Assertio Holdings, Inc. (“Assertio” or the “Company”) (Nasdaq:
ASRT), a specialty pharmaceutical company offering differentiated
products to patients, today reported financial results for the
first quarter ended March 31, 2023.
“Since becoming CEO a little over two years ago, we adopted a
strategy to increase profitability, improve our balance sheet,
reduce our cost of capital, diversify our business and create
internal and external opportunities for growth,” said Dan Peisert,
President and Chief Executive Officer of Assertio. “Through the
adoption of our innovative digital non-personal sales model,
significant growth and cash flow, the refinancing of our
indebtedness and our most recent completed acquisition of Sympazan,
we have achieved most of what we set out to do and put Assertio on
a pathway for significant and sustainable growth over the coming
years.”
First quarter net product sales performed above internal
expectations in what is typically a seasonally low quarter,
delivering 18% growth in net product sales, more than $25 million
of adjusted EBITDA and almost $23 million in cash flow from
operations. Results were driven by continued growth of Indocin and
the first full quarter of sales for Sympazan. As a result, the
Company is raising its full-year net product sales and adjusted
EBITDA outlook.
Financial Highlights (unaudited):
|
Three Months Ended March 31, |
(in millions, except per share amounts) |
|
2023 |
|
|
|
2022 |
Net Product Sales
(GAAP) |
$ |
41.8 |
|
|
$ |
35.5 |
Net (Loss) Income
(GAAP) |
$ |
(3.5 |
) |
|
$ |
9.1 |
(Loss) Earnings Per
Share (GAAP) |
$ |
(0.07 |
) |
|
$ |
0.20 |
Adjusted EBITDA
(Non-GAAP)1 |
$ |
25.6 |
|
|
$ |
23.9 |
Adjusted Earnings Per
Share (Non-GAAP)1 |
$ |
0.29 |
|
|
$ |
0.38 |
First quarter results included the following
as compared to the prior year quarter:
- Net product sales increased 18%, to $41.8 million.
- Increased sales of Indocin and the addition of Sympazan more
than offset expected declines in Cambia and Zipsor.
- Indocin sales increased 42%, primarily due to the transition of
volumes to more profitable commercial channels implemented in
October 2022.
- Sympazan prescriptions achieved a new record in the quarter,
following its prior record in the third quarter 2022.
- GAAP net loss of $3.5 million, compared to GAAP net income
of $9.1 million in the prior year quarter. The decrease was
primarily due to:
- $9.9 million in expenses associated with the exchange of
convertible debt during the quarter,
- $7.5 million non-cash increase in contingent consideration
associated with future Indocin royalties as a result of continued
sales growth, and
- Increased operating expenses, including $2.4 million in
transaction costs associated with the pending acquisition of
Spectrum Pharmaceuticals, Inc., as announced on April 25,
2023.
- Adjusted EBITDA of $25.6 million, increased from
$23.9 million in the first quarter 2022.
- The change in adjusted EBITDA was driven by $6.2 million of
additional net product sales, partially offset by higher operating
expenses.
- On February 23, 2023, the Company strengthened its balance
sheet through a $30.0 million exchange of convertible debt in a
cash and stock exchange transaction.
- The transaction reduced Assertio’s overall debt by 43%, will
save the Company $2.0 million in annual interest payments, and
reduced the potential dilution from the exchanged convertible notes
by 4.6%.
- At March 31, 2023, cash and cash equivalents was $68.6 million
and outstanding principal amount of convertible debt was $40
million.
- Subsequent to quarter end, on April 25, 2023, Assertio
announced it has entered into a definitive agreement pursuant to
which Assertio will acquire all outstanding shares of Spectrum
Pharmaceuticals, Inc. (“Spectrum”) in an all-stock and contingent
value rights (“CVR”) transaction.
- Diversifies Assertio’s net product sales with the addition of
ROLVEDON™, a novel long-acting G-CSF product recently launched into
a blockbuster market in October 2022.
- Subject to the terms and conditions of the agreement, closing
is expected in the third quarter 2023, subsequent to which Assertio
intends to market ROLVEDON through Spectrum’s existing commercial
team plus Assertio’s digital non-personal resources.
- Transaction is expected to accelerate and enhance the profit
opportunities for the combined company and generate double-digit
accretion to adjusted EPS and increased operating cash flow in
2024.
“As part of Assertio’s ongoing transformation over the past two
years, we also laid out a goal to build and diversify our portfolio
through accretive acquisitions that fit our unique go-to-market
model,” said Peisert. “Our recent announcement to acquire Spectrum
Pharmaceuticals exemplifies that goal and significantly diversifies
our asset base with its exciting new G-CSF asset ROLVEDON. We
believe that Assertio’s platform can increase the market accessible
to ROLVEDON in a time and cost efficient manner not available to it
under Spectrum’s traditional sales model. In addition, ROLVEDON’s
patent protection could extend to 2036, representing a significant
runway on which to generate increased adjusted EBITDA and drive
increased operating cash flows through successful execution of our
plan.”
Raises 2023 Financial Guidance
|
Prior Guidance |
Current Guidance |
Net Product Sales (GAAP) |
$150.0 Million to $160.0 Million |
$157.0 Million to $167.0 Million |
Adjusted EBITDA (Non-GAAP)2 |
$85.0 Million to $93.0 Million |
$90.0 Million to $98.0 Million |
The Company’s full year Adjusted EBITDA guidance includes an
initial estimate of the anticipated clinical trial costs in the
second half of the year. The guidance does not include the effect
of the Spectrum acquisition. The Company intends to update its
guidance to include the effect of the acquisition after closing,
currently anticipated to take place in the third quarter 2023.
Balance Sheet and Cash Flow
For the quarter ended March 31, 2023, the Company generated
$22.7 million in cash flow from operations, its eighth
consecutive quarter of positive cash flows. At quarter end, cash
and cash equivalents totaled $68.6 million.
On February 23, 2023, Assertio entered into Exchange Agreements
pursuant to which Assertio exchanged $30.0 million aggregate
principal amount of convertible debt for a combination of an
aggregate of $10.5 million in cash and an aggregate of
approximately 7.0 million shares of its common stock in the
transactions.
———————————1 Non-GAAP measures are reconciled to the
corresponding GAAP measures in the schedules attached.
2 See “Non-GAAP Financial Measures” below for information about
reconciling our Adjusted EBITDA guidance to Net Income.
Conference Call and Investor Presentation
Information
Assertio’s management will host a conference call to discuss its
first quarter 2023 financial results today:
Date: |
Tuesday, May 9, 2023 |
Time: |
11:30 a.m. Eastern Time (note time change) |
Webcast (live and archive): |
http://investor.assertiotx.com/overview/default.aspx (Events &
Webcasts, Investor Page) |
Dial-in numbers: |
1-929-201-5912 |
To access the live webcast, the recorded conference call replay,
and other materials, please visit Assertio’s investor relations
website at http://investor.assertiotx.com/overview/default.aspx.
Please connect 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. The replay will be available approximately
two hours after the call on Assertio’s investor website.
About Assertio
Assertio is a specialty pharmaceutical company offering
differentiated products to patients utilizing a non-personal
promotional model. We have built and continue to build our
commercial portfolio by identifying new opportunities within our
existing products as well as acquisitions or licensing of
additional approved products. To learn more about Assertio, visit
www.assertiotx.com.
Investor Contact
Matt Kreps, Managing DirectorDarrow AssociatesM:
214-597-8200mkreps@darrowir.com
Forward Looking Statements
The statements in this communication include forward-looking
statements concerning Assertio and Spectrum, the proposed
transactions and other related matters. Forward-looking statements
may discuss goals, intentions and expectations as to future plans,
trends, events, results of operations or financial condition, or
otherwise, based on current beliefs and involve numerous risks and
uncertainties that could cause actual results to differ materially
from expectations. Forward-looking statements speak only as of the
date they are made or as of the dates indicated in the statements
and should not be relied upon as predictions of future events, as
there can be no assurance that the events or circumstances
reflected in these statements will be achieved or will occur.
Forward-looking statements can often, but not always, be identified
by the use of forward-looking terminology including “believes,”
“expects,” “may,” “will,” “should,” “seeks,” “intends,” “plans,”
“pro forma,” “estimates,” “anticipates,” “designed,” or the
negative of these words and phrases, other variations of these
words and phrases or comparable terminology. These forward-looking
statements involve risks and uncertainties that could cause actual
results to differ materially from those contemplated by the
statements, including: Assertio’s ability to realize the benefits
from its operating model; cost and outcomes of clinical trials;
failure to obtain applicable regulatory or stockholder approvals in
a timely manner or otherwise; failure to satisfy other closing
conditions to the proposed transactions; risks that the new
businesses will not be integrated successfully or that the combined
company will not realize estimated cost savings, value of certain
tax assets, synergies and growth, or that such benefits may take
longer to realize than expected; failure to realize anticipated
benefits of the combined operations; risks relating to
unanticipated costs of integration; demand for the combined
company’s products; the growth, change and competitive landscape of
the markets in which the combined company participates; expected
industry trends, including pricing pressures and managed healthcare
practices; variations in revenues obtained from commercialization
agreements, including contingent milestone payments, royalties,
license fees and other contract revenues, including non-recurring
revenues, and the accounting treatment with respect thereto;
Assertio’s and Spectrum’s abilities to obtain and maintain
intellectual property protection for their respective products and
operate their respective businesses without infringing the
intellectual property rights of others; the commercial success and
market acceptance of Assertio’s and Spectrum’s products; the entry
and sales of generics of Assertio’s products including the Indocin
products which are not patent protected and may face generic
competition at any time; the outcome of, and Assertio’s intentions
with respect to, any litigation or investigations, including
antitrust litigation, opioid-related investigations, opioid-related
litigation and related claims for negligence and breach of
fiduciary duty against Assertio’s former insurance broker, and
other disputes and litigation, and the costs and expenses
associated therewith; and the ability of Assertio’s and Spectrum’s
third-party manufacturers to manufacture adequate quantities of
commercially salable inventory and active pharmaceutical
ingredients for each of their respective products, and Assertio’s
and Spectrum’s abilities to maintain their respective supply
chains. For a discussion of additional factors that could cause
actual results to differ materially from those contemplated by
forward-looking statements, see the sections captioned “Risk
Factors” in Assertio’s and Spectrum’s Annual Reports on Form 10-K
for the year ended December 31, 2022 and other filings with the
Securities and Exchange Commission (the “SEC”). Many of these risks
and uncertainties may be exacerbated by the COVID-19 pandemic and
any worsening of the global business and economic environment as a
result. Assertio and Spectrum do not assume, and hereby disclaim,
any obligation to update forward-looking statements, except as may
be required by law.
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, adjusted earnings, and adjusted earnings per share
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. 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 full-year non-GAAP adjusted
EBITDA information, which the Company believes 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 to
estimated net income is provided in this release because some of
the information necessary for estimated net income such as income
taxes, fair value change in contingent consideration, and
stock-based compensation is not yet ascertainable or accessible and
the Company is unable to quantify these amounts that would be
required to be included in estimated net income 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 adjustments to interest
expense, income tax expense (benefit), depreciation expense,
amortization expense, sales reserves adjustments for products the
Company is no longer selling, stock-based compensation expense,
fair value adjustments to contingent consideration or derivative
liability, restructuring costs, amortization of fair value
inventory step-up as result of purchase accounting,
transaction-related costs, gains or losses from adjustments to
long-lived assets and assets not part of current operations, and
gains or losses resulting from debt refinancing or
extinguishment.
No Offer or Solicitation
This communication is not intended to and does not constitute an
offer to sell or the solicitation of an offer to subscribe for or
buy or an invitation to purchase or subscribe for any securities or
the solicitation of any vote in any jurisdiction pursuant to the
proposed transactions or otherwise, nor shall there be any sale,
issuance or transfer of securities in any jurisdiction in
contravention of applicable law. No offer of securities shall be
made except by means of a prospectus meeting the requirements of
Section 10 of the Securities Act of 1933, as amended. Subject to
certain exceptions to be approved by the relevant regulators or
certain facts to be ascertained, the public offer will not be made
directly or indirectly, in or into any jurisdiction where to do so
would constitute a violation of the laws of such jurisdiction, or
by use of the mails or by any means or instrumentality (including
without limitation, facsimile transmission, telephone and the
internet) of interstate or foreign commerce, or any facility of a
national securities exchange, of any such jurisdiction.
Important Additional Information Will be Filed with the
SEC
Assertio will file with the SEC a Registration Statement on Form
S-4, which will include a joint proxy statement and prospectus of
both Assertio and Spectrum (the “joint proxy
statement/prospectus”). INVESTORS AND STOCKHOLDERS ARE URGED TO
READ THE JOINT PROXY STATEMENT/PROSPECTUS, AND OTHER RELEVANT
DOCUMENTS TO BE FILED WITH THE SEC, IN THEIR ENTIRETY CAREFULLY
WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT ASSERTIO, SPECTRUM, THE PROPOSED TRANSACTIONS AND
RELATED MATTERS. Investors and stockholders will be able to obtain
free copies of the joint proxy statement/prospectus and other
documents filed with the SEC by Assertio and Spectrum through the
website maintained by the SEC at www.sec.gov. In addition,
investors and stockholders will be able to obtain free copies of
the joint proxy statement/prospectus and other documents filed with
the SEC by Assertio and Spectrum by contacting Investor Relations
at Assertio Holdings, Inc., 100 South Sanders Rd., Suite 300, Lake
Forest, IL 60045 (for documents filed by Assertio) or Investor
Relations at Spectrum Pharmaceuticals, Inc. by email at
ir@sppirx.com or by phone at (949) 788-6700 (for documents filed by
Spectrum).
Participants in the Solicitation
Assertio and Spectrum and their respective directors and
executive officers may be deemed to be participants in the
solicitation of proxies from their respective stockholders in
respect of the proposed transactions contemplated by the joint
proxy statement/prospectus. Information regarding the persons who
are, under the rules of the SEC, participants in the solicitation
of the stockholders of Assertio and Spectrum in connection with the
proposed transactions, including a description of their direct or
indirect interests, by security holdings or otherwise, will be set
forth in the joint proxy statement/prospectus when it is filed with
the SEC. Information regarding Assertio’s directors and executive
officers is contained in its Annual Report on Form 10-K for the
year ended December 31, 2022 and its Proxy Statement on Schedule
14A, dated April 3, 2023, which are filed with the SEC. Information
regarding Spectrum’s directors and executive officers is contained
in its Annual Report on Form 10-K for the year ended December 31,
2022 and its Proxy Statement on Schedule 14A, dated April 27, 2022,
which are filed with the SEC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
INCOME(in thousands, except per share
amounts)(unaudited) |
|
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Revenues: |
|
|
|
Product sales, net |
$ |
41,769 |
|
|
$ |
35,546 |
|
Royalties and milestones |
|
697 |
|
|
|
992 |
|
Total revenues |
|
42,466 |
|
|
|
36,538 |
|
Costs and expenses: |
|
|
|
Cost of sales |
|
5,467 |
|
|
|
4,195 |
|
Selling, general and administrative expenses |
|
16,904 |
|
|
|
10,638 |
|
Fair value of contingent consideration |
|
9,167 |
|
|
|
1,645 |
|
Amortization of intangible assets |
|
6,284 |
|
|
|
8,501 |
|
Total costs and expenses |
|
37,822 |
|
|
|
24,979 |
|
Income from operations |
|
4,644 |
|
|
|
11,559 |
|
Other (expense) income: |
|
|
|
Debt-related expenses |
|
(9,918 |
) |
|
|
— |
|
Interest expense |
|
(1,122 |
) |
|
|
(2,327 |
) |
Other gain |
|
802 |
|
|
|
545 |
|
Total other expense |
|
(10,238 |
) |
|
|
(1,782 |
) |
Net (loss) income before
income taxes |
|
(5,594 |
) |
|
|
9,777 |
|
Income tax benefit
(expense) |
|
2,110 |
|
|
|
(713 |
) |
Net (loss) income and
comprehensive (loss) income |
$ |
(3,484 |
) |
|
$ |
9,064 |
|
|
|
|
|
Basic net (loss) income per
share |
$ |
(0.07 |
) |
|
$ |
0.20 |
|
Diluted net (loss) income per
share |
$ |
(0.07 |
) |
|
$ |
0.20 |
|
Shares used in computing basic
net (loss) income per share |
|
51,005 |
|
|
|
45,204 |
|
Shares used in computing
diluted net (loss) income per share |
|
51,005 |
|
|
|
46,127 |
|
CONDENSED CONSOLIDATED BALANCE SHEETS(in
thousands, except share and per share
data)(unaudited) |
|
|
As of |
|
March 31, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
68,603 |
|
|
$ |
64,941 |
|
Accounts receivable, net |
|
46,466 |
|
|
|
45,357 |
|
Inventories, net |
|
16,226 |
|
|
|
13,696 |
|
Prepaid and other current assets |
|
6,554 |
|
|
|
8,268 |
|
Total current assets |
|
137,849 |
|
|
|
132,262 |
|
Property and equipment,
net |
|
544 |
|
|
|
744 |
|
Intangible assets, net |
|
191,712 |
|
|
|
197,996 |
|
Deferred tax asset |
|
81,569 |
|
|
|
80,202 |
|
Other long-term assets |
|
2,600 |
|
|
|
2,709 |
|
Total assets |
$ |
414,274 |
|
|
$ |
413,913 |
|
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
6,173 |
|
|
$ |
5,991 |
|
Accrued rebates, returns and discounts |
|
52,313 |
|
|
|
49,426 |
|
Accrued liabilities |
|
10,799 |
|
|
|
12,181 |
|
Long-term debt, current portion |
|
470 |
|
|
|
470 |
|
Contingent consideration, current portion |
|
24,458 |
|
|
|
26,300 |
|
Other current liabilities |
|
332 |
|
|
|
948 |
|
Total current liabilities |
|
94,545 |
|
|
|
95,316 |
|
Long-term debt |
|
38,151 |
|
|
|
66,403 |
|
Contingent consideration |
|
26,600 |
|
|
|
22,200 |
|
Other long-term
liabilities |
|
4,314 |
|
|
|
4,269 |
|
Total liabilities |
|
163,610 |
|
|
|
188,188 |
|
Commitments and
contingencies |
|
|
|
Shareholders’ equity: |
|
|
|
Common stock, $0.0001 par value, 200,000,000 shares authorized;
55,661,866 and 48,319,838 shares issued and outstanding as of
March 31, 2023 and December 31, 2022, respectively. |
|
5 |
|
|
|
5 |
|
Additional paid-in capital |
|
573,744 |
|
|
|
545,321 |
|
Accumulated deficit |
|
(323,085 |
) |
|
|
(319,601 |
) |
Total shareholders’ equity |
|
250,664 |
|
|
|
225,725 |
|
Total liabilities and
shareholders' equity |
$ |
414,274 |
|
|
$ |
413,913 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in
thousands)(unaudited) |
|
|
Three Months Ended March 31, |
|
|
2023 |
|
|
|
2022 |
|
Operating
Activities |
|
|
|
Net (loss) income |
$ |
(3,484 |
) |
|
|
9,064 |
|
Adjustments to reconcile net (loss) income to net cash from
operating activities: |
|
|
|
Depreciation and amortization |
|
6,484 |
|
|
|
8,699 |
|
Amortization of debt issuance costs and Royalty Rights |
|
147 |
|
|
|
28 |
|
Recurring fair value measurements of assets and liabilities |
|
9,167 |
|
|
|
1,645 |
|
Debt-related expenses |
|
9,918 |
|
|
|
— |
|
Provisions for inventory and other assets |
|
1,072 |
|
|
|
31 |
|
Stock-based compensation |
|
2,446 |
|
|
|
982 |
|
Deferred income taxes |
|
(1,367 |
) |
|
|
— |
|
Changes in assets and
liabilities, net of acquisition: |
|
|
|
Accounts receivable |
|
(1,109 |
) |
|
|
(4,561 |
) |
Inventories |
|
(3,602 |
) |
|
|
(2,022 |
) |
Prepaid and other assets |
|
1,824 |
|
|
|
9,845 |
|
Accounts payable and other accrued liabilities |
|
(290 |
) |
|
|
(1,511 |
) |
Accrued rebates, returns and discounts |
|
2,887 |
|
|
|
2,926 |
|
Interest payable |
|
(1,376 |
) |
|
|
2,300 |
|
Net cash provided by operating activities |
|
22,717 |
|
|
|
27,426 |
|
Investing
Activities |
|
|
|
Purchase of Sympazan |
|
(105 |
) |
|
|
— |
|
Purchase of Otrexup |
|
— |
|
|
|
(404 |
) |
Net cash used in investing activities |
|
(105 |
) |
|
|
(404 |
) |
Financing
Activities |
|
|
|
Payment in settlement of
convertible debt inducement |
|
(10,500 |
) |
|
|
— |
|
Payment of direct transaction
costs related to convertible debt inducement |
|
(1,119 |
) |
|
|
— |
|
Payment of contingent
consideration |
|
(6,609 |
) |
|
|
(1,845 |
) |
Payment of taxes related to
net share settlement of equity awards |
|
(722 |
) |
|
|
(598 |
) |
Net cash used in financing activities |
|
(18,950 |
) |
|
|
(2,443 |
) |
Net increase in cash and cash
equivalents |
|
3,662 |
|
|
|
24,579 |
|
Cash and cash equivalents at
beginning of year |
|
64,941 |
|
|
|
36,810 |
|
Cash and cash equivalents at
end of period |
$ |
68,603 |
|
|
$ |
61,389 |
|
Supplemental
Disclosure of Cash Flow Information |
|
|
|
Net cash paid (refunded) for income taxes |
$ |
29 |
|
|
$ |
(8,360 |
) |
Cash paid for interest |
$ |
2,351 |
|
|
$ |
— |
|
RECONCILIATION OF GAAP NET (LOSS) INCOME TO NON-GAAP EBITDA
and ADJUSTED EBITDA (in
thousands)(unaudited) |
|
|
|
Three Months Ended March 31, |
|
|
|
|
|
2023 |
|
|
|
2022 |
|
Financial Statement Classification |
GAAP Net (Loss)
Income |
|
$ |
(3,484 |
) |
|
$ |
9,064 |
|
|
Interest expense |
|
|
1,122 |
|
|
|
2,327 |
|
Interest expense |
Income tax (benefit) expense |
|
|
(2,110 |
) |
|
|
713 |
|
Income tax benefit
(expense) |
Depreciation expense |
|
|
200 |
|
|
|
197 |
|
Selling, general and
administrative expenses |
Amortization of intangible assets |
|
|
6,284 |
|
|
|
8,501 |
|
Amortization of intangible
assets |
EBITDA
(Non-GAAP) |
|
$ |
2,012 |
|
|
$ |
20,802 |
|
|
Adjustments: |
|
|
|
|
|
|
Stock-based compensation |
|
|
2,446 |
|
|
|
982 |
|
Selling, general and
administrative expenses |
Contingent consideration fair value change (1) |
|
|
9,167 |
|
|
|
1,645 |
|
Fair value of contingent
consideration |
Debt-related expenses (2) |
|
|
9,918 |
|
|
|
— |
|
Debt-related expenses |
Transaction-related expenses (3) |
|
|
2,355 |
|
|
|
— |
|
Selling, general and
administrative expenses |
Other (4) |
|
|
(295 |
) |
|
|
434 |
|
Multiple |
Adjusted EBITDA
(Non-GAAP) |
|
$ |
25,603 |
|
|
$ |
23,863 |
|
|
(1) The fair value of the contingent
consideration is remeasured each reporting period, with changes in
the fair value resulting from changes in the underlying inputs
being recognized as operating expenses until the contingent
consideration arrangement is settled.
(2) Debt-related expenses consist of an induced
conversion expense of approximately $8.8 million and direct
transaction costs of approximately $1.1 million as a result of
the $30.0 million Convertible Note Exchange during the three months
ended March 31, 2023.
(3) Represents transaction-related expenses
associated with the pending acquisition of Spectrum
Pharmaceuticals, Inc., which was announced on April 25, 2023.
(4) Other for the three months ended
March 31, 2023 includes interest income of $0.5 million
recognized in Other gain related to the Company’s short-term
investments, partially offset by $0.2 million of inventory step-up
amortization recognized in Cost of sales related to acquired
inventories sold. Other for the three months ended March 31,
2022 represents amortization of inventory step-up recognized in
Cost of sales related to acquired inventories sold.
RECONCILIATION OF GAAP NET (LOSS) INCOME and NET (LOSS)
INCOME PER SHARE TO NON-GAAP ADJUSTED EARNINGS and
ADJUSTED EARNINGS PER SHARE
(1)(in thousands, except per share
amounts)(unaudited) |
|
|
Three Months EndedMarch 31,
2023 |
|
Three Months EndedMarch 31,
2022 |
|
Amount |
|
Diluted EPS (2) |
|
Amount |
|
Diluted EPS (2) |
Net (Loss) income per share
(GAAP)(2) |
|
(3,484 |
) |
|
|
(0.07 |
) |
|
|
9,064 |
|
|
|
0.20 |
Add: Debt-related expenses,
net of tax(2) |
|
9,639 |
|
|
|
|
|
— |
|
|
|
Add: Convertible debt interest
expense, net of tax(2) |
|
842 |
|
|
|
|
|
— |
|
|
|
Adjustments |
|
|
|
|
|
|
|
Amortization of intangible assets |
|
6,284 |
|
|
|
|
|
8,501 |
|
|
|
Stock-based compensation |
|
2,446 |
|
|
|
|
|
982 |
|
|
|
Contingent consideration fair value change |
|
9,167 |
|
|
|
|
|
1,645 |
|
|
|
Contingent consideration cash payable (3) |
|
(2,069 |
) |
|
|
|
|
(271 |
) |
|
|
Transaction-related expenses |
|
2,355 |
|
|
|
|
|
— |
|
— |
|
Other |
|
(295 |
) |
|
|
|
|
434 |
|
|
|
Income tax expense, as adjusted (4) |
|
(4,472 |
) |
|
|
|
|
(2,823 |
) |
|
|
Adjusted earnings
(Non-GAAP) |
$ |
20,413 |
|
|
$ |
0.29 |
|
|
$ |
17,532 |
|
|
$ |
0.38 |
|
|
|
|
|
|
|
|
Diluted shares used in
calculation (GAAP)(2) |
|
51,005 |
|
|
|
|
|
46,127 |
|
|
|
Add: Dilutive effect of
stock-based awards and equivalents(2) |
|
4,436 |
|
|
|
|
|
— |
|
|
|
Add: Dilutive effect of 2027
Convertible Notes(2) |
|
14,489 |
|
|
|
|
|
— |
|
|
|
Diluted shares used in
calculation (Non-GAAP)(2) |
|
69,930 |
|
|
|
|
|
46,127 |
|
|
|
(1) Certain adjustments included here are the
same as those reflected in the Company’s reconciliation of GAAP net
(loss) income to non-GAAP adjusted EBITDA and therefore should be
read in conjunction with that reconciliation and respective
footnotes.
(2) The Company uses the if-converted method
with respect to its convertible debt to compute GAAP and Non-GAAP
diluted earnings per share when the effect is dilutive. Under the
if-converted method, the Company assumes the 2027 Convertible
Notes, which were entered into on August 22, 2022, were converted
at the beginning of each period presented and outstanding. As a
result, interest expense and any other income statement impact
associated with the 2027 Convertible Notes, net of tax, is added
back to net income used in the diluted earnings per share
calculation.
For the three months ended March 31, 2023, as the Company was in
a GAAP net loss position, the potentially dilutive convertible debt
under the if-converted method and stock-based awards under the
treasury-stock method were not included in the computation of GAAP
diluted net (loss) per share, because to do so would be
anti-dilutive. However, the potentially dilutive convertible debt
under the if-converted method and stock-based awards under the
treasury-stock method were included in the computation of non-GAAP
adjusted earnings and adjusted earnings per share because the
effect was dilutive.
For the three months ended March 31, 2022, the Company used the
treasury-stock method to compute GAAP diluted net income per share
as there was no convertible debt outstanding during the period.
(3) Represents the accrued cash payable of the
INDOCIN contingent consideration for the respective period based on
20% royalty for annual INDOCIN net sales over $20.0 million.
(4) Represents the Company’s income tax expense
adjusted for the tax effect of pre-tax adjustments excluded from
adjusted earnings. The tax effect of pre-tax adjustments excluded
from adjusted earnings is computed at the blended federal and state
statutory rate of 25%.
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