-- Completed Strategic Asset Sales of NUCYNTA® Franchise and Gralise® Totaling $502.5 Million --
-- Repaid Senior Secured Debt in Full and Successfully Tendered for Convertible Debt --
-- Merger with Zyla Life Sciences On Track and Expected to Close Shortly After the Company’s 2020 Annual Meeting on May 19, 2020 --
LAKE FOREST, Ill., May 11, 2020 (GLOBE NEWSWIRE) -- Assertio Therapeutics, Inc. (“Assertio” or the “Company”) (NASDAQ: ASRT) today reported financial results for the quarter ended March 31, 2020 and provided an update on its business performance and strategic initiatives.
First-Quarter Financial Highlights:
(unaudited)
First Quarter 2020 | |||
(in millions, except earnings per share) | GAAP | Non-GAAP(1) | |
Total Revenues | $20.9 | — | |
Net Income | $41.2 | $10.3 | |
Earnings Per Share | $0.58 | $0.10 | |
Adjusted EBITDA | — | $6.1 |
(1) All non-GAAP measures included in this earnings release are reconciled to the corresponding GAAP measures in the schedules attached.
“Today we reported positive results in a truly transformative quarter for Assertio, one in which we strategically divested assets, repaid our debt, and announced a merger agreement with Zyla Life Sciences. These bold steps position the new Assertio as a company with a diversified and growing portfolio, low leverage and as a result well positioned to add differentiated products through acquisitions and partnerships,” said Arthur Higgins, President and CEO of Assertio. “With the transformation of Assertio now well in place, I am looking forward to my new role as non-executive chairman at the close of the merger, where I will work with the Assertio Board and its Leadership to achieve our vision of becoming a leading specialty pharmaceutical company.”
First-Quarter Business Highlights:
Revenue Summary:
(in thousands, unaudited)
Three Months Ended March 31, | ||||||||||||||||
2020 | 2019 | |||||||||||||||
Product sales, net | ||||||||||||||||
CAMBIA | $ | 6,274 | $ | 8,808 | ||||||||||||
Zipsor | 2,331 | 4,231 | ||||||||||||||
Gralise | 547 | 13,278 | ||||||||||||||
Total neurology product sales, net | 9,152 | 26,317 | ||||||||||||||
NUCYNTA and Lazanda product sales adjustments | 100 | 133 | ||||||||||||||
Total product sales, net | 9,252 | 26,450 | ||||||||||||||
Commercialization agreement: | ||||||||||||||||
Commercialization agreement, net | 11,258 | 30,856 | ||||||||||||||
Royalties and milestone revenue | 407 | 623 | ||||||||||||||
Total revenues | $ | 20,917 | $ | 57,929 |
2020 Company Update:
The Company will provide an update on its strategy and merger integration during its second quarter earnings call.
Conference Call and Webcast:
The Company will host a conference call today, Monday, May 11, 2020 beginning at 8:30 a.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 two 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.
Forward Looking Statements
Statements in this communication that are not historical facts are forward-looking statements that reflect Assertio’s and Zyla’s respective management’s current expectations, assumptions and estimates of future performance and economic conditions. These forward-looking statements are made in reliance on the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to, among other things, future events or the future performance or operations of Assertio and Zyla, respectively. All statements other than historical facts may be forward-looking statements; words such as “anticipate,” “believe,” “could,” “design,” “estimate,” “expect,” “forecast,” “goal,” “guidance,” “imply,” “intend,” “may”, “objective,” “opportunity,” “outlook,” “plan,” “position,” “potential,” “predict,” “project,” “prospective,” “pursue,” “seek,” “should,” “strategy,” “target,” “would,” “will” or other similar expressions that convey the uncertainty of future events or outcomes are used to identify forward-looking statements. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the control of Assertio or Zyla. Factors that could cause Assertio’s or Zyla’s actual results (or the actual results of the new combined company) to differ materially from those implied in the forward-looking statements include: (1) the risk that the conditions to the closing of the proposed Merger are not satisfied, including the risk that required approvals for the proposed Merger from the stockholders of Assertio or Zyla are not obtained; (2) the occurrence of any event, change or other circumstances that either could give rise to the right of one or both of Assertio or Zyla to terminate the Agreement; (3) the risk of litigation relating to the proposed Merger; (4) uncertainties as to the timing of the consummation of the proposed transaction and the ability of each party to consummate the proposed Merger; (5) risks related to disruption of management time from ongoing business operations due to the proposed Merger; (6) unexpected costs, charges or expenses resulting from the proposed Merger; (7) the ability of the Assertio and Zyla to retain and hire key personnel; (8) competitive responses to the proposed Merger and the impact of competitive services; (9) certain restrictions during the pendency of the merger that may impact Assertio’s or Zyla’s ability to pursue certain business opportunities or strategic transaction; (10) potential adverse changes to business relationships resulting from the announcement or completion of the proposed transaction; (11) the combined company’s ability to achieve the growth prospects and synergies expected from the transaction, as well as delays, challenges and expenses associated with integrating the combined company’s existing businesses; (12) negative effects of this announcement or the consummation of the proposed Merger on the market price of Assertio’s or Zyla’s common stock, credit ratings and operating results; and (13) legislative, regulatory and economic developments, including changing business conditions in the industries in which Assertio and Zyla operate and (14) natural disasters or calamities, epidemics, pandemics or disease outbreaks (including COVID-19) or any escalation or worsening of the foregoing. These risks, as well as other risks associated with the proposed transaction, are more fully described in the joint proxy statement/prospectus that has been filed with the United States Securities and Exchange Commission (the “SEC”) in connection with the proposed transaction. Investors and potential investors are urged not to place undue reliance on forward-looking statements in this communication, which speak only as of this date. While Assertio or Zyla may elect to update these forward-looking statements at some point in the future, each specifically disclaims any obligation to update or revise any forward-looking-statements contained in this press release whether as a result of new information or future events, except as may be required by law. Nothing contained herein constitutes or will be deemed to constitute a forecast, projection or estimate of the future financial performance of Assertio, Zyla, the new holding company or the combined company, whether following the implementation of the proposed transaction or otherwise.
No Offer or Solicitation
This communication includes information related to a proposed business combination involving Assertio and Zyla. Such information is for informational purposes only and is neither an offer to purchase, nor a solicitation of an offer to sell, subscribe for or buy 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.
Additional Information and Where to Find It
This communication may be deemed to be solicitation material in respect of the proposed issuance of shares for Assertio and the proposed Merger for Zyla. The proposed issuance of shares will be submitted to Assertio’s stockholders and the proposed Merger will be submitted to Zyla’s stockholders for their consideration. In connection with the proposed Merger and the solicitation of proxies, Assertio and Zyla have filed, and mailed to their respective stockholders, the Joint Proxy Statement/Prospectus dated April 20, 2020. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION WITH RESPECT TO THE PROPOSED MERGER, INVESTORS AND STOCKHOLDERS OF ASSERTIO AND INVESTORS AND STOCKHOLDERS OF ZYLA ARE URGED TO READ THE DEFINITIVE REGISTRATION STATEMENT, INCLUDING THE JOINT PROXY STATEMENT, REGARDING THE PROPOSED MERGER (INCLUDING ANY AMENDMENTS OR SUPPLEMENTS THERETO) AND OTHER RELEVANT MATERIALS, WHEN THEY BECOME AVAILABLE, IN THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER.
The Joint Proxy Statement, any amendments or supplements thereto and other relevant materials, and any other documents filed by Assertio or Zyla with the SEC, may be obtained once such documents are filed with the SEC free of charge at the SEC’s website at www.sec.gov or free of charge from Assertio at www.assertiotx.com or by directing a request to Assertio’s Investor Relations Department at investor@assertiotx.com or free of charge from Zyla at www.zyla.com or by directing a Zyla’s Investor Relations Department at ir@zyla.com.
Participants in the Solicitation
Assertio, Zyla and certain of their respective executive officers, directors, other members of management and employees may, under the rules of the SEC, be deemed to be “participants” in the solicitation of proxies in connection with the proposed issuance of shares and the proposed Merger. Information regarding Assertio’s directors and executive officers is available in its Joint Proxy Statement/Prospectus dated April 20, 2020 and its Annual Report on Form 10-K for the year ended December 31, 2019, that was filed with the SEC on March 10, 2020. Information regarding Zyla’s directors and executive officers is available in its Annual Report on Form 10-K for the year ended December 31, 2019, that was filed with the SEC on March 26, 2020 and in Amendment No. 1 to its Annual Report on Form-10-K for the year ended December 31, 2019, that was filed with the SEC on April 28, 2020. These documents may be obtained free of charge from the sources indicated above. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, is contained in the Joint Proxy Statement/Prospectus and other relevant materials relating to the proposed Merger to be filed with the SEC when they become available.
Investor and Media Contact:
Dan Peisert
Senior Vice President, Chief Financial Officer
dpeisert@assertiotx.com
Non-GAAP Financial Measures
To supplement the Company’s financial results presented on a U.S. generally accepted accounting principles (GAAP) basis, the Company has included information about non-GAAP revenue, non-GAAP adjusted earnings, non-GAAP adjusted 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 Items
Non-GAAP measures presented within this release exclude specified items. The Company considers specified items to be significant income/expense items not indicative of current operations, including the related tax effect. Specified items include non-cash adjustments to Collegium agreement revenue and cost of sales, adjustments to sales reserves for products the Company is no longer selling, interest income, interest expense, amortization expense, stock-based compensation expense, non-cash interest expense related to debt, depreciation expense, income taxes, transaction-related costs, CEO transition and restructuring costs, 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 or extinguishment, gains or losses from non-cash adjustments to long-lived assets and assets not part of current operations, and adjustments 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 March 31, | |||||||||||||||
2020 | 2019 | ||||||||||||||
Revenues: | |||||||||||||||
Product sales, net | $ | 9,252 | $ | 26,450 | |||||||||||
Commercialization agreement, net | 11,258 | 30,856 | |||||||||||||
Royalties and milestones | 407 | 623 | |||||||||||||
Total revenues | 20,917 | 57,929 | |||||||||||||
Costs and expenses: | |||||||||||||||
Cost of sales (excluding amortization of intangible assets) | 1,399 | 2,575 | |||||||||||||
Research and development expenses | 1,041 | 1,793 | |||||||||||||
Selling, general and administrative expenses | 27,314 | 25,045 | |||||||||||||
Amortization of intangible assets | 7,795 | 25,444 | |||||||||||||
Total costs and expenses | 37,549 | 54,857 | |||||||||||||
(Loss) income from operations | (16,632 | ) | 3,072 | ||||||||||||
Other income (expense): | |||||||||||||||
Gain on sale of Gralise | 127,505 | — | |||||||||||||
Loss on extinguishment of convertible notes | (31,608 | ) | — | ||||||||||||
Loss on sale of NUCYNTA | (15,755 | ) | |||||||||||||
Interest expense | (8,674 | ) | (16,554 | ) | |||||||||||
Loss on prepayment of Senior Notes | (8,233 | ) | — | ||||||||||||
Other | (3,325 | ) | (609 | ) | |||||||||||
Total other income (expense) | 59,910 | (17,163 | ) | ||||||||||||
Net income (loss) before income taxes | 43,278 | (14,091 | ) | ||||||||||||
Income tax expense | (2,048 | ) | (210 | ) | |||||||||||
Net income (loss) and Comprehensive income (loss) | $ | 41,230 | $ | (14,301 | ) | ||||||||||
Basic net income (loss) per share | $ | 0.58 | $ | (0.22 | ) | ||||||||||
Diluted net income (loss) per share | $ | 0.58 | $ | (0.22 | ) | ||||||||||
Shares used in computing basic net income (loss) per share | 70,940 | 64,239 | |||||||||||||
Shares used in computing diluted net income (loss) per share | 71,051 | 64,239 |
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 31, 2020 | December 31, 2019 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 105,973 | $ | 42,107 | |||||||
Accounts receivable, net | 12,952 | 42,744 | |||||||||
Consideration receivable from sale of Gralise | 50,019 | — | |||||||||
Inventories, net | 518 | 3,412 | |||||||||
Prepaid and other current assets | 10,651 | 15,688 | |||||||||
Total current assets | 180,113 | 103,951 | |||||||||
Property and equipment, net | 3,233 | 3,497 | |||||||||
Intangible assets, net | 23,671 | 400,535 | |||||||||
Investments, net | 8,132 | 13,064 | |||||||||
Other long-term assets | 4,125 | 6,123 | |||||||||
Total assets | 219,274 | 527,170 | |||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||
Current liabilities: | |||||||||||
Accounts payable | 4,982 | 16,193 | |||||||||
Accrued rebates, returns and discounts | 32,359 | 58,943 | |||||||||
Accrued liabilities | 24,716 | 18,948 | |||||||||
Senior Notes, current portion | — | 80,000 | |||||||||
Convertible Notes, current portion | 57,866 | — | |||||||||
Interest payable | 304 | 8,375 | |||||||||
Other current liabilities | 2,066 | 2,094 | |||||||||
Total current liabilities | 122,293 | 184,553 | |||||||||
Senior Notes | — | 76,443 | |||||||||
Convertible Notes | — | 194,815 | |||||||||
Other long-term liabilities | 12,944 | 13,401 | |||||||||
Total liabilities | 135,237 | 469,212 | |||||||||
Commitments and contingencies | |||||||||||
Shareholders’ equity: | |||||||||||
Common stock | 8 | 8 | |||||||||
Additional paid-in capital | 442,600 | 457,751 | |||||||||
Accumulated deficit | (358,571 | ) | (399,801 | ) | |||||||
Total shareholders’ equity | 84,037 | 57,958 | |||||||||
Total liabilities and shareholders' equity | $ | 219,274 | $ | 527,170 |
RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA AND EARNINGS
(in thousands)
(unaudited)
Three Months Ended March 31, | ||||||||||||||||||
2020 | 2019 | Financial Statement Classification | ||||||||||||||||
Net (loss) income (GAAP) | $ | 41,230 | $ | (14,301 | ) | |||||||||||||
Interest expense | 8,674 | 16,554 | Interest expense | |||||||||||||||
Income tax (benefit) expense | 2,048 | 210 | Income tax benefit (expense) | |||||||||||||||
Depreciation expense | 273 | 337 | Selling, general and administrative expenses | |||||||||||||||
Amortization of intangible assets | 7,795 | 25,444 | Amortization of intangible assets | |||||||||||||||
EBITDA (Non-GAAP) | $ | 60,020 | $ | 28,244 | ||||||||||||||
Adjustments: | ||||||||||||||||||
NUCYNTA, Lazanda and Gralise revenue reserves (1) | (647 | ) | (133 | ) | Product sales, net | |||||||||||||
Commercialization agreement revenues (2) | 1,846 | 1,930 | Commercialization agreement, net | |||||||||||||||
Transaction-related costs(3) | 7,694 | — | Selling, general and administrative expenses | |||||||||||||||
Expenses for opioid-related litigation, investigations and regulations (4) | 2,128 | 2,500 | Selling, general and administrative expenses | |||||||||||||||
Stock-based compensation | 1,934 | 2,702 | Multiple (5) | |||||||||||||||
Gain on sale of Gralise (6) | (127,505 | ) | — | Gain on sale of Gralise | ||||||||||||||
Loss on extinguishment of convertible notes (7) | 31,608 | — | Loss on extinguishment of convertible notes | |||||||||||||||
Loss on sale of NUCYNTA (8) | 15,755 | — | Loss on sale of NUCYNTA | |||||||||||||||
Loss on prepayment of Senior Notes (7) | 8,233 | — | Loss on prepayment of Senior Notes | |||||||||||||||
Change in fair value of warrants | 3,146 | 1,629 | Other | |||||||||||||||
Other (9) | 1,854 | (501 | ) | Other | ||||||||||||||
Adjusted EBITDA (Non-GAAP) | $ | 6,066 | $ | 36,371 | ||||||||||||||
Adjusted EBITDA (Non-GAAP) | 6,066 | 36,371 | ||||||||||||||||
Depreciation expense | (273 | ) | (337 | ) | ||||||||||||||
Cash portion of Senior Notes interest expense (10) | (1,648 | ) | (8,206 | ) | ||||||||||||||
Income taxes benefit (expense), as adjusted (11) | 6,167 | (8,561 | ) | |||||||||||||||
Adjusted Earnings (Non-GAAP) | $ | 10,312 | $ | 19,267 | ||||||||||||||
— | ||||||||||||||||||
Shares used in calculation (12) | 102,410 | 82,170 | ||||||||||||||||
Adjusted earnings per share (Non-GAAP) | $ | 0.10 | $ | 0.23 | ||||||||||||||
RECONCILIATION OF GAAP NET INCOME (LOSS) PER SHARE TO
NON-GAAP ADJUSTED EARNINGS PER SHARE (1)
(unaudited)
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
GAAP net (loss)/income per share | $ | 0.58 | $ | (0.22 | ) | |||
Conversion from basic shares to diluted shares (2) | (0.18 | ) | 0.05 | |||||
Adjustments: | ||||||||
NUCYNTA, Lazanda and Gralise revenue reserves | (0.01 | ) | — | |||||
Commercialization agreement revenues | 0.02 | 0.02 | ||||||
Transaction-related costs | 0.08 | — | ||||||
Expenses for opioid-related litigation, investigations and regulations | 0.02 | 0.03 | ||||||
Intangible amortization related to product acquisitions | 0.08 | 0.31 | ||||||
Stock-based compensation | 0.02 | 0.03 | ||||||
Gain on sale of Gralise | (1.25 | ) | — | |||||
Loss on extinguishment of convertible notes | 0.31 | — | ||||||
Loss on sale of NUCYNTA | 0.15 | — | ||||||
Loss on prepayment of Senior Notes | 0.08 | — | ||||||
Change in fair value of warrants | 0.03 | 0.02 | ||||||
Other | 0.02 | — | ||||||
Non-cash interest expense on debt (3) | 0.07 | 0.10 | ||||||
Income tax effect of non-GAAP adjustments (4) | 0.08 | (0.11 | ) | |||||
Non-GAAP adjusted diluted earnings per share | $ | 0.10 | $ | 0.23 |
(1) Represents per share calculations of adjustments reflective in the Company’s reconciliation of GAAP net (loss) income to non-GAAP adjusted earnings and therefore should be read in conjunction with that reconciliation and respective footnotes.
(2) The Company uses the if-converted method to compute adjusted diluted earnings per share with respect to its convertible debt.
(3) Represents per share adjustment for interest expense, net of cash portion of Senior Notes interest expense.
(4) Represents the Company’s income tax (benefit) expense adjusted for the tax effect of pre-tax non-GAAP adjustments excluded from adjusted earnings. The tax effect of pre-tax non-GAAP adjustments excluded from non-GAAP adjusted earnings is computed at the statutory rate of 21%.