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EP

EAGLE PHARMACEUTICALS, INC. (EGRX)·Q2 2023 Earnings Summary

Executive Summary

  • Q2 2023 revenue was $64.6M, GAAP EPS $0.39, and adjusted non-GAAP EPS $1.18; gross margin improved to 74% from 68% in Q2 2022 as mix shifted toward higher-margin oncology and PEMFEXY royalty buydown benefits .
  • Oncology strength persisted: oncology gross profit rose to $41.9M (80% margin), with adjusted oncology gross profit at $43.8M (84% margin), driven by PEMFEXY share gains and resilient BENDEKA/BELRAPZO despite new competition .
  • Hospital portfolio relaunch advanced: Barhemsys + Byfavo sales reached $1.2M, ~30% sequential growth for two consecutive quarters, with an estimated 19,000 patients dosed and 275 facilities purchasing; management expects the growth trajectory to continue .
  • Guidance raised and reiterated: adjusted non-GAAP EBITDA to $78.0–$84.0M and adjusted non-GAAP EPS to $4.40–$4.70; share repurchases resumed in July 2023, framing capital return and confidence as stock reaction catalysts .
  • Management emphasized fourth consecutive “beat versus consensus,” stronger ex-amortization margins, and a plan to leverage existing commercial infrastructure for accretive product additions via R&D or acquisition .

What Went Well and What Went Wrong

What Went Well

  • Oncology margins expanded meaningfully: “Gross profit, excluding amortization expense in our oncology business was $43.8M…representing…84% [margin],” highlighting durable profitability even as mix evolves .
  • PEMFEXY market share and profitability improved: share in non-340B pemetrexed rose to ~21% leaving Q2; PEMFEXY royalty buydown increased profitability and gross margin, a “great decision” in hindsight per CFO .
  • Hospital relaunch momentum: Barhemsys/Byfavo sales up ~30% sequential for two quarters, with 19,000 patients dosed; CEO: “Our expectation is that this growth rate…is going to continue into the foreseeable future” .

What Went Wrong

  • YoY revenue declined: total revenue fell to $64.6M vs $74.1M in Q2 2022; royalty revenue decreased to $21.7M vs $24.9M prior year, reflecting bendamustine royalty changes and Japan mix .
  • Adjusted profitability compressed YoY: adjusted non-GAAP EPS declined to $1.18 from $1.56 and adjusted EBITDA to $20.7M from $25.9M, given increased SG&A to support expanded sales teams and hospital relaunch .
  • BENDEKA/BELRAPZO market share moderated: combined share was ~84% in Q2 2023 vs ~88–90% historically, reflecting generic market formation albeit with continued strength .

Financial Results

Quarterly Trend (oldest → newest)

MetricQ4 2022Q1 2023Q2 2023
Total Revenue ($USD Millions)$60.7 $66.3 $64.6
GAAP EPS ($)$0.62 diluted $0.44 diluted $0.39 diluted
Adjusted non-GAAP EPS ($)$1.10 diluted $1.26 diluted $1.18 diluted
Gross Margin (%)67% 74% 74%
Adjusted EBITDA ($USD Millions)$20.0 $22.3 $20.7

YoY Q2 Comparison

MetricQ2 2022Q2 2023
Total Revenue ($USD Millions)$74.1 $64.6
GAAP EPS ($)$(0.74) diluted $0.39 diluted
Adjusted non-GAAP EPS ($)$1.56 diluted $1.18 diluted
Gross Margin (%)68% 74%
Adjusted EBITDA ($USD Millions)$25.9 $20.7

Segment Breakdown – Oncology (Q2)

MetricQ2 2022Q2 2023
PEMFEXY Product Sales ($USD Millions)$16.5 $19.4
BELRAPZO Product Sales ($USD Millions)$8.1 $6.8
BENDEKA Product Sales ($USD Millions)$3.5 $3.8
TREAKISYM Product Sales ($USD Millions)$0.8 $0.7
Oncology Product Sales, net ($USD Millions)$28.9 $30.8
Oncology Royalty Revenue ($USD Millions)$24.9 $21.7
Oncology Total Revenue ($USD Millions)$53.9 $52.4
Oncology Gross Profit ($USD Millions)$38.7 $41.9
Adjusted Oncology Gross Profit ($USD Millions)$38.7 $43.8

KPIs (Q2 2023)

KPIQ2 2023
Barhemsys + Byfavo Sales ($USD Millions)$1.2
Estimated Patients Dosed (Barhemsys/Byfavo)19,000
Facilities Purchasing (Barhemsys/Byfavo)275
BENDEKA + BELRAPZO U.S. Bendamustine Share~84%
Gross Margin ex-amortization (%, company)83% (Q2)
Working Capital ($USD Millions)$100.6 (as of 6/30/23)

Guidance Changes

MetricPeriodPrevious Guidance (Q1 2023)Current Guidance (Q2 2023)Change
Adjusted non-GAAP EBITDA ($USD Millions)FY 2023$74.0–$80.0 $78.0–$84.0 Raised
Adjusted non-GAAP EPS ($)FY 2023$4.20–$4.53 $4.40–$4.70 Raised
Adjusted non-GAAP R&D Expense ($USD Millions)FY 2023$41.0–$45.0 $41.0–$45.0 Maintained
Adjusted non-GAAP SG&A Expense ($USD Millions)FY 2023$86.0–$90.0 $86.0–$90.0 Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2022 and Q1 2023)Current Period (Q2 2023)Trend
PEMFEXY market share and profitabilityExited Q4 2022 at ~6% share; targeted ~12% by end Q1; bought down royalties to improve margin Non-340B share ~21% leaving Q2; receivables cadence normal; royalty buydown continues to lift GM Increasing share and margin
Bendamustine franchise resilience~88–90% share post competition; aim to retain ~75% of gross profit in 2023 ~84% share in Q2; oncology gross profit up YoY Slight share moderation, strong profitability
Hospital relaunch (Barhemsys/Byfavo)32% sequential growth in Q1; BYFAVO J-code effective 7/1/23 ~30% sequential growth for two quarters; 19k patients; 275 facilities; management expects continued growth Accelerating adoption
R&D pipeline (CAL02)IND accepted; Phase 2 to begin early 2023 Phase 2 underway; QIDP + Fast Track; interim around H1 2024 Advancing, de-risking
EA-114 (breast cancer)Limited detail in prior quartersType C FDA meeting scheduled Aug 2023 Regulatory engagement
Capital allocation (M&A, buybacks)Working with lenders to enable accretive acquisition Guidance raised; buybacks resumed in July Active deployment

Management Commentary

  • “We delivered a strong second quarter with impressive earnings and revenue…this is now the fourth consecutive quarter in which we have beaten consensus estimates…we recently raised our full year guidance and in July resumed repurchases” – CEO Scott Tarriff .
  • “Gross margin, excluding amortization expense was 83% in Q2 2023 compared to 70% in the prior year quarter,” aided by expiration of bendamustine royalties and PEMFEXY royalty buydown .
  • “We have more than tripled our market share of the non-340B pemetrexed market to approximately 21% leaving Q2 up from 6% at the end of last year,” with receivables trends normalizing .
  • “Barhemsys and Byfavo…growth has been about 30% quarter over consecutive quarter since the relaunch…we anticipate a similar growth rate to continue” .

Q&A Highlights

  • Seasonality and margins: RYANODEX sales cadence tied to expiry cycles; gross margin expansion driven by bendamustine royalty expiry and PEMFEXY royalty buydown (partly offset by new amortization on acquired intangibles) .
  • Hospital franchise outlook: Management expects continued steady growth, with increasing facility penetration and patient adoption making it a meaningful contributor over 1–3 years .
  • Stock disconnect vs fundamentals: Company emphasized strong 1.5-year performance, rising margins, and selective reinvestment in R&D and commercial infrastructure; sees opportunity to add products with minimal incremental expense .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for EGRX were unavailable via our data interface at the time of analysis; therefore, explicit “vs consensus” comparisons are not provided. Management stated Q2 marked the fourth consecutive quarter of beating consensus estimates .
  • With raised 2023 guidance (EPS and EBITDA), Street models may need upward revision to reflect stronger ex-amortization margins, PEMFEXY share gains, and hospital relaunch momentum .

Key Takeaways for Investors

  • Mix and margin: Gross margin improved to 74% (83% ex-amortization) on PEMFEXY royalty buydown and bendamustine royalty expiry; oncology margins are structurally high, supporting cash generation .
  • Oncology durability: Despite competitive entry, BENDEKA/BELRAPZO retain ~84% share, and oncology gross profit increased; PEMFEXY share gains provide incremental growth .
  • Hospital relaunch is working: Barhemsys/Byfavo adoption and sequential growth (~30%) suggest a building revenue stream with sticky hospital use-cases post J-code .
  • Guidance and capital return: Raised FY23 EPS/EBITDA guidance and resumed buybacks; near-term trading may react to continued margin expansion, hospital momentum, and acquisition optionality .
  • Pipeline optionality: CAL02 secured QIDP/Fast Track with Phase 2 underway and interim around H1 2024; EA-114 Type C meeting imminent, adding potential medium-term catalysts .
  • Execution consistency: Management underscored four consecutive “beats” and robust working capital ($100.6M), positioning the company to add products with minimal incremental SG&A .
  • Risk monitor: YoY revenue and adjusted profitability down vs Q2 2022; maintain vigilance on bendamustine share erosion pace and hospital adoption ramp sustainability .