you give us a update on your potential around the big bag formulation and do you have any change thoughts on that product?.

Yes, thank you, Tim. So on the royalty side and the oncology division; we haven't heard anything different than what we've heard about oncology. We think it's a well entrenched important division to them. We haven't heard anything. I'll tell you though that we have 96% market share.

I believe that Bendeka is still Teva's second largest product, its oncology division's largest product. They have been tremendous partners. They've done as much as you could ever expected them to do and very successfully. We speak to them regularly. They are very engaged.

Look at our results; we couldn't possibly be happier at the royalty rate and the market share. And so all is good with that relationship as far as we are concerned.

Now what they ultimately do with the division is obviously outside of our control but I can tell you that whoever if there should be a divesture, whoever that party is would have to step into Teva's shoes and have that contract in place that we have with Teva, that's number one.

And two, I'd think anybody who would acquire that division is doing so for the strength of Bendeka and I'd think that it would continue. In fact, it may wind up with in hands of Oncology Company for all we know that would have greater capability of expanding the use of Bendamustine. So we are thrilled.

We are not worried about any future event and have extremely engaged and it has been a great partner. In terms of the big bag, we don't have anything to add today. That is certainly an option that we would have. We don't plan on doing anything different in the short term. And if that situation changes we will certainly let everybody know. .

Is there any change of control provision in your licensing agreement that would obviously impact that relationship?.

No, I don't -- yes, no change in control. I don't believe so Tim, no. .

Okay. And I guess one more question just on the CRL. So you mentioned a potential dispute resolution process.

What are the typical timeframe for those processes?.

Yes. It's hard to say, Tim. There is a formalized process. In my opening remarks I believe I said a few months so I think that's the timeframe that we are speaking about. It really depends on how quickly you get resolved and how many levels you need to go through.

But I do believe that we were as accurate as we could be today that we think its a few months process. And we will do that in parallel. We need to as we negotiate through whatever additional data we may need with the division. So both of those events will take place simultaneously. .

Thank you. And I'd like to turn it back over to Ms. Lisa Wilson for closing remarks. .

Well, hello, everybody. And thank you again for being here. I really appreciate the time everybody took. Just in conclusion I would say obviously from a product standpoint, we have one of our strongest quarters in the history of the company. The qualities of the sales were really very strong. We'll do everything we can to resolve the CRL issue.

We stand dedicated to our pipeline. We are dedicated to exertional heat stroke. And obviously we will provide more information and more color when it's available. And again thank you for very much for being on the call. .

I'd like to thank everybody for their participation on today's conference call. Please feel free to disconnect your line at any time..