Sagent Pharmaceuticals' CEO Discusses Q1 2014 - Earnings Call Transcript

| About: Sagent Pharmaceuticals (SGNT)

Sagent Pharmaceuticals Inc (NASDAQ:SGNT)

Q1 2014 Earnings Conference Call

May 06, 2014 09:00 AM ET

Executives

Jim Polson – Senior Director, Strategic Communications, FTI Consulting

Jeffrey M. Yordon – Chairman and Chief Executive Officer

Jonathon M. Singer – Executive Vice President and Chief Financial Officer

Analysts

Elliot Wilbur – Needham & Company, LLC.

Traver A. Davis – Piper Jaffray & Co

Randall S. Stanicky – RBC Capital Markets LLC

David Anderson – JPMorgan Securities LLC

David Lewis – Morgan Stanley & Co. LLC

Sumant Kulkarni – Bank of America Merrill Lynch

Elliot Wilbur – Needham & Co. LLC

Operator

Good day, ladies and gentlemen, and welcome to the Sagent Pharmaceuticals First Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference, Jim Polson of Investor Relations. Sir, you may begin.

Jim Polson

Thank you, and good morning. On behalf of Sagent Pharmaceuticals, I’m pleased to welcome everyone to the first quarter 2014 earnings conference call. I’m Jim Polson, Sagent’s Investor Relations Advisor.

Joining me on the call this morning are Jeff Yordon, Sagent’s Chairman and Chief Executive Officer; and Jonathon Singer, Sagent’s CFO. Jeff will start with an overview of Sagent and our recent progress and Jon will follow with a discussion of our 2014 first quarter financial results and 2014 fiscal year guidance. We will then open the call for Q&A.

Before we begin, we would note that this call may include forward-looking statements, which are subject to risks, uncertainties, and other factors which may cause actual results to differ materially from those discussed. Although Sagent believes that expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurances that our expectations will be attained. Please refer to the complete Safe Harbor statements within the press release.

More information on these factors is included in the risk factors and MD&A section of Sagent’s Form 10-Q filed with the SEC on March 7, 2014. We undertake no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments.

We would also note that some of our prepared remarks this morning will refer to non-GAAP financial measures. You can find a reconciliation of these non-GAAP measures to the most closely comparable GAAP measures within the earnings release issued earlier today.

With that, I would like to turn the call over to Jeff.

Jeffrey M. Yordon

Thanks Jim, and good morning, everyone. I am very pleased to welcome you to Sagent’s first quarter 2014 earnings call. We appreciate your time, interest, and participation in this event. As we reported this morning, we are pleased to have had a strong start to the year with another quarter of record revenue performance, driven by broad demand across our diverse product offering.

Revenues for the quarter were $70.9 million, which is an 18% increase over the prior year period. Adjusted gross profit for the first quarter of 2014 was $20.7 million, 29.2% of net revenue. Jon will provide additional detail on the results during the financial review portion of the call.

Growth this quarter was driven primarily by new products launched over the previous 12 months and solid demand for our base business portfolio, partially driven by market shortages. Products launched prior to 2013 contributed over half of our growth this quarter.

With the growth in our product portfolio, and the flexibility and responsiveness of our supply chain, we are in a strong position to take advantage of changes in market conditions. During portions of the first quarter, our highest volume heparin code was intermittently on shortage. There were periods in which we appear to be the only supplier of the code, generating approximately $4 million of incremental revenue in the quarter.

Heparin is a critical life-saving drug that we are very pleased to be able to provide to our customers. We don’t include shortages in our financial projections, so do not consider the recent shortage, which we evaluated – I’m sorry – when we evaluated our guidance strategy.

However, we have been working with our manufacturing partner to make sure we’ve accelerated supply to ensure we can continue to support our customers. Heparin has an extremely long supply chain. It has many challenges associated with the timely delivery of the product. Our partners have done an outstanding job in supplying significantly higher units than we anticipated.

Similarly, our primary competitor for calcium leucovorin has exited the market due to manufacturing issues. We believe this is more of a permanent change in the competitive structure of the market and believe we will see a continuation of strong demand for this product.

In addition to the base business, we’ve seen solid growth in demand for the products launched over the last 12 months. Docetaxel, Propofol and Zoledronic Acid all made meaningful contributions to our strong quarterly performance in line with our expectations.

Our strategy of launching multiple formulations of Zoledronic Acid has worked exceptionally well; despite significant quarter-over-quarter reduction in pricing, we have seen a steady increase in demand for our premix bag.

In addition, to the cost and convenience advantage of the bags, there have been intermittent shortages uncertain diligence which are utilize to reconstitute the vials. By providing a premix that doesn’t require the diligence, we have further differentiated our offering.

Our ability to develop and launch diverse presentations of a single product demonstrates the value of our partnership network and our lack of reliance on a single manufacturing competency.

In order to continue to enhance our existing portfolio, we spent a significant amount of time evaluating new product opportunities. We did not spend as much as we had anticipated in the first quarter, primarily due to the delay in certain milestone payments and a slightly slower ramp in spending in our global research center in China.

However, we anticipate acceleration in the second quarter as we increase activity in advance of certain regulatory changes. The FDA will require an increase in exhibit batches and stability data for filings after June 30th of this year.

Accordingly, we are pressing our organization and our development partners to complete the majority of our ANDA filing activity by midyear. Despite this accelerated timeline, we continue to believe we’ll file 12 to 15 new products this year.

Our current new product pipeline includes 38 products, represented by 64 ANDAs, which we had filed or licensed rights to that were under review by the FDA and three products represented by 10 ANDAs that have been recently approved and were pending commercial launch.

We also had an additional 28 products, represented by 42 ANDAs under initial development at March 31, 2014. We believe that this is one of the most robust pipelines in the industry.

In addition to these filings, we continue to invest resources to accelerate the expansion of our product line and our overall footprint with a focus on the following objectives; seeking niche, proprietary injectable products of interest to our customers, working on the reformulation of the existing high-volume generic injectables that would provide our customers with significant advantages and provide Sagent with the manufacturing cost advantage and evaluating product opportunities that leverage our vertical integration capabilities for either the U.S. or the China markets.

Our focus on long-term strategic initiatives and a commitment to internal investment on product development will continue to expand our product offerings, diversify our product portfolio, and continue to build a long-term, profitable business for our shareholders. We will continue to supplement our development initiatives with evaluation of external growth opportunities.

The M&A market continues to be quite robust, and we are consistently evaluating opportunities that could enhance our pipeline and/or vertical integration competencies. We have nothing specific to report at this time, but we believe M&A will continue to be an integral part of our growth strategy.

With that, I’ll turn the call over to Jon for his commentary on our financial performance.

Jonathon M. Singer

Thank you, Jeff. I’ll walk through the 2014 first quarter results, provide some information on the balance sheet, and close with a review of our guidance for the year. Net revenue for the three months ended March 31, 2014 totaled $70.9 million, an increase of $10.7 million or 18% as compared to $60.2 million for the three months ended March 31, 2013. The increase was driven primarily by the launch of 23 new codes or presentations of 10 products since March 31, 2013 which contributed $9.7 million in revenue during the first quarter of 2014.

Net revenue for products launched prior to March 31, 2013 increased $1 million due to the increased demand driven by market shortages offset by price declines as Zoledronic Acid vials, which we launched at market formation in March of last year.

Revenue by therapeutic class for the first quarter of 2014 was 38% anti-infective, 31% critical care and 31% oncology. The comparable amounts for the first quarter of 2013 were 37% anti-infective, 32% critical care, and 31% oncology.

Gross profit as a percentage of net revenue was 28.8% for the three months ended March 31, 2014 compared to 30.7% for the three months ended March 31, 2013. Adjusted gross profit as a percentage of net revenue was 29.2% for the three months ended March 31, 2014 and 31.9% for the comparable prior year period. The decrease in gross profit and adjusted gross profit is a percentage of net revenue is primarily due to the impact of $1.5 million of unabsorbed manufacturing costs at our SCP facility.

Adjusted EBITDA for the three months ended March 31, 2014 totaled $9.6 million, a decrease of $4.6 million compared to $14.2 million in the first quarter of 2013. The decline is driven by the inclusion of $5 million of other operating income for the one-time termination of termination fee related to the amendment of the company’s manufacturing and supply agreement with Actavis which was included in the first quarter of 2013.

Including the impact of interest in other non-operating expenses, the net income for the three months ended March 31, 2014 declined to $5.1 million compared to the net income for the first quarter of 2013 of $9.8 million.

Turning to the balance sheet at March 31, 2013 we had $139.7 million of cash and short-term investments with no outstanding borrowings against our $40 million revolver and we retired the remaining $10 million in debt for the SCP during the first quarter of this year.

Turning to our guidance, we’re excited by the fast start to the year and the record revenue performance of the company in the first quarter, which clearly reduces the risk around meeting the low end of the guidance range. We provided broad guidance at the outset of the year that considered a number of uncertainties that needed to be managed as the year progressed including limited visibility to approval timelines, competitive pricing and the impact of market shortages.

In addition we continue to anticipate an acceleration in product development spending as discussed earlier on the call. Accordingly, Sagent’s business plan for fiscal 2014 currently anticipates net revenue for the year to be in the range of $2.50 to $2.90, driven by annualization of products launched in 2013 and 10 to 15 product launches in 2014.

Adjusted gross profit as a percentage of net revenue in the range of 24% to 28% inclusive of approximately $8 million of expense due to unabsorbed manufacturing cost at our SCP facility, product development expense in the range of $30 million to $36 million, which is a $10 million to $60 million increase from 2013.

As a reminder, the increase was driven by carry-over spending from 2013, support for SCP development initiatives, potential support for P4 challenges, and increased opportunity driven by market consolidation and selling, general and administrative expenses in the range of $30 million to $40 million – $35 million to $40 million.

Based upon the above assumption, the company anticipates reported net income for fiscal 2014 to be in the range of $10 million loss coming in earnings. We anticipate, we’ll revisit our outlook in conjunction with the second quarter close.

With that, we’ll turn the call over to the operator for the Q&A portion of the call.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions) Our first question comes from Elliot Wilbur of Needham & Company. Your line is now open.

Elliot Wilbur – Needham & Company, LLC.

Thanks. Good morning. First question has to do with the impact of shortages in the quarter. You specifically called out heparin, wondering if that was just more of a volume gain or if there was some additional price leverage that you were able to obtain in the quarter.

And then maybe just thinking about whether or not there’s going to be any carry through impact in the current period based on heparin or any other products that benefited from a shortage in the period. Or if there’s been any change kind of post quarter in terms of new products that potentially have shortage issues.

Jonathon M. Singer

So Elliott, as I indicated in the commentary, we probably picked up between $3 million and $5 million as a result of the shortage related activity in the quarter, primarily in heparin but also across a number of different codes.

On the margin, we were probably able to pick up 300 to 400 basis points on the heparin that we sold to non-contracted customers and we’re continuing to see what I would consider to be intermittent shortages on heparin, where our competitors – they’ll get a shipment in, it will blow out into the marketplace and then we’ll see a resumption of what I would consider the higher demand, but probably not at the same pace in April and May as we saw in February and March.

Other than that, I would tell you that we’re seeing higher overall shortage activity this year than we did last year. But there’s nothing particular right now that we see that’s driving what I would consider the unusual demand.

Jeffrey M. Yordon

No, the only thing I’d add to that Elliott is that the FDA is being much more responsive when they anticipate shortages. We have in the last month been notified by the agency of three potential shortages that we do have in our portfolio. But it’s too early to tell what impact that will have.

Elliot Wilbur – Needham & Company, LLC.

Okay. Thanks. And then I have a question for you Jeff as well – maybe just a little bit more color around SCP. I know you’ve got one of the approved and coming out of the facility. Currently – but maybe just update in terms of number of filings, potentially coming out of the facility the balance of the year and maybe just sort of an update in general what’s going on there.

And then just with the implementation of GDUFA, not really sure how that impacts the prior sort of CBE-30 process and whether or not there’s still that type of opportunity that may have existed in the past to really leverage potential acquisitions of approved products and bringing them into the facility to take up capacity. I’m not sure if that’s as easy to do as it once was and maybe just share your thoughts around that subject.

Jeffrey M. Yordon

Sure. Okay Elliot. The best way I would characterize SCP is we actually have weekly and monthly goals for them to attain. To bring a Greenfield project to the point that we have done with this one takes a tremendous amount of work and I have to sincerely complement our management team there for the great job they’ve done.

They have been meeting all of the objectives. They have been doing a lot of development work. They have been doing exactly the number of batches that we’ve asked for them to do. I think previously on the last call, we talked about challenging them with some very, very difficult products that have come through.

We anticipate that there will be at least several more ANDAs that will be filed this year from there. We’re working on the CBE-30s and our belief is that the CBE-30 process is not that different in GDUFA than it was prior.

That’s one of the few prior things that we don’t think is going to be significantly different. So, we have pretty high expectations that our CBE-30 strategies will work well with SCP.

Elliot Wilbur – Needham & Company, LLC.

And one last question for you Jeff. You characterize the acquisition environment as robust. Some might also characterize it as very richly priced. I mean clearly a sellers’ market evaluations are sky-high. Just seems like it’s going to be very difficult for a company like Sagent to really find an attractive sort of mainstream asset or, at least, kind of the type of assets that we sort of have traditionally thought about you guys acquiring.

So, should we think about the company may be moving a couple of standard deviations away from what we would have normally considered to be, sort of, your type of business or your type of assets? Or is it just going to be a matter of biding your time and exercising patience and eventually someone is going to overpay for something and then a lot of the fluff is going to come out of the market, just trying to figure out where you guys think you can really obtain value in the current environment?

Jeffrey M. Yordon

Yes. I think it’s a great question. Certainly we haven’t had a difficult time finding opportunities. The difficult time is paying a fair value for those opportunities. I think your latter point is correct. We have to bide our time. I’m encouraged by the fact that many of the larger companies are talking about divesting a bunch of their mature products. The issue there would be if they are looking to divest all of the products to one potential buyer and then of course that would eliminate a lot of the smaller companies.

I tend to believe that there will be some of those products that would be interested in divesting that some of the bigger companies won’t be interested in that will be a good opportunity for us. We also have expanded our focus outside of the United States where we think we might have a little bit better chance of avoiding some very competitive auctions. So stay tuned. We’ll talk a lot more about this in the future.

Elliot Wilbur – Needham & Co. LLC

All right. Thank you.

Operator

Thank you. Our next question comes from David Amsellem of Piper Jaffray. Your line is now open.

Traver A. Davis – Piper Jaffray & Co

Hi guys. This is Trevor Davis on for David. Thanks for taking the questions. So maybe just on the ANDA pipeline, just curious how many filings that you have pending that are actually greater than 30 months in age at the FDA that I guess you have not already heard action from them on? And then also – can you just give us an update on Nembutal that filing there and your latest thoughts on when that potentially could launch? And then just a third one, on how Docetaxel is performing and how do you expect those competitive dynamics to play out for the remainder of the year? Thanks.

Jeffrey M. Yordon

Okay. Let’s start with the second one. The Nembutal as we have said previously, we based on the complete response letter we believe for sure that we’ll have an approval sometime this year. We can’t be more specific than that because again, we have no visibility but based on everything we know, with that application, we still believe that we will be launching that product.

Your first question about how many of these – 50% of the filings we have in there were filed in 2010 or prior. So we’re in a pretty strong position. I think we’re in a real strong position to get some of those approved. The Docetaxel performance has been very strong and we anticipate that that performance should continue throughout the rest of this year.

Traver A. Davis – Piper Jaffray & Co

Great. That’s helpful. Thank you.

Operator

Thank you. Our next question comes from Randall Stanicky of RBC Capital Markets. Your line is now open.

Randall S. Stanicky – RBC Capital Markets LLC

Hey, guys. Thanks very much for the questions. I just have two on iron sucrose, can we just get an update, I know there was four issues we were talking about last quarter and just in terms of the timing that your comfort level with taking that through and do you still expect the same competitive dynamics in 2015, still the likely launch timing and then I just have one follow-up.

Jeffrey M. Yordon

Sure. I think we’re right on track in terms of our response to the FDA on iron sucrose. We still believe strongly that we have a very good chance to launch that product next year. There’s no reason to believe that we wouldn’t. And I don’t think the dynamics have changed at all. I still believe that we should be first and we believe that we will be there for a while by ourselves. So we feel good about it. We have spent an enormous amount of time and resources on putting ourselves in a position to get the product approved next year.

Randall S. Stanicky – RBC Capital Markets LLC

Jeff, is there a timing frame that we can be thinking about, the actual submission to FDA. Thinking in a sense, I mean, is there a time internally that you guys are looking at to have everything sorted out?

Jeffrey M. Yordon

Yes. What I’ve asked is wait for our next earnings call. I think we’ll have a lot more clarity on it by that point in time and I can talk more intelligently about it at that time.

Randall S. Stanicky – RBC Capital Markets LLC

Okay. That’s great. And my follow-up is, if you were to look at an asset that you thought that was attractive that came with a non-injectables business, would that be something that could potentially interest you?

Jeffrey M. Yordon

Doubtful. We have been pretty steadfast on focusing on the area that we feel that we have a great deal of competency in. And we really don’t believe that there are many of the other areas that we’re set up to do that. Remember we have the whole world that we haven’t exploited yet in terms of sales opportunities. So from an opportunity standpoint, we certainly aren’t limited in the injectable field because there are so many other countries we have actually gone ahead and hired some people to help us begin to look at opportunities outside of the United States. So you’ll see more and more activity in that area as we move forward.

Randall S. Stanicky – RBC Capital Markets LLC

That’s great. Thanks very much.

Operator

Thank you. Our next question comes from Chris Schott of JPMorgan. Your line is now open.

David Anderson – JPMorgan Securities LLC

Hi. Thanks. This is actually David Anderson for Chris. Just a couple of questions here. On the gross margins in the quarter, really strong as you came in above your guidance range, can you just talk about some of the drivers there and how we should think about the progression for the remainder of the year?

And then, secondly, on the products from islands to geo facility it sounds like they are making pretty good progress on closing out the warning letter and I know these products aren’t in your guidance but just any sense on you in terms of increased confidence in the ability to launch those products this year? And then what sort of impact we could see on your guidance range from those products? Thanks.

Jonathon Singer

Sure. So the margin strength if you go back to the first call is partially driven by the shortages in recognizing better profitability on some of those products. We also had some positive mix contribution – the pricing environment on certain of the products was probably a little bit stronger earlier in the year than we anticipated. And then we also had a little bit lower spending in SCP. They’ve got a hiring plan that they are metering out throughout the year as we ramp up production, and they’ve been pretty intelligent about the way in which they manage their cost.

So there is not a single contributing factor. There is probably four or five positives that have contributed to that. To the extent that the shortages don’t reoccur and SCP gets on track with spending, I think we’ll fall back into the guidance range that we discussed from a margin perspective.

Jeffrey M. Yordon

I think, the second part of your question, in terms of Mylan and Agila, I totally agree, it’s perceptive view. We believe that the problem should be rectified probably earlier than we anticipated. As you said, we have no sales from those products in this year’s guidance.

Again, what we have to understand is once we get a better feel for the status of that facility, we can then begin to project when we can start building some inventory. So once again, I’d like to say we will address that much more specifically at the end of the next call when we have a little bit better perspective on how long it’s going to take us to gear up ones that facility is deemed acceptable.

David Anderson – JPMorgan Securities LLC

Okay. Thanks.

Operator

Thank you. Our next question comes from David Lewis of Morgan Stanley. Your line is now open.

David Lewis – Morgan Stanley & Co. LLC

Good morning. Just two quick questions. The first is, Jon, just a follow-up on the gross margin questions you got on the call, just specifically on Zoledronic Acid, GM trend so far this year, are they trending in line with what you would have expected I think around 50%?

Jonathon Singer

Yes. The Zoledronic Acid trends are in line with expectation. We’re seeing pricing kind of perform in line with what we projected. And we’re seeing good solid demand, if we continue to see a preference for the bad due to the shortage of [diligence] (ph), we could see some positive impact on that in the back half of the year, but I don’t think – we don’t project that right now. So we’re doing right about in line with expectations, both from a volume and margin perspective on that product.

David Lewis – Morgan Stanley & Co. LLC

Got it. Maybe just a kind of derivative question for you or Jeff, just in terms of your pricing negotiations and status with some of the GPO contracts you’ve been mentioning, a combination of both the GPO negotiations and just general shortages, how should we think about pricing now across the quarters here in 2014? Thank you.

Jeffrey M. Yordon

I think we have been pretty consistent about talking about the fact that pricing has been more rational. With the exception once again, of a couple of small companies, that have been irrational, I think for the most part this has been a wonderful six-month period in terms of price stability.

I also – I have personally been involved with conversations with some big GPOs and the GPOs are really talking the talk that the shortage products are so important that if someone can commit to them that they can supply them, and if some other manufacturer were to come in at a lower price, they are willing now to commit to keep the price at that level that they’ve agreed to as long as you can consistently supply it. So we’re working on a couple of agreements like that with some GPOs. So I’m hopeful that this trend will continue. And again this is a time that hospitals should not be chasing price. They should be chasing supply.

David Lewis – Morgan Stanley & Co. LLC

Okay. Thank you very much.

Operator

Thank you. (Operator Instructions) Our next question comes from Sumant Kulkarni of Bank of America Merrill Lynch. Your line is now open.

Sumant Kulkarni – Bank of America Merrill Lynch

Good morning. Thanks for taking my questions. I have three and I’ll ask them all upfront. The first one is assuming that the heparin shortages do not repeat and leucovorin takes, would the company need any new launches to meet the low end of the sales guidance range? And for the high-end of the guidance range, other than genetic Nembutal, what would you need to achieve that?

And the second question is on the capacity for business development, could you give us any financial metrics around what the company thinks would be a sweet spot for BD? And the last question is, do have any results of any FDA inspections pending at any of your partners that might be making any significant contributions to your products currently?

Jeffrey M. Yordon

Okay. All good questions, Sumant. First one is, I think Jon was very specific in saying that basically, as a result of the start that we’ve had, it pretty much takes away sort of the low end of our guidance. We don’t think that there are some extraordinary things that have to take place, other than what we have contemplated in guidance, to be in the middle of that range.

To hit the high end of that range, certainly an approval of a product like Nembutal would be wonderful soon. You also have to understand that one of the reasons we put that range together now with PDUFA and not having any visibility, if we get an approval tomorrow, Sumant, there’s a good chance that we won’t launch that product for three or four months minimum. And in the past, having the visibility, we would know for sure that May 8 we are going to get an approval, and as a result of that we’ve built inventory.

So that was contemplated in the guidance as well. So I think, again, we should get approvals. We don’t know when those approvals are going to take place. But they’ll all contribute and we certainly feel much more comfortable about guidance for this year.

The second one, the – you were talking...

Jonathon Singer

Size of the deal that we have capacity for. Yeah, I think it really depends upon the economics of the opportunity. We’ve got good cash on the balance sheet and a credit line that I think has flexibility to grow for some of the smaller deals and then some of the larger deals that they made strategic sense, we would look at alternatives, financing, using equity, or some debt instrument.

So we are casting a pretty wide net because we think there’s a lot of opportunity to finance out there for the right deal. And so we are focused more upon what makes sense strategically within a broad sized category as opposed to limiting the scope that we’re looking at and we’ll deal with the financing aspect in conjunction with the evaluation of the opportunity.

Jeffrey M. Yordon

And last question in terms of impact of any partner facility, there’s really only one at this point in time and that’s the Agila facility. As that facility gets on track sooner, obviously we don’t have any sales in our guidance for 2014. That would have the biggest impact. But again remember that has to happen in enough time for us to then build inventory and launch the products. So that’s the only one. Is that possible? That certainly is possible this year?

Sumant Kulkarni – Bank of America Merrill Lynch

Thank you.

Operator

Thank you. Our next question comes from Elliot Wilbur of Needham & Company. Your line is now open.

Elliot Wilbur – Needham & Co. LLC

Thanks. Just a couple of quick follow-ups and Jon maybe just segued based on your prior commentary around sources of financing for transaction. But if you look at the EBITDA levels that you have generated in the quarter adjusted EBITDA just under $10 million and the annualized that number, what type of leverage do think you could get off of that sort of EBITDA run rate given the inherent volatility in the business? I’m assuming levering that up to four to five times is probably maybe a little bit sort of beyond what the company may be comfortable, but I’m trying to get a sense of what you think sort of the normalized leverageable EBITDA levels are.

Jonathon M. Singer

Yes. I think your evaluation is reflective of how we look at it right now for the base business. And a lot of it is we’ll be impacted by the consistency of the business that we’re looking at. If we’re looking at a portfolio that has consistent margin and EBITDA, that’s going to impact the level of leverage that we put across the consolidated entity.

So we can’t just look at what we’re generating from a consistent basis within our current portfolio. That’s why I don’t really have a direct answer to the question because a lot of it predicated upon the characteristics of what we acquire.

Elliot Wilbur – Needham & Co. LLC

Okay. Fair enough. And then I don’t think I’ve heard the word inversion yet, asked on or mentioned a question on the conference call. But obviously you’re looking at ex-U.S. businesses I’m just sort of wondering, how that strategy may have kind of a merged to the forefront of your thinking in terms of potential ex-U.S. acquisitions.

Jonathon M. Singer

Yes. Obviously inversions are hot right now. And there would be advantages if it made sense. The way we’re looking at it Elliot is strategy first and a version second from a standpoint of the international opportunities.

So as we look at opportunities outside of the United States, we are looking for things that fit strategically and then within the context of that strategic fit if we could execute it in a way that created a tax-advantage, we’d obviously pursue that.

But to Jeff’s comment earlier about what we’re looking at from a standpoint of fit, things that complement our focus on injectables and then to the degree that there are opportunities ex-U.S. in that area that have an aversion opportunity, clearly we’d include that as we’ve thought about how we structure the transaction.

Elliot Wilbur – Needham & Co. LLC

Okay. And then last follow-up for Jeff, Jeff could you talk about one of your recent approvals as product Glido seems like an interesting asset not sure kind of what your thinking is in terms of the market opportunity there and launch time and just maybe a little bit of color there?

Jeffrey M. Yordon

Yeah. This is actually been a long process. It’s about a five and a half year process. This is a product that’s a big product in Europe. It’s a syringe with a circular tip that allows clinicians to lubricate catheters without having to use their hands. It’s a more sterile, it’s easier to use.

We think it’s a really nice opportunity. I think we’ll launch the product sometime before September. We’re trying to gear up. It was a venture with a German company. We’re really excited to have it on the market. We think it’ll be a real nice product this year and in the future.

Operator

Thank you. And at this time, I’m not showing any further questions. I’d like to turn the call back to Mr. Polson for any closing comments.

Jim Polson

Great. We’d like to thank everyone for their participation on our call this morning and interest in Sagent. We will look forward to speaking with you on our second quarter call in a few months. Thanks.

Operator

Thank you. Ladies and gentlemen, thank you for participating in today’s conference. This does conclude today’s program. You may all disconnect. Everyone have a wonderful day.

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