Earnings Call Transcript - ANIP Q1 2024

Operator, Operator

Good day, everyone, and welcome to today's ANI Pharmaceuticals, Inc. First Quarter 2024 Earnings Results Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question-and-answer session. Please note this call is being recorded and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Lisa Wilson.

Lisa Wilson, Investor Relations

Thank you, Shelby. Welcome to ANI Pharmaceuticals Q1 2024 earnings results call. This is Lisa Wilson, 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. 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. For the benefit of those who may be listening to the replay or archived webcast, this call was held and recorded on May 10th, 2024. Since then ANI may have made announcements related to the topic 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 Lalwani, CEO

Thank you, Lisa. Good morning, everyone, and thank you for your interest in ANI Pharmaceuticals and for joining our first quarter earnings call. The company remains committed to our purpose, serving patients and improving lives. On behalf of all of ANI, we are grateful for the continued support of our customers, suppliers, partners, and shareholders. We remain focused on driving continued growth through our rare disease business and our generics business, both supported by strong cash flow from our established brands business. We're pleased to report record first quarter results and are reiterating our full year guidance for total revenues, Cortrophin Gel revenues, adjusted EBITDA, and adjusted EPS, which Steve will further highlight. Total revenues for the first quarter were $137.4 million, an increase of 29% over the first quarter of 2023. Adjusted non-GAAP EBITDA was $37.6 million, up 14% from the prior year period. Adjusted non-GAAP EPS was $1.21, an increase of 3% over the first quarter of 2023. Our lead rare disease asset, purified Cortrophin Gel generated $36.9 million of revenue in the quarter, a year-over-year increase of 126%. Our rare disease team continued to execute on successful Cortrophin Gel commercialization in the first quarter, driving prescribing growth across our core specialties of neurology, rheumatology, and nephrology, as well as traction in our newer specialties of pulmonology and ophthalmology. We are pleased to report that the prescribing momentum has carried into the second quarter, and we achieved the highest number of new patient starts since launch during the month of April. On our fourth quarter call, we discussed several investments to support the Cortrophin Gel franchise with the goal of driving greater adoption across current and new specialty areas. I am proud to update you on the progress made on these initiatives. First, given the strong traction that we have seen in pulmonology, we've announced plans to add a second geographical region to our pulmonology sales force. This team is now in place, and the increased focus is paying off with record new patient starts in the first quarter for pulmonology. We also deployed a small targeted ophthalmology sales force in the first quarter. We see ophthalmology as a meaningful driver of future Cortrophin Gel growth. For both pulmonology and ophthalmology, we also gained traction with new to ACTH prescribers. As you might recall, in the fourth quarter, we launched a new 1-mL vial of Cortrophin Gel for the treatment of acute gouty arthritis flares. We believe that bringing the only ACTH product to market with this indication presents a promising growth opportunity for the Cortrophin franchise. We believe Cortrophin Gel remains on a strong multiyear growth trajectory, driven both by increased market penetration within core and new indications, as well as further expansion of the total ACTH category. While we have gained significant traction with Cortrophin Gel after a little over two years on the market, the number of patients on ACTH therapy today remains substantially lower than a few years ago. Our prescriber engagement activities and investments to drive growth continue to boost higher utilization by first-time and returning ACTH prescribers as more physicians use Cortrophin Gel therapy for appropriate patients. While we have ample opportunity ahead to maximize Cortrophin Gel's potential, expanding the scope and scale of our rare disease business through M&A and in-licensing remains a high priority. We are actively evaluating opportunities with a focus on commercial assets that overlap with our current priority therapeutic areas of nephrology, neurology, rheumatology, pulmonology, and ophthalmology, as well as assets outside of these areas that would leverage our rare disease platform. Turning now to our generics business, which delivered another solid quarter with revenue of $70.2 million, an increase of 10% over the first quarter of 2023. Our strong new launch execution and operational excellence contributed to this performance. We launched six new products during the quarter, including a competitive generic therapy product with 180-day exclusivity. Notably, we retained the number two ranking for competitive generic therapy approvals and are a top 15 manufacturer in number of product approvals. Overall, our generics business remains a key growth driver as we leverage our high-performance R&D team, operational excellence, and US-based manufacturing footprint. We remain an established and reliable partner of choice for our customers. Our established brands business continues to address patient needs with reliability of supply, a unique set of commercial capabilities, and opportunistic business development to expand the portfolio. Our overall portfolio is strengthened by this high gross margin, low working capital, and strong cash flow generation business. With these results and almost $230 million of cash on hand, the first quarter has set a solid foundation for 2024. We have many important initiatives and opportunities to execute on this year, and we look forward to continuing the momentum. I'll now turn the call over to Steve, who will walk through our first quarter financial results and 2024 guidance in more detail. Steve?

Stephen Carey, CFO

Thank you, Nikhil, and good morning to everyone on the call. ANI generated first quarter revenues of $137.4 million, up 29% over the prior year period. Revenues from Cortrophin Gel, reported in our rare disease segment, were $36.9 million, up 126% from the prior year period, driven primarily by increased volume. As we previously guided, Cortrophin Gel revenues were down on a sequential basis due to the typical seasonality seen with rare disease drugs. We continue to expect sequential revenue growth for Cortrophin Gel in the second, third, and fourth quarter of 2024 off of this first-quarter revenue achievement. Revenues of our generics, established brands, and other segments were $100.5 million, an increase of 11% over the prior year period. Generic revenues for the quarter were $70.2 million, an increase of 10% over the prior year period driven by increased volumes in the base business and contributions from new products launched in 2023 and in the first quarter of 2024. Net revenues for established brands and other were $30.3 million in the quarter, an increase of 13% over the prior year period. As we guided on the Q4 call, the first quarter benefited from supply tailwind. Cost of sales, excluding depreciation and amortization, increased 30% to $49.2 million in the first quarter of 2024 compared to the prior year period, primarily due to growth in sales volumes of pharmaceutical products across all segments and significant growth of royalty-bearing products. Non-GAAP gross margin was 64.5%, a decrease of approximately 145 basis points from the prior year period, primarily driven by product mix. Research and development expenses increased 77% to $10.5 million in the first quarter of 2024, primarily due to a higher level of activity associated with both ongoing and new projects. Selling, general and administrative expenses increased 32% to $48 million in the first quarter of 2024 due to increased employment-related costs and continued investment in our rare disease sales and marketing infrastructure and activities, higher legal expenses, as well as an overall increase in activities to support ANI's growth. During the first quarter of 2024, we completed the sale of our Oakville, Ontario, Canada manufacturing facility for $14.2 million and recognized the corresponding $5.3 million gain in the P&L. We also recorded a $9.7 million gain on our shares of CG Oncology common stock, triggered by CG Oncology's initial public offering in January 2024. When CG Oncology purchased ANI's targeted oncolytic technology in 2010, CG Oncology undertook to pay ANI, among other things, running royalties in the amount of 5% on net sales of CG0070, also known as Cretostimogene by CG Oncology, its sublicensees, or its affiliates in a territory contractually defined as worldwide. In February 2024, CG Oncology disputed its royalty obligation to ANI. That dispute is currently in active litigation. Both the gain on the sale of our Oakville facility and the gain on our CG Oncology equity have been excluded from the calculation of our non-GAAP EBITDA and non-GAAP EPS measures presented in this morning's earnings release. Net income available to common shareholders for the first quarter of 2024 was $17.8 million as compared to $1 million in the prior year period. First quarter diluted GAAP earnings per share was $0.82 as compared to $0.06 in the prior year period. On an adjusted non-GAAP basis, diluted earnings per share was $1.21 for the quarter, compared to $1.17 per share in the prior year period. Adjusted non-GAAP EBITDA for the first quarter of 2024 was $37.6 million, an increase of 14% over the prior year period. We generated cash flow from operations of $18.3 million during the Q1, and we ended the quarter with $228.6 million in unrestricted cash. We have $293.3 million in face value of outstanding debt, which is due in November of 2027. At the end of the first quarter, our gross leverage was 2.1 times and our net leverage was less than half a turn of our trailing 12-month adjusted non-GAAP EBITDA of $138.4 million. Finally, as outlined in this morning's press release, we are pleased to reiterate full year 2024 guidance as follows: Full year 2024 net revenues of $520 million to $542 million, Cortrophin Gel net revenues of $170 million to $180 million, full year adjusted non-GAAP EBITDA of $135 million to $145 million and adjusted non-GAAP earnings per share between $4.26 and $4.67. We continue to expect total company adjusted non-GAAP gross margin between 62% and 63% and the company will continue to tax effect non-GAAP adjustments for computation of adjusted non-GAAP diluted earnings per share using our estimated statutory rate of 26%. The company now anticipates between 19.4 million and 19.7 million shares outstanding for the purpose of calculating diluted EPS and now expects its US GAAP effective tax rate to be between 22% and 25% as compared to 20% to 22% previously disclosed. With that, I will now turn the call back to Nikhil.

Nikhil Lalwani, CEO

Thank you, Steve. We are energized by our Q1 results and look forward to building momentum throughout 2024. The company remains focused on driving continued growth through our rare disease business and our generics business, both supported by strong cash flow from established brands. Thank you for your interest in ANI and supporting the ANI team as we work to fulfill our purpose of serving patients, improving lives. We look forward to keeping you updated during the year ahead, and we are happy to answer any questions. Thank you. Operator, please open the line for questions.

Operator, Operator

Thank you. We'll take our first question from Gary Nachman with Raymond James. Your line is open.

Gary Nachman, Analyst

Thanks, everyone, and good morning. First, regarding Cortrophin, how is the overall ACTH market growing compared to your market share gains from Acthar? For the new patients you mentioned reaching an all-time high in April, are most of them experienced or new to ACTH? Please elaborate on those dynamics and discuss the progress in the newer segments, particularly OXO, since you just launched that. Also, do you anticipate increasing investments in either ophthalmology or pulmonology in the near future?

Nikhil Lalwani, CEO

Thank you, Gary, and good morning. I'll address each question individually. Your first question about the growth of the overall ACTH market indicates that both we and our competitor have observed rising awareness and prescribing trends within the category, leading to growth in the ACTH market. If we combine our revenue guidance of $170 million to $180 million for 2024 with their estimates, we anticipate that the ACTH market will see revenue growth of nearly 10%, returning to the market size seen in 2021. It's worth mentioning that the number of patients receiving ACTH therapy is still significantly lower than it was a few years ago. Therefore, there remains considerable potential for growth in the ACTH market, which is our primary focus. As for your second question about new patient starts in April, we aim to share information that is useful for investors while being mindful of competitive sensitivities. I can share that we're experiencing growth in our main categories of neurology, nephrology, and rheumatology, along with our newer segments of pulmonology and ophthalmology, which relates to your third question. In pulmonology, we initially operated with a smaller sales team in one region, but we've expanded into a second region, leading to a significant increase in new patient starts in that area during the first quarter. Regarding ophthalmology, we have set up a new sales team, which was established in the first quarter, and we look forward to updating you on their progress. The final part of your question pertains to our plans for increased investments in these new areas. As mentioned earlier, we believe there is substantial growth potential in the ACTH market and for Cortrophin Gel, and how we allocate resources to capitalize on that growth will depend on various factors, including the mergers and acquisitions we are pursuing and the potential advantages they may bring. I hope this answers your questions, Gary.

Gary Nachman, Analyst

Yeah, that was very helpful. And then just on that last point, where are you in your search for new rare disease assets? How has the market been on those for you guys? And do you think you should still be able to execute on something by the end of this year?

Nikhil Lalwani, CEO

Thank you for the question, Gary. Our corporate development and executive teams have been very active in exploring various opportunities based on our previously discussed criteria. Our top priority remains leveraging our existing salesforce call points, which include neurology, nephrology, rheumatology, ophthalmology, and pulmonology. Additionally, we expanded our focus a few months ago to look at other rare disease indications that utilize our remaining rare disease infrastructure, including specialty pharmacy distribution, market access, medical affairs, patient support, compliance, and more. We are currently assessing multiple targets and are determined to pursue the right deal for ANI that aligns with our strategic and financial goals. At this moment, we are confident in our ability to secure a deal that enhances the scope and scale of our rare disease business.

Gary Nachman, Analyst

All right, great. And then just the last question, it's a pretty strong quarter for overall revenue, you left the full year guidance intact. So how should we think of the cadence of the quarters for the rest of the year for the various segments? You touched a little bit on Cortrophin with the sequential growth, but maybe touch on all the segments just sequentially. And then just want to make sure was there anything unusual in there in the first quarter on the top line that we should be aware of. Thank you.

Nikhil Lalwani, CEO

Thank you, Gary. The first quarter results aligned closely with the annual guidance we shared on February 29th. We expected a slight sequential decline in rare diseases due to usual insurance resets and channel dynamics associated with that segment. On the other hand, we experienced high single-digit to low double-digit growth in generics, benefiting from supply chain improvements in established brands. Looking ahead for the rest of the year, we are optimistic about reaching $170 million to $180 million in annual revenues for rare diseases, reflecting a growth of 52% to 61% over 2023. Notably, we recorded the highest number of new patient starts in April and are working to maintain that momentum, with growth observed across both core and newer specialties. In generics, we anticipate consistent high single-digit to low double-digit year-on-year growth supported by regular new product launches, having introduced six products in the first quarter, a trend we plan to continue thanks to strong operational performance. Regarding established brands, our current guidance does not factor in any additional benefits from supply chain tailwinds, consistent with the current market conditions. I hope that addresses your questions about the upcoming quarters across the four segments and what we observed in Q1.

Operator, Operator

Thank you. We'll take our next question from Les Sulewski with Truist Securities. Your line is open.

Leszek Sulewski, Analyst

Good morning, guys. Thank you for taking my questions and congrats on the progress in Q1. So, first on the generics front, how much of that 10% growth was driven by new product uptake versus volume from the legacy portfolio? And I guess what impact was due to a pricing tailwind, if any? And then you mentioned the supply tailwinds in Q1, impacting branded products. I guess, how does that kind of play out for the remainder of the year, if that comes off? And then lastly, what is the reasoning on the dispute of the royalty rights by CG Oncology? Can we expect some sort of a resolution this year or in the near term? And would that be in a monetary settlement or do you think you have a case for retaining these royalties? Thank you.

Nikhil Lalwani, CEO

Good morning, Les, and thank you. Regarding your first question about the 10% growth in generics, we typically don’t break down our revenues into new launches, volume, or pricing. However, I can say that there has been an improvement in the pricing environment for generics, influenced by various factors including supply challenges faced by other companies. Additionally, our new product launch pace remains strong, with six launches in the first quarter, and we expect this trend to continue in the upcoming quarters. Our baseline business benefits from our strong operational efficiency and good manufacturing practices across our U.S. sites, which helps establish us as a preferred partner for our customers and enhances our generics business. Moving to your next question about supply tailwinds and the outlook, we experienced some supply-related benefits in the first quarter. As we mentioned in our February 29 conference call, these benefits were only factored into the first quarter for established brands. Our ongoing guidance maintains that we do not expect additional supply tailwind benefits for established brands going forward. I will now pass your question about CG Oncology and the litigation to Steve.

Stephen Carey, CFO

Yeah, thank you, Nikhil, and good morning, Les. And thanks for the question. ANI's policy is not to comment on pending litigation. ANI has filed suit against CG Oncology seeking various forms of relief. The public record of ANI's suit against CG Oncology provides additional background. I would also refer you to footnote number twelve to our financial statements filed in Form 10-Q this morning, which can be found on page number 27, and there you'll find more information regarding the pending litigation and the status. Thank you.

Operator, Operator

Thank you. We'll take our next question from Vamil Divan with Guggenheim Securities. Your line is open.

Vamil Divan, Analyst

Thank you for taking my questions. I hope you can hear me well, as I am traveling today. I have a couple of follow-up questions on topics you've already touched on. First, regarding established brands, if the supply tailwind is easing or if current market dynamics suggest less of a benefit, could you explain how we should view that segment on an organic basis moving forward? What do you think is a reasonable expectation for underlying growth or decline? It has been challenging to assess the core performance we should anticipate because of the volatility caused by the tailwinds. My second question is about the CG Oncology litigation. I appreciate the additional insights, and I'm wondering if you could comment on your long-term interest in maintaining your stake in the company and whether that interest is affected by the litigation. Lastly, on the expense side, SG&A and R&D were higher than our forecasts for this quarter. Are there any one-time factors we should consider as we plan for the rest of the year? Thank you.

Nikhil Lalwani, CEO

Good morning, Les, and thank you for joining us, especially while you're traveling. Regarding your first question about the outlook for established brands, we reiterated our total company guidance of $520 million to $542 million in revenues. We expect our lead rare disease asset Cortrophin Gel to generate $170 million to $180 million. Therefore, generics, established brands, and others are expected to contribute about $350 million to $362 million. For generics, we anticipate growth in the high single-digit to low double-digit range, based on a base of $270 million from last year. This should provide a clear framework for how we view established brands for the remainder of 2024. Please note that we have assumed no supply tailwinds from Q2 through Q4 in this guidance, which aligns with our original forecast from February and the current marketplace conditions. As for your second question on CG Oncology, I'll hand it over to Steve.

Stephen Carey, CFO

Yeah, Vamil, good morning, and thanks for taking our call this morning. Yeah, in terms of our equity position in CG Oncology, this position harkens back to the November 15, 2010, transaction where the company sold assets to CG Oncology. At that time, right, way back in that time, our equity stake was 19.9%. Obviously, during the intervening years, that ownership position has been diluted down and upon CG Oncology's IPO in January of 2024, we hold just shy of 220,000 shares of their common stock, which, as you see, as of March 31st, was worth about $9.7 million. And that's reflected on our balance sheet. In terms of our future plans for that holding, we're not going to comment on that this morning. Thank you. And then I think your last question related to SG&A, in the first quarter, in terms of SG&A, I would say you asked if there was any one-time items of any note in the first quarter actuals. And on that question, Vamil, there was none. You know, there's always kind of intra-quarter puts and takes in certain variable spending, but nothing that I would hold out as significant or material this morning, and as we said on the prepared comments, right, the SG&A increase year-over-year does reflect principally our investments behind people costs and within that category, primarily in terms of the expansion of our field source capabilities and sales and marketing support capabilities behind Cortrophin. And in that regard, right, we're really, as Nikhil had stated, right, we see a long multi-year trajectory for that product, which is obviously a core product for us. And in that regard, right, we're investing behind it for the health and trajectory in the mid to long term.

Nikhil Lalwani, CEO

Vamil, just one other thing to add, going back to question two regarding CG Oncology, I'll just go back to what Steve said, that when CG Oncology purchased ANI's targeted oncolytic technology in 2010, CG Oncology undertook to pay ANI, among other things, running royalties in the amount of 5% of net sales of CG0070, also known as Cretostimogene. So, I just wanted to add that in addition to the point made on the equity position.

Oren Livnat, Analyst

Thanks. I have a couple, on Cortrophin, can you talk about the evolution of the value per patient as you continue to expand the launch into broader specialties and indications, including the 1-mL launch? I'm trying to remember which patient indications use the drug for longer and/or at higher doses. And is your expansion into pulmonology and ophthalmology and gout, is that putting upward pressure on the sort of average annualized price or value per patient or not? And I have a couple follow-ups.

Nikhil Lalwani, CEO

All right. Good morning and thank you, Oren, for joining our call. I think that again, trying to strike a balance between sharing competitively sensitive information but being helpful to investors. I think your characterization at the end is appropriate, which is that there's probably upward pressure on the value per patient with going into the newer specialty areas. And we look forward to updating you on the progress on this as we move forward.

Oren Livnat, Analyst

Okay. And in Q1, I know it's an important quarter, as you already called out for insurance resets and normal seasonal impacts, but has your overall coverage for Cortrophin changed in the New Year reflected in Q1 or maybe kicking in later in the year on an absolute basis, or your relative positioning versus Acthar?

Nikhil Lalwani, CEO

Yeah, there again trying to strike a balance, I think that we are unambiguously clear that our efforts have helped improve access for the ACTH category and have played a significant role in making the ACTH therapy available to appropriate patients in need and resulted in overall ACTH market growth. And I'll, sort of, repeat when you add our guidance of 170 to 180 to their guidance, we expect that the overall ACTH market will grow in revenues almost 10% and go back to a number from 2021. And we believe that there is a long runway of growth for the ACTH market, but the number of patients on therapy today is significantly lower than patients a few years ago.

Oren Livnat, Analyst

Okay. And on generics, I guess implied in your guidance is still pretty steady growth through the year. I think previously you indicated you expected some back-half more significant launches in there. Is that still the case? Or have you seen maybe earlier and better pull-through of launches? And specifically, looking at IQVIA, and I know that has limited utility in this space, I do see one product, Hyoscyamine, that seems to have jumped out in March or appeared in March and looks like an important contributor. I don't think you've ever press released that. I don't even know what it is, to be honest. Is that something new and exciting and a material contributor, or am I reading too much into IQVIA data?

Nikhil Lalwani, CEO

Thank you for your question, Oren. I believe the pace of our launches aligns with our expectations and positions us to achieve growth in the high single digits to low double digits for generics in 2024. You can anticipate this pace to lead to sequential growth each quarter, as you mentioned, to meet our annual target. One of the strengths of our generics business is its diversification. We offer over 100 product families, ensuring we do not have concentration issues within the product families or our new launches. This diversification is a key advantage of our generics business, and I don’t have any specific updates on individual launches, including the example you provided with Hyoscyamine.

Oren Livnat, Analyst

Okay. And again, I think just to follow on an earlier question, lastly, yeah, Q1 spending looked a little high. Or I guess the implication is that with your full-year guidance that will basically be flat or even flat to down the rest of the year. Am I interpreting that correctly, or are you just going to play it by ear on the guidance front and if new investments are warranted in Cortrophin, you'll keep making them?

Nikhil Lalwani, CEO

Yeah, look, we currently expect SG&A to be fairly ratable throughout the year, and as such, Q1 expense is a fair proxy for future quarters, excluding the normal impacts of certain human capital costs, such as merit, which kicks in in April, and normal course onboarding of incremental headcount. As a general comment, R&D spend can be a bit more lumpy. However, Q1 spend is a decent anchor point for which any given quarter may have moderate variability from. Our current guidance, which is a reiteration of the guidance from February 29, factors all of this in. So there is all the investments that we're talking about and all the trends that I just spoke about in SG&A and R&D are all factored into the guidance that we have given.

Oren Livnat, Analyst

Okay. And lastly, I'm sorry, I ask many questions. I know several of us have touched on the same thing. I just want to be clear, in your guidance with regards to established brands, based on the other moving parts, I'm correct in assuming you and what you see today see that line dropping somewhat precipitously back to much lower levels as early as this quarter, correct? Or should we assume your guidance is just always conservative and you'll take it on a quarter-by-quarter basis and it could crush again in 2Q, and then we'll assume it declines from there and so on and so forth?

Nikhil Lalwani, CEO

Our 2024 guidance assumed established brand supply tailwinds for the first quarter and no supply tailwinds in subsequent quarters, and the current market environment is consistent with those assumptions.

Oren Livnat, Analyst

Okay, I hear you. Thank you so much. Congrats on another impressive quarter.

Nikhil Lalwani, CEO

Yes, thank you.

Stephen Carey, CFO

Thank you, Oren.

Operator, Operator

Thank you. We'll take our last question from Tim Chiang with Capital One. Your line is open.

Timothy Chiang, Analyst

Great, thanks. Nikhil, could you just comment on how this 1-mL vial size product is doing? I know you just launched it in the fourth quarter. Any sort of feedback you're getting from rheumatologists?

Nikhil Lalwani, CEO

Good morning, Tim, and thank you for your question. We are still in the early stages with the 1-mL vial for treating acute gouty arthritis flares. We specifically launched the 1-mL vials due to their dosing size and suitability for this condition, which is something our competitor lacks. Additionally, our distinct J-code facilitates its administration by physicians. The 5-mL vial is mainly used for self-administration. So, it’s still early, and we look forward to updating you on the progress of the 1-mL vial for acute gouty arthritis flares.

Timothy Chiang, Analyst

Okay, great. And maybe just one follow-up. What could you sort of provide in terms of color and think to what sort of progress you're making on the M&A front? Have you guys looked at a lot of products over the past months? Could you comment on just what the environment looks like for you guys right now?

Nikhil Lalwani, CEO

We are continuing to evaluate multiple targets and have conducted due diligence on several since we began. The competitiveness of the business development environment aligns with our expectations. We remain confident in our ability to grow our rare disease business through mergers and acquisitions. Additionally, we are committed to being diligent and highly selective as we look to invest capital in finding the right assets.

Timothy Chiang, Analyst

Okay, great. That's very helpful. Thanks, Nikhil.

Nikhil Lalwani, CEO

Thank you, Tim.

Operator, Operator

Thank you. That concludes today's teleconference. Thank you for your participation. You may now disconnect and have a wonderful day.