Good day and welcome to today’s program. My name is Keith and I will be your conference operator. At this time I'd like to welcome everyone to Eagle Pharmaceuticals’ Fourth Quarter and Full Year 2018 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded today February 28, 2019.

It is now my pleasure to turn the floor over to Ms. Lisa Wilson, Investor Relations for Eagle Pharmaceuticals. Please go ahead..

Thank you, Keith. Welcome to Eagle Pharmaceuticals’ fourth quarter 2018 earnings call. This is Lisa Wilson, Investor Relations for Eagle Pharmaceuticals. With me on today's call, are Eagle’s Chief Executive Officer, Scott Tarriff; and Chief Financial Officer, Pete Meyers.

This morning, the company issued a press release detailing financial results for the three and twelve months ended December 31, 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 the beliefs, 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 February 28, 2019.

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..

Well thank you, Lisa and good morning everyone. We had an outstanding fourth quarter and full year. In 2018, we generated substantial cash flows that enabled us to advance multiple development programs.

We launched Big Bag, our 500 ml bendamustine formulation to compliment Bendeka, we purchased $78 million in Eagle’s stock and still end the year with a very strong balance sheet, which we will use to continue our product development, and commercialization efforts and strengthen our portfolios.

Despite some challenges in 2018, we believe we have multiple paths forward to support the long-term earnings potential of our business. I'll begin with an update on our bendamustine portfolio, which has had some very significant catalysts in 2018 and here in early 2019. This business is strong and growing.

In June of 2018 we prevailed in obtaining orphan drug exclusivity for Bendeka, the most significant product in our portfolio through December of 2022. We have always maintained that this exclusivity correctly applied would extent to trend a project generics.

Just last week of February 20 FDA issued a decision in favor of Eagle regarding the scope of Bendeka’s exclusivity. Pursuant to that decision, no bendamustine product use to treat the same indications including generic versions of Treanda may launch any date until December 7, 2022, unless they are clinically secured.

Prior to the decision generic versions of Treanda are poised to enter the market in November of 2019. We are obviously very pleased with the ODE results. This is now the most certitude we have had with our bendamustine asset since we launched. We should now have close to four years of continued exclusivity.

Royalties from Bendeka sales by Teva totaled $31.9 million in the fourth quarter and $134.4 million for the full year. The cash flow will allow us to build out the pipeline both organically and externally. We are working aggressively on both and I will discuss some of this today.

To fill the need in the market for a lower cost alternative we launched Big Bag, our 500 ml liquid bendamustine solution that does not require reconstitution during the second quarter of 2018. For the year Big Bag sales totaled $22.9 million and we exited 2018 with a 6% share of the bendamustine market.

Based on recent pull through data, we expect to exit February with a 10% share. The combined bendamustine franchise revenue and royalty totaled $181.8 million in 2018. Teva continues to do an outstanding job.

We believe we have identified an additional value creating opportunity driven by our bendamustine franchise that may allow us to generate a step up in value. We hope to be able to discuss this additional value with you shortly. Turning now to our Ryanodex program. In Q4 we entered into a cooperative research and development agreement with the U.S.

military to conduct a study to evaluate the neuroprotective effects of our Ryanodex. This study is now underway with three of the six animal cohorts already challenged. We expect to complete the study in the next few weeks.

Rodents exposed to the nerve agents [indiscernible] will be treated with the current standard of care atropine therapy and randomized to receive Ryanodex or control vehicle as added treatment.

If approved, Ryanodex would represent a first of its kind neuroprotective treatment to combat neurological damage due to nerve agent exposure, which often results in death.

Our previous rodent study that indicated that rodents treated with Ryanodex and antiepileptic drugs, perform better in neuro behavior testing, compared to animals treated with antiepileptic drugs only and had substantially less brain damage. Early indications from our ongoing study with the U.S.

military are very encouraging and we look forward to further advancing this program this year. We've also made progress evaluating Ryanodex as a treatment option for acute radiation syndrome or ARS. Last year we conducted an animal study to evaluate the efficacy of intravenous administration of our Ryanodex to prevent or mitigate ARS.

Animals in each treatment group received a well-characterized, high-dose of radiation to their whole body and also received randomly-assigned Ryanodex in different treatment modalities. The treatments were quite promising with less mortality post treatment overall for the Ryanodex group and the non-treated animals.

We plan to further explore and investigational indication for Ryanodex for the treatment of individuals exposed to high doses of radiation such as nuclear power plant leakage or nuclear weapons and conduct additional research to evaluate it for certain cancer patients undergoing radiation treatment.

Given the nature of the indication, it is likely to be developed under the FDA's Animal Rule.

We are also continuing to work to develop an IM formulation for Ryanodex, which would allow even more rapid administration, enabling immediate administration to patients in need by eliminating the requirement for an IV infusion, the associated wait time for IV administration would be removed, delivering a clear benefit to individuals in the life-threatening situations.

We are pursuing IM administration expansion as a new chemical entity with the FDA. If approved, we anticipate they would be eligible for five years of NCE regulatory exclusivity. Lastly, I'd like to address the next steps in the development of Ryanodex for exertional heat stroke.

We have now conducted two distinct trials and believe that based on the results there is a clinically meaningful treatment effect with the use of our Ryanodex in addition to standard of care cooling alone.

In fact, we believe these data show that there is six times higher likelihood that a patient will have full CNS recovery using Ryanodex when compared to cooling alone. We are confident that Ryanodex works as anticipated and that there is a need for a drug to treat EHS, which does not exist today.

We have submitted a meeting request to FDA and hope to meet as soon as possible to discuss an appropriate path forward. Today bendamustine assets are our largest revenue drivers and last week's FDA decision ensures the durability of these assets. That said there is tremendous additional potential in our pipeline.

As I just explained, we are working to expand the value of our Ryanodex by advancing multiple promising programs and other pipeline product candidates which have significant potential as well. And with regard to vasopressin and PEMFEXY, we're actively pursuing legal avenues to make our products available to patients as soon as possible.

We are the first to file on the 1 ml vasopressin injection product which we submitted to the FDA as an ANDA referencing part of streamed product. This patent litigation is ongoing with the trial scheduled to begin in May of 2020, depending on different factors we may be able to get to the market as early at the end of next year.

We continue our patent litigation related to PEMFEXY product which references Eli Lilly's Alimta in the Delaware court. The related antitrust litigation has stayed at least until the trial in the patent case. The patent trial is scheduled to begin in September 9, 2019.

As we head into 2019 we will continue to build value in the business by gaining greater clarity regarding our pipeline, exploring new opportunities with the existing products and delivering a very efficient business model that provides the cash necessary to execute our strategy.

As I stated earlier, we now have the most servitude in the bendamustine franchise that we've ever had. And it's likely that these assets will continue to deliver similar value for another four years. The question going forward for us is how to best invest our bendamustine cashflow.

Our plan is to build that organic pipeline, which we will know more about that over the next 60 or 90 days to continue to buy back shares when we think is appropriate and increase our emphasis on analyzing licensing opportunities as a way to ensure continued growth.

With that, I'll turn the call over to Pete to provide a review of the fourth quarter results.

Pete?.

Thank you, Scott. In the fourth quarter of 2018 total revenue was $56.1 million compared to $46.8 million in Q4 2017. Full year 2018 revenue totaled $213.3 million.

In 2017 total revenue was $236.7 million of which $37.5 million was the result of milestone payments, excluding milestone payments 2018 revenue was up 7% compared to 2017 largely due to the sales of Big Bag, which we launched in the second quarter of 2018 as well as continued growth in Ryanodex revenue.

Big Bag product sales were $6.8 million in the fourth quarter, based on IMS data, Big Bag’s market share of wholesale shipments-to-end users was 6% of the U.S. bendamustine market in the fourth quarter and we expect to exit February at a 10% share. So we are approaching our 12% aspirational market share.

Eagle recognizes Big Bag revenue on shipments by Eagle to wholesalers, as anticipated fourth quarter 2018 shipments to wholesalers were slightly below that of the third quarter to the stocking that occurred in Q3.

Product sales during the fourth quarter were up 95% year-over-year totaling $20.3 million compared to $10.4 million, largely due to Big Bag sales. For the year, product sales increased by $25 million to $70.4 million in 2018 compared to $45.3 million in 2017. Fourth quarter Ryanodex product sales reached $5.1 million up 10% on a year-over-year basis.

Ryanodex market share in the fourth quarter was 47% of the normalized units urns and 68% share of dollars, for the full year Ryanodex sales totaled $20.2 million or 15% compared to prior year. Q4 royalty revenue was $35.7 million compared to $36.4 million in the prior year quarter.

BENDEKA royalties were $31.9 million compared to $34.7 million in the fourth quarter of 2017. For the full year, royalty revenue was $142.9 million compared to $153.9 million in 2017, 2018 BENDEKA royalties were $134.4 million compared to $145.8 million in 2017.

In 2019, we expect Big Bag sales to increase and Ryanodex sales to be down due to the expected cycle. Gross margin was 67% during the fourth quarter, 2018 as compared to 71% of the fourth quarter of 2017. Obviously the gross margin on Big Bag sales was lower than that on the BENDEKA royalties.

The year-over-year compression in gross margin occasioned by the introduction of Big Bag revenue is partly offset by an expansion of Ryanodex gross margin. On the expense front R&D expenses were $5.9 million for the quarter compared to $9.4 million in the prior year quarter.

The fourth quarter year-over-year decrease reflects a substantial reduction in fulvestrant expenses partially offset by the cost of analytical work to support the vasopressin ANDA. Excluding stock based compensation and other non cash and non-recurring items our R&D expense in the fourth quarter $4.4 million.

Fully year R&D expense was $44.4 million compared to $32.6 million in 2017 reflecting the cost of the fulvestrant trial as well as the Vasopressin analytical work. Excluding stock based compensation and other non cash and non-recurring items, 2018 R&D expense was $37.8 million below our guidance of $40 million to $44 million.

Based on our portfolio as it exists today, it is likely that our R&D spend in 2019 will be lower than in 2018. SG&A expenses increased to $15.5 million in the fourth quarter of 2018 compared to $13.4 million in the fourth quarter of 2017.

External legal expenses associated with litigation of PEMFEXY, Vasopressin and bendamustine accounts for the year-over-year increase. However, full year 2018 SG&A decreased to $60.5 million compared to $71.4 million in 2017, 2017 SG&A included the increased marketing expense related to EHS and the contract sales force agreement with Spectrum.

The elimination of those expenses in 2018 was partially offset by the aforementioned increase in external legal expenses.

Excluding stock based compensation and other non-cash and non-recurring items, fourth quarter 2018 SG&A expense was $11.3 million and full year 2018 SG&A expense was $43.1 million below our guidance of $44 million to $47 million for the year.

Net income for the fourth quarter was $12.6 million or $0.88 per basic share and $0.86 per diluted share compared to net income of $9.1 million or $0.61 per basic and $0.58 per diluted share in the prior year period due to the fact as discussed above, 2018 net income was $31.9 million or $2 16 per basic share and $2.09 per diluted share, compared to net income of $51.9 million or $3 44 per basic and $3 27 per diluted share.

Adjusted non-GAAP net income for the fourth quarter of 2018 was $17.7 million or $1.23 per basic and $1.20 per diluted share compared to adjusted non-GAAP net income of $15.6 million or $1.05 per basic and $1 per diluted share in the prior year quarter.

Adjusted non-GAAP net income for 2018 was $59.2 million or $4 01 per basic and $3 87 per diluted share compared to adjusted non-GAAP net income of $69 million for $4 57 per basic share and $4 34 per diluted share.

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 EBITDA for the fourth quarter of 2018 was $22.1 million compared to $16.4 million in the prior quarter. For the full year, EBITDA was $71.4 million compared to EBITDA of $96.2 million in 2017.

As a reminder, in 2017 we earned $37.5 million of milestones, 2018 cash flow from operations excluding receivables billed $65 million. On October 30, 2018 the company entered into an accelerated stock repurchase agreement with JP Morgan pursuant to which it repurchased $50 million in Eagle shares from JP Morgan.

Since our IPO, we repurchased $154 million in Eagle shares. As of December 31, 2018 the company had $78.8 million in cash and cash equivalents and $66.5 million in net accounts receivable, $41.8 million of which was due from Teva. The company had $45 million in outstanding debt.

Therefore at December 31, 2018 the company had net cash and receivables of $100 million, after having bought back $50 million in stock in the fourth quarter. With that I'd like to open the call for questions. Operator please go ahead and open the lines of questions..

[Operator Instructions] We'll take our first question from David Amsellem with Piper Jaffray. Please go ahead, your line is open..

Hi, good morning. This is [indiscernible] on for David. Thanks for taking the question. So now that there's been resolution on Bendeka exclusivity and you have greater visibility on cash flows from your bendamustine franchise, you guys discuss your current thinking around business development opportunities.

I guess there's a lack of near-term competition from Treanda generics change your appetite or willingness to take on R&D risk..

Yes, thank you for the question. Good morning. It does change things. This is the way we approach it now. We have four years of cash flow coming bendamustine, which as I stayed in on the call, really does give us the most servitude that we've had in the cash flow since we launched the product.

And as we look to grow the company now knowing that we are likely to have this four years of cash flow in place, what we're excited about is first, we have really a great balance sheet. And so we have plenty of room to use the balance sheet if we elect to. We also have a significant amount of cash and the cash continues to grow.

At the same time we have the equity and stock if we needed to use that. So it's clear that we have all the wherewithal to grow the company. I think the growth of the company is going to come typically from one or two places, either going to come to pass through organic growth, or through external growth.

Organically, I think we're all pretty aware of what's transpiring things. There's going to be a lot of data that we'll see over the next couple of months.

But to answer your question more directly, yes, we're paying far more attention now to external growth and how can that come? That could be potentially products that are already in the market, it could be from R&D, it could be from M&A. But I do believe that one way or another we will grow this company and we have the wherewithal to do it.

And hopefully we'll have more to speak to over the upcoming weeks and months that how we see the growth unfolding..

That's helpful. One quick follow-up if I may.

I mean to the extent that you do look externally, can you discuss your thinking about potentially pivoting to more Paragraph IV filings versus sticking primarily to the 505(b) 2 based model?.

Yes certainly. We clearly see ourselves as a specialty company, a branded company. And I believe it's more likely that we'll continue to work on projects similar to what we have, where we find the unmet needs or niches within the market to really move patient care and to help our investors.

I think it's unlikely or at least less likely for us to go into the ANDA space unless from time to time things like vasopressin come along that we think we're uniquely qualified to handle. But we should continue to think of ourselves as a specialty company and not a generic company..

Okay, thanks again..

Thank you..

We’ll take our next question from Randall Stanicky with RBC Capital Markets. Please go ahead..

Hi guys, this is Dan Busby on for Randall. Good morning..

Good morning..

Few questions. To tart off, follow-up on that last business development question.

Could you just remind us what your commercial capabilities are right now? For example, how many sales reps you have and what kind of reach that gives you into the oncology in critical care hospital settings?.

Sure Dan, thanks for the question. So our sales and marketing organization consists of 48 individuals of which 31 are reps calling in the hospitals, the balance being marketing folks and sales management.

David, did you want to comment further on the infrastructure?.

David Pernock is on the line with us..

Yes, so basically rare but good question. We have our representatives are focused on, calling on a lot of the major hospitals, right, several thousand hospitals. And we also reach into the oncology marketplace as well, including some clinics. We also have ability to work with the national accounts for contracting purposes, et cetera.

And basically we have strong marketing staff as well supporting our overall efforts. So we have very good experienced team. most of our people, our leaders are very experienced in marketplace and most of the people we hire are very – have 10 years to 12 years experience in hospitals sales and our oncology sales.

And basically we feel we have the ability to handle future oncology products as well as future acute care hospital based products..

Thank you, David. And the only thing I would add to that is we're proud of the fact that we've been able to get to our 10% share of Big Bag as quickly as we have and clearly we should get to the 12% that we've targeted quickly. And I think that's due to the quality of the sales force that we've developed. And we're pretty pleased with that.

And we think we have a strategic asset here at Eagle, that commercial group that we have is clearly strategic. And we have the ability to add additional products into this infrastructure without adding much of any infrastructure cost to the company.

And we believe that there's leverage in the P&L going forward because of the breadth and the quality of the commercial team that we have..

Great, thanks. And just to follow-up on the Big Bag point, it's been a pretty strong uptick thus far.

Have you revisited your 12% market share target, I guess in other words, is there potential upside to see that?.

So I would say that we're consistent with our thought process that 12% seems to be the right number for a number of reasons. We're comfortable at 12%. And what's important for us to do at this point, I believe, is to leverage the value of the sales force and bring additional products into the company as a way to generate our growth.

Clearly, the best way to create value for the company is to diversify away from bendamustine. The good news is we have such a strong, capable franchise for the next four years.

The bad news in some respect is that it is a very significant part of our company and we should be using that salesforce now to generate value from additional products, not just bendamustine. I think that's the best way, the best path forward for the company to build, diversified long-term value for shareholders..

Okay, and just one last question from me on EHS.

So just to be clear, have you met with FDA at all yet? If so, what's the feedback? And then when can we expect clarity on the path forward, will this fall within the 60-day to 90-day timeframe that you referenced earlier?.

Yes, I believe so. We've not met as of yet. We've requested our meeting with the agency that'll happen soon. And once we have feedback and a better understanding of the path forward we’ll obviously report that to everyone..

Okay, thanks everyone..

Thank you..

Our next question comes from Brandon Folkes with Cantor Fitzgerald. Please go ahead..

Hi. Thanks for taking my question. On Ryanodex for Acute Radiation Syndrome and nerve agents, could you maybe help us think through the timeline and process of getting this product potentially into the strategic national stockpile? I mean, is this something that could be procured under the emergency use authorization? Thank you..

Thanks Brandon, well certainly it's possible. We're in the middle of the study now. We're about halfway through as I mentioned in the call earlier, that we're a few weeks away from finishing and then a few weeks after that having the results.

Assuming that the results of the current studies are similar to the results of the first study that we did and we're really very encouraged and excited about the neuroprotective capabilities of the drug.

At that point we'll start to have those conversations with the agency and with the government about how the drug would ultimately be used if its stockpiled, not just in the U.S., rest of the world. I do believe that we're – a few months, weeks away from being able to answer that question.

Obviously we're encouraged about the study results that we've seen in the first study. I’d like to report out this next study that we're encouraged about and then I think things will take care of itself but we're still a little bit away from being able to accurately answer your question.

And as it relates to radiation syndrome, I would say that we're a year behind where we are today. In nerve agents as the rest of this year unfolds we'll continue to do more work around radiation indications and depending on the timing of that path forward. We should have more information for you later in the year or early next year..

Okay. Thank you very much..

Thank you..

[Operator Instructions] We'll go next with Timothy Lugo with William Blair, please go ahead..

Hi. I’m Myles[ph] on for Tim, thanks very much for taking the question, I think you've got some on the quarter and in the year.

I just had a question regarding the timeline on patent litigation cases for PEMFEXY, sort of mentioned about the vasopressin that you might have and say a result in the best case scenario by the end of 2020 wondering whether you have granularity on the timing for PEMFEXY trial and when we're talking about additional organic growth opportunities from your platform, any work being done from Eagle Biologics, if you could comment on that, that'd be great..

Thank you very much. That's a lot in there. Let me see if we have that all down. But from the patent litigation timelines, I think we’ve mentioned, we have our PEMFEXY litigation coming up in September of this year already and so that's really just a few months away. Let's see how that goes.

Where we're still quite bullish that we think we have a good hand in that case. Let's get into trial and see how that goes and that don't fall in the normal order as you normally see in these going forward.

We'll have the trial, hopefully we're victorious and then if that is the case we'll just have to figure out the best way to monetize the asset and get into to the market but that's the timing there. Vasopressin, the litigation is May of next year and again the same timeline, we'll go through a trial, we'll get a response.

Hopefully we'll be victorious there as well. And then we'll have to determine at that point the best way to monetize that asset as well. But you can see after a couple of years of hard work on all of this, it’s coming to head here and having two patent litigation trials taking place between September and May is quite a bit.

Again, we feel good, let's see what happens and then we'll be aggressive as we always are figuring out how to build value for investors from those two assets.

In terms of the pipeline, the pipeline in its totality we hope to continue to provide more information over the upcoming weeks and months not just for the organic capabilities that we have and the products that we're working on with certainly external growth opportunities that we're looking at and as I stated earlier, we have a belief in the company that based on our balance sheet, our cash and our equity and most importantly the strategic value that we see in the sales force it would be in everyone's best interest that if we can construct a deal that makes sense to us from an expense and timing standpoint to augment the pipeline with outside products as well.

So we're being more aggressive with that. In terms of the Biologics business that continues to move along, recognizing that it's been a little slower than we anticipated. We continue to have high hopes that we'll be able to create partnerships using this technology.

We're still very encouraged by the technology and we hope to have more information about the use of that asset and that technology that we have in the upcoming months..

Thanks for getting through that and appreciate your color..

Thank you. Thank you. Let me go back before we take any other questions potentially to Brandon's question earlier. What I would add as you look to the stockpile for nerve agents, once we get through the radiation syndrome, certainly in the area of potential nuclear bomb or a discharge of a nuclear weapon in someplace, the opportunity for the U.S.

government would be to have one vial of Ryanodex that would be able to cover the civilian population for both the nerve agent release and the radiation release. And I certainly think as we move through the opportunities around Ryanodex, the likelihood ultimately winding up in the civilian stockpile will continue to increase.

And certainly once we put the product into an IM version, then we've have – if it hasn't happened by then, we have an excellent opportunity of being able to have a full dissemination of Ryanodex available to the population if unfortunately it's needed.

And with that, do we have any other questions?.

There are no further questions at this time..

Okay. And with that, I’d just like, once again, to thank everybody. We had a really very positive quarter. We're expecting a very positive next several years of the company. We are very focused on growing this company in many opportunities that we have to do that.

Look-forward to having additional positive information to share with you and appreciate the time that you spent with us today. Thank you..

And this will conclude today's program. Thank you for your participation. You may now disconnect and have a great day..