ANI Pharmaceuticals Reports Record Full Year and Fourth Quarter 2018 Results and Provides 2019 Guidance

ANI Pharmaceuticals Reports Record Full Year and Fourth Quarter 2018 Results and Provides 2019 Guidance

BAUDETTE, Minn., Feb. 27, 2019 /PRNewswire/ --

For the full year ended December 31, 2018:

Record net revenues of $201.6 million, an increase of 14% versus 2017

GAAP net income of $15.5 million and diluted GAAP earnings per share of $1.30

Adjusted non-GAAP EBITDA of $84.4 million

Adjusted non-GAAP diluted earnings per share of $5.07

For the fourth quarter 2018:

Record net revenues of $57.1 million, an increase of 21% versus 2017

GAAP net income of $5.4 million and diluted GAAP earnings per share of $0.46

Adjusted non-GAAP EBITDA of $22.2 million

Adjusted non-GAAP diluted earnings per share of $1.32

Net revenues of $231 million to $245 million

Adjusted non-GAAP EBITDA of $95 million to $105 million

Adjusted non-GAAP diluted earnings per share of $5.57 to $6.21

ANI Pharmaceuticals, Inc. ( ANI ) (NASDAQ: ANIP) today reported its financial results for the three and twelve months ended December 31, 2018 and provided its 2019 financial guidance. The Company will host its earnings conference call this morning, February 27, 2019, at 10:30 AM ET. Investors and other interested parties can join the call by dialing (866) 776-8875. The conference ID is 4655318.

Arthur S. Przybyl, President and CEO, stated,

ANI had a strong year, generating record net revenues, record adjusted non-GAAP EBITDA, and record adjusted non-GAAP diluted earnings per share. ANI's fourth quarter results also produced record net revenues, an increase of 21% over the prior year period, and record adjusted non-GAAP EBITDA, an increase of 13% of the prior year period. In 2018, adjusted non-GAAP EBITDA was 42% as a percent of net revenue and we generated $67.1 million of cash from operations during the year.

Our record 2018 results exemplify ANI's role as a best-in-class specialty pharmaceutical company. We launched seven generic and four branded products during the year, increasing our commercial drug portfolio to 42 products. Our work has continued on our Cortrophin

re-commercialization project, and we intend to file the supplemental NDA in the first quarter of 2020. We continue to integrate our new Canadian operations and are working to use the facility for the tech transfer of several of our pipeline products and to grow our contract manufacturing business platform. With our new debt financing in place, we are in a strong position to not only refinance the convertible debt, but also have additional funds available to us for future acquisitions and provide ample opportunity to continue to grow.

2019 Financial Guidance

For the twelve months ending December 31, 2019, ANI is providing guidance on net revenue, adjusted non-GAAP EBITDA, and adjusted non-GAAP diluted earnings per share. The following table summarizes 2019 guidance as compared to 2018 actual results:

($ in millions except per share

ANI's 2019 financial guidance reflects management's

current assumptions regarding customer relationships, product pricing, prescription trends, competition, inventory levels, cost of sales, operating costs, timing of research and development spend, taxes, and the anticipated timing of future product launches and other key events. 2019 guidance includes:

full year revenues and expenses related to our August 6, 2018 acquisition of WellSpring Pharma Services Inc.;

continued investment in our Cortrophin Gel Re-Commercialization program. The above guidance ranges include approximately $14.5 million to $16.5 million of total ANI Research and Development expense as compared to $15.4 million incurred in 2018;

continued select investment in Selling, General, and Administrative expenses to support the continued growth of our business and brands;

a combined federal, state, and international

effective income tax rate of 24%; and

approximately 11.9 million shares of fully diluted common stock outstanding.

In December 2018, ANI refinanced its $125 million credit facility into a $265 million facility. As part of the refinancing, ANI extended the maturity of its currently outstanding $72.2 million term loan, increased its line of credit from $50 million to $75 million, and entered into a deferred draw term loan for $118 million. The deferred draw term loan is to be used only to retire the remaining convertible debt that matures in December 2019. The line of credit is currently undrawn.

Generic Pharmaceutical Products

Fourth Quarter Revenue Results and Update

Revenues from sales of generic pharmaceuticals increased 13%, to $33.7 million from $29.8 million in the prior period, primarily due to the

second quarter 2018 launch of Ezetimibe-Simvastatin and other products launched in 2018, tempered by volume decreases for Fenofibrate and Nilutamide. ANI has launched seven generic products in 2018: Candesartan Hydrochlorothiazide (the authorized generic of Atacand HCT ), Terbutaline Sulfate (the authorized generic of Brethine ), Morphine Sulfate Oral Solution, Cholestyramine for Oral Suspension, Ezetimibe-Simvastatin, Desipramine, and Felbamate, increasing its generic commercialized product portfolio to a total of 31 products.

Key Generic Pipeline Products

Branded Pharmaceutical Products

Fourth Quarter Revenue Results and Update

Revenues from sales of branded pharmaceuticals increased 21%, to $18.8 million from $15.5 million in the prior period, primarily due to sales of Atacand and Atacand HCT , which were launched under the ANI label in October 2018 and sales of Casodex and Arimidex , which were launched under the ANI label in July 2018,

tempered by lower unit sales and price of Inderal LA and lower unit sales of Vancocin . ANI sells eleven branded products under the ANI label.

Key Brand Pipeline Products

Vancocin Oral Solution Update

ANI is currently advancing a commercialization effort for Vancocin oral solution. ANI filed a prior approval supplement ( PAS ) in September 2018 and received a GDUFA date of March 2019. This product will be manufactured at ANI's site in Baudette, Minnesota and will compete in a market that currently exceeds $450 million annually.

Re-commercialization Update

In the fourth quarter of 2018, ANI completed its first commercial scale batch of Corticotropin API, which met specifications and was analytically-consistent with commercial API batches from the legacy API commercial manufacturer. ANI continues to manufacture additional commercial scale batches of Corticotropin API and is on track to initiate API process validation and registration batch manufacturing in the first quarter of 2019. ANI has completed validation for some API analytical methods to be used for API batch release and stability testing and will validate the remaining API release methods in the first quarter of 2019, prior to initiation of process validation and registration batch manufacturing. Commercial scale registration batch manufacturing and process validation for Cortrophin Gel is scheduled to begin in the second

ANI is on track to file a supplemental NDA by the first quarter of 2020.

For further details, please see ANI's Cortrophin Gel Re-commercialization Milestone Update in Table 5.

Contract Manufacturing

Fourth Quarter Revenue Results and Update

Contract manufacturing revenue increased by 94% to $3.7 million from $1.9 million in the prior year period, primarily due to the impact of contract manufacturing revenue from our Canadian subsidiary, ANI Pharmaceuticals Canada Inc. ( ANI Canada ). Through the ANI Canada subsidiary, ANI acquired WellSpring Pharma Services Inc. ( WellSpring ), a Canadian company located in Oakville, Ontario that performs contract development and manufacturing of pharmaceutical products, in August 2018. ANI has continued the integration of the ANI Canada operations in the

Royalty and Other Income

Fourth Quarter Revenue Result and Update

Royalty and other income increased to $0.9 million from $41 thousand, primarily due to the $0.3 million of royalties from sales related to Gilead's Yescarta product, as further described below and the impact of product development services and laboratory services revenue from our ANI Canada subsidiary.

Key Royalty Product: Yescarta

ANI is entitled to a percentage of global Yescarta net sales as well as a portion of certain product milestones, such as the recent positive opinion issued by the European Medicines Agency ( EMA ) Committee for Medicinal Products for Human Use ( CHMP ).

Fourth Quarter Results

For the three months ended December 31, 2018, ANI reported net revenues of $57.1 million, an increase of 21% from $47.3 million in the prior year period, due to the following factors:

Revenues from sales of generic

pharmaceuticals increased 13%, to $33.7 million from $29.8 million in the prior period, primarily due to the second quarter 2018 launch of Ezetimibe-Simvastatin and other products launched in 2018, tempered by volume decreases for Fenofibrate and Nilutamide.

Revenues from sales of branded pharmaceuticals increased 21%, to $18.8 million from $15.5 million in the prior period, primarily due to sales of Atacand and Atacand HCT , which were launched under the ANI label in October 2018 and sales of Casodex and Arimidex , which were launched under the ANI label in July 2018, tempered by lower unit sales and price of Inderal LA and lower unit sales of Vancocin .

Contract manufacturing revenue increased by 94% to $3.7 million from $1.9 million in the prior year period, primarily due to the results of the ANI Canada subsidiary.

and other income increased to $0.9 million from $41 thousand, due to the royalties from Yescarta sales, as well as the impact of product development services and laboratory services revenue from our ANI Canada subsidiary.

Operating expenses increased to $45.7 million for the three months ended December 31, 2018, from $39.9 million in the prior year period. The increase was primarily due to a $4.5 million increase in selling, general, and administrative expense as compared with the prior period, as a result of increases in personnel and related costs. In addition, depreciation and amortization increased by $1.7 million due to the amortization of the product rights for Atacand , Atacand HCT , Arimidex , and Casodex , which were acquired in December 2017.

Cost of sales as a percentage of net revenues decreased to 35% during the three

months ended December 31, 2018, from 37% during same period in 2017, excluding $2.9 million of net inventory step-up costs related to sales of Inderal XL, InnoPran XL , and Inderal LA in the fourth quarter of 2017. The decrease was primarily due to change in product mix towards higher-margin brand products and lower sales of products subject to profit-sharing arrangements.

Net income was $5.4 million for the three months ended December 31, 2018, as compared to a net loss of $9.6 million in the prior year period. The effective tax rate for the three months ended December 31, 2018 was 26%.

Diluted earnings per share for the three months ended December 31, 2018 was $0.46, based on 11,785 thousand diluted shares outstanding, as compared to diluted loss per share of $0.83 in the prior year period. Adjusted non-GAAP diluted earnings per share was $1.32, as

compared to adjusted non-GAAP diluted earnings per share of $1.08 in the prior year period. For a reconciliation of adjusted non-GAAP diluted earnings per share to the most directly comparable GAAP financial measure, please see Table 4.

Results for Year Ended December 31, 2018

For the year ended December 31, 2018, ANI reported net revenues of $201.6 million, an increase of 14% from $176.8 million in the prior year period, due to the following factors:

Revenues from sales of generic pharmaceuticals decreased 1%, to $117.5 million from $118.4 million in the prior period, primarily due to volume decreases for Fenofibrate and Nilutamide, as well as sales decreases for Propranolol ER driven by

price, tempered by the impact of the second quarter 2017 launch of Diphenoxylate Hydrochloride and Atropine Sulfate, as well as the second quarter 2018 launch of Ezetimibe-Simvastatin and other products launched in 2018.

Revenues from sales of branded pharmaceuticals increased 19%, to $60.6 million from $50.9 million in the prior period, primarily due to sales of Arimidex and Casodex , which were launched under the ANI label in July 2018, sales of Atacand and Atacand HCT , which were launched under the ANI label in October 2018, as well as sales of Inderal XL and InnoPran XL , both of which were acquired in the first quarter of 2017, and which were re-launched under our label in the first quarter of 2018. These increases were tempered by lower unit sales of Inderal LA and Vancocin .

Contract manufacturing revenue increased by

29% to $9.1 million from $7.0 million in the prior year period, primarily due to the impact of contract manufacturing sales from our ANI Canada subsidiary.

Royalty and other income increased to $14.5 million from $0.4 million, primarily due to the royalties received on sales of Atacand , Atacand HCT , Arimidex , and Casodex , as well as royalties from Yescarta sales and milestones.

Operating expenses increased to $166.2 million for the year ended December 31, 2018, from $148.5 million in the prior year period. The increase was primarily due to a $12.5 million increase in selling, general, and administrative expense as compared with the prior period, as a result of increases in personnel and related costs and $1.4 million of costs associated with the WellSpring acquisition and integration. Research and development expense increased by

$6.3 million as compared with the prior period, primarily as a result of $1.3 million of acquired in-process research and development, which was recognized as research and development expense in relation to the asset acquisition from Impax/Amneal, as well as increased work on development projects, primarily the Cortrophin Gel re-commercialization project and work on the ANDAs acquired in the asset purchase agreement with Impax/Amneal. In addition, depreciation and amortization increased by $5.8 million due primarily to the amortization of the product rights for Atacand , Atacand HCT , Arimidex , and Casodex , which were acquired in December 2017.

Excluding the $5.6 million of net inventory step-up, primarily related to the sales and write off Inderal XL and InnoPran XL in the year ended December 31, 2018 and $10.4 million of net inventory

step-up costs related to sales of Inderal XL, InnoPran XL , and Inderal LA in the year ended December 31, 2017, cost of sales as a percentage of net revenues decreased to 33% during the year ended December 31, 2018, from 39% in the year ended December 31, 2017, primarily due to increased royalty revenues, change in product mix towards higher-margin brand products, and lower sales of products subject to profit-sharing arrangements.

Net income was $15.5 million for the year ended December 31, 2018, as compared to a net loss of $1.1 million in the prior year period. The effective tax rate for the year ended December 31, 2018 was 23%.

Diluted earnings per share for the year ended December 31, 2018 was $1.30, based on 11,772 thousand diluted shares outstanding, as compared to diluted loss per share of $0.09 in the prior year period. Adjusted non-GAAP diluted

earnings per share was $5.07, as compared to adjusted non-GAAP diluted earnings per share of $3.91 in the prior year period. For a reconciliation of adjusted non-GAAP diluted earnings per share to the most directly comparable GAAP financial measure, please see Table 4.

Selected Balance Sheet Data

ANI generated $67.1 million of positive cash flows from operations in the year ended December 31, 2018.

In August 2018, ANI acquired WellSpring, a Canadian company that performs contract development and manufacturing of pharmaceutical products for a purchase price of $18.0 million, subject to certain customary adjustments. Pursuant to these customary adjustments, the total purchase consideration was $16.7 million. The consideration was paid entirely from cash on hand. As a result of the transaction, ANI acquired WellSpring's pharmaceutical manufacturing facility, laboratory, and offices, current book of commercial business, as well as an organized workforce. In April 2018, ANI purchased from IDT Australia, Limited the ANDAs for 23 previously-marketed generic drug

products and API for four of the acquired products for $2.7 million in cash and a single-digit royalty on net profits from sales of one of the products. ANI made the $2.7 million payment using cash on hand. In May 2018, ANI purchased from Impax Laboratories, Inc. (now Amneal) the approved ANDAs for three previously-commercialized generic drug products, the approved ANDAs for two generic drug products that have not yet been commercialized, the development package for one generic drug product, and a license, supply, and distribution agreement for a generic drug product with an ANDA that is pending approval, and certain manufacturing equipment required to manufacture one of the products, for $2.3 million in cash. ANI made the $2.3 million payment using cash on hand.

ANI Product Development Pipeline

ANI's pipeline consists of 75 products, addressing a total annual

market size of $4.5 billion, based on data from IQVIA. Of these 75 products, 70 were acquired and of these acquired products, ANI expects that 54 can be commercialized based on either CBE-30s or prior approval supplements filed with the FDA.

Non-GAAP Financial Measures