Q1 2022 Assertio Holdings Inc Earnings Call
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Good morning.
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Yeah.
Good afternoon, and welcome to the third of your Holdings, Inc. First quarter 2022 financial results Conference call.
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After todays presentation, there will be an opportunity to ask questions. Please note. This event is being recorded.
I would now like to turn the conference over to Max Nemmers Investor Relations and administration.
Please go ahead.
Thank you good afternoon, and thank you all for joining us today to discuss to discuss <unk> first quarter 2022 financial.
The news release coming our earnings for this period is now available on the Investor page of our website at Investor <unk>, TX Dot com.
I'd encourage you to review the.
Release, and the accompanying presentation as it is important to today's discussion with me today are Dan <unk>, President and CEO and pulse Schwichtenberg Senior Vice President and CFO , Dan will open the remarks and provide an overview of the business followed by Paul who will review our financials.
After that we'll open the call for your questions. During this call management will make projections and other forward looking statements regarding our future.
Performance such forward looking statements are not guarantees of future.
The future performance and involve risks and uncertainties, including those noted in this afternoon's press release as well as <unk> filings with the SEC. These and other risks are more fully described in the risk factors section and other sections of our annual report on Form 10-K, our actual results may differ materially from those projected in the forward looking statements and <unk> specifically.
Disclaims any intent or obligation to update these forward looking statements, except as required by law with that I will now turn the call over to Dan Dan. Thank you Max.
Welcome to everyone joining us here this afternoon.
2021 was a year of change.
By comparison, the first quarter of 2022 was quiet because it lacked change.
However, the results of the quarter provide validation of the benefits from the changes we made since you can see the direct impact of those efforts that were completed last year and the positive change reflected in the numbers we are reporting this quarter.
Net product sales increased 37% versus the prior year with one third of the incremental growth coming from our newly acquired product Otrexup, which in this quarter. We recorded $3 1 million in sales slightly ahead of our internal forecasts.
Net product sales were $35 5 million.
This is the highest quarterly result, since the first quarter of 2018, when we were known as Depomed.
<unk> partial quarter, we recognize sales of NUCYNTA.
Adjusted EBITDA of $23 9 million increased 52% versus the prior year. It was up 34% sequentially as we were able to maintain and even slightly improve our operating costs relative to the fourth quarter of last year, despite adding more trucks.
In addition, we had very strong gross profit margins this quarter, which Paul will elaborate on in more detail in his prepared remarks.
We are reiterating our full year revenue guidance of $126 million to $136 million and increasing our adjusted EBITDA guidance range by $2 million, which is now $66 million to $74 million.
On the revenue front there are a few factors that were still paying attention to.
And we simply need more time to pass.
We can assess if the impacts would be positive or negative.
Relative to the current assumptions.
We're still seeing the increase mix of heavily discounted into some product that we discussed on our March call and it has grown since that time as well, we're not only trying to understand it but also stop it and turn it back around.
In addition, we're very early into the loss of exclusivity for <unk> and we wanted to see how that plays out both for the brand and our authorized generic.
We also believe that it won't be until about the time that we report our third quarter that we'd be in a position to fully assess to what extent our sales and marketing efforts are bending the curve I know trucks up.
We're introducing a new metric, which we think will be meaningful for investors. This year adjusted earnings per share.
This quarter <unk> reporting 38 per share versus <unk> 27 in the prior year quarter.
Representing growth of 41%.
This measure should be more comparable across companies that report similar numbers in.
And includes interest expense, Andy accrued royalty for industry.
And better represents a <unk> operating cash earnings per share basis. As a reminder, we don't pay any royalties in the first $20 million in interest in sales. So as we progress throughout the year, we will start to see the royalty impact our adjusted earnings per share.
We continue to be acutely focused on achieving the priorities for our business in 2022 that were laid out last quarter.
Many of those priorities focus around business development.
We're looking to bring on new products to help us diversify and transform our business, which at the same time can help serve as a catalyst to improve the balance sheet and reduce the cost of capital as well as reducer revenue concentration.
That yardstick that we put out there of adding $50 million of incremental gross profit by 2024 of which are trucks up represents about one fifth of those call still stands.
I think thats, a meaningful and reasonable growth goal for Sergio.
That incremental 40 million will be on top of what should be approximately $110 million of gross profit. This year based upon the midpoint of our guidance using the 85% margin we reported last year with the leverage we can achieve in our operating model.
Should allow us to deliver a low teens three year growth CAGR and adjusted EBITDA.
Now I'll turn the call over to Paul who will walk through our quarterly results and guidance in more detail.
Thank you Dan This afternoon I will review the financial highlights from our first quarter of 2022.
As in previous quarters, there are slides available on our website that I will reference as I discuss the results.
Starting with slide three net product sales were $35 5 million for the first quarter of 2022 compared to net product sales of $26 million in the prior year quarter.
$32 2 million last quarter.
The increase in net sales versus the prior year quarter is primarily driven by indecision.
And the addition of Otrexup.
<unk> net sales in the first quarter increased by $6 8 million over the prior year quarter and $3 million over last quarter due to an improvement in net realized price.
Otrexup net sales for the first quarter were $3 1 million, representing one third of the portfolio year over year sales increase of $9 5 million.
Cambium ZIP store net sales were down versus the prior quarter as the first quarter has historically been the most seasonally affected quarter due to patient copay and deductible resets on January one.
As a reminder, zips or loss exclusivity near the end of the first quarter and we will see the impact of this on our future sales.
Overall portfolio net sales were up 37% versus the prior year quarter. Please refer to our 10-Q for specific product level net sales information.
Cost of goods sold in the first quarter reflect lower costs due to mix and improved margins on indecision, resulting in an increase in the gross margin of 344 basis points versus the prior year quarter.
As a drug device combination <unk> gross margins are lower than the rest of the portfolio.
<unk> trucks that becomes a larger portion of portfolio revenue and.
With the loss of <unk>, <unk>, which carries a high gross margin, we do expect to see some decline in the gross margin percentage going forward.
Also on slide three adjusted EBITDA for the first quarter was $23 9 million compared to $15 7 million in the prior year quarter, and $17 8 million last quarter, reflecting a 34% quarter over quarter growth.
EBITDA in the first quarter represents the fourth sequential quarter of growth after adjusting for onetime legal matters.
And a 52% increase over the prior year quarter.
The first quarter non-GAAP adjusted earnings per share was 38 versus <unk> 27 in the prior year quarter, reflecting 41% growth.
As Dan mentioned, we don't pay any royalties on the first $20 million in distant sales. So as we progress throughout the year, we will start to see the royalty impact our adjusted earnings per share.
Summarized on slide four adjusting adjusted selling general administrative expenses in the first quarter were $9 5 million versus $7 3 million in the prior year quarter, and $10 1 million last quarter.
Prior year quarter SG&A expenses included an insurance benefit of 5 million apps.
Absent this benefit SG&A expenses declined $2 8 million or 23% versus the prior year quarter.
Quarterly SG&A expenses going forward will fluctuate depending on the timing of business activities throughout the year.
Net income for the first quarter was $9 1 million, reflecting 99% growth over the prior year quarter net income of $4 5 million, which included the $5 million insurance benefit.
98% growth over last quarter's net income of $4 6 million.
On March 31, 2022, our senior secured debt balance shown on slide five with $70 8 million.
On may 2nd the company paid scheduled interest and principal of $9 3 million, leaving a third party debt balance of $66 million as of today.
Also on slide five ending cash at March 31, 2022 was $61 4 million.
The net increase in cash of $24 6 million from the December 31, 2021 balance of $36 8 million is primarily attributable to cash from operations, which includes the receipt of an income tax receivable of $8 3 million.
As of March 31, 2022, the company's net debt defined as senior secured debt less cash to trailing 12 month. Adjusted EBITDA was 0.16, reflecting a substantial reduction from a ratio of 0.7 at the end of the prior quarter.
Net cash provided by operating activities as reported in the company's statement of cash flows for the first quarter was $27 4 million versus a use of cash of $4 2 million in the prior year quarter, reflecting the fourth consecutive quarter of positive operating cash flow.
As previously mentioned first quarter cash flows were impacted positively by the $8 $3 million income tax receipt.
On an annual basis, we expect cash flows to be positive, but due to the timing of working capital and interest payments quarterly operating casuals will fluctuate.
Lastly, our annual guidance for 2020 to summarize on slide six is as follows product net sales of $126 million to $130 million and adjusted EBITDA of $66 million to $74 million.
The updated guidance for 2022 reflects the following factors.
Higher EBITDA due to lower expected net operating expenses for the remainder of 2022.
Product net sales guidance reflects no change and includes the following factors Endesa net sales growth driven by favorable pricing, partially offset by a shift in sales mix to more heavily discounted channels.
The addition of Otrexup sales.
Increased rebates and discounts to maintain managed care access for Cambria.
Zips or a loss of exclusivity in March of 2022.
And the discontinuation of <unk> matrix sales.
Overall, we're very pleased with the first quarter results as they reflect the positive impact of changes we've made to the business over the last year.
And we look forward to continuing with our strategy to position <unk> for long term sustainable growth.
And now I'll turn the call back over to Max.
Thank you Paul Danielle can we open up the call for Q&A.
Certainly.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone keypad.
If you are using a speakerphone. Please pick up your handset before pressing the key to withdraw your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
The first question comes from Tim Clarkson with Van Clemens.
Please proceed.
Hi, guys, sorry, just wanted to check.
<unk> technology, the first quarter and most of the revenues are coming from.
Three or four drugs.
Yes, the majority are coming from.
Consistent with prior quarters from Anderson and then the second largest contributor is going to be Cambria.
Okay.
Looking out six to 12 months I mean, obviously, you can't guarantee outcomes, but I mean, what would be an ideal competition five or six drugs at that point or.
Four five or or I suppose it depends on what kind of deals you can get.
It does depend on what kind of deals we can get one of the primary goals of business development is to reduce our product concentration.
We think that better.
A key driver for us in the end just overall.
Diversification of our revenues and cash flows as well as helping us get <unk>.
<unk> terms of any refinancing.
You mentioned when we talked a couple of weeks ago that you thought that there was that an attractive pipeline out there potential trucks, you can acquire or are you still seeing that pipeline available.
Yes, we are grows everyday as well.
Okay, Okay, I've got a great quarter in Q.
Thank you there are currently no further questions registered at this time so as a reminder, it is star one on your telephone keypad to ask a question.
Next question comes from Scott Weiss of Simco capital.
Okay.
Hey, guys congrats on the good quarter.
Can you guys comment on can you guys comment on Anderson and volume growth and what you saw during the quarter.
And how it changed relative to previous quarters.
I think it is in volume growth and it's been consistent with prior quarters, if not maybe slightly decelerating. The biggest comment about <unk> is just the increased mix of 340 b.
That is weighing on the I guess the.
And that ASP is the best way to put it.
Okay.
Then can you give us an idea as to what you think penetration is and if you saw it slow a bit does that mean that you are starting to hit peak penetration.
I think.
In terms of your question is likely in terms of <unk> penetration I think.
Consistent with.
What we've heard in some of our market research studies.
The product is likely fully penetrated in that high risk segment and in order for us to have.
<unk>.
I guess success in penetrating some of the moderate.
Risk segment getting it on label is going to be a key factor. There. So that is part of our long term objectives with that product.
Well that requires studies.
Stay tuned we're still still assessing that and still need to go in front of the FDA.
Okay.
On a touch up what was the linearity of the quarter January February March.
But most of the sales for the quarter came in the months of February and March.
As we.
Held back on shipments throughout the month of January .
When we acquired the product we've mentioned previously when we acquired the product there was a high level of inventory in the channel. So we tried to get that down.
And what's the reception been in the marketplace to the drug since you started getting it out to the market and I believe the drug get about $15 million in 'twenty one.
Should we expect a number similar to that or.
What should we expect in 2002.
Okay.
The market receptivity to it I don't think anything has changed with the receptivity is just.
US marketing it instead of and Torrey the prior owner of the asset we haven't at this point changed too terribly much with the distribution of the marketing of it at this point.
The.
If you recall, but we reduced the level of channel inventory and you saw that reduction happened at the end of the tail end of last year with our 15 days of ownership are not reporting any sales last year, and then not really booking much in sales in January so.
I wouldn't be surprised if our sales this year were below that 15 five run rate just because we didn't really sell anything in the month of January .
Okay.
And then lastly is there any update that you can provide us on a possible refinancing of the debt, especially with the cash level, increasing so much is there more of an appetite from your lenders.
So what I would say is obviously the debt.
The debt refinancing is a continuing priority for us.
We have been in discussions with lenders.
And what we've learned is that we believe we can achieve a better rate.
Can extend the term.
But at the same time, we're also trying to maintain.
<unk> ability.
You'll be able to purchase another asset and reduce our sales concentration on edison's.
So it was strong stronger cash position is good but our ultimate goal is we think it's probably going to be most beneficial to do a refinancing in conjunction with the transaction.
Very good thanks, guys.
Thanks Scott.
Thank you there are currently no further questions at this time.
So this concludes our question and answer session I would like to turn the conference back over to Dan.
T shirt.
President and Chief Executive Officer for any closing remarks.
Thank you Danielle.
I Trust you all share the enthusiasm we hear on this or do you have for our business and the substantial improvement we've driven in its performance I look forward to speaking with many of you in person at many of the upcoming conferences that we'll be attending later this week at Sidoti later in May at the Microcap Rodeo in early June at LD micro.
Thank you for joining us this afternoon and have a good evening.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.