Ilanit Allen - Investor Relations Scott Tarriff - Chief Executive Officer Pete Meyers - Chief Financial Officer.

Brandon Folkes - Cantor Fitzgerald Randall Stanicky - RBC Capital Markets David Amsellem - Piper Jaffray Stephen Ragard - Mizuho.

Good day, and welcome to today’s program. My name is Erica, and I’ll be your conference operator. At this time, I’d like to welcome everyone to Eagle Pharmaceuticals’ Second Quarter 2018 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 7, 2018. It is now my pleasure to turn the floor over to Ms. Ilanit Allen, Investor Relations for Eagle Pharmaceuticals. Please go ahead..

Thank you, Erica. Welcome to Eagle Pharmaceuticals’ second quarter 2018 earnings call. This is Ilanit Allen of In-Site Communications, Investor Relations for Eagle Pharmaceuticals. With me on today’s call are Eagle’s Chief Executive Officer, Scott Tarriff; Chief Financial Officer, Pete Meyers; and General Counsel, Michael Cordera.

This morning, the company issued a press release detailing financial results for the three months ended June 30, 2018. 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 would like to remind everyone that any statements made on today’s conference call that express a belief, expectation, projection, forecast, anticipation, or intent regarding future events and the company’s future performance maybe 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 will 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 maybe listening to the replay or archived webcast, this call was held and recorded on August 7, 2018. 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, Ilanit, and good morning, everyone. We continue to execute our strategy to deliver best-in-class products and drive sustainable value for shareholders.

We had another strong quarter during which we launched our 500ml liquid form of bendamustine solution that does not require reconstitution or Big Bag, filling an important need in the market for a lower cost alternative complementing our BENDEKA royalties and supporting our commitment to maximizing the value of each of our assets.

Initial sales of about $8 million during the quarter, largely reflects stocking. We expect to see a progressive pull through in the weeks and months ahead. Furthermore, in June, we prevailed in the first stage of our dispute with the FDA regarding orphan drug exclusivity for BENDEKA.

From the outset, Eagle has believed that the dispute would likely be resolved in two stages. The first stage was to confirm that BENDEKA was entitled to orphan drug exclusivity, and in June the court issued an order confirming that BENDEKA was entitled to seven years of orphan exclusivity from the date of approval.

Consequently, the FDA will not be able to approve any drug applications referencing BENDEKA until the ODE expires in December 2022. The second stage relates to the scope of that exclusivity. In July, the FDA filed a motion to clarify that the order did not require the FDA to resend or otherwise affect applications, referencing TREANDA.

In short, FDA's motion was an attempt to bypass stage two of the dispute and limit the scope of BENDEKA's exclusivity. The court denied that motion on the grounds that issue of scope was not properly [indiscernible] and that it should be first resolved through the FDA's regulatory process, and additional litigation if necessary.

We continue to strongly believe that an appropriate application of the orphan drug exclusivity regulations would first allow generic TREANDA entrants in December 2022 rather than November 2019, and plan to vigorously pursue the exclusivity grant directly with the FDA or through litigation if necessary.

A favorable outcome in the ODE dispute combined with an additional BENDEKA patent, which brings our total to 15 U.S. patents expiring 2031 to 2033, should enable us to extend and protect the life cycle of our bendamustine products well beyond 2022. We had record Ryanodex sales during the quarter of $7.2 million, driven largely by the reorder cycle.

To put this in perspective, total sales in 2017 were $17.5 million. We believe Ryanodex has tremendous potential beyond its current indication and I’ll discuss that in greater detail shortly. We also advanced several pipeline programs that have the potential to add significantly to the value of our overall product portfolio.

We were first to file a vasopressin 1ml injection ANDA, which was accepted for filing by the FDA back in April. If approved, this would afford us 180 days of exclusivity with branded product sales of approximately $400 million last year. We believe this would be a solid addition to our portfolio if approved.

We expect to have fulvestrant data available in the fall and will update the market accordingly. We continue both patent and anti-trust litigation related to our PEMFEXY product, which references Eli Lilly's Alimta. The patent case has a trial scheduled to begin on December 9, 2019.

We also filed a motion for judgment on the proceedings and anticipate a ruling within the next six months. The anti-trust case, which we brought against Lilly regarding their improper and overbroad use code practice before the FDA, doesn't yet have a schedule.

As we’ve indicated in the past, we are also evaluating the use of Ryanodex as a potential treatment for the neurological impact of nerve agent exposure. Ongoing discussions with the U.S. Military have been progressing well, and we will have more to share on this in coming weeks.

We also expect to announce additional targeted indications for Ryanodex beyond malignant hyperthermia exertional heat stroke and nerve agents later this year. Of course, a key focus for Eagle has been preparing for our upcoming Ryanodex study at the Hajj.

In about a week, we will be returning to Saudi Arabia to conduct an additional clinical trial for Ryanodex for exertional heat stroke as agreed to with the FDA. The Hajj begins in the evening of August 19, and we expect to treat our first patient on the 20th. We will have an update for the market regarding enrolment, shortly thereafter.

During our first study in 2015, we collected data for 34 patients over the course of 1.5 days. Our study unfortunately ended abruptly following an unfortunate stampede. This year, we are returning to the Hajj to conduct a Phase 3 clinical study to further evaluate the safety and efficacy of Ryanodex in patients with exertional heat stroke.

The study is going to be randomized and double-blind to minimize any possible bias. It will be conducted at four emergency departments in the Mecca region of Saudi Arabia during the 2018 Hajj season, which runs August 19 through the 24.

This is a confirmatory study and we hope to enroll sufficient number of subjects to run a meaningful analysis and show a treatment difference comparable to what we observed in our Phase 2 study in 2015. All enrolled patients will receive body cooling, and approximately half of them will also receive Ryanodex.

As you may know, Hajj programs undergo strenuous physical activity over several days in very hot weather environment. Current temperatures in that region are well over 100 degrees Fahrenheit and humidity is also quite high. We’re building and training a team of about 60 people, including Saudi emergency medical physicians, nurses, and coordinators.

We’re also assembling a local team to support all study logistics, including supplies, data management, transportation, and regulatory filing.

The study will be conducted in compliance with all current regulations and is intended to provide confirmatory evidence of safety and efficacy to satisfy FDA requirements to amend our NDA for Ryanodex for the treatment of exertional heat stroke. We remain hopeful that our EHS product could be on the market for most of the 2019 heat season.

Before I turn the call over to Pete to discuss our financial performance in greater detail, I’d like to highlight that we remain focused on execution and fully realizing the potential of our portfolio of assets.

During the second quarter, we delivered both top and bottom line growth with $59 million in revenue and $0.95 in earnings per share, while significantly advancing programs that can contribute meaningfully to long-term value of the business.

With $100 million in cash at the end of the quarter, $69 million in receivables, and $47.5 million in debt, we feel confident in the resources available to us to continuing executing our priorities.

As I stated in the past, we believe 2018 could be another solid year of growth for Eagle with continued near-term value creation and tremendous upside potential with our advanced pipeline. And with that, I’d like to turn the call over to Pete, to review the second quarter financial results.

Pete?.

number one, the enrollment of fulvestrant and Ryanodex EHS clinical trials. Number two, API outlays for the fulvestrant and vasopressin programs; and number three, additional development work on the Ryanodex nerve agent program.

Excluding stock-based compensation and other non-cash and non-recurring items, R&D expense would be in the range of $40 million to $44 million. SG&A expenses decreased to $16 million in the second quarter of 2018, compared to $23.3 million in the second quarter of 2017.

The decrease was due to the expiration of the spectrum promotion contract at the end of June 2017, as well as the reduction in marketing expenses. Excluding stock-based compensation and other non-cash and non-recurring items, second quarter 2018 SG&A expense was $11.7 million.

2018 SG&A expense is expected to be in the range of $61 million to $64 million. Excluding stock-based compensation and other non-cash and non-recurring items, SG&A expense would be in the range of $44 million to $47 million.

We recorded a $7.4 million restructuring charge in the second quarter, which reflects an initiative to rationalize our product portfolio and focus our physical sites. These measures included the discontinuation of manufacture and distribution of nonalcohol docetaxel in June 2018.

The $7.4 million charge includes a $4 million inventory write-off and $3.4 million in certain asset impairment charges related to property, plant, and equipment.

We also reported an asset impairment charge for the remaining intangible asset for docetaxel of $2.7 million, as well as an adjustment to remove the contingent consideration liability associated with docetaxel.

Net income for the second quarter was $2.7 million or $0.18 per basic share and $0.17 per diluted share, compared to net income of $4.5 million or $0.30 per basic and $0.28 per diluted share in the prior year period, due to the factors discussed above.

Adjusted non-GAAP net income for the second quarter of 2018 was $14.7 million or $0.99 per basic and $0.95 per diluted share, compared to adjusted non-GAAP net income of $7.9 million or $0.52 per basic and $0.49 per diluted share in the prior year quarter.

For 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 EBITDA for the second quarter of 2018 was $15.9 million, compared to $11 million in the prior year quarter.

During the second quarter, we completed $3.5 million in share repurchases as part of our $100 million expanded share repurchase program. So, August 2016, we have repurchased $91.3 million in stock.

As of June 30, 2018, the company had $100.2 million in cash and cash equivalents, $69.4 million in net accounts receivable, $45.9 million of which was due from Teva. The company had $47.5 million in outstanding debt. With that, I’d like to open the call for questions. Operator, please go ahead and open the line for questions..

Thank you. [Operator Instructions] And we will go first to the line of Brandon Folkes from Cantor Fitzgerald. Please go ahead..

Hi, guys, thanks for taking my questions and congratulations on the quarter. Firstly, on vasopressin, when do you expect to bring this to market and any potential to request a waiver of the [indiscernible] from the FDA? And then secondly, could you just provide an update on the second ANDA product expected to file this year? Thank you..

Thanks a lot. Thanks for the question. So, on vasopressin we’re in the middle of litigation as you would expect. Remember the way the system works it’s up to 30 months. It’s not necessarily 30 months.

We’re in litigation and we're just moving along as aggressively as we can and we will just wait and see how the courts work through it and we expect to get our approval and get to the market at our first opportunity.

In terms of the second product, we're just still moving along with that and as we have more material news to provide to you, we will – you know those two products are just very exciting for us and we're looking forward to moving them through the process. Thank you..

Thanks. Could I just – two follow-ups.

Firstly, Pete I know you talked about the Ryanodex strength in the quarter, can I just confirm there was no stocking on Ryanodex?.

That product is actually dropship directly to customers. So, there’s no real possibility of wholesaler stocking. .

Okay. And then could you just help us think through the R&D spending for the rest of the year on a quarterly basis, obviously with the Ryanodex trial in August? Thank you..

Yes. We’ve obviously reiterated our R&D expense guidance for the year, which I'm sure you've deduced that the back end of the year will be significantly less than the first two quarters, and that is largely a result of the fulvestrant clinical trial, the cost for which were essentially entirely accrued through June 30..

Okay, great. Thank you very much..

Thank you..

Thank you. [Operator Instructions] We’ll go next to the line of Randall Stanicky from RBC Capital Markets..

Great. Thanks, Scott. I just have a couple of questions. First, can we start on Big Bag.

I know of the $8.1 million there is some stock in there, but can you just remind us of your target market share expectations, and then specifically how do we think about the difference in economics to you from a percent of market share sold at other BENDEKA through Teva by a way of 25% royalty to you versus a percent of market share sold as your Big Bag at the lower price, but what’s your full, like a 68% gross margin? And then I've got a couple of follow-ups..

Okay. Thanks Randall. Let’s take this one first because I think you're touching on something very important. Let me take the first half. And turn to the second half of the question over to Pete. The 8.1 was mostly stocking.

And we're just going through the typical launch period working through the normal contractual issues and reimbursement issues that you go through launch. We are very positive on the product and we expect to be in-line with the previous market share guidance, which is great. So, if you remember, we forecasted previously achieving a 12% share.

If you just go through the numbers that will eventually get us to around $75 million sales annual sales level.

And so, you look at the 8.1, you look at the quarter, take into account our future growth of the product, obviously you can see the excitement and then how we balance through what we lose on the royalty side by launching Big Bag, I’ll turn that over to Pete to explain that..

Sure. So, think of the ANSP of Big Bag is roughly equivalent to the BENDEKA ANSP Randall. You’re correct in the strategy of approaching more cross sensitive customers, but ultimately as one looks across the blended pricing in the market you should think of them as roughly the same.

As you know, the BENDEKA vial will generate a royalty to us – 25% royalty on Teva’s revenue. 90% of that number drops to the bottom line of course because we don't have incremental costs associated with the BENDEKA royalty other than the 10% royalty that we pay out to Zydus.

So, think of the BENDEKA vial going out the door generating round numbers, $400 in EBITDA to Eagle. You’ve heard us say and we will reiterate today that a vial of Big Bag that goes out the door is roughly 2 times to 3 times that in EBITDA contribution.

The reason is that obviously we're booking the top line revenue on Big Bag, and we are incurring COGS [ph] against it. We then pay 20% of that result in gross profit to Teva.

We then pay 10% of the gross profit, net of that Teva obligation to Zydus and have one word to penalize the model so to speak for having cannibalized the BENDEKA vial, and one would backout $400 and therefore you get to a number of EBITDA generation and BIG BAG that’s roughly twice what we would have earned if that vial had been BENDEKA..

That’s great. It’s very clear and helpful. So, thanks for that.

The other question I want to ask you Scott on the next steps on Stage II of the BENDEKA exclusivity, the idea or the goal here to block generics TREANDA is, where do we see that? I mean, is that something that we would be waiting for the FDA to make its move in November 2019 or is there an event legal or otherwise that we could expect to see before that timeframe?.

Yes. So, Ran, I think the answer to that is we don't know. We’ll do what we can do to push it along. We'd like clarity as soon as we get it. We think the law is pretty clear though. Right. We’re strongly in our position as it relates to TREANDA. And we’ll just have to see the mechanics as we go through of getting to that ultimate point.

Obviously, we’d like to get it behind us sooner than later and we’ll work towards that goal..

Got it.

And just a quick one on Ryanodex, the 34 patients you had in 2015 what’s the target patient number for this trial? Did it combined 100, which I know that was your original goal and is the FDA going to look at p-dose of these two trials separately?.

Great questions Randall. Look, we were obviously, where all of this has been following this over the last three years. We were pretty excited about the results that we received on the 34 patients. The p-value on the 34 missed the 0.05 by a little bit. It was actually pretty strong results for small numbers.

We don't have a specific numeric target because it’s an unusual study from the standpoint that we can't just keep enrolment open until we receive a target number. We can't stay at the Hajj longer, we can’t stay past August 24 because after that there is no Hajj anymore.

So, we just have to get as many patients, as many subjects in that 5-day period that we can. What I can tell you is that when the statisticians take a look at the p-value and the numbers on the 34 patients, they project that if you get around double that up to around 70, we would have fallen in the p-value of 0.05 or below. So that’s exciting.

We’ll just have to get out there. We’ll see how many subjects we wind up enrolling, it is those 5-days. Shortly after the conclusion of the study, we’ll probably announce how many patients were enrolled. So that’s coming up – in two weeks we’ll be able to tell you exactly what we round-up with. I think there is a lot going on with the amendment.

If we can combine the two studies, I don't think formally we can do that, but in an orphan drug situation that we’re in and the type of product, I think if you combine them, even if it wasn't officially combined and then you wind up with a really solid p-value, we would expect approval based on those numbers or hope for approval.

And so, we're pretty positive about the outcome. Let’s just hope that we do a good job recruiting, but I didn’t mention in the script that I guess I should have is that we're going to be out running the study many more hours. The first time we ran eight-hour days and the study was cut short a day and a half.

Now, we are running more like 10-hour and 12-hour days for five days. So, if there is no interruption in the event you can see how many hours we're going to be recruiting subjects compared to 2015..

And you'll PR those patient numbers in the days or week or so following the Hajj?.

Yes, somewhere short Ran, shortly thereafter the 24th. I think the 24th is a Friday.

So, early that following week, once we get through it and sit back and make sure that we have it accurately, we’ll put out a release and let everybody know how many subjects were enrolled, and then we will just have to wait back, sit back and wait for the tabulation, the scrubbing of the data, and the closing – the blocking of the database and then reporting..

Perfect. And then my last quick question. I don't want to overread the tea leaves here, but last quarter in your prepared comments, you referenced potential product or company acquisition, I didn’t hear you or say that or reference that again in your prepared comments this morning.

Again, I don't want to overread the tea leaves, but should we think about the capital deployment strategy or focus having changed at all or evolved at all? Thanks..

This is Pete. Thanks for the question. We continue to look at external BD opportunities. Again, just given our balance sheet strength and the infrastructure we have on critical care, we do see a lot of assets.

The [indiscernible] remain high, but we spent a fair amount of time looking at acquisition opportunity and obviously we continue to opportunistically repurchase our shares as well..

I think, too, Randall, this will all become a lot clearer in our next steps after we report out the two clinical trials for fulvestrant and the Hajj. And we’ll have clearer direction of how they evolve the company going forward. So, we’re in a little bit of a wait-and-see mode..

Alright, thanks guys..

Thank you..

Thank you. [Operator Instructions] We will go next to the line of David Amsellem from Piper Jaffray. Please go ahead..

Hi, thanks. So, just a couple.

So, first on Big Bag, wanted to look ahead, if possible to 2019 and we know that BENDEKA as a share of overall bendamustine sales and volumes has been fluctuating somewhat over the last, say 12 months to 18 months, so with that in mind, what are your thoughts on how much of the market Big Bag can capture assuming that generics of TREANDA are, indeed, blocked until the ODE expiry? I wanted get your thoughts on that, number one.

And then number two, on fulvestrant, I know we're engaging a little bit hypothetical here.

But assuming that you do have a somewhat better safety profile in terms of injection site pain, I mean, what are your thoughts on the relative ease of getting a J-code? And what are your thoughts on how much of the market you would be able to capture assuming that you have multiple generics of Faslodex entering, as expected, next year.

So, wanted to get your thoughts on that as well. Thanks..

Thank you, David. So, let’s take the Big Bag question first. From what we’ve seen and what we believe is that the bendamustine market is, give or take a flat market over the next few years. It’s actually been hanging in pretty well. We’re really actually very proud of the work that Teva is doing. They're doing a fantastic job marketing the molecule.

Really, a very nice job with it. And so, we’re assuming give or take a couple of percentage points here or there, about a flat market for bendamustine. And as we just said, we think we get our Big Bag share up to 12%, which would get us up to about $75 million a year on sales.

So, if you just go through the numbers, you can again see why we launched and the excitement we have around adding value to our P&L by going through this and ultimately gaining this 12% share. So, just good news all the way around, I would think.

And on fulvestrant, if we do wind up having a passing study and wind up being able to take that warning out of the label because of less pain and the other issues associated with it, I think we have an excellent chance of gaining a new J-code. We’re working on that and we feel pretty good about that opportunity.

And then the share, you know we don't typically project share, but if we have a product that is safer and less painful and ease of administration, I think we’ll do pretty well. We’ve always been very excited about the opportunity, assuming we get this product to the market. So, yes, let’s see what happens..

Okay. Thanks..

Thank you. [Operator Instructions] We’ll go next to the line of Stephen Ragard from Mizuho. Please go ahead..

Hi, good morning. Thanks for taking my questions.

Most of mine have been answered, but are you able to give some color around what type of data you think you’ll need to generate, support for the nerve agent indication for Ryanodex?.

Yes. Very good question on nerve agent. So, first, we believe it’s clearly an animal model. I don't think we have volunteers that we can find for exposure to nerve agents, so that's the great news. We are working with the military and we’ll have an update here, I hope, shortly.

We did run one animal model in rodents, and we reported that data, I think some time earlier this year or last year that it was rather strong. And so, what we’ll do is we’ll repeat that study with more subjects with more animals. And it will be in an FDA type of study where that could potentially be our pivotal study for filing. We’ll run that study.

We’ll go to the FDA. We’ll meet with them and see if we need any other work. But relatively speaking, it is work that could be done quickly and work that could be done inexpensively. And I hope to have a report out to everybody in the next short amount of time, and we can talk in more detail about our plans..

Great, thank you..

Thank you..

Thank you. And at this time, we have no further questions. So, I’d like to thank everybody for their participation on today's conference call. This does conclude today's presentation and you may disconnect at any time..

Thank you everyone..