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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Assertio Holdings Inc | NASDAQ:ASRT | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.0888 | 9.64% | 1.01 | 0.99 | 1.01 | 1.03 | 0.94 | 0.94 | 1,195,631 | 00:16:38 |
Third-Quarter Financial Highlights:(unaudited)
Third Quarter 2019 | ||||
(in millions, except earnings per share) | GAAP | Non-GAAP(1) | ||
Total Revenues | $55.1 | — | ||
Net Income | $3.3 | $23.2 | ||
Earnings Per Share | $0.05 | $0.24 | ||
Adjusted EBITDA | — | $34.3 |
(1) All non-GAAP measures included in this earnings release are reconciled to the corresponding GAAP measures in the schedules attached.
“We reported another quarter of strong earnings growth, exceeding non-GAAP adjusted EBITDA expectations for the fifth time in the last six quarters, despite some softness in our top line,” said Arthur Higgins, President and CEO of Assertio. “As a result of this strong performance, as well as our outlook for the fourth quarter, today we are raising our non-GAAP adjusted EBITDA guidance range for the full year. We have achieved significant operational efficiencies over the past two years - and today we are announcing additional initiatives that we expect will deliver $15.0 million in annual savings beginning in 2020 and $20.0 million in annual savings thereafter. Our priority was, and remains, delivering strong cash flows as we rapidly de-lever the Company and better position it to pursue new growth opportunities.”
Third-Quarter Business Highlights:
*Patent expiration dates reflect the addition of six months of pediatric patent term extension Assertio anticipates securing from the United States Food and Drug Administration.
Revenue Summary:(in thousands, unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Product sales, net | |||||||||||||||
Gralise | $ | 14,931 | $ | 14,630 | $ | 46,008 | $ | 43,272 | |||||||
CAMBIA | 8,135 | 10,365 | 23,701 | 24,870 | |||||||||||
Zipsor | 3,273 | 4,441 | 9,028 | 13,175 | |||||||||||
Total neurology product sales, net | 26,339 | 29,436 | 78,737 | 81,317 | |||||||||||
NUCYNTA products | 1,254 | 11 | 1,153 | 18,782 | |||||||||||
Lazanda | (91 | ) | (12 | ) | (1 | ) | 528 | ||||||||
Total product sales, net | 27,502 | 29,435 | 79,889 | 100,627 | |||||||||||
Commercialization agreement: | |||||||||||||||
Commercialization rights and facilitation services | 27,304 | 27,781 | 89,163 | 87,055 | |||||||||||
Revenue from transfer of inventory | — | — | — | 55,705 | |||||||||||
Royalties and Milestone Revenue | 341 | 20,277 | 1,226 | 25,784 | |||||||||||
Total revenues | $ | 55,147 | $ | 77,493 | $ | 170,278 | $ | 269,171 |
2019 Financial Guidance:The Company is raising its previous 2019 earnings guidance range and lowering its Neurology Franchise Net Sales guidance to $102 to $105 million.
Prior 2019 Guidance | Current 2019 Guidance | |
Neurology Franchise Net Sales | Low Single Digit Growth | $102 to $105 million |
GAAP Net Loss(1) | ($68) to ($58) million | ($47) to ($42) million |
Non-GAAP Adjusted EBITDA(1)(2) | $118 to $128 million | $124 to $129 million |
(1) Guidance includes $2.8 million of non-cash Collegium warrant related income and excludes any future warrant mark-to-market adjustments, which cannot be estimated.
(2) Guidance excludes any Collegium warrant mark-to-market adjustments.
Conference Call and Webcast:Assertio will host a conference call today, Wednesday, November 6, 2019 beginning at 4:30 p.m. ET to discuss its results. This event can be accessed in three ways:
About Assertio Therapeutics, Inc.Assertio Therapeutics is committed to providing responsible solutions to advance patient care in the Company’s core areas of neurology, orphan and specialty medicines. Assertio currently markets three FDA-approved products and continues to identify, license and develop new products that offer enhanced options for patients that may be under served by existing therapies. To learn more about Assertio, visit www.assertiotx.com.
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995This news release contains forward-looking statements. These statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to regulatory approval and clinical development of long-acting cosyntropin, expectations regarding royalties to be received based on sales of NUCYNTA and NUCYNTA ER, expectations regarding potential business opportunities and other risks outlined in the Company’s public filings with the Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. All information provided in this news release speaks as of the date hereof. Except as otherwise required by law, the Company undertakes no obligation to update or revise its forward-looking statements.
Investor and Media Contact:John B. ThomasSenior Vice President, Investor Relations and Corporate Communicationsjthomas@assertiotx.com
Non-GAAP Financial MeasuresTo supplement the Company’s financial results presented on a U.S. generally accepted accounting principles (GAAP) basis, the Company has included information about non-GAAP revenue, non-GAAP adjusted earnings, non-GAAP adjusted diluted earnings per share, non-GAAP adjusted EBITDA and other non-GAAP financial measures as useful operating metrics. The Company believes that the presentation of these non-GAAP financial measures, when viewed with results under GAAP and the accompanying reconciliation, provides supplementary information to analysts, investors, lenders, and the Company’s management in assessing the Company’s performance and results from period to period. The Company uses these non-GAAP measures internally to understand, manage and evaluate the Company’s performance, and in part, in the determination of bonuses for executive officers and employees. These non-GAAP financial measures should be considered in addition to, and not a substitute for, or superior to, net income or other financial measures calculated in accordance with GAAP. Non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, non-GAAP measures used by other companies.
Specified ItemsNon-GAAP measures presented within this release exclude specified items. The Company considers specified items to be significant income/expense items not indicative of current operations, including the related tax effect. Specified items include non-cash adjustment to Collegium agreement revenue and cost of sales, release of NUCYNTA and Lazanda sales reserves for products the Company is no longer selling, interest income, interest expense, amortization, acquired in-process research and development and non-cash adjustments related to product acquisitions, stock-based compensation expense, non-cash interest expense related to debt, depreciation, taxes, transaction costs, CEO transition, restructuring costs, adjustments to net sales related to reserves recorded prior to the Company’s exit of opioid commercialization activities, legal costs and expenses incurred in connection with opioid-related litigation, investigations and regulations pertaining to the company’s historical commercialization of opioid products, certain types of legal settlements, disputes, fees and costs, gains or losses resulting from debt refinancing transactions and disposal or impairment of long-lived assets, and to adjust for the tax effect related to each of the non-GAAP adjustments.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share amounts)(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Product sales, net | $ | 27,502 | $ | 29,435 | $ | 79,889 | $ | 100,627 | |||||||
Commercialization agreement, net | 27,304 | 27,781 | 89,163 | 142,760 | |||||||||||
Royalties and milestones | 341 | 20,277 | 1,226 | 25,784 | |||||||||||
Total revenues | 55,147 | 77,493 | 170,278 | 269,171 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of sales (excluding amortization of intangible assets) | 2,243 | 2,975 | 6,942 | 17,772 | |||||||||||
Research and development expenses | 1,476 | 2,127 | 4,531 | 5,835 | |||||||||||
Selling, general and administrative expenses | 36,117 | 33,409 | 85,917 | 93,750 | |||||||||||
Amortization of intangible assets | 25,444 | 25,443 | 76,331 | 76,331 | |||||||||||
Restructuring charges | — | 3,911 | — | 18,742 | |||||||||||
Total costs and expenses | 65,280 | 67,865 | 173,721 | 212,430 | |||||||||||
(Loss) income from operations | (10,133 | ) | 9,628 | (3,443 | ) | 56,741 | |||||||||
Other income (expense): | |||||||||||||||
Litigation settlement | — | 62,000 | — | 62,000 | |||||||||||
Gain on debt extinguishment | 26,385 | — | 26,385 | — | |||||||||||
Interest expense | (13,872 | ) | (17,190 | ) | (45,268 | ) | (52,268 | ) | |||||||
Other (expense) income, net | (764 | ) | 677 | (2,613 | ) | 973 | |||||||||
Total other expense (income) | 11,749 | 45,487 | (21,496 | ) | 10,705 | ||||||||||
Net income (loss) before income taxes | 1,616 | 55,115 | (24,939 | ) | 67,446 | ||||||||||
Income tax benefit (expense) | 1,715 | (6,845 | ) | 364 | (6,400 | ) | |||||||||
Net income (loss) | $ | 3,331 | $ | 48,270 | $ | (24,575 | ) | $ | 61,046 | ||||||
Basic net income (loss) per share | 0.05 | 0.76 | (0.36 | ) | 0.96 | ||||||||||
Diluted net income (loss) per share | 0.05 | 0.65 | (0.36 | ) | 0.93 | ||||||||||
Shares used in computing basic net income (loss) per share | 72,747 | 63,917 | 67,332 | 63,714 | |||||||||||
Shares used in computing diluted net income (loss) per share | 72,747 | 82,690 | 67,332 | 82,282 | |||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS(in thousands)(unaudited)
September 30, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 54,181 | $ | 110,949 | |||
Accounts receivable, net | 43,427 | 37,211 | |||||
Inventories, net | 3,314 | 3,396 | |||||
Prepaid and other current assets | 23,480 | 56,551 | |||||
Total current assets | 124,402 | 208,107 | |||||
Property and equipment, net | 3,873 | 13,064 | |||||
Intangible assets, net | 615,768 | 692,099 | |||||
Investments | 7,244 | 11,784 | |||||
Other long-term assets | 5,579 | 7,812 | |||||
Total assets | $ | 756,866 | $ | 932,866 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 22,700 | $ | 6,138 | |||
Accrued rebates, returns and discounts | 60,979 | 75,759 | |||||
Accrued liabilities | 33,270 | 31,361 | |||||
Current portion of Senior Notes | 80,000 | 120,000 | |||||
Interest payable | 6,687 | 11,645 | |||||
Other current liabilities | 2,096 | 1,133 | |||||
Total current liabilities | 205,732 | 246,036 | |||||
Contingent consideration liability | 981 | 1,038 | |||||
Senior Notes | 94,661 | 158,309 | |||||
Convertible Notes | 190,923 | 287,798 | |||||
Other long-term liabilities | 16,135 | 19,350 | |||||
Total liabilities | 508,432 | 712,531 | |||||
Commitments and contingencies | |||||||
Shareholders’ equity: | |||||||
Common stock | 8 | 6 | |||||
Additional paid-in capital | 455,601 | 402,934 | |||||
Accumulated deficit | (207,175 | ) | (182,600 | ) | |||
Accumulated other comprehensive loss | — | (5 | ) | ||||
Total shareholders’ equity | 248,434 | 220,335 | |||||
Total liabilities and shareholders' equity | $ | 756,866 | $ | 932,866 | |||
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA(in thousands)(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
GAAP net (loss)/income | $ | 3,331 | $ | 48,270 | $ | (24,575 | ) | $ | 61,046 | ||||||
Commercialization agreement revenues (1) | 3,804 | 2,862 | 7,667 | (46,426 | ) | ||||||||||
Commercialization agreement cost of sales (2) | — | — | — | 6,200 | |||||||||||
NUCYNTA and Lazanda revenue reserves (3) | (1,163 | ) | 2 | (1,152 | ) | (11,249 | ) | ||||||||
Expenses for opioid-related litigation, investigations and regulations (4) | 2,174 | 1,313 | 7,024 | 4,360 | |||||||||||
Intangible amortization related to product acquisitions | 25,444 | 25,443 | 76,331 | 76,331 | |||||||||||
Contingent consideration related to product acquisitions | — | (117 | ) | (142 | ) | (658 | ) | ||||||||
Purdue litigation settlement | — | (62,000 | ) | — | (62,000 | ) | |||||||||
Stock-based compensation | 3,004 | 2,944 | 8,340 | 7,890 | |||||||||||
Interest and other income | (218 | ) | (677 | ) | (915 | ) | (973 | ) | |||||||
Interest expense | 13,872 | 17,190 | 45,268 | 52,268 | |||||||||||
Depreciation | 278 | (1,252 | ) | 894 | 1,677 | ||||||||||
Income tax (benefit) expense | (1,715 | ) | 6,845 | (364 | ) | 6,400 | |||||||||
Restructuring and related costs (5) | — | 4,079 | — | 19,383 | |||||||||||
Other costs | — | 75 | — | 123 | |||||||||||
Loss on disposal of equipment (6) | 10,070 | — | 10,076 | — | |||||||||||
Gain on debt extinguishment, net (7) | (25,968 | ) | — | (25,968 | ) | — | |||||||||
Change in fair value of warrants | 1,423 | — | 4,900 | — | |||||||||||
Non-GAAP adjusted EBITDA | $ | 34,336 | $ | 44,977 | $ | 107,384 | $ | 114,372 |
(1) For the period from January 8, 2018 through November 8, 2018, the adjustment relates to the non-cash value assigned to inventory transferred to Collegium. As of the date of the Commercialization Amendment, on November 8, 2018, the Company ceased recognition of fixed revenues and began the recognition of variable revenues when they become due beginning in January 2019. The adjustment for the three and nine months ended September 30, 2019 relates to non-cash expense for third-party royalties, which are expected to have no net impact for the full year period, as well as the amortization of the contract asset.
(2) Represents the cash received for inventory transferred to Collegium at the commencement of the Commercialization Agreement.
(3) Removal of the impact of revenue adjustment estimates related to products that we are no longer commercializing. The three months ended March 31, 2018 included a $12.5 million benefit related to the release of sales reserves for which the Company is no longer financially responsible, net of $1.8 million in royalties payable to a third party.
(4) Legal costs/expenses related to opioid-related litigation, investigations and regulations pertaining to the Company’s historical commercialization of opioid products.
(5) Restructuring and other costs represents non-recurring costs associated with the Company’s restructuring, reincorporation, headquarters relocation and CEO transition.
(6) Recognition of $10.1 million loss on the September 2019 disposal of equipment residing at a manufacturing supplier that will no longer be used in future production.
(7) In connection with the August 2019 debt refinancing of the convertible notes the Company recognized a net gain of $26.0 million, comprised of a $26.4 million gain on debt extinguishment offset by approximately $0.4 million of nonrecurring related expenses.
RECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EARNINGS(in thousands, except per share amounts)(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
GAAP net (loss)/income | $ | 3,331 | $ | 48,270 | $ | (24,575 | ) | $ | 61,046 | ||||||
Commercialization agreement revenues (1) | 3,804 | 2,862 | 7,667 | (46,426 | ) | ||||||||||
Commercialization agreement cost of sales (2) | — | — | — | 6,200 | |||||||||||
Non-cash interest expense on debt | 5,870 | 5,490 | 18,090 | 16,298 | |||||||||||
Nucynta and Lazanda revenue reserves (3) | (1,163 | ) | 2 | (1,152 | ) | (11,249 | ) | ||||||||
Expenses for opioid-related litigation, investigations and regulations (4) | 2,174 | 1,313 | 7,024 | 4,360 | |||||||||||
Purdue litigation settlement | — | (62,000 | ) | — | (62,000 | ) | |||||||||
Intangible amortization related to product acquisitions | 25,444 | 25,443 | 76,331 | 76,331 | |||||||||||
Contingent consideration related to product acquisitions | — | (117 | ) | (142 | ) | (658 | ) | ||||||||
Stock-based compensation | 3,004 | 2,944 | 8,340 | 7,890 | |||||||||||
Restructuring and related costs (5) | — | 4,079 | — | 19,383 | |||||||||||
Other costs | — | 75 | (332 | ) | 123 | ||||||||||
Loss on disposal of equipment (6) | 10,070 | — | 10,076 | — | |||||||||||
Gain on debt extinguishment, net (7) | (25,968 | ) | — | (25,968 | ) | — | |||||||||
Change in fair value of warrants | 1,423 | — | 4,900 | — | |||||||||||
Income tax effect of non-GAAP adjustments (8) | (4,800 | ) | 4,551 | (20,963 | ) | (1,159 | ) | ||||||||
Non-GAAP adjusted earnings | $ | 23,189 | $ | 32,912 | $ | 59,296 | $ | 70,139 | |||||||
Add interest expense of convertible debt, net of tax (9) | 1,770 | 1,704 | 5,176 | 5,110 | |||||||||||
Numerator | $ | 24,959 | $ | 34,616 | $ | 64,472 | $ | 75,249 | |||||||
Shares used in calculation (9) | 105,322 | 82,690 | 90,198 | 82,282 | |||||||||||
Non-GAAP adjusted diluted earnings per share | $ | 0.24 | $ | 0.42 | $ | 0.71 | $ | 0.91 |
(1) For the period from January 8, 2018 through November 8, 2018, the adjustment relates to the non-cash value assigned to inventory transferred to Collegium. As of the date of the Commercialization Amendment, on November 8, 2018, the Company ceased recognition of fixed revenues and began the recognition of variable revenues when they become due beginning in January 2019. The adjustment for the three and nine months ended September 30, 2019 relates to non-cash expense for third-party royalties, which are expected to have no net impact for the full year period, as well as the amortization of the contract asset.
(2) Represents the cash received for inventory transferred to Collegium at the commencement of the Commercialization Agreement.
(3) Removal of the impact of revenue adjustment estimates related to products that we are no longer commercializing. The three months ended March 31, 2018 included a $12.5 million benefit related to the release of sales reserves for which the Company is no longer financially responsible, net of $1.8 million in royalties payable to a third party.
(4) Legal costs/expenses related to opioid-related litigation, investigations and regulations pertaining to the Company’s historical commercialization of opioid products.
(5) Restructuring and other costs represents non-recurring costs associated with the Company’s restructuring, reincorporation, headquarters relocation and CEO transition.
(6) Recognition of $10.1 million loss on the September 2019 disposal of equipment residing at a manufacturing supplier that will no longer be used in future production.
(7) In connection with the August 2019 debt refinancing of the convertible notes the Company recognized a net gain of $26.0 million, comprised of a $26.4 million gain on debt extinguishment offset by approximately $0.4 million of nonrecurring related expenses.
(8) Calculated by taking the pre-tax non-GAAP adjustments and applying the statutory tax rate.
(9) The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt.
RECONCILIATION OF GAAP NET INCOME (LOSS) PER SHARE TONON-GAAP ADJUSTED EARNINGS PER SHARE(unaudited)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
GAAP net (loss)/income per share | $ | 0.05 | $ | 0.76 | $ | (0.36 | ) | $ | 0.96 | ||||||
Conversion from basic shares to diluted shares | (0.02 | ) | (0.17 | ) | 0.08 | (0.22 | ) | ||||||||
Commercialization agreement revenues | 0.04 | 0.03 | 0.09 | (0.57 | ) | ||||||||||
Commercialization agreement cost of sales | — | — | — | 0.08 | |||||||||||
Non-cash interest expense on debt | 0.06 | 0.07 | 0.20 | 0.20 | |||||||||||
NUCYNTA and Lazanda revenue reserves | (0.01 | ) | — | (0.01 | ) | (0.14 | ) | ||||||||
Expenses for opioid-related litigation, investigations and regulations | 0.02 | 0.01 | 0.08 | 0.05 | |||||||||||
Purdue litigation settlement | — | (0.75 | ) | — | (0.75 | ) | |||||||||
Intangible amortization related to product acquisitions | 0.24 | 0.31 | 0.85 | 0.92 | |||||||||||
Contingent consideration related to product acquisitions | — | — | — | — | |||||||||||
Stock based compensation | 0.03 | 0.03 | 0.09 | 0.10 | |||||||||||
Restructuring and related costs | — | 0.05 | — | 0.23 | |||||||||||
Loss on disposal of equipment | 0.10 | — | 0.11 | — | |||||||||||
Gain on debt extinguishment, net | (0.25 | ) | — | (0.29 | ) | — | |||||||||
Change in fair value of warrants | 0.01 | — | 0.05 | — | |||||||||||
Income tax effect of non-GAAP adjustments | (0.05 | ) | 0.06 | (0.24 | ) | (0.01 | ) | ||||||||
Add interest expense of convertible debt, net of tax | 0.02 | 0.02 | 0.06 | 0.06 | |||||||||||
Non-GAAP adjusted diluted earnings per share | $ | 0.24 | $ | 0.42 | $ | 0.71 | $ | 0.91 | |||||||
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATIONFor the three months ended September 30, 2019(in thousands)(unaudited)
Commercialization agreement revenues | Product Sales | Royalties and milestones | Cost of sales | Research and development expense | Selling, general and administrative expense | Amortization of intangible assets | Interest expense | Other (Expense) Income, Net | Income taxes (expense) benefit | |||||||||||||||||||||||||||||||
GAAP as reported | $ | 27,304 | $ | 27,502 | $ | 341 | $ | 2,243 | $ | 1,476 | $ | 36,117 | $ | 25,444 | $ | (13,872 | ) | $ | 25,621 | $ | 1,715 | |||||||||||||||||||
Commercialization agreement revenues and cost of sales | 3,804 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Non-cash interest expense on debt | — | — | — | — | — | — | — | 5,870 | — | — | ||||||||||||||||||||||||||||||
NUCYNTA and Lazanda revenue reserves | — | (1,163 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Expenses for opioid-related litigation, investigations and regulations | — | — | — | — | — | (2,174 | ) | — | — | — | — | |||||||||||||||||||||||||||||
Intangible amortization related to product acquisitions | — | — | — | — | — | — | (25,444 | ) | — | — | — | |||||||||||||||||||||||||||||
Stock based compensation | — | — | — | (28 | ) | (165 | ) | (2,811 | ) | — | — | — | — | |||||||||||||||||||||||||||
Restructuring and other costs | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Loss on disposal of equipment | — | — | — | — | — | (10,070 | ) | — | — | — | — | |||||||||||||||||||||||||||||
Gain on debt extinguishment, net | — | — | — | — | — | — | — | — | (25,968 | ) | — | |||||||||||||||||||||||||||||
Change in fair value of warrants | — | — | — | — | — | — | — | — | 1,423 | — | ||||||||||||||||||||||||||||||
Income tax effect of non-GAAP adjustments | — | — | — | — | — | — | — | — | — | (4,800 | ) | |||||||||||||||||||||||||||||
Non-GAAP adjusted | $ | 31,108 | $ | 26,339 | $ | 341 | $ | 2,215 | $ | 1,311 | $ | 21,062 | $ | — | $ | (8,002 | ) | $ | 1,076 | $ | (3,085 | ) | ||||||||||||||||||
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATIONFor the nine months ended September 30, 2019(in thousands)(unaudited)
Commercialization agreement revenues | Product Sales | Royalties and milestones | Cost of sales | Research and development expense | Selling, general and administrative expense | Amortization of intangible assets | Interest expense | Other (Expense) Income, Net | Income taxes (expense) benefit | |||||||||||||||||||||||||||||||
GAAP as reported | $ | 89,163 | $ | 79,889 | $ | 1,226 | $ | 6,942 | $ | 4,531 | $ | 85,917 | $ | 76,331 | $ | (45,268 | ) | $ | 23,772 | $ | 364 | |||||||||||||||||||
Commercialization agreement revenues and cost of sales | 7,667 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Non-cash interest expense on debt | — | — | — | — | — | — | — | 18,090 | — | — | ||||||||||||||||||||||||||||||
NUCYNTA and Lazanda revenue reserves | — | (1,152 | ) | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Expenses for opioid-related litigation, investigations and regulations | — | — | — | — | — | (7,024 | ) | — | — | — | — | |||||||||||||||||||||||||||||
Intangible amortization related to product acquisitions | — | — | — | — | — | — | (76,331 | ) | — | — | — | |||||||||||||||||||||||||||||
Contingent consideration related to product acquisitions | — | — | — | — | — | 142 | — | — | — | — | ||||||||||||||||||||||||||||||
Stock based compensation | — | — | — | (78 | ) | (514 | ) | (7,748 | ) | — | — | — | — | |||||||||||||||||||||||||||
Restructuring and other costs | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
Loss on disposal of equipment | — | — | — | — | — | (10,076 | ) | — | — | — | — | |||||||||||||||||||||||||||||
Gain on debt extinguishment, net | — | — | — | — | — | — | — | — | (25,968 | ) | — | |||||||||||||||||||||||||||||
Change in fair value of warrants | — | — | — | — | — | — | — | — | 4,900 | — | ||||||||||||||||||||||||||||||
Other costs | — | — | — | — | — | — | — | — | (332 | ) | — | |||||||||||||||||||||||||||||
Income tax effect of non-GAAP adjustments | — | — | — | — | — | — | — | — | — | (20,963 | ) | |||||||||||||||||||||||||||||
Non-GAAP adjusted | $ | 96,830 | $ | 78,737 | $ | 1,226 | $ | 6,864 | $ | 4,017 | $ | 61,211 | $ | — | $ | (27,178 | ) | $ | 2,372 | $ | (20,599 | ) | ||||||||||||||||||
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATIONFor the three months ended September 30, 2018(in thousands)(unaudited)
Commercialization agreement revenues | Product Sales | Royalties and milestones | Cost of sales | Research and development expense | Selling, general and administrative expense | Restructuring Charges | Amortization of intangible assets | Interest expense | Other (Expense) Income, Net | Income taxes (expense) benefit | ||||||||||||||||||||||||||||||||||
GAAP as reported | $ | 27,781 | $ | 29,435 | $ | 20,277 | $ | 2,975 | $ | 2,127 | $ | 33,409 | $ | 3,911 | $ | 25,443 | $ | (17,190 | ) | $ | 62,677 | $ | (6,845 | ) | ||||||||||||||||||||
Commercialization agreement revenues and cost of sales | 2,862 | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||
Non-cash interest expense on debt | — | — | — | — | — | — | — | — | 5,490 | — | — | |||||||||||||||||||||||||||||||||
NUCYNTA and Lazanda revenue reserves | — | 2 | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Expenses for opioid-related litigation, investigations and regulations | — | — | — | — | — | (1,313 | ) | — | — | — | — | — | ||||||||||||||||||||||||||||||||
Intangible amortization related to product acquisitions | — | — | — | — | — | — | — | (25,443 | ) | — | — | — | ||||||||||||||||||||||||||||||||
Contingent consideration related to product acquisitions | — | — | — | — | — | 117 | — | — | — | — | — | |||||||||||||||||||||||||||||||||
Stock based compensation | — | — | — | — | (270 | ) | (2,674 | ) | 173 | — | — | — | — | |||||||||||||||||||||||||||||||
Restructuring and other costs | — | — | — | — | — | (243 | ) | (4,084 | ) | — | — | — | — | |||||||||||||||||||||||||||||||
Purdue litigation settlement | — | — | — | — | — | — | — | — | — | (62,000 | ) | — | ||||||||||||||||||||||||||||||||
Income tax effect of non-GAAP adjustments | — | — | — | — | — | — | — | — | — | — | 4,551 | |||||||||||||||||||||||||||||||||
Non-GAAP adjusted | $ | 30,643 | $ | 29,437 | $ | 20,277 | $ | 2,975 | $ | 1,857 | $ | 29,296 | $ | — | $ | — | $ | (11,700 | ) | $ | 677 | $ | (2,294 | ) | ||||||||||||||||||||
RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATIONFor the nine months ended September 30, 2018(in thousands)(unaudited)
Commercialization agreement revenues | Product Sales | Royalties and milestones | Cost of sales | Research and development expense | Selling, general and administrative expense | Restructuring Charges | Amortization of intangible assets | Interest expense | Other (Expense) Income, Net | Income taxes (expense) benefit | |||||||||||||||||||||||
GAAP as reported | 142,760 | 100,627 | 25,784 | 17,772 | 5,835 | 93,750 | 18,742 | 76,331 | (52,268 | ) | 62,973 | (6,400 | ) | ||||||||||||||||||||
Commercialization agreement revenues and cost of sales | (46,426 | ) | — | (6,200 | ) | — | — | — | — | — | — | ||||||||||||||||||||||
Non-cash interest expense on debt | — | — | — | — | — | — | — | — | 16,298 | — | — | ||||||||||||||||||||||
NUCYNTA and Lazanda revenue reserves | — | (11,249 | ) | — | — | — | — | — | — | — | — | — | |||||||||||||||||||||
Expenses for opioid-related litigation, investigations and regulations | — | — | — | — | — | (4,360 | ) | — | — | — | — | — | |||||||||||||||||||||
Intangible amortization related to product acquisitions | — | — | — | — | — | — | — | (76,331 | ) | — | — | — | |||||||||||||||||||||
Contingent consideration related to product acquisitions | — | — | — | — | — | 658 | — | — | — | — | — | ||||||||||||||||||||||
Stock based compensation | — | — | — | (30 | ) | (337 | ) | (7,523 | ) | (2,385 | ) | — | — | — | — | ||||||||||||||||||
Restructuring and other costs | — | — | — | — | — | (764 | ) | (16,357 | ) | — | — | — | — | ||||||||||||||||||||
Purdue litigation settlement | — | — | — | — | — | — | — | — | — | (62,000 | ) | — | |||||||||||||||||||||
Income tax effect of non-GAAP adjustments | — | — | — | — | — | — | — | — | — | — | (1,159 | ) | |||||||||||||||||||||
Non-GAAP adjusted | 96,334 | 89,378 | 25,784 | 11,542 | 5,498 | 81,761 | — | — | (35,970 | ) | 973 | (7,559 | ) | ||||||||||||||||||||
FULL-YEAR 2019 NON-GAAP GUIDANCE RECONCILATION(in millions)(unaudited)
Earnings (1) | ||||||||
Low End | High End | |||||||
GAAP | $ | (47 | ) | $ | (42 | ) | ||
Specified Items(2) | $ | 171 | $ | 171 | ||||
Non-GAAP | $ | 124 | $ | 129 |
(1) GAAP net loss guidance refers to GAAP net loss and non-GAAP earnings guidance refers to non-GAAP adjusted EBITDA.
(2) For purposes of this forward-looking reconciliation, a description of the categories of specified items included in this reconciliation are detailed in the tables above.
SENIOR SECURED NOTE COVENANT DISCLOSURES
The Company was in compliance with its covenants, including the Senior Secured Debt Leverage Ratio and Net Sales covenants, with respect to the Company’s senior secured notes as of September 30, 2019. Set forth below are additional disclosures that the Company is required to make in connection with the senior secured notes.
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDAFor the Rolling Twelve Month Period Ended September 30, 2019(in thousands)(unaudited)
The below reconciliation discloses the calculation of Adjusted EBITDA (as defined in the Company’s senior secured notes) on a rolling twelve month basis to support covenant compliance in connection with our senior secured notes.
Twelve Months Ended | |||
September 30, 2019 | |||
GAAP net (loss)/income | $ | (48,713 | ) |
Commercialization agreement revenues (1) | 28,929 | ||
Nucynta and Lazanda revenue reserves (2) | (2,176 | ) | |
Expenses for opioid-related litigation, investigations and regulations (3) | 10,561 | ||
Intangible amortization related to product acquisitions | 101,774 | ||
Contingent consideration related to product acquisitions | 1 | ||
Stock-based compensation | 10,889 | ||
Interest and other income | (1,139 | ) | |
Interest expense | 61,881 | ||
Depreciation | 1,148 | ||
Income taxes expense (benefit) | (5,697 | ) | |
Restructuring and related costs (4) | 1,881 | ||
Loss on disposal of equipment (5) | 10,076 | ||
Gain on debt extinguishment, net (6) | (25,968 | ) | |
Change in fair value of warrants | 4,900 | ||
Adjusted EBITDA | $ | 148,347 |
(1) The adjustment for the twelve months ended September 30, 2019 relates to non-cash expense for third-party royalties, which are expected to have no net impact for the full year period, as well as the amortization of the contract asset.
(2) Removal of the impact of revenue adjustment estimates related to products that we are no longer commercializing.
(3) Legal costs/expenses related to opioid-related litigation, investigations and regulations pertaining to the Company’s historical commercialization of opioid products.
(4) Restructuring and other costs represents non-recurring costs associated with the Company’s restructuring, reincorporation, headquarters relocation and CEO transition.
(5) Recognition of $10.1 million loss on the September 2019 disposal of equipment residing at a manufacturing supplier that will no longer be used in future production.
(6) In connection with the August 2019 debt refinancing of the convertible notes the Company recognized a net gain of $26.0 million, comprised of a $26.4 million gain on debt extinguishment offset by approximately $0.4 million of nonrecurring related expenses.
Additional Covenant Disclosures
Long-acting cosyntropin has not yet been launched for commercial sale and therefore no revenue in respect of this product was recognized by the Company as of September 30, 2019.
During the rolling twelve month period ended September 30, 2019, the Company collected $123.4 million in cash receipts, net of cash payments made, in connection with the Company’s Commercialization Agreement with Collegium.
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