Earnings Call Transcript - ANIP Q2 2025

Operator, Operator

Good day, everyone, and welcome to today's ANI Pharmaceuticals, Inc. 2Q 2025 Earnings Results Call. Please note, this call is being recorded. It is now my pleasure to turn the conference over to Lisa Wilson. Please go ahead.

Lisa Wilson, Investor Relations

Thank you, operator. Welcome to ANI Pharmaceuticals Q2 2025 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; Steve Carey, Chief Financial Officer; Chris Mutz, Senior Vice President and Head of ANI's Rare Disease Business; and Dr. Mary Pao, our Chief Medical Officer. You can also access the webcast of this call through the Investors section of the ANI website at 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's 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 August 8, 2025. 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 Lalwani, CEO

Thank you, Lisa. Good morning, everyone, and thank you for joining us. I'll start by discussing our second quarter performance and highlights, along with our raised 2025 guidance. Chris Mutz will then provide additional color on our Rare Disease business, including our lead asset Cortrophin Gel and our retina assets, ILUVIEN and YUTIQ. Finally, Steve Carey, our CFO, will review our second quarter results and updated 2025 guidance in more detail. Following our remarks, our Chief Medical Officer, Dr. Mary Pao, will join us, and we will take your questions. This was a record-setting quarter for our company with all-time overall company highs in net revenue, adjusted non-GAAP EBITDA and adjusted non-GAAP EPS, reflecting very strong momentum across both our Rare Disease and Generics business units. Our Rare Disease team delivered exceptional year-over-year and sequential quarterly growth with Cortrophin Gel demand accelerating and both new patient starts and new cases initiated reaching new highs. We continue to pursue initiatives to improve the performance of our retina franchise, yielding positive results. And our generics business delivered another solid quarter, driven by new product launches and strong operational execution. Based on our very strong second quarter performance and broad-based momentum across Rare Disease and Generics, we are raising our 2025 guidance for total net revenues, adjusted non-GAAP EBITDA and adjusted non-GAAP EPS. We now expect 2025 revenues of $818 million to $843 million, which represents growth of 33% to 37% over 2024 versus our prior guidance of $768 million to $793 million. We expect Rare Disease to account for approximately 57% of total company net revenues in the second half of 2025. We expect adjusted non-GAAP EBITDA of $213 million to $223 million, which reflects growth of 37% to 43% over 2024 versus our prior guidance of $195 million to $205 million. Lastly, we expect adjusted non-GAAP earnings per share between $6.98 and $7.35, up from our prior guidance of $6.27 and $6.62. Steve will provide more specifics on our increased guidance later in the call. Turning now to our second quarter results. Total net revenues were $211.4 million, representing year-over-year growth of 53% on an as-reported basis and 37% on an organic basis, driven by strong growth for our lead rare disease asset, Cortrophin Gel and our Generics business. Adjusted non-GAAP EBITDA was $54.1 million and adjusted non-GAAP EPS was $1.80. Cortrophin Gel had an exceptional quarter with revenues of $81.6 million, up 66% year-over-year and 54% from the first quarter of 2025. Strong execution by our commercial teams, including our newly expanded portfolio sales team, the successful launch of our prefilled syringe and continued momentum across our target therapeutic areas contributed to record demand in the second quarter. As a reminder, in the first quarter, we expanded our portfolio sales team, which promotes Cortrophin Gel in neurology, nephrology and rheumatology from 52 to 70 members. Remapping and increasing the number of sales territories led to a meaningful increase in productivity as the smaller territories allowed all of our reps to spend more time detailing Cortrophin and less time traveling. As a result, the team was able to produce a meaningful sequential quarterly growth in new cases initiated and new patient starts that exceeded our prior expectations. We also saw strong interest and demand for our new Cortrophin Gel prefilled syringe presentation, which we launched in April. The prefilled syringe offers advantages to both patients and physicians by reducing the number of steps required for self-administration, which is especially important for patients with impaired vision or limited hand mobility. We expect the prefilled syringe to remain an important driver of prescription demand going forward. Based on continued growth in Cortrophin Gel, prescribers and patients as well as broad adoption across therapeutic areas, we are increasingly confident that Cortrophin is on a strong multiyear growth trajectory. The ACTH market grew 27% to $684 million in 2024 and is expected to grow 36% to $933 million in 2025 based on the midpoint of our new guidance and the competitors' guidance. While recent growth in the ACTH market has been strong, the current number of patients on ACTH therapy remains significantly below historical levels, offering substantial room for expansion. We estimate that today's patient base is still roughly half of what it was at the market's peak in 2017. In addition, today's ACTH market covers a broader set of indications, including acute gouty arthritis flares, which was not there in 2017. Further, based on our epidemiological analysis, we believe that the addressable patient population for ACTH therapy could be many times larger than the previous high of 8 years ago. Importantly, a large and growing group of our prescribers were previously naive to ACTH. We believe that number now exceeds 50%. We remain confident in our Rare Disease team's ability to sustain robust multiyear growth for Cortrophin Gel. Based on our first half performance and continued strong underlying demand trends, we are increasing our 2025 Cortrophin Gel guidance to $322 million to $329 million from our prior guidance of $265 million to $274 million. Our new guidance reflects year-over-year growth of 63% to 66%. Turning now to our retina portfolio. Our retina portfolio, ILUVIEN and YUTIQ, generated revenues of $22.3 million in the second quarter, consistent with our expectations. Our commercial team progressed several key initiatives during the second quarter. We executed on the addition of the chronic NIU-PS indication to ILUVIEN's label and fully transitioned our U.S. promotional focus to ILUVIEN. At the same time, we remain committed to supporting physician offices in navigating ongoing Medicare market access challenges, particularly for patients who previously relied on foundational support. We also took important steps to strengthen our U.S. ophthalmology sales team. As noted earlier, we remain on track to realize meaningful revenue synergies for Cortrophin within ophthalmology. Our international ILUVIEN business, accounting for over 1/3 of ILUVIEN revenues, continues to perform well across both our direct markets and those served by distribution partners. We also completed the NEW DAY clinical trial of ILUVIEN in earlier-stage DME and presented the results at the American Society of Retina Specialists, or ASRS, Annual Meeting. NEW DAY was the first clinical study that tested a long-acting steroid against anti-VEGF standard of care treatment. Feedback on the NEW DAY results from study investigators and retina physicians at ASRS was positive and reinforced our view that the data could help support the use of ILUVIEN earlier in the DME patient journey. Chris will speak more on NEW DAY and our next steps with the data. While the second quarter was productive for our ophthalmology team, and we successfully executed against our objectives, externally, the market access challenges that have impacted prescribing of retina drugs for Medicare patients since January have persisted. We previously assumed that some funding for Medicare patient support foundations would resume and Medicare access would improve in the second half after a large ophthalmology company launched its matching program for donations to the Good Days fund. Unfortunately, this has not yet happened. So we made the decision to update our guidance to reflect this dynamic. We now expect 2025 revenues for our retina franchise of $87 million to $93 million versus our prior guidance of $97 million to $103 million. Moving now to our Generics business, which also delivered strong performance in the second quarter with revenues of $90.3 million, an increase of 22% over the prior year period. The quarter reflected strong execution in our base business and contribution from new product launches, including prucalopride tablets with 180-day exclusivity. Based on the performance of our Generics business in the first half of the year, we continue to expect growth for the full year in the mid-teens. Our brand portfolio also had a strong quarter with revenues of $13.2 million, up 32% year-over-year. We were able to identify and capture increased demand for certain products during the second quarter and anticipate a return to a more normalized level of demand during the second half. Next, I will review a few points regarding ANI standing in the evolving tariff situation. While we await the administration's pharmaceutical industry-specific framework, it is worth reiterating ANI's long-standing commitment to the U.S. pharmaceutical industry and our positive and unique positioning relative to our peers. We are a U.S. domiciled pharmaceutical company with over 90% of total company revenues coming from finished goods manufactured in the U.S. Products representing less than 5% of our total company revenues rely directly on imports from China. In addition, we have a strong balance sheet that enables us to carry healthy levels of finished goods and raw material inventories. We look forward to maintaining our strong commitment to the U.S. pharmaceutical industry. Before I turn the call over to Chris, I'd like to comment on the recent trial with CG Oncology. As a reminder, under an assignment and technology transfer agreement dated November 15, 2010, ANI had sold CG0070, cretostimogene and related assets such as the Investigational New Drug Application, or IND, Phase I, Phase II clinical data, know-how and IP to CG Oncology. ANI commenced a civil action against CG Oncology in the Superior Court of the State of Delaware in March 2024, alleging that CG Oncology is liable to pay a running royalty of 5% on the worldwide net sales of their lead product, CG0070 or cretostimogene. The court proceeded to trial on July 21, and the jury returned a verdict in favor of CG Oncology on July 29. We continue to believe in the merits of our position and intend to vigorously challenge the verdict through post-trial motions and/or an appeal. I'll now turn the call over to Chris to discuss our Rare Disease business in more detail. Chris?

Christopher K. Mutz, Senior Vice President and Head of Rare Disease Business

Thank you, Nikhil, and good morning, everyone. Our Rare Disease team was highly productive during the second quarter. We generated record demand for Cortrophin Gel with broad-based strength across specialties. And we made good progress capturing opportunities and addressing challenges for our retina franchise. First, on Cortrophin Gel. We are very pleased with continued strong demand and feedback from physicians. Similar to the last several quarters, we saw growth across all of our targeted specialties. The number of cases initiated and new patient starts reached record highs. Our expanded portfolio sales team hit the ground running, adding new prescribers and driving meaningful increases in new patient starts across neurology, nephrology, and rheumatology. Our specialty-focused teams produced strong growth in our newer areas of pulmonology and ophthalmology, and we believe we are still in the early stages of penetrating these therapeutic areas. In ophthalmology, we saw a record number of new cases initiated and a 33% sequential quarterly increase in Cortrophin volumes. We have already realized meaningful revenue synergies as a result of the Alimera acquisition and believe there are further opportunities as we expand awareness of Cortrophin's utility in helping patients with severe allergic and inflammatory eye conditions. We saw very strong demand for our new Cortrophin prefilled syringe offering, which we launched in April. The reduced number of steps required to administer the prefilled syringe has resonated with patients and physicians, and we observed prescribing of the prefilled syringe ramp across indications during the quarter. We are pleased to report that the prefilled syringe already accounts for approximately 70% of new cases initiated only 3 months into its launch. Cortrophin Gel prescribing for acute gouty arthritis flares remained a strong driver in the second quarter. As a reminder, the gout indication is unique to Cortrophin Gel among ACTH therapies. Gout accounts for approximately 15% of Cortrophin Gel use and has contributed significantly to the growth of new prescribers for Cortrophin. We're continuing to invest in evidence generation for Cortrophin Gel with our previously announced Phase IV trial in acute gouty arthritis flares. We believe the 150-patient study will provide physicians with valuable insight on the treatment of acute gouty arthritis flares with Cortrophin Gel and could support positioning in the American College of Rheumatology treatment guidelines. We are also pleased to announce 2 new publications of important preclinical data that expand the body of evidence around the use of Cortrophin Gel in nephrology and ophthalmology. Firstly, our preclinical study of Cortrophin Gel in uveitis that was presented earlier this year has been published in ocular immunology and inflammation. Secondly, a manuscript for a preclinical study of Cortrophin Gel in membranous nephropathy was accepted for publication in Molecular Therapy, a leading journal in the field of innovative therapeutics. The study speaks directly to the steroid-independent mechanism of action of Cortrophin Gel in an animal model of membranous nephropathy, specifically its effect on the complement system, an area of significant interest in ongoing membranous nephropathy drug development. Overall, we are delighted with the growing recognition of Cortrophin Gel as a treatment option for appropriate patients and look forward to delivering strong multiyear growth for the product. Turning to our retina franchise. As Nikhil mentioned, in the second quarter, our commercial team was focused on managing the ILUVIEN launch with the combined label for chronic NIU-PS and DME and transitioning promotional efforts fully to ILUVIEN. We have successfully hired and onboarded nearly all vacancies across our sales territories and now have a full team dedicated to educating and supporting the retina community. In mid-June, we began promoting ILUVIEN under the combined label for chronic NIU-PS and DME, and the transition is on track with our sales teams educating customers across the country and our market access team working with payers to establish coverage for ILUVIEN's new NIU-PS indication. We've received positive feedback on the convenience of a single product covering both indications. Also in Q2, we strengthened our promotional efforts, launching new peer-to-peer educational speaker programs and new refreshed marketing materials for ILUVIEN, which are helping our sales team increase awareness among retina physicians. Our initiatives to help physician practices navigate the market access challenges for Medicare patients that have impacted the retina market since early January yielded positive results in the quarter. As a reminder, patient support foundations such as Good Days did not receive sufficient funding for 2025, which affected their ability to assist Medicare patients with co-pay support. This change in access affected retina products broadly and was not unique to our portfolio. The magnitude of the disruption that this lack of foundation funding has had on the treatment of retina diseases in Medicare patients was actually a topic of a paper at the recent ASRS meeting in Long Beach, California. In a survey of 455 retina specialists presented at the meeting, 94% of respondents reported a significant or moderate impact on their practice and 78% of respondents noted that at least 25% of their Medicare age patients were unable to receive their preferred medication. Our commercial team has been working closely with retina practices to help improve access for Medicare patients, including accepting ILUVIEN through a specialty pharmacy using Medicare Part D benefits. I'm very proud of how our team executed in the quarter while facing these significant access challenges. We're hopeful that funding for patient support organizations will resume in the second half, which should help increase access for Medicare patients to ILUVIEN and other retina products. As a reminder, one of the largest companies in the retina space recently initiated a matching program for donations to Good Days through which it will match up to $200 million of donations over the balance of 2025. We recently presented the results from our NEW DAY study of ILUVIEN in patients with DME at the American Society of Retina Specialists Annual Meeting in Long Beach, California. Feedback on the results from study investigators and retina physicians at ASRS was very positive. And although the study did not meet its primary endpoint, some physicians have indicated that the NEW DAY data may support treating DME patients earlier with ILUVIEN based on its role in reducing treatment burden for these patients. Following the release of this data, several next steps are underway. We are preparing additional presentations at upcoming national and international conferences to further share and contextualize these findings. In parallel, we are actively exploring the potential of including NEW DAY in promotion aimed at increasing awareness and understanding of the study results.

Stephen P. Carey, CFO

Thanks, Chris, and good morning to everyone on the call. I'll review our second quarter results and then discuss our updated guidance for the full year. ANI generated revenues of $211.4 million in the second quarter, up 53% over the prior year period. Revenues from Rare Disease and brands were $117.2 million in the second quarter, approximately double the prior year period on an as-reported basis and up 60% on an organic basis, driven by growth in our Rare Disease franchise. Rare Disease revenues were $104 million, up 111% from the prior year. Revenues from Cortrophin Gel were $81.6 million, up 66% from the prior year period, driven by increased volume on a record number of new patient starts. Revenues from ILUVIEN and YUTIQ were $22.3 million, up from $16.1 million in the first quarter. Revenues for brands were $13.2 million in the second quarter, up 32% versus the prior year period. We continue to capture increased demand for certain products through a portion of the second quarter and anticipate a full return to more normalized levels of demand during the second half of the year. Revenues for our Generics and other segment were $94.2 million, an increase of 20% over the prior year period. Revenues for generics were $90.3 million, an increase of 22% over the prior year period, driven by increased volumes on contributions from new product launches in 2024 and the first half of 2025, including our launch of prucalopride with its 180-day exclusivity. Now moving down the P&L. As a reminder, when I speak to our operating expenses, I will be referring to our non-GAAP expenses, which are detailed on Table 3 in our press release. Generally, our non-GAAP operating expenses exclude depreciation and amortization, stock-based compensation and certain costs related to litigation and M&A activity. Please refer to Table 3 for a reconciliation to our GAAP expenditures. Non-GAAP cost of sales increased 29% to $74.2 million in the second quarter of 2025 compared to the prior year period, primarily due to net growth in sales volumes and significant growth of royalty-bearing products. Non-GAAP gross margin was 64.9%, an increase of over 6 points from the prior year period, principally due to favorable mix towards Rare Disease products and strength in Generics driven by the prucalopride 180-day exclusivity, which concluded at the end of the second quarter. Non-GAAP research and development expenses were $16 million in the second quarter, an increase of 130% from the prior year period, driven by higher investment to support future growth of our Rare Disease and Generics businesses. Spend related to our NEW DAY study as well as year-over-year timing of spend. Non-GAAP selling, general and administrative expenses increased 66% to $67.1 million in the second quarter, driven by spend for our new larger ophthalmology sales team promoting Cortrophin Gel and ILUVIEN and continued investment in Rare Disease sales and marketing activities, including the new sales representatives that we added in the first quarter. Adjusted non-GAAP diluted earnings per share was $1.80 for the second quarter compared to $1.02 per share in the prior year period. Adjusted non-GAAP EBITDA for the second quarter was $54.1 million compared to $33.2 million in the prior year period. Turning to the balance sheet. We ended the second quarter with $217.8 million in unrestricted cash, up from $149.8 million at the end of the first quarter. Cash flow from operations was $110.8 million in the first half of the year. As of June 30, we had $635.2 million in principal value of outstanding debt, inclusive of our senior convertible notes and term loan. At the end of the second quarter, our gross leverage was 3.3x, and our net leverage was 2.2x our trailing 12-month adjusted non-GAAP EBITDA of $190 million. Utilizing the midpoint of our revised 2025 adjusted non-GAAP EBITDA guidance, our net leverage is approximately 1.9x on a forward basis. Now turning to our updated 2025 financial guidance. We are raising our guidance for total revenue and adjusted non-GAAP EBITDA, primarily based on higher estimates for our Rare Disease business. Our updated guidance is as follows: full year 2025 net revenue of $818 million to $843 million, up from our prior guidance of $768 million to $793 million, representing year-over-year growth of approximately 33% to 37%. Cortrophin Gel net revenue of $322 million to $329 million, up from our prior guidance of $265 million to $274 million, representing growth of 63% to 66%. We continue to expect sequential growth of Cortrophin revenues in the third and fourth quarters. Combined ILUVIEN and YUTIQ net revenue of $87 million to $93 million versus our prior guidance of $97 million to $103 million. Our revised guidance assumes no meaningful change in the co-pay funding gaps facing Medicare patients in retina for the remainder of the year. Generics revenue growth in the mid-teens, driven by strength in our base business and contribution from new product launches. Consistent with our expectations and previous guidance, we expect Generics revenue in the second half of the year to be lower than that of the first half due to competitive entrants into the prucalopride market that occurred late in the second quarter. Adjusted non-GAAP EBITDA of $213 million to $223 million, up from our prior guidance of $195 million to $205 million, representing growth of approximately 37% to 43%. Adjusted non-GAAP earnings per share between $6.98 and $7.35, up from our prior guidance of $6.27 and $6.62. We currently anticipate a full year U.S. GAAP effective tax rate of approximately 24% to 25%. And consistent with prior quarters, we will tax effect non-GAAP adjustments for the computation of adjusted non-GAAP EBITDA diluted earnings per share using our estimated statutory rate of 26%. We also continue to anticipate between 20.3 million and 20.5 million shares outstanding for the purpose of calculating diluted EPS. With that, I'll turn the call back to Nikhil.

Nikhil Lalwani, CEO

Operator, please open the line for questions.

Operator, Operator

We'll take our first question from Gary Nachman with Raymond James.

Gary Jay Nachman, Analyst

Congrats on the great quarter. So given the strength you saw in Cortrophin in the second quarter, first, I wanted to make sure there wasn't anything unusual in there in terms of one-time benefits or seasonality with any of the indications. And with the great ROI you're getting with the increased sales force, it begs the question if there are other adds to the sales force you'll consider doing in any of the areas anytime soon, especially with the good market growth and the headroom there. And then you called out ophthalmology and gouty arthritis flares as the biggest drivers of growth. Is there still a lot of upside potential in both of those markets? Maybe you could walk through that.

Nikhil Lalwani, CEO

Thank you, Gary. I'll take each question. So the first question on seasonality or one-time benefit on Cortrophin, no. This is driven by the underlying demand. I think the factor to consider is new patient starts, which have more than doubled in Q2 '25 versus Q2 '24. So this performance is an outcome of the increased demand rather than seasonality or any one-time benefit. Second, we do not contemplate adding at this time additional sales team members. Having said that, obviously, we continue to evaluate high ROI commercial initiatives to sustain the long-term growth of Cortrophin. We believe that there is a multiyear strong growth runway for Cortrophin and are investing both in evidence generation that Chris spoke about, bringing new presentations. We brought the 1 ml and the prefilled syringe, and we're investing in other ways to increase the physician and patient convenience. So that's how I would think about continuing to grow the franchise to deliver strong multiyear growth. And then the third is, look, ophthalmology revenue synergies that we saw in Q2, which led to the 33% increase in volume is important. The gout additional acceleration is also important. But really, we have growth across therapeutic areas and indications. And we're really nowhere close to the addressable market, right? As we've spoken about epidemiologically, when you look at these different indications and look at the addressable market as a subset of the patients that are refractory or for whom steroid-resistant, the addressable market is many times larger than even what was being treated at the peak. So that provides substantial room for expansion. And the other data point that was important that we shared is that more than 50% of our prescribers are HCPs who had not used ACTH prior to the launch of Cortrophin. So that gives us additional confidence in driving this sustainable long-term multiyear growth in Cortrophin. Thank you, Gary.

Gary Jay Nachman, Analyst

Okay. Great. And just a couple of quick follow-ups. With the additional cash flow that you're generating with the good performance, just what are your priorities in terms of use of capital, debt paydown or business development? And how much more active are you getting on the BD front? And then just gross margin, why isn't that guidance coming up more just given that the mix is shifting more to Rare Disease? And if it continues to move in that direction, the business mix, should we expect gross margins to move upwards and maybe to what extent over the next couple of years?

Nikhil Lalwani, CEO

Thank you for your question. I'll address the first part regarding business development and then pass it to Steve to discuss cash flows and your question about gross margin. In terms of business development, we have demonstrated strong organic growth, and there is significant potential for continued growth in our two Rare Disease assets, Cortrophin and ILUVIEN, as well as in our Generics business. Therefore, we have a positive outlook for organic growth. We are focusing our business development efforts on expanding our Rare Disease business and are actively searching for assets. As we reach the one-year mark since the Alimera acquisition, we are evaluating our next steps thoughtfully, without rushing. I want to emphasize again that our organic growth outlook is robust, as reflected in our projections for 2025 compared to 2024. Now, I'll hand it over to Steve to respond to your inquiry about cash flows, and we can revisit the gross margin topic afterward.

Stephen P. Carey, CFO

Yes, thank you, Nikhil. We are pleased with the cash generation in the first half of the year. Our near to midterm goal for cash is to continue building up our balance sheet and reserves as we consider reinvesting into the business, both through organic growth and potential business development or acquisitions. As we generate more cash, we can also plan for future debt paydowns. The cash we have is in accounts that earn good interest income, which helps mitigate some of our debt liabilities. Regarding gross margin, our second quarter was supported by strong performances across several areas, especially with prucalopride in Generics benefiting from first-to-market pricing, better-than-expected brand performance, and a shift towards Rare Disease products. In the second half of the year, we will not have the same advantage from prucalopride due to increased competition entering the market in June, along with an expected normalization in brand performance. This will lead to a slight decrease in gross margin for the latter half of the year, but we remain confident in our full-year guidance of 63% to 64% margins. Looking to the future, we are optimistic about reaching mid-60s margins by 2025, which we consider a solid foundation for continued growth. We are focusing on improving our procurement processes and enhancing our manufacturing capabilities at our three U.S.-based plants, and we plan to keep investing in these areas to optimize margins moving forward. While we cannot provide specific forward-looking guidance at this moment, we do expect to see positive margin developments as we progress.

Faisal Ali Khurshid, Analyst

I just wanted to ask for a little more granularity on what exactly is driving the kind of pretty meaningful inflection to the expansion of the ACTH class like combined with the Acthar results reported earlier this week and your results today as well. Clearly, this class is experiencing a pretty big inflection. And I get what you're saying is that it's just like a huge TAM, even increasing penetration a little bit represents a large dollar value. But if you could kind of pinpoint like is it particular indications? Is it particular prescribers? Is it the launch of these easier-to-use dosage forms? Like what exactly is kind of like giving this really strong growth?

Nikhil Lalwani, CEO

I believe we are seeing positive developments that have led us to raise our guidance by $55 million. While our competitor mentioned 20% to 30% growth, we see several key factors contributing to our performance. First, the Cortrophin sales expansion is progressing faster than expected, with our team increasing from 52 to 70 members focusing on nephrology, neurology, and rheumatology, which is a significant factor. Second, we have seen growth in our newer indications, such as gout, and revenue synergies in ophthalmology, with a 33% increase in volume from our combined sales team promoting both Cortrophin and ILUVIEN. Third, Chris noted that 70% of our new enrollments are now with the prefilled syringe presentation, which has achieved rapid adoption, surpassing our expectations. Finally, we are adding new prescribers, particularly those who are new to ACTH, who now represent around 50% of our Cortrophin prescriber base. This growth is not driven by a single element but multiple factors. Most importantly, we have made substantial progress in establishing a profitable and sustainable Rare Disease business since our launch in 2022, positioning us well to further penetrate this large market and persuade more prescribers to offer Cortrophin Gel to the right patients.

Faisal Ali Khurshid, Analyst

Got it. If I could ask a follow-up about the prefilled syringe. Just to clarify, you're saying that 70 percent of new patient starts were the prefilled syringe. Could you also comment broadly on whether the economics of the prefilled syringe are any different from the traditional vial and syringe format?

Nikhil Lalwani, CEO

Yes. To address your first question, Chris mentioned in his prepared remarks that 70% of enrollments in July, which refers to new cases initiated, were for the prefilled syringe. Regarding your second question about gross to net, there is a modest upward pricing advantage with the prefilled syringe in terms of its weighted average cost of capital. We aim to find a balance between providing useful information to investors and maintaining competitive sensitivity. That's the extent of what we can share.

Daniel Kyle Krizay, Analyst

This is Daniel on for Vamil. Congrats on the quarter. So a couple of questions. One is sort of a follow-up question on some of the previous ones revolving around the prefilled syringes. So are there any particular specialties that are adopting this presentation more quickly than others or maybe more quickly than you all expected? If any other additional color you can provide there? And then the second question is on ILUVIEN. So you mentioned that there's continued market access challenges that sort of pushed the full year guidance down here. But can you speak to if the NEW DAY trial results had any positive impact on this new guidance? Or maybe asked differently, like these positive results partially offset this negative impact from the market access challenges for 2025, will the expected benefit from these NEW DAY results and the resulting education there be more of a longer-term benefit?

Nikhil Lalwani, CEO

Thank you for your question. Regarding the prefilled syringe, both physicians and patients have found its ease of use to be very appealing, which has led to an increase in prescriptions across various indications during the quarter. This is reflected in the fact that 70% of new cases initiated were with the prefilled syringe. As for your question about ILUVIEN and the NEW DAY study, the overall feedback from study investigators and physicians at ASRS has been positive. Recently, both Dr. Singer and the study investigators expressed their appreciation for the first body of data examining ILUVIEN as a baseline therapy for patients in the early stages of DME. They were particularly interested in the difference in the time to first supplemental injection of aflibercept between the ILUVIEN arm and the aflibercept arm, noting that about 30% of patients in both arms did not require a supplemental injection. Moreover, the total number of injections in the ILUVIEN arm was 2.8, compared to over 7 in the aflibercept arm. Following the release of these findings, we are preparing additional data presentations for upcoming national and international conferences to further describe these results. At the same time, we are looking into promoting NEW DAY to increase awareness and understanding of the study results, particularly among early DME patients. We will continue to focus on NEW DAY to share and enhance awareness of the findings as we move forward, but there hasn't been a specific upside considered for the second half of the year in light of this.

David A. Amsellem, Analyst

Just a couple of quick ones for me on Cortrophin. First, as the category grows, how do you envision the payer landscape evolving? It looks like it's pretty benign at present. But over time, particularly given the expensive price points here for both products in the category, do you envision potentially a more restrictive environment? Do you envision potentially some at least minor erosion in net pricing? This is more of a long-term question, not a '25 question. So just help us understand your thought process there. And then secondly, I know that you've cited growth across all the various therapeutic categories. But given that the label is quite expansive, are there other clinical settings that you're going to explore or might explore down the road aside from the current therapeutic verticals?

Nikhil Lalwani, CEO

Thank you, David. Regarding the payer landscape, we introduced competition in this category in 2022 when we launched, as there was only one ACTH option before. From the beginning, we aimed to partner with them, and we will keep engaging with them as we bring the Cortrophin therapy to the right patients. I'll keep it brief, balancing what is useful for investors with what is sensitive competitively. Now, in terms of therapeutic areas for Cortrophin, we currently have significant opportunities that haven't been fully tapped within our existing indications and therapeutic areas, including rheumatology, nephrology, and neurology, as well as newer specialties like gout, pulmonology, and ophthalmology. We've discussed the revenue synergies in ophthalmology. In the near term, our focus is on these areas, which present substantial expansion opportunities. Could we consider other therapeutic areas? Yes, we contemplate that, but in the near term, we are concentrating on the vast potential for patients who can benefit from Cortrophin therapy. That is where our current focus lies.

Ekaterina V. Knyazkova, Analyst

Another question on Cortrophin Gel. And I think you touched upon this in the prepared remarks. But just between the growth that you're seeing and your competitors are seeing, just any thoughts on how quickly the category overall could kind of get back to that $1.2 billion peak that I think we saw in 2017? And has your thinking changed just in terms of how big this category can kind of get over time? And then second question is also on Cortrophin. But just as you look at the category more broadly, are you starting to kind of see physician perception change just in terms of if they're reaching for the product earlier or different types of cases or different use cases, I think, than previously?

Nikhil Lalwani, CEO

Sure. So I'll take the first question on where the overall category is going, and then Chris can jump in with the physician perception and where it's being used for the category. So look, overall, we believe that the market can go well past the previous peak and remain confident in our ability to sustain robust multiyear growth. Our belief is driven by 3 factors, right? First, that there is substantial room for expansion in the number of patients on ACTH therapy, right? If I break that down into 2 parts. Firstly, the current number of patients on ACTH therapy are almost half of the patients on therapy at the previous peak in 2017. Second, based on the epidemiology analysis, right, we believe the addressable patient population for ACTH therapy could be many times larger than the previous high. So here, we looked at patient populations by indications such as MS, nephrotic syndrome, rheumatoid arthritis that are refractory or steroid resistance, right? And this is there across indications. So that's the first factor, right, substantial room for expansion in the number of patients. Second, today's ACTH market includes acute gouty arthritis flares, which accounts for approximately 15% of Cortrophin use and was not there in the previous peak. And then third is reason to believe is our ability to expand the ACTH market is that more than 50% of Cortrophin prescribers had never used ACTH therapy before. And with that, I'll ask Chris to answer your question about the use cases and physician perception.

Christopher K. Mutz, Senior Vice President and Head of Rare Disease Business

Yes. Thank you, Ekaterina, for the question. We believe this is really about our different specialties. We focus on five specialties, each functioning quite differently. To provide some context, rheumatology is particularly important for us. One of the key dynamics we’ve observed, which we’ve mentioned previously, is the significant impact of acute gouty arthritis flare indications within the rheumatology community. This has helped drive the use and trial of Cortrophin Gel. We’ve noticed that this has significantly contributed to bringing new rheumatologists on board who are using Cortrophin Gel for their patients suffering from severe persistent gout flares, which are challenging to treat. This increased utilization has also paved the way for other indications we have in rheumatology. So, this is one dynamic that is currently in play and is really fueling growth and attracting new physicians to this field.

Brandon Richard Folkes, Analyst

Congratulations on a really good quarter here. Maybe just following on from a number of the prior questions. But sort of when you think about these potential patient expansions of the market that you were talking about here, how do you view Cortrophin's market share expanding over time as these new patients grow the market? Given your success in new prescribers, would you be willing to sort of put a figure out there whether you think Cortrophin could be an equal market share product at peak or even the dominant product in the market at peak? And then maybe just one on granularity. How do we think about the pushes and pulls in the R&D spend going forward compared to this quarter?

Nikhil Lalwani, CEO

Thank you for your question, Brandon. Regarding the overall market, we believe it has the potential to exceed its previous peak, and there is a significant patient population that can benefit. Our focus is on ensuring that ACTH therapy with Cortrophin reaches the right patients, rather than concentrating on market share. As we discussed, the market grew by 27% last year and, if you consider our guidance alongside our competitors' guidance, it's expected to continue growing even faster. It's about expanding the market and providing ACTH therapy to those in need. When it comes to sharing specific market share figures, we have to balance the information that is useful for investors with what's competitively sensitive. Therefore, our primary goal is to increase the use of ACTH and specifically Cortrophin within that market. Regarding your second question about R&D, there tends to be a variation in our R&D spending throughout the year, which is why you might see an increase in the second quarter. I'll let Steve elaborate if he has anything more to add regarding the timing of R&D expenditures.

Stephen P. Carey, CFO

Yes, Brandon. Yes, just to remind everyone, as we've spoken in the past, when you think about any of our OpEx lines, the R&D line is the one that can have the most variability quarter-to-quarter. And second quarter R&D was up sequentially versus Q1, consistent with our expectations and consistent with our comments on the first quarter earnings call because first quarter '25 was certainly a bit lower from a run rate perspective from 2025. And if you look at the cadence in 2024, kind of the opposite happened. The second quarter of 2024, I think, was the low watermark. I think it was around $7 million or so. And so point being, the spend can be a little bit lumpy because it's highly dependent on the timing of spend, both internally and with third-party partners and can be dependent highly on when we procure certain materials, et cetera, that get expensed for R&D purposes. When we look forward for 2025, I would also comment, right, we had kind of the culmination or at least the beginning of the culmination of the NEW DAY trial in the second quarter. There will be NEW DAY spend in the third quarter, but that will start to trail off as the year goes on. But overall, we remain very committed to continuing to invest in R&D to drive the mid- and long-term growth in the business. And we have exciting projects going on, both in support of rare disease and our generics business.

Leszek Sulewski, Analyst

I have 2, one on the Cortrophin and the second on Generics. On the Cortrophin side, can you help us square up the updated outlook? What has driven the disconnect since you last issued the guidance? And your peers saw near 50% growth in the category. How are you able to outpace that? What portion of your growth can essentially be allocated to the new sales team adds? And then just to go back to Brandon's question, are you seeing an uptick in switches and market share gains? And then on the Generics front, how are you thinking about new product cadence across Generics in the second half and perhaps into next year as prucalopride exclusivity period comes off? And second, are you seeing any uptick in delays on the FDA approvals front?

Nikhil Lalwani, CEO

Thank you, Les. To address your first question about Cortrophin, we are raising our guidance for Cortrophin for the second time in 2025, increasing it from $265 million to $322 million and now to $329 million, which is over a $55 million increase. The sales expansion, with an increase in our sales team from 52 to 70 members, has contributed to this improvement, although we won't be breaking down the impact of that versus other factors. Additionally, we're seeing faster growth in the new indications for gout and increased revenue synergies in ophthalmology, along with a rapid uptake of the prefilled syringe presentation, which accounts for 70% of new cases—this is higher than we had initially expected. The addition of new prescribers has also accelerated; we initially estimated about 40%, but we are now at 50% of our prescriber base. These factors, combined with strong underlying demand from patient populations and physicians using it appropriately, are driving our success. Regarding your follow-up about market share, similar to what I shared with Brandon, we’re focused on providing Cortrophin to the right patients and not primarily concerned about market share. Both us and our competitors are growing, and increased awareness in this category benefits physicians as they treat appropriate patients. Switching to Generics, thank you for inquiring about our Generics business. We continue to execute well in R&D and have not encountered significant delays in FDA approvals. As Steve mentioned earlier, we are dedicated to investing in R&D for Generics and we anticipate a steady stream of new product launches. Our strong performance in Generics has been driven by this and operational excellence, and we expect that trend to continue moving forward. Thank you, Les. Yes, we have a U.S.-based supply chain entirely and have been planning for this volume expansion and are well positioned with our supply chain to be able to continue to serve the patients in need.

Operator, Operator

And we show no further questions in queue at this time. I will turn the call back to Nikhil Lalwani for closing or additional remarks.

Nikhil Lalwani, CEO

Thank you, everybody, for joining our call. Apologies for running over a little bit, and we're really grateful for your interest in ANI and look forward to continue updating you on our progress as we move forward. Thanks, everybody.

Operator, Operator

Thank you. This does conclude today's program. Thank you for your participation. You may disconnect at any time.