You are here

Assertio Therapeutics Announces Third-Quarter 2018 Financial Results

-- Confirms Full-Year Net Sales Guidance Range for the Neurology Franchise --
-- Raises Full-Year Earnings Guidance and Confirms Adjusted EBITDA Guidance --
-- Amends and Strengthens Commercial Agreement with Collegium --
-- Confirms Regulatory Plan to File for FDA Approval of Cosyntropin Depot by Year End --

LAKE FOREST, Ill., Nov. 08, 2018 (GLOBE NEWSWIRE) -- Assertio Therapeutics, Inc. (NASDAQ: ASRT) today reported financial results for the quarter ended September 30, 2018, and provided an update on its business performance and strategic initiatives.

“Our third-quarter performance positions us well to achieve our neurology franchise net sales and adjusted EBITDA goals for the full year,” said Arthur Higgins, President and CEO of Assertio. “We remain focused on diversifying our commercial portfolio and advancing the development of cosyntropin depot, which we plan to file for FDA approval by year end. In addition, this year we’ve secured $97 million in non-dilutive cash, which improves our leverage position as we continue to focus on debt reduction. Lastly, and significantly, we amended and strengthened our commercial agreement with Collegium.”

Financial Highlights

  • Third-quarter GAAP net revenues of $77.5 million(1) or $81.2 million(1)(4) on a non-GAAP basis(4)
  • Third-quarter GAAP net income of $48.3 million
  • Third-quarter GAAP EPS of $0.65 per diluted share(2) and non-GAAP EPS of $0.42(3) per diluted share
  • Third-quarter non-GAAP adjusted EBITDA of $45.0 million(1)
  • Third-quarter ending cash and cash equivalents of $121.9 million(2)

Business Highlights

  • Strengthened NUCYNTA Collaboration with Collegium -  Extends Minimum Term; Annual Royalty Payments Through 2021: On November 8, 2018, the Company announced an amendment to the Commercialization Agreement with Collegium Pharmaceutical, Inc. relating to the NUCYNTA® franchise. The amendment strengthens the collaboration and further aligns the parties’ mutual interest in growing the franchise:
    • Secures a minimum term of the Commercialization Agreement through at least December 31, 2021, prior to which Collegium may not terminate.
    • Ensures that if annual net sales remain between $180 million to $233 million, the maximum financial impact per annum between the existing and amended agreement will never exceed $9 million for the next three years.
    • Provides Assertio and its shareholders an opportunity to realize further value from a successful collaboration with Collegium’s issuance to Assertio of a four-year warrant to purchase $20 million of Collegium common stock at an exercise price of $19.20.
    • Reduces Assertio’s ongoing costs and expenses relating to NUCYNTA beginning in 2019 by requiring Collegium to reimburse Assertio for minimum annual royalties payable to Grünenthal GmbH through 2021 and for certain other costs and expenses relating to the NUCYNTA franchise currently carried by Assertio.
    • Compensates Assertio with a $5 million termination fee if Collegium terminates after December 31, 2021 and before December 31, 2022.

(1)      Includes $20 million in cash received from PDL BioPharma..
(2)     Includes $20 million in cash received from PDL BioPharma and a recognized gain of $62 million from the settlement agreement with Purdue Pharma L.P.
(3)     All non-GAAP measures included in this earnings news release are reconciled to the attached corresponding GAAP measures in the schedules.
(4)     The $81.2 million is calculated by adding an adjustment for the anticipated $3.7 million royalty payable to Grünenthal in accordance with our minimum royalty agreement to the GAAP net revenue of $77.5 million.

  • Confirmed Cosyntropin Depot Strategy: The Company continues to expect to file a New Drug Application with the U.S. Food and Drug Administration for cosyntropin depot by year end. The Company will be filing a 505(b)(2) application for a diagnostic indication. The Company believes this filing strategy is the most efficient and expeditious way to make available this important product to patients. As previously announced, Assertio and its development partner also began enrolling and dosing pediatric patients in a new clinical trial evaluating cosyntropin (synthetic ACTH Depot) for the treatment of infantile spasms, a specific seizure type present in infantile epilepsy syndrome, a rare pediatric disorder. Cosyntropin depot is a long-acting, alcohol-free synthetic ACTH analogue that the Company believes, if approved, will offer patients, physicians, and payers in the United States an important treatment alternative.

  • Settled Purdue Pharma Litigation: In the third quarter, the Company recognized a gain of $62 million related to its previously announced patent litigation settlement with Purdue Pharma L.P.  The settlement resolves all pending claims relating to Purdue’s alleged infringement of certain of the Company’s patents in relation to Purdue’s commercialization of Oxycontin® (oxycodone hydrochloride-controlled release).

    Under the terms of the settlement agreement, Purdue will pay Assertio a total of $62 million, of which $30 million in cash was paid on August 28, 2018 and an additional $32 million will be paid on February 1, 2019.

  • Monetized Royalty Stream: In the third quarter, the Company received $20 million in cash in connection with its sale to PDL BioPharma of the Company’s remaining interest in royalty payments payable under license agreements relating to the Company’s Acuform® technology in the Type 2 diabetes therapeutic area. Substantially all of the Company’s interest in such royalty payments were initially sold to PDL in 2013.

  • Completed Delaware Reincorporation, Corporate Headquarters Relocation and Name Change: In the third quarter, the Company completed its reincorporation from California to Delaware and changed its name from “Depomed, Inc.” to “Assertio Therapeutics, Inc.” In connection with the reincorporation and name change, the Company’s common stock began trading under a new ticker symbol “ASRT” and a new CUSIP number, 04545L 107, on August 15, 2018.

    On August 15, 2018, the Company completed the relocation of its corporate headquarters from Newark, CA, to Lake Forest, IL. The relocation is consistent with the Company’s strategy to attract new pharmaceutical talent based in the Chicagoland area.

    Additionally, the Company has entered into a sublease for the majority of its Newark facility and anticipates being able to sublease the remaining office space.

Revenue Summary
(in thousands, unaudited)

    
 Three Months Ended September 30, Nine Months Ended September 30,
 2018 2017 2018 2017
        
Product sales, net:       
Gralise$14,630  $21,103  43,272  57,777 
Cambia10,365  8,164  24,870  23,862 
Zipsor4,441  3,232  13,175  12,286 
Total neurology product sales, net29,436  32,499  81,317  93,925 
        
Nucynta products (1)11  58,665  18,782  183,299 
Lazanda (2)(12) 4,040  528  13,239 
  Pharmacy benefit manager dispute reserve      (4,742)
Total product sales, net29,435  95,204  100,627  285,721 
        
Commercialization Agreement (3)       
Commercialization rights and facilitation services, net27,781    87,055   
Revenue from transfer of inventory    55,705   
Royalties and milestone revenue20,277  209  25,784  596 
        
Total revenues$77,493  $95,413  $269,171  $286,317 


 

(1) The Company transitioned the commercial rights to sell NUCYNTA to Collegium on January 9, 2018. NUCYNTA product sales for the three months ended September 30, 2018 relate to sales reserve estimate adjustments. NUCYNTA product sales for the nine months ended September 30, 2018 reflect the Company's sales of NUCYNTA during a stub period between January 1st and January 8th, and also includes a $12.5 million benefit related to the release of sales reserves for which the Company is no longer financially responsible.

(2) The Company divested Lazanda in November 2017. Product sales for the three and nine months ended September 30, 2018 relate to sales reserve estimate adjustments.

(3) The Commercialization Agreement revenues for the nine months ended September 30, 2018 includes $87.1 million related to the commercialization rights and facilitation services provided to Collegium and $55.7 million related to the fair value of inventory transferred to Collegium. The $27.8 million of the Commercialization Agreement revenues recognized in the third quarter is net of a $3.7 million royalty payable to Grünenthal.

2018 Financial Guidance
The Company confirms its full-year net sales guidance range for the neurology franchise and its full-year adjusted EBITDA guidance ranges. The Company is raising its full-year net (loss)/income guidance to be within the range of $40 million to $50 million from the previous range of ($8) million to ($18) million related to the positive impact of the Purdue Pharma litigation settlement, offset by the impact of taxes.

   
(in millions)Prior 2018 GuidanceCurrent 2018 Guidance
Neurology Franchise Net Sales$105 to $110 million$105 to $110 million
GAAP SG&A Expense$118 to $128 million$118 to $128 million
GAAP R&D Expense$9 to $14 million$9 to $14 million
Non-GAAP SG&A Expense$100 to $110 million$100 to $110 million
Non-GAAP R&D Expense$7 to $12 million$7 to $12 million
GAAP Net (Loss)/Income($8) to ($18) million$40 to $50 million*
Non-GAAP Adjusted EBITDA$145 to $155 million$145 to $155 million

*Connotes modified 2018 guidance

Conference Call and Webcast
Assertio will host a conference call today, Thursday, November 8, 2018 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 (844) 839-0046 (United States) or (857) 270-6032 (International) referencing Conference ID 2462479.

  • 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 1995
The statements that are not historical facts contained in this release are forward-looking statements that involve risks and uncertainties including, but not limited to, the commercialization of Gralise, CAMBIA, and Zipsor, royalties associated with Collegium’s commercialization of NUCYNTA and NUCYNTA ER, regulatory approval and clinical development of cosyntropin depot, Assertio’s financial outlook for 2018 and expectations regarding financial results and potential business opportunities and other risks detailed in the Company’s Securities and Exchange Commission filings, including the Company’s most recent Annual Report on Form 10-K and most recent Quarterly Report on Form 10-Q. The inclusion of forward-looking statements should not be regarded as a representation that any of the Company’s plans or objectives will be achieved. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

Investor and Media Contact:
John B. Thomas
SVP, Investor Relations and Corporate Communications
jthomas@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 revenue, non-GAAP adjusted earnings, non-GAAP adjusted 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 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, 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, and to adjust for the tax effect related to each of the non-GAAP adjustments.


 
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)
    
 Three Months Ended September 30, Nine Months Ended September 30,
 2018 2017 2018 2017
 (unaudited) (unaudited)
Revenues:       
Product sales, net$29,435  $95,204  $100,627  $285,721 
Commercialization agreement, net27,781    142,760   
Royalties and milestones20,277  209  25,784  596 
Total revenues77,493  95,413  269,171  286,317 
        
Costs and expenses:       
Cost of sales (excluding amortization of intangible assets)2,975  17,396  17,772  54,895 
Research and development expenses2,127  1,761  5,835  12,459 
Selling, general and administrative expenses33,409  48,850  93,750  147,379 
Amortization of intangible assets25,443  25,734  76,331  77,204 
Restructuring charges3,911  434  18,742  3,875 
Total costs and expenses67,865  94,175  212,430  295,812 
        
Income/(loss) from operations9,628  1,238  56,741  (9,495)
Litigation Settlement62,000    62,000   
Interest and other income677  72  973  604 
Loss on prepayment of Senior Notes      (5,364)
Interest expense(17,190) (17,815) (52,268) (55,697)
Benefit (expense) from income taxes(6,845) 513  (6,400) 560 
Net income/(loss)$48,270  $(15,992) $61,046  $(69,392)
        
Basic net income (loss) per share$0.76  $(0.25) $0.96  $(1.11)
Diluted net income (loss) per share$0.65  $(0.25) $0.93  $(1.11)
Basic shares used in calculation63,917  62,997  63,714  62,556 
Diluted shares used in calculation82,690  62,997  82,282  62,556 


 
 
 
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
(unaudited)
    
 September 30, 2018 December 31, 2017
    
Cash, cash equivalents and marketable securities121,904  128,089 
Accounts receivable43,912  72,482 
Inventories4,255  13,042 
Property and equipment, net11,808  13,024 
Intangible assets, net717,542  793,873 
Prepaid and other assets84,086  18,107 
Total assets983,507  1,038,617 
    
Accounts payable17,394  14,732 
Income tax payable  126 
Interest payable10,260  13,220 
Accrued liabilities26,075  60,496 
Accrued rebates, returns and discounts80,913  135,828 
Senior notes302,466  357,220 
Convertible notes283,061  269,510 
Contingent consideration liability877  1,613 
Other liabilities20,052  16,364 
Shareholders’ equity242,409  169,508 
Total liabilities and shareholders’ equity983,507  1,038,617 


 
 
 
RECONCILIATION OF GAAP NET LOSS TO NON-GAAP ADJUSTED EBITDA
(in thousands)
(unaudited)
    
 Three Months Ended September 30, Nine Months Ended September 30,
 2018 2017 2018 2017
 (unaudited) (unaudited)
        
GAAP net income/(loss)$48,270  $(15,992) $61,046  $(69,392)
Commercialization agreement revenues (1)2,862    (46,426)  
Commercialization agreement cost of sales (1)    6,200   
Nucynta sales reserve (2)    (10,711)  
Nucynta and Lazanda revenue reserves (3)2    (538)  
Expenses for opioid-related litigation, investigations and regulations (4)1,313    4,360   
Managed care dispute reserve      4,742 
Intangible amortization related to product acquisitions25,443  25,734  76,331  77,204 
Contingent consideration related to product acquisitions(117) (1,194) (658) (6,525)
Stock-based compensation2,944  2,911  7,890  9,870 
Purdue litigation settlement(62,000)   (62,000)  
Interest and other income(677) (72) (973) (332)
Interest expense17,190  17,584  52,268  59,829 
Depreciation(1,252) 605  1,677  1,839 
Provision for (benefit from) income taxes6,845  (513) 6,400  (560)
Restructuring and related costs (5)4,079  434  19,383  3,875 
Other costs75  612  123  3,142 
Non-GAAP adjusted EBITDA$44,977  $30,109  $114,372  $83,692 


 

(1) Adjustment for the non-cash value assigned to inventory transferred to Collegium.

(2) Represents 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 Grünenthal.

(3) Removal of the impact of revenue adjustment estimates related to products that we are no longer commercializing.

(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.

 
 
 
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,
 2018 2017 2018 2017
 (unaudited) (unaudited)
        
GAAP net income/(loss)$48,270  $(15,992) $61,046  $(69,392)
Commercialization agreement revenues (1)2,862    (46,426)  
Commercialization agreement cost of sales (1)    6,200   
Nucynta sales reserve (2)    (10,711) $ 
Non-cash interest expense on debt5,490  4,839  16,298  15,613 
Nucynta and Lazanda revenue reserves (3)2    (538)  
Managed care dispute reserve      4,742 
Expenses for opioid-related litigation, investigations and regulations (4)1,313    4,360   
Purdue Settlement(62,000)   (62,000)  
Intangible amortization related to product acquisitions25,443  25,734  76,331  77,204 
Contingent consideration related to product acquisitions(117) (1,194) (658) (6,525)
Stock-based compensation2,944  2,911  7,890  9,870 
Restructuring and related costs (5)4,079  434  19,383  3,875 
Valuation allowance on deferred tax assets  4,172    19,274 
Other costs75  612  123  3,142 
Income tax effect of non-GAAP adjustments (6)4,551  (11,846) (1,159) (38,249)
Non-GAAP adjusted earnings$32,912  $9,670  $70,139  $19,554 
Add interest expense of convertible debt, net of tax (7)1,704  1,348  5,110  2,695 
Numerator$34,616  $11,018  $75,249  $22,249 
Shares used in calculation (7)82,690  81,376  82,282  81,607 
Non-GAAP adjusted earnings per share$0.42  $0.14  $0.91  $0.27 


 

(1) Adjustment for the non-cash value assigned to inventory transferred to Collegium.

(2) Represents 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 Grünenthal.

(3) Removal of the impact of revenue adjustment estimates related to products that we are no longer commercializing.

(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) Calculated by taking the pre-tax non-GAAP adjustments and applying the statutory tax rate.

(7) The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt.

 
 
 
RECONCILIATION OF GAAP NET LOSS PER SHARE TO NON-GAAP ADJUSTED EARNINGS PER SHARE
(unaudited)
    
 Three Months Ended September 30, Nine Months Ended September 30,
 2018 2017 2018 2017
        
GAAP net income/(loss) per share0.76  (0.25) 0.96  (1.11)
Conversion from basic shares to diluted shares(0.17) 0.06  (0.22) 0.26 
Commercialization agreement revenues0.03    (0.57)  
Commercialization agreement cost of sales    0.08   
Nucynta sales reserve    (0.13)  
Non-cash interest expense on debt0.07  0.06  0.20  0.19 
Nucynta and Lazanda revenue reserves    (0.01)  
Managed care dispute reserve      0.06 
Expenses for opioid-related litigation, investigations and regulations0.01    0.05   
Litigation settlement(0.75)   (0.75)  
Intangible amortization related to product acquisitions0.31  0.32  0.92  0.95 
Contingent consideration related to product acquisitions  (0.01)   (0.08)
Stock based compensation0.03  0.04  0.10  0.12 
Restructuring and related costs0.05  0.02  0.23  0.09 
Valuation allowance on deferred tax assets  0.05    0.24 
Income tax effect of non-GAAP adjustments0.06  (0.15) (0.01) (0.47)
Add interest expense of convertible debt, net of tax0.02  0.02  0.06  0.03 
Non-GAAP adjusted earnings per share0.42  0.14  0.91  0.27 


 
 
 
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
For 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 Income Provision for (benefit from) income taxes
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                     
Nucynta sales reserve                      
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           (168) (4,084)        
Other costs           (75)          
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 INFORMATION
For 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 Income Provision for (benefit from) income taxes
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)              
Nucynta sales reserve   (10,711)                  
Non-cash interest expense on debt                 16,298     
Nucynta and Lazanda revenue reserves   (538)                  
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           (641) (16,357)        
Other costs           (123)          
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 2018 NON-GAAP GUIDANCE RECONCILATION
(in millions)
(unaudited)
  
 Full Year 2018 Guidance
 Earnings(1) R&D SG&A
 Low End High End Low End High End Low End High End
GAAP$40  $50  $9  $14  $118  $128 
Specified Items(2)$105  $105  $(2) $(2) $(18) $(18)
Non-GAAP$145  $155  $7  $12  $100  $110 


 

(1) GAAP net income guidance refers to GAAP net income 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.


Thursday, November 8, 2018 - 16:06