Good morning, everyone, and welcome to ANI's Fourth Quarter 2019 Earnings Call. [Operator Instructions]. Please note, this call may be recorded. It is now my pleasure to turn today's program over to Mr. Arthur Przybyl. Please go ahead, sir.

Thank you, Laurie. Good morning, everyone. Welcome to ANI's earnings conference call for the full year and fourth quarter 2019. My name is Art Przybyl, I'm the CEO. And joining me today is Stephen Carey, our Chief Financial Officer. Before we begin, I want to refer everyone to the forward-looking statements language in this morning's press release and ask each of you to review it carefully as important context for this conference call. Discussions will also include certain financial measures that were not prepared in accordance with generally accepted accounting principles. Reconciliation of those non-GAAP financial measures can be found in our earnings release dated today. ANI reported its full year 2019 net revenues of $206.5 million, adjusted non-GAAP gross profit of a $146.9 million or 71% of net revenues, and adjusted non-GAAP EBITDA of $83.2 million, or 40% of net revenues. Our 2019 net revenues increased by 2.5%. Gross Profit dollars increased by 9% and both are record amounts for ANI. Our net revenues and gross profit on three of our generic products were significantly impacted by competitive price erosion in the third and fourth quarter of 2019. The resulting impact was an annual estimated decline of $21.7 million in net revenues, and an annual estimated decline of $21 million in gross profit. In 2020, we expect to offset the impact of these declines through the recent launch of Vancomycin oral solution and the subsequent January 2020 acquisition of Amerigen's marketed products and pipeline. For 2020, we are providing midpoint net revenue guidance of $218 million and increase of 6% and adjusted non-GAAP EBITDA guidance of $83 million, the same number as compared to 2019. Our 2020 guidance does not include any effect from additional acquisitions, and does not include any effect from the potential launch of quarter Cortrophin…

Thank you, Art. And good morning to everyone on the line this morning. For the year ended December 31, 2019, ANI posted record net revenues, adjusted non-GAAP gross profit and adjusted gross margin. Annual net revenues were $206.5 million, up $5 million or 2.5% from prior year. Adjusted non-GAAP gross profit reached $146.9 million, up $12.7 million or 9% and adjusted non-GAAP gross margins were over 71%. We generated $45.6 million of cash from operation and importantly continued to invest significant levels of cash back into the business, while maintaining financial and balance sheet discipline. Adjusted non-GAAP EBITDA was off $1.2 million from prior year levels at $83.2 million while adjusted EPS was down $0.01 at $5.06 per diluted share. As of December 31st balance sheet date, we had $62.3 million of unrestricted cash, up $19.3 million from prior year and up to $2.6 million from September. This balance is net of $20.9 million of business development closed during the year in support of expanding our future pipeline opportunities and $6.6 million of capital expenditures made in support of advancing the capabilities of our 3 manufacturing plans. On December 1st, we successfully refinance the maturity of our $118.75 million convertible debt by exercising our option to borrow $118 million pursuant to the delayed job term loan feature in our $265 million senior secured credit facility. The company experience no equity dilution related to the maturity of the convertible notes. Total net debt as of the balance sheet date was reduced to $125.2 million, representing 1.5 times net leverage and 2.3 times gross leverage on a trailing 12 month basis. Looking forward, we expect to continue to reinvest our cash flow from operations in business development opportunities. In January of 2020, we used $52.5 of cash from the balance sheet to…

Thank you for that, Steve. Laurie, we will now open the conference call to questions.

Thank you. [Operator Instructions] Your first question comes from Dana Flanders with Guggenheim.

Hi, thank you very much for the questions. I just had a couple quick ones if I could. First, could you provide kind of the relative contribution of the Amerigen portfolio to guidance this year? Any context would be helpful. And kind of what the growth outlook for that portfolio is going forward? Number two, just how do we - how should we think about just the gross margin sustainability? I know it's ticking down this year to the mid-60% range. That's still a relatively attractive margin profile versus generic peers. So just curious if the base is down enough, and you're launching enough valuable products that you can sustain that mid-60% gross margins. And just the third one, I may have missed this. But how much inventory build are you planning for Cortrophin this year? I understand you're not including any revenue and guidance, but just curious how much demand you can meet if you are approved four months after filing. Thank you.

So let me let me take the last question first, the inventory builds for Cortrophin and anticipate again spending another $11.5 million this year on top of the 6.7 last year. So the most important part of the inventory for Cortrophin is really the stockpile of pig pituitaries and more importantly than that, the stockpile of active pharmaceutical ingredient. We will have a stockpile of active pharmaceutical ingredient after we invest that total investment but that is very, very close to a 50% of the market. If you're - if we're estimating that the market is 30,000 biles, we're going to be very close to being able to - from our API stockpile generate almost 15,000 biles of finish dosage form. Your second question, the gross margin sustainability in the mid-60s. We think that's an accurate reflection of where our business is at this moment in time. We no longer have really, I'll say top heavy generic product contributors after the hits we took on those three products recently. And so we feel that that's really an accurate reflection of where the business is today ex any additional acquisitions et cetera. And the last question, maybe on the portfolio of Amerigen, Steve, could you could you address that, please?

Yeah, sure. Good morning, Dana. And thanks for the questions. Yeah, we are not going to speak to the particular numbers for the Amerigen portfolio in the guidance. And I think that would be a typical approach, right. I mean, we do anticipate a significant contribution from the Amerigen portfolio. And I would say qualitatively that that contribution is very much in keeping with what our expectations for the portfolio were when we purchased it. All of the transition plans to move the volume as it stood in the hands of Amerigen over to ANI contracts and customer contracts has gone very smoothly. And so we're quite pleased with our expectations for that portfolio.

Okay, thank you very much.

You're welcome, Dana.

Your next question comes from a line of Elliot Wilbur of Raymond James.

Thanks. Good morning. First question for yourself Art, regarding the upcoming Corticotropin filing. Likely be the last time we hear from you before you actually submit the application. So just a couple points of clarification. When you actually file, do they notify you of official acceptance and is that a 30 day timeline? And if so, is that something that you would press release? Second part of the question, do you think the filing portal should qualify for potentially an expedited review? And last part here is these types of applications generally seem to move through the agency much more smoothly, efficiently and expeditiously when they have attention from folks kind of outside the review division and other than the individual reviewer themselves? So maybe, could you describe if there were any activities taking place that might become visible to us, post that filling or ahead of the filing that suggests that, this is going to be a high priority endeavor for FDA?

Thank you, Ellie. Good morning. So I’ll take the last part of your question first. In areas will there be activities outside of the filing, yes, there will be. I think it's very - your point is very well taken. Very important to that, several government officials, both in the Senate and House of Representatives, as well as HHS, FDA, are cognizant of the fact that we have filed our supplemental to our approved Cortrophin Gel drug. There's obviously, over the years a significant amount of noise associated with the monopolistic approach and pricing approach of Acthar Gel. And so I think we would certainly provide notification to these government officials that that there's an important filing in the FDA NDA division associated with our product and why it's important. So we certainly will have a letter writing campaign to respective officials that we think cannot influence approval, but nevertheless, have an understanding this has arrived on their desk after four years. You asked a little bit about the expedite review, this product is not eligible for an expedited review, it's already approved. This is why we will we will receive on the date of filing a four months PDUFA date. And so in theory, the product itself could be - the supplemental could be approved within four months. We're not handicapping that but that is certainly a potential possibility. But as such as not eligible for expedited review. However, it's very important to point out that we're in NDA division. This is not a biosimilar. We're not in office of generic drugs. And typically, my perspective is that the NDA division is a more expeditious division than maybe the office of generic drugs for some of these complex type products. And so I - hopefully that answers the extent of your questions. If I miss something, let me know.

Sure. No, just one follow up point here. Is there actually a post submission notification that the supplement is ready for review?

I forgot. A very good point. So yes, there will be a notification approximately within 30 days that they have accepted our filing. We see this as kind of de rigueur and we see no reason why they wouldn't with the filing that we're submitting. Whether or not we - this is sort of second nature, whether or not we issue a press release associated with the fact that they've accepted our filing is debatable. If I think we will internalize that and if we feel it that is important to do so, we certainly will. But again, we expect 100%, that they will accept this filing.

Okay. And just a couple financial questions for Steve and yourself as well. I am just thinking about numbers cadence sort of the balance or the course of the year. We expect, obviously second half to be stronger than the first half. But maybe more specifically, would you think that by the time we get to the second half of the year that the incremental contribution from the Amerigen portfolio, the ramp in Vancomycin Oral Solution, and also the incremental benefit of Bretylium is effectively offsetting the negative impact that you experienced on both EEMT and EES?

Well, we certainly anticipate that. The effect of Amerigen on our business is, sake of argument, instantaneous. So on the day we bought it, we picked up their revenues and gross profit. Now we have subsequently launched some additional products from that Amerigen portfolio. And obviously we didn't acquire Amerigen on January 1st. But that's - there's an immediate effect from Amerigen. Vancomycin and Bretylium is I think both Steve and I spoke to is a constant bill. And so from Vancomycin Oral Solution - and I'll see the importance of that. From Vancomycin Oral Solution we see a steady bill of scripts over time. And so we feel very good. We've sort of extrapolated out what that means we feel very good about the forecasted annualized revenue number for that product. For Bretylium. Bretylium is going to take a little bit longer because Bretylium has been off the market for some time. We certainly believe that this is a critical care drug that should be on crash carts as it was in the past for all hospitals and emergency services. We have an opinion paper that will be - that was authored actually by in 'the father of Bretylium', and that it will be coming out shortly and that will help guide hospitals and PMT committees to understand the continued significance of the Bretylium. But that one's going to take a little bit longer. And so we have quite frankly, a slower ramp on that product. And Steve, is there anything you'd like to add to that at all?

No, I think that's spot on our end. And Elliot to the lead in of your question I'd say also spot on we currently anticipate the comps for the first and second quarter obviously more difficult. And then when you get big in the factors being described here, we would anticipate the third and fourth quarter to be reflective of growth.

Okay. Two quick financial follow up, Steve. With respect to adjusted EBITDA guidance. Obviously, most Cortrophin expenses are excluded from that. But I wasn't sure if in fact that excluded all potential expenses relating to launch including some potential sales and marketing activities in the back half of the year. And maybe just if you could provide a little bit of color in terms of what's happening in the branded business, the brand portfolio and the softness and a couple of the more established brand lines as an incremental generic competition customer mix, just what the dynamics there are and kind of why you're seeing a little bit more pressure at the market?

So, I'd like you first - and I'll let you take the first question. Elli, our brand has primarily been acquired, and they have great margins and great cash flow. Overtime they decline. They are mature brands. They have been generic versions of these drugs and many times leaving launching authorized generic ourselves against the brand. So, as you know, our brands have sake of argument 1% or less market share. So overtime, you will see our brands decline. And so you might not have seen that in the past, but that is because we've done branded acquisitions that sort of cover up the declines on the existing brand sales, okay. And those declines are driven by just more and more people going to generics, or maybe more and more payers continuing to refer pharmacies or to obviously, the fact that there's a generic version available. Nevertheless, brands for us still represent - again significant revenues and margins and cash flows. And really, from an SG&A perspective, cost has nothing to service. It's very de minimis amount. So we are still active in attempting to acquire mature brands where we can. And so those opportunities pop up from time to time. And as you know Rob is - Rob Schrepfer is on top of those opportunities when they present themselves. Okay. Steve, maybe you want to tackle the Cortrophin question.

Yeah, sure thanks. So I think we can think of the Cortrophin expenses Elliot probably in three buckets. So the first is on the R&D expense side. So what we anticipate there is certainly on an annual basis a significant decline year-over-year in R&D spend, call it somewhere around the $6ish million plus of annualized declines. And from a calendar Asian, the remaining spend that we anticipate will occur principally in the call it, the first quarter of this year. And so that'll be a little bit of optimist in the back half of the year from an expense perspective. About half of those declines are reductions in spend. We currently anticipate reallocating towards the generic programs that we're running. The second main bucket would be the prelaunch inventories that we spoke about in the prepared comments. And so we do project $11 million to $12 million of prelaunch inventory builds in 2020 as compared to the $6.7 million spend this year. And those expenditures we are adding back for non-GAAP purposes. Obviously under the premise that once this product is approved those are, that would be inventory right and sufficient wouldn't be kidding [ph] our P&L. And then lastly is on the sales and marketing side. And the guidance figures we gave this morning do not include any significant sales and marketing spend in those numbers. It's kind of under the premise that we're not putting in sales figures. We're not putting in the sales and marketing spend either. And so, we should expect to see that as add back to our non-GAAP figures until we reach the point of launching the product.

Okay. One last question for Art, strategic question. The company's done a very, very good job over the years in terms of building a business through opportunistic acquisitions, about brand and generic products taking advantage of the distress in Missouri in the space. One of the areas you've talked about though for some time and in terms of having a strong interest in injectables. But sort of listening to the rhetoric from around the industry, that's also an area where quite a few companies that still see that as a growth opportunity or growth sector and are actively looking for assets in the space. I'm just wondering, what do you think or what would you sort of highlight or characterize as the opportunities for ANI within the context of your industry that still sort of use injectables as an attractive area?

So that's a good question, Elliot. I mean, for us it's sort of a natural segue since obviously Cortrophin Gel will be our - probably for - maybe for a long, long time to come our largest injectable product as we anticipated, as we've talked about annuity like revenues on the product. Our injectable opportunities, so far have been more related in product development areas. So, we did a deal with collectives [ph] and picked up several injectable opportunities, again, as you mentioned, because maybe the need on the part of the seller for capital, et cetera. And I think we see, there are certainly opportunities out there for injectables some commercialize or development. And yes, we are very well aware that a lot of folks are chasing some of those opportunities. Some of those opportunities have been actually created by the government to be frank on 505(b)2s and alike. And I think you've seen some of them on products like calcium gluconate has I mean just absolutely ridiculous price associated with a product that costs nothing to make. And so, those opportunities are still out there. I think one way to look at us is to say, okay, we've always been a sort of Nuts And Bolts Company. We've been very careful how we built out the business model in generics and mature brands. We've been very careful how we spend our money. We've been very careful on our debt levels and leverage. But at the same time, the company took a significant high risk, high reward opportunity, and we plumped down $75 million for a bunch of papers. But those papers are now coming to fruition for us. And I think we are incredibly bullish on Cortrophin Gel and what it could do for the company and our…

Thanks.

Thank you, Elliot.

Your next question comes from the line of Brandon Folkes of Cantor Fitzgerald.

All right. Thanks for taking my question. Maybe just following on that. Art, you mentioned that you think - you believe that the generics industry needs to continue to consolidate whilst pivoting towards the injectable specialty drugs. If the opportunity presents itself, would you still grow your generics business through consolidation or should we think of business development going forward really focused on sort of the injectable and specialty or have as …

No, I think - Brandon, thanks for that question. I think that, we mentioned that we certainly will continue to look for tuck in acquisitions. Okay. And, I think that the key, kind of the key numbers in regards to our generic acquisitions that we've done is that we've done 15 for total of $135 million. And from those transactions just in 2019, those transaction contributed $26 million in revenues at obviously very nice margins. And so we wouldn't stop with that. Okay. But we've always been a value type of buyer. And today's marketplace for these acquisitions, it's still vibrant. There are just - there are so many companies that are strapped for cash. There are many companies - generics has always been an entrepreneurial type business in '14 and '15 when the generic market was flying high and people thought prices were going up forever. A lot of smaller entrepreneurial companies propped up and started. And entrepreneurs did development on products the traditional way. And now they're getting approvals, but they're a little bit short on cash to launch some of these drugs. We see it all the time. And it cost us as much money if not more to launch drugs, inventory builds and obviously waiting for your receivable dollars from the wholesalers than it does maybe than to develop the drug. And so that's where some of our opportunities lie. So we will certainly - we won’t turn the blind eye to a good value or a good acquisition opportunity for our shareholders, which is why I mentioned that we still look for these tucking opportunities. However, it is very important for us to - without question diversify away from just doing the primary bulk of our business with the three consortiums. Now we're going to…

Great, thanks very much.

Moderator if there's no other questions, I just like to thank everybody for attending ANI’s 2019 earnings conference call and wish you all a good afternoon. Thank you very much. Bye-bye. Thank you.

Thank you. This concludes ANI’s fourth quarter 2019 earnings call. You may now disconnect your lines at this time and have a wonderful day.