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

Good morning, everyone. Welcome to ANI's earnings conference call for the third quarter 2019. My name is Art Przybyl, I am 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 third quarter 2019 revenues of $51.3 million and adjusted non-GAAP EBITDA of $19.8 million. For the 9 months ended September 30, 2019, ANI reported revenues of $158.6 million, a 10% increase, and adjusted non-GAAP EBITDA of $65.8 million, a 6% increase. Our 9-month reported revenues and adjusted non-GAAP EBITDA are both record amounts for ANI. Today, we provided revised 2019 net revenue guidance of $209 million to $212 million and adjusted non-GAAP EBITDA guidance of $84.7 million to $86.8 million, a direct result of additional competition and subsequent price erosion on several currently marketed generic products. Over the last several years, we have from time to time, experienced generic price erosion from new competitors. Now, as in the past, we believe we can overcome these competitive challenges and continue to grow and advance our business model. We remain committed to our core business model fundamentals. First and foremost, year-over-year growth in revenues and non-GAAP EBITDA. Since we became a public company in 2013, we have grown our annual revenues from $30.1 million and adjusted non-GAAP EBITDA from $7.5 million to today's numbers and have annually reported record revenues and adjusted non-GAAP EBITDA since 2013. We expect to…

Thank you, Art. Good morning to everyone on the line, and thank you for joining the call. While ANI's third quarter 2019 key financial metrics fell short of both internal and external expectations, our financial position and financial performance remain very strong. In fact, this is the 15th consecutive quarter that ANI has posted year-over-year top line sales growth. As we will discuss, we have a diversified portfolio, a strong balance sheet position, an extremely solid track record of business development and remain on track to file the most promising drug in the company's history with the FDA. With this morning's announcement, we are resetting our guidance for 2019. During the third quarter, we experienced competitive actions against our EEMT franchise and our EES franchise faces competition from 2 newly approved market entrants in the fourth quarter. These market realities have led us to recalibrate near-term expectations. As such, we are guiding to full year revenues of between $209 million to $212 million, reflecting fourth quarter revenues of between $50.4 million and $53.4 million. Full year non-GAAP adjusted EBITDA of between $84.7 million and $86.8 million, reflecting fourth quarter projections of $18.9 million to $21 million and full year non-GAAP adjusted earnings per diluted share of between $5.06 and $5.23. These reductions occurred during a period in which we are building momentum behind our late September 2019 launch of Vancomycin Oral Solution. This product provides an FDA-approved alternative to a market that is largely served by compounding pharmacies. It is not a typical AB-rated generic launch. And therefore, we currently anticipate revenues to ramp over time as we build market awareness and product adoption. In addition, we look forward to our upcoming December launch of Bretylium Tosylate Injection, our first marketed injectable product for use in emergency room settings. We…

Thank you, Steve. Nicole, we will now open the conference call to questions.

[Operator Instructions] Your first question comes from the line of Dana Flanders with Guggenheim.

I have 3 if that's okay. My first one is just -- can you maybe help us understand how we should think about generic gross margins trending into the back half of this year and into next year, given competition on some of your larger products? My second one is just on the durability of the portfolio in some of your top franchises. And I just ask because I believe EEMT is a desi product and Methazolamine (sic) [ Methazolamide ] has some API barriers. And so as we lap the impact of competition to some of these products, should we think about the risk of further competition is maybe not as severe? And then my third question, and I appreciate you haven't given 2020 guidance, but it sounded like you thought you had some nice pipeline opportunities to drive growth into next year. So curious if you could maybe just give us any initial thoughts on how we should think about top line growth in the generics business into next year, just given competition and what you have in the pipeline?

So, Dana, this is Art. I'll answer the last one first regarding 2020 guidance on some of our generic products. I'm going to actually punt on that question and -- not because I want to, but because I think Steve explained that a couple of the key products for us, Vancomycin Oral Solution and Bretylium as much as they represent potentially substantial revenue and margin opportunities, they are ramps. So unlike AB product that gets approved and you have a current market of $25 million and take some price erosion against that current market and say I'm going to capture 30% of that market, depending upon the level of competitors and sort of plug that in right away. You can't do that with these products. So these products are growing and will grow over time, obviously, with the Bretylium launch. And so we're going to -- I'm going take the opportunity to beg off on that question. And obviously, we'll be providing 2020 guidance for our generics and our entire business model in February at the fourth quarter earnings release. Additionally, we never obviously anticipate the -- any transaction -- accretive transaction opportunities. There are several out there. We are certainly involved in them. Needless to say, we don't need transactions. It has to be the right value for us and, obviously, the right value for the seller. And so we would never put that into our guidance. But we certainly -- potentially anticipate that some of -- there could be some upcoming transactions that could be included in that guidance as well. So stay tuned for 2020. In regards to the stability of our generic franchise, our EEMT product has always been relatively stable. The issue with that product is that there is a declining unit market and has…

Sure. Dana, thanks for the questions. Yes, I think your question was specifically about the gross margin profile of the generic business. I don't think we've publicly commented on the breakdown of our margins, but I can speak of in the aggregate. So clearly, some of the pricing contraction will have a modest negative effect on the gross margin profile. But I think given the diversity of our portfolio and the numbers of products and with a few of the launches that we've been speaking of, we're talking about very modest numbers somewhere in, I don't know, directionally, 2 to 3 points on the margin line, something in that range.

Your next question is from the line of Elliot Wilbur with Raymond James.

Art, can you just talk a little bit about sort of capital deployment strategy. Obviously, the company has done quite a few transactions over the years, and there's a lot of assets that are emerging for sale or remain for sale. But just from your perspective, where do you see the best relative values if you think about the 3 different buckets that you've transacted at in the past, branded assets, generic products or -- and portfolios or potentially even manufacturing or dosage-form platforms?

Sure. So we continue to pursue mature brands. If you look at our mature brand -- and why do we do that? I mean typically, you've seen us buy those at, I think, relatively good reasonable value-add in multiples. We've been successful, as you know, many times launching AGs against some of those mature brands and putting together some programs that maybe stabilize the decline in mature brands in terms of market units as they -- as it happens over time. But if you look at our mature brand portfolio, it's certainly grown over the years. And it's -- I would say, it's not an annuity, but it's certainly more so of an annuity than the cliff that you can experience sometimes amongst your generic products. So for us, mature brands has always represented cash flow and diversification away from risk associated with our generic product portfolio, okay? And we've always -- we've taken the same path in our generic product portfolio. Like many other generic companies, a small percentage of your generic products drives a large percentage of your revenues in your portfolio. And that's just a function, step function of competition. We continue to pursue accretive generic transactions as well. We have to be careful with those types of transactions. And they have to have a crystal ball approach to what can happen to some of those products. As you know, many of the generic products that we have acquired have been discontinued. And we've always sort of pluck the nuggets out of those acquired product portfolios, advanced them to the marketplace and done very, very well. I mean, yes, regardless of the fact that competition has hit that market, it's been a great product for us for 3 years running. And that's the nature of generics, take…

Okay. And then I want to ask you a question around Cortrophin Gel as well. Upon submission of the application in March and assuming that FDA does what it's supposed to do, and you were the recipient of a positive review and approval within the statutory timeline, how quickly do you think you could actually go-to-market in terms of actual product sales, if in fact, you were to receive an approval, I guess, would be in the...

If we received approval after a 4-month PDUFA date, we would launch on 1 day after the approval. We would launch the next step. We'll be ready to launch. So when Steve talks about the inventory, the fact that we're starting to build inventories, you're going to see over the course of next year and beginning in the fourth quarter -- well, beginning in the third quarter, but in the fourth quarter, substantial inventory builds, which will be associated with stockpiling of, we'll call it the gross raw material to pituitaries stockpiling active pharmaceutical ingredient and beginning to actually have finished dosage-form inventory on hand, ready to sell on the day of approval or the day after approval.

Okay. And as part of the application review process, are you anticipating actual inspections of both the API facility and the finished dosage-form plant? I can't remember if we've discussed this previously.

Okay. Yes, we are. We make the assumption that as part of the supplemental review that both our API and finished dosage-form drug manufacturers will be inspected.

Okay. And just one last question on the recent announcement around the Bretylium opportunity, I think you've characterized that around -- market size around 360,000 files, but given that the product hasn't been on the market for a very long time, I have no idea sort of what price point for that asset could be. You haven't launched it yet, so I'm assuming you don't want to say a whole lot, but just given that I would assume it would be a premium product to what's currently being used, which I think is injectable lidocaine. But just any color you could share maybe outside of just the volume commentary around that product would be helpful.

Well, I agree with you. We see the launch of the product as premium product, understanding the effect of product launches like this, in fact, many of them have to go through P&T committees in a hospital setting, but understanding that this is a drug that can be -- 2 of these vials can be placed on, for sake of argument, every crash cart out there. I think Rob talked about -- we've talked about a number of 180,000 crash carts and 2 per crash cart. But yes, we would -- we will weigh all of that as we're pricing the product, but since we would be the only one on the market, yes, we would view this as premium pricing within the confines of wanting this to not be -- have any effect on a decision associated with repurchasing this for crash carts as it -- with that decision going through P&T committees.

And the final question will come from the line of Brandon Folkes with Cantor Fitzgerald.

So you talked about launching Cortrophin on day 1 post-approval, but correct me if I'm wrong here. So given that it's an sNDA, it's obviously not going to be substitutable for Acthar. So can you just help us think about your go-to-market strategy on day 1 to get prescribers writing your product? And then any comment you may be willing to give around the potential for your competitor to bring in an auto-injector of the Cortrophin product?

So let's answer the first question. It's a bit premature to speak to our go-to-market strategies. I'll give you some macro thoughts that I've always expressed. And yes, the product -- you're right, the product is not -- we'll potentially have or have more than those same label indications as the competitive product. So first and foremost, we will give at some point in time a much more detailed, deeper dive into our go-to-market strategy for Cortrophin. I could tell you that part of that go-to-market strategy will begin, in earnest, well in advance of the anticipated FDA approval for the product. And I will continue to reiterate from my perspective that a product like this, a specialty pharmacy-distributed-driven product through a small group of prescribing physicians and obviously, the payers that are supporting this, we remain firmly in the camp that market share units and revenues will be driven, first and foremost, as most drug products are driven today that are not monopolistic, that economics will rule the day. And we continue to believe that, okay? So there'll be more to come on our go-to-market strategy with Cortrophin. And the second part of your question, Brandon, I'm sorry, was...

Any thoughts on the competitor to talk about bringing auto-injector.

The auto-injector, I'm sorry. So look, the auto-injector, I suspect that they could potentially launch an auto-injector, okay? And I think our competitor is talking about that. I guess you have to ask yourself how much an auto-injector delivery system will drive or maintain market share for a drug that's selling for, I believe, over $50,000 a vial in the face of what potentially could be a 30% to 50% discount to that price. And I'll let you answer that question. And again, I think it falls back on, economics rules the day.

We have no further audio questions.

Okay. Then I'd like to thank everybody for attending ANI's third quarter earnings conference call today. Have a great afternoon. Bye-bye.

This concludes ANI's Third Quarter 2019 Earnings Call. You may now disconnect your lines at this time, and have a wonderful day.