Q1 2020 Earnings Call

Ladies and gentlemen, this is the operator today's conference is scheduled to begin momentarily until that time. Your lives will again be placed on musicals. Thank you for your patience.

[music].

Good morning, My name is <unk> and so I will be your conference operator today.

This time I would like to welcome everyone to the Q1 2000 2030 years old Therapeutics incorporated conference call. All lines have been placed on mute to prevent any background noise. If you should need assistance during the call. Please press Star then zero and an operator, we'll come back online to assist you. Thank you at this.

Hi, My watch turn the conference over to Mr. Max numbers, you may begin Sir.

Thank you data.

Good.

Good morning, and welcome to our Investor Conference call to discuss the studios first quarter 2020 financial results, but now.

The newspaper covering our earnings for this period is now available on the Investor page of our website at Investor data studio TX Dotcom.

I would encourage you to review the relief as it is important to today's discussion.

With me today, Arthur Higgins, President and Chief Executive Officer, Dan Pfizer, Senior Vice President and Chief Financial Officer.

Before we get started I remind you that some statements we make today, maybe considered forward looking statements for purposes of the private securities.

Litigation Reform Act of 1995, that's cardio cautions that these forward looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward looking statements. These and other risks are more fully described in the risk factor section and other sections of our annual report on form 10-K.

Sure deal undertakes no obligation to update these forward looking statements, except as required by law references to current cash and cash equivalents are based on balances as of March 31st 20 twice the non-GAAP financial.

Measures a studio uses are not based on any standardized methodology prescribed by gap and may be calculated differently from and therefore, it may not be comparable to non-GAAP.

Measures used by other companies before making any voting on investment decisions with respect to the proposed merger investor and stockholders of a studio and Lyla are urged to read the definitive registration statements, including the joint proxy statement regarding the proposed.

Merger and other relevant materials when they become available carefully and then there entirety because they will contain important information about the proposed merger with that I'll turn the call over darker.

Thanks, Max and thanks, everyone for joining us this morning.

I Trust roasting see unhealthy during these challenging times.

Today, we reported point this past quarter result in a moment.

Sure I see a bill will discuss.

<unk> financial results.

These results are even more satisfying when considering the Ritchie are the same time, we took significant steps to transform the company.

In the fourth quarter includes the steel multicenter franchise to Collegium for $375 million.

We also closed the sale of go lease to how would you.

$27.5 million.

We paid 180 million senior debt.

Successfully tender, but it can bastion of the remainder of our convertible debt.

Q1 was indeed, a milestone quarter for a company.

It was a quarter, which we saw the completion.

The key objectives I.

<unk> for myself when I joined the company.

Mostly through.

You just heard that which are the time with over $800 million.

Secondly, a.

Addressed the concentration of our business.

Which had over 70%.

Our revenues coming from opioids.

And thirdly to build a leaner.

More entrepreneurial company.

As we speak today.

We're a company study debt free.

We have you seen over revenues coming from opioids.

By reducing arrest you need be by over 50%.

We have created a leaner.

More entrepreneurial company.

<unk> sequencing and execution of this started you.

It's the reason we were able to I know since our merger with dive at life Sciences.

This transaction that's compelling industrial logic.

With a tremendous opportunity for us to unlock shareholder value.

The combination brings together are complementary products to create a company.

The largest portfolio of Ryan that and said.

It's a portfolio well the times, we live in where physicians are looking for non opioid pain solutions.

We expect the combined company till the synergies.

At least 40 million.

That number excludes 50 million in cost savings, which we had already committed to tear deal.

The combined companies pro forma.

I was in a 19 revenues.

Approximately 130 million I.

We expect well that number at least mid single digits. This year.

We're also targeting CBD deep.

As a percentage of sales to be north of 25%.

I don't leave the level to be less.

And two times.

The combined company due to leverage.

He is very well positioned <unk> platform and.

International capabilities to be a smart consolidator.

Specialty pharma market hungry for consolidation.

Indeed, our financial metrics.

Our platform capabilities.

More consistent with companies with market cap.

Multiples of where we trade today.

So again I hope you sense my excitement.

Before this combination is compelling industrial logic.

But its ability to unlock significant shareholder value.

I've also pieces report that we're on track for the closing of this transaction shortly after the Companys annual meeting on May 19.

Consistent with our focus on superior execution.

Our integration planning and de one readiness as well and bonds.

This is even more remarkable when you consider I.

Announcement to closing is likely to be less than 10 weeks.

With the transformation of essential no well in please.

I am looking forward to my new role as non executive chairman of the close of this merger.

And that rule I will work with yourself to award.

Hi, this leadership.

To achieve our vision of becoming the leading specialty pharmaceutical company.

Before I hand over to didn't peiser, who will walk through the quarterly result.

I'd like to thank all of my call it had to say our tool.

It's hard work a shape the company these past few years.

With their tireless effort.

Agility and the piece of constant change.

And flawless execution of strategy.

We would not be in such a favorable position.

Our such a bright future in front of us.

Finally to a new colleagues at Tyler we look forward to welcome your.

Saturday or.

And I want to thank you for all your hard work to make sure we're positioning the new Sadiola.

For success from day one.

With that I'd like to hand over to Dine Piper Seattle.

Thank you are there.

This morning, I'll review the financial highlights from the first quarter 2020, My comments will focus primarily on a non-GAAP results unless otherwise noted.

Year over year and quarter over quarter comparisons are all clouded by the many transactions we completed in the first quarter, including the sale of released Allergan sale would be since its collegian the repayment of our senior secured notes and the repurchase of the majority of our outstanding convertible indebtedness, which was followed by the tender that was completed in April there.

For a limit the discussion of any historical comparisons to the continuing portion of our business.

Oh, so we'll not be providing financial guidance at this time there are two key contributing factors to decision, which are a pending merger was Iowa as well as the overall impacted covert 19.

In the first quarter, we reported 20.9 million total revenues. This included 11 point Threemillion a gap New center commercialization agreement revenues that were recorded from Collegium prior to the consumer so.

Our results also included zero point Sixmillion grow lease in other domestic product sales for coal adjustments, which is excluded from our non-GAAP adjusted EBITDA.

Our neurology product sales from Cambia, and Zipsor totaled 8.6 million versus 13 million in the prior year period, and 12.2 million or fourth quarter.

These results are primarily reflection of fluctuations and channel inventory levels that are businesses experienced in the last two years these inventory shifts of meat or year over year comparison in the first quarter difficult.

In planning for 2020, we anticipated this unexpected or first half results for Cambia and zipsor to be broadly in line with the prior year before taking into account any cold weather related impact.

Late in the first quarter, we believe that both patients and retailers who are buying advanced product because of anticipated disruptions caused by Kogut 90.

This happened late in the quarter for products such that we did not see any of this increase until April.

In addition to the shifts and channel inventories, we continue to invest in or patient discount programs behind both products to ensure that patients receive access to our medicines one their prescribing.

On a total prescription demand basis as reported by Symphony Elves, Cambia was up 5.9% and Zipsor was up 9.6% year over year.

Sintering that we were still promoting release somehow salvage and in the quarter. This is a strong results and more indicative of the underlying demand for our products.

Due to covert 19, we also pulled all of our sales representatives from the field in mid March and shifted to telephonic promotions with the physicians and their territories.

At this point, it's still too early to predict the impact that cobot 19 may have on our business.

However, we believe that we have adequate inventories for the near term and our supply chain has not been materially impacted today.

The first quarter, we incurred non-GAAP operating expenses defined as reported GAAP operating expenses less depreciation amortization transaction costs opioid litigation costs and stock based compensation of 16 point Threemillion relative to 21.39 in the prior year.

And 21.7 million in the prior quarter.

A reduction of 23.3% and 24.6% respectively.

As you can see we're well on track to realize the 15 million accelerated cost savings we implemented at the end of last year.

In addition, we've taken further action in April to cope with my team to further reduce our cost base to weather disruption and they result.

Reported adjusted EBITDA of 6.1 million, which does reflect the 13.19 non-GAAP commercialization agreement revenues that will receive huge prior to the closing had been sent to sell to Collegium on February 13th.

A year over year reduction from 36.4 million of adjusted EBITDA in the prior year period is fully reflective of the sales increased leasing you said, though.

Excluded from our adjusted EBITDA results in a royalty receipts from Albertsons would release for GAAP purposes for included these in the gain recorded on then on the sale backed that out of our EBITDA results.

Oh, the 52, and a half million owed to us from Allergan, We received 2.5 million in the quarter, which is only reflect Albertsons January sales, which was a partial month, reflecting closed in January 13th.

Following the transactions in the quarter, our balance sheet as far simpler.

Reflecting the reduction in tangible assets into the only the addition of the royalty receivable anchor lease.

Subsequent to quarter, and we completed the tender of our remaining debt.

All of our convertible debt was either repurchased or tendered at 99. The house. The say just over 1.3 million in principle. We also saved approximately 1 million interest by completing the privately negotiated repurchase agreements prior to the tender.

This exemplifies the focus that Arthur and I have on cash and cash flow.

Before I close I'd also like to reiterate the point that are coming in his comments. The team here to cereal has got a tremendous job and we've completed a large number of transactions to help repositioned the company.

That's started with the refinancing in August of last year, we expect to soon concluded with the acquisitions out next month.

Everyone. Here is played an instrumental role and making old as possible and with that I think you.

As we begin to welcome our new colleagues from silo and look forward to building sustainable growth oriented company that is well positioned in the current marketplace.

I'd be remiss not to also think character different weren't for his vision leadership in constant encouragement.

Not had been possible, especially in the timeframe in which we did it.

That ends our prepared remarks, I'll turn the call back Max for closing comments.

Yes.

Thank you Dan and thank you everyone for joining us. This morning, a replay of this webcast and conference call will be available shortly and for the next the 30 days. We also look forward to seeing you at our virtual annual General meeting on May 19, 2020. Please contact us if you have any follow up questions or we can assist.

Anyway.

As a reminder, our earnings release and other materials are posted to the Investor Relations section of the Sergio website. Thank you for your interest have a good day.

Thank you for participating in today's Q1 2020, a studio Therapeutics incorporated conference call. This concludes today's conference you may disconnect at this time.