Good day, everyone, and welcome to the ANI Pharmaceuticals, Inc. Third Quarter 2023 Earnings Results Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask a question during the question-and-answer session. Please note, this call is being recorded. At this time, it is my pleasure to turn the conference over to Judy DiClemente with Investor Relations for ANI. Please go ahead.

Thank you, Jamie. Welcome to ANI Pharmaceuticals third quarter 2023 earnings results call. This is Judy DiClemente of Insight Communications, Investor Relations for ANI. With me on today's call are Nikhil Lalwani, President and Chief Executive Officer; and Stephen Carey, Chief Financial Officer. You can also access the webcast of this call through the Investors section of the ANI website at www.anipharmaceuticals.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 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 ANI Pharmaceuticals management as of today and involve risks and uncertainties, including those noted in our press release issued this morning 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. ANI specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. The archived webcast will be available for 30 days on our website, anipharmaceuticals.com. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on November 8, 2023. Since then, ANI 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 Nikhil Lalwani. Nikhil?

Thank you, Judy. Good morning, everyone, and thank you for joining the ANI Pharmaceuticals third quarter earnings call, and thank you for your interest in ANI Pharmaceuticals. First, I would like to express tremendous gratitude to our customers, suppliers and investors for their strong support of our ANI team and our Board as we work tirelessly to fulfill our purpose of serving patients and improving lives. Our time-tested values of teamwork, innovation, integrity, compliance, accountability, commitment to excellence, and always putting the patient first, guide us every day as we keep striving for serving patients and improving lives. Turning now to our business performance for the third quarter. Steve and I will share the details of our financial results, the momentum we've built across key business segments, and our overall confidence in the company's ability to drive sustainable, profitable growth. I'm delighted to share that clarity of our strategy and very strong execution has enabled ANI to deliver another record quarter for revenue and adjusted non-GAAP EBITDA. This record quarterly performance also allowed us to raise full year 2023 guidance for the third quarter in a row. This morning, we reported record net quarterly revenues of $131.8 million, an increase of 57% over the third quarter of 2022, and up 13% over the record we achieved last quarter. Equally impressive, our adjusted non-GAAP EBITDA was $36.5 million, a 98% year-over-year increase and our adjusted non-GAAP diluted EPS was $1.27, representing nearly a 118% increase over the third quarter of 2022. These results and the Q4 outlook for all segments have allowed us to once again raise our full year 2023 guidance. We now expect net revenues to be in the range of $468 million to $478 million, adjusted non-GAAP EBITDA to be between $128 million and $133 million, and adjusted non-GAAP earnings per share to be between $4.29 to $4.57. The midpoint of the revised total company guidance represents remarkable year-over-year growth in net revenues of approximately 49%, adjusted non-GAAP EBITDA of 133%, and adjusted non-GAAP earnings per diluted share of 226%. Now let's take a closer look at our performance and the progress made against strategic imperatives for our key business segments, starting with our rare disease business. We believe our rare disease business will continue to be the largest driver of ANI's future growth. We will deliver this growth through the purified Cortrophin Gel launch momentum as anchor and by adding assets that leverage our rare disease infrastructure and capabilities. Revenues for Cortrophin Gel totaled $29.7 million in the third quarter, an increase of 136% over the prior year and up 22% compared to the second quarter of 2023. Cortrophin Gel continues to accelerate with record quarterly new cases initiated and new patient starts. We also saw increasing momentum with new unique prescribers, including many prescribers who were naive to ACTH therapy. The company's efforts to increase the effectiveness of the field sales force and improve awareness of ACTH therapy for appropriate patients have yielded results. The outlook for the overall ACTH category remains robust with six consecutive quarters of year-over-year growth according to IQVIA. We saw ongoing strength in our targeted specialties of urology, nephrology, and rheumatology. In addition, we made gains through positive patient response to the company's entry into the pulmonology specialty. Also, during the quarter, we announced the FDA approval and commercial availability of the new 1 mL vial size of Cortrophin Gel, the only approved purified ACTH indicated for the treatment of acute gouty arthritis flares. The commercial launch of the 1 mL vial for acute gouty arthritis flares is supported by ANI's existing sales force. And while it is still early in the launch, we are already receiving positive physician response. Recently, the company received a specific J-Code for Cortrophin to support physician administration of the 1 mL vial. With momentum from our initial three priority specialties and good progress made with the two new specialties, we are raising our full year revenue guidance for Cortrophin Gel to $100 million to $107 million, up from the previous range of $90 million to $100 million. The new range represents year-over-year revenue growth of between 140% and 157% compared to the $42 million recognized in 2022. As we approach the end of 2023 and move into 2024, our company remains actively committed to increasing the scope and scale of our rare disease portfolio through acquisitions and in-licensing by leveraging our financial strength alongside the rare disease infrastructure and capabilities that we have built. Turning now to our Generics, Established Brands and Other segment, which also delivered strong results during the quarter, growing by 43% year-over-year to $102.1 million in the third quarter. As with the prior two quarters, we were able to leverage the company's operational excellence and U.S.-based manufacturing footprint to fill the gap in pharmaceutical shortages due to supply chain disruptions. While some of the market opportunities from the past three quarters have softened, we remain poised to capitalize on current and future opportunities as an established and reliable partner of choice for our customers. Our strong R&D organization continues to deliver with five new product launches, including Colestipol Hydrochloride Tablets, Estradiol 0.1%, and Thyroid Tablets. In addition, we filed three new ANDAs and two new 505(b)(2) applications during the quarter. We also retained the #2 ranking in competitive generic therapy approvals. Going forward, our aim for the generics, established brands, and other segments is to remain focused on driving growth through superior new product launch execution, operational excellence, cost competitiveness, and supply reliability with a patient-first orientation. To support the ongoing growth of this segment, the company has invested in expanding the manufacturing footprint and capacities at the New Jersey site and expects these to be operational by early 2024. With all that we've put in place during 2023 across all areas of the business, we are confident in our ability to build a sustainable biopharmaceutical company serving patients and improving lives. I'll now turn over to Steve, who will walk through our third quarter financial results and revised guidance in more detail. Steve?

Thank you, Nikhil, and good morning to everyone on the call. As Nikhil indicated, we posted very strong results in the third quarter of 2023. We saw growth across our core businesses, generating record third quarter revenues of $131.8 million. This represents $48 million or 57% growth over the $83.8 million reported in the third quarter of 2022 and a 13% sequential increase from the $116.5 million of revenues reported in the second quarter, which had been the company's previous record. Revenues from Cortrophin reported in our Rare Disease segment were $29.7 million in the quarter, up 136% from the prior year. Revenues of our Generic, Established Brands, and Other segment rose $30.9 million to $102.1 million, an increase of 43% over the prior year. Net revenue gains across the segment reflect increased volumes on the base business, the annualization of 2022 launches, and new product launches in 2023. From a product perspective, performance was driven by revenues from year-over-year gains in products such as Colestipol, Famotidine, Mixed Amphetamine Salts Extended Release, Nitrofurantoin, and Thyroid, tempered by a decrease in revenues of Fenofibrate, Nebivolol, and Prazosin, among others. As Nikhil mentioned earlier, our strong commitment to U.S.-based manufacturing and excellence in generic R&D, procurement, and sales and marketing have enabled ANI to meet market demand for key products in the face of competitive supply chain issues throughout the first three quarters of this year. The market conditions for specific molecules have changed recently, and as a result, we currently expect fourth quarter established brand revenues to be significantly lower than what we are reporting this morning for the third quarter of 2023. We do expect to see ongoing sequential growth in generic revenues; however, it will be tempered by declines in certain molecules. Importantly, the steps we have taken to enhance the capabilities of AI have increased our ability to service these supply chain disruptions, and our business is well poised to meet current and future opportunities as they arise. Operating expenses during the third quarter increased by 28% to $113.9 million for the three months ended September 30, 2023, compared to $88.8 million in the prior year period. Cost of sales, excluding depreciation and amortization, increased by $15.2 million to $48.1 million in the third quarter of 2023 compared to $32.9 million in the prior year period, driven by significant growth in sales volumes of generic and rare disease pharmaceutical products. Research and development expenses were $11.1 million in the third quarter of 2023, an increase of $3.5 million from the prior year period, primarily due to $1.6 million in expenses related to a 505(b)(2) filing and a higher level of activity associated with the ongoing and new projects in the current year period. Selling, general, and administrative expenses increased by 40% to $42 million in the third quarter of 2023 compared to $30.1 million in the prior year period, primarily due to increased employment-related costs as well as an overall increase in activities required to support the significant growth in our business. Depreciation and amortization expense was $16.2 million for the three months ended September 30, 2023, an increase of $1 million from the prior year period. During the quarter, we recognized a gain of $2.6 million arising from the Novitium contingent consideration fair value adjustment compared to a loss of $2.5 million in the prior year period, primarily due to a change in the anticipated cash flows, specifically extending the timeframe over which cash flows will be generated by the product and the passage of time, as well as an increase to the probability of payment for the product development-based milestone payments. Regarding the closure of our Oakville, Ontario, Canada manufacturing plant, there was no P&L impact in the current year period as our restructuring activities are essentially complete. This is compared to $1.5 million of restructuring expense recorded in the prior year period. On November 6, 2023, we entered into an agreement for the sale of the site for a total sales price of CAD 17.85 million or approximately USD 13 million based on the current exchange rate. Closing the sale is currently expected to occur in the first quarter of 2024. Net income available to common shareholders for the third quarter of 2023 was $9.5 million, as compared to a net loss of $9 million in the prior year period. Diluted GAAP earnings per share was $0.45, as compared to a loss of $0.55 in the prior year period. On an adjusted non-GAAP basis, we had diluted earnings per share of $1.27 for the quarter compared to $0.58 per share in the prior year period. Adjusted non-GAAP EBITDA for the third quarter of 2023 reached a new company record of $36.5 million and reflects gross profit pull-through from the strong revenue performance. This is an increase of $18.1 million compared to the $18.4 million posted in the prior year period. Adjusted non-GAAP EBITDA also rose $2.4 million on a sequential basis, up from our previous record of $34.1 million recognized in the second quarter of 2023. From a balance sheet perspective, we ended the quarter with $193.1 million in unrestricted cash, driven in part by cash flow from operations of $32.1 million during the quarter ended September 30, 2023. On a nine-month year-to-date basis, we have generated $74.2 million of cash flow from operations. We have $294.8 million in face value of outstanding debt, which is due in November of 2027. As of the balance sheet, our gross leverage is 2.3x, and our net leverage is less than 1x trailing 12-month adjusted non-GAAP EBITDA of $126.9 million. Finally, as Nikhil mentioned and as outlined in this morning's press release, we are pleased to raise full year 2023 guidance as follows: we are raising total company expected net revenues to be between $468 million and $478 million, up from the previously issued guidance of $425 million and $445 million, representing approximately 48% to 51% growth as compared to the $316.4 million recognized for the full year 2022. We are raising total company adjusted non-GAAP EBITDA to be between $128 million and $133 million, up from previously issued guidance of $150 million and $125 million, representing approximately 129% to 138% growth as compared to the $55.9 million recognized in 2022. We are raising total company adjusted non-GAAP earnings per share to $4.29 to $4.57, up from the previously issued guidance of $3.62 to $4.11, representing approximately 215% to 236% growth as compared to the $1.36 reported in 2022. We are raising Cortrophin specific revenue guidance to be in the range of $100 million to $107 million, up from previously issued guidance of $90 million to $100 million, representing 140% to 157% growth as compared to the $41.7 million recognized in 2022. And we now project total company non-GAAP gross margin to be between 63% and 63.8% as compared to the previously issued guidance of 63% and 64.8%. In addition, we currently anticipate between 19.2 million and 19.3 million shares outstanding for purpose of calculating EPS, and a U.S. GAAP effective tax rate of between 9% and 13%. The company will continue to tax effect adjustments for computation of adjusted non-GAAP diluted earnings per share at a tax rate of 24%. We will now open up the call for questions.

We'll take our first question from Les Sulewski with Truist Securities.

First, I want to start off on the generics front. It seems to be that there's a shift in tone in gravitation towards a little bit of a weakness that you're seeing. Can you just talk a little bit about that, which categories essentially? And a follow-up to that is, what is the reasoning behind the expansion and the manufacturing footprint given the softness in the market? Or maybe it's a little bit exaggerated. Just give you a little more color, if you can.

Sure. First, regarding the softness we've observed, it's related to specific opportunities that have emerged from supply chain disruptions. We've mentioned several structural factors, including product-specific issues and site-related problems stemming from FDA audits, as well as company-specific financial challenges faced by our competitors, which have created opportunities for us. When we refer to softening, we are specifically addressing certain products in the generics and established brands categories and the decline in these product-level opportunities. The mix of current, new, and returning opportunities is very dynamic and changing, so we concentrate our guidance on overall company performance. To answer your second question, the softening is again linked to opportunities arising from supply chain disruptions. As Steve pointed out, we remain confident in the growth of the generic business, and the expansion at our New Jersey site is intended to support that growth for the next few years. This added capacity is planned to accommodate the growth we anticipate based on both new and existing products in our portfolio.

Nikhil, that's helpful. Perhaps I'll reframe the question in another way. Are you seeing market weakness? Or are you seeing more of just the supply chain essentially kind of resolving and stabilizing?

So you're seeing specific resolution of certain supply chain-related disruptions. We still think that the macro trends that give rise to the supply chain disruptions, which are product-specific issues, manufacturing site-related issues, and company-specific financial issues, all of these are persisting. So the market macro trend is persisting. We're seeing that specific opportunities that we had related to these trends are softening. Some of those are softening, and that is what we're speaking towards. So no, we're not talking about overall market weakness at all. Of course, you've heard from many of our competitors in the generic space, and I think you've seen the strength in what they are reporting.

I have, yes. And that is helpful. Okay. Just moving on. On the consumption side, so the 1 ml dosage, is there a difference in shelf life? And would you see a prescribing this off-label? And what essentially is the appeal to prescribers? And what’s the kind of potential opportunity for this dosage?

Yes. Look, the launch of the 1 mL vial size and the commercial availability of that is for the adjunctive treatment of certain patients with acute gouty arthritis flares. Recently, the company received a specific J-Code for Cortrophin to support physician administration of the 1 mL. So the 1 mL vial is for acute gouty arthritis and certain patients for adjunctive treatment. While we received positive initial physician response, we are very early into this launch, and we would love to share more at the next earnings call as the launch evolves.

Got it. Okay. And just to go back to generics briefly. On the 3Q results, was the impact driven primarily by seasonality, I'd say, the strength, some sort of perhaps inventory stocking, or just product channel mix? And then how do you envision essentially given what we discussed earlier, the '24 to kind of shape out?

Yes. I think the generics' Q3 performance is driven by a combination of new product launches, opportunities from the supply chain disruptions, and continued strong performance with our base business. So you asked about the question around seasonality. We don't believe that from the product portfolio we have that there is a seasonality impact on that. And then as far as 2024, we are working through many moving parts, and we'll plan on releasing our 2024 financial guidance on our year-end earnings call, which will occur towards the end of February. However, we continue to, as you would have seen, even in the R&D expense, invest in R&D for the generics business to support future growth. That growth will come from new product launches, cost competitiveness, and supply chain reliability.

We'll take our next question from Vamil Divan with Guggenheim Securities.

So a couple of questions for me. First on the Cortrophin side. I know you mentioned the 1 mL, and I'm curious about the gouty arthritis opportunity in particular, and that is sort of a unique one for you. Can you maybe just quantify, I guess, initially any sort of feedback or kind of doctor interest in that indication, but also does quantify what you see as a potential opportunity in that specific indication? And then my second question is going back to some of the comments around the softness that you're seeing. I mean, the main thing is really rather frankly 2024, and I know you're not going to give guidance until in February. But if I look at things right now, based on where you're planning to leave 2023, it looks like the sort of consensus number you are assuming very minimal sales growth for next year. And EPS is actually sort of below where you leave this year. So I'm just wondering if you can provide any color at all on how we should think about the trajectory for the different businesses for next year at this point, understanding that you will give more detail a few months from now, but it does seem like there's a pretty big disconnect from the trajectory of the business and where consensus numbers are right now for next year?

All right. I think first, your question around gout, like many of our other indications, we’re focused on patients for whom current treatments are not sufficient. In the case of gout flares, there are patients with acute gouty arthritis flares who might benefit from an additional option beyond the other therapeutics available. We have received positive initial physician response so far. It's not something that we are able to quantify at this point, and we try to find a balance between sharing information to assist the investment community while not giving away competitively sensitive data. Please stay tuned, and we will come back to share more about the gout launch. You should know that we have assumed no material revenues from gout in the 2023 guidance, as it is early days in the launch. And then regarding your second question about 2024 and how that links to the 2023 guidance, I mean, you have been working with us long enough to know that we deliver what we commit to. This is the continuation of that philosophy of being more conservative while giving guidance. In terms of 2024, we see continued evolution of the Cortrophin Gel launch, ongoing strong execution in our tax business. You've also heard about our efforts to leverage the Cortrophin launch as our anchor asset in rare disease and build on that across the multiple moving parts, including the supply chain disruptions. We plan on releasing our 2024 financial guidance as we move forward.

Okay. Maybe just one quick follow-up, just again on the commentary around the softening in specific markets you're seeing. Would you say is that more on the Generic side or more Established Brands? Is there any way to just sort of give us a little bit of directional sense on where you might be seeing more of the impact?

Sure. So we are seeing impacts across products, both in Generics and in Established Brands. In Generics, some of the growth that we're seeing from the other products and the new launches is tempering some of that decline. So in the Q4 numbers, you will see the impact more on the Established Brand side than you will on the Generics side.

We'll take our next question from Oren Livnat with H.C. Wainright.

If I could just, I guess, approach the same discussion from a little bit different perspective. Obviously, you've raised guidance dramatically from the beginning of the year from initial guidance, I think, about $100 million and 9% EPS raise, mostly from the generics. When you issue guidance, I guess, how conservative are you being? How are you looking at the world regarding all these disruptions and opportunities you have? Do you have much visibility on these looking forward? Or do you assume the ones that you already have in hand will end shortly looking forward to be extremely conservative in your guidance? What I'm asking is, it's not surprising that some of the opportunities you’ve experienced this year are rolling off, right? They don't last forever. But when you give first-time guidance next year or when you have given guidance each quarter of this year, what are you assuming for the durability of those opportunities? And do you build in anything for expected new disruptions to benefit from those disruptions coming your way? I have a follow-up.

Sure, and thank you for your question. Look, I think I've spoken about this, which is that when we speak to guidance or provide guidance, we obviously bake in the performance of the previous quarter and then assume, with the many moving parts, our best understanding of what subset of those opportunities will continue in the subsequent quarters. And we have some understanding as well. If there is a site-related issue, it takes time to resolve those. If there’s a product level specific technical issue with one player in a five-player market, then we know that it could be shorter. We bake in that understanding as we're giving guidance. To use words that Steve has used before, we have seen there is always more in the previous periods when we were doing, and we’re not assuming that these will persist forever. That’s why we baked that in as we give guidance. Of course, we continue to learn more, and we try to share that, maintaining our philosophy of stating what we will deliver and delivering on that.

I appreciate your clarification. You mentioned that the largest quarter-over-quarter change in Q4 is expected to be on the branded side. We typically don't observe legacy brands experiencing similar disruptions as we see with generics, where products frequently enter and exit the market. Could you discuss whether the benefits you've experienced this year have primarily come from volume or pricing? If that is expected to moderate moving forward, will it be due to pricing dynamics? If so, is that softening related to general trends involving payers and contracting, or is it primarily a supply and demand situation as certain products return to the market and prices adjust accordingly?

Yes. No, thank you for that question, Oren. It's all primarily volume-related and is largely driven by volume. It's not driven by pricing.

Yes. And can you comment on generics, I guess, portfolio pricing trends in general? I think historically, you've had a pretty well-diversified portfolio. It's not enormous, but it's spread pretty well. Can you talk about how that's changed this year with some of these benefits? Are there any one or two a handful of products that have driven outsized gains? And what's maybe single or handful of revenue percentages in your portfolio now?

Yes. I think that the diversification of our product portfolio across the generics business persists. We have multiple products in the generics business that have seen benefits from the supply chain disruptions. None have taken a lion’s share of our overall generic business. I think it's still within the top 10%. But Steve, could you clarify?

That's correct, Nikhil. On the generic side of the portfolio, the company has, throughout the years, aimed to diversify the generics. At this moment in time, I would say we have quite a diverse portfolio. And no single product is taking any significant share of the generics portfolio.

All right. And just lastly, the rare disease business has been outperforming as well. I don't want to only focus on generics. Can you talk about the investment there? I think once upon a time, you told us you expected this year to have approximately 10% year-over-year spend on that business. Is it safe to assume that you've been investing more behind that than originally due to outperformance? And is that necessary to support the demand? Or are you actually investing more to drive more demand now and going forward?

Yes. Thank you, Oren. No, I think that our investments have been in line with the numbers you mentioned, which is roughly a 10% year-on-year increase.

At this time, as we have no questions standing by, I will turn the conference back over to Nikhil Lalwani for any additional or closing comments.

Thank you, everyone, for joining our call this morning. We believe that our efforts during 2023 have created a strong foundation for continued success in fulfilling our purpose of serving patients and improving lives. We look forward to updating you on our progress. We appreciate your time and interest in ANI. Thank you.

Ladies and gentlemen, that does conclude today's conference. Thank you for your participation. You may disconnect at this time.