Assertio Holdings, Inc. (“Assertio” or the “Company”) (Nasdaq:
ASRT), a commercial-stage pharmaceutical company, today reported
financial results for the third quarter ended September 30, 2020.
“We are proud of what we have achieved so far this
year, as we have completed the conversion to our new business model
and are seeing early results in the form of improved
per-prescription profitability. Although patient volumes and
elective procedures, the two primary drivers of our business,
continue to be negatively impacted by COVID-19, we are doing
everything within our control to both mitigate the near-term
effects of the pandemic and position Assertio for profitability in
the current environment. Zipsor, our oral formulation of diclofenac
for mild-to-moderate acute pain, achieved an approximately 25%
increase in demand quarter-over-quarter1, which we believe will
support Zipsor sales growth in the coming quarters, and sales of
Indocin continued to grow on a year-over-year and
quarter-over-quarter basis,” said Todd Smith, president and chief
executive officer. “Sales of SPRIX were negatively impacted by a
recent formulary action by a large pharmacy benefit manager
(“PBM”). We intend to vigorously pursue a reversal of this
unexpected decision, which we believe is a disservice to the large
numbers of patients who can benefit from the only labeled opioid
alternative on the market in SPRIX.
“Our entire industry continues to face significant
near-term uncertainty. While it is impossible to ignore the effects
of the challenges we faced, both at the macro-level and specific to
Assertio, I am extremely pleased with our third quarter results. As
we move ahead, we are committed to making financial and operational
decisions aimed at positioning Assertio for sustainable
profitability and positive cash flows. We remain committed to our
strategy of profitably commercializing our current portfolio,
managing our business toward positive cash flow and strategically
expanding our portfolio through focused business development
efforts.”
2020 Third Quarter Highlights:
(unaudited)
(in millions) |
GAAP |
Non-GAAP2 |
Product sales |
$ |
34,266 |
|
$ |
33,666 |
|
Gross Profit Margin3 |
81 |
% |
82 |
% |
Operating Expenses4 |
$ |
27,062 |
|
$ |
21,865 |
|
Net Loss |
$ |
(10,522 |
) |
— |
Adjusted EBITDA |
— |
$ |
6,968 |
|
- Initiated transition of business to
“Hub” model from traditional retail focus, increasing profit per
prescription;
- Indocin sales achieved growth of 46%
quarter-over-quarter and 23% year-over-year compared to pro-forma
sales for the three months ended June 30, 2020 and September 30,
2019, respectively;
- Assertio has terminated its license
related to the SOLUMATRIX® products following completion of a
portfolio optimization exercise aimed at driving margin
improvements at the organizational level and focusing on more
profitable products in its portfolio;
- SPRIX sales were negatively affected
by recent PBM formulary action - Assertio working to pursue
reversal of decision;
- On-track to realize $40.0 million in
operational synergies following completion of merger and
integration of Zyla Life Sciences;
- Cash totaled $34.7 million as of
September 30, 2020, compared with $59.4 million as of June 30,
2020. The quarter-over-quarter decline in cash and cash equivalents
included the effect of the following non-recurring items:
prepayment of debt plus accrued interest totaling $10.3 million,
the delay in timing of approximately $7.3 million in expense
reimbursements due from partners and, $2.8 million of severance and
restructuring related payments made in the quarter.
COVID-19
Assertio continues to closely monitor the COVID-19
pandemic and its impact on the patients who are treated with the
Company's products and the communities where it operates. Over the
past quarter, the Company has taken steps to help minimize the
spread of COVID-19 and at the same time, is working to ensure
continued patient access to its medicines. Assertio’s products are
promotionally sensitive, and demand for these products is driven by
both patient volumes and elective procedures, as well as the
ability of its sales representatives to call on physicians. Because
of COVID-19, both patient visits and elective procedures have
declined compared with the same period in 2019. Additionally,
COVID-19 impacted the Company’s ability to make office visits to
providers who prescribe its products. As a result, the Company
adapted its approach and increased virtual visits which it believes
are, by nature, less effective than in-person sales calls. The
combination of reduced patient volumes and elective procedures, and
the migration to virtual visits resulted in a decline in
prescriptions relative to expectations. The Company believes that
it is prepared with sufficient product inventory, technology to
facilitate virtual office visits and operations prepared to adapt
its work environment as needed. The extent to which our operations
may continue to be impacted by the COVID-19 pandemic will depend
largely on future developments, which are highly uncertain and
cannot be accurately predicted, including new information which may
emerge concerning the severity of the outbreak and actions by
government authorities to contain the outbreak or treat its
impact.
Outlook for 2020
In light of the impact of COVID-19 on the Company’s
business through the first nine months of 2020 and the continuing
unpredictable effect of the pandemic on near-term financial
performance, as well as the September 2020 PBM action related to
SPRIX, Assertio now expects that full-year pro-forma 2020 revenue
will decline approximately 5% from pro-forma revenue for 2019 of
approximately $126 million but the Company is unable to re-confirm
EBITDA margin guidance at this time. Additionally, the Company
remains on track to realize $40.0 million annually in projected
synergies from the merger with Zyla.
Earnings Conference Call
Information
Assertio’s management will host a conference call
to discuss the third quarter 2020 financial results today:
Date: |
Friday, November 6, 2020 |
Time: |
8:30 a.m. ET |
Webcast (live and archive): |
assertiotx.com (Events & Webcasts, Investor page) |
Dial-in numbers: |
1-877-550-3745 (domestic) |
|
1-281-973-6277 (international) |
Replay numbers: |
1-855-859-2056 (domestic) |
|
1-404-537-3406 (international) |
Conference number: |
7487419 |
The live webcast and replay may be accessed at
http://investor.assertiotx.com/. Please connect to the Company’s
website at least 15 minutes prior to the live webcast to ensure
adequate time for any software download that may be needed to
access the webcast. Individuals also may participate in the call by
dialing 1-877-550-3745 (domestic) or 1-281-973-6277 (international)
and asking for the "Assertio Q3 Earnings Call." The replay will be
available approximately two hours after the call on the Assertio
website.
About Assertio Assertio is a
leading commercial pharmaceutical company bringing differentiated
products to patients. The Company has a robust portfolio of branded
prescription products in three areas: neurology, hospital and pain
and inflammation. Assertio has grown through business development
including licensing, mergers and acquisitions. The Company seeks to
leverage its commercial excellence to be the partner of choice. To
learn more about Assertio, visit www.assertiotx.com.
Forward Looking Statements
Statements in this communication that are not historical facts are
forward-looking statements that reflect Assertio's current
expectations, assumptions and estimates of future performance and
economic conditions. These forward-looking statements are made in
reliance on the safe harbor provisions of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and
Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements relate to, among other things,
future events or the future performance or operations of Assertio.
All statements other than historical facts may be forward-looking
statements and can be identified by words such as "anticipate,"
"believe," "could," "design," "estimate," "expect," "forecast,"
"goal," "guidance," "imply," "intend," "may", "objective,"
"opportunity," "outlook," "plan," "position," "potential,"
"predict," "project," "prospective," "pursue," "seek," "should,"
"strategy," "target," "would," "will," "aim" or other similar
expressions that convey the uncertainty of future events or
outcomes are used to identify forward-looking statements. Such
forward-looking statements are not guarantees of future performance
and are subject to risks, uncertainties and other factors, some of
which are beyond the control of Assertio. Factors that could cause
Assertio's actual results to differ materially from those implied
in the forward-looking statements include: (1) risks related to
disruption of management time from ongoing business operations due
to the integration of the merger with Zyla Life Sciences (the
"Merger"); (2) unexpected costs, charges or expenses resulting from
the Merger; (3) the ability of the Assertio to retain key
personnel; (4) potential adverse changes to business relationships
resulting from the Merger; (5) the combined company's ability to
achieve the growth prospects and synergies expected from the
transaction, as well as delays, challenges and expenses associated
with integrating the combined company's existing businesses; (6)
negative effects of the Merger on the market price of Assertio's
common stock, credit ratings and operating results; (7)
legislative, regulatory and economic developments, including
changing business conditions in the industries in which Assertio
operates; (8) Assertio's ability to successfully pursue and
complete business development, strategic partnerships, and
investment opportunities to build and grow for the future; (9) the
commercial success and market acceptance of Assertio's products;
(10) coverage of Assertio’s products by payors and pharmacy benefit
managers; (11) Assertio’s ability to execute on its sales and
marketing strategy, including developing relationships with
customers, physicians, payors and other constituencies; (12) the
entry of any generic products for any of Assertio’s products; (13)
the outcome of Assertio’s opioid-related investigations, Assertio’s
opioid-related litigation brought by state and local governmental
entities and private parties, and Assertio’s insurance, antitrust,
securities class action and other litigation, and the costs and
expenses associated therewith; (14) Assertio's estimates regarding
expenses, future revenues, capital requirements and needs for
additional financing; (15) Assertio's ability to generate
sufficient cash flow from its business to make payments on its
indebtedness; (16) Assertio's ability to restructure or refinance
its indebtedness and Assertio's compliance with the terms and
conditions of the agreements governing its indebtedness; (17)
compliance or non-compliance with legal and regulatory requirements
related to the development or promotion of pharmaceutical products
in the U.S.; (18) Assertio's plans to acquire, in-license or
co-promote other products, and/or acquire companies; (19)
Assertio's ability to raise additional capital, if necessary; (20)
variations in revenues obtained from collaborative agreements; (21)
Assertio's collaborative partners' compliance or non-compliance
with obligations under its collaboration agreements; (22) the
ability of Assertio's common stock to regain compliance with
Nasdaq's minimum closing bid requirement of at least $1.00 per
share; (23) the impact of Zyla's bankruptcy and acquisition of
products from Iroko Pharmaceuticals; (24) obtaining and maintaining
intellectual property protection for the Company’s products; (25)
Assertio’s ability to operate its business without infringing the
intellectual property rights of others; (26) the impact of
disasters, acts of terrorism or global pandemics, including
COVID-19; (27) general market conditions; and other risks listed in
Assertio's filings with the United States Securities and Exchange
Commission ("SEC"). These risks are more fully described in the
joint proxy statement/prospectus filed with the SEC in connection
with the Merger and Assertio's Annual Report on Form 10-K and
Quarterly Reports on Form 10-Q filed with the SEC and in other
filings Assertio makes with the SEC from time to time. While
Assertio may elect to update these forward-looking statements at
some point in the future, it specifically disclaims any obligation
to update or revise any forward-looking-statements contained in
this press release whether as a result of new information or future
events, except as may be required by applicable law.
Investor Contact Lee Roth Burns
McClellan for Assertio Holdings, Inc.
lroth@burnsmc.comir@assertiotx.com
Non-GAAP Financial Measures To
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 measures of EBITDA,
adjusted EBITDA. gross profit, and operating expense 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.
This release also includes estimated non-GAAP
adjusted EBITDA margin information, which the Company believes not
only provides the Company's management with comparable financial
data for internal financial analysis but also provides meaningful
supplemental information to investors. Non-GAAP adjusted EBITDA
margin information enables investors to better understand the
anticipated performance of the business, but should be considered a
supplement to, and not as a substitute for or superior to,
financial measures calculated in accordance with GAAP. No
reconciliation of estimated non-GAAP adjusted EBITDA margin is
provided in this release because some of the excluded information
is not yet ascertainable or accessible and the Company is unable to
quantify certain amounts that would be required to be included in
the most directly comparable GAAP financial measures without
unreasonable efforts.
Specified Items Non-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. Specified items include
non-cash adjustments to Collegium agreement revenue and cost of
sales, adjustments to sales reserves for products the Company is no
longer selling, interest income, interest expense, amortization
expense, stock-based compensation expense, depreciation expense,
income tax expense (benefit), transaction-related costs, CEO
transition and restructuring costs, 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 or extinguishment, non-cash gains
or losses from adjustments to long-lived assets and assets not part
of current operations, fair value adjustments to contingent
consideration, and amortization of fair value inventory step-up as
result of purchase accounting.
Pro forma Items The Company is
providing non-GAAP pro forma net product sales to show the net
product sales as if the Zyla Merger had been completed as of
January 1, 2019, and therefore the Company operated on a combined
basis, including Zyla, for the entirety of 2019 and 2020 periods
presented in this release. The Company believes this supplemental
information is useful to help investors understand the results of
the combined operations, including Zyla, and assess the Company’s
performance from period to period.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (in thousands, except per share
amounts) (unaudited)
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenues: |
|
|
|
|
|
|
|
Product sales, net |
$ |
34,266 |
|
|
$ |
27,502 |
|
|
$ |
63,683 |
|
|
$ |
79,889 |
|
Commercialization agreement, net |
— |
|
|
27,304 |
|
|
11,258 |
|
|
89,163 |
|
Royalties and milestones |
299 |
|
|
341 |
|
|
1,158 |
|
|
1,226 |
|
Total
revenues |
34,565 |
|
|
55,147 |
|
|
76,099 |
|
|
170,278 |
|
Costs and
expenses: |
|
|
|
|
|
|
|
Cost of sales (excluding amortization of intangible assets) |
6,462 |
|
|
2,243 |
|
|
13,099 |
|
|
6,942 |
|
Research and development expenses |
1,316 |
|
|
1,476 |
|
|
3,983 |
|
|
4,531 |
|
Selling, general and administrative expenses |
25,746 |
|
|
36,117 |
|
|
81,191 |
|
|
85,917 |
|
Amortization of intangible assets |
5,587 |
|
|
25,444 |
|
|
18,237 |
|
|
76,331 |
|
Restructuring charges |
268 |
|
|
— |
|
|
6,787 |
|
|
— |
|
Total costs
and expenses |
39,379 |
|
|
65,280 |
|
|
123,297 |
|
|
173,721 |
|
Loss from
operations |
(4,814 |
) |
|
(10,133 |
) |
|
(47,198 |
) |
|
(3,443 |
) |
Other income
(expense): |
|
|
|
|
|
|
|
Gain on sale of Gralise |
— |
|
|
— |
|
|
126,655 |
|
|
— |
|
(Loss) Gain on extinguishment of convertible notes |
— |
|
|
26,385 |
|
|
(47,880 |
) |
|
26,385 |
|
Loss on sale of NUCYNTA |
— |
|
|
— |
|
|
(14,749 |
) |
|
— |
|
Interest expense |
(3,050 |
) |
|
(13,872 |
) |
|
(13,328 |
) |
|
(45,268 |
) |
Change in fair value of contingent consideration |
(1,861 |
) |
|
— |
|
|
(1,861 |
) |
|
— |
|
Loss on prepayment of Senior Notes |
— |
|
|
— |
|
|
(8,233 |
) |
|
— |
|
Other gain (loss) |
253 |
|
|
(764 |
) |
|
(3,571 |
) |
|
(2,613 |
) |
Total other
(expense) income |
(4,658 |
) |
|
11,749 |
|
|
37,033 |
|
|
(21,496 |
) |
Net (loss)
income before income taxes |
(9,472 |
) |
|
1,616 |
|
|
(10,165 |
) |
|
(24,939 |
) |
Income tax
(expense) benefit |
(1,050 |
) |
|
1,715 |
|
|
6,374 |
|
|
364 |
|
Net (loss)
income and Comprehensive (loss) income |
$ |
(10,522 |
) |
|
$ |
3,331 |
|
|
$ |
(3,791 |
) |
|
$ |
(24,575 |
) |
|
|
|
|
|
|
|
|
Basic and
diluted net (loss) income per share |
$ |
(0.09 |
) |
|
$ |
0.05 |
|
|
$ |
(0.04 |
) |
|
$ |
(0.36 |
) |
Shares used
in computing basic and diluted net (loss) income per share |
119,564 |
|
|
72,747 |
|
|
99,832 |
|
|
67,332 |
|
CONDENSED CONSOLIDATED BALANCE
SHEETS (in thousands)
(unaudited)
|
September 30, 2020 |
|
December 31, 2019 |
|
|
|
|
ASSETS |
|
|
|
Current
assets: |
|
|
|
Cash and cash equivalents |
$ |
34,737 |
|
|
$ |
42,107 |
|
Accounts receivable, net |
39,223 |
|
|
42,744 |
|
Inventories, net |
13,469 |
|
|
3,412 |
|
Prepaid and other current assets |
17,063 |
|
|
15,688 |
|
Total current assets |
104,492 |
|
|
103,951 |
|
Property and
equipment, net |
3,773 |
|
|
3,497 |
|
Intangible
assets, net |
206,628 |
|
|
400,535 |
|
Goodwill |
9,008 |
|
|
— |
|
Other
long-term assets |
8,896 |
|
|
19,187 |
|
Total
assets |
332,797 |
|
|
527,170 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
Current
liabilities: |
|
|
|
Accounts payable |
$ |
22,981 |
|
|
$ |
16,193 |
|
Accrued rebates, returns and discounts |
48,932 |
|
|
58,943 |
|
Accrued liabilities |
33,062 |
|
|
18,948 |
|
Current portion of long-term debt |
11,010 |
|
|
80,000 |
|
Contingent consideration, current portion |
6,475 |
|
|
— |
|
Interest payable |
5,829 |
|
|
8,375 |
|
Other current liabilities |
3,085 |
|
|
2,094 |
|
Total current liabilities |
131,374 |
|
|
184,553 |
|
Long-term
debt |
77,235 |
|
|
271,258 |
|
Contingent
consideration |
35,188 |
|
|
168 |
|
Other
long-term liabilities |
13,050 |
|
|
13,233 |
|
Total
liabilities |
256,847 |
|
|
469,212 |
|
Commitments
and contingencies |
|
|
|
Shareholders’ equity: |
|
|
|
Common stock |
12 |
|
|
8 |
|
Additional paid-in capital |
479,530 |
|
|
457,751 |
|
Accumulated deficit |
(403,592 |
) |
|
(399,801 |
) |
Total shareholders’ equity |
75,950 |
|
|
57,958 |
|
Total
liabilities and shareholders' equity |
$ |
332,797 |
|
|
$ |
527,170 |
|
RECONCILIATION OF GAAP NET INCOME (LOSS)
TO NON-GAAP EBITDA and ADJUSTED EBITDA (in
thousands) (unaudited)
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
Financial Statement Classification |
Net (loss) income (GAAP) |
|
$ |
(10,522 |
) |
|
$ |
3,331 |
|
|
$ |
(3,791 |
) |
|
$ |
(24,575 |
) |
|
|
Interest expense |
|
3,050 |
|
|
13,872 |
|
|
13,328 |
|
|
45,268 |
|
|
Interest expense |
Income tax expense (benefit) |
|
1,050 |
|
|
(1,715 |
) |
|
(6,374 |
) |
|
(364 |
) |
|
Income tax (expense) benefit |
Depreciation expense |
|
561 |
|
|
278 |
|
|
1,231 |
|
|
894 |
|
|
Selling, general and administrative expenses |
Amortization of intangible assets |
|
5,587 |
|
|
25,444 |
|
|
18,237 |
|
|
76,331 |
|
|
Amortization of intangible assets |
EBITDA (Non-GAAP) |
|
$ |
(274 |
) |
|
$ |
41,210 |
|
|
$ |
22,631 |
|
|
$ |
97,554 |
|
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
NUCYNTA, Lazanda and Gralise revenue reserves (1) |
|
(602 |
) |
|
(1,163 |
) |
|
(1,709 |
) |
|
(1,152 |
) |
|
Product sales, net |
Commercialization agreement revenues (2) |
|
— |
|
|
3,804 |
|
|
1,846 |
|
|
7,667 |
|
|
Commercialization agreement, net |
Inventory Step-up (3) |
|
518 |
|
|
— |
|
|
2,940 |
|
|
— |
|
|
Cost of sales |
Transaction-related costs (4) |
|
1,960 |
|
|
— |
|
|
18,031 |
|
|
— |
|
|
Selling, general and administrative expenses |
Expenses for opioid-related litigation, investigations and
regulations (5) |
|
1,726 |
|
|
2,174 |
|
|
4,950 |
|
|
7,024 |
|
|
Selling, general and administrative expenses |
Loss (Gain) on debt extinguishment, net (6) |
|
— |
|
|
(25,968 |
) |
|
56,113 |
|
|
(25,968 |
) |
|
Multiple |
Stock-based compensation (7) |
|
1,511 |
|
|
3,004 |
|
|
6,039 |
|
|
8,340 |
|
|
Multiple |
Other (8) |
|
— |
|
|
9,852 |
|
|
1,854 |
|
|
9,019 |
|
|
Multiple |
Loss on sale of NUCYNTA (9) |
|
— |
|
|
— |
|
|
14,749 |
|
|
— |
|
|
Loss on sale of NUCYNTA |
Change in fair value of warrants (10) |
|
— |
|
|
1,423 |
|
|
3,629 |
|
|
4,900 |
|
|
Other gain ( loss) |
Restructuring cost (11) |
|
268 |
|
|
— |
|
|
6,787 |
|
|
— |
|
|
Restructuring charges |
Gain on sale of Gralise (12) |
|
— |
|
|
— |
|
|
(126,655 |
) |
|
— |
|
|
Gain on sale of Gralise |
Changes in fair value of contingent consideration (13) |
|
1,861 |
|
|
|
|
1,861 |
|
|
— |
|
|
Change in fair value of contingent consideration |
Adjusted EBITDA (Non-GAAP) |
|
$ |
6,968 |
|
|
$ |
34,336 |
|
|
$ |
13,066 |
|
|
$ |
107,384 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Refer to the next page for table footnotes
(1) |
|
Removal of the impact of revenue adjustment estimates related to
products that we are no longer commercializing. |
(2) |
|
Adjustments relate to non-cash
expense related to Collegium agreement for third-party royalties,
which have no net impact for the full year period, as well as the
amortization of the contract asset. |
(3) |
|
Fair value of inventories
acquired with the Zyla Merger included an inventory step-up in the
value of product inventories acquired. The three and nine ended
September 30, 2020 cost of sales included $0.5 million and
$2.9 million of amortization of inventory step-up related to Zyla
acquired inventories sold. |
(4) |
|
Represents one-time
transaction-related costs primarily related to legal and consulting
fees for the disposition of Gralise and NUCYNTA, and the merger
with Zyla, including CEO transition related expense. |
(5) |
|
Legal costs/expenses related to
opioid-related litigation, investigations and regulations
pertaining to the Company’s historical commercialization of opioid
products. |
(6) |
|
Loss on debt extinguishment for
the nine months ended September 30, 2020 is a result of the
settlement of all but $0.3 million in aggregate principal
outstanding of the Company’s 2021 and 2024 Notes and settlement of
all the remaining outstanding principal of the Company’s Senior
Notes. Gain on debt extinguishment for the three and nine months
ended September 30, 2019 is 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. |
(7) |
|
Stock based compensation for the
three months ended September 30, 2020 and 2019, included $0.0
million and $0.2 million in Research and development expense,
respectively, $1.5 million and $2.8 million in Selling, general and
administrative expenses, respectively. Stock based compensation for
the nine months ended September 30, 2020 and 2019, included $0.3
million and $0.5 million in Research and development expense,
respectively, $5.7 million and $7.7 million in Selling, general and
administrative expenses, respectively. |
(8) |
|
Other for nine months ended
September 30, 2020 primarily represents a credit loss reserve
recognized in the first quarter of 2020 related the Company’s $3.0
million investment in a company engaged in medical research. This
investment is structured as a long-term loan receivable with a
convertible feature and is valued at amortized cost. Other for the
three and nine months ended September 30, 2019 primarily consists
of a $10.1 million loss recognized in the third quarter of 2019 on
the disposal of equipment residing at a manufacturing supplier that
were longer being used offset by certain non-operating net other
income. |
(9) |
|
Represents the loss recognized on
the sale of the remaining rights, title and interest in and to the
NUCYNTA franchise of products to Collegium in the first quarter of
2020. |
(10) |
|
Represents the change in fair
value of the Company’s Collegium warrant which was sold during the
first quarter of 2020. |
(11) |
|
In April 2020, the Company
executed a limited reduction to its sales force due to the impact
of COVID-19 on its ability to see in-person providers who prescribe
our products. As a result, $0.6 million of severance and benefits
costs was recognized. Subsequent to the Zyla Merger in May 2020,
the Company began implementing reorganization plans of its
workforce and other restructuring activities to realize the
synergies of the Zyla Merger and to re-align resources to strategic
areas and drive growth. As a result, $5.1 million of severance
and benefits costs, $1.0 million of stock-based compensation
expense associated with equity modifications for certain executives
and $0.1 million of other exit costs were recognized as
restructuring cost during the nine months ended September 30,
2020. |
(12) |
|
Represents the gain recognized on
the sale of Gralise to Alvogen in the first quarter of 2020. |
(13) |
|
Pursuant to the Zyla Merger, the
Company assumed a contingent consideration obligation which is
measured at fair value. The fair value of the contingent
consideration is remeasured each reporting period, with changes in
the fair value resulting from a change in the underlying inputs are
recognized in operating expenses until the contingent consideration
arrangement is settled. |
PRO FORMA PRODUCT SALES
(NON-GAAP) (in thousands)
(unaudited)
The following pro forma product sales, net is
presented to illustrate the effects of the Zyla Merger as if the
transaction had occurred on January 1, 2019. The unaudited proforma
information for the three and nine months ended September 30, 2020
and 2019 excludes product sales related to Assertio’s Gralise and
NUCYNTA products which were sold in January 2020 and February 2020,
respectively. This supplemental pro forma financial information has
been prepared for comparative purposes only and is not necessarily
indicative of what actual results would have occurred, or of
results that may occur in the future. Supplemental unaudited
proforma information is based upon accounting estimates and
judgments that the Company believes are reasonable.
The unaudited pro forma product sales, net for the
three and nine months ended September 30, 2020 and 2019 are as
follows:
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
GAAP product sales, net |
|
$ |
34,266 |
|
|
$ |
27,502 |
|
|
$ |
63,683 |
|
|
$ |
79,889 |
|
Add: |
|
|
|
|
|
|
|
|
Zyla product sales prior to Merger (1) |
|
— |
|
|
22,386 |
|
|
27,102 |
|
|
62,005 |
|
Less: |
|
|
|
|
|
|
|
|
Product sales for divested products (2) |
|
(600 |
) |
|
(16,143 |
) |
|
(1,709 |
) |
|
(47,334 |
) |
Pro forma
product sales, net (Non-GAAP) |
|
$ |
33,666 |
|
|
$ |
33,745 |
|
|
$ |
89,076 |
|
|
$ |
94,560 |
|
(1) |
|
Zyla product
sales prior to the Merger on May 20, 2020 for the respective
periods. |
(2) |
|
Product sales of Gralise, NUCYNTA, Lazanda, and TIVORBEX which
we are no longer commercializing. |
RECONCILIATION OF ADJUSTED GROSS PROFIT
MARGIN (NON-GAAP) (in thousands)
(unaudited)
|
|
|
|
|
Three Months Ended September 30, 2020 |
Cost of Sales (GAAP) |
|
$ |
6,462 |
|
Adjustment: |
|
|
Inventory Step-up (1) |
|
(518 |
) |
Adjusted
Cost of Sales |
|
5,944 |
|
|
|
|
Proforma
Product Sales, Net |
|
33,666 |
|
Adjusted
Cost of sales |
|
5,944 |
|
Adjusted
Gross Profit |
|
$ |
27,722 |
|
Adjusted
Gross Profit Margin (Non-GAAP) |
|
82 |
|
(1) Refer to related item in footnote table to
Reconciliation of GAAP Net Income (Loss) to Non-GAAP EBITDA and
Adjusted EBITDA.
RECONCILIATION OF ADJUSTED OPERATING
EXPENSES (NON-GAAP) (in thousands)
(unaudited)
|
|
|
|
|
Three Months Ended September 30, 2020 |
Selling, general and administrative expenses (GAAP) |
|
$ |
25,746 |
|
Research and
development expenses (GAAP) |
|
1,316 |
|
Operating
expenses |
|
27,062 |
|
Adjustments: |
|
|
Transaction-related costs (1) |
|
(1,960 |
) |
Expenses for opioid-related litigation, investigations and
regulations (1) |
|
(1,726 |
) |
Stock-based compensation (1) |
|
(1,511 |
) |
Adjusted
Operating expenses (Non-GAAP) |
|
$ |
21,865 |
|
(1) Refer to related item in footnote table to
Reconciliation of GAAP Net Income (Loss) to Non-GAAP EBITDA and
Adjusted EBITDA.
__________________________ 1 IQVIA-reported average TRx for
13-week period ended October 2, 2020. This includes estimates and
projections, which could cause minor fluctuations in historical
comparisons. Although this data is not reflective of product
revenues, management utilizes this metric to evaluate commercial
strategy. 2 All non-GAAP measures included in this earnings release
are reconciled to the corresponding GAAP measures in the schedules
attached. 3 Gross profit margin = (Product Sales - Cost of Sales) /
Product Sales. 4 Operating Expenses = Selling, general and
administrative expenses + Research and development expenses.
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