Assertio Holdings, Inc. (“Assertio” or the “Company”) (Nasdaq:
ASRT), a specialty pharmaceutical company that acquires,
commercializes and develops safe and effective therapies that make
a difference in the lives of patients, today reported financial
results for the third quarter ended September 30, 2023.
“Our third quarter results were disappointing, with the loss of
Indocin exclusivity and Rolvedon results below expectations driving
significant charges to our net income. While we are learning that
certain aspects of the acquisition may not be everything we
initially expected, we did not buy Spectrum just for the third
quarter. The addition of Rolvedon diversifies and extends our
portfolio’s duration, plus brings improved commercial access and
business-to-business contracting teams that are important to our
strategic direction,” said Dan Peisert, CEO of Assertio. “We have
taken immediate steps to improve the business and remain committed
to building a strategic path for Rolvedon’s long-term sustainable
growth.”
“Despite these headwinds, Assertio’s innovative non-personal
platform continues to drive profitable growth on our other assets.
Sympazan achieved another new monthly high on a 4% increase in
total prescription volume quarter over quarter, and new payor
coverage drove volumes and Net Product Sales for Otrexup up 4% and
6%, respectively, for the nine months year-to-date,” said Peisert.
“We have built this platform to scale and accommodate assets across
a variety of therapeutic categories as we continue to pursue
additional licensing and acquisition opportunities that can
leverage these capabilities, bringing further value to Assertio and
capitalizing on our existing liquidity.”
Financial Highlights (unaudited):
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
(in millions, except per share amounts) |
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
|
2022 |
Net Product Sales
(GAAP) |
$ |
35.1 |
|
|
$ |
34.3 |
|
$ |
117.0 |
|
|
$ |
105.3 |
Net (Loss) Income
(GAAP) |
$ |
(279.5 |
) |
|
$ |
4.2 |
|
$ |
(274.6 |
) |
|
$ |
21.1 |
(Loss) Earnings Per
Share (GAAP) |
$ |
(3.42 |
) |
|
$ |
0.08 |
|
$ |
(4.35 |
) |
|
$ |
0.42 |
Adjusted EBITDA
(Non-GAAP)1 |
$ |
12.9 |
|
|
$ |
21.4 |
|
$ |
63.3 |
|
|
$ |
68.2 |
Adjusted Earnings Per
Share (Non-GAAP)1 |
$ |
0.01 |
|
|
$ |
0.22 |
|
$ |
0.46 |
|
|
$ |
0.85 |
Third quarter results included the following as compared to the
prior year quarter:
- Net product sales increased from $34.3 million to $35.1 million
year over year.
- The addition of Rolvedon and Sympazan sales in the current
period were mostly offset by declines in Indocin and Cambia
following their respective generic entrants.
- Rolvedon net product sales were $7.1 million for the two months
following the acquisition of Spectrum. Our initial assessment
indicates there were several dynamics that impacted the third
quarter. While the early phase of the launch benefited from
favorable reimbursement, expectations for an incremental demand
increase from a permanent J-code, effective April 1, have not been
achieved, and there were high levels of inventory in the channel at
the end of second quarter.
- Indocin net products sales in the third quarter were $17.9
million, a $4.0 million decrease from the prior year quarter
reflecting competition from a generic entrant and a
compounder.
- Gross margin2 in the third quarter was 80%, decreased from 88%
in the prior year third quarter.
- Inventory step-up amortization for Rolvedon was $1.8 million,
which contributed a 500 basis point decrease, with the balance of
the change primarily reflecting changes in sales mix due to
declines in Indocin and Cambia.
- SG&A expense was $21.0 million, increased from $11.9
million in the prior year third quarter.
- On a year-over-year basis, the 2023 third quarter included $2.7
million of Spectrum transaction costs and $5.9 million in higher
operating expense due to the additions of Rolvedon and
Sympazan.
- Third quarter 2023 included the following non-cash items:
- A charge of $238.8 million for loss on impairment of intangible
assets, driven by the revaluation of long-lived assets following a
decline in market capitalization during the quarter.
- Fair value of contingent consideration resulted in a benefit of
$17.5 million in the current period, compared to a expense of $3.9
million in prior year third quarter, which was primarily driven by
the revaluation of the Indocin contingent liability due to generic
entry.
- Income tax expense was $50.7 million, increased from $0.2
million in the prior year third quarter, primarily due to the
impact of $43.0 million in tax expense from applying a full
valuation allowance against net deferred tax assets.
- Adjusted EBITDA was $12.9 million, decreased from $21.4 million
in the prior year third quarter, primarily due to higher operating
expenses from the additions of Rolvedon and Sympazan.
Balance Sheet and Cash Flow
- For the quarter ended September 30, 2023, cash and cash
equivalents totaled $76.9 million.
- Convertible debt outstanding principal balance at September 30,
2023 was $40 million and does not mature until September 2027.
- Cash generated from operating activities quarter-to-date and
year-to-date was $2.6 million and $43.9 million, respectively,
inclusive of transaction costs associated with the merger and
supporting Spectrum’s current working capital needs.
Management updates
The Company has appointed Paul Schwichtenberg to a new role as
Senior Vice President with responsibility for market access,
pricing, trade and distribution, and other commercial activities.
In addition, on an interim basis, Schwichtenberg will also oversee
the oncology commercial team while Assertio recruits a new team
leader.
The Company has also appointed Ajay Patel as Chief Financial
Officer, in addition to his current role as Chief Accounting
Officer. Patel has been with Assertio since 2019, holding financial
and accounting positions with increasing leadership responsibility
during his tenure.
Said Peisert, “We believe Paul’s deep financial acumen,
experience with gross to net and leadership in optimizing margins
and cash flows will be critical for guiding our commercial team to
success. Ajay has been instrumental in the Company’s financial
transformation over the past three years, as we transitioned the
business from a net debt to net cash position, extended the
maturity of our debt and significantly improved both Adjusted
EBITDA margins and operating cash flows. I am excited to work with
both of them in these new roles for the continued transformation of
our business.”
Conference Call and Investor Presentation
Information
Assertio’s management will host a conference call to discuss its
third quarter 2023 financial results today:
Date: |
Wednesday, November 8, 2023 |
Time: |
4:30 p.m. Eastern Time |
Webcast (live and archive): |
http://investor.assertiotx.com/overview/default.aspx (Events
& Webcasts, Investor Page) |
Dial-in numbers: |
1-929-201-5912, Conference ID 9687947 |
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 that acquires,
commercializes and develops safe and effective therapies that make
a difference in the lives of patients. Utilizing a proprietary
digital-focused commercialization approach we can promote products
across multiple therapeutic categories. We strive to lead by
example, embrace change, and make a positive impact in our
community while creating better experiences for our employees,
partners and shareholders. 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, 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; 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, including as a result of
the generic indomethacin suppositories that were approved by the
FDA on or around August 2, 2023) and/or other products competitive
with any of Assertio’s products (including indomethacin
suppositories compounded by hospitals and other institutions
including a 503B compounder that commenced sales of its competitive
product in the second half of 2022, in what we believe to be
violation of certain provisions of the Food, Drug and Cosmetic
Act); the uncertainty around the potential impacts of the recently
approved generic indomethacin suppository to Assertio’s future
results of operations, financial condition, and cash flows;
Assertio’s financial cost and outcomes of clinical trials; 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
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, as well as Spectrum’s legacy
shareholder litigation and potential litigation relating to the
Spectrum merger, 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 on
commercially reasonable terms and in compliance with their
contractual obligations to Assertio and Spectrum as applicable, 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 may include adjustments to interest
expense and interest income, 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
charges, amortization of fair value inventory step-up as a result
of purchase accounting, transaction-related costs, gains or losses
from adjustments to long-lived assets and assets not part of
current operations, changes in valuation allowances on deferred tax
assets, and gains or losses resulting from debt refinancing or
extinguishment.
1 Non-GAAP measures are reconciled to the corresponding GAAP
measures in the schedules attached. 2 Gross margin represents the
ratio of net product sales less cost of sales to net product
sales.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)
INCOME(in thousands, except per share
amounts)(unaudited) |
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenues: |
|
|
|
|
|
|
|
Product sales, net |
$ |
35,137 |
|
|
$ |
34,279 |
|
|
$ |
116,989 |
|
|
$ |
105,258 |
|
Royalties and milestones |
|
490 |
|
|
|
473 |
|
|
|
1,910 |
|
|
|
1,916 |
|
Other revenue |
|
— |
|
|
|
(540 |
) |
|
|
185 |
|
|
|
(1,290 |
) |
Total revenues |
|
35,627 |
|
|
|
34,212 |
|
|
|
119,084 |
|
|
|
105,884 |
|
Costs and expenses: |
|
|
|
|
|
|
|
Cost of sales |
|
7,060 |
|
|
|
4,009 |
|
|
|
17,299 |
|
|
|
12,734 |
|
Research and development expenses |
|
1,316 |
|
|
|
— |
|
|
|
1,819 |
|
|
|
— |
|
Selling, general and administrative expenses |
|
21,005 |
|
|
|
11,900 |
|
|
|
54,680 |
|
|
|
33,084 |
|
Change in fair value of contingent consideration |
|
(17,532 |
) |
|
|
3,900 |
|
|
|
(8,124 |
) |
|
|
6,845 |
|
Amortization of intangible assets |
|
10,184 |
|
|
|
7,969 |
|
|
|
22,752 |
|
|
|
24,438 |
|
Loss on impairment of intangible assets |
|
238,831 |
|
|
|
— |
|
|
|
238,831 |
|
|
|
— |
|
Restructuring charges |
|
3,034 |
|
|
|
— |
|
|
|
3,034 |
|
|
|
— |
|
Total costs and expenses |
|
263,898 |
|
|
|
27,778 |
|
|
|
330,291 |
|
|
|
77,101 |
|
(Loss) income from
operations |
|
(228,271 |
) |
|
|
6,434 |
|
|
|
(211,207 |
) |
|
|
28,783 |
|
Other (expense) income: |
|
|
|
|
|
|
|
Debt-related expenses |
|
— |
|
|
|
— |
|
|
|
(9,918 |
) |
|
|
— |
|
Interest expense |
|
(752 |
) |
|
|
(2,052 |
) |
|
|
(2,625 |
) |
|
|
(6,648 |
) |
Other gain |
|
138 |
|
|
|
2 |
|
|
|
1,601 |
|
|
|
453 |
|
Total other expense |
|
(614 |
) |
|
|
(2,050 |
) |
|
|
(10,942 |
) |
|
|
(6,195 |
) |
Net (loss) income before
income taxes |
|
(228,885 |
) |
|
|
4,384 |
|
|
|
(222,149 |
) |
|
|
22,588 |
|
Income tax expense |
|
(50,659 |
) |
|
|
(210 |
) |
|
|
(52,409 |
) |
|
|
(1,516 |
) |
Net (loss) income and comprehensive income |
$ |
(279,544 |
) |
|
$ |
4,174 |
|
|
$ |
(274,558 |
) |
|
$ |
21,072 |
|
|
|
|
|
|
|
|
|
Basic net (loss) income per
share |
$ |
(3.42 |
) |
|
$ |
0.09 |
|
|
$ |
(4.35 |
) |
|
$ |
0.45 |
|
Diluted net (loss) income per
share |
$ |
(3.42 |
) |
|
$ |
0.08 |
|
|
$ |
(4.35 |
) |
|
$ |
0.42 |
|
Shares used in computing basic
net (loss) income per share |
|
81,713 |
|
|
|
48,180 |
|
|
|
63,066 |
|
|
|
46,566 |
|
Shares used in computing
diluted net (loss) income per share |
|
81,713 |
|
|
|
57,386 |
|
|
|
63,066 |
|
|
|
50,470 |
|
CONDENSED CONSOLIDATED BALANCE SHEETS(in
thousands, except share and per share
data)(unaudited) |
|
|
As of |
|
September 30, 2023 |
|
December 31, 2022 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
76,888 |
|
|
$ |
64,941 |
|
Accounts receivable, net |
|
62,467 |
|
|
|
45,357 |
|
Inventories, net |
|
42,710 |
|
|
|
13,696 |
|
Prepaid and other current assets |
|
2,895 |
|
|
|
8,268 |
|
Total current assets |
|
184,960 |
|
|
|
132,262 |
|
Property and equipment,
net |
|
804 |
|
|
|
744 |
|
Intangible assets, net |
|
170,413 |
|
|
|
197,996 |
|
Goodwill |
|
19,856 |
|
|
|
— |
|
Deferred tax asset |
|
— |
|
|
|
80,202 |
|
Other long-term assets |
|
3,995 |
|
|
|
2,709 |
|
Total assets |
$ |
380,028 |
|
|
$ |
413,913 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
19,004 |
|
|
$ |
5,991 |
|
Accrued rebates, returns and discounts |
|
59,424 |
|
|
|
49,426 |
|
Accrued liabilities |
|
22,065 |
|
|
|
12,181 |
|
Long-term debt, current portion |
|
— |
|
|
|
470 |
|
Contingent consideration, current portion |
|
12,800 |
|
|
|
26,300 |
|
Other current liabilities |
|
996 |
|
|
|
948 |
|
Total current liabilities |
|
114,289 |
|
|
|
95,316 |
|
Long-term debt |
|
38,866 |
|
|
|
66,403 |
|
Contingent consideration |
|
16,100 |
|
|
|
22,200 |
|
Other long-term
liabilities |
|
17,900 |
|
|
|
4,269 |
|
Total liabilities |
|
187,155 |
|
|
|
188,188 |
|
Commitments and
contingencies |
|
|
|
Shareholders’ equity: |
|
|
|
Common stock, $0.0001 par value, 200,000,000 shares authorized;
94,553,009 and 48,319,838 shares issued and outstanding as of
September 30, 2023 and December 31, 2022, respectively. |
|
9 |
|
|
|
5 |
|
Additional paid-in capital |
|
787,023 |
|
|
|
545,321 |
|
Accumulated deficit |
|
(594,159 |
) |
|
|
(319,601 |
) |
Total shareholders’ equity |
|
192,873 |
|
|
|
225,725 |
|
Total liabilities and
shareholders' equity |
$ |
380,028 |
|
|
$ |
413,913 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(in
thousands)(unaudited) |
|
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
Operating
Activities |
|
|
|
Net (loss) income |
$ |
(274,558 |
) |
|
$ |
21,072 |
|
Adjustments to reconcile net
(loss) income to net cash from operating activities: |
|
|
|
Depreciation and amortization |
|
23,321 |
|
|
|
25,033 |
|
Amortization of debt issuance costs and Royalty Rights |
|
350 |
|
|
|
128 |
|
Loss on impairment of intangible assets |
|
238,831 |
|
|
|
— |
|
Recurring fair value measurements of assets and liabilities |
|
(7,612 |
) |
|
|
6,845 |
|
Debt-related expenses |
|
9,918 |
|
|
|
— |
|
Provisions for inventory and other assets |
|
2,129 |
|
|
|
828 |
|
Stock-based compensation |
|
6,516 |
|
|
|
5,116 |
|
Deferred income taxes |
|
47,192 |
|
|
|
— |
|
Changes in assets and
liabilities, net of acquisition: |
|
|
|
Accounts receivable |
|
33,865 |
|
|
|
(319 |
) |
Inventories |
|
(8,898 |
) |
|
|
(7,607 |
) |
Prepaid and other assets |
|
6,769 |
|
|
|
13,288 |
|
Accounts payable and other accrued liabilities |
|
(21,523 |
) |
|
|
(7,193 |
) |
Accrued rebates, returns and discounts |
|
(11,027 |
) |
|
|
(4,058 |
) |
Interest payable |
|
(1,376 |
) |
|
|
(1,232 |
) |
Net cash provided by operating activities |
|
43,897 |
|
|
|
51,901 |
|
Investing
Activities |
|
|
|
Purchases of property and
equipment |
|
(528 |
) |
|
|
— |
|
Purchase of Sympazan |
|
(280 |
) |
|
|
— |
|
Net cash acquired in Spectrum
Merger |
|
1,950 |
|
|
|
— |
|
Purchase of Otrexup |
|
— |
|
|
|
(16,889 |
) |
Proceeds from sale of
investments |
|
2,194 |
|
|
|
— |
|
Net cash provided by (used in) investing activities |
|
3,336 |
|
|
|
(16,889 |
) |
Financing
Activities |
|
|
|
Proceeds from issuance of 2027
Convertible Notes |
|
— |
|
|
|
65,916 |
|
Payments in connection with
2027 Convertible Notes |
|
(10,500 |
) |
|
|
— |
|
Payment of direct transaction
costs related to convertible debt inducement |
|
(1,119 |
) |
|
|
— |
|
Payment in connection with
2024 Senior Notes |
|
— |
|
|
|
(70,750 |
) |
Payment of contingent
consideration |
|
(15,408 |
) |
|
|
(7,845 |
) |
Proceeds from the issuance of
common stock |
|
— |
|
|
|
7,020 |
|
Payments related to the
vesting and settlement of equity awards, net |
|
(7,770 |
) |
|
|
(707 |
) |
Other financing
activities |
|
(489 |
) |
|
|
(630 |
) |
Net cash used in financing activities |
|
(35,286 |
) |
|
|
(6,996 |
) |
Net increase in cash and cash
equivalents |
|
11,947 |
|
|
|
28,016 |
|
Cash and cash equivalents at
beginning of year |
|
64,941 |
|
|
|
36,810 |
|
Cash and cash equivalents at
end of period |
$ |
76,888 |
|
|
$ |
64,826 |
|
Supplemental
Disclosure of Cash Flow Information |
|
|
|
Net cash paid (refunded) for income taxes |
$ |
3,424 |
|
|
$ |
(7,822 |
) |
Cash paid for interest |
$ |
3,651 |
|
|
$ |
7,752 |
|
RECONCILIATION OF GAAP NET (LOSS) INCOME TO NON-GAAP EBITDA
and ADJUSTED EBITDA(in
thousands)(unaudited) |
|
|
|
|
|
|
|
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
|
|
|
2023 |
|
|
|
2022 |
|
|
2023 |
|
|
|
2022 |
|
Financial Statement Classification |
GAAP Net (Loss)
Income |
|
$ |
(279,544 |
) |
|
$ |
4,174 |
|
$ |
(274,558 |
) |
|
$ |
21,072 |
|
|
Interest expense |
|
|
752 |
|
|
|
2,052 |
|
|
2,625 |
|
|
|
6,648 |
|
Interest expense |
Income tax expense |
|
|
50,659 |
|
|
|
210 |
|
|
52,409 |
|
|
|
1,516 |
|
Income tax expense |
Depreciation expense |
|
|
172 |
|
|
|
197 |
|
|
569 |
|
|
|
592 |
|
Selling, general and
administrative expenses |
Amortization of intangible assets |
|
|
10,184 |
|
|
|
7,969 |
|
|
22,752 |
|
|
|
24,438 |
|
Amortization of intangible
assets |
EBITDA
(Non-GAAP) |
|
$ |
(217,777 |
) |
|
$ |
14,602 |
|
$ |
(196,203 |
) |
|
$ |
54,266 |
|
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
Legacy product reserves(1) |
|
|
— |
|
|
|
540 |
|
|
(185 |
) |
|
|
1,290 |
|
Other revenue |
Stock-based compensation |
|
|
1,864 |
|
|
|
2,400 |
|
|
6,516 |
|
|
|
5,116 |
|
Selling, general and
administrative expenses |
Change in fair value of contingent consideration(2) |
|
|
(17,532 |
) |
|
|
3,900 |
|
|
(8,124 |
) |
|
|
6,845 |
|
Change in fair value of
contingent consideration |
Debt-related expenses(3) |
|
|
— |
|
|
|
— |
|
|
9,918 |
|
|
|
— |
|
Debt-related expenses |
Transaction-related expenses(4) |
|
|
2,736 |
|
|
|
— |
|
|
8,539 |
|
|
|
— |
|
Selling, general and
administrative expenses |
Loss on impairment of intangible assets(5) |
|
|
238,831 |
|
|
|
— |
|
|
238,831 |
|
|
|
— |
|
Loss on impairment of
intangible assets |
Restructuring charges(6) |
|
|
3,034 |
|
|
|
— |
|
|
3,034 |
|
|
|
— |
|
Restructuring charges |
Other(7) |
|
|
1,755 |
|
|
|
— |
|
|
967 |
|
|
|
700 |
|
Multiple |
Adjusted EBITDA
(Non-GAAP) |
|
$ |
12,911 |
|
|
$ |
21,442 |
|
$ |
63,293 |
|
|
$ |
68,217 |
|
|
(1) Represents removal of the impact of revenue adjustment to
reserves for product sales allowances (gross-to-net-sales
allowances) estimates related to previously divested products.
(2) 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 a benefit
or expense in operating expenses until the contingent consideration
arrangement is settled.
(3) Debt-related expenses consist of an induced conversion
expense of approximately $8.8 million and direct transaction
costs of approximately $1.1 million incurred as a result of
the privately negotiated exchange of $30.0 million principal amount
of the Company’s 6.5% Convertible Senior Notes due 2027 in the
first quarter of 2023.
(4) Represents transaction-related expenses associated with the
acquisition of Spectrum, which closed effective July 31, 2023.
(5) Represents the charge in the period for the impairment of
intangible assets resulting from the revaluation of the Company’s
long-lived assets.
(6) Restructuring charges represent non-recurring costs
associated with the Company’s announced restructuring plan.
(7) Other for the three and nine months ended September 30,
2023 includes $1.8 million and $2.2 million, respectively, of
inventory step-up amortization recognized in Cost of sales related
to acquired inventories sold and the loss recognized in Other
(loss) gain of $0.5 million in each period related to the fair
value adjustment of the derivative liability associated with the
embedded conversion feature of the convertible notes, partially
offset by interest income of $0.6 million and $1.7 million,
respectively, recognized in Other gain (loss) related to the
Company’s short-term investments. Other for the nine months ended
September 30, 2022 represents amortization of inventory
step-up recognized in Cost of sales related acquired inventories
sold.
RECONCILIATION OF GAAP NET (LOSS) INCOME and NET (LOSS)
INCOME PER SHARE TONON-GAAP ADJUSTED (LOSS)
EARNINGS and ADJUSTED (LOSS) EARNINGS PER
SHARE(1)(in thousands, except per
share amounts)(unaudited) |
|
|
|
|
|
Three Months Ended September 30, 2023 |
|
Three Months Ended September 30, 2022 |
|
Amount |
|
Diluted EPS(2) |
|
Amount |
|
Diluted EPS(2) |
Net (loss) income (GAAP)(2) |
$ |
(279,544 |
) |
|
$ |
(3.42 |
) |
|
$ |
4,174 |
|
|
$ |
0.08 |
Add: Convertible debt interest
expense,net of tax(2) |
|
— |
|
|
|
|
|
497 |
|
|
|
Adjustments |
|
|
|
|
|
|
|
Amortization of intangible assets |
|
10,184 |
|
|
|
|
|
7,969 |
|
|
|
Legacy products revenue reserves |
|
— |
|
|
|
|
|
540 |
|
|
|
Stock-based compensation |
|
1,864 |
|
|
|
|
|
2,400 |
|
|
|
Change in fair value of contingent consideration |
|
(17,532 |
) |
|
|
|
|
3,900 |
|
|
|
Contingent consideration cash payable(3) |
|
(3,590 |
) |
|
|
|
|
(4,374 |
) |
|
|
Transaction-related expenses |
|
2,736 |
|
|
|
|
|
— |
|
|
|
Loss on impairment of intangible assets |
|
238,831 |
|
|
|
|
|
— |
|
|
|
Restructuring charges |
|
3,034 |
|
|
|
|
|
— |
|
|
|
Other |
|
1,755 |
|
|
|
|
|
— |
|
|
|
Increase in deferred tax asset valuation allowance(4) |
|
43,035 |
|
|
|
|
|
— |
|
|
|
Income tax benefit (expense), as adjusted(5) |
|
387 |
|
|
|
|
|
(2,609 |
) |
|
|
Adjusted (loss)
earnings (Non-GAAP) |
$ |
1,160 |
|
|
$ |
0.01 |
|
|
$ |
12,497 |
|
|
$ |
0.22 |
|
|
|
|
|
|
|
|
Diluted shares used in
calculation (GAAP)(2) |
|
81,713 |
|
|
|
|
|
57,386 |
|
|
|
Add: Dilutive effect of
stock-based awards and equivalents(2) |
|
2,191 |
|
|
|
|
|
— |
|
|
|
Diluted shares used in
calculation (Non-GAAP)(2) |
|
83,904 |
|
|
|
|
|
57,386 |
|
|
|
(1) Certain adjustments included here are the same as those
reflected in the Company’s reconciliation of GAAP net 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,
net of tax, 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 September 30, 2023, the
Company’s potentially dilutive convertible debt under the
if-converted method was not included in the computation of both
non-GAAP and GAAP diluted net income per share, because to do so
would be anti-dilutive. However, the potentially dilutive
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.
(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 amount of income tax expense related to the
recognition of a full valuation allowance against deferred tax
assets.
(5) Represents the Company’s income tax benefit (expense)
adjustment from 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%.
RECONCILIATION OF GAAP NET (LOSS) INCOME and NET (LOSS)
INCOME PER SHARE TONON-GAAP ADJUSTED (LOSS) EARNINGS and ADJUSTED
(LOSS) EARNINGS PER SHARE(1)(in
thousands, except per share
amounts)(unaudited) |
|
|
|
|
|
Nine Months Ended September 30, 2023 |
|
Nine Months Ended September 30, 2022 |
|
Amount |
|
Diluted EPS(2) |
|
Amount |
|
Diluted EPS(2) |
Net (loss) income (GAAP)(2) |
$ |
(274,558 |
) |
|
$ |
(4.35 |
) |
|
$ |
21,072 |
|
|
$ |
0.42 |
Add: Convertible debt interest
expense,net of tax(2) |
|
1,969 |
|
|
|
|
|
487 |
|
|
|
Adjustments |
|
|
|
|
|
|
|
Amortization of intangible assets |
|
22,752 |
|
|
|
|
|
24,438 |
|
|
|
Legacy products revenue reserves |
|
(185 |
) |
|
|
|
|
1,290 |
|
|
|
Stock-based compensation |
|
6,516 |
|
|
|
|
|
5,116 |
|
|
|
Debt-related expenses, net of tax |
|
9,639 |
|
|
|
|
|
— |
|
|
|
Change in fair value of contingent consideration |
|
(8,124 |
) |
|
|
|
|
6,845 |
|
|
|
Contingent consideration cash payable(3) |
|
(11,274 |
) |
|
|
|
|
(9,213 |
) |
|
|
Transaction-related expenses |
|
8,539 |
|
|
|
|
|
— |
|
|
|
Loss on impairment of intangible assets |
|
238,831 |
|
|
|
|
|
— |
|
|
|
Restructuring charges |
|
3,034 |
|
|
|
|
|
— |
|
|
|
Other |
|
967 |
|
|
|
|
|
700 |
|
|
|
Release of deferred tax asset valuation allowance(4) |
|
43,035 |
|
|
|
|
|
— |
|
|
|
Income taxes expense, as adjusted(5) |
|
(5,556 |
) |
|
|
|
|
(7,294 |
) |
|
|
Adjusted (loss) earnings (Non-GAAP) |
$ |
35,585 |
|
|
$ |
0.46 |
|
|
$ |
43,441 |
|
|
$ |
0.85 |
|
|
|
|
|
|
|
|
Diluted shares used in
calculation (GAAP)(2) |
|
63,066 |
|
|
|
|
|
50,470 |
|
|
|
Add: Dilutive effect of
stock-based awards and equivalents(2) |
|
3,770 |
|
|
|
|
|
— |
|
|
|
Add: Dilutive effect of 2027
Convertible Notes(2) |
|
11,324 |
|
|
|
|
|
— |
|
|
|
Diluted shares used in
calculation (Non-GAAP)(2) |
|
78,160 |
|
|
|
|
|
50,470 |
|
|
|
(1) Certain adjustments included here are the same as those
reflected in the Company’s reconciliation of GAAP net 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,
net of tax, 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 nine months ended September 30, 2023, the Company’s
potentially dilutive convertible debt under the if-converted method
was not included in the computation of GAAP diluted net income 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.
(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 amount of income tax expense related to the
recognition of a full valuation allowance against deferred tax
assets.
(5) Represents the Company’s income tax benefit (expense)
adjustment from 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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