Assertio Reports Third Quarter 2022 Financial Results

2022-11-08

财报并购

Net Product Sales Increase 32% Year-Over-Year, Non-GAAP Adjusted EBITDA Increases 36%

Increases Guidance for Net Product Sales and Adjusted EBITDA

Debt Refinancing Extends Maturity, Reduces Cost and Increases Strategic Flexibility

Expects Sympazan to Add $1 Million in Net Product Sales in 4Q

LAKE FOREST, Ill., Nov. 08, 2022 (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 third quarter ended September 30, 2022.

Financial Highlights (unaudited):

Three Months Ended September 30, Nine Months Ended September 30,(in millions, except per share amounts)2022 2021 2022 2021 Net Product Sales (GAAP)$34.3 $26.0 $105.3 $77.3 Net Income (loss) (GAAP)$4.2 $3.7 $21.1 $(5.9)Earnings (loss) Per Share (GAAP)$0.08 $0.08 $0.42 $(0.14)Adjusted EBITDA (Non-GAAP)1$21.4 $15.8 $68.2 $31.0 Adjusted Earnings Per Share (Non-GAAP)1$0.22 $0.19 $0.85 $0.27

Third quarter net product sales increased 32% year-over-year to $34.3 million.

Increased sales of Indocin and the addition of Otrexup more than offset the expected declines in Zipsor and Solumatrix.

Indocin sales increased 50%, primarily due to net pricing, offset by lower volumes due to a deliberate reduction in channel inventories in the quarter.

Third quarter GAAP net income increased to $4.2 million, compared to $3.7 million in the prior year quarter, and adjusted EBITDA increased to $21.4 million, from $15.8 million.

The increases were driven by $8.3 million of additional Net Product Sales and the Company maintained its gross profit margin2 in the third quarter at 88% due to continued strong sales of Indocin.

Refinanced the Company’s 13.5% 2024 Senior Notes with a $70.0 million 6.5% convertible notes offering that extends debt maturity to 2027 and creates greater flexibility as the Company seeks to further diversify the product portfolio.

Cash at September 30, 2022 was $64.8 million, increased from $52.3 million at June 30, inclusive of $10.0 million in cash flow from operations during the third quarter.

Announced an exclusive license for Sympazan® (clobazam) Oral Film for an upfront payment of $9.0 million.

On a full-year basis, Assertio estimates Sympazan would have added $4.0 million to $4.5 million in adjusted EBITDA and an additional $0.05 in adjusted EPS based on trailing 12 month net sales of approximately $9.5 million.

Received notice of allowance of a new Sympazan patent, and will pay an additional $6 million in milestones in the fourth quarter. When issued, this new patent will provide protection to 2039.

“Third quarter results demonstrated the value of our platform, driving more than $21 million in adjusted EBITDA and $10 million in cash flow from operations. In addition, our refinancing extends maturity, significantly reduces our debt service cost and creates greater operating flexibility as we continue to seek strategic growth transactions that will further diversify our portfolio,” said Dan Peisert, President and Chief Executive Officer of Assertio. “Our recent Sympazan transaction exemplifies our goal of acquiring assets that fit into our platform, are immediately accretive, have long duration exclusivity and offer opportunities for organic growth.”

“In addition to the attractive economics we can secure from further acquisitions such as Sympazan, we continue to explore larger transformative acquisition opportunities to accelerate our goal to diversify our portfolio and take advantage of a favorable M&A environment. With almost $65 million in cash on our balance sheet at quarter end and continued positive cash flow, we are fueled to execute on our strategic goals,” said Peisert.

Raises 2022 Financial Guidance

Effective November 8, 2022, Assertio increased its outlook for the full year 2022 to now anticipate net product sales greater than $141 million, and adjusted EBITDA greater than $86 million. The increased outlook reflects higher than planned net product sales, continued operating performance and the addition of $1 million (partial quarter) in anticipated Sympazan sales.

Prior GuidanceCurrent GuidanceNet Product Sales (GAAP)$129.0 Million to $137.0 MillionGreater than $141.0 MillionAdjusted EBITDA (Non-GAAP)3$73.0 Million to $79.0 MillionGreater than $86.0 Million

Balance Sheet and Cash Flow

For the quarter ended September 30, 2022 the company generated $10.0 million in cash flow from operations, its sixth consecutive quarter of positive cash flows. At quarter end, cash and cash equivalents totaled $64.8 million.

During the third quarter, the company completed an offering of $70.0 million aggregate principal amount of 6.5% convertible senior notes due 2027. Assertio used proceeds from the offering to fully redeem its $59.0 million 13% interest senior debt.

Conference Call and Investor Presentation Information

Assertio’s management will host a conference call to discuss its third quarter 2022 financial results today:

Date:November 8, 2022Time:4:30 p.m. Eastern TimeWebcast (live and archive):http://investor.assertiotx.com/overview/default.aspx

(Events & Webcasts, Investor Page)Dial-in numbers:1-929-526-1599 (domestic)Conference number:971287

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.

_______________

1 Non-GAAP measures are reconciled to the corresponding GAAP measures in the schedules attached.

2 Gross profit margin represents the ratio of net products sales less cost of sales to net product sales.

3 See “Non-GAAP Financial Measures” below for information about reconciling our Adjusted EBITDA guidance to Net Income.

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 Director

Darrow Associates

Austin, TX

M: 214-597-8200

mkreps@darrowir.com

Forward Looking Statements

Statements in this communication that are not historical facts 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. 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, 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.

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, 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.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands, except per share amounts)

(unaudited) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenues: Product sales, net$34,279 $25,997 $105,258 $77,271 Royalties and milestones 473 416 1,916 1,391 Other revenue (540) (941) (1,290) (976)Total revenues 34,212 25,472 105,884 77,686 Costs and expenses: Cost of sales 4,009 3,050 12,734 10,936 Selling, general and administrative expenses 11,900 9,013 33,084 41,377 Fair value of contingent consideration 3,900 300 6,845 1,902 Amortization of intangible assets 7,969 7,175 24,438 20,939 Restructuring charges — — — 1,089 Total costs and expenses 27,778 19,538 77,101 76,243 Income from operations 6,434 5,934 28,783 1,443 Other (expense) income: Interest expense (2,052) (2,495) (6,648) (7,783)Other gain 2 344 453 747 Total other expense (2,050) (2,151) (6,195) (7,036)Net income (loss) before income taxes 4,384 3,783 22,588 (5,593)Income tax expense (210) (46) (1,516) (294)Net income (loss) and comprehensive income (loss)$4,174 $3,737 $21,072 $(5,887) Basic net income (loss) per share$0.09 $0.08 $0.45 $(0.14)Diluted net income (loss) per share$0.08 $0.08 $0.42 $(0.14)Shares used in computing basic net income (loss) per share 48,180 44,969 46,566 42,550 Shares used in computing diluted net income (loss) per share 57,386 45,055 50,470 42,550

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited) September 30,

2022 December 31,

2021ASSETS Current assets: Cash and cash equivalents$64,826 $36,810 Accounts receivable, net 44,680 44,361 Inventories, net 14,268 7,489 Prepaid and other current assets 2,720 14,838 Total current assets 126,494 103,498 Property and equipment, net 935 1,527 Intangible assets, net 191,617 216,054 Other long-term assets 4,298 5,468 Total assets$323,344 $326,547 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Accounts payable$8,374 $6,685 Accrued rebates, returns and discounts 48,608 52,662 Accrued liabilities 10,992 14,699 Long-term debt, current portion 2,175 12,174 Contingent consideration, current portion 10,900 14,500 Other current liabilities 11,247 34,299 Total current liabilities 92,296 135,019 Long-term debt 65,982 61,319 Contingent consideration 25,759 23,159 Other long-term liabilities 4,392 4,636 Total liabilities 188,429 224,133 Shareholders’ equity: Common stock, $0.0001 par value, 200,000,000 shares authorized;

48,196,618 and 44,640,444 shares issued and outstanding as of

September 30, 2022 and December 31, 2021, respectively. 5 4 Additional paid-in capital 543,064 531,636 Accumulated deficit (408,154) (429,226) Total shareholders’ equity 134,915 102,414 Total liabilities and shareholders' equity$323,344 $326,547

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited) Nine Months Ended September 30, 2022 2021 Operating Activities Net income (loss)$21,072 (5,887)Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 25,033 21,698 Amortization of royalty rights 128 159 Provision for inventory and other assets 828 (86)Stock-based compensation 5,116 2,596 Recurring fair value measurement of assets and liabilities 6,845 1,902 Changes in assets and liabilities, net of acquisition: Accounts receivable (319) 8,205 Inventories (7,607) 6,317 Prepaid and other assets 13,288 5,777 Accounts payable and other accrued liabilities (7,193) (22,405)Accrued rebates, returns and discounts (4,058) (19,284)Interest payable (1,232) 2,400 Net cash provided by operating activities 51,901 1,392 Investing Activities Purchase of Otrexup (16,889) — Net cash used in investing activities (16,889) — Financing Activities Proceeds from issuance of 2027 Convertible Notes 65,916 — Payments in connection with 2021 Convertible Notes — (335)Payment in connection with 2024 Senior Notes (70,750) (4,750)Payment of contingent consideration (7,845) (2,495)Payment of Royalty Rights (630) (510)Proceeds from issuance of common stock 7,020 44,861 Proceeds from exercise of stock options — 193 Shares withheld for payment of employee's withholding tax liability (707) (416) Net cash (used in) provided by financing activities (6,996) 36,548 Net increase in cash and cash equivalents 28,016 37,940 Cash and cash equivalents at beginning of year 36,810 20,786 Cash and cash equivalents at end of period$64,826 $58,726 Supplemental Disclosure of Cash Flow Information Net cash refunded for income taxes$(7,822) $— Cash paid for interest$7,752 $5,216

RECONCILIATION OF GAAP NET INCOME TO NON-GAAP EBITDA and ADJUSTED EBITDA

(in thousands)

(unaudited) Three Months Ended

September 30, Nine Months Ended

September 30, 2022 2021 2022 2021 Financial Statement

ClassificationGAAP Net Income/(Loss) $4,174 $3,737 $21,072 $(5,887) Interest expense 2,052 2,495 6,648 7,783 Interest expenseIncome tax expense 210 46 1,516 294 Income tax expenseDepreciation expense 197 236 592 758 Selling, general and administrative expensesAmortization of intangible assets 7,969 7,175 24,438 20,939 Amortization of intangible assetsEBITDA (Non-GAAP) $14,602 $13,689 54,266 23,887 Adjustments: Legacy products revenue reserves(1) 540 941 1,290 976 Other revenueStock-based compensation 2,400 866 5,116 2,596 Selling, general and administrative expensesContingent consideration fair value change(2) 3,900 300 6,845 1,902 Fair value of contingent considerationRestructuring charges — — — 1,089 Restructuring chargesOther(3) — — 700 554 MultipleAdjusted EBITDA (Non-GAAP) $21,442 $15,796 68,217 31,004

(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 the change 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 amortization of inventory step-up recognized in Cost of sales related 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

September 30, 2022 Three Months Ended

September 30, 2021 Amount Diluted EPS(4) Amount Diluted EPSNet income per share (GAAP)4,174 0.07 3,737 0.08 Add: Interest Expense on convertible debt, net of tax(4)497 0.01 — — Adjustments Amortization of intangible assets7,969 0.14 7,175 0.16 Legacy products revenue reserves540 0.01 941 0.02 Stock-based compensation2,400 0.04 866 0.02 Contingent consideration fair value change3,900 0.07 300 0.01 Restructuring charges— — — — Other— — — — Contingent consideration cash payable(2)(4,374) (0.07) (2,908) (0.06)Income taxes expense, as adjusted(3)(2,609) (0.05) (1,594) (0.04)Adjusted earnings (Non-GAAP)12,497 0.22 8,517 0.19 Diluted shares used in calculation(4)57,386 45,055 Dilution effect of 2027 Convertible Notes(4)7,246 —

(1)Represents per share calculations of adjustments 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)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. (3) 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%. (4)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 any adjustments recognized in net income for the 2027 Convertible Notes 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.

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) Nine Months Ended

September 30, 2022 Nine Months Ended

September 30, 2021 Amount Diluted EPS(4) Amount Diluted EPSDiluted net income (loss) per share (GAAP)21,072 0.42 (5,887) (0.14)Add: Interest Expense on convertible debt, net of tax(4)487 0.01 — — Adjustments Amortization of intangible assets24,438 0.48 20,939 0.49 Legacy products revenue reserves1,290 0.03 976 0.02 Stock-based compensation5,116 0.10 2,596 0.06 Contingent consideration fair value change6,845 0.14 1,902 0.04 Restructuring charges— — 1,089 0.03 Other700 0.01 554 0.01 Contingent consideration cash payable(2)(9,213) (0.18) (4,443) (0.10)Income taxes expense, as adjusted(3)(7,294) (0.14) (5,903) (0.14)Adjusted earnings (Non-GAAP)43,441 0.85 11,823 0.27 Diluted shares used in calculation(4)50,470 42,550 Dilution effect of 2027 Convertible Notes(4)2,442

(1)Represents per share calculations of adjustments 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)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. (3)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%. (4)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 any adjustments recognized in net income for the 2027 Convertible Notes 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.