Q2 2022 Assertio Holdings Inc Earnings Call
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Hello, everyone and welcome to the Associate Holdings Q2 earnings call. My name is Emily and I'll be moderating the call today.
The end of the presentation you have the opportunity to ask a question by pressing star followed by the number one on your telephone keypad.
How did you weigh ritual hoist, Matt Kreps with Darrow Associates Investor Relations for the company. Please go ahead.
Thank you Emily good morning, and thank you all for joining us to discuss <unk> second quarter 2022 financial news release, covering our earnings for this period is now available on the Investor page of our website at Investor Stereo, TX Dot Com I would encourage you to review the release and the accompanying presentation as it is important today.
Got you.
With me today are GAAP either.
CEO , Paul Schwichtenberg, Senior Vice President and CFO .
Then we'll 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 future performance such forward looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in this mornings press release as well as bonds 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 I'm sorry, do you have specifically disclaims any intent or obligation to update these forward looking statements except as required by law.
And with that I'll now turn the call over to Dan. Thank you.
Okay.
Thank you, Matt and welcome to everyone joining us this morning.
I'm incredibly proud of our second quarter results as we nearly over exceeded on every aspect of our plan for the quarter net.
Net product sales were $35 4 million in the quarter, just 115000 shy of last quarter. Despite the loss of exclusivity for zips or thanks to outperformance in industry bricks and Cambria.
Anderson returned to volume growth in the quarter year over year, the suppository volumes were up almost 4% and increased 7% sequentially in.
In addition, the mix is heavily discounted product purchased under 340 B was down in the second quarter relative to where it has been in the previous six months.
We now have a firm grasp on the trends in this channel and are more comfortable forecasting the mix. In addition, we're going to be implementing some enhanced commercial and channel strategies specific to this channel in our third quarter that will positively benefit our fourth quarter and our future outlook for the brand and the company as a whole with respect to this.
Got you.
<unk> is also seeing strong strong volume resurgence with 20% year over year, and 13% sequential paid volume growth from what we believe is a rebound in elective procedures and the market's desire for non opioid pain alternatives.
Can be a showed volume growth sequentially, but the improvement year over year was operational driven as we focused on profitable volumes as Paul will describe in a minute. This is helping us exceed our gross profit margin expectations. This year.
At the end of the quarter, we pulled the majority of promotion office, Cambria and shifted those resources and dollars towards our trucks up.
Otrexup declined sequentially in the second quarter due to a decline of 14 days on hand in wholesaler inventories, which was due in part to supply disruptions that we experienced in the quarter and to a lesser extent continued to experience today.
Our supplier <unk> was acquired and has likely been distracted these issues impacting supply are minor and fixable, we expect everything to be resolved for commercial supply by the end of August however supply of samples has been impacted to a greater extent in may last longer as we prioritize commercial supply.
<unk> are important for generating demand for this product and we're also a big reason why we anticipated an increase in operating expenses after acquiring no trucks up now some of these expenses have been pushed into the second half and into 2023.
Longer term our enthusiasm for growing Otrexup is building as we continue to see new opportunities for the product.
Gross margins operating expenses and cash flows in the quarter all came in better than expected due to continued outstanding execution by the team.
As stated in our release, we are increasing our guidance narrowing the ranges for both full year net product sales and adjusted EBITDA.
We expect net product sales to be 129% to $137 million.
And adjusted EBITDA to be $73 million to $79 million.
The drivers behind the outsized EBITDA improvements relative to revenues or both the actual results shown in the quarter as well as an outlook for better gross profit margins than we had initially assumed given all the improvements we've seen year to date.
As we look forward, we're seeing a lot of positive developments in our business.
The commercial and channel strategy as I mentioned with respect to interest and are expected to have a meaningful and durable positive impact on that brand and will carry over to other products in the company as well.
We will see those benefits on both the top line and margins.
We also saw volume growth returned to enter some here in the second quarter consistent with the historical low to mid single digit trend, indicating the decline we saw in the first quarter may have been transient and tied to the omnicom resurgence or labor shortages affecting procedure volumes.
Longer term for Angus and the potential expansion into the moderate risk <unk> segment is a significant opportunity.
Our research indicates this segment maybe twice as large as the high risk segment, where the product is being used today.
Work to get this added to the product label, which would permit promotion for this use is accelerating as well.
As you saw in this quarter <unk> is beginning to accelerate and I personally believe personally believe that there is a large need for products like bricks, we've made minor improvements to its coverage and access but have room for far more.
Otrexup has similar opportunities with coverage and access like sports does in addition, otrexup will be the primary beneficiary of our digital commercial platform, which as of July has moved from multichannel to true Omni channel with all key digital channels activated and providing continuous feedback and learnings to measure performed.
Yes.
I mentioned, we pulled promotion from camby in anticipation of the loss of exclusivity in January of next year like.
Like we've seen with <unk> here in <unk>, the remainder of the portfolio can cover the shortfall.
<unk> is certainly larger than <unk> contribution, we do think that the business. We have today can still generate net product sales in excess of $120 million in 2023.
Our goal as it has been is still to add to the portfolio through business development.
The acquisition environment today is very favorable we're seeing a number of quality assets and companies are very lucky to have built in the capacity to be able to handle multiple work streams at the same time. So we can evaluate more than one deal simultaneously.
For example, as I speak we have three active BD projects underway at various stages.
Our big picture BD goals had been to find transactions that meet the following criteria.
Refinance our existing debt and fund the transaction.
Our accretive have durable IP create opportunities to grow and fits with our platform.
One of our shorter term goals is also to grow our business in 2023.
Some of the attractive assets. We know we see now are smaller and like we saw with Otrexup on a standalone basis will likely help us achieve the diversification we needed to successfully execute a full refinancing but can be financed with cash on hand or seller financing.
So we May proceed with the smaller tuck in while we continue to pursue some of the larger opportunities as well.
Now I'll turn the call over to Paul who will walk through our quarterly results and guidance in more detail Paul.
Thank you Dan This morning, I will review the financial highlights from our second quarter of 2022.
As in previous quarters, there are slides available on our website that I will reference as I discuss the results.
<unk> with slide three net product sales were $35 4 million for the second quarter of 'twenty, two compared to net product sales of $225 2 million in the prior year quarter, and $35 5 million last quarter.
The increase in net sales versus the prior year quarter is primarily driven by <unk> and the addition of Otrexup.
<unk> net sales in the second quarter increased by $9 8 million over the prior year quarter, and $1 5 million over last quarter.
Due to higher volume and an improvement in net realized price.
<unk> net sales for the second quarter were $2 6 million versus $3 1 million in the prior quarter.
The $500000 decrease in Otrexup net sales from last quarter is primarily due to a decline in wholesaler inventory levels, partially driven by the supply disruptions that Dan mentioned.
As we stated on previous calls the wholesaler inventory levels for Otrexup were high at the time of acquisition last December .
We expected a decline in wholesaler inventory levels in the first quarter.
As we delayed shipping until late January the decline did not occur in the first quarter to the magnitude that was originally expected.
After the subsequent decline here in second quarter inventories are now aligned with where we had anticipated they would be and we expect them to remain steady at these levels.
Cambria and <unk> combined net sales were $1 2 million higher than the prior quarter, primarily due to higher volume on spreads and the effective financial and operational execution of more profitable channel strategies for Cambria.
This focus on profitability for Cambria has led to improved net sales and gross profit margins and was achieved through lower co pay and consignment costs, reducing the shipment of free goods, resulting in lower gross to net expenses.
And cost of goods sold.
As a reminder, zips or lost exclusivity near the end of the first quarter and as expected we did see a $2 million decline in net sales versus the prior quarter.
Overall portfolio net sales were up 40% versus the prior year quarter.
These refer to our 10-Q for specific product level net sales information.
Cost of goods sold in the second quarter reflect lower costs due to product mix and improved margins on indiscernible, resulting in a gross margin of 87% an improvement of 275 basis points versus the prior year quarter.
We now expect gross margins to be in the high 80% for the full year.
With the second half slightly lower than the first half.
As our trucks it becomes a larger portion of portfolio revenue, we do expect to see some decline in the overall gross margin percentage going forward.
Also on slide three adjusted EBITDA for the second quarter was $22 9 million compared to $23 9 million last quarter and an adjusted EBITDA loss of 505 in the prior year quarter.
Adjusted EBITDA margin reflected as a percentage of total revenue in the second quarter was 65, 2% versus 65, 3% in the prior quarter.
The second quarter non-GAAP adjusted earnings per share was 28 versus <unk> 38 in the prior quarter and a loss per share of <unk> 16 in the prior year quarter.
As mentioned last quarter, we do not pay any royalties on the first $20 million of investment sales. So as we progress throughout the year, we are seeing the royalty impact on adjusted earnings per share as.
As we back out the royalty payable during the period and our adjusted earnings per share calculation.
Summarized on slide four adjusted selling general administrative expenses in the second quarter were $8 6 million, which includes a net benefit of $2 million from an insurance settlement.
Last year's operating expenses included an $11 3 million legal accrual, making comparison on a year over year basis more difficult.
Said, we do expect an increase in operating expenses in the second half of this year versus our first half run rate adjusted for onetime benefits funding, both increase otrexup sampling and marketing cost.
Q2 operating expenses also included $1 million in costs associated with a debt refinanced financing effort that we chose not to pursue very early in the quarter because it did not provide us with the flexibility that we needed to pursue business development to grow our business.
Additionally, the rate quotes we received were all variable rates typically LIBOR spreads the floor of a 100 basis points. When LIBOR was in a range of 10% to 35 basis points given the significant increases in LIBOR to just under 250 basis points over the past few months in hindsight.
Any interest savings would have been eliminated so it turns out to have been quite a good decision not to pursue the refinancing.
We do intend to complete a refinancing at the appropriate time when the rate environment is more stable and most likely in conjunction with a larger acquisition that diversifies, our revenues and cash flows.
Net income for the second quarter was $7 8 million compared to $9 1 million last quarter and a net loss of $14 2 million in the prior year quarter, which included the $11 3 million legal accrual.
Turning to the balance sheet.
On June 32022, our senior secured debt balance shown on slide five was $59 million.
On may 2nd the company paid scheduled interest and principal of $9 3 million.
We also took an aggressive step in the second quarter to reduce our debt level by using our at the market facility to raise over 7 million through equity sales in the quarter at an average price of $3 <unk> per share and using those proceeds to prepay an additional $7 million of principal on June 30th.
This prepayment will save the company interest of approximately 500000 in 2022.
And $1 $4 million over the remaining life of the debt.
Additionally, this additional principal payment improves our debt to market cap ratio, which is one of the biggest concerns from our investors and potential lenders.
Also on slide five ending cash on June 32022 was $52 3 million. The net decrease in cash of $9 $1 million is mostly due to a scheduled $16 million of otrexup purchase price payment to <unk>.
Partially offset by net cash generated by the business during the quarter.
To date, we primarily focus on debt reduction and maximizing our cash position for business development. So that we are ready should the opportunities in our business development pipeline come to fruition.
As of June 32022, the company's net debt to trailing 12 month EBITDA was 0.08, reflecting a substantial reduction from a ratio of <unk> seven at the end of 2021 and <unk> one six 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 second quarter was $14 4 million, adding to our first quarter cash flows of $27 $4 million year.
Year to date, we have generated $41 9 million in cash flow from operations. This was our fifth consecutive quarter of positive operating cash flow.
I will note that first quarter cash flows were positively impacted by the $8 $3 million income tax receipt and second quarter by the net $2 million and favorable insurance settlement receipt.
On an annual basis, we expect cash flows to be positive, but due to the timing of working capital royalties and interest payments the quarterly operating cash flows will fluctuate.
Lastly, as Dan mentioned, we are raising our guidance for a second time. This year our updated annual guidance for 2022 is summarized on slide six is as follows product net sales are now expected to be in a range of $129 million to $137 million compared with our prior expectations.
$126 million to $136 million.
Adjusted EBITDA is expected to be $73 million to $79 million, a considerable step up from our previous guidance of $66 million to $74 million.
The updated guidance for 2022 reflects changes in revenue mix volume and more favorable margins, partially offset by increased net operating expenses for the remainder of 2022, there are several moving parts within those generalizations, including.
New product net sales guidance that includes the following factors Q1, and Q2 actual net sales.
Favorable <unk> volume.
Favorable channel mix across the portfolio due to lower volume and unprofitable channels.
<unk> net sales growth driven by the new commercial and channel strategy as Dan mentioned.
One of the tactics, we will employ as part of launching these new strategies will be the purposely titrate sales and inventory is lower than the third quarter.
Therefore, and disciplined sales are likely to be lower than the second quarter before seeing a positive impact beginning in the fourth quarter and continuing into 2023.
New adjusted EBITDA guidance reflects Q1, and Q2 actual results, including net sales gross margin and EBITDA as well as anticipated Q3, and Q4 product revenue and improved margins.
Overall, we're once again incredibly pleased with the quarter results as they reflect the positive impact of changes we've made to the business over the last 18 months.
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 Matt.
Thank you Paul and Dan <unk>.
Can we go ahead and open up the call for Q&A from our listeners. Please.
Of course, thank you.
To ask a question. Please do so by pressing star followed by one on your telephone keypad. If you changed your mind I would like to remove your question from the key please stop by.
Turning to ask a question. Please ensure that you have a device and your microphone on mute lately.
Yes.
Our first question today comes from Scott Henry with Roth Capital. Please go ahead Scott Your line is open.
Thank you.
Good morning.
Strong results.
Dan just a couple of questions.
First on in dosing.
The roughly $23 million in the quarter forgetting about inventory changes do you think that.
A good base level that we should think about from here on out and it sounds like you expect to have growth in it as well.
Thoughts.
Yes, I think the results we saw this quarter do reflect that.
Good base level like Paul just mentioned, we expect it to be a little bit lower here in the third the upcoming third quarter before recovering again in the fourth and that's a purpose tactful or.
Tactical decision that we're going to be making.
Going forward, we obviously intend to improve upon that.
Okay and.
With it being a larger product.
As an NSAID.
Do you think about the competitive landscape.
Bigger revenues will make it a bigger target.
What are your expectations for competition and also the royalty you pay out.
I believe that goes through the SG&A line, but I wanted to confirm if that was the SG&A or through the Cogs line.
Okay.
Paul do you want answer that.
The answer to your second question, Scott the royalty payout I should does not run through the P&L.
They could be.
Fair value of that royalty as in contingent consideration on the balance sheet.
So the royalty payment really only impacts the net cash flow and not the P&L and adjusted EPS.
And if we include the.
The accrual for.
The royalty in the adjusted EPS, So that's where it's also Catherine.
Okay. Thank you for that color and then the competitive landscape.
So.
And this has not had traditional.
Regulatory nor IP.
Exclusivity for quite some time now so it has been.
In a situation where competitive.
Entrants could pop up at any time, and it's something that we think about on a daily basis and want to stay ahead of it. So a lot of what Paul and I have talked about over the last 24 months and then how we stay ahead of the competition and how we continue to protect this brand and many of our lifecycle.
Management strategies are.
Surround protecting this brand so.
Everything that we do is with a conscious decision about how we continue to protect it and stay aware of what the competition might be doing.
Okay fair enough.
Shifting to our tracks up.
Hi.
The supply situation is supply backup to ski currently and is there any long term solutions, where you can have more control over that supply.
Hi, Jason question. So we expect that on a SKU by SKU basis, we're getting pretty close we think that by the end of August we'll be in a very good position and we will have full supply with many months on hand for all of our all of our products.
All of the Skus under underneath our trucks up other than samples.
Right.
And hopefully by the end of this year or early into the next year, we will have the samples taken care of as well longer term that will require some additional work it's not necessarily a.
Specific to <unk> activity. This is a downstream supplier of theirs, they're just ultimately responsible for them.
So whether or not it's us watching over them or <unk>, but they have a long term solution for this I guess sub supplier.
We just need to get it put in place.
Okay.
Great and then.
Yes.
With the capital structure you chose to.
Put out a little equity to reduce debt.
When you're thinking about M&A.
How do you think about equity a little differently.
M&A would you prefer not to use your equity because it.
Seems to be undervalued, certainly relative to the merits of the company just wanted to get your thought on how you think of the use of equity with regards to M&A.
So there is no doubt we think that our equity is cheap what we saw in the second quarter was <unk>.
Very unusual phenomenon, where as Paul talked about short term interest rates went from the.
At the start of the year 10 basis points and are now I think at the end of the quarter were right around 180 basis points and out today or just under 250 basis points. So there was substantial.
Volatility in those short term rates that underlie all of the rate quotes that we were getting out of variable nature. So it made.
<unk> and certainty of a debt refinancing very uncertain.
The other component was.
From the time that we reported our second quarter results to the end of the quarter, our stock has outperformed the market by 60% plus.
What we saw was an opportunity to take advantage of that very very unusual situation and solve a key problem in any refinancing which had been debt to cap and that ratio and we got that to well under <unk> five now and think that we have solved that issue.
So any future discussions that we have with potential lenders. We don't think that that's going to be a concern. So now going forward we think the.
Future discussions that we have around execution on our refinancing will solely concerned around the diversification of our revenues and whether or not we've achieved what the lenders are looking for so it was more of a.
Have we solve their can we solve one of the two big problems refinancing and we think we've done that.
Okay, Great I appreciate the color on that.
Final question.
Just the plan are all.
Pipeline compound any updates there.
And expectations for a filing.
Yeah. Good question I, probably should have said something in my prepared remarks that we're still really really excited about NDS and fluconazole.
There really isn't a material update other than we still expect.
A value inflection point of some sort one way or the other to be in 2022.
It's still waiting on.
Some data from outside parties basically is what it is to be able to complete the dossier or the regulatory filings. So we still from the update that we received during the quarter. We still expect that to be something that can be achieved this year and we should be able to know and once we received word from any asset that they have submitted the.
Filing.
And whether it's accepted by the FDA will communicate that to our investors.
Perfect. Thank you for taking the questions.
Thank you.
Our next question comes from Mitra <unk> with Sidoti. Please go ahead.
Yes, hi, good morning, Thanks for taking the questions at first and nice quarter.
Dan You mentioned you have a few BD projects in the pipeline I was just wondering if youre seeing more opportunities. He has given the increased cost of capital.
It appears you are looking at.
I don't know if it's because of an increased cost of capital, but we are seeing more opportunities.
And I've described this more so as the equity markets not being available.
As as opposed to increased cost of capital in.
And it very well could be the both of them combined so we're seeing.
We're seeing opportunities come from many different directions, and continuing to come from many different directions.
And we're the quality assets and we're quite excited about the potential with many of them.
Okay, No that's great. Thanks.
And could you provide us an update is still early days in terms of the link Rx partnership and maybe also on coach.
They are progressing relative to your expectations.
Blink our excess specific too.
Trucks up.
Thank you.
That's progressing.
The hope and promise of that is as expected.
The uptake of it I think is progressing a little bit slower than expected and getting.
Getting the news out to physicians that that it's available.
<unk>.
So we recently just did another round of Av.
Awareness campaigns associated with some of the day.
I guess potential disruption in the prescribing for methotrexate.
Post the ROE versus Wade decision.
There were some some headlines that it was hard to get prescriptions of methotrexate because of that so we mean that physicians more aware of Blink Rx and the ability to solve some of those issues. If they saw that as a potential concern it at their local pharmacy level.
So we're doing things to drive awareness to blank so that patients can still use that service Cove is going fine I think we had I don't have the exact statistics, but just a little bit over 3% of the.
I guess the volumes of prescriptions for <unk> were going through this quarter. So that's.
That's still on track still doing quite well.
And the team is doing some more social media launches I think there was a.
Both a Twitter.
Facebook launch for Cambria in July .
Okay, No that's great and then speaking of the digital obviously in terms of the model you have do you still need to make.
Significant investments in terms of.
The virtual platform or you pretty much where you need to be.
I think the substantial investments have been made.
Got it to a true omni channel platform here in July .
Upgraded from multichannel so it's all talking to each other and everything that the team intended to launch has been launched or will continue to make tweaks, along the way and fail fast.
As part of the strategy here so.
We're excited about what this platform can bring we will continue to make investments, but all the big investment dollars have been made.
And now it's a matter of watching.
Watching what the what the platform can do.
Okay, that's great Paul quickly.
How should we think about a tax rate for the remainder of the year.
Yes, so our our tax.
Effective tax rate after considering our Nols is about 6% to 10%.
Which is obviously well below the hurdle rate, but thats through the utilization of our Nols.
Right right. Okay. That's great. Thanks, again for taking the questions.
Yep.
Our next question comes from Amit <unk> with AWS financial. Please go ahead Thomas.
Hi, So first off on this.
Just a change of strategy could you talk about that a little bit more if youre able to is it pricing.
Pricing strategy or is it a marketing strategy.
Uh huh.
It's.
It's actually neither.
Sure.
It's more directed at this channel.
I'd be more inclined to talk specifics about it.
At a later time after we put some of these tactics in place and put the strategy in place I'd, rather not have competitors, nor the market here about it until we get some of this stuff out.
But we do expect this to have.
It will be a material benefit to both can be as well as the company in terms of its trickle down to our other products.
Okay fair enough.
As far as the trucks, what goes as far as getting more and more physicians to be aware of it.
What do you feel like is the.
The overhang for them to cross.
Cross line actually write prescriptions.
I don't think it sort of awareness issue of Otrexup I think it's more of a coverage and access issue.
So that's where we're spending.
Vast majority of our time.
Awareness issues.
Or more in the.
I guess, the alternative segments, where the prior owner didn't.
Make any calls in the pediatric segment.
Where it does have a labeled indication.
And we're starting to add resources there so the hard part about us attracting new patients and new prescriptions here is just not having the samples so.
<unk>.
That's been I guess, what and one part is delaying some of the demand creation here is not having samples.
We still have some and we'll continue to do something when we're looking at ways of using blink to find alternate ways of getting I guess introductory prescriptions.
Patients as opposed to having a physical sample in the physician office.
Okay and my last question was how far along are you on these three active BD projects is there any.
Yes.
Any of them happening soon.
Can never.
Never have a crystal ball some some BD.
Deals that I've been in very large ones like.
Two to three months and then we've had.
Otrexup took us how long does that won't take us six months.
And if you would've asked me at the very start of it and if I would've given you an answer at the various started but I would have thought it would have taken two and a half.
No.
There is.
There is never an easy way to predict it and the way I always look at these and I've been doing it for a very long times, it's always zero percent until it's 100% so.
We're going to keep marching along and.
In operating our business.
Looking for the flexibility in case these do happen.
And setting goals to make sure that we.
Can accomplish them.
Because we do want to accomplish them.
But never do we plan on one or two or three of them coming.
Okay. That's it for me thank you.
Our next question comes from Thomas Cochran with Lake Street capital.
Hector.
Thanks, Dan quick question, just a follow up on the prior question about infrastructure investment.
The acquisitions that you have on the radar are those all essentially plug and play with the infrastructure investment that you've made or are there additional investments that would need to support those.
Interesting question so for some of the smaller single asset like I'd say, the tuck ins or bolt ons, they would be immediate plug and play very easy for us to do.
In both cases, they would be coming from companies that are like our trucks up where they were doing 100% in person and we would be moving that over to digital.
Some of the others that we're looking at some of the bigger ones.
There is.
One that the portfolio of assets that I'm actually very excited about.
In that particular case, there would be a launch asset as well.
And if we pursue that we would likely retain some of the reps that would come with it. So so that we can launch those assets once that asset.
So that would be a situation, where we bring we'd be bringing on a more material new set of revenue base.
And would also be bringing on some some additional costs in the form of a physical presence again.
Got it and then against the backdrop of the sorry go ahead.
Yes.
I'm done.
Thinking about the backdrop of a transition to increased virtual engagement I don't know if you can provide any color around how sticky those relationships or is there more churn than you would expect with a fully in person field force.
Curious to get some color around that now that you've been out there for quite some time with this model.
Yeah.
Hello.
Yes.
What do you mean churn with that can you can elaborate.
Yes.
Are you seeing a once you get a customer on board do they do they tend to stick with you and right or are they do they tend to come and go from the program. So to speak I'm just curious how steady those revenues are over the long term and how well you can engage with with with docs purely from a virtual perspective.
We haven't <unk>.
As in are they consistent writers every month through every quarter.
Most of what we're doing is just awareness.
It truly is just awareness campaigns and then measuring to see if the messaging is still driving.
So I don't have data on whether or not they're churning in and out my assumption is that they are staying in and continuing to write.
But I can get back to you on.
I guess, our retention statistics are but what we're seeing so far is that.
That.
The response has been.
On a.
ROI basis far higher than anything we ever got with and in person Rep, and I think that that <unk>.
<unk> out in the results that we're showing with our business today.
Got it I appreciate you taking the questions. Thank you.
Our next question comes from Scott <unk> with <unk>. Please.
Please go ahead.
Hey, guys great quarter congratulations.
Thanks Scott.
I wanted to flush out the capital raise a little bit more.
<unk> had a decent balance sheet coming into the quarter was $60 million cash and $70 million of debt. So one why raise money at $3 <unk> and can you comment on who it was with was it with a hedge fund and institutional fund any kind of color. There would be helpful. And two you suggested in your comments that this resolved the primary issue that you have.
With lenders with the refinance so does that mean, we should expect something in the near term with regard to a refinancing.
And the last point Scott.
We've been consistent we're going to continue to be consistent the refinancing the appropriate time for that we think the best chance for execution on that is when we have a BD deal that can diversify our top line.
Yeah.
That was issue number one issue number two is debt to cap, we think that this small $7 million.
The equity raise and.
Which was immediately turned into debt prepayment solves debt to cap.
This was done under the ATM, we don't know who the.
And.
The holders of that are.
Just simply.
Trades that we executed in into the market probably through the black box.
Did the trading for us So we don't know who the Counterparties where.
And then on the balance sheet coming in we had.
This quarter had some pretty big outflows too.
So to put up a quarter, we paid the debt principal we paid $1 3 million principal and interest of $16 million or <unk>.
We've got our cash balance only dropped by $9 million.
So we think we had a pretty good quarter and we wanted to keep cash up at these levels to maintain flexibility for BD, which is the primary reason why we use the ATM in the quarter.
Got it okay. Thank you.
Number two on zips or so you lost exclusivity at the end of March can you comment how it's performed relative to your expectations post the Teva launch and is it possible to put some numbers around that.
The hardest part about putting numbers around it is just the shakeout in the gross to net.
When in the first quarter after a generic.
Loss of exclusivity event.
So we expected to record zero in revenues and that's essentially what we record as a few hundred grand here and there.
So when you have inventory levels looking backwards on demand that are in the 20 days and then your demand dropped precipitously that 20 days quickly becomes.
Worth more than a whole entire quarter. So you don't expect to ship anything and we really didn't ship much. What we were encouraged by was the brand still was being adjudicated.
So what we saw was.
More of the brand inventory was being pulled off the the end user shelf than what we had initially anticipated.
That days on hand at the end customer.
More rapidly pulled off than we expected it to.
Which.
We indicate that we might be able to make some I guess restocking of that wholesaler and end caps and pharmacy shelf, a little bit sooner than expected. So.
That was the encouraging thing for us and it might allow us to have some additional zip store revenue towards the tail end of this year.
Okay.
And then lastly on <unk> you talk about the long term expansion into the moderate risk segment of the market.
And it could be as large as double the high risk segment of the market.
Previously you've spoken about wanting some studies in a moderate risk with the hope of getting a label.
Is there anything new on that and timing on those studies and how long would those studies last and how much would they cost and if you can put some numbers around the size of the market that would be great too.
Yes, the market from what we understand from our market research we've done.
Yes.
Is double what the high risk segment is so the market.
Research shows that high risk is about 20% 2022, and the moderate risk segment is about 40% of the <unk>.
The overall market. So we think it's a potential doubling of the total Tam for <unk> to expand into this.
Additional risk segment.
We are currently designing the clinical trial.
<unk>.
And we will not be able to answer questions about how long it will take nor how much cost it will be until after we go in front of the FDA and get their blessing I don't want to set expectations for either timing nor cost until I've had that discussion currently we're not anticipating filing the IND and having a.
Discussions with the FDA until inside the fourth quarter like November timeframe.
So.
It'll be closer to those.
Around nine when we'd be able to communicate that.
Yes.
The nice thing about it is right. After you hear from the FDA and it can be up and running in your clinical so we think the clinical.
Along as we get the answers we need from the FDA, we should be able to be up and running in that clinical early in the fourth in the first quarter of next year.
And these clinical slashed about how long.
That's the that's the million dollar question Scott So it depends on how many patients we're going to need all based upon the design of the trial.
But each individual key revenues in each individual patient should only need to be followed for 30 days. So it theoretically could be short.
Okay.
Okay great. Thank.
Thank you appreciate it.
Thank you.
Thanks for all the questions we have for today I'll turn the call back to Dan <unk> for closing remarks.
Yes.
We appreciate everyone's time today and I look forward to speaking with many of you in person at some of the upcoming conferences that we'll be attending including the Midwest ideas Conference. Later this month and the Lake Street Conference next month.
Thank you for joining us this morning, and I hope you enjoy the rest of your day.
Thank you everyone for joining us today. This concludes our call you may now disconnect.