ANIP - ANI Pharma: Slow And Steady Revenue Generator

2023-09-12 06:36:06 ET

Summary

• ANI Pharmaceuticals is a revenue-generating pharmaceutical manufacturer with a low market cap.
• The company's rare disease segment, led by its Purified Cortrophin Gel product, is expected to be its primary growth driver.
• ANI Pharmaceuticals reported a 58% increase in net quarterly revenues and raised its full-year 2023 guidance.

ANI Pharmaceuticals ( ANIP ) is not the type of company I usually cover, but it is a solid-looking, revenue-generating, fast-paced, active pharmaceutical manufacturer, so I thought I will diversify my interests a little, and cover it. ANIP "develops, manufactures, and markets branded and generic prescription pharmaceuticals in the United States and Canada," including controlled substances for CNS medicines, oncology products, steroids, and injectables. It also does contract manufacturing. The company has been in business for over twenty years, and on NASDAQ for a decade. Its development has been immense and varied. Despite that, it has a low market cap, and that is puzzling.

ANIP's facilities include both solid and liquid dose manufacturing and packaging. The company manufactures over 111 commercial products consisting of capsules, tablets, suspensions, enemas, injections, topical and powder forms. Two years ago, it acquired Novitium, a US/NJ and India-based pharma company with a broad product portfolio. In the same year, they received FDA approval for Purified Cortrophin Gel indicated for certain autoimmune disorders. With the launch of this rare disease product, the company stepped in to launch its rare disease business.

The company acquired the NDA for this product from Merck Sharpe and Dohme in 2016 for $75mn and spent another $100mn and four years reestablishing the product. This was first approved in 1954 and had 54 labeled indications at peak.

This is the company's first branded product, and thus a very big deal. It competes with Mallinckrodt Pharmaceuticals' Acthar Gel, which has been the mainstay corticotropin injection for many decades. These medicines target multiple sclerosis exacerbations, infantile spasms, and certain autoimmune and inflammatory conditions. The total market is approximately $1bn (2020 figures from the company). In the 3rd year of launch, the company has guided for ~$100mn in revenues from this product.

In the coming years, the company thinks that the rare disease segment will be its primary growth driver. As they said in their recent earnings call :

Our goal is to scale up our Rare Disease business with the successful launch of our lead asset, Purified Cortrophin Gel, and to add assets that leverage the Rare Disease infrastructure we have built. Revenues for Cortrophin Gel totaled $24.3 million in the first quarter, an increase -- an increase of 138% over the prior year and up 49% compared to the first quarter.

The acquisition of Novitium last year vastly improved their generic business. This business now consists of NDAs for marketed generics like Atacand, Atacand HCT, Arimidex, Casodex, Lithobid, Vancocin, Inderal LA, Inderal XL, InnoPran XL, Oxistat, Veregen, and Pandel. The company saw a 45% year-over-year growth, reaching $92.2 million in the second quarter, for its generics business. There were also four new ANDAs approved. Just last month, ANI Pharmaceuticals announced the approval and launch of its Estradiol Gel 0.1% product in the US; Estradiol is a generic version of the hot flashes therapy Divigel. Two other generics were approved in May, seizure therapy Celontin and osteoporosis drug RLD Fosamax Oral Solution.

This past quarter, the company reported net quarterly revenues of $116.5 million. This is a 58% increase over the previous year, as well as a 9% increase from the first quarter. Not just revenues, earnings, too, made a new record for the company, with adjusted non-GAAP EBITDA reaching $34.1mn, which is more than double over last year's same quarter.

As a result of an outstanding quarter, the company raised its full-year 2023 guidance. Total guided revenue is now $425mn, earnings are $115mn to $125mn, and EPS is between $3.62 to $4.11. This improves the PE by a small factor, given the current share price of ~$60.

The company also did a small equity raise of some $80mn. As the company noted:

Obviously, we did the equity raise earlier this year with the intent of fueling this with expansion and expanding the scale and scope of our Rare Disease business.

Thus, the additional funds are meant for acquiring new rare disease assets given the highly successful Cortrophin franchise.

Financials

ANIP has a market cap of $1.17bn and a cash balance of $162mn. Research and development expenses were $7.4 million in the second quarter of 2023, while general and administrative expenses increased by 21% to $38.8 million. Cost of sales excluding depreciation and amortization increased by $7 million to $42.3 million. Total operating expenses were $104.1 million. Extrapolating that with their revenues, they have a long cash runway.

About 8% of the stock is held by retailers. Nearly 80% is in the hands of institutions. keyholders are BlackRock, Meridien, and ESSJAY LLC. Insiders have been selling stock recently, although there were a number of purchases earlier.

Bottom Line

ANIP is a "slow grower" but it is also a steady revenue generator. The company is making efforts to rebrand itself in various ways, through smart acquisitions and other means. I think ANIP is worth watching.

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