Diclofenac Potassium

Net Product Sales Increase 55% in the Fourth Quarter, 42% for the Full Year Full Year Net Income Increases to $109.6 Million, Non-GAAP Adjusted EBITDA Increases to $101.6 Million Cash Flows from Operations Was $26.7 Million for the Fourth Quarter and $78.6 Million for the Full Year LAKE FOREST, Ill., March 08, 2023 (GLOBE NEWSWIRE) -- Assertio Holdings, Inc. (“Assertio” or the “Company”) (Nasdaq: ASRT), a specialty pharmaceutical company offering differentiated products to patients, today reported financial results for the fourth quarter and full year ended December 31, 2022. Financial Highlights (unaudited): Three Months Ended December 31, Twelve Months Ended December 31, (in millions, except per share amounts) 2022 2021 2022 2021 Net Product Sales (GAAP) $ 49.9 $ 32.2 $ 155.1 $ 109.4 Net Income (Loss) (GAAP) $ 88.6 $ 4.6 $ 109.6 $ (1.3 ) Earnings (Loss) Per Share (GAAP) $ 1.34 $ 0.10 $ 2.03 $ (0.03 ) Adjusted EBITDA (Non-GAAP)1 $ 33.4 $ 17.8 $ 101.6 $ 48.8 Adjusted Earnings Per Share (Non-GAAP)1 $ 0.32 $ 0.21 $ 1.19 $ 0.49 The 2022 results reported today reflect a full year benefit from the creation of the Company’s non-personal commercial platform and related cost savings. In addition, the strategic actions taken in the second half – refinancing the debt, exiting an unprofitable sales channel and acquiring Sympazan – as well as the acquisition of Otrexup in late 2021, have contributed to the positive change in our business. These actions have produced full year results where net product sales increased 42%, adjusted EBITDA increased 108% and operating cash flow increased by $73.1 million. Fourth quarter results included the following as compared to the prior year quarter: Net product sales increased 55% to $49.9 million. Increased sales of Indocin, a full quarter of Otrexup and the addition of Sympazan more than offset the expected declines in Zipsor and Solumatrix. Indocin sales increased 87% due to a volume mix shift to more profitable channels and a return to normal customer inventory levels after a reduction in the prior quarter. Selling, general and administrative expenses were $13.7 million, reflecting an increase of $2.4 million. The increase was driven by $1.4 million of higher stock-based compensation expense and $1.0 million in higher sales and marketing expenses due to the addition of Otrexup and Sympazan. GAAP net income increased to $88.6 million, from $4.6 million. The increase was driven by a tax benefit of $80.4 million from the reversal of a valuation allowance against deferred tax assets, which reflects the positive change in the Company’s financial performance that has now been consistently generating positive net income and operating cash flows. Additional gross profit2 of $16.6 million was driven by higher product net sales, partially offset by higher selling, general and administrative and amortization expenses and $9.8 million of fair value expense for contingent consideration as a result of an increase in the long-term Indocin sales forecast. The fourth quarter also included $1.1 million of lower interest expense resulting from our convertible debt refinancing, which reduced the cash interest rate to 6.5% from 13%. Adjusted EBITDA increased to $33.4 million, from $17.8 million. The increase was driven by $17.7 million of additional net product sales, and the resulting increase in gross profit, partially offset by higher selling, general and administrative expenses. The Company’s gross profit margin2 improved by 317 basis points due to continued strong sales of Indocin. Cash and cash equivalents at December 31, 2022 was $64.9 million, which reflected $26.7 million of cash flow from operations in the fourth quarter partially offset by $25.0 million of final purchase price payments for Otrexup and Sympazan. The convertible debt refinancing in August resulted in the elimination of debt principal payments resulting in $4.8 million of cash flow benefit in the fourth quarter versus the prior year quarter. “Assertio’s successful achievement of its strategic priorities in 2022 delivered financial results that exceeded our outlook quarter after quarter, culminating in an especially strong fourth quarter as we shifted Indocin demand in favor of higher margin commercial purchases,” said Dan Peisert, Chief Executive Officer. “The fourth quarter was a springboard into 2023 where we see opportunities to increase sales in our key Indocin, Sympazan and Otrexup assets, which we expect will offset the January loss of exclusivity on Cambia. Our life cycle management program for Indocin will be one of our key priorities for 2023 as we seek to access a larger addressable market. Later this year, we expect to be enrolling patients into a clinical trial that is currently being designed to expand the label and, if approved, to provide regulatory exclusivity.” “Our balance sheet is well positioned to support our growth plans, in particular our business development initiatives. Our $30.0 million note exchanges in February 2023 further positioned our balance sheet to pursue meaningful business development opportunities which fit our criteria. We are actively engaged in evaluating multiple prospective opportunities to expand and diversify our business, while remaining focused on identifying the right assets that best advance our strategic growth objectives.” 2023 Full Year Financial Guidance Assertio announced its initial 2023 operating guidance as follows: Net Product Sales (GAAP) $150.0 Million to $160.0 Million Adjusted EBITDA (Non-GAAP)3 $85.0 Million to $93.0 Million The Company anticipates revenue in the first quarter of 2023 to be between $36.0 million to $38.0 million, reflecting typical seasonality and the loss of Cambia exclusivity. 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 potential acquisition of new portfolio assets. _______________ 1 Non-GAAP measures are reconciled to the corresponding GAAP measures in the schedules attached. 2 Gross profit represents net products sales less cost of sales. 3See “Non-GAAP Financial Measures” below for information about reconciling our Adjusted EBITDA guidance to Net Income. Balance Sheet and Cash Flow For the quarter ended December 31, 2022, the Company generated $26.7 million in cash flow from operations, its seventh consecutive quarter of positive cash flows. For the full year 2022, the Company generated $78.6 million in cash flow from operations. At year-end 2022, cash and cash equivalents totaled $64.9 million, a slight increase from the third quarter even after funding $25.0 million of asset purchase payments for Otrexup and Sympazan in the fourth quarter. 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. This reduces the amount of convertible debt outstanding that can become senior indebtedness in the event the Company seeks to finance any of its future business development transactions with secured debt. Assertio did not receive any cash proceeds from the issuance of the shares of its common stock. The transactions reduced Assertio’s overall debt by 42.9%, will save the Company $2.0 million in annual interest payments, reduced the potential dilution from the exchanged convertible notes by 4.6%, and will be accretive to 2023 diluted EPS by $0.02. Conference Call and Investor Presentation Information As previously announced, Assertio’s management will host a conference call to discuss its fourth quarter and full year 2022 financial results today: Date: Wednesday, March 8, 2023 Time: 4:30 p.m. Eastern Time Webcast (live and archive): (Events & Webcasts, Investor Page) Dial-in numbers: 1-404-975-4839 Conference number: 800382 To access the live webcast, the recorded conference call replay, and other materials, please visit Assertio’s investor relations website at . 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 . Investor Contact Matt Kreps Managing Director Darrow Associates M: 214-597-8200 mkreps@darrowir.com Forward Looking Statements Statements in this communication that are not statements of historical fact are forward-looking statements that reflect Assertio'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, 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, including our ability to realize the benefits from our operating model, successfully acquire and integrate new assets and explore new business development initiatives, as well as the cost and outcomes of clinical studies. All statements other than historical facts may be forward-looking statements and can be identified by 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," "aim" or other similar expressions that convey the uncertainty of future events or outcomes and 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, including the risks described in Assertio's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the U.S. Securities and Exchange Commission ("SEC") and in other filings Assertio makes with the SEC from time to time. 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 may elect to update these forward-looking statements at some point in the future, it 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 applicable law. Nothing contained herein constitutes or will be deemed to constitute a forecast, projection or estimate of the future financial performance or expected results of Assertio. 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. ASSERTIO HOLDINGS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands, except per share amounts) (unaudited) Three Months Ended December 31, Year Ended December 31, 2022 2021 2022 2021 Revenues: Product sales, net $ 49,866 $ 32,152 $ 155,121 $ 109,420 Royalties and milestones 487 1,188 2,403 2,579 Other revenue — (10 ) (1,290 ) (985 ) Total revenues 50,353 33,330 156,234 111,014 Costs and expenses: Cost of sales 6,015 4,896 18,748 15,832 Selling, general and administrative expenses 13,706 11,266 46,786 52,641 Fair value of contingent consideration 11,841 2,011 18,687 3,914 Amortization of intangible assets 8,171 7,175 32,608 28,114 Restructuring charges — — — 1,089 Total costs and expenses 39,733 25,348 116,829 101,590 Income from operations 10,620 7,982 39,405 9,424 Other (expense) income: Interest expense (1,313 ) (2,437 ) (7,961 ) (10,220 ) Other (loss) gain (731 ) (503 ) (278 ) 243 Total other (expense) income (2,044 ) (2,940 ) (8,239 ) (9,977 ) Net income (loss) before income taxes 8,576 5,042 31,166 (553 ) Income tax benefit (expense) 79,975 (433 ) 78,459 (728 ) Net income (loss) and comprehensive income (loss) $ 88,551 $ 4,609 $ 109,625 $ (1,281 ) Basic net income (loss) per share $ 1.83 $ 0.10 $ 2.33 $ (0.03 ) Diluted net income (loss) per share $ 1.34 $ 0.10 $ 2.03 $ (0.03 ) Shares used in computing basic net income (loss) per share 48,300 45,017 47,004 43,169 Shares used in computing diluted net income (loss) per share 67,074 45,388 54,669 43,169 ASSERTIO HOLDINGS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (unaudited) December 31, 2022 2021 ASSETS Current assets: Cash and cash equivalents $ 64,941 $ 36,810 Accounts receivable, net 45,357 44,361 Inventories, net 13,696 7,489 Prepaid and other current assets 8,268 14,838 Total current assets 132,262 103,498 Property and equipment, net 744 1,527 Intangible assets, net 197,996 216,054 Deferred tax asset 80,202 — Other long-term assets 2,709 5,468 Total assets $ 413,913 $ 326,547 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable $ 5,991 $ 6,685 Accrued rebates, returns and discounts 49,426 52,662 Accrued liabilities 12,181 14,699 Long-term debt, current portion 470 12,174 Contingent consideration, current portion 26,300 14,500 Other current liabilities 948 34,299 Total current liabilities 95,316 135,019 Long-term debt 66,403 61,319 Contingent consideration 22,200 23,159 Other long-term liabilities 4,269 4,636 Total liabilities 188,188 224,133 Shareholders’ equity: Common stock, $0.0001 par value, 200,000,000 shares authorized; 48,319,838 and 44,640,444 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively 5 4 Additional paid-in capital 545,321 531,636 Accumulated deficit (319,601 ) (429,226 ) Total shareholders’ equity 225,725 102,414 Total liabilities and shareholders' equity $ 413,913 $ 326,547 ASSERTIO HOLDINGS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (unaudited) Year Ended December 31, 2022 2021 Operating Activities Net income (loss) $ 109,625 $ (1,281 ) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 33,396 29,077 Amortization of debt issuance costs and Royalty Rights 304 194 Gain on extinguishment of debt (1,046 ) — Recurring fair value measurements of assets and liabilities 18,939 3,914 Stock-based compensation 7,504 3,545 Provisions for inventory and other assets 3,265 1,368 Deferred income taxes (80,375 ) — Changes in assets and liabilities, net of acquisition: Accounts receivable (996 ) (11 ) Inventories (6,593 ) 4,268 Prepaid and other assets 8,019 3,600 Accounts payable and other accrued liabilities (10,208 ) (28,699 ) Accrued rebates, returns and discounts (3,236 ) (10,452 ) Net cash provided by operating activities 78,598 5,523 Investing Activities Purchases of property and equipment (274 ) (53 ) Purchase of Otrexup (27,027 ) (18,472 ) Purchase of Sympazan (15,372 ) — Net cash used in investing activities (42,673 ) (18,525 ) Financing Activities Proceeds from issuance of 2027 Convertible Notes 70,000 — Payment in connection with 2024 Senior Notes (70,750 ) (9,500 ) Payment of debt issuance costs (4,084 ) — Payment of contingent consideration (7,845 ) (4,807 ) Payment of Royalty Rights (1,297 ) (968 ) Payments in connection with convertible notes — (335 ) Proceeds from issuance of common stock 7,020 44,861 Proceeds from exercise of stock options 34 193 Shares withheld for payment of employee's withholding tax liability (872 ) (418 ) Net cash (used in) provided by financing activities (7,794 ) 29,026 Net increase in cash and cash equivalents 28,131 16,024 Cash and cash equivalents at beginning of year 36,810 20,786 Cash and cash equivalents at end of year $ 64,941 $ 36,810 Supplemental Disclosure of Cash Flow Information Net cash received for refund of income taxes $ 6,913 $ — Cash paid for interest $ 7,752 $ 10,124 Supplemental Disclosure of Non-Cash Investing Activities Deferred payments for acquisition of Otrexup intangible assets $ — $ 26,021 RECONCILIATION OF GAAP NET INCOME TO NON-GAAP EBITDA and ADJUSTED EBITDA (in thousands) (unaudited) Three Months Ended December 31, Twelve months ended December 31, 2022 2021 2022 2021 Financial Statement Classification GAAP Net Income (Loss) $ 88,551 $ 4,609 $ 109,625 $ (1,281 ) Interest expense 1,313 2,437 7,961 10,220 Interest expense Income tax expense (benefit) (79,975 ) 433 (78,459 ) 728 Income tax benefit (expense) Depreciation expense 196 203 787 963 Selling, general and administrative expenses Amortization of intangible assets 8,171 7,175 32,608 28,114 Amortization of intangible assets EBITDA (Non-GAAP) 18,256 14,857 72,522 38,744 Adjustments: Legacy product reserves(1) — 10 1,290 985 Other revenue Stock-based compensation 2,388 949 7,504 3,545 Selling, general and administrative expenses Contingent consideration fair value change (2) 11,841 2,011 18,687 3,914 Fair value of contingent consideration Restructuring cost — — — 1,089 Restructuring charges Other (3) 892 — 1,592 554 Multiple Adjusted EBITDA (Non-GAAP) $ 33,377 $ 17,827 $ 101,595 $ 48,831 (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 operating expenses until the contingent consideration arrangement is settled. (3) Other represents the following adjustments included in the three and twelve months ended December 31, 2022: (i) amortization of inventory step-up recognized in Cost of sales related acquired inventories sold of $0.1 million and $0.8 million, respectively, (ii) loss recognized in Other (loss) gain related to the fair value adjustment of the derivative liability associated with the embedded conversion feature of the 2027 Convertible Notes of $0.3 million in each period, (iii) gain recognized in Other (loss) gain on debt extinguishment associated with the Royalty Rights obligation of $1.0 million in each period, and (iv) loss recognized in recognized in Other (loss) gain for the expected credit loss reserve on the NES investment of $1.6 million in each period. Other for the twelve months ended December 31, 2021 represents amortization of inventory step-up recognized in Cost of sales related to acquired inventories sold. RECONCILIATION OF GAAP NET INCOME and GAAP NET INCOME PER SHARE TO NON-GAAP ADJUSTED EARNINGS and ADJUSTED EARNINGS PER SHARE (1) (in thousands, except per share amounts) (unaudited) Three Months Ended December 31, 2022 Three Months Ended December 31, 2021 Amount Diluted EPS (2) Amount Diluted EPS (2) Net income per share (GAAP) $ 88,551 $ 1.32 $ 4,609 $ 0.10 Add: Convertible debt interest expense and fair value adjustment, net of tax(2) 1,169 0.02 — — Adjustments Amortization of intangible assets 8,171 0.12 7,175 0.16 Legacy products revenue reserves — — 10 — Stock-based compensation 2,388 0.04 949 0.02 Contingent consideration fair value change 11,841 0.18 2,011 0.04 Other 640 0.01 — — Contingent consideration cash payable (3) (6,854 ) (0.10 ) (3,669 ) (0.08 ) Release of deferred tax asset valuation allowance (5) (80,375 ) (1.20 ) — — Income taxes expense, as adjusted (4) (4,047 ) (0.07 ) (1,619 ) (0.03 ) Adjusted earnings (Non-GAAP) $ 21,484 $ 0.32 $ 9,466 $ 0.21 Diluted shares used in calculation (2) 67,074 45,388 Dilution effect of 2027 Convertible Notes (2) 17,094 — (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 to compute adjusted diluted earnings per share with respect to its convertible debt. Under the if-converted method, the Company assumes the 2027 Convertible Notes were converted at the beginning of each period presented. As a result, interest expense and the fair value adjustment of the derivative liability associated with the 2027 Convertible Notes, net of tax, is added back to net income used in the diluted earnings per share calculation. Additionally, the diluted shares used in the diluted earnings per share calculation includes the dilution effect of the 2027 Convertible Notes. (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%. (5) Represents the amount of income tax benefit related to the reversal of previously recorded valuation allowances. RECONCILIATION OF GAAP NET INCOME (LOSS) and GAAP NET INCOME (LOSS) PER SHARE TO NON-GAAP ADJUSTED EARNINGS and ADJUSTED EARNINGS PER SHARE (1) (in thousands, except per share amounts) (unaudited) Twelve Months Ended December 31, 2022 Twelve Months Ended December 31, 2021 Amount Diluted EPS (2) Amount Diluted EPS (2) Net income (loss) per share (GAAP) $ 109,625 $ 2.01 $ (1,281 ) $ (0.03 ) Add: Convertible debt interest expense and fair value adjustment, net of tax (2) 1,560 0.02 — — Adjustments Amortization of intangible assets 32,608 0.60 28,114 0.65 Legacy products revenue reserves 1,290 0.02 985 0.02 Stock-based compensation 7,504 0.14 3,545 0.08 Contingent consideration fair value change 18,687 0.34 3,914 0.09 Restructuring charges — — 1,089 0.03 Other 1,340 0.03 554 0.01 Contingent consideration cash payable (3) (16,068 ) (0.29 ) (8,111 ) (0.19 ) Release of deferred tax asset valuation allowance (5) (80,375 ) (1.47 ) — — Income taxes expense, as adjusted (4) (11,340 ) (0.21 ) (7,523 ) (0.17 ) Adjusted earnings (Non-GAAP) $ 64,831 $ 1.19 $ 21,286 $ 0.49 Diluted shares used in calculation (2) 54,669 43,169 Dilution effect of 2027 Convertible Notes (2) 6,135 — (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 to compute adjusted diluted earnings per share with respect to its convertible debt. Under the if-converted method, the Company assumes the 2027 Convertible Notes were converted at the beginning of each period presented. As a result, interest expense and the fair value adjustment of the derivative liability associated with the 2027 Convertible Notes, net of tax, is added back to net income used in the diluted earnings per share calculation. Additionally, the diluted shares used in the diluted earnings per share calculation includes the dilution effect of the 2027 Convertible Notes. (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%. (5) Represents the amount of income tax benefit related to the reversal of previously recorded valuation allowances.