Implements Plan to Reduce Acute Care Segment
Staff
Recro Pharma, Inc. (Nasdaq:REPH), a revenue generating specialty
pharmaceutical company with a high-performing contract development
and manufacturing (CDMO) Segment, today announced an initiative
that will reduce the operating expenses of its Acute Care Segment,
including a reduction in staff of approximately 50 employees. Some
Acute Care Segment employees engaged in efforts to select a partner
for and in obtaining FDA approval of (IV) meloxicam were
retained. This initiative is expected to significantly lower
operating expenses following receipt of a second Complete Response
Letter (CRL) from the U.S. Food and Drug Administration (FDA)
Office of Drug Evaluation II regarding its New Drug Application
(NDA). The headcount reduction will not affect Recro Pharma’s CDMO
Segment, which continues its strong performance, providing positive
cash flow.
The workforce reduction was communicated today
and the Company expects to incur the charges for expenses
associated with the headcount reduction as well as additional
restructuring costs during both the first and second quarter of
2019. Recro Pharma believes this plan significantly reduces
the Company's 2019 planned cash burn and anticipates becoming cash
flow breakeven during Q3 and cash flow positive in the second half
of 2019 (excluding the impact from any potential partnering
transactions).
“Recro Pharma has faced challenges while moving
IV meloxicam through the regulatory process, making difficult
decisions necessary to ensure shareholder value is preserved in the
short term and can be built over the long term,” said Gerri
Henwood, President and Chief Executive Officer of Recro Pharma. “We
continue to believe that IV meloxicam would be an attractive
non-opioid pain management candidate for the hospital marketplace,
and we believe it will ultimately be approved by FDA.”
Recro Pharma plans to request a meeting with the
FDA to determine a path forward for IV meloxicam, which may include
dispute resolution. In light of the additional timing setback
due to the second CRL, the Company also intends to seek a strategic
partner for the commercialization of IV meloxicam.
“We sincerely thank those employees leaving the
Company for their dedicated service. Following this
restructuring, our resources will be laser-focused on growing the
CDMO division, obtaining marketing approval for IV meloxicam from
the FDA and securing a strategic commercialization partner,”
concluded Ms. Henwood.
Financial Guidance
For 2019, Recro Pharma is increasing its revenue
guidance from $80 million to an anticipated $85-87 million,
Operating Income from $23.5 million to $28-30 million and EBITDA,
as Adjusted* from $34 million to $38-40 million, based on current
trends including organic growth from existing customers and new
business prospects. This guidance takes into consideration
existing contracts and timing of customer order patterns, as well
as the Company’s experience with customer’s product market
estimations.
*Operating Income, as Adjusted and EBITDA, as
Adjusted is a non-GAAP financial measure (see reconciliation page
of press release)
Non-GAAP Financial Measures
To supplement our financial results determined
by U.S. generally accepted accounting principles ("GAAP"), we have
also disclosed in the table below the following non-GAAP
information for our Contract Development and Manufacturing
Organization (CDMO): “Operating Income, as Adjusted” which is
Operating Income without the impact of ASU, No.2014-09 as to remove
the variability of timing of revenue recognized and expected cash
receipt, and “EBITDA, as Adjusted” which is “Operating Income, as
Adjusted” before interest, taxes, depreciation, amortization and
non-cash stock-based compensation. We believe these non-GAAP
financial measures are helpful in understanding our CDMO Business
as it is useful to investors in allowing for greater transparency
of supplemental information used by management. “EBITDA, as
Adjusted” is used by investors, as well as management in assessing
our performance. Non-GAAP financial measures should be considered
in addition to, but not as a substitute for, reported GAAP results.
Further, Non-GAAP financial measures, even if similarly titled, may
not be calculated in the same manner by all companies, and
therefore should not be compared.
Reconciliation of Non-GAAP Financial
Measures (unaudited)
CDMO Business ($millions) |
Full Year 2017 |
|
Full Year 2018 |
|
Full Year
2019Estimate |
Operating
Income |
$ |
25.4 |
|
$ |
24.9 |
|
$28.0 – 30.0 |
less: Revenue recognition * |
|
na |
|
$ |
1.4 |
|
$0.0 |
Operating Income, as Adjusted |
$ |
25.4 |
|
$ |
23.5 |
|
$28.0 – 30.0 |
Depreciation |
$ |
4.8 |
|
$ |
4.8 |
|
$5.6 |
Amortization of intangible assets |
$ |
2.6 |
|
$ |
2.6 |
|
$2.6 |
Non-Cash stock-based compensation |
$ |
1.0 |
|
$ |
1.3 |
|
$1.8 |
EBITDA, as Adjusted |
$ |
33.8 |
|
$ |
32.2 |
|
$38.0 - 40.0 |
* Impact of adoption of ASU, No. 2014-09 starting January
2018 |
|
About Recro Pharma, Inc.
Recro Pharma is a specialty pharmaceutical
company that operates through two business divisions, an Acute
Care, hospital product division and a revenue-generating contract
development and manufacturing, or CDMO, division, located in
Gainesville, GA. The Acute Care division is primarily focused on
developing innovative products for the hospital and other acute
care settings. The Company’s lead product candidate is a
proprietary injectable form of meloxicam, a long-acting
preferential COX-2 inhibitor. IV meloxicam has successfully
completed two pivotal Phase III clinical efficacy trials, a large
double-blind placebo-controlled Phase III safety trial and four
Phase II clinical efficacy trials, as well as other safety studies.
On March 22, 2019 Recro announced that FDA had provided a second
CRL in response to the Company’s NDA for IV meloxicam. The Company
is evaluating the path forward for IV meloxicam and plans to
schedule a meeting with the FDA. As injectable meloxicam is in the
non-opioid class of drugs, if approved, the Company believes it has
the potential to overcome many of the issues associated with
commonly prescribed opioid therapeutics, including respiratory
depression, constipation, excessive nausea and vomiting, as well as
having no addictive potential while maintaining meaningful
analgesic effects for relief of pain. The Company’s CDMO division
leverages its formulation expertise to develop and manufacture
pharmaceutical products using its proprietary delivery technologies
and other manufacturing services for commercial and
development-stage partners who commercialize or plan to
commercialize these products. These collaborations can result in
revenue streams including royalties, profit sharing, research and
development and manufacturing fees, which support continued
operations for its CDMO division, and it contributes non-dilutive
funding for the development and pre-commercialization activities of
its Acute Care division.
Cautionary Statement Regarding Forward Looking
Statements
This press release contains forward-looking
statements that involve risks and uncertainties. Such
forward-looking statements reflect Recro's expectations about its
future performance and opportunities that involve substantial risks
and uncertainties. When used herein, the words "anticipate,"
"believe," "estimate," "may," "upcoming," "plan," "target,"
"intend" and "expect" and similar expressions, as they relate to
Recro or its management, are intended to identify such
forward-looking statements. These forward-looking statements are
based on information available to Recro as of the date of this
press release and are subject to a number of risks, uncertainties,
and other factors that could cause Recro’s performance to differ
materially from those expressed in, or implied by, these
forward-looking statements. Recro assumes no obligation to update
any such forward-looking statements. Factors that could cause
Recro’s actual performance to materially differ from those
expressed in the forward-looking statements set forth in this press
release include, without limitation: the Company’s ability to
manage costs and execute on its operational and budget plans, the
Company's ability to achieve its financial goals, including
financial guidance, the Company’s ability to pay its debt under its
credit agreement, the Company’s ability to attract a strategic
partner for the development and commercialization of IV meloxicam,
the Company’s ability to adequately resolve the deficiencies
identified by the FDA in the second CRL for IV meloxicam, and the
time frame associated with any such resolution, including whether
the FDA will require additional clinical studies and the time and
cost of such studies; whether the Company will prepare an amended
new drug application (NDA) for IV meloxicam and, whether the FDA
will accept and approve any such resubmitted NDA and the labeling
under any such approval; the Company’s ability to raise future
financing for continued product development and IV meloxicam
commercialization; with regard to the Company’s clinical trial
results, whether there may be changes in the interpretation by the
FDA of the data of the Company’s clinical trials and the length,
cost and uncertain results and timing of our ongoing clinical
trials; with regard to the potential commercial opportunity of IV
meloxicam, whether any FDA approval of IV meloxicam will include
labeling restrictions and the potential that IV meloxicam does not
receive regulatory approval or does not receive reimbursement by
third party payors, that IV meloxicam is not accepted by the
medical community, including physicians, patients, health care
providers and hospital formularies or that a commercial market for
IV meloxicam does not develop; the Company’s ability to maintain
relationships with CDMO commercial partners; and the Company’s
ability to obtain, maintain and successfully enforce adequate
patent and other intellectual property protection. The
forward-looking statements in this press release should be
considered together with the risks and uncertainties that may
affect Recro’s business and future results included in Recro’s
filings with the Securities and Exchange Commission at
www.sec.gov.
CONTACT: Investor
Relations Contact: Argot PartnersSam Martin / Claudia
Styslinger(212) 600-1902sam@argotpartners.com
claudia@argotpartners.com
Recro Pharma, Inc. Ryan D. Lake (484) 395-2436
rlake@recropharma.com
Media Contact: Argot Partners David Rosen (212) 600-1902
david.rosen@argotpartners.com
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