Teligent, Inc. (NASDAQ: TLGT), a New Jersey-based generics
pharmaceutical company, today announced its financial results for
the fourth quarter and year ended December 31, 2020.
“We are pleased with the progress our team has
made at Teligent. Despite the COVID-19 pandemic presenting
unforeseen challenges, our company made remarkable strides across
multiple areas of our business throughout 2020 that continues into
2021, thanks in large part to the steadfast dedication of our
employees and the encouraging support and vision among our
investors,” said Tim Sawyer, Teligent’s President & Chief
Executive Officer. “We have reduced our debt by $118 million since
June 30, 2020, secured additional equity financing through our ATM
offering, and we continue to make steady progress in addressing the
issues raised in the FDA Warning Letter. Based on the quality
remediation progress to date, which we have shared with the FDA,
and that which we have planned for the coming months, we now
believe that Teligent will be in position to inform the FDA on our
inspection readiness during the third quarter. While there is still
room for further improvement of our balance sheet, we believe our
improved financial condition now provides us with the runway to
execute on multiple strategic initiatives over the next year, which
we further believe will help drive significant shareholder
value.”
Summary of 2020
Achievements
- Appointment of new senior
leadership team with extensive generic and specialty pharmaceutical
experience, including Tim Sawyer as Chief Executive Officer and
Philip Yachmetz as Executive Vice President, Chief Legal Officer
and Corporate Secretary, and John Celentano as Chairman of the
Board.
- Completion of its Series C
Convertible Financing and Exchange in July.
- Completion of its Series D Convertible Note Exchange in
September.
- Implementation and completion in the fourth quarter of a
comprehensive review of all Teligent products designed to remediate
issues identified in the FDA’s warning letter and to further
strengthen quality systems.
Early 2021 Achievements
- In January 2021, the Company
announced a series of additional strategic actions in partnership
with its senior lenders and its Series C noteholders to
recapitalize and enhance the Company’s financial flexibility,
including:
- Completion of $77 million
debt-for-equity exchange with Series C noteholders and senior
secured lenders; this transaction, along with financings earlier in
2020, has resulted in aggregate debt reduction of $118 million
since June 30, 2020.
- Amended Second Lien Credit
Agreement to provide $4.6 million in incremental financing to
support the company’s ongoing liquidity.
- Completed an At-The-Market (ATM)
equity offering, raising gross proceeds of approximately $38.5
million.
- The Company also took steps to
deepen its corporate governance talent, appointing both industry
veteran William S. Marth and financial expert Carter Pate to its
Board of Directors in February 2021.
Financial Highlights
Fourth Quarter 2020 Highlights
- Consolidated net revenues for the
fourth quarter of 2020 were $9.9 million dollars, bringing full
year 2020 revenues to $45.3 million dollars versus $16 million for
the 2019 quarter and $65.9 million for the full year 2019, driven
primarily by lower demand from customer orders due to COVID and our
product remediation efforts in our portfolio products.
- Gross margin for the fourth
quarter, not including an impairment charge was a negative 52.1%
versus a positive 12.2% in the 2019 quarter. Increased costs for
quality remediation and higher reserves for excess and obsolete
inventories contributed to the negative margin in the fourth
quarter of 2020.
- Fourth quarter total operating
expenses, net of the impairment charges were unfavorable compared
with third quarter results. Total selling, general and
administrative costs were $2.2 million higher as higher
salary-related and consulting expenses more than offset lower bad
debt expenses in the fourth quarter. Research & Development
expenses were lower by $0.7 million as salary, insurance and API
expenses were lower, in part due to a prior write-off of API costs
in the third quarter.
- Due to the current forecast of
short-term unprofitable U. S. operations, the uncertainty regarding
the timing of the FDA lifting of the warning letter and other
factors, a formal assessment of recoverability regarding our Buena
plant as well as various intangible assets including trademarks,
technology and other intangible assets was conducted in the fourth
quarter of 2020. As part of this assessment, the Buena plant could
not be assumed to have the FDA warning letter lifted, which had a
significant impact on its assumed value. As a result, the company
recorded impairment charges totaling $79.8 million in the fourth
quarter.
2020 Full Year Highlights
- With respect to full year financial
performance, the Company posted $45.3 million of revenue compared
with $65.9 million in 2019. The COVID-19 pandemic has affected end
user product utilization and disrupted the business for the better
part of 2020, along with lower sales attributable to our product
quality remediation efforts.
- Cost of revenues as a percentage of
total revenues increased to 108% compared with 64% in 2019. Cost of
revenues increased $6.7 million, despite lower revenues, due to
higher remediation costs and inventory reserves. Not included in
cost of sales is an impairment charge of $79.8 million related to
the write down of the Company's manufacturing facility due to long
range forecasted operating results.
- Selling, general and administrative
expenses were higher due to increased salary and consulting costs
regarding restructuring of the company. Research and development
expenses were lower due to lower salary and related expense and
lower research activities as part of an effort to conserve
cash.
For the full year 2020, the Company recorded
impairment charges totaling $101.5 million. These charges included
a first quarter impairment charge of $8.4 million related to
trademarks and technology of $4.9 million and product acquisition
costs of $3.5 million. As previously noted, the Company also
recorded a fourth quarter impairment charge of $79.8 million
related to a valuation assessment of its Buena plant facility,
$10.0 million related to product acquisition costs, $3.2 million
related to trademark and technology and $0.1 million related to
in-process research and development. No impairment charges were
recorded in the prior year.
Full Year 2021 Financial
Guidance
Given the continuing macroeconomic volatility
triggered by the COVID-19 global pandemic and the impact this has
had and will continue to have on the Company’s business plans and
efforts to resolve the Warning Letter issued by the FDA in November
2019, as well as the dependence on the FDA’s schedule to reinspect
the company’s facilities and conduct the pre-approval inspection of
its newly constructed sterile injectable manufacturing facility in
Buena, New Jersey, the Company will not be providing financial
guidance for the year ending December 31, 2021 at this time.
FDA Warning Letter Update
As previously disclosed, the Company received a
warning letter from the FDA in November 2019 following an
inspection from April 2, 2019 to May 20, 2019 of its Buena, New
Jersey manufacturing facility. Following the Company’s submission
of a response to the FDA in April 2020, on August 13, 2020, the
Company received an additional comment letter from the FDA in which
the FDA indicated that it had reviewed the Company’s responses and
deemed them to be inadequate as they failed to address and/or
provide supporting documentation to several of the concerns raised
in the FDA Warning Letter.
The Company has since provided the FDA with
supplemental submissions outlining certain additional changes in
its practices, submitting additional documentation to support
previous and ongoing independent assessments, providing updates to
the Company’s organizational structure, and providing further
detail in regard to ongoing remediation projects (including
comprehensive product quality assessments) to ensure all of our
products are safe, effective and compliant. As part of a
comprehensive effort to significantly boost our quality
initiatives, we appointed a new Vice President of Quality in the
fourth quarter of 2020, and also made a series of senior support
staff additions to further improve our reporting and compliance
functions.
As part of the Company’s efforts to remediate
the issues identified in the FDA Warning Letter and to strengthen
its quality systems, the Company undertook and completed a
comprehensive review of all of our products during the fourth
quarter of 2020. While the review did not identify material issues
with many of the Company’s products, it did identify issues of
non-conformance with respect to certain products, which resulted in
recalls and halting the production of certain products, which the
Company is actively reviewing and remediating. The Company is
continuing to work diligently to remediate all issues cited by the
FDA and those resulting from its comprehensive quality review, and
have and will continue to have active communications with the FDA
regarding its progress. Based on management’s current assessment of
these remediation efforts, the Company believes it will be ready to
inform the FDA on its inspection readiness during the third
quarter. However, since the Company does not control the timing of
the FDA re-inspection of the facility, we cannot predict a precise
time range for the date when FDA will perform the site
re-inspection.
COVID-19 Response Summary
In alignment with the directives in the state of
New Jersey, as a Pharmaceutical manufacturing facility, we are
considered "essential". We have and will continue to remain open as
long as conditions remain safe for our employees in order to
continue to supply our products to the patients that need them. The
Company has taken several preventative measures to help ensure
business continuity, while maintaining safe and stable operations.
We have directed all non-production, Quality or R&D employees,
to continue working from home in accordance with state and local
guidelines while we continue to evaluate and finalize our return to
office protocols. We have implemented social distancing measures
on-site at our manufacturing facility to protect employees and our
products. Our employees are provided daily personal protective
equipment upon their arrival to the site and we have implemented
temperature monitoring services at our newly established single
point of entrance. We have also implemented a more frequent
sanitization process of the facility.
About Teligent, Inc.
Teligent is a specialty generic pharmaceutical
company. Our mission is to be a leading player in the specialty
generic prescription drug market. Learn more on our website
www.teligent.com. Forward-Looking
Statements
This press release includes certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, plans, objectives,
expectations and intentions, and other statements contained in this
press release that are not historical facts and statements
identified by words such as “plan,” “believe,” “continue,” “should”
or words of similar meaning. Factors that could cause actual
results to differ materially from these expectations include, but
are not limited to: our inability to meet current or future
regulatory requirements in connection with existing or future
ANDAs; our inability to achieve profitability; our failure to
obtain FDA approvals as anticipated; our inability to execute and
implement our business plan and strategy; the potential lack of
market acceptance of our products; our inability to protect our
intellectual property rights; changes in global political,
economic, business, competitive, market and regulatory factors; and
our inability to successfully complete future product acquisitions.
These statements are based on our current beliefs or expectations
and are inherently subject to various risks and uncertainties,
including those set forth under the caption “Risk Factors” in
Teligent, Inc.’s most recent Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and other periodic reports we file with the
Securities and Exchange Commission. Teligent, Inc. does not
undertake any obligation to update any forward-looking statements
contained in this document as a result of new information, future
events or otherwise, except as required by
law. Non-GAAP Financial Measures
In addition to reporting financial information
required in accordance with U.S. generally accepted accounting
principles (GAAP), Teligent is also presenting EBITDA, Adjusted
EBITDA and Adjusted EBITDA before product development and research
which are non-GAAP financial measures. Since EBITDA, Adjusted
EBITDA and Adjusted EBITDA before product development and research
costs are non-GAAP financial measures, they should not be used in
isolation or as a substitute for consolidated statements of
operations and cash flow data prepared in accordance with GAAP. In
addition, Teligent's definition of Adjusted EBITDA and adjusted net
loss may not be comparable to similarly titled non-GAAP financial
measures reported by other companies.
Adjusted EBITDA, as defined by the Company, is
calculated as follows:
Net loss, plus:
Depreciation expense
Amortization of intangibles
Impairment losses
Interest expense, net
Amortization of debt issuance costs, debt discounts and debt
extinguishment
Provision for income taxes
Foreign currency exchange gain/(loss)
Loss on debt restructuring
Change in fair value of derivatives
Non-cash stock-based compensation expense
Other expenses
The Company believes that Adjusted EBITDA is a
meaningful indicator, to both Company management and investors, of
the past and expected ongoing operating performance of the Company.
EBITDA is a commonly used and widely accepted measure of financial
performance. Adjusted EBITDA is deemed by the Company to be a
useful performance indicator because it includes an add back of
non-cash and non-recurring operating expenses which have little to
no bearing on cash flows and may be subject to uncontrollable
factors not reflective of the Company's true operational
performance.
While the Company uses EBITDA, Adjusted EBITDA
and Adjusted EBITDA before product development and research costs
in managing and analyzing its business and financial condition and
believes these non-GAAP financial measures to be useful to
investors in evaluating the Company's performance, it is open to
certain shortcomings. EBITDA and Adjusted EBITDA do not take into
account the impact of capital expenditures on either the liquidity
or the financial performance of the Company and likewise omit
share-based compensation expenses, which may vary over time and may
represent a material portion of overall compensation expense. Due
to the inherent limitations of EBITDA, Adjusted EBITDA and Adjusted
EBITDA before product development and research costs, the Company's
management utilizes comparable GAAP financial measures to evaluate
the business in conjunction with EBITDA and Adjusted EBITDA and
encourages investors to do likewise.
The Company also presents a non-GAAP financial
measure of adjusted net income (loss) and adjusted net income
(loss) per diluted share, to show the adjusted net income when
EBITDA adjustments are added back or subtracted out of the
traditional GAAP reported net income (loss). Adjusted diluted
earnings per share, as defined by the Company, is equal to adjusted
net income divided by the actual or anticipated diluted share count
for the applicable period.
Contact: |
Philip YachmetzTeligent, Inc.(856)
776-4632pyachmetz@teligent.comwww.teligent.com |
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