MISSISSAUGA, Ontario,
Aug. 9, 2017 /CNW/ -- Aralez
Pharmaceuticals Inc. (NASDAQ: ARLZ) (TSX: ARZ)
("Aralez" or the "Company") today announced
financial results for the second quarter and first half of 2017.
The Company also highlighted certain corporate and commercial
updates. All figures are in U.S. dollars.
"We are pleased to report solid revenue and commercial progress
across our business for the second quarter of 2017," said
Adrian Adams, Chief Executive
Officer of Aralez. "We are also delighted with the strength of the
early launch metrics for Zontivity® and are pleased
that, within weeks of our national launch we have already reached
all-time high prescription levels. We are seeing encouraging
progress with Yosprala® and remain pleased with the
stability and performance of the Toprol-XL® franchise.
The Canadian business has also delivered strong quarter over
quarter growth with the Blexten™ launch significantly
exceeding our expectations. Based on the overall solid performance
of our portfolio, we currently expect to finish the year toward the
upper end of our 2017 guidance range for net revenue. We also
remain focused on enhancing our financial flexibility by creating a
strategic pathway to reduce our debt balance and corresponding cash
interest payments, to further extend our cash runway."
Corporate Updates:
- On June 27, 2017, the Company
announced that the United States District Court for the District of
New Jersey upheld the validity of
two patents covering Vimovo®
(naproxen/esomeprazole magnesium) owned by a subsidiary of Aralez
and licensed to Horizon Pharma, and further held that each
defendant would infringe at least one of the two Aralez
subsidiary's patents with their proposed generic
naproxen/esomeprazole magnesium products.
- On June 8, 2017, the Company
commenced the national U.S. launch of Zontivity, which is now being
promoted by a full complement of 75 sales representatives deployed
to high volume physicians who treat post-myocardial infarction (MI)
and peripheral artery disease (PAD) patients. Aralez is positioning
Zontivity for patients with PAD and/or patients with a history of
MI without a history of stroke or transient ischemic attack (TIA),
and with a more focused targeting on persistent vascular risk
within these specific populations, including patients with PAD,
patients with diabetes and/or patients who are smokers.
- As previously announced, during the second quarter of 2017 the
Company reduced its U.S. sales force by 32% and
implemented a cost savings program with the objective of improving
the Company's cost structure and preserving financial flexibility.
The Company is currently on track in executing this cost savings
program with the majority of savings expected in the second half of
2017.
Financial Summary
Aralez's financial results for the
three and six months ended June 30,
2016 include the operations of Tribute Pharmaceuticals
Canada Inc. (Tribute) from February 5,
2016, the closing date of the Pozen Inc. and Tribute merger
transaction (the "Merger"), through June 30,
2016, but do not include the results of Zontivity or
Toprol-XL and its currently marketed authorized generic
(collectively, the Toprol-XL franchise) as these acquisitions were
completed on September 6, 2016 and
October 31, 2016, respectively.
Aralez's financial results for the three and six months ended
June 30, 2017 include the results of
Tribute, Zontivity and the Toprol-XL franchise. Revenues for
Zontivity were previously recorded in other revenues net of related
cost of product revenues and fees paid during the transition
service period, which expired on March 31,
2017. Effective March 31,
2017, revenues for Zontivity are recorded in net product
revenues. Revenues for the Toprol-XL franchise are recorded in
other revenues net of related cost of product revenues and fees
paid during the transition service period, which will expire on
December 31, 2017.
Second Quarter 2017
Total revenues for the three
months ended June 30, 2017 were
$27.6 million compared to
$12.6 million for the three months
ended June 30, 2016. Net product
revenues of $8.8 million for the
three months ended June 30, 2017
primarily related to the product portfolio acquired with the
acquisition of Tribute as well as net product revenues from
Zontivity, Yosprala and Fibricor®. Other revenues of
$18.9 million for the three months
ended June 30, 2017 were comprised of
net revenues from the Toprol-XL franchise acquisition, license fee
revenue recognized in the second quarter of 2017 in connection with
a license agreement executed in May
2017, and Vimovo royalties. Net product revenues of
$7.4 million for the three months
ended June 30, 2016 related to the
Tribute product portfolio acquired in the Merger. Other revenues of
$5.2 million for the three months
ended June 30, 2016 were comprised
solely of Vimovo royalties.
Selling, general and administrative costs were $32.2 million for the three months ended
June 30, 2017 compared to
$22.7 million for the three months
ended June 30, 2016. The increase was
primarily due to increased costs related to the overall increase in
the Company's U.S. sales force, the build-up of which began in the
second half of 2016, notwithstanding the reduction in sales force
in the second quarter of 2017, and increased promotional expenses
to support the commercialization of Yosprala and relaunch of
Zontivity in the U.S. during the second quarter of 2017.
Net loss in the second quarter of 2017 was $27.5 million, or $0.42 per diluted share, compared to net loss of
$17.5 million, or $0.27 per diluted share, in the second quarter of
2016. Adjusted EBITDA in the second quarter of 2017 was
($3.3) million compared to
($11.4) million in the second quarter
of 2016.
First Half 2017
Total revenues for the first half of
2017 were $53.6 million compared to
$20.6 million for the first half of
2016. Net product revenues of $15.5
million for the first half of 2017 primarily related to the
product portfolio acquired with the acquisition of Tribute as well
as net product revenues from Zontivity, Yosprala and Fibricor.
Other revenues of $38.1 million for
the first half of 2017 were primarily comprised of net revenues
from the Toprol-XL franchise, license fee revenue recognized in the
second quarter of 2017 in connection with a license agreement
executed in May 2017, and Vimovo
royalties. Net product revenues of $10.9
million for the first half of 2016 related to the Tribute
product portfolio acquired in the Merger. Other revenues of
$9.7 million for the first half of
2016 were comprised solely of Vimovo royalties.
Selling, general and administrative costs were $63.1 million for the first half of 2017 compared
to $60.2 million for the first half
of 2016. The increase in 2017 was primarily due to increased costs
related to the overall increase in the Company's U.S. sales force,
the build-up of which began in the second half 2016,
notwithstanding the reduction in sales force in the second quarter
of 2017, and increased promotional expenses to support the
commercialization of Yosprala and Zontivity relaunch in the U.S.
during the first half of 2017. The increased costs in 2017 were
partially offset by costs related to the Merger in the prior
year.
Net loss in the first half of 2017 was $55.0 million, or $0.83 per diluted share, compared to net loss of
$51.3 million, or $0.96 per diluted share, in the first half of
2016. Adjusted EBITDA in the first half of 2017 was
($7.0) million compared to
($22.5) million in the first half of
2016.
Balance Sheet
As of June 30,
2017, approximately 66.8 million of the Company's common
shares were issued and outstanding and the Company had cash and
cash equivalents of approximately $55.8
million. The Company currently believes it has sufficient
cash to fund operations for at least the next 12 months.
Second Quarter Results Webcast
Aralez will host a
webcast this morning, August 9, 2017
at 9:00 a.m. ET to present second
quarter 2017 results. The webcast can be accessed live and will be
available for replay at www.aralez.com.
Conference Call Details
Date: Wednesday, August 9, 2017
Time: 9:00 a.m. ET
Dial-in (U.S.): 877-407-8037
Dial-in (International): 201-689-8037
About Aralez Pharmaceuticals Inc.
Aralez
Pharmaceuticals Inc. (NASDAQ: ARLZ) (TSX: ARZ) is a global
specialty pharmaceutical company focused on delivering meaningful
products to improve patients' lives while creating shareholder
value by acquiring, developing and commercializing products
primarily in cardiovascular, pain and other specialty areas.
Aralez's Global Headquarters is in Ontario, Canada, the U.S. Headquarters is in
Princeton, New Jersey and the
Irish Headquarters is in Dublin,
Ireland. More information about Aralez can be found at
www.aralez.com.
Use of Non-GAAP Financial Measures
The Company has
presented certain non-GAAP financial measures, including Adjusted
EBITDA (as defined below). These non-GAAP financial measures
exclude certain amounts, expenses or income, from the corresponding
financial measures determined in accordance with accounting
principles generally accepted in the U.S. (GAAP).
Adjusted EBITDA for the Company is defined as net income (loss)
before income taxes, interest expense and financing costs,
depreciation and amortization, share-based compensation, gains or
losses related to warrants, changes to the fair value of contingent
consideration, restructuring costs, retention and severance costs,
impact of an acquisition of a business or product, transaction
costs related to (i) acquisitions (ii) business development
opportunities and (iii) debt refinancing options, acquired
in-process R&D, tax equalization payments, interest income, the
impact of changes in foreign currency rates, asset impairment
charges, losses or gains on sale of assets, losses or gains on
extinguishment or modification of debt and the impact of a sale or
disposition of a business or product, including discontinued
operations.
Management believes this non-GAAP information is useful for
investors, taken in conjunction with GAAP financial statements,
because it provides greater transparency regarding the Company's
operating performance by excluding (i) non-cash expenses that are
substantially dependent on changes in the market price of the
Company's common shares, and (ii) discrete items, such as merger
and acquisition costs, transaction costs related to acquisitions,
business development opportunities and debt refinancing options,
and severance and retention expenses, that may not be consistently
recurring. Management uses these measures, among other factors, to
assess and analyze operational results and to make financial and
operational decisions. Non-GAAP information is not prepared under a
comprehensive set of accounting rules and should only be used
to supplement an understanding of the Company's operating results
as reported under GAAP, not as a substitute for GAAP. In addition,
these non-GAAP financial measures are unlikely to be comparable
with non-GAAP information provided by other companies. The
determination of the amounts that are excluded from non-GAAP
financial measures is a matter of management judgment and depends
upon, among other factors, the nature of the underlying expense or
income amounts. Reconciliations between non-GAAP financial measures
and the most comparable GAAP financial measures are included in the
tables accompanying this press release.
Cautionary Note Regarding Forward-Looking Statements
This press release includes certain statements that constitute
"forward-looking statements" within the meaning of applicable
securities laws. Forward-looking statements include, but are not
limited to, statements regarding the launch of Zontivity, including
the strength of the early launch metrics and the Company's
positioning and targeting for the product, encouraging progress
with Yosprala, the stability and performance of the Toprol-XL
franchise, the Blexten launch significantly exceeding expectations,
that the Company currently expects to finish the year toward the
upper end of its 2017 guidance range for net revenue, the Company's
focus on enhancing its financial flexibility by creating a
strategic pathway to reduce its debt balance and corresponding cash
interest payments, to further extend its cash runway, the Company's
cost savings program with the objective of improving the Company's
cost structure and preserving financial flexibility, including that
the Company is currently on track in executing this cost savings
program with the majority of savings expected in the second half of
2017, that the Company currently believes it has sufficient cash to
fund operations for at least the next 12 months, the outlook for
the Company's future business and financial performance, the
Company's strategies, plans, objectives, goals, prospects, future
performance or results of current and anticipated products, and
other statements that are not historical facts, and such statements
are typically identified by use of terms such as "may," "will,"
"would," "should," "could," "expect," "plan," "intend,"
"anticipate," "believe," "estimate," "predict," "likely,"
"potential," "continue" or the negative or similar words,
variations of these words or other comparable words or phrases,
although some forward-looking statements are expressed
differently.
You should be aware that the forward-looking statements included
herein represent management's current judgment and expectations,
and are based on current estimates and assumptions made by
management in light of its experience and perception of historical
trends, current conditions and expected future developments, as
well as other factors that it believes are appropriate and
reasonable under the circumstances, but there can be no assurance
that such estimates and assumptions will prove to be correct and,
as a result, the forward-looking statements based on those
estimates and assumptions could prove to be incorrect. Accordingly,
actual results, level of activity, performance or achievements or
future events or developments could differ materially from those
expressed or implied in the forward-looking statements.
Material factors, risks or assumptions that were applied or taken
into account in providing financial guidance for the year ending
December 31, 2017, which is set forth
in our first quarter 2017 earnings press release dated May 9, 2017 and is referred to in part in this
press release, include, but are not limited to, (i) successfully
integrating Zontivity and the Toprol-XL franchise, (ii) expected
costs to support the commercialization efforts with respect to
Yosprala, Fibricor, Zontivity, the Toprol-XL franchise and the
Canadian product portfolio as well as expected costs to support the
global corporate structure, (iii) the exclusion of any impact from
additional potential strategic business transactions, such as
mergers, acquisitions, divestures, or financings that may be
consummated, (iv) an increase in prescription trends and revenues
for both Yosprala and Zontivity in 2017 relative to 2016, (v) with
respect to the Toprol-XL franchise, pricing with respect to the AG
business at or near current levels and pricing with respect to VA
business as reflected in our modified VA National Contract, (vi)
our ability to source, qualify and maintain suppliers for our
drugs, including for Yosprala, (vii) our ability to mitigate legal
and regulatory risks and uncertainties, including ongoing
litigation related to Vimovo and Yosprala, that may negatively
impact our expectations regarding our products and product
candidates, (viii) future performance of our commercialization
partners being in line with our expectations and the impact such
performance is anticipated to have being consistent with our
expectations with respect to our revenue projections, (ix) currency
rates remaining at or near current levels for the remainder of
fiscal 2017, (x) ongoing operational activities to manage expenses
and improve profitability; and (xi) prescription trends,
competition, pricing levels, inventory, and the anticipated timing
of future product launches and events remaining in line with
management's current beliefs. Readers are cautioned that actual
future operating results and economic performance of the Company,
including with respect to our net revenues and Adjusted EBITDA for
the year ending December 31, 2017,
are subject to a number of risks and uncertainties, including,
among other things, those described below, and could differ
materially from what is currently expected as set out in this press
release.
In addition, the Company's operations and 2017 financial
guidance involve risks and uncertainties, many of which are outside
of the Company's control, and any one or any combination of these
risks and uncertainties could also affect whether the
forward-looking statements ultimately prove to be correct and could
cause the Company's actual results, level of activity, performance
or achievements or future events or developments to differ
materially from those expressed or implied by the forward-looking
statements. These risks and uncertainties include, without
limitation, the Company's inability to maintain a sales force of
sufficient scale for the commercialization of its products in a
timely and cost-effective manner; the Company's failure to
successfully commercialize its products and product candidates;
competition, including increased generic competition; costs and
delays in the development and/or approval of the Company's product
candidates, including as a result of the need to conduct additional
studies or due to issues with third-party API or finished product
manufacturers, or the failure to obtain such approval of the
Company's product candidates for all expected indications or in all
targeted territories; with respect to certain products, dependence
on reimbursement from third-party payors and the possibility of a
failure to obtain coverage or reduction in the extent of
reimbursement; the inability to maintain or enter into, and the
risks resulting from the Company's dependence upon, collaboration
or contractual arrangements necessary for the development,
manufacture, commercialization, marketing, sales and distribution
of any products, including the Company's dependence on AstraZeneca
AB and Horizon Pharma USA, Inc.
for the sales and marketing of Vimovo, the Company's dependence on
Patheon Pharmaceuticals Inc. for the manufacture of Yosprala, the
Company's dependence on a subsidiary of Merck & Co. for the
supply of Zontivity and the Company's dependence on AstraZeneca AB
for the manufacture and supply of Toprol-XL and its currently
marketed authorized generic (AG); the Company's dependence on
maintaining and renewing contracts with customers, distributors and
other counterparties (certain of which may be under negotiation
from time to time), including the Company's inability to renew
existing contracts on favorable terms, and the risks that we may
not be able to maintain the Company's existing terms with certain
customers, distributors and other counterparties; the Company's
ability to protect its intellectual property and defend its
patents, including if generic competitors successfully appeal the
recent District Court decision with respect to certain Vimovo
patents; regulatory obligations and oversight; failure to
successfully identify, execute, integrate, maintain and realize
expected benefits from new acquisitions, such as the acquisitions
of Tribute, Zontivity and Toprol-XL and its AG; failure to realize
the expected benefits of the Company's initiatives to reduce costs
and improve profitability; fluctuations in the value of certain
foreign currencies, including the Canadian dollar, in relation to
the U.S. dollar, and other world currencies; changes in laws and
regulations, including tax laws and unanticipated tax liabilities
and regulations regarding the pricing of pharmaceutical products;
risks related to the Company's financing and liquidity; general
adverse economic, market and business conditions; and those risks
detailed from time-to-time under the caption "Risk Factors" and
elsewhere in the Company's Securities and Exchange Commission (SEC)
filings and reports and Canadian securities law filings, including
in the Company's Annual Report on Form 10-K for the year ended
December 31, 2016 and its Quarterly
Report on Form 10-Q for the quarterly period ended June 30, 2017, which will be available on EDGAR
at www.sec.gov, on SEDAR at www.sedar.com, and on the Company's
website at www.aralez.com, and those described from time to time in
the Company's future reports filed with the SEC and applicable
securities regulatory authorities in Canada. You should not place undue importance
on forward-looking statements and should not rely upon this
information as of any other date. We undertake no obligation to
publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise, unless
required by law.
Aralez Pharmaceuticals US Inc. Contact:
Nichol L. Ochsner
Executive Director, Investor Relations & Corporate
Communications
732-754-2545
nochsner@aralez.com
Financial Tables to Follow
ARALEZ
PHARMACEUTICALS INC.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
|
(in thousands, except
per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product revenues,
net
|
|
$
|
8,768
|
|
$
|
7,375
|
|
$
|
15,454
|
|
$
|
10,940
|
|
Other
revenues
|
|
|
18,850
|
|
|
5,203
|
|
|
38,133
|
|
|
9,695
|
|
Total revenues,
net
|
|
|
27,618
|
|
|
12,578
|
|
|
53,587
|
|
|
20,635
|
|
Costs and
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of product
revenues (exclusive of amortization
shown separately below)
|
|
|
2,948
|
|
|
3,360
|
|
|
5,704
|
|
|
5,898
|
|
Selling, general and
administrative
|
|
|
32,234
|
|
|
22,731
|
|
|
63,080
|
|
|
60,190
|
|
Research and
development
|
|
|
728
|
|
|
1,474
|
|
|
822
|
|
|
5,886
|
|
Amortization of
intangible assets
|
|
|
8,534
|
|
|
2,134
|
|
|
17,047
|
|
|
3,406
|
|
Change in fair value of
contingent consideration
|
|
|
3,594
|
|
|
—
|
|
|
8,037
|
|
|
—
|
|
Total costs and
expenses
|
|
|
48,038
|
|
|
29,699
|
|
|
94,690
|
|
|
75,380
|
|
Loss from
operations
|
|
|
(20,420)
|
|
|
(17,121)
|
|
|
(41,103)
|
|
|
(54,745)
|
|
Interest
expense
|
|
|
(6,727)
|
|
|
(593)
|
|
|
(13,380)
|
|
|
(900)
|
|
Other income (expense),
net
|
|
|
109
|
|
|
(270)
|
|
|
520
|
|
|
4,527
|
|
Loss before income
taxes
|
|
|
(27,038)
|
|
|
(17,984)
|
|
|
(53,963)
|
|
|
(51,118)
|
|
Income tax expense
(benefit)
|
|
|
482
|
|
|
(509)
|
|
|
1,034
|
|
|
145
|
|
Net loss
|
|
$
|
(27,520)
|
|
$
|
(17,475)
|
|
$
|
(54,997)
|
|
$
|
(51,263)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net loss per
common share
|
|
$
|
(0.42)
|
|
$
|
(0.27)
|
|
$
|
(0.83)
|
|
$
|
(0.88)
|
|
Diluted net loss per
common share
|
|
$
|
(0.42)
|
|
$
|
(0.27)
|
|
$
|
(0.83)
|
|
$
|
(0.96)
|
|
Shares used in
computing basic net loss per common share
|
|
|
66,110
|
|
|
64,360
|
|
|
65,901
|
|
|
58,258
|
|
Shares used in
computing diluted net loss per common share
|
|
|
66,110
|
|
|
64,363
|
|
|
65,901
|
|
|
58,362
|
|
ARALEZ
PHARMACEUTICALS INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS (unaudited)
|
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
June 30, 2017
|
|
December 31, 2016
|
|
ASSETS
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
55,776
|
|
$
|
64,943
|
|
Accounts receivable,
net
|
|
|
9,548
|
|
|
20,405
|
|
Inventory
|
|
|
4,994
|
|
|
4,548
|
|
Prepaid expenses and
other current assets
|
|
|
4,164
|
|
|
2,435
|
|
Property and
equipment, net
|
|
|
8,061
|
|
|
7,316
|
|
Goodwill
|
|
|
79,202
|
|
|
76,694
|
|
Other intangible
assets, net
|
|
|
325,359
|
|
|
340,194
|
|
Other long-term
assets
|
|
|
1,409
|
|
|
842
|
|
Total
assets
|
|
$
|
488,513
|
|
$
|
517,377
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
24,494
|
|
$
|
8,833
|
|
Accrued
expenses
|
|
|
28,916
|
|
|
32,141
|
|
Short-term contingent
consideration
|
|
|
9,151
|
|
|
10,430
|
|
Other current
liabilities
|
|
|
4,268
|
|
|
5,870
|
|
Long-term
debt
|
|
|
274,494
|
|
|
274,441
|
|
Deferred tax
liability
|
|
|
3,386
|
|
|
3,273
|
|
Long-term contingent
consideration
|
|
|
65,815
|
|
|
60,685
|
|
Other long-term
liabilities
|
|
|
2,962
|
|
|
2,218
|
|
Total
liabilities
|
|
|
413,486
|
|
|
397,891
|
|
Total shareholders'
equity
|
|
|
75,027
|
|
|
119,486
|
|
Total liabilities and
shareholders' equity
|
|
$
|
488,513
|
|
$
|
517,377
|
|
ARALEZ
PHARMACEUTICALS INC.
|
RECONCILIATION OF
GAAP TO NON-GAAP FINANCIAL MEASURES
|
(unaudited; in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$
|
(27,520)
|
|
$
|
(17,475)
|
|
$
|
(54,997)
|
|
$
|
(51,263)
|
|
Share-based
compensation
|
|
|
2,953
|
|
|
2,633
|
|
|
5,777
|
|
|
6,543
|
|
Severance and
retention
|
|
|
863
|
|
|
606
|
|
|
925
|
|
|
1,700
|
|
Depreciation and
amortization expense
|
|
|
8,902
|
|
|
2,170
|
|
|
17,777
|
|
|
3,481
|
|
Interest
expense
|
|
|
6,727
|
|
|
593
|
|
|
13,380
|
|
|
900
|
|
Accretion of contingent
consideration
|
|
|
3,594
|
|
|
—
|
|
|
8,037
|
|
|
—
|
|
Change in fair value of
warrant liability
|
|
|
—
|
|
|
(159)
|
|
|
(24)
|
|
|
(4,740)
|
|
Transaction related
expenses
|
|
|
782
|
|
|
317
|
|
|
1,605
|
|
|
8,500
|
|
Excise tax equalization
payments
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,043
|
|
Other (income) expense,
net
|
|
|
(109)
|
|
|
429
|
|
|
(496)
|
|
|
213
|
|
Income tax
expense
|
|
|
482
|
|
|
(509)
|
|
|
1,034
|
|
|
145
|
|
Adjusted
EBITDA
|
|
$
|
(3,326)
|
|
$
|
(11,395)
|
|
$
|
(6,982)
|
|
$
|
(22,478)
|
|
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SOURCE Aralez Pharmaceuticals Inc.