Assertio Therapeutics, Inc. (NASDAQ: ASRT) today reported financial
results for the quarter ended September 30, 2019 and provided an
update on its business performance and strategic initiatives.
Third-Quarter Financial
Highlights:(unaudited)
|
Third Quarter 2019 |
(in millions, except earnings per share) |
GAAP |
Non-GAAP(1) |
Total Revenues |
$55.1 |
— |
Net Income |
$3.3 |
$23.2 |
Earnings Per Share |
$0.05 |
$0.24 |
Adjusted EBITDA |
— |
$34.3 |
(1) All non-GAAP measures included in this earnings release are
reconciled to the corresponding GAAP measures in the schedules
attached.
“We reported another quarter of strong earnings growth,
exceeding non-GAAP adjusted EBITDA expectations for the fifth time
in the last six quarters, despite some softness in our top line,”
said Arthur Higgins, President and CEO of Assertio. “As a result of
this strong performance, as well as our outlook for the fourth
quarter, today we are raising our non-GAAP adjusted EBITDA guidance
range for the full year. We have achieved significant operational
efficiencies over the past two years - and today we are announcing
additional initiatives that we expect will deliver $15.0 million in
annual savings beginning in 2020 and $20.0 million in annual
savings thereafter. Our priority was, and remains, delivering
strong cash flows as we rapidly de-lever the Company and better
position it to pursue new growth opportunities.”
Third-Quarter Business Highlights:
- Acceleration of Cost Savings Initiatives:
Today the Company announced an acceleration of cost savings
initiatives that it expects will deliver $15.0 million in savings
beginning in 2020 and $20.0 million in annual savings
thereafter. The Company will take a charge of
approximately $4.0 million in the fourth quarter of 2019 related to
these initiatives. This acceleration in cost savings was completed
after a thorough review of the Company’s organizational structures,
budgets, capital projects and capabilities.
- Announced Debt Refinancing: The Company
announced in August that it entered into separate, privately
negotiated exchange agreements (Exchange Agreements) with a limited
number of holders of Assertio’s currently outstanding 2.50%
Convertible Notes due 2021 (2021 Notes). Pursuant to the Exchange
Agreements, Assertio exchanged approximately $200.0 million
aggregate principal amount of 2021 Notes for a combination of (a)
$120.0 million of its 5.00% Convertible Senior Notes due August 15,
2024 (2024 Notes), (b) $30.0 million in cash plus accrued but
unpaid interest on the 2021 Notes, and (c) the issuance of 15.8
million shares of Assertio’s common stock. This transaction reduces
total outstanding debt, de-levers the balance sheet, extends
maturity of a substantial portion of the Company’s convertible
debt, and makes Assertio a potentially more attractive business
development partner.
- Significant Reduction in Secured Debt: As of
September 30, 2019, the Company has made scheduled principal
repayments of $100.0 million in 2019, reducing the Company’s
senior secured debt to $182.5 million. The Company also paid an
additional $20.0 million principal payment in October 2019, further
reducing its senior secured debt to $162.5 million. Combined with
the $80.0 million of debt reduced in our debt refinancing, the
Company has reduced its gross debt leverage to 3.4x of the
mid-point of its adjusted EBITDA guidance range.
- Favorable NUCYNTA® Patent Ruling Upheld: In
the third quarter, there was a period during which the defendants
could have petitioned the U.S. Supreme Court for writ of
certiorari. That period has now passed. As a result, the District
Court’s favorable decision is final and non-appealable. Previously,
the United States Court of Appeals for the Federal Circuit ruled in
favor of Assertio with respect to the Company’s patent litigation
against three filers of Abbreviated New Drug Applications (ANDAs)
for the NUCYNTA franchise. The Federal Circuit’s ruling affirms the
decision of the United States District Court (D.N.J.), which found
U.S. patent No. 7,994,364 (the ’364 Patent) to be valid and
infringed by the defendants. The ’364 Patent covers the entire
NUCYNTA franchise until December 2025.* The NUCYNTA franchise
is commercialized by Collegium Pharmaceutical, Inc. (Collegium).
The Company receives royalties from Collegium based on net sales of
the franchise.
- Cosyntropin: The Company announced on October
21, 2019 that its development partner West Therapeutic Development,
LLC (West) has received a Complete Response Letter (CRL) from the
U.S. Food and Drug Administration (FDA) for its New Drug
Application (NDA) for its injectable formulation of long-acting
cosyntropin (synthetic adrenocorticotropic hormone, or ACTH). West
is seeking approval for use as a diagnostic drug in the screening
of patients presumed to have adrenocortical insufficiency. The
primary focus of the CRL relates to the FDA determination that
certain pharmacodynamic parameters were not adequately achieved.
West and Assertio will work together to determine if the FDA’s
comments set forth in the CRL can be adequately addressed.
*Patent expiration dates reflect the addition of six months of
pediatric patent term extension Assertio anticipates securing from
the United States Food and Drug Administration.
Revenue Summary:(in thousands, unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Product sales, net |
|
|
|
|
|
|
|
Gralise |
$ |
14,931 |
|
|
$ |
14,630 |
|
|
$ |
46,008 |
|
|
$ |
43,272 |
|
CAMBIA |
8,135 |
|
|
10,365 |
|
|
23,701 |
|
|
24,870 |
|
Zipsor |
3,273 |
|
|
4,441 |
|
|
9,028 |
|
|
13,175 |
|
Total neurology product sales, net |
26,339 |
|
|
29,436 |
|
|
78,737 |
|
|
81,317 |
|
NUCYNTA products |
1,254 |
|
|
11 |
|
|
1,153 |
|
|
18,782 |
|
Lazanda |
(91 |
) |
|
(12 |
) |
|
(1 |
) |
|
528 |
|
Total product sales, net |
27,502 |
|
|
29,435 |
|
|
79,889 |
|
|
100,627 |
|
Commercialization
agreement: |
|
|
|
|
|
|
|
Commercialization rights and facilitation services |
27,304 |
|
|
27,781 |
|
|
89,163 |
|
|
87,055 |
|
Revenue from transfer of inventory |
— |
|
|
— |
|
|
— |
|
|
55,705 |
|
Royalties and Milestone
Revenue |
341 |
|
|
20,277 |
|
|
1,226 |
|
|
25,784 |
|
Total revenues |
$ |
55,147 |
|
|
$ |
77,493 |
|
|
$ |
170,278 |
|
|
$ |
269,171 |
|
2019 Financial Guidance:The Company is raising
its previous 2019 earnings guidance range and lowering its
Neurology Franchise Net Sales guidance to $102 to $105 million.
|
Prior 2019 Guidance |
Current 2019 Guidance |
Neurology Franchise Net Sales |
Low Single Digit Growth |
$102 to $105 million |
GAAP Net Loss(1) |
($68) to ($58) million |
($47) to ($42) million |
Non-GAAP Adjusted EBITDA(1)(2) |
$118 to $128 million |
$124 to $129 million |
(1) Guidance includes $2.8 million of non-cash Collegium warrant
related income and excludes any future warrant mark-to-market
adjustments, which cannot be estimated.
(2) Guidance excludes any Collegium warrant mark-to-market
adjustments.
Conference Call and Webcast:Assertio will host
a conference call today, Wednesday, November 6, 2019 beginning at
4:30 p.m. ET to discuss its results. This event can be accessed in
three ways:
- From the Assertio website: http://investor.assertiotx.com.
Please access the website 15 minutes prior to the start of the
call to download and install any necessary audio
software.
- By telephone: Participants can access the call by dialing (877)
550-3745 (United States) or (281) 973-6277 (International)
referencing Conference ID 8382875.
- By replay: A replay of the webcast will be located under the
Investor Relations section of Assertio’s website approximately two
hours after the conclusion of the live call.
About Assertio Therapeutics, Inc.Assertio
Therapeutics is committed to providing responsible solutions to
advance patient care in the Company’s core areas of neurology,
orphan and specialty medicines. Assertio currently markets three
FDA-approved products and continues to identify, license and
develop new products that offer enhanced options for patients that
may be under served by existing therapies. To learn more about
Assertio, visit www.assertiotx.com.
“Safe Harbor” Statement under the Private Securities
Litigation Reform Act of 1995This news release contains
forward-looking statements. These statements involve inherent risks
and uncertainties that could cause actual results to differ
materially from those projected or anticipated, including risks
related to regulatory approval and clinical development of
long-acting cosyntropin, expectations regarding royalties to be
received based on sales of NUCYNTA and NUCYNTA ER, expectations
regarding potential business opportunities and other risks outlined
in the Company’s public filings with the Securities and Exchange
Commission, including the Company’s most recent annual report on
Form 10-K and subsequent Quarterly Reports on Form 10-Q. All
information provided in this news release speaks as of the date
hereof. Except as otherwise required by law, the Company undertakes
no obligation to update or revise its forward-looking
statements.
Investor and Media Contact:John B. ThomasSenior
Vice President, Investor Relations and Corporate
Communicationsjthomas@assertiotx.com
Non-GAAP Financial MeasuresTo supplement the
Company’s financial results presented on a U.S. generally accepted
accounting principles (GAAP) basis, the Company has included
information about non-GAAP revenue, non-GAAP adjusted earnings,
non-GAAP adjusted diluted earnings per share, non-GAAP adjusted
EBITDA and other non-GAAP financial measures as useful operating
metrics. The Company believes that the presentation of these
non-GAAP financial measures, when viewed with results under GAAP
and the accompanying reconciliation, provides supplementary
information to analysts, investors, lenders, and the Company’s
management in assessing the Company’s performance and results from
period to period. The Company uses these non-GAAP measures
internally to understand, manage and evaluate the Company’s
performance, and in part, in the determination of bonuses for
executive officers and employees. These non-GAAP financial measures
should be considered in addition to, and not a substitute for, or
superior to, net income or other financial measures calculated in
accordance with GAAP. Non-GAAP financial measures used by us may be
calculated differently from, and therefore may not be comparable
to, non-GAAP measures used by other companies.
Specified ItemsNon-GAAP measures presented
within this release exclude specified items. The Company considers
specified items to be significant income/expense items not
indicative of current operations, including the related tax effect.
Specified items include non-cash adjustment to Collegium agreement
revenue and cost of sales, release of NUCYNTA and Lazanda sales
reserves for products the Company is no longer selling, interest
income, interest expense, amortization, acquired in-process
research and development and non-cash adjustments related to
product acquisitions, stock-based compensation expense, non-cash
interest expense related to debt, depreciation, taxes, transaction
costs, CEO transition, restructuring costs, adjustments to net
sales related to reserves recorded prior to the Company’s exit of
opioid commercialization activities, legal costs and expenses
incurred in connection with opioid-related litigation,
investigations and regulations pertaining to the company’s
historical commercialization of opioid products, certain types of
legal settlements, disputes, fees and costs, gains or losses
resulting from debt refinancing transactions and disposal or
impairment of long-lived assets, and to adjust for the tax effect
related to each of the non-GAAP adjustments.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except per share
amounts)(unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Revenues: |
|
|
|
|
|
|
|
Product sales, net |
$ |
27,502 |
|
|
$ |
29,435 |
|
|
$ |
79,889 |
|
|
$ |
100,627 |
|
Commercialization agreement, net |
27,304 |
|
|
27,781 |
|
|
89,163 |
|
|
142,760 |
|
Royalties and milestones |
341 |
|
|
20,277 |
|
|
1,226 |
|
|
25,784 |
|
Total revenues |
55,147 |
|
|
77,493 |
|
|
170,278 |
|
|
269,171 |
|
Costs and expenses: |
|
|
|
|
|
|
|
Cost of sales (excluding amortization of intangible assets) |
2,243 |
|
|
2,975 |
|
|
6,942 |
|
|
17,772 |
|
Research and development expenses |
1,476 |
|
|
2,127 |
|
|
4,531 |
|
|
5,835 |
|
Selling, general and administrative expenses |
36,117 |
|
|
33,409 |
|
|
85,917 |
|
|
93,750 |
|
Amortization of intangible assets |
25,444 |
|
|
25,443 |
|
|
76,331 |
|
|
76,331 |
|
Restructuring charges |
— |
|
|
3,911 |
|
|
— |
|
|
18,742 |
|
Total costs and expenses |
65,280 |
|
|
67,865 |
|
|
173,721 |
|
|
212,430 |
|
(Loss) income from
operations |
(10,133 |
) |
|
9,628 |
|
|
(3,443 |
) |
|
56,741 |
|
Other income (expense): |
|
|
|
|
|
|
|
Litigation settlement |
— |
|
|
62,000 |
|
|
— |
|
|
62,000 |
|
Gain on debt extinguishment |
26,385 |
|
|
— |
|
|
26,385 |
|
|
— |
|
Interest expense |
(13,872 |
) |
|
(17,190 |
) |
|
(45,268 |
) |
|
(52,268 |
) |
Other (expense) income, net |
(764 |
) |
|
677 |
|
|
(2,613 |
) |
|
973 |
|
Total other expense
(income) |
11,749 |
|
|
45,487 |
|
|
(21,496 |
) |
|
10,705 |
|
Net income (loss) before
income taxes |
1,616 |
|
|
55,115 |
|
|
(24,939 |
) |
|
67,446 |
|
Income tax benefit
(expense) |
1,715 |
|
|
(6,845 |
) |
|
364 |
|
|
(6,400 |
) |
Net income (loss) |
$ |
3,331 |
|
|
$ |
48,270 |
|
|
$ |
(24,575 |
) |
|
$ |
61,046 |
|
Basic net income (loss) per
share |
0.05 |
|
|
0.76 |
|
|
(0.36 |
) |
|
0.96 |
|
Diluted net income (loss) per
share |
0.05 |
|
|
0.65 |
|
|
(0.36 |
) |
|
0.93 |
|
Shares used in computing basic
net income (loss) per share |
72,747 |
|
|
63,917 |
|
|
67,332 |
|
|
63,714 |
|
Shares used in computing
diluted net income (loss) per share |
72,747 |
|
|
82,690 |
|
|
67,332 |
|
|
82,282 |
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE
SHEETS(in
thousands)(unaudited)
|
September 30, 2019 |
|
December 31, 2018 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
54,181 |
|
|
$ |
110,949 |
|
Accounts receivable, net |
43,427 |
|
|
37,211 |
|
Inventories, net |
3,314 |
|
|
3,396 |
|
Prepaid and other current assets |
23,480 |
|
|
56,551 |
|
Total current assets |
124,402 |
|
|
208,107 |
|
Property and equipment,
net |
3,873 |
|
|
13,064 |
|
Intangible assets, net |
615,768 |
|
|
692,099 |
|
Investments |
7,244 |
|
|
11,784 |
|
Other long-term assets |
5,579 |
|
|
7,812 |
|
Total assets |
$ |
756,866 |
|
|
$ |
932,866 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
22,700 |
|
|
$ |
6,138 |
|
Accrued rebates, returns and discounts |
60,979 |
|
|
75,759 |
|
Accrued liabilities |
33,270 |
|
|
31,361 |
|
Current portion of Senior Notes |
80,000 |
|
|
120,000 |
|
Interest payable |
6,687 |
|
|
11,645 |
|
Other current liabilities |
2,096 |
|
|
1,133 |
|
Total current liabilities |
205,732 |
|
|
246,036 |
|
Contingent consideration
liability |
981 |
|
|
1,038 |
|
Senior Notes |
94,661 |
|
|
158,309 |
|
Convertible Notes |
190,923 |
|
|
287,798 |
|
Other long-term
liabilities |
16,135 |
|
|
19,350 |
|
Total liabilities |
508,432 |
|
|
712,531 |
|
Commitments and
contingencies |
|
|
|
Shareholders’ equity: |
|
|
|
Common stock |
8 |
|
|
6 |
|
Additional paid-in capital |
455,601 |
|
|
402,934 |
|
Accumulated deficit |
(207,175 |
) |
|
(182,600 |
) |
Accumulated other comprehensive loss |
— |
|
|
(5 |
) |
Total shareholders’ equity |
248,434 |
|
|
220,335 |
|
Total liabilities and
shareholders' equity |
$ |
756,866 |
|
|
$ |
932,866 |
|
|
|
|
|
|
|
|
|
RECONCILIATION OF GAAP NET INCOME (LOSS)
TO NON-GAAP ADJUSTED EBITDA(in
thousands)(unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
GAAP net (loss)/income |
$ |
3,331 |
|
|
$ |
48,270 |
|
|
$ |
(24,575 |
) |
|
$ |
61,046 |
|
Commercialization agreement revenues (1) |
3,804 |
|
|
2,862 |
|
|
7,667 |
|
|
(46,426 |
) |
Commercialization agreement cost of sales (2) |
— |
|
|
— |
|
|
— |
|
|
6,200 |
|
NUCYNTA and Lazanda revenue reserves (3) |
(1,163 |
) |
|
2 |
|
|
(1,152 |
) |
|
(11,249 |
) |
Expenses for opioid-related litigation, investigations and
regulations (4) |
2,174 |
|
|
1,313 |
|
|
7,024 |
|
|
4,360 |
|
Intangible amortization related to product acquisitions |
25,444 |
|
|
25,443 |
|
|
76,331 |
|
|
76,331 |
|
Contingent consideration related to product acquisitions |
— |
|
|
(117 |
) |
|
(142 |
) |
|
(658 |
) |
Purdue litigation settlement |
— |
|
|
(62,000 |
) |
|
— |
|
|
(62,000 |
) |
Stock-based compensation |
3,004 |
|
|
2,944 |
|
|
8,340 |
|
|
7,890 |
|
Interest and other income |
(218 |
) |
|
(677 |
) |
|
(915 |
) |
|
(973 |
) |
Interest expense |
13,872 |
|
|
17,190 |
|
|
45,268 |
|
|
52,268 |
|
Depreciation |
278 |
|
|
(1,252 |
) |
|
894 |
|
|
1,677 |
|
Income tax (benefit) expense |
(1,715 |
) |
|
6,845 |
|
|
(364 |
) |
|
6,400 |
|
Restructuring and related costs (5) |
— |
|
|
4,079 |
|
|
— |
|
|
19,383 |
|
Other costs |
— |
|
|
75 |
|
|
— |
|
|
123 |
|
Loss on disposal of equipment (6) |
10,070 |
|
|
— |
|
|
10,076 |
|
|
— |
|
Gain on debt extinguishment, net (7) |
(25,968 |
) |
|
— |
|
|
(25,968 |
) |
|
— |
|
Change in fair value of warrants |
1,423 |
|
|
— |
|
|
4,900 |
|
|
— |
|
Non-GAAP adjusted EBITDA |
$ |
34,336 |
|
|
$ |
44,977 |
|
|
$ |
107,384 |
|
|
$ |
114,372 |
|
(1) For the period from January 8, 2018 through November 8,
2018, the adjustment relates to the non-cash value assigned to
inventory transferred to Collegium. As of the date of the
Commercialization Amendment, on November 8, 2018, the Company
ceased recognition of fixed revenues and began the recognition of
variable revenues when they become due beginning in January
2019. The adjustment for the three and nine months ended
September 30, 2019 relates to non-cash expense for third-party
royalties, which are expected to have no net impact for the full
year period, as well as the amortization of the contract asset.
(2) Represents the cash received for inventory transferred to
Collegium at the commencement of the Commercialization
Agreement.
(3) Removal of the impact of revenue adjustment estimates
related to products that we are no longer commercializing. The
three months ended March 31, 2018 included a $12.5 million benefit
related to the release of sales reserves for which the Company is
no longer financially responsible, net of $1.8 million in royalties
payable to a third party.
(4) Legal costs/expenses related to opioid-related litigation,
investigations and regulations pertaining to the Company’s
historical commercialization of opioid products.
(5) Restructuring and other costs represents non-recurring costs
associated with the Company’s restructuring, reincorporation,
headquarters relocation and CEO transition.
(6) Recognition of $10.1 million loss on the September 2019
disposal of equipment residing at a manufacturing supplier that
will no longer be used in future production.
(7) In connection with the August 2019 debt refinancing of
the convertible notes the Company recognized a net gain of $26.0
million, comprised of a $26.4 million gain on debt extinguishment
offset by approximately $0.4 million of nonrecurring related
expenses.
RECONCILIATION OF GAAP NET INCOME/(LOSS)
TO NON-GAAP ADJUSTED EARNINGS(in thousands, except
per share amounts)(unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
GAAP net (loss)/income |
$ |
3,331 |
|
|
$ |
48,270 |
|
|
$ |
(24,575 |
) |
|
$ |
61,046 |
|
Commercialization agreement revenues (1) |
3,804 |
|
|
2,862 |
|
|
7,667 |
|
|
(46,426 |
) |
Commercialization agreement cost of sales (2) |
— |
|
|
— |
|
|
— |
|
|
6,200 |
|
Non-cash interest expense on debt |
5,870 |
|
|
5,490 |
|
|
18,090 |
|
|
16,298 |
|
Nucynta and Lazanda revenue reserves (3) |
(1,163 |
) |
|
2 |
|
|
(1,152 |
) |
|
(11,249 |
) |
Expenses for opioid-related litigation, investigations and
regulations (4) |
2,174 |
|
|
1,313 |
|
|
7,024 |
|
|
4,360 |
|
Purdue litigation settlement |
— |
|
|
(62,000 |
) |
|
— |
|
|
(62,000 |
) |
Intangible amortization related to product acquisitions |
25,444 |
|
|
25,443 |
|
|
76,331 |
|
|
76,331 |
|
Contingent consideration related to product acquisitions |
— |
|
|
(117 |
) |
|
(142 |
) |
|
(658 |
) |
Stock-based compensation |
3,004 |
|
|
2,944 |
|
|
8,340 |
|
|
7,890 |
|
Restructuring and related costs (5) |
— |
|
|
4,079 |
|
|
— |
|
|
19,383 |
|
Other costs |
— |
|
|
75 |
|
|
(332 |
) |
|
123 |
|
Loss on disposal of equipment (6) |
10,070 |
|
|
— |
|
|
10,076 |
|
|
— |
|
Gain on debt extinguishment, net (7) |
(25,968 |
) |
|
— |
|
|
(25,968 |
) |
|
— |
|
Change in fair value of warrants |
1,423 |
|
|
— |
|
|
4,900 |
|
|
— |
|
Income tax effect of non-GAAP adjustments (8) |
(4,800 |
) |
|
4,551 |
|
|
(20,963 |
) |
|
(1,159 |
) |
Non-GAAP adjusted
earnings |
$ |
23,189 |
|
|
$ |
32,912 |
|
|
$ |
59,296 |
|
|
$ |
70,139 |
|
Add interest expense of
convertible debt, net of tax (9) |
1,770 |
|
|
1,704 |
|
|
5,176 |
|
|
5,110 |
|
Numerator |
$ |
24,959 |
|
|
$ |
34,616 |
|
|
$ |
64,472 |
|
|
$ |
75,249 |
|
Shares used in calculation
(9) |
105,322 |
|
|
82,690 |
|
|
90,198 |
|
|
82,282 |
|
Non-GAAP adjusted diluted
earnings per share |
$ |
0.24 |
|
|
$ |
0.42 |
|
|
$ |
0.71 |
|
|
$ |
0.91 |
|
(1) For the period from January 8, 2018 through November 8,
2018, the adjustment relates to the non-cash value assigned to
inventory transferred to Collegium. As of the date of the
Commercialization Amendment, on November 8, 2018, the Company
ceased recognition of fixed revenues and began the recognition of
variable revenues when they become due beginning in January
2019. The adjustment for the three and nine months ended
September 30, 2019 relates to non-cash expense for third-party
royalties, which are expected to have no net impact for the full
year period, as well as the amortization of the contract asset.
(2) Represents the cash received for inventory transferred to
Collegium at the commencement of the Commercialization
Agreement.
(3) Removal of the impact of revenue adjustment estimates
related to products that we are no longer commercializing. The
three months ended March 31, 2018 included a $12.5 million benefit
related to the release of sales reserves for which the Company is
no longer financially responsible, net of $1.8 million in royalties
payable to a third party.
(4) Legal costs/expenses related to opioid-related litigation,
investigations and regulations pertaining to the Company’s
historical commercialization of opioid products.
(5) Restructuring and other costs represents non-recurring costs
associated with the Company’s restructuring, reincorporation,
headquarters relocation and CEO transition.
(6) Recognition of $10.1 million loss on the September 2019
disposal of equipment residing at a manufacturing supplier that
will no longer be used in future production.
(7) In connection with the August 2019 debt refinancing of
the convertible notes the Company recognized a net gain of $26.0
million, comprised of a $26.4 million gain on debt extinguishment
offset by approximately $0.4 million of nonrecurring related
expenses.
(8) Calculated by taking the pre-tax non-GAAP adjustments
and applying the statutory tax rate.
(9) The Company uses the if-converted method to compute
diluted earnings per share with respect to its convertible
debt.
RECONCILIATION OF GAAP NET INCOME (LOSS)
PER SHARE TONON-GAAP ADJUSTED EARNINGS PER
SHARE(unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
GAAP net (loss)/income per
share |
$ |
0.05 |
|
|
$ |
0.76 |
|
|
$ |
(0.36 |
) |
|
$ |
0.96 |
|
Conversion from basic shares to diluted shares |
(0.02 |
) |
|
(0.17 |
) |
|
0.08 |
|
|
(0.22 |
) |
Commercialization agreement revenues |
0.04 |
|
|
0.03 |
|
|
0.09 |
|
|
(0.57 |
) |
Commercialization agreement cost of sales |
— |
|
|
— |
|
|
— |
|
|
0.08 |
|
Non-cash interest expense on debt |
0.06 |
|
|
0.07 |
|
|
0.20 |
|
|
0.20 |
|
NUCYNTA and Lazanda revenue reserves |
(0.01 |
) |
|
— |
|
|
(0.01 |
) |
|
(0.14 |
) |
Expenses for opioid-related litigation, investigations and
regulations |
0.02 |
|
|
0.01 |
|
|
0.08 |
|
|
0.05 |
|
Purdue litigation settlement |
— |
|
|
(0.75 |
) |
|
— |
|
|
(0.75 |
) |
Intangible amortization related to product acquisitions |
0.24 |
|
|
0.31 |
|
|
0.85 |
|
|
0.92 |
|
Contingent consideration related to product acquisitions |
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock based compensation |
0.03 |
|
|
0.03 |
|
|
0.09 |
|
|
0.10 |
|
Restructuring and related costs |
— |
|
|
0.05 |
|
|
— |
|
|
0.23 |
|
Loss on disposal of equipment |
0.10 |
|
|
— |
|
|
0.11 |
|
|
— |
|
Gain on debt extinguishment, net |
(0.25 |
) |
|
— |
|
|
(0.29 |
) |
|
— |
|
Change in fair value of warrants |
0.01 |
|
|
— |
|
|
0.05 |
|
|
— |
|
Income tax effect of non-GAAP adjustments |
(0.05 |
) |
|
0.06 |
|
|
(0.24 |
) |
|
(0.01 |
) |
Add interest expense of convertible debt, net of tax |
0.02 |
|
|
0.02 |
|
|
0.06 |
|
|
0.06 |
|
Non-GAAP adjusted diluted
earnings per share |
$ |
0.24 |
|
|
$ |
0.42 |
|
|
$ |
0.71 |
|
|
$ |
0.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILATIONS OF GAAP REPORTED TO
NON-GAAP ADJUSTED INFORMATIONFor the three months
ended September 30, 2019(in
thousands)(unaudited)
|
|
Commercialization agreement revenues |
|
Product Sales |
|
Royalties and milestones |
|
Cost of sales |
|
Research and development expense |
|
Selling, general and administrative expense |
|
Amortization of intangible assets |
|
Interest expense |
|
Other (Expense) Income, Net |
|
Income taxes (expense) benefit |
GAAP as reported |
|
$ |
27,304 |
|
|
$ |
27,502 |
|
|
$ |
341 |
|
|
$ |
2,243 |
|
|
$ |
1,476 |
|
|
$ |
36,117 |
|
|
$ |
25,444 |
|
|
$ |
(13,872 |
) |
|
$ |
25,621 |
|
|
$ |
1,715 |
|
Commercialization agreement revenues and cost of sales |
|
3,804 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Non-cash interest expense on debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,870 |
|
|
— |
|
|
— |
|
NUCYNTA and Lazanda revenue reserves |
|
— |
|
|
(1,163 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Expenses for opioid-related litigation, investigations and
regulations |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,174 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Intangible amortization related to product acquisitions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(25,444 |
) |
|
— |
|
|
— |
|
|
— |
|
Stock based compensation |
|
— |
|
|
— |
|
|
— |
|
|
(28 |
) |
|
(165 |
) |
|
(2,811 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Restructuring and other costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Loss on disposal of equipment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,070 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Gain on debt extinguishment, net |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(25,968 |
) |
|
— |
|
Change in fair value of warrants |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,423 |
|
|
— |
|
Income tax effect of non-GAAP adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,800 |
) |
Non-GAAP adjusted |
|
$ |
31,108 |
|
|
$ |
26,339 |
|
|
$ |
341 |
|
|
$ |
2,215 |
|
|
$ |
1,311 |
|
|
$ |
21,062 |
|
|
$ |
— |
|
|
$ |
(8,002 |
) |
|
$ |
1,076 |
|
|
$ |
(3,085 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILATIONS OF GAAP REPORTED TO
NON-GAAP ADJUSTED INFORMATIONFor the nine months
ended September 30, 2019(in
thousands)(unaudited)
|
|
Commercialization agreement revenues |
|
Product Sales |
|
Royalties and milestones |
|
Cost of sales |
|
Research and development expense |
|
Selling, general and administrative expense |
|
Amortization of intangible assets |
|
Interest expense |
|
Other (Expense) Income, Net |
|
Income taxes (expense) benefit |
GAAP as reported |
|
$ |
89,163 |
|
|
$ |
79,889 |
|
|
$ |
1,226 |
|
|
$ |
6,942 |
|
|
$ |
4,531 |
|
|
$ |
85,917 |
|
|
$ |
76,331 |
|
|
$ |
(45,268 |
) |
|
$ |
23,772 |
|
|
$ |
364 |
|
Commercialization agreement revenues and cost of sales |
|
7,667 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Non-cash interest expense on debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
18,090 |
|
|
— |
|
|
— |
|
NUCYNTA and Lazanda revenue reserves |
|
— |
|
|
(1,152 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Expenses for opioid-related litigation, investigations and
regulations |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(7,024 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Intangible amortization related to product acquisitions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(76,331 |
) |
|
— |
|
|
— |
|
|
— |
|
Contingent consideration related to product acquisitions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
142 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock based compensation |
|
— |
|
|
— |
|
|
— |
|
|
(78 |
) |
|
(514 |
) |
|
(7,748 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Restructuring and other costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Loss on disposal of equipment |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(10,076 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Gain on debt extinguishment, net |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(25,968 |
) |
|
— |
|
Change in fair value of warrants |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,900 |
|
|
— |
|
Other costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(332 |
) |
|
— |
|
Income tax effect of non-GAAP adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(20,963 |
) |
Non-GAAP adjusted |
|
$ |
96,830 |
|
|
$ |
78,737 |
|
|
$ |
1,226 |
|
|
$ |
6,864 |
|
|
$ |
4,017 |
|
|
$ |
61,211 |
|
|
$ |
— |
|
|
$ |
(27,178 |
) |
|
$ |
2,372 |
|
|
$ |
(20,599 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILATIONS OF GAAP REPORTED TO
NON-GAAP ADJUSTED INFORMATIONFor the three months
ended September 30, 2018(in
thousands)(unaudited)
|
|
Commercialization agreement revenues |
|
Product Sales |
|
Royalties and milestones |
|
Cost of sales |
|
Research and development expense |
|
Selling, general and administrative expense |
|
Restructuring Charges |
|
Amortization of intangible assets |
|
Interest expense |
|
Other (Expense) Income, Net |
|
Income taxes (expense) benefit |
GAAP as reported |
|
$ |
27,781 |
|
|
$ |
29,435 |
|
|
$ |
20,277 |
|
|
$ |
2,975 |
|
|
$ |
2,127 |
|
|
$ |
33,409 |
|
|
$ |
3,911 |
|
|
$ |
25,443 |
|
|
$ |
(17,190 |
) |
|
$ |
62,677 |
|
|
$ |
(6,845 |
) |
Commercialization agreement revenues and cost of sales |
|
2,862 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Non-cash interest expense on debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
5,490 |
|
|
— |
|
|
— |
|
NUCYNTA and Lazanda revenue reserves |
|
— |
|
|
2 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Expenses for opioid-related litigation, investigations and
regulations |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,313 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Intangible amortization related to product acquisitions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(25,443 |
) |
|
— |
|
|
— |
|
|
— |
|
Contingent consideration related to product acquisitions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
117 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock based compensation |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(270 |
) |
|
(2,674 |
) |
|
173 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Restructuring and other costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(243 |
) |
|
(4,084 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Purdue litigation settlement |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(62,000 |
) |
|
— |
|
Income tax effect of non-GAAP adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
4,551 |
|
Non-GAAP adjusted |
|
$ |
30,643 |
|
|
$ |
29,437 |
|
|
$ |
20,277 |
|
|
$ |
2,975 |
|
|
$ |
1,857 |
|
|
$ |
29,296 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
(11,700 |
) |
|
$ |
677 |
|
|
$ |
(2,294 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILATIONS OF GAAP REPORTED TO
NON-GAAP ADJUSTED INFORMATIONFor the nine months
ended September 30, 2018(in
thousands)(unaudited)
|
|
Commercialization agreement revenues |
|
Product Sales |
|
Royalties and milestones |
|
Cost of sales |
|
Research and development expense |
|
Selling, general and administrative expense |
|
Restructuring Charges |
|
Amortization of intangible assets |
|
Interest expense |
|
Other (Expense) Income, Net |
|
Income taxes (expense) benefit |
GAAP as reported |
|
142,760 |
|
|
100,627 |
|
|
25,784 |
|
|
17,772 |
|
|
5,835 |
|
|
93,750 |
|
|
18,742 |
|
|
76,331 |
|
|
(52,268 |
) |
|
62,973 |
|
|
(6,400 |
) |
Commercialization agreement revenues and cost of sales |
|
(46,426 |
) |
|
|
|
— |
|
|
(6,200 |
) |
|
— |
|
|
— |
|
|
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Non-cash interest expense on debt |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
16,298 |
|
|
— |
|
|
— |
|
NUCYNTA and Lazanda revenue reserves |
|
— |
|
|
(11,249 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Expenses for opioid-related litigation, investigations and
regulations |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,360 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Intangible amortization related to product acquisitions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(76,331 |
) |
|
— |
|
|
— |
|
|
— |
|
Contingent consideration related to product acquisitions |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
658 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Stock based compensation |
|
— |
|
|
— |
|
|
— |
|
|
(30 |
) |
|
(337 |
) |
|
(7,523 |
) |
|
(2,385 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Restructuring and other costs |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(764 |
) |
|
(16,357 |
) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Purdue litigation settlement |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(62,000 |
) |
|
— |
|
Income tax effect of non-GAAP adjustments |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,159 |
) |
Non-GAAP adjusted |
|
96,334 |
|
|
89,378 |
|
|
25,784 |
|
|
11,542 |
|
|
5,498 |
|
|
81,761 |
|
|
— |
|
|
— |
|
|
(35,970 |
) |
|
973 |
|
|
(7,559 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FULL-YEAR 2019 NON-GAAP GUIDANCE
RECONCILATION(in
millions)(unaudited)
|
Earnings (1) |
|
Low End |
High End |
GAAP |
|
$ |
(47 |
) |
|
$ |
(42 |
) |
Specified
Items(2) |
|
$ |
171 |
|
|
$ |
171 |
|
Non-GAAP |
|
$ |
124 |
|
|
$ |
129 |
|
(1) GAAP net loss guidance refers to GAAP net loss and
non-GAAP earnings guidance refers to non-GAAP adjusted EBITDA.
(2) For purposes of this forward-looking reconciliation, a
description of the categories of specified items included in this
reconciliation are detailed in the tables above.
SENIOR SECURED NOTE COVENANT
DISCLOSURES
The Company was in compliance with its covenants, including the
Senior Secured Debt Leverage Ratio and Net Sales covenants, with
respect to the Company’s senior secured notes as of
September 30, 2019. Set forth below are additional
disclosures that the Company is required to make in connection with
the senior secured notes.
RECONCILIATION OF GAAP NET INCOME (LOSS)
TO NON-GAAP ADJUSTED EBITDAFor the Rolling Twelve
Month Period Ended September 30, 2019(in
thousands)(unaudited)
The below reconciliation discloses the calculation of Adjusted
EBITDA (as defined in the Company’s senior secured notes) on a
rolling twelve month basis to support covenant compliance in
connection with our senior secured notes.
|
Twelve Months Ended |
|
September 30, 2019 |
GAAP net (loss)/income |
$ |
(48,713 |
) |
Commercialization agreement revenues (1) |
28,929 |
|
Nucynta and Lazanda revenue reserves (2) |
(2,176 |
) |
Expenses for opioid-related litigation, investigations and
regulations (3) |
10,561 |
|
Intangible amortization related to product acquisitions |
101,774 |
|
Contingent consideration related to product acquisitions |
1 |
|
Stock-based compensation |
10,889 |
|
Interest and other income |
(1,139 |
) |
Interest expense |
61,881 |
|
Depreciation |
1,148 |
|
Income taxes expense (benefit) |
(5,697 |
) |
Restructuring and related costs (4) |
1,881 |
|
Loss on disposal of equipment (5) |
10,076 |
|
Gain on debt extinguishment, net (6) |
(25,968 |
) |
Change in fair value of warrants |
4,900 |
|
Adjusted EBITDA |
$ |
148,347 |
|
(1) The adjustment for the twelve months ended September
30, 2019 relates to non-cash expense for third-party royalties,
which are expected to have no net impact for the full year period,
as well as the amortization of the contract asset.
(2) Removal of the impact of revenue adjustment estimates
related to products that we are no longer commercializing.
(3) Legal costs/expenses related to opioid-related litigation,
investigations and regulations pertaining to the Company’s
historical commercialization of opioid products.
(4) Restructuring and other costs represents non-recurring costs
associated with the Company’s restructuring, reincorporation,
headquarters relocation and CEO transition.
(5) Recognition of $10.1 million loss on the September 2019
disposal of equipment residing at a manufacturing supplier that
will no longer be used in future production.
(6) In connection with the August 2019 debt refinancing of
the convertible notes the Company recognized a net gain of $26.0
million, comprised of a $26.4 million gain on debt extinguishment
offset by approximately $0.4 million of nonrecurring related
expenses.
Additional Covenant Disclosures
Long-acting cosyntropin has not yet been launched for commercial
sale and therefore no revenue in respect of this product was
recognized by the Company as of September 30, 2019.
During the rolling twelve month period ended September 30,
2019, the Company collected $123.4 million in cash receipts, net of
cash payments made, in connection with the Company’s
Commercialization Agreement with Collegium.
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