ANI Pharmaceuticals, Inc. ($ANIP)

Okay. Good afternoon, everyone. Thank you for joining us. For our next presentation, we're excited to have ANI Pharmaceuticals here with us. Representing the company to my right is Nikhil Lalwani, who's the President and Chief Executive Officer of the company; and to his right, Stephen Carey is the Chief Financial Officer of the company. For those of you who don't know me, I'll just quickly introduce myself. My name is Glen Santangelo. I'm the analyst at Barclays responsible for the specialty pharmaceuticals sector, among a few other things. But again, we're very happy to have you here, Nikhil and Stephen. So thank you guys very much for taking the time out of your schedules.

Thank you, Glen, and thank you for having me.

Okay. Excellent. So why don't we just sort of dive right into it? I mean, 2025 was just a great year for the company. And I finally think that we can sort of reposition you no longer as a generics company that has rare disease assets. We're now going to call you a rare disease company that also happens to have a generics business as you cross that 50% threshold. So congratulations on that milestone. Maybe a good place to start is if you just want to sort of level set everybody and talk about 2025 and the momentum you had sort of into the end of the year that set the stage for 2026 that will be a good place -- a good framework for us to dive in right after that.

Sure. Yes. Thank you, Glen, and thank you for acknowledging our transformation into a leading rare disease company. 2025 was important for the acceleration of that transformation into a leading rare disease company. As a company overall, we grew 4% on the top line and 47% on the EBITDA -- adjusted non-GAAP EBITDA line. The growth was fueled primarily by our rare disease business and within rare disease, Cortrophin, our lead asset, where we grew 75% to 76% to deliver $347 million (sic) [ $348 million ] in revenues in 2025. And then our generics business, which has played an important role in terms of providing EBITDA and cash flows also grew 28% to $384 million and gave us strong momentum going into 2026. As we head into '26, we believe the acceleration of ANI into a rare disease company remains our top priority. We have 60% of our revenues coming from Rare Disease with Cortrophin growing to $540 million to $575 million from the $347 million we delivered in 2025. And the generics business with a significant outperformance in '25, staying flattish in 2026 to deliver an overall total company revenues of excess of $1 billion to $1.055 billion to $1.115 billion and the adjusted non-GAAP EBITDA line to $275 million to $290 million. Importantly, as we're driving growth, we're also balancing profitability. So we're growing 19% to 26% on the top line and 20% to 26% on the adjusted non-GAAP EBITDA.

Okay. Excellent. Well, thank you for all that background. I think it's sort of very helpful. And congrats on everything you achieved. I mean to see the 44% revenue and even have a little bit of margin leverage on top of that was incredible. Just looking at the stock, I mean, it's up a fair amount over the last sort of 12 to 14 months since the beginning of last year. I would have argued maybe even it should have been up a little bit more. But still, I mean, the market, I think, is slowly coming around. So it's great to see. And maybe that's a -- let's start with Cortrophin Gel because I think that's clearly top of mind for everybody. And I'm trying to come back to that comment on the stock performance versus the revenue growth and the operating profit, growth that we saw. I think one of the concerns that we hear, which maybe is a good place to start is just talking about the durability of this product and the growth. And you laid out the guidance for 2026, which is helpful. So clearly, you're confident. But how would you sort of explain to people to sort of give them confidence that Cortrophin Gel has a long runway here and that 2025 was an aberration. What gives you sort of that confidence in the growth?

Thank you for that question. We believe very strongly in the robust multiyear growth potential for Cortrophin. And it really starts with the patients. We believe the addressable patient population is significantly underpenetrated. If I take one indication as an example, acute gouty arthritis flares, there are 9.9 million patients in the country with that indication. However, only 36% receive treatment per year. Of those, only 8% receive injectable treatments because their flares are so acute. So our addressable patient population is 285,000 patients. That's what we think is addressable. So a very small patient population amongst the much larger incidents. And we're significantly underpenetrated, right? We're less than 10,000 patients for treating that indication versus a 285,000 potential addressable market. So the runway, and this is true in -- there's a slide in our deck that covers it across multiple sclerosis, rheumatoid arthritis, nephrotic syndrome, sarcoidosis, across multiple indications. And it's across the category between us and the competitor ACTH significantly underpenetrates the addressable market across indications. So that's really the key opportunity, the key driver of growth, right? Now we are able to reach these patients. And that's proven by over 50% of our prescribers since we launched are prescribers that were naive to ACTH. They've never written an ACTH drug before. So we're able to reach these physicians and consequently reach this larger patient population by reaching these patients. When you think about the market, right, since we've launched the -- in the last market, the deceleration slowed first. And then last 2 years, it's grown 27% and 45%, respectively, with -- so really, for us, this is a question about market growth, significant addressable market and both it's beneficial to actually have 2 players out there that are trying to increase the share of voice. So this is an alternate treatment option for the appropriate patients in need. On durability, a very important part is additional competition, right? What is the risk of additional competition? And look, the way we see it, this is a very -- this tough category to genericize. This is an animal-derived, porcine derived, and it's then taken through a complex manufacturing process. There's a very large number of peptides that are immersed in a gel to make an exact copy of this and show equivalents is very complex. There are companies that have tried in the past and not been successful because it's a tough drug to genericize. When you think about someone going -- starting from scratch and trying to develop a new drug application, you have to go one indication at a time, run multiple studies and get approvals one indication at a time. So we believe there's a long multiyear growth opportunity. And so there's growth and durability in this, in Cortrophin.

Maybe I just want to come back to one thing you just talked about is the ACTH market. You sort of talked about the deceleration earlier years ago. And when you launched this product, I think, in 2022, you sort of reaccelerated the growth. Talk about -- give us a little bit of history here in terms of the deceleration of that market, what the issues were in the past. And clearly, you've had a positive impact. But Talk about how big this market was prior to those Acthar Gel issues and the market decline? And what's your view on the TAM of the market today versus maybe what we would have thought 5 years ago?

Sure. So...

And I just asked because maybe that it's the lack of confidence given the history in this market that maybe makes people -- I don't want to say, use the word skeptical, but right, it certainly is on people's minds.

Sure. Yes. The market was -- so the ACTH market was $1.2 billion in 2017. And then it reduced over time to about $600 million in 2021. And we believe that the reduction in sales happened for a number of reasons that were exogenous external to the efficacy of the ACTH product and that involved a competitor having litigations, bankruptcy, other issues that didn't really have to do with does an ACTH product help appropriate patients. We've launched in January of 2022. And since we've launched, the -- as I said, that the market has reduced the degrowth and then really returned to growth. And if you look at where we are exiting '25, the market is basically back at the previous peak, right? If you take the 4Q run rate or even the total year sales, we're essentially back at the previous peak. But we're just getting started because the addressable patient population is much, much larger, right? And if you think of where ANI's growth has come from, this has not come from share capture. A big portion of our growth has come from reaching new patients. 50% of our prescribers were naive to ACTH. It probably not even heard of the category before we launched. In addition, 15% of our volume comes from acute gouty arthritis players in an indication that was the competitor does not have and did not have in that previous peak. So we feel very confident of the ability to drive significant market growth by reaching the appropriate patients in need.

And can you talk about some of the differences between yourself and your key competitor in terms of -- and you talked about the indication is a little bit different, but if you could just sort of elaborate a little bit on the differences between the products.

Right. So both products are porcine-derived. However, there's a difference formulation and different composition of peptides that are in their product as well as our product. There's also a complex and different manufacturing process for the active ingredient as well as the -- for the API as well as for the finished dose formulation. So the products are different. They're from -- they're in the ACTH category, right? They have different indications. So there's a number of overlapping indications that both products have, but they have infantile spasms that we don't, and we have a number of different indications. But from a commercialization perspective, acute gouty arthritis flares is the main indication that we've been commercializing that or focusing on for commercialization that they don't have.

All right. Stephen, maybe just a couple of quick financial questions before we leave Cortrophin. You talked about expanding the sales reps by 90 in the middle of the year, right? So that's going to add some incremental operating expenses and maybe drive some accelerated growth in the second half versus the first half. But also on the conference call, you sort of laid out a case that maybe some of the insurance verifications might be happening in January a little bit slower. And so that when we think about the first quarter, maybe it might be a little bit lighter relative to what we would normally expect. So if you could just sort of walk people through the cadence of 2026 and how we should think about that 55% to 65% growth that you expect for the year, how that may play out from a cadence perspective?

Yes, sure, absolutely. And thanks for the question. I think of the Cortrophin revenue cadence really in 3 different layers, Glen. right? If you look at 2025, given the growth profile that Nikhil has been talking about, we had sequential growth throughout 2025. And the base of the 2026 forecast is for that continued acceleration, right? All of the resources we had behind the product leaving the 2025 year are still in a growth mode and driving further utilization of the product. And so the base layer is continued evolution of growth in the product. And with the always present for Rare Disease and for Cortrophin, a sequential step down Q1 versus Q4 of the prior year due to insurance reverifications. That's the base of the forecast. The second layer of the forecast is the 90-person additional employees that we're putting behind the gouty arthritis flares indication. And that team is being recruited today and will be in the market detailing the product by midyear. And so a step-up in revenues in the third and fourth quarter as that team comes online and starts to become productive. And the evolution of that team will continue into 2027 as they become more efficient. Those are the 2 core principles behind the guide. And then what we did on the year-end call, just to give external constituents further insight is we did talk about due to the increased volume of reverifications that need to occur, that we're seeing that taking a little bit longer in January. And so we see a shift of certain that volume, a slight shift of that out of January into later months. And so we talked about the first quarter being down.

Doesn't go away.

It doesn't go away. It just shifts back by a month or so. And therefore, right, we just gave a little bit more specificity to the first quarter.

Okay. All right. Can we shift gears and talk about your other rare disease asset, ILUVIEN? It's been about 18 months since you acquired the product. I'm just trying to back up in my mind. A lot has happened with this product. And so when you rewind -- could you just remind us the rationale for the deal, the changes you made to the label? And with a lot of those changes sort of now behind us, obviously, do you think there'll be greater focus on sort of driving that commercial success in fiscal '25, if I want to label '25 as that sort of transitional year for the product?

Sure. Yes. Thank you. The acquisition of Alimera was anchored in picking a therapeutic area or specialty that was synergistic with Cortrophin from a sales force perspective. So we picked ophthalmology as a key therapeutic area. And so we -- and then what we did is we expanded the sales force. We got about 31 reps from the Alimera acquisition. We added another 14 reps. And now we have about 45 reps that are out there promoting both Cortrophin and ILUVIEN to retina specialists as well as ophthalmologists. So that's the industrial logic behind the deal. As you rightly pointed out that 2025 for the retina assets, ILUVIEN was a reset year. As we head into '26, we have momentum from a number of the commercial and strategic initiatives that we put in place. We have a strengthened commercial team. We had the successful deployment of initiatives from a marketing and sort of commercial initiatives to back the strengthened commercial team. We also have the release of the NEW DAY clinical study results. We're using that NEW DAY study results to -- we believe the results of that study will support the use of ILUVIEN earlier in the treatment of DME. So that's been a positive that will carry into 2026. We had some challenges with funding support for Medicare patients that don't have adequate co-pay funding. While there is no -- none of that funding return baked into our guidance, what we have done and have had success with in '25 is getting some of the leading retina practices to use alternate approaches for patients that have the Part D benefit to use that benefit to get access to ILUVIEN. And then an important part you mentioned, which is ILUVIEN is now indicated for both diabetic macular edema as well as chronic noninfectious uveitis in the posterior segment of the eye. So we merged the label of YUTIQ, which was the original product into ILUVIEN and now just have one product that is with more detailing. And that's made it simpler for the physician offices as they deal with only one product for both indications as well as in terms of maintaining inventory since this is a product that...

Commercially, is that playing out as you expected, hopefully?

It is playing out as we expected. And then obviously, within uveitis, steroids are the standard of care. And if you think of a lot of the innovation that's happening in the retina area, it's around reduced treatment burden and increasing the duration of care. And ILUVIEN meets both those criteria by being a long-acting intravitreal injection, which microdoses fluocinolone acetonide into the eye over a 3-year period.

Okay. Well, we got about 5 minutes left, and I got a lot to cover. So we're going to start doing a little rapid fire. So I'm going to shift gears and I'm going to shift to the generics business. You came off a great 2025. You said the business grew 28%, even the exit rate was very strong in the fourth quarter. But let's think about that year in the first half of the year, you had Prucalopride, right, on 180-day exclusivity that probably benefited that. And then you had the partner launch in the second half of 2025, which may also be contributing to the growth. Are we setting ourselves up for a very difficult comp in 2026? Like how should we think about that sort of growth year-over-year, just sort of given those events that benefited 2025?

Sure. So historically, our generics business, we've oriented to high single-digit, low double-digit type growth. But we've outperformed that expectation every year. We've essentially, if you look since '21, we've grown at a 25% CAGR. We obviously had a very strong 2025. The anchors or drivers of that strong growth are a superior R&D capabilities and execution, supported by strong operational execution and a U.S.-based manufacturing footprint. All of these trends will carry into 2026. We invest high single-digit percentage of our generic sales into R&D, and that allows us to launch 10 to 15 new products annually, which will support in '26, the performance in '26 -- and our orientation for this year is for the generics business to stay relatively flat to last year's significant overperformance of 28% growth.

Okay. Perfect. All right. Just moving on the established brands. It's only 4% of your revenue, so we're just going to spend 20 seconds here. You basically grew another 16% in the fourth quarter. Could you talk about the durability of the growth there? Is it even worth having a conversation? I mean, help us think how you've been able to sort of continue. And I know there were some items in there that explain that growth, but...

Yes. Look, I think that from a capital allocation perspective, Rare Disease is our priority one. Generics and the brands business creates a virtuous cycle of growth that allows us to take the EBITDA and cash flows from these businesses and it reinvested into driving the growth of our Rare Disease business. And so we'll continue to capture opportunities that we get with the brands business, but it's sort of -- we have to be disciplined for capital allocation and make sure that we support rare disease. We support the growth of generics with investment in generics R&D and then let brands just play a role in terms of generating EBITDA and cash flow for the Rare Disease business.

Steve, shifting gears to the gross margin. We got a big mix shift going on at the company, and it's not always easy for us to see the gross margin evolve the different components of your business. Maybe you can sort of help us think through that a little bit, how the gross margin should trend. And we know you have the royalty that's now stepped up in the highest tier with respect to Cortrophin. So help us think about that gross margin progression '25 through '27 just sort of given the mix shift that's sort of transpiring?

Yes, sure. So when we think about our 3 businesses, we talk about our highest gross margin business is the legacy brands business that Nikhil just spoke about. On the other end of the spectrum, the generics business. And in between is the Rare Disease business, largely due to the royalty to Merck. As we think about evolution going forward, first of all, '25 to '26 is influenced by those mix changes, but also a big influence is the nonrecurrence of that Prucalopride 180-day launch in the first half of the year. So that's a big year-over-year item. And as we think about things developing going forward, as rare disease sales continue to advance and become a bigger portion of the overall company revenues, that will be accretive to the gross margin line.

I know we're not way too early to talk about 2027. But as we get through these comp issues in 2026, we get through the sales force expansion, hopefully, we start to see that leverage drop in 2027 on the gross margin side and on the EBITDA side, right, as you annualize those operating expenses that you plan to incrementally add in 2026. Is that like a fair characterization?

Yes, that's a fair characterization. And as Nikhil said -- touch earlier, right, as we're driving the business for growth and the mid- to long-term success of the business, we're very thoughtful in terms of balancing out the profitability profile.

Okay. Can we talk about the balance sheet? The leverage is back down to 2x. Yes, that's solid free cash flow. What's the thought process around BD at this point, appreciating you clearly had a lot on your plate the last 18 months around the Alimera deal, certainly have no shortage of things going on. But how should we think about the BD strategy at this point given where the balance sheet sits?

Sure. So we want -- we have significant growth opportunities organically, both with rare disease as well as generics and long sustainable growth sorry, durable and high-growth opportunities organically. So we want to make sure that the deal that we do, deals that we do sort of add to that. The focus is on increasing scope and scale of our Rare Disease business. The near-term focus is on commercial assets, right, assets that do not have clinical risk associated with it. And I think the 2 types of assets, right? The ones that are synergistic with Cortrophin on a call point perspective. But secondly, and we're increasingly looking at this is assets that leverage the rest of our infrastructure, right, which is patient support, specialty pharmacy distribution, hub services, medical affairs, market access, the rest of the rare disease infrastructure, it does not matter if they're in an indication or a specialty that is different from the ones that Cortrophin overlaps because it allows us to focus on Cortrophin and then overall, continue acceleration of our transformation into a leading rare disease company.

We're out of time, but I did have one more question that I wanted to sort of squeeze in. We sort of framed everything. You exit 2025 on solid footing. You gave 2026 guidance sort of well above expectations. Again, I look at the stock essentially flat sort of year-to-date, and we can discuss the different reasons for that. But you're here at a conference, you're meeting with investors. And I guess what type of feedback are you getting? And is there anything you want to share with the investors here in terms of dislocations in terms of maybe the questions you're getting, what they think versus what you see as reality or your opinion? Like how do you sort of reconcile sort of that disconnect maybe with the recent performance of the stock, recognizing 2025 was a pretty decent year?

Sure. Thank you for that opportunity, Glen. We believe that the long-term growth and durability of our businesses is underappreciated in rare disease. And I think that that's the message that I would leave with investors.

Yes, that's what I was going to do. I was going to flip it to you for the last word. I mean, so in your mind, you think it's the lack of confidence in the durability of your rare disease assets and the growth outlook. I mean, I want to give you the last word with investors, anything you want to leave anyone with, anything you think people misunderstand and then we'll close it out.

Yes, it's not the lack of confidence. I think that it's just understanding that more. This is we have patents into the 2040s on Cortrophin. There is a large addressable patient population that we can help address the appropriate patients. So there's a multiyear growth opportunity with Cortrophin. In ILUVIEN, we have a large addressable market that we're addressing, so 10x of what anything patients that we're treating today. Both drugs are tough to genericize. So we have a very long runway. And so we have a long-term growing and durable rare disease portfolio. And we have a balance sheet that can support expansion of the scope and scale of our Rare Disease business.

Okay. Nikhil and Stephen, we'll leave it there. Thank you very much. Thank you for joining us.

Thanks so much, Glen.

Thank you very much.