ANI Pharmaceuticals - Q2 2024

Transcript

Operator (participant)

Good day, everyone, and welcome to today's ANI Pharmaceuticals Inc. second quarter 2024 earnings results call. Please note this call is being recorded. After the speaker's opening remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press the star key, followed by the number 1 on your telephone keypad. If you would like to withdraw yourself from the questioning queue, please press star 2. It is now my pleasure to turn the conference over to Lisa Wilson. Please go ahead, ma'am.

Lisa Wilson (Head of Investor Relations)

Thank you, Katie. Welcome to ANI Pharmaceuticals Q2 2024 earnings results call. This is Lisa Wilson of In-Site Communications, investor relations for ANI. With me on today's call are Nikhil Lalwani, President and Chief Executive Officer, Steve Carey, Chief Financial Officer, and Chris Mutz, Senior Vice President and Head of ANI's Rare Disease Business. You can also access the webcast of this call through the investor 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 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 archive 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 archive webcast, this call was held and recorded on August sixth, 2024. 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)

Thanks, Lisa. Good morning, everyone, and thank you for joining our second quarter earnings call. We are delighted with ANI's accomplishments in the second quarter. We achieved both record revenues and a major milestone in our ongoing efforts to expand the scope and scale of our rare disease business with our proposed acquisition of Alimera Sciences. The company continues to rise to each challenge and goal, and I'm proud of the team's ability to drive sustained long-term growth while never losing sight of our purpose of serving patients, improving lives. During the second quarter, ANI generated revenues of $138 million, an increase of 18% over the second quarter of 2023. Adjusted non-GAAP EBITDA was $33.2 million, and adjusted non-GAAP EPS was $1.02.

Based on our strong second quarter results and the continued momentum that we're seeing across the business, we're pleased to raise our full year 2024 guidance, which Steve will discuss later in the call. Accelerating demand for our lead rare disease asset, Purified Cortrophin Gel, and solid growth for generics drove our robust top-line performance, which more than offset the expected established brands business performance. Cortrophin Gel generated $49.2 million in revenues during the quarter, up 102% over the prior year quarter and 33% over the first quarter of 2024. The second quarter represented the highest number of both new patient starts and unique prescribers since launch in January 2022.

We continue to have momentum in the addition of new prescribers and robust growth from existing prescribers, and volumes increased across all targeted specialties, neurology, rheumatology, nephrology, pulmonology, and ophthalmology. We are pleased to report that the areas of strategic investment behind Cortrophin Gel that we announced earlier this year and late last year, including expanding our pulmonology sales team, launching a targeted ophthalmology sales team, and actively promoting the acute gouty arthritis flares indication, have been yielding positive results. Our ophthalmology sales team has a strong start and drove significant growth in prescriptions and new patient starts in the second quarter. We also saw particularly strong year-over-year and quarter-over-quarter growth for acute gouty arthritis flares. Cortrophin Gel is the only ACTH product approved for this indication. As a reminder, we began promotional activities for the acute gouty arthritis flares indication in late 2023.

More than 9 million people in the U.S. are affected by gout, and some of these experience acute gouty arthritis flares as a symptom of their underlying disease. For some of these patients, Cortrophin Gel may be an appropriate additional treatment option for their flares. We have seen increasing momentum in physicians adopting Cortrophin Gel for patients with acute gouty arthritis flares who have not responded adequately to conventional therapies... We continue our efforts to enhance the convenience and remove pain points for patients starting on ACTH and the healthcare providers who treat them. In the fourth quarter of 2023, we introduced the 1 mL version of Cortrophin Gel to meet the needs of physicians who desired a smaller configuration of ACTH for certain patients, such as those with acute gouty arthritis flares.

Today, we are pleased to report for the first time that we are nearing the completion of development of a 1 mL prefilled syringe, offering further benefits to patients and physicians. We plan to file for FDA approval of the prefilled syringe in the second half of 2024 and are excited about the potential of this product. We look forward to launching this product in the first half of 2025. Turning now to our generics business, which delivered another strong quarter with revenue of $74 million, an increase of 17% over the second quarter of 2023, and 5% over the first quarter of 2024. The solid performance reflected strength in our base business, coupled with contribution from new product launches. We launched four new products in the second quarter, each into limited competition markets in generics.

We've launched 3 new products so far in the third quarter and have a number of products pending approval that we expect to launch in the second half. We made substantial progress on bringing online the significant capacity expansion at our New Jersey site and believe all 15 new manufacturing suites and the new QC lab will be fully operational in the second half of 2024. The New Jersey site expansion will support the future growth of our generics business. Revenue for established brands was $14.9 million during the quarter, a decrease of 49% from the prior year period. The performance was anticipated and in line with our expectations and guidance. As a reminder, we noted on the first quarter call in May that we did not expect the tailwinds arising from competitor supply dynamics to persist beyond the first quarter.

In June, we delivered a major milestone in our growth strategy with announcing the proposed acquisition of Alimera Sciences. This highly synergistic transaction will add two commercial assets in ophthalmology to our rare disease portfolio and more than $100 million in highly durable branded revenue annually. The acquisition is aligned with the M&A strategy we laid out over the past several quarters. Specifically, this transaction will expand the scope and scale of our rare disease business and strengthen one of our priority therapeutic areas of ophthalmology, which is also a key specialty for our lead rare disease asset, Cortrophin Gel, and the overall ACTH market. The deal will provide ANI two durable assets with double-digit growth.

With Alimera, ANI's rare disease segment would account for approximately 45% of the total company revenues on a pro forma 2024 basis, and we expect rare disease to be the largest driver of the company's future growth. From a financial perspective, we expect high single digit to low double-digit accretion in adjusted non-GAAP EPS in 2025, with substantial accretion thereafter. Integration planning is well underway, and the transaction remains on track to close later this quarter. Now, I'd like to turn the call over to Chris Mutz, our head of rare disease, to discuss the Alimera products and transaction in more detail. Chris?

Christopher Mutz (SVP, Head of Rare Disease Business)

Thank you, Nikhil. We're excited about what Alimera brings to ANI, starting with two high-growth, durable commercial products. Alimera's first product, ILUVIEN, is used to treat diabetic macular edema or DME, the leading cause of vision loss in diabetic patients. The company's second product, YUTIQ, is used to treat patients with chronic non-infectious uveitis affecting the back of the eye. ILUVIEN and YUTIQ are both double-digit growth assets with high barriers to genericization and significant future upside. With the acquisition of Alimera, ANI will have three commercial rare disease assets, Cortrophin, ILUVIEN and YUTIQ, and an expanded rare disease commercial team covering the specialties of ophthalmology, neurology, nephrology, rheumatology, and pulmonology. A nationwide sales force of approximately 45 sales representatives will be dedicated to ophthalmology alone, extending our reach and ability to promote all three products for difficult-to-treat late-line patients with limited therapeutic options.

Alimera will also increase ANI's geographic diversification with its established ex-US footprint, including direct marketing operations in Europe and partnerships in additional key geographical regions. Earlier this morning, Alimera reported second quarter results. ILUVIEN and YUTIQ generated net revenue of $27 million in the second quarter, which represented year-over-year growth of 54%. Alimera's adjusted EBITDA increased to $6.7 million in the second quarter, up from $0.9 million in the prior year quarter and $1.8 million in the first quarter of 2024. ILUVIEN and YUTIQ are both high-growth products, and we are confident in our ability to unlock additional value through commercial synergies and execution. With that, I'd like to turn the call over to Steve, who will walk through our second quarter financial results and revised 2024 guidance in more detail. Steve?

Steve Carey (CFO)

Thank you, Chris, and good morning to everyone on the call. ANI generated second quarter revenues of $138 million, up 18% over the prior year period. Revenues from Cortrophin Gel reported in our Rare Disease segment were $49.2 million, up 102% from the prior year period, driven primarily by increased volume on record number of new patient starts. Based upon the continued strong execution of the Rare Disease team in driving growth, we are raising our full-year Cortrophin Gel revenue guidance range by $15 million to $185 million-$195 million. Similar to last year, we expect fourth quarter to be the strongest revenue quarter of the year. Revenues of our generics, established brands, and other segment were $88.8 million, a 4% decrease over the prior year period.

Generic revenues for the quarter were $74 million, an increase of 17% over the prior year period, driven by continued strength in the base business and the contributions of new product launches. Net revenues for established brands and other were $14.9 million in the quarter, a decrease of 49% over the prior year period. This performance was expected, as Nikhil noted in his earlier remarks, and second quarter performance is generally indicative of our quarterly expectation for the back half of 2024. Cost of sales, excluding depreciation and amortization, increased 36% to $57.7 million in the second quarter of 2024 compared to the prior year period, primarily due to net growth in sales volumes of pharmaceutical products and significant growth of royalty-bearing products, including Cortrophin Gel.

Non-GAAP gross margin was 58.4%, a decrease of approximately 570 basis points from the prior year period and 600 basis points from the first quarter of 2024, primarily due to product mix, driven by the reduction in established brand revenues, as well as expenses related to the capacity expansion at our New Jersey manufacturing site. We expect sequential improvement in gross margin in both the third and fourth quarter of this year. Research and development expenses decreased 1% to $7.3 million in the second quarter of 2024 compared to the prior year period, and 30% from the first quarter. The sequential decline was related to expense timing and the inherent variability of R&D expenditures on a quarter-to-quarter basis.

We expect R&D to increase in the second half of 2024 relative to the first half of the year, due to the timing of R&D activities. Selling, general, and administrative expenses increased 36% to $52.8 million in the second quarter of 2024 due to increased employment-related costs, continued investment in rare disease sales and marketing activities, legal expenses, expenses related to the pending acquisition of Alimera, and an overall increase in activities required to support the growth of our business.

On a GAAP basis, net loss available to common shareholders for the second quarter of 2024 was $2.7 million, as compared to net income of $5.8 million in the prior year period, driven by $3.5 million of expenses related to the pending acquisition of Alimera and a $2.7 million unrealized mark-to-market loss on the value of our investment in CG Oncology. Both of these items are adjusted for in our non-GAAP metrics this morning. Second quarter diluted GAAP earnings per share was a loss of $0.14, as compared to income of $0.29 per share in the prior year period. On an adjusted non-GAAP basis, diluted earnings per share was $1.02 for the quarter, compared to $1.28 per share in the prior year period.

Adjusted non-GAAP EBITDA for the second quarter of 2024 was $33.2 million, compared to $34.1 million in the prior year period. We ended the quarter with $240.1 million in unrestricted cash and have $292.5 million in face value of outstanding debt, which is due in November of 2027. At the end of the second quarter, our gross leverage ratio was 2.1 times, and our net leverage ratio was well under 0.5 turn of our trailing twelve-month adjusted non-GAAP EBITDA of $137.5 million.

Finally, as Nikhil mentioned, and as outlined in this morning's press release, we are pleased to increase our full year 2024 guidance as follows: full year 2024 net revenues of $540 million-$560 million, up from our prior guidance of $520 million-$542 million, representing year-over-year growth of approximately 11%-15%. Cortrophin Gel net revenues of $185 million-$195 million, up from our prior guidance of $170 million-$180 million, representing year-over-year growth of 65%-74%.

Adjusted non-GAAP EBITDA of $140 million-$150 million, up from our prior guidance of $135 million-$145 million, representing year-over-year growth of approximately 5%-12%. Adjusted non-GAAP earnings per share between $4.38 and $4.82, up from our prior guidance of $4.26 and $4.67. We are reducing our estimate for total company non-GAAP gross margin by 1 point to be between 61%-62% from our prior assumption of between 62%-63%, due to a modest change in the timing of when the new manufacturing suites at our New Jersey site become fully operational.

This factor is short-term in nature, as we anticipate achieving the full benefit and efficiency of the new suites in the second half of this year and beyond. Consistent with prior quarters, we 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 19.8 million shares outstanding for the purpose of calculating diluted EPS and continues to expect its US GAAP effective tax rate to be between 22% and 25%. Please note that our updated 2024 full year guidance does not include contribution from the pending acquisition of Alimera. With that, I will now turn the call back to Nikhil.

Nikhil Lalwani (CEO)

Thank you, Steve. We are extremely pleased with our performance in the second quarter and the continued momentum that has allowed us to increase our full-year expectation. It's an exciting time at ANI, with a strong first half and the anticipated Q3 closing of the acquisition of Alimera. By the end of this year, ANI will have three growing and durable commercial assets in rare disease, an expanded commercial team covering the specialties of ophthalmology, neurology, nephrology, rheumatology, and pulmonology, and a highly leverageable global footprint over 20 countries. We are thrilled to unite the two companies with a shared culture built around similar missions of serving patients, improving lives. Thank you for your interest in ANI, and we look forward to keeping you updated throughout the rest of the year. Operator, please open the line for questions.

Operator (participant)

Thank you. At this time, if you would like to ask a question, please press star one on your telephone keypad. You may remove yourself from the queue at any time by pressing star two. Once again, that is star one to ask a question. We will pause for a moment to allow questions to queue. Thank you. Our first question will come from Les Sulewski with Truist Securities. Please go ahead.

Les Sulewski (BioPharma Equity Research Analyst)

Hi, this is Jeremy on for Les. Thanks for taking our questions. First for me is, what other drivers do you have for the guidance range aside from Cortrophin? And then also on the prefilled syringe, can you give us any more color and explain if there's anything similar to this in the marketplace? Thank you.

Nikhil Lalwani (CEO)

Yeah. Good morning, and thank you, Jeremy. Thank you for joining. I'll take your second question first, which is on the prefilled syringe. Look, we continue our efforts to enhance the convenience and remove pain points for patients starting on ACTH and the healthcare providers who treat them. You will remember that in the fourth quarter of 2023, we introduced the 1 mL version of Cortrophin Gel to meet the needs of physicians who desired the smaller configuration of ACTH for certain patients. Now, we've completed or we're nearing the completion of development of a 1 mL prefilled syringe, offering further benefits, right? Specifically, helping patients with the preparation and administration of the Cortrophin Gel product.

As I said before, we plan to file for approval of the prefilled syringe in the second half of 2024, and launch this in the first half of 2025. Then you're going back to your question on, you know, guidance and what's driving the guidance increase. Look, overall, we've continued to see strong momentum across our rare disease and generics business lines. Both were a touch better than we had expected, and hence, we're raising the full year guidance, and established brands, royalties, and others were largely in line with our expectations. Thank you, Jeremy. Thank you.

Operator (participant)

Thank you. Our next question will come from Gary Nachman with Raymond James. Your line is now open.

Gary Nachman (Biotech Equity Research Analyst)

All right. Thanks. Good morning, guys, and nice quarter. So regarding some of the key drivers of the strong Cortrophin growth, just elaborate how many new prescribers are you getting? Where are you seeing that mostly, and what therapeutic areas? And how much of the volume growth is share gain versus overall market growth? And you called out gouty flares and ops, but those are still relatively small, right? So which areas are driving most of the upside in absolute dollars, and how much upside potential is there, with the gouty flare indication and the 1 mL vial that you were just talking about?

Nikhil Lalwani (CEO)

All right. Well, thank you for your questions, Gary. I will try and answer all of them. I think number one is, you know, on the overall ACTH category, and the question around, you know, share growth versus category growth. Look, you know, and our competitor reported their results earlier this year, earlier today. And what you'll see is, as we've been saying, even in the prior quarters, that overall, the number of patients that are being treated with ACTH today are significantly lower than, patients that were being treated, many years ago. And, you know, with our efforts and the efforts of the competitor, you're seeing for the first time, the category, after many years of decline, are seeing, you know, category growth. So the decline slowed, and now the category is seeing growth.

And in fact, if you, you know, add the revised guidance that they shared earlier today and our raised guidance, so we raised guidance, our competitor raised guidance, you'll see that the what it implies for the ACTH category is a high teens growth. And there is a significant runway, you know, for the category, right? So again, we believe that the efforts of ourselves and the competitor will increase the awareness of the ACTH market or ACTH category and result in overall ACTH market growth. So for us, it's not a share capture, it's not about share capture, it's about getting Cortrophin to the appropriate patients in need. So that was one of your questions. The next was, you know, where did the growth come from?

Look, we saw growth across therapeutic areas, both the ones we focused on at launch, neurology, nephrology, and rheumatology, and the newer areas of ophthalmology, gout, and pulmonology. And I would highlight so to your question on where did the, you know, the majority of the growth, you know, on an absolute basis, did come from the core indication that we, that we launched with, which is neurology, nephrology, and rheumatology. Of course, as you're aware, the number of resources that we have out there talking about or detailing these different specialties is lower than what we have for the newer indications.

But, you know, there is very strong growth, and I would highlight the particularly strong growth both on a quarter-over-quarter and year-over-year basis that we've seen in gout, which is proprietary to Cortrophin Gel as the only ACTH product approved for this indication. And then in addition, you know, our ophthalmology sales team is off to a very strong start and drove significant growth in prescriptions and new patient starts in the second quarter, right? And, obviously, we will build on that as we, as we expand the ophthalmology franchise with the integration of the, of the Alimera Sciences acquisition. And then your last question, I think, was around how much upside is there? I think, Gary, you're aware of how large the ACTH market was.

Even when you add, you know, our raised guidance and the competitor's raised guidance, that's still, you know, a touch over 50% of what peak sales of the category was a few years ago. So, yeah. Hopefully, I covered all your questions, Gary.

Gary Nachman (Biotech Equity Research Analyst)

Yeah, most of it, just that last question was really more on the gouty flare indication-

Nikhil Lalwani (CEO)

Yeah

Gary Nachman (Biotech Equity Research Analyst)

... and the 1 mL vial and having that presentation. I think in the prepared remarks, you know, you just talked about how many of these patients are out there and how many could be candidates. I'm also curious if that 1 mL vial could be used for other indications, not just the gouty flares, just having a, you know, a smaller vial size.

Nikhil Lalwani (CEO)

Yeah. No, thank you for your question. Look, the addition of the 1 mL vial has been additive. It has helped us to expand usage to HCPs who are new to prescribing Cortrophin, and their first experience with Cortrophin has been, you know, with the 1 mL vial. And the volume in the 1 mL vial has grown significantly quarter-over-quarter. And look, it just goes back to, you know, our approach towards enhancing the convenience as well as addressing the pain points and needs of both the appropriate patients as well as the healthcare providers who treat them. So the 1 mL vial was, you know, one step in that direction.

And now, I was pleased to report earlier today, that we are nearing the completion of our prefill syringe to help, you know, appropriate patients. And that brings, you know, another option for enhancing the convenience and addressing the pain points of the patients as well as the healthcare providers who treat them.

Gary Nachman (Biotech Equity Research Analyst)

Okay, that's helpful. And then just one more on Alimera. So first, I just want to confirm that you're not factoring any benefit from the deal in the raised Cortrophin guidance for the ophthalmology segment. And then just talk about the planning for the close and integration, and are there any issues or hurdles you're expecting, and anything that you need to build out beforehand, just to make sure that you have a successful transition from, from day one? Thanks.

Nikhil Lalwani (CEO)

Yeah, thank you. So your first question, there is no benefit from increased Cortrophin sales from an expanded ophthalmology sales force baked into the guidance. As you know, we are yet to close the deal, so this is for standalone ANI. And then your second question around integration planning. Look, we're making very good progress on planning for the integration. First part of it is on, you know, working towards the close of the deal, and as I said, you know, we look forward to closing the deal later this quarter.

And then from a planning perspective, you know, I think that, we're making, again, good progress interacting, appropriately with the Alimera leadership and team to understand, you know, what the, what the organization systems and processes will look like after, after deal closure. And as you would expect, you know, thinking about, you know, at the heart of this, of this integration is the combined ophthalmology, you know, 45+ sales team, and how, how they are, going to carry all three durable commercial assets that Chris spoke about.

So, you know, thinking about how we will organize with them, you know, what does the training program look like for the folks that have been selling ILUVIEN and YUTIQ for them to sell Cortrophin and the, our team who's been selling Cortrophin for them to sell ILUVIEN and YUTIQ? And obviously, with the other sort of, you know, IC plan and other support that they need to be able in the hub, distribution, all of those integrating, all of those. I think those are all the steps that we're working towards, and we're making good progress on that, you know, in that area.

Gary Nachman (Biotech Equity Research Analyst)

All right, great. Thanks, Nikhil.

Nikhil Lalwani (CEO)

Thank you, Gary.

Operator (participant)

Thank you. Our next question will come from Vamil Divan with Guggenheim Securities. Your line is now open.

Vamil Divan (Senior Research Analyst)

Great. Thanks for taking my question. So maybe just a couple of things I just want to clarify here. One, on the Cortrophin side, you mentioned fourth quarter, you expect to be the largest quarter of the year. Again, just curious, I assume you're expecting still sequential growth from 2Q to 3Q, and then 3Q to 4Q, but if you could just confirm that, that'd be helpful. And then on the Established Brands side, you mentioned, the second quarter is sort of a good base to look at for the remainder of this year. I'm just curious if you can comment any further than that in terms of in 2025. Is this, is this sort of nice, sort of steady state, or do you expect any sort of, you know, meaningful changes next year?

Last question, just for the Alimera. You mentioned now you have the ex-US presence that they provide. I'm curious how you're thinking about that. As you think about sort of future business development, you know, priorities, is expanding ex-US maybe turning into a little bit more of a focus, given what Alimera provides you? Thank you.

Nikhil Lalwani (CEO)

Thank you, Vamil, and good morning. So your question on Cortrophin. Yes, we expect to see sequential growth and that the fourth quarter, you know, as Steve mentioned in his prepared remarks, we do expect the fourth quarter to be the largest, the highest, right? So therefore, there will be sequential growth from 3Q and 4Q. The second question was around, actually, the third question was around the ex-US Alimera business and what opportunities that gives us. Look, we're working through these and, you know, we will share updates as they're meaningful and, you know, and as they develop. Nothing specific to report at this time.

Obviously, we're currently focused on, you know, closing the deal, integrating the asset, the company, and continuing the great work that Rick and team have been doing. So that's on the Alimera ex-US business and what opportunities that gives us. And then the third question on Established Brands. Yeah, look, you know, on Established Brands, we are continuing. This is an important component of our, you know, of our portfolio of businesses in that it is low working capital, high gross margin, and strong cash flow generation part of the business. So, we are working on a number of different things. Historically, as you know, for Established Brands, we expand the portfolio by doing business development deals for Established Brands, and we haven't done one since 2021, as we've-...

You know, found different pathways to growth, whether it's capturing the benefits of the supply tailwinds or trying innovative commercial strategies. And so we'll deploy some combination of these three to you know, to work through the plans for established brands, and we'll share more as we go along. But you know, going back to your core question, the current portfolio, year on year, you'll see some marginal decline in them in the absence of one of these moves being made. Yeah? Thank you.

Vamil Divan (Senior Research Analyst)

Okay. Thank you, Rituja.

Nikhil Lalwani (CEO)

Yeah.

Operator (participant)

Thank you. Our next question will come from Oren Livnat with H.C. Wainwright. Your line is now open.

Oren Livnat (Senior Equity Research Analyst)

Thanks. I have a few questions. I guess coincidentally, this morning, along with your announcement of the prefilled syringe development work, Mallinckrodt also announced the availability of their single-use prefilled auto-injector, because that was approved months back. Can you just tell us if you think that'll have any material impact on the competitive ACTH landscape? Like, are there certain indications where patient self-administration and auto-injector would be most relevant, and do you think that will have any, different market access or coverage than the current, you know, relative coverage of your two products now? And I have follow-ups. Thanks.

Nikhil Lalwani (CEO)

Sure. Good morning, Oren, and thank you for your question. Look, the competitor's device, from what we can tell, is aimed at, you know. The competitor's efforts as well as ANI's efforts are aimed at enhancing the convenience and addressing pain points, that, you know, a subset of patients have. So, for example, our prefilled syringe is used to address, you know, patients that have, you know, that can be helpful for patients in preparing and administering the Cortrophin Gel product, right, in a 1 mL prefilled syringe. And I think the way I would think about it is both the competitor and us are, you know, working on investing to increase the awareness and bring new options to patients, and therefore increase awareness of the category and drive growth in the category, right?

We lost a 1 mL vial, which was also appreciated by, as I mentioned earlier, by healthcare providers, some of whom, you know, who were naive to ACTH and initiated their usage of ACTH by trying with the 1 mL vial. So again, you know, different options for patients as well as the healthcare providers who treat them. And again, you know, I reiterate that overall, this is great for the category, given that there is a significant runway for the ACTH category, with the number of patients being treated today being significantly lower than the number of patients being treated many years ago.

Oren Livnat (Senior Equity Research Analyst)

Okay. I appreciate, you know, different strokes, different folks on products and needs across the landscape. I'm just curious if you think... I don't know what dose their auto-injector is for, if it's adjustable. You know, do you think there are any particular areas where that will have any impact, or do you think it's just steady as she goes with your growth trajectory?

Nikhil Lalwani (CEO)

Yeah, I think that, you know, that there are probably a subset of indications where a 1 mL or a 0.5 ml, you know, dose may be more convenient, right, to have than taking a 5 ml vial. And then, it is with this understanding itself that we, you know, we invested to bring the 1 mL vial, you know, many months ago, right? And now are going to bring a prefilled syringe. And, you know, you would expect that, the options from a dosing perspective, you'd expect that that will not create sort of meaningful differentiation between the two, between the two for now. So...

Oren Livnat (Senior Equity Research Analyst)

Okay. Regarding Alimera, you know, I know it hasn't closed yet, so, you know, I guess feel free to say no comment, but since you're clearly in the planning stages, you know, can you give us any color on potential synergies there? Maybe what sort of EBITDA margins you hope the business can contribute versus what I guess they are just reporting now. And I guess another question I have is, you know, you talk about these as rare disease. Obviously, DME is a much larger indication, but you're targeting a niche of it, and NIU is rare disease. Is there any opportunity to revisit pricing of these products?

It seems to me that, you know, the value is quite high there, and it's particularly in an orphan indication, and the differentiation of the product is not super expensive in my view. Do you have freedom to make changes there, or are you limited in the sort of IR, IRA framework that works better?

Nikhil Lalwani (CEO)

Yeah. Thank you. Thank you for your questions, Oren. I think that the sort of financial outlook for the deal remains what we shared at, when we announced the deal, in that from a synergies perspective, like we had announced in 2025, we expect to see about $10 million worth of synergies. And as we're doing the integration plan, we're seeing a runway into that, or there's—I guess there's no information that suggests that we couldn't capture that. And then from an, you know, again, from an EBITDA addition, we also gave guidance on, you know, how much adjusted EBITDA we expect to add. Steve, you can jump in, but I think it was in the $30 million-plus range that we, we talked about. You can help me with that, Steve.

So that's in terms of EBITDA addition in pro forma 2025. And that obviously is net of any additional Cortrophin sales and revenue synergies. That's just the additional EBITDA that we would get from the Alimera acquisition. And then the third part regarding, you know, pricing, again, we try to strike a balance between sharing information that is helpful as well as competitively sensitive. And, you know, we're in the integration planning stage, so, you know, allow us to come back to you with further information on that topic. But Steve, could you just tell us answer Oren's clarification regarding what we had said about additional EBITDA in 2025?

Steve Carey (CFO)

Yeah. Yeah, good morning, Oren. Yeah, and I think importantly, I would note, in terms of our gross margin profile, right, it's gonna be accretive to our gross margins. The Alimera products are in the, I think the low 80%. And in terms of EBITDA, you know, we would expect, in the end the mid-30s, as Nikhil mentioned.

Oren Livnat (Senior Equity Research Analyst)

Okay. And just lastly, I noticed in your GAAP SG&A, you had some litigation expense in there, and I'm just wondering if you're able to give us any color. Is that just on the disclosed CG Oncology dispute that we've known about, or is there potential Paragraph IV or 505(b)(2) IP-related stuff there? And I guess, should we hope to hear any news on the 505(b)(2) front in the foreseeable future? Thank you.

Steve Carey (CFO)

Yeah, in—I mean, in terms of, in terms of the incremental litigation, as you would expect, we're vigorously pursuing the defense of our rights in CG Oncology. And so that, that is an element in terms of the increased spend, that we have in litigation, year over year on a, a GAAP basis. That's—I think, you know, that's the only one that, that we would, you know, highlight, today to you. And then what was the second, part of your question? I'm sorry.

Oren Livnat (Senior Equity Research Analyst)

Yeah, I just wanted-

Nikhil Lalwani (CEO)

No, I got it. I can take that.

Steve Carey (CFO)

Yeah.

Nikhil Lalwani (CEO)

Yeah. So, Oren, on the 505(b)(2)s, we will share more when we have meaningful updates to, to give. But, you know, to your- there's no linkage between the litigation spend and the, the launch of 505(b)(2) products, but we will share updates on that when they're, they're material.

Oren Livnat (Senior Equity Research Analyst)

All right. Thanks so much. Congrats on another upside quarter.

Nikhil Lalwani (CEO)

Thank you, Oren.

Operator (participant)

Thank you. Our next question will come from Tim Chiang with Capital One. Your line is now open.

Tim Chiang (Senior Research Analyst)

Hey, thanks. Nikhil, you know, it seems like your generic segment revenues are actually exceeding your original targets. Can you just sort of comment on, you know, where you see expectations for growth from the generic segment in the back half of the year? Obviously, you've increased your guidance for rare disease and your total revenues, but so how, how do you sort of see your generic segment playing out in the back half?

Nikhil Lalwani (CEO)

Yeah, good morning, and thank you for your questions, Tim. Look, for our generics business, the performance is really coming on the back of three things, right? Number one is our new product, the cadence of new product launches, right? We've launched, as we talked about, four new products in the second quarter, three, two more already in the third quarter, so about 12 since the start of the year. That, combined with our operational excellence and being a reliable supplier with, you know, strong GMP status and U.S.-based manufacturing, enables us to deliver, as we had shared before, on a full year basis, high single-digit to low double-digit growth.

And then you can expect towards the—to your question, I think, sequential growth as we move to the subsequent quarters in 2025.

Tim Chiang (Senior Research Analyst)

And maybe just a follow-up. I mean, how, with you cited this new facility in New Jersey. You know, how much capacity are you actually going to be able to increase with that new facility?

Nikhil Lalwani (CEO)

Yeah, we are adding about 15 new manufacturing suites and a new QC lab, so that's a substantial increase in capacity. We've also upgraded the equipment and added higher, you know, higher batch size equipment in there. So I don't have a specific percentage, but it's a meaningful addition to the volume so that we can service out of the New Jersey site, and it will serve, you know, the growth of the our generics business for multiple years.

Tim Chiang (Senior Research Analyst)

Okay, great. Nice quarter. Thanks.

Nikhil Lalwani (CEO)

Thank you, Tim.

Operator (participant)

Thank you. It appears we have no further questions at this time, and I'll turn the program back over to Nikhil Lalwani for closing remarks.

Nikhil Lalwani (CEO)

Thank you again for your interest in ANI and for joining our call this morning. We really appreciate it, and we look forward to updating you on our progress as we move forward. Thank you.

Operator (participant)

Thank you, ladies and gentlemen. This concludes today's event. You may now disconnect.