Q4 2019 Earnings Call
Good afternoon, ladies and gentlemen, and the most come to the fourth quarter 2019 and for your assertion Therapeutics Inc. earnings Conference call. At this time all participants are in listen only mode. If anyone should require assistance turning the conference piece persons are done here on your Touchtone telephony.
As a reminder, this conference call is being recorded I would now like to turn the conference over to your host Max Nice Investor Relations.
Thank you below.
Good afternoon, and welcome to our Investor Conference call to discuss it sort of use fourth quarter full year 2019 financial results announced this afternoon.
The news release, an investor presentation, covering our earnings for this period are now available on the Investor page of our website at Investor Dot sturdy go TX dotcom.
I would encourage you to review the presentation slides as they are important to today's discussion.
With me today are Arthur Hagens, President and Chief Executive Officer, Dan, either senior Vice President and Chief Financial Officer.
I would like you I'd like to remind you that the matters discussed on this call contain forward looking statements that involve risks and uncertainties.
Including those related to the commercialization of release, Cambia and Zipsor, our collaborative arrangements regulatory and development plans or debt agreements expectations regarding potential business and investment opportunities litigations and other legal proceedings and other statements that are not historical facts.
Total prescription data is based on the Symphony prescriber level do this include estimates, which could cause minor fluctuations in historical comparisons. Although this data is not reflective of product revenues management utilizes this metric to evaluate commercial strategy.
[noise] actual results may differ materially from the results predicted and recorded results should not be considered an indication of future performance. These and other risks are more fully described in the risk factor section and then other sections of our quarterly reports on form 10-Q, and our annual report on form 10-K.
A studio disclaims any obligation to update or revise any forward looking statements made on this call as result of new information or future developments.
References to current cash and cash equivalents are based on balances as of December 31st 2019.
Non-GAAP financial measures a certain new users are now based on any standardized methodology prescribed by gap and may be calculated differently from and therefore may not be comparable to non-GAAP measures used by other companies with that I'll turn the call over to Arthur.
[noise], Thank you box.
As you all know Oh, we have been very busy since our last conference call in November.
Today, we're going to focus on our fourth quarter.
Full year results.
And the key strategic moves we have undertaken of late.
We will not today be discussing our outlook for 2020 M. beyond.
But we instead plan to hold a separate conference call in the near future.
Outline how do we intend to leverage strengthened balance sheet to create sustainable growth oriented specialty pharmaceutical company [noise].
[noise] this month.
Box my through your honor Basri I see all.
When I joined a self deal then death on that.
We had over 800, no we didn't have debt.
Annualized interest cost 65 million.
Clearly surfacing not debt was a major barton.
But more importantly.
Despite significantly impacted our ability to do acquisitions and strategic combinations.
[noise], that's why I made addressing our debt I sort of number one priority.
I'm excited to report today.
We are no and truck.
As a standalone company.
To retire or extending debt until approximately 50 million up cash on our balance sheet.
[noise] My second priority was to reduce.
Remove.
Dependence on revenues from our opioid products.
When I joined 70% of our revenues came from opioids.
Going forward.
Zero percent cover revenues, our income will come from opioids.
The third priority was to build a leading entrepreneurial growth oriented specialty pharmaceutical company.
We have done so.
The transformation of our company.
And would you build a new culture.
We named the company.
Movies headquarters.
And just or expenses.
Or 50%.
Creating a truly lean on responsive organization.
[noise] central to these achievements obesity priorities as being a relentless focus on profitability.
We have delivered over 400 million EBITDA from our operations in the past few years.
And we have recently generated.
Four or 500 million in cash from our divestitures of girls lease and you Center.
To follow illustrate our focus on profitability and an execution today.
Report fourth quarter, adjusted EBITDA of 31 million.
We have no beaten adjusted EBITDA expectations for the six times in the last seven quarters.
Our full year adjusted EBITDA was 178 million.
Handily exceeding our previously raised 2019 guidance, a 124 to 129 million.
[noise] I'm also excited to report a go forward brands, Cambia and Zipsor, so, 4% and 17% total prescription growth for the year.
This is remarkable talking the right when I joined the company. These brands on the Rx basis were declining 15, I'm, 35% respectively.
We see these two.
Instead brands being well positioned to take advantage of positions looking for non opioid pain solutions.
So in summary.
We have arrived at the first destination and our journey.
It is a destination, where we can enjoy.
So on balance sheet.
No revenues, our income coming from opioids.
And most importantly, a platform well positioned for growth and sustainability.
We know look forward.
The next stage of our Johnny I.
We intend to take advantage almost in balance sheet onto a scalable commercial platform to create a sustainable growth orientated specialty pharma company.
We look forward to a call in near future.
We cannot particularly how do we intend to achieve this objective.
Before I hand over to Dan Hi, said, a CFO, who will review our fourth for a full year results.
I want to acknowledge and find all my colleagues of this air fuel.
Whose hard work dedication has enabled the successful transformation of our company.
I know I can rely on that same hard work and dedication.
Taking a company do even greater success in Twentytwenty and beyond.
I'll now hand over to Don.
[noise]. Thank you Arthur.
Today I'll discuss both our quarterly and full your GAAP results, which are heavily influenced by the transactions. We've executed on these wells are non-GAAP results.
Aren't there mentioned, we've been busy and that as reflected in our income statement.
And our fourth quarter, we recorded a 190 million GAAP loss on the impairment of the Houston to intangible asset due to our revised outlook for the future revenue performance of the product.
There's also affirmed that could lead Jim's lowered guidance in 2020.
Subsequent to year end, we completed the sale of new sent to Collegium for 375 million less the royalties we had received in 2020.
And our first quarter results those royalties will be treated as commercialization agreement revenues and when would we will eat additional loss and the remaining intangible bounce.
Also included on our GAAP results is 2.2 million of costs associated with the Gridley's divestiture well the transaction closed in January we expense the remaining really sample inventories and the transactions costs incurred in the fourth quarter.
The gain associated with the transaction and all the royalties earned from Allergan will be excluded from our non-GAAP adjusted EBITDA for future periods.
Associated with the cost savings initiatives, we announced last quarter, we incurred a onetime restructuring charge of 3.9 million.
We have implemented all the initiatives designed to accelerate 15 million of cost savings and as you can see from our fourth quarter results. We were slightly ahead of plan on the timing of those savings.
Turning to the operating results our adjusted EBITDA for the fourth quarter and full year 2019 was 31 million and 138.4 million respectively.
This result was well above our previous full year guidance of 124 to 129 million.
The quarterly results were also impacted by 3.2 million dollar loss, which is included in both our GAAP and non-GAAP results related to the termination of the coast and Tropin commercialization agreement, where we received only a partial payment and settlement when outstanding receivable balance from west.
If west a successful and finding a new partner and launching the product we may receive up to 10 million of west future licensing income for the product.
The strong EBITDA performance in the quarter continues to exemplified the continued focus by the organization on operating efficiencies and profitability.
In addition, the quarter benefited from a strong topline performance.
Neurology revenues for the fourth quarter, 29.3 million, which is 1.3% above the prior year and 11.4% above the prior quarter.
Our full year neurology revenues were 108.1 million, which was also above our guidance of 102 to 105 million.
Had it not been for the returns issue. We experience was absorbed this year, we would've been able to show year over year growth in 2019 as well.
Cambia generated sales of 8.8 million for the fourth quarter.
32.5 million for the full year.
Cambia performed well with 7% annual and 5% sequential prescription growth in the quarter.
As Arthur stated earlier 2019 prescription volumes were 4% above 2018.
Net revenues leg prescription growth this year due to the unfavorable payer mix in both our commercial and government lines of business as we've discussed previously.
We've invested in our patient access programs, we're seeing the benefits and prescription girls.
As well as 7.6% net revenue improvement over the third quarter.
We see a lot of opportunity for cambia in the future, especially as we highlight the brand and refocus our sales efforts towards Cambia and the second quarter of 2020.
Now with the returns issue behind US, we're seeing Zipsor net revenue performance returned to growth.
3.5 million recorded in the fourth quarter represented 8% year over year, and 6% sequential net revenue growth.
Prescription demand in the fourth quarter was especially strong for the product recording a multiyear quarterly high that was 28% to both the prior year and 12% above the prior quarter.
We also finished the full year was 17% prescription growth a testament to our patient access programs and changes to our sales model over the year have improved the outlet for the product and franchise.
Release also had a good quarter delivering $17.1 million net revenues for the quarter.
A 15.6% year over year improvement, despite a 3% decline in prescription demand as the product continued to benefit from a favorable payer mix.
The transaction with Allergan close in January 13th and to ensure a successful transition we've agreed to promote the product for the first quarter of 2020 and al the general reimburse us for cost to do so.
Beginning in the second quarter will realign our coal plants to emphasize cambia and zipsor.
Thus any benefits we may expect to see from this focus won't occur until later in the here.
We recorded 29.5 million of GAAP commercialization agreement revenues from Collegium in the fourth quarter versus 27.3 million last quarter.
After adjusting for the changes in the contract asset and the accounting for the Grnenthal royalties. The non-GAAP revenues are 25.4 million in the fourth quarter relative to 31.1 million on our third quarter.
This decline is due to the step down a royalty rates to 14% for Collegium sales above 180 million and the non-GAAP numbers are more reflective of the cash received under the agreement.
Despite the $6 million difference in non-GAAP commercialization agreement revenues of 3.2 million.
Coached and turbocharge and expensing nearly half of our full year R&D expenses in the fourth quarter.
Our EBITDA performance in the fourth quarter of 31 million compares quite favorably to the 34.3 million in our third quarter due to our focus on operational efficiencies, which drove the decline in our basis Gina.
Subsequent to year end and the closure both the release and use into transactions. We now have 77 million of convertible debt outstanding.
We repaid our senior debt in full and entered into a number of privately negotiated transactions retirement, approximately 188 million of par value of our converts.
Small discount to par in mid February.
We expect that once we have repaid all of our indebtedness will have approximately 50 million in cash as well as the future royalties from the sales grew lease totaling 52.5 million.
Arthur and are committed to having a business that is EBITDA positive by year end.
Now that the restrictive senior debt covenants, the owners interest and debt service James on our cash flows and our reliance on income from an opioid are gone we can turn our efforts away from refinancing and restructuring activities and towards building and growing our business.
But that is occupied a significant amount of management's time and effort.
As well has been a source of concern from potential business development and M&A Counterparties.
We feel a tremendous amount of wheat has been removed from our shoulders. We're excited about the future and look forward to providing insight on a go forward plans shortly.
And our that ends our prepared comments today will we will not be hosting a question and answers section on this call.
As was mentioned, we instead plan to hold a separate conference call in the near future and we'll discuss our plans for the remainder of our convertible debt can you explain how we intend to leverage our strengthened balance sheet to create a sustainable and growth oriented specialty pharmaceutical company.
Thank you for your attention. This afternoon, we look forward speaking in the near future.
Now I'll turn the call back over to Max for final comments.
Thank you Dan and thank you everyone for joining us. This afternoon, a replay of this webcast and conference call will be available shortly and for the next 30 days.
Please dial 18558, Fivenine to 056, using passcode 20992 to four please contact us if youve any follow up questions or if we can assist in any way as a reminder, our earnings related materials are posted to the Investor Relations section.
Of the authority or website. Thank you for your interest have a good evening.
This concludes todays conference call. Thank you for your participation and travel wonderful day, you may now disconnect.
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