UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________
FORM 8-K
___________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 7, 2018
___________________
AVADEL PHARMACEUTICALS PLC
(Exact name of registrant as specified in its charter)
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Ireland (State or Other Jurisdiction of Incorporation) | 000-28508 (Commission File Number) | 98-1341933 (I.R.S. Employer Identification No.) | ||||
Block 10-1 Blanchardstown Corporate Park, Ballycoolin Dublin 15, Ireland (Address of Principal Executive Offices) | Not Applicable (Zip Code) | |||||
Registrant's telephone number, including area code: +353 1 485 1200
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Item 2.02 Results of Operations and Financial Condition.
On August 7, 2018, Avadel Pharmaceuticals plc (the “Company”) issued a press release announcing its earnings for the quarter ended June 30, 2018. That press release is attached as Exhibit 99.1 and is incorporated herein by reference.
The information responsive to this Item 2.02 of this Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 (the “Securities Act”) or the Exchange Act, except as may be expressly set forth by specific reference in such a filing.
Item 7.01 Regulation FD Disclosure.
On August 7, 2018, the Company posted to its website a set of presentation materials that it will use during its earnings call and webcast to assist participants with understanding the Company’s financial results for the quarter ended June 30, 2018. A copy of this presentation is attached hereto as Exhibit 99.2.
The information responsive to this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.2, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act or the Exchange Act, except as may be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
99.1 | Press release dated August 7, 2018, issued by Avadel Pharmaceuticals plc * | |
99.2 | Presentation materials dated August 7, 2018, issued by Avadel Pharmaceuticals plc* | |
* This information shall be deemed to be "furnished" and not filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
AVADEL PHARMACEUTICALS PLC
By: /s/ Phillandas T. Thompson
Phillandas T. Thompson
Senior Vice President, General Counsel and Corporate Secretary
Date: August 7, 2018
Exhibit Index
* This information shall be deemed to be "furnished" and not filed herewith.
Avadel Pharmaceuticals Reports Second Quarter 2018 Financial Results
Dublin, Ireland - August 7, 2018 - Avadel Pharmaceuticals plc (NASDAQ: AVDL), a company focused on providing innovative medicines for chronic urological, central nervous system, and sleep disorders, today announced its financial results for the second quarter of 2018.
Mike Anderson, Avadel’s Chief Executive Officer, said, “Our second quarter was a period of continued investment and focus on building the foundation that is expected to propel us forward into the future. We came in above consensus with $29 million in revenues, largely from our generic hospital products, and have transformed our investment focus to growth-oriented products that have the potential to deliver long-term shareholder value. We are adequately capitalized to continue this transformation, and over the next 12 - 18 months we expect to accelerate our two near-term growth catalysts, NOCTIVA™ and FT 218.”
Mr. Anderson continued, “We are just a few months into the launch of NOCTIVA, and although net revenue to date is just under one million dollars, we are encouraged with a number of early indicators of positive traction, including prescription demand, active prescribers, and product awareness levels. More than 2,600 prescriptions have been written to date. We have had positive physician reception with more than 1,000 unique prescribers and our unaided brand-awareness level has reached over 60% in just a few short months. Education and increasing the relevance of nocturia as a condition to be treated in and of itself, and improving coverage and patient access, particularly in Part D, are keys to translating this demand into improved revenue numbers and accelerating NOCTIVA’s growth over the next 12-18 months."
“Additionally, we continue to improve recruitment efforts for our REST-ON Phase III trial of our investigational FT 218 drug in patients with narcolepsy. As we enter the second half of this year, we are approximately 50% enrolled. With the FDA’s recent agreement to allow the inclusion of a select group of former sodium oxybate users, we have initiated a database review program across our clinical sites. We have also implemented a new patient referral program and, over the next few months, we will be adding seven new clinical sites in the U.S., and three in Australia where sodium oxybate is not currently available to patients. We have only been fully operational in our initial U.S. sites for about a year and are confident that these additional measures should continue to improve the enrollment rate for the second half of our study." concluded Mr. Anderson.
Overview of second quarter 2018 financial results:
Revenues: | ||||||||
Three Months Ended June 30, | ||||||||
($ in 000s) By Product | 2018 | 2017 | ||||||
Bloxiverz | $ | 5,544 | $ | 13,719 | ||||
Vazculep | 11,377 | 10,154 | ||||||
Akovaz | 11,875 | 20,912 | ||||||
Noctiva | 289 | — | ||||||
Other | 31 | 2,320 | ||||||
Product sales | 29,116 | 47,105 | ||||||
License revenue | 114 | (794 | ) | |||||
Total revenues | $ | 29,230 | $ | 46,311 | ||||
Revenues for the second quarter 2018 were $29.2 million, compared to $46.3 million in the second quarter 2017. The decline on a year-over-year basis was attributed to lower net selling prices and units shipped for Bloxiverz® and Akovaz® due to more competition, slightly offset by higher Vaculep® revenues from increased units shipped during the second quarter 2018. Net sales for NOCTIVA were $289,000 in the second quarter 2018, down on a quarter-over-quarter basis from $666,000 due largely to the initial wholesaler stocking that occurred at the end of the first quarter 2018 in anticipation of the May 2018 branded launch.
Operating expenses: | ||||||||
Three Months Ended June 30, | ||||||||
($ in 000s) Operating expenses | 2018 | 2017 | ||||||
Cost of products | $ | 3,512 | $ | 4,561 | ||||
Research and development expenses (R&D) | 11,890 | 6,792 | ||||||
Selling, general and administrative expenses (SG&A) | 27,843 | 12,429 | ||||||
R&D expense was up 75% in the second quarter 2018 compared to the prior year period, primarily due to increased spend on the Phase III REST-ON trial. The $15.5 million increase in SG&A in the second quarter 2018 compared to the second quarter 2017 was due to sales and marketing expenses associated with the launch of NOCTIVA.
GAAP earnings: | ||||||||
Three Months Ended June 30, | ||||||||
($ in 000s except for per share) | 2018 | 2017 | ||||||
Net (loss) income | $ | (3,438 | ) | $ | 28,927 | |||
Net (loss) income per share - diluted | (0.09 | ) | 0.68 | |||||
Included in GAAP net loss for the second quarter 2018 were gains of $12.9 million related to changes in the fair value of related party contingent consideration, compared to gains of $13.2 million in the same period last year. These non-cash gains were recorded as a result of reducing the fair value of related party contingent consideration due to changing market conditions across the Company's three hospital products.
Adjusted earnings (1): | ||||||||
Three Months Ended June 30, | ||||||||
($ in 000s except for per share) | 2018 | 2017 | ||||||
Net (loss) income | $ | (20,261 | ) | $ | 8,165 | |||
Net (loss) income per share - diluted | (0.55 | ) | 0.19 | |||||
The decrease in adjusted net income is largely attributable to lower revenues from the Company’s hospital products and higher SG&A due to the 2018 launch of Noctiva. Please see the Supplemental Information section within this document for a reconciliation of adjusted net income and adjusted diluted EPS to the respective GAAP amounts.
2018 Guidance:
The Company maintained its full year 2018 spend guidance for R&D of between $40 to $50 million, and SG&A of between $80 to $90 million. Cash interest expense as a result of the Company's convertible notes offering in February 2018 is expected to be approximately $6 million, and a non-GAAP tax benefit of 0% to 10% of loss before tax is anticipated for the full year 2018. During the second quarter competing products were approved for Vazculep, Bloxiverz and NOCTIVA; as such, the Company is lowering its full year revenue guidance to a range of $90 to $105 million from $105 to $125 million. Included in this range is an estimated $5 to $10 million in revenue from NOCTIVA, down from previous guidance of $10 to $20 million, in part due to a lower than expected net-realized selling price from a less favorable mix of commercially insured to Medicare Part D prescriptions in the initial launch period. The Company
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(1) Descriptions of Avadel’s non-GAAP financial measures are included under the caption Non-GAAP Disclosures and Adjustments included within this press release and reconciliations of such non-GAAP financial measures to their most closely applicable GAAP financial measures are found in the Supplemental Information section herein.
expects an increase in net-selling price as it continues to improve script volume and market access throughout the course of the next 12 to 18 months.
Conference Call:
A conference call to discuss these results has been scheduled for Tuesday, August 7, 2018 at 10:00 a.m. EDT. A question and answer period will follow management's prepared remarks. To access the conference call, investors are invited to dial (844) 388-0559 (U.S. and Canada) or (216) 562-0393 (International). The conference ID number is 7367859. A live audio webcast can be accessed by visiting the Investors section of the Company’s website, www.avadel.com. A replay of the webcast will be archived on Avadel’s website for 90 days following the event.
About Avadel Pharmaceuticals plc:
Avadel Pharmaceuticals plc (NASDAQ: AVDL) is a specialty pharmaceutical company that seeks to develop differentiated pharmaceutical products that are safe, effective and easy to take through formulation development, by utilizing its proprietary drug delivery technology and through in-licensing / acquiring new products; ultimately, helping patients adhere to their prescribed medical treatment and see better results. Avadel’s current portfolio of products and product candidates focuses on the urology, central nervous system (CNS) / sleep, and hospital markets. The Company is headquartered in Dublin, Ireland with operations in St. Louis, Missouri and Lyon, France. For more information, please visit www.avadel.com.
Safe Harbor: This press release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “will,” “may,” “believe,” “expect,” “anticipate,” “estimate,” “project” and similar expressions, and the negatives thereof, identify forward-looking statements, each of which speaks only as of the date the statement is made. Although we believe that our forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business and operations, our business is subject to significant risks and as a result there can be no assurance that actual results of our research, development and commercialization activities and our results of operations will not differ materially from the results contemplated in such forward-looking statements. These risks include: (i) risks relating to our exchangeable senior notes including use of the net proceeds from the offering of the notes and other future events related to the notes; (ii) risks relating to the divestiture of our former pediatric business including whether such divestiture will be accretive to our operating income and cash flow; (iii) risks relating to our license agreement with Serenity Pharmaceuticals, LLC including that a potential competitive product, and patent litigation with the manufacturer of that product, could have a material adverse impact on our ability to successfully exploit any market opportunity for the drug desmopressin acetate (the “Drug”) which we are marketing under the brand name Noctivatm, our internal analyses may overstate the market opportunity in the United States for the Drug or we may not effectively exploit such market opportunity, that significant safety or drug interaction problems could arise with respect to the Drug, that we may not successfully increase awareness of nocturia and the potential benefits of the Drug, and that the need for management to focus attention on the development and commercialization of the Drug could cause our ongoing business operations to suffer; and (iv) the other risks, uncertainties and contingencies described in the Company's filings with the U.S. Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2017, in particular disclosures that may be set forth in particular under the captions “Forward-Looking Statements” and “Risk Factors,” including without limitation: our dependence on a small number of products and customers for the majority of our revenues; the possibility that our Bloxiverz®,Vazculep® and Akovaz® products, which are not patent protected, could face substantial competition resulting in a loss of market share or forcing us to reduce the prices we charge for those products; the possibility that we could fail to successfully complete the research and development for pipeline products we are evaluating for potential application to the FDA pursuant to our "unapproved-to-approved" strategy, or that competitors could complete the development of such products and apply for FDA approval of such products before us; the possibility that our products may not reach the commercial market or gain market acceptance; our need to invest substantial sums in research and development in order to remain competitive; our dependence on certain single providers for development of several of our drug delivery platforms and products; our dependence on a limited number of suppliers to manufacture our products and to deliver certain raw materials used in our products; the possibility that our competitors may develop and market technologies or products that are more effective or safer than ours, or obtain regulatory approval and market such technologies or products before we do; the challenges in protecting the
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(1) Descriptions of Avadel’s non-GAAP financial measures are included under the caption Non-GAAP Disclosures and Adjustments included within this press release and reconciliations of such non-GAAP financial measures to their most closely applicable GAAP financial measures are found in the Supplemental Information section herein.
intellectual property underlying our drug delivery platforms and other products; and our dependence on key personnel to execute our business plan.
Non-GAAP Disclosures and Adjustments
Avadel discloses certain non-GAAP financial measures, including adjusted net income and loss and adjusted net income and loss per diluted share, as management believes that such non-GAAP financial measures can enhance an overall understanding of the Company’s financial performance when considered together with financial measures prepared in accordance with generally accepted accounting principles (GAAP) in the U.S. In addition to reporting its financial results in accordance with GAAP, Avadel reports certain non-GAAP results that exclude, if any, fair value remeasurements of its contingent consideration, amortization of debt discount and debt issuance costs attributable to our exchangeable notes, impairment of intangible assets, if any, amortization of intangible assets, restructuring costs, if any, foreign exchange gains and losses on assets and liabilities denominated in foreign currencies, unrealized gains/losses on marketable equity securities, but includes the cash payments plus any unpaid accrued cash payments associated with the contingent consideration and cash interest payments or related accruals on the exchangeable notes. The Company's management uses these non-GAAP measures internally for forecasting, budgeting and measuring its operating performance. Investors and other readers should review the related GAAP financial measures and the reconciliation of non-GAAP measures to their most closely comparable GAAP measure set forth below and should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP. The table provided within the following “Supplemental Information” section reconciles GAAP net income and loss and diluted earnings or loss per share to the corresponding adjusted amounts.
*******
Contacts: | Michael F. Kanan |
Chief Financial Officer | |
Phone: (636) 449-1844 | |
Email: mkanan@avadel.com | |
Lauren Stival | |
Sr. Director, Investor Relations & Corporate Communications | |
Phone: (636) 449-5866 | |
Email: lstival@avadel.com | |
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(1) Descriptions of Avadel’s non-GAAP financial measures are included under the caption Non-GAAP Disclosures and Adjustments included within this press release and reconciliations of such non-GAAP financial measures to their most closely applicable GAAP financial measures are found in the Supplemental Information section herein.
AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Revenues: | ||||||||||||||||
Product sales | $ | 29,116 | $ | 47,105 | $ | 62,277 | $ | 98,862 | ||||||||
License revenue | 114 | (794 | ) | 246 | (44 | ) | ||||||||||
Total revenues | 29,230 | 46,311 | 62,523 | 98,818 | ||||||||||||
Operating expenses: | ||||||||||||||||
Cost of products | 3,512 | 4,561 | 10,104 | 8,463 | ||||||||||||
Research and development expenses | 11,890 | 6,792 | 21,841 | 13,998 | ||||||||||||
Selling, general and administrative expenses | 27,843 | 12,429 | 52,330 | 24,241 | ||||||||||||
Intangible asset amortization | 1,609 | 564 | 3,376 | 1,128 | ||||||||||||
Gain - changes in fair value of related party contingent consideration | (12,889 | ) | (13,230 | ) | (9,921 | ) | (20,201 | ) | ||||||||
Restructuring costs | 50 | 1,069 | 203 | 3,722 | ||||||||||||
Total operating expenses | 32,015 | 12,185 | 77,933 | 31,351 | ||||||||||||
Operating (loss) income | (2,785 | ) | 34,126 | (15,410 | ) | 67,467 | ||||||||||
Investment and other income (expense), net | 583 | 764 | 637 | 1,585 | ||||||||||||
Interest expense, net | (2,980 | ) | (263 | ) | (4,577 | ) | (526 | ) | ||||||||
Other income - changes in fair value of related party payable | 1,402 | 1,670 | 1,007 | 2,220 | ||||||||||||
(Loss) income before income taxes | (3,780 | ) | 36,297 | (18,343 | ) | 70,746 | ||||||||||
Income tax (benefit) provision | (342 | ) | 7,370 | (2,669 | ) | 15,909 | ||||||||||
Net (loss) income | $ | (3,438 | ) | $ | 28,927 | $ | (15,674 | ) | $ | 54,837 | ||||||
Net (loss) income per share - basic | $ | (0.09 | ) | $ | 0.70 | $ | (0.42 | ) | $ | 1.33 | ||||||
Net (loss) income per share - diluted | (0.09 | ) | 0.68 | (0.42 | ) | 1.29 | ||||||||||
Weighted average number of shares outstanding - basic | 36,772 | 41,091 | 37,666 | 41,233 | ||||||||||||
Weighted average number of shares outstanding - diluted | 36,772 | 42,487 | 37,666 | 42,625 | ||||||||||||
AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
June 30, 2018 | December 31, 2017 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 12,477 | $ | 16,564 | ||||
Marketable securities | 134,629 | 77,511 | ||||||
Accounts receivable | 14,940 | 14,785 | ||||||
Inventories | 5,724 | 6,157 | ||||||
Prepaid expenses and other current assets | 7,206 | 8,958 | ||||||
Total current assets | 174,976 | 123,975 | ||||||
Property and equipment, net | 2,439 | 3,001 | ||||||
Goodwill | 18,491 | 18,491 | ||||||
Intangible assets, net | 70,962 | 92,289 | ||||||
Research and development tax credit receivable | 6,124 | 5,272 | ||||||
Other non-current assets | 22,244 | 10,249 | ||||||
Total assets | $ | 295,236 | $ | 253,277 | ||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Current liabilities: | ||||||||
Current portion of long-term debt | $ | 108 | $ | 111 | ||||
Current portion of long-term related party payable | 14,067 | 25,007 | ||||||
Accounts payable | 11,169 | 7,477 | ||||||
Deferred revenue | 1,724 | 2,007 | ||||||
Accrued expenses | 21,493 | 50,926 | ||||||
Other current liabilities | 3,052 | 1,011 | ||||||
Total current liabilities | 51,613 | 86,539 | ||||||
Long-term debt, less current portion | 113,038 | 156 | ||||||
Long-term related party payable, less current portion | 38,050 | 73,918 | ||||||
Other non-current liabilities | 13,989 | 7,084 | ||||||
Total liabilities | 216,690 | 167,697 | ||||||
Shareholders’ equity: | ||||||||
Preferred shares, $0.01 nominal value; 50,000 shares authorized at June 30, 2018 and December 31, 2017, respectively; none issued or outstanding at June 30, 2018 and December 31, 2017, respectively | — | — | ||||||
Ordinary shares, nominal value of $0.01; 500,000 shares authorized; 42,148 issued and 36,740 outstanding at June 30, 2018 and 41,463 issued and 39,346 outstanding at December 31, 2017 | 421 | 414 | ||||||
Treasury shares, at cost, 5,408 and 2,117 shares held at June 30, 2018 and December 31, 2017, respectively | (49,998 | ) | (22,361 | ) | ||||
Additional paid-in capital | 430,141 | 393,478 | ||||||
Accumulated deficit | (278,359 | ) | (262,685 | ) | ||||
Accumulated other comprehensive loss | (23,659 | ) | (23,266 | ) | ||||
Total shareholders’ equity | 78,546 | 85,580 | ||||||
Total liabilities and shareholders’ equity | $ | 295,236 | $ | 253,277 | ||||
AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Six Months Ended June 30, | ||||||||
2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Net (loss) income | $ | (15,674 | ) | $ | 54,837 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 3,810 | 1,611 | ||||||
Amortization of premiums on marketable securities | 1,693 | 34 | ||||||
Foreign exchange loss | (160 | ) | 1,304 | |||||
Remeasurement of related party acquisition-related contingent consideration | (9,921 | ) | (20,201 | ) | ||||
Remeasurement of related party financing-related contingent consideration | (1,007 | ) | (2,220 | ) | ||||
Amortization of debt discount and debt issuance costs | 2,019 | — | ||||||
Change in deferred tax and income tax deferred charge | (3,247 | ) | 322 | |||||
Stock-based compensation expense | 4,358 | 4,055 | ||||||
Other adjustments | 251 | (115 | ) | |||||
Net changes in assets and liabilities | ||||||||
Accounts receivable | (157 | ) | (1,446 | ) | ||||
Inventories | (242 | ) | (2,489 | ) | ||||
Prepaid expenses and other current assets | 1,587 | (264 | ) | |||||
Research and development tax credit receivable | (1,003 | ) | (1,175 | ) | ||||
Accounts payable & other current liabilities | 5,206 | 4,931 | ||||||
Accrued expenses | (9,831 | ) | 12,747 | |||||
Earn-out payments for related party contingent consideration in excess of acquisition-date fair value | (11,113 | ) | (16,515 | ) | ||||
Royalty payments for related party payable in excess of original fair value | (1,618 | ) | (2,287 | ) | ||||
Other assets and liabilities | (2,893 | ) | 407 | |||||
Net cash (used in) provided by operating activities | (37,942 | ) | 33,536 | |||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (99 | ) | (321 | ) | ||||
Purchase of intangible asset | (20,000 | ) | — | |||||
Proceeds from sales of marketable securities | 253,525 | 51,820 | ||||||
Purchases of marketable securities | (312,638 | ) | (67,743 | ) | ||||
Net cash used in investing activities | (79,212 | ) | (16,244 | ) | ||||
Cash flows from financing activities: | ||||||||
Earn-out payments for related party contingent consideration | (645 | ) | (665 | ) | ||||
Proceeds from debt issuance | 143,750 | — | ||||||
Payments for debt issuance costs | (5,760 | ) | — | |||||
Share repurchases | (27,637 | ) | (13,081 | ) | ||||
Cash proceeds from the issuance of ordinary shares and warrants | 3,446 | 376 | ||||||
Other financing activities, net | 6 | 12 | ||||||
Net cash provided by (used in) financing activities | 113,160 | (13,358 | ) | |||||
Effect of foreign currency exchange rate changes on cash and cash equivalents | (93 | ) | 358 | |||||
Net change in cash and cash equivalents | (4,087 | ) | 4,292 | |||||
Cash and cash equivalents at January 1, | 16,564 | 39,215 | ||||||
Cash and cash equivalents at June 30, | $ | 12,477 | $ | 43,507 | ||||
AVADEL PHARMACEUTICALS PLC
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except per share data)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
Revenues by Product: | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Bloxiverz | $ | 5,544 | $ | 13,719 | $ | 13,035 | $ | 27,621 | ||||||||
Vazculep | 11,377 | 10,154 | 24,338 | 20,334 | ||||||||||||
Akovaz | 11,875 | 20,912 | 22,092 | 46,549 | ||||||||||||
Noctiva | 289 | — | 955 | — | ||||||||||||
Other | 31 | 2,320 | 1,857 | 4,358 | ||||||||||||
Total product sales | 29,116 | 47,105 | 62,277 | 98,862 | ||||||||||||
License revenue | 114 | (794 | ) | 246 | (44 | ) | ||||||||||
Total revenues | $ | 29,230 | $ | 46,311 | $ | 62,523 | $ | 98,818 | ||||||||
GAAP to Non-GAAP adjustments for the three-months ended June 30, 2018 | ||||||||||||||||||||||||||||||||||||||||
Exclude | Include | |||||||||||||||||||||||||||||||||||||||
GAAP | Intangible asset amortization | Foreign exchange (gain)/loss | Restructuring impacts | Equity securities unrealized (gain)/loss impact | Amortization of debt discount and debt issuance costs | Contingent related party payable fair value remeasurements | Contingent related party payable paid/accrued | Total adjustments | Adjusted GAAP | |||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||||||
Product sales | $ | 29,116 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 29,116 | ||||||||||||||||||||
License revenue | 114 | — | — | — | — | — | — | — | — | 114 | ||||||||||||||||||||||||||||||
Total revenues | 29,230 | — | — | — | — | — | — | — | — | 29,230 | ||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
Cost of products | 3,512 | — | — | — | — | — | — | — | — | 3,512 | ||||||||||||||||||||||||||||||
Research and development expenses | 11,890 | — | — | — | — | — | — | — | — | 11,890 | ||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 27,843 | — | — | — | — | — | — | — | — | 27,843 | ||||||||||||||||||||||||||||||
Intangible asset amortization | 1,609 | (1,609 | ) | — | — | — | — | — | — | (1,609 | ) | — | ||||||||||||||||||||||||||||
Loss (gain) - changes in fair value of related party contingent consideration | (12,889 | ) | — | — | — | — | — | 12,889 | 5,060 | 17,949 | 5,060 | |||||||||||||||||||||||||||||
Restructuring costs | 50 | — | — | (50 | ) | — | — | — | — | (50 | ) | — | ||||||||||||||||||||||||||||
Total operating expenses | 32,015 | (1,609 | ) | — | (50 | ) | — | — | 12,889 | 5,060 | 16,290 | 48,305 | ||||||||||||||||||||||||||||
Operating (loss) income | (2,785 | ) | 1,609 | — | 50 | — | — | (12,889 | ) | (5,060 | ) | (16,290 | ) | (19,075 | ) | |||||||||||||||||||||||||
Investment and other income (expense), net | 583 | — | 7 | — | (112 | ) | — | — | — | (105 | ) | 478 | ||||||||||||||||||||||||||||
Interest expense, net | (2,980 | ) | — | — | — | — | 1,363 | — | — | 1,363 | (1,617 | ) | ||||||||||||||||||||||||||||
Other expense (income) - changes in fair value of related party payable | 1,402 | — | — | — | — | — | (1,402 | ) | (751 | ) | (2,153 | ) | (751 | ) | ||||||||||||||||||||||||||
(Loss) income before income taxes | (3,780 | ) | 1,609 | 7 | 50 | (112 | ) | 1,363 | (14,291 | ) | (5,811 | ) | (17,185 | ) | (20,965 | ) | ||||||||||||||||||||||||
Income tax (benefit) provision | (342 | ) | 338 | — | — | (2 | ) | — | (471 | ) | (227 | ) | (362 | ) | (704 | ) | ||||||||||||||||||||||||
Net (loss) income | $ | (3,438 | ) | $ | 1,271 | $ | 7 | $ | 50 | $ | (110 | ) | $ | 1,363 | $ | (13,820 | ) | $ | (5,584 | ) | $ | (16,823 | ) | $ | (20,261 | ) | ||||||||||||||
Net income (loss) per share - diluted(1) | $ | (0.09 | ) | $ | 0.03 | $ | — | $ | — | $ | — | $ | 0.04 | $ | (0.38 | ) | $ | (0.15 | ) | $ | (0.46 | ) | $ | (0.55 | ) | |||||||||||||||
Weighted average number of shares outstanding - diluted | 36,772 | 36,772 | 36,772 | 36,772 | 36,772 | 36,772 | 36,772 | 36,772 | 36,772 | 36,772 | ||||||||||||||||||||||||||||||
(1) Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.
GAAP to Non-GAAP adjustments for the three-months ended June 30, 2017 | ||||||||||||||||||||||||||||||||||||
Exclude | Include | |||||||||||||||||||||||||||||||||||
GAAP | Intangible asset amortization | Foreign exchange (gain)/loss | Restructuring impacts | License revenue adjustment | Contingent related party payable fair value remeasurements | Contingent related party payable paid/accrued | Total adjustments | Adjusted GAAP | ||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||
Product sales | $ | 47,105 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 47,105 | ||||||||||||||||||
License revenue | (794 | ) | — | — | — | 1,100 | — | — | 1,100 | 306 | ||||||||||||||||||||||||||
Total revenues | 46,311 | — | — | — | 1,100 | — | — | 1,100 | 47,411 | |||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||
Cost of products | 4,561 | — | — | — | — | — | — | — | 4,561 | |||||||||||||||||||||||||||
Research and development expenses | 6,792 | — | — | — | — | — | — | — | 6,792 | |||||||||||||||||||||||||||
Selling, general and administrative expenses | 12,429 | — | — | — | — | — | — | — | 12,429 | |||||||||||||||||||||||||||
Intangible asset amortization | 564 | (564 | ) | — | — | — | — | — | (564 | ) | — | |||||||||||||||||||||||||
Loss (gain) - changes in fair value of related party contingent consideration | (13,230 | ) | — | — | — | — | 13,230 | 8,516 | 21,746 | 8,516 | ||||||||||||||||||||||||||
Restructuring costs | 1,069 | — | — | (1,069 | ) | — | — | — | (1,069 | ) | — | |||||||||||||||||||||||||
Total operating expenses | 12,185 | (564 | ) | — | (1,069 | ) | — | 13,230 | 8,516 | 20,113 | 32,298 | |||||||||||||||||||||||||
Operating (loss) income | 34,126 | 564 | — | 1,069 | 1,100 | (13,230 | ) | (8,516 | ) | (19,013 | ) | 15,113 | ||||||||||||||||||||||||
Investment and other income (expense), net | 764 | — | (237 | ) | — | — | — | — | (237 | ) | 527 | |||||||||||||||||||||||||
Interest expense, net | (263 | ) | — | — | — | — | — | — | — | (263 | ) | |||||||||||||||||||||||||
Other expense (income) - changes in fair value of related party payable | 1,670 | — | — | — | — | (1,670 | ) | (1,166 | ) | (2,836 | ) | (1,166 | ) | |||||||||||||||||||||||
(Loss) income before income taxes | 36,297 | 564 | (237 | ) | 1,069 | 1,100 | (14,900 | ) | (9,682 | ) | (22,086 | ) | 14,211 | |||||||||||||||||||||||
Income tax (benefit) provision | 7,370 | 201 | — | — | — | (909 | ) | (616 | ) | (1,324 | ) | 6,046 | ||||||||||||||||||||||||
Net (loss) income | $ | 28,927 | $ | 363 | $ | (237 | ) | $ | 1,069 | $ | 1,100 | $ | (13,991 | ) | $ | (9,066 | ) | $ | (20,762 | ) | $ | 8,165 | ||||||||||||||
Net income (loss) per share - diluted(1) | $ | 0.68 | $ | 0.01 | $ | (0.01 | ) | $ | 0.03 | $ | 0.03 | $ | (0.33 | ) | $ | (0.21 | ) | $ | (0.49 | ) | $ | 0.19 | ||||||||||||||
Weighted average number of shares outstanding - diluted | 42,487 | 42,487 | 42,487 | 42,487 | 42,487 | 42,487 | 42,487 | 42,487 | 42,487 | |||||||||||||||||||||||||||
(1) Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.
GAAP to Non-GAAP adjustments for the six-months ended June 30, 2018 | ||||||||||||||||||||||||||||||||||||||||
Exclude | Include | |||||||||||||||||||||||||||||||||||||||
GAAP | Intangible asset amortization | Foreign exchange (gain)/loss | Restructuring impacts | Equity securities unrealized (gain)/loss impact | Amortization of debt discount and debt issuance costs | Contingent related party payable fair value remeasurements | Contingent related party payable paid/accrued | Total adjustments | Adjusted GAAP | |||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||||||
Product sales | $ | 62,277 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 62,277 | ||||||||||||||||||||
License revenue | 246 | — | — | — | — | — | — | — | — | 246 | ||||||||||||||||||||||||||||||
Total revenues | 62,523 | — | — | — | — | — | — | — | — | 62,523 | ||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
Cost of products | 10,104 | — | — | — | — | — | — | — | — | 10,104 | ||||||||||||||||||||||||||||||
Research and development expenses | 21,841 | — | — | — | — | — | — | — | — | 21,841 | ||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 52,330 | — | — | — | — | — | — | — | — | 52,330 | ||||||||||||||||||||||||||||||
Intangible asset amortization | 3,376 | (3,376 | ) | — | — | — | — | — | — | (3,376 | ) | — | ||||||||||||||||||||||||||||
Loss (gain) - changes in fair value of related party contingent consideration | (9,921 | ) | — | — | — | — | — | 9,921 | 10,850 | 20,771 | 10,850 | |||||||||||||||||||||||||||||
Restructuring costs | 203 | — | — | (203 | ) | — | — | — | — | (203 | ) | — | ||||||||||||||||||||||||||||
Total operating expenses | 77,933 | (3,376 | ) | — | (203 | ) | — | — | 9,921 | 10,850 | 17,192 | 95,125 | ||||||||||||||||||||||||||||
Operating (loss) income | (15,410 | ) | 3,376 | — | 203 | — | — | (9,921 | ) | (10,850 | ) | (17,192 | ) | (32,602 | ) | |||||||||||||||||||||||||
Investment and other income (expense), net | 637 | — | (160 | ) | — | 186 | — | — | — | 26 | 663 | |||||||||||||||||||||||||||||
Interest expense, net | (4,577 | ) | — | — | — | — | 2,019 | — | — | 2,019 | (2,558 | ) | ||||||||||||||||||||||||||||
Other expense (income) - changes in fair value of related party payable | 1,007 | — | — | — | — | — | (1,007 | ) | (1,548 | ) | (2,555 | ) | (1,548 | ) | ||||||||||||||||||||||||||
(Loss) income before income taxes | (18,343 | ) | 3,376 | (160 | ) | 203 | 186 | 2,019 | (10,928 | ) | (12,398 | ) | (17,702 | ) | (36,045 | ) | ||||||||||||||||||||||||
Income tax (benefit) provision | (2,669 | ) | 709 | — | — | (5 | ) | — | (348 | ) | (473 | ) | (117 | ) | (2,786 | ) | ||||||||||||||||||||||||
Net (loss) income | $ | (15,674 | ) | $ | 2,667 | $ | (160 | ) | $ | 203 | $ | 191 | $ | 2,019 | $ | (10,580 | ) | $ | (11,925 | ) | $ | (17,585 | ) | $ | (33,259 | ) | ||||||||||||||
Net income (loss) per share - diluted(1) | $ | (0.42 | ) | $ | 0.07 | $ | — | $ | 0.01 | $ | 0.01 | $ | 0.05 | $ | (0.28 | ) | $ | (0.32 | ) | $ | (0.47 | ) | $ | (0.88 | ) | |||||||||||||||
Weighted average number of shares outstanding - diluted | 37,666 | 37,666 | 37,666 | 37,666 | 37,666 | 37,666 | 37,666 | 37,666 | 37,666 | 37,666 | ||||||||||||||||||||||||||||||
GAAP to Non-GAAP adjustments for the six-months ended June 30, 2017 | ||||||||||||||||||||||||||||||||||||||||
Exclude | Include | |||||||||||||||||||||||||||||||||||||||
GAAP | Intangible asset amortization | Foreign exchange (gain)/loss | Restructuring impacts | Purchase accounting adjustments - FSC | License revenue adjustment | Contingent related party payable fair value remeasurements | Contingent related party payable paid/accrued | Total adjustments | Adjusted GAAP | |||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||||||
Product sales | $ | 98,862 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 98,862 | ||||||||||||||||||||
License revenue | (44 | ) | — | — | — | — | 1,100 | — | — | 1,100 | 1,056 | |||||||||||||||||||||||||||||
Total revenues | 98,818 | — | — | — | — | 1,100 | — | — | 1,100 | 99,918 | ||||||||||||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||||||||||||||||||
Cost of products | 8,463 | — | — | — | (46 | ) | — | — | — | (46 | ) | 8,417 | ||||||||||||||||||||||||||||
Research and development expenses | 13,998 | — | — | — | — | — | — | — | — | 13,998 | ||||||||||||||||||||||||||||||
Selling, general and administrative expenses | 24,241 | — | — | — | — | — | — | — | — | 24,241 | ||||||||||||||||||||||||||||||
Intangible asset amortization | 1,128 | (1,128 | ) | — | — | — | — | — | — | (1,128 | ) | — | ||||||||||||||||||||||||||||
Loss (gain) - changes in fair value of related party contingent consideration | (20,201 | ) | — | — | — | — | — | 20,201 | 18,132 | 38,333 | 18,132 | |||||||||||||||||||||||||||||
Restructuring costs | 3,722 | — | — | (3,722 | ) | — | — | — | — | (3,722 | ) | — | ||||||||||||||||||||||||||||
Total operating expenses | 31,351 | (1,128 | ) | — | (3,722 | ) | (46 | ) | — | 20,201 | 18,132 | 33,437 | 64,788 | |||||||||||||||||||||||||||
Operating (loss) income | 67,467 | 1,128 | — | 3,722 | 46 | 1,100 | (20,201 | ) | (18,132 | ) | (32,337 | ) | 35,130 | |||||||||||||||||||||||||||
Investment and other income (expense), net | 1,585 | — | (6 | ) | — | — | — | — | — | (6 | ) | 1,579 | ||||||||||||||||||||||||||||
Interest expense, net | (526 | ) | — | — | — | — | — | — | — | — | (526 | ) | ||||||||||||||||||||||||||||
Other expense (income) - changes in fair value of related party payable | 2,220 | — | — | — | — | — | (2,220 | ) | (2,465 | ) | (4,685 | ) | (2,465 | ) | ||||||||||||||||||||||||||
(Loss) income before income taxes | 70,746 | 1,128 | (6 | ) | 3,722 | 46 | 1,100 | (22,421 | ) | (20,597 | ) | (37,028 | ) | 33,718 | ||||||||||||||||||||||||||
Income tax (benefit) provision | 15,909 | 402 | — | — | 17 | — | (1,269 | ) | (1,307 | ) | (2,157 | ) | 13,752 | |||||||||||||||||||||||||||
Net (loss) income | $ | 54,837 | $ | 726 | $ | (6 | ) | $ | 3,722 | $ | 29 | $ | 1,100 | $ | (21,152 | ) | $ | (19,290 | ) | $ | (34,871 | ) | $ | 19,966 | ||||||||||||||||
Net income (loss) per share - diluted(1) | $ | 1.29 | $ | 0.02 | $ | — | $ | 0.09 | $ | — | $ | 0.03 | $ | (0.50 | ) | $ | (0.45 | ) | $ | (0.82 | ) | $ | 0.47 | |||||||||||||||||
Weighted average number of shares outstanding - diluted | 42,625 | 42,625 | 42,625 | 42,625 | 42,625 | 42,625 | 42,625 | 42,625 | 42,625 | 42,625 | ||||||||||||||||||||||||||||||
(1) Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.
Second Quarter 2018 Earnings Conference Call August 7, 2018
Safe Harbor This presentation may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “will,” “may,” “believe,” “expect,” “anticipate,” “estimate,” “project” and similar expressions, and the negatives thereof, identify forward-looking statements, each of which speaks only as of the date the statement is made. Although we believe that our forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business and operations, our business is subject to significant risks and as a result there can be no assurance that actual results of our research, development and commercialization activities and our results of operations will not differ materially from the results contemplated in such forward-looking statements. These risks include: (i) risks relating to our exchangeable senior notes including use of the net proceeds from the offering of the notes and other future events related to the notes; (ii) risks relating to the divestiture of our former pediatric business including whether such divestiture will be accretive to our operating income and cash flow; (iii) risks relating to our license agreement with Serenity Pharmaceuticals, LLC including that our internal analyses may overstate the market opportunity in the United States for the drug desmopressin acetate (the “Drug”) or we may not effectively exploit such market opportunity, that significant safety or drug interaction problems could arise with respect to the Drug, that we may not successfully increase awareness of nocturia and the potential benefits of the Drug, and that the need for management to focus attention on the development and commercialization of the Drug could cause our ongoing business operations to suffer; and (iv) the other risks, uncertainties and contingencies described in the Company's filings with the U.S. Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2017, in particular disclosures that may be set forth in particular under the captions “Forward-Looking Statements” and “Risk Factors,” including without limitation: our dependence on a small number of products and customers for the majority of our revenues; the possibility that our Bloxiverz®,Vazculep® and Akovaz® products, which are not patent protected, could face substantial competition resulting in a loss of market share or forcing us to reduce the prices we charge for those products; the possibility that we could fail to successfully complete the research and development for pipeline products we are evaluating for potential application to the FDA pursuant to our "unapproved-to-approved" strategy, or that competitors could complete the development of such products and apply for FDA approval of such products before us; the possibility that our products may not reach the commercial market or gain market acceptance; our need to invest substantial sums in research and development in order to remain competitive; our dependence on certain single providers for development of several of our drug delivery platforms and products; our dependence on a limited number of suppliers to manufacture our products and to deliver certain raw materials used in our products; the possibility that our competitors may develop and market technologies or products that are more effective or safer than ours, or obtain regulatory approval and market such technologies or products before we do; the challenges in protecting the intellectual property underlying our drug delivery platforms and other products; and our dependence on key personnel to execute our business plan. 2
2Q 2018 Call Outline I. Opening remarks II. REST-ON Phase III trial I. Enrollment II. Protocol amendment III. Initiatives & new sites III. NOCTIVA™ launch update I. Demand, prescribers, and awareness II. Coverage progress III. Life cycle management IV. Financial Results 3
2Q 2018 Overview Akovaz® • Hospital products have Total provided cash to transition Hospital Products company from drug delivery to Bloxiverz® Revenue specialty pharma $29M • Major long-term value opportunities with NOCTIVA Urology Vazculep® and FT 218 (investigational) • 4th hospital product (AV 001) will add to top line in 2020 NOCTIVA™ 4
REST-ON Phase III Trial 5
REST-ON Status Update Enrollment Progress Total Needed Enrolled • Majority of patients from US and Canada • Only fully operation in US since 2Q 2017 due to site initiation delays in part from: • DEA licensing procedural change 264 • Delayed IRB approval • Additional sites & enrollment initiatives is expected to improve second half of enrollment 6
Protocol Change • Prior to June 2018, patients had to be naïve to sodium oxybate • New protocol admits patients with limited past use of sodium oxybate who meet the following criteria: Dose of sodium Duration on drug At least one year Initial review, via online oxybate never for no more than 2 since past exposure screening tool, provided exceeded 4.5 g weeks to sodium oxybate +100 patients to contact to gather past use of sodium oxybate 7
REST-ON Status Update Majority of patients enrolled to date from US and Canada Only fully operation in US since 2Q 2017 7 new US sites in US & 3 Australian sites to be initiated over next few months 16 total sites to open by Q1 2019 Specific site closures pending 8
REST-ON Status Update High awareness for FT 218 & REST-ON: over 2,000 online screening questionnaires completed Almost 50% of patients discontinue sodium oxybate within 12 months - recent data suggests ~27% patients non-compliant with 2nd dose1 Qualitative market research shows physician preference for 1x-nightly sodium oxybate over 2x-low sodium and generics is, on average, greater than 50%2 Continue to raise awareness for REST-ON trial and 1x – nightly sodium oxybate 1. Data on file 2. Data on file 9
NOCTIVA™ Launch Update 10
NOCTIVA™: 2018 Revenue Guidance Updated full year 2018 revenue guidance: $5 - $10 million Net revenue realized a function of: • Mix of Medicare Part D to commercial insurance plans – no preferred brand Part D coverage to date • Commercial copay assistance for non-preferred brand status plans Over 2,600 prescriptions from more than 1,000 unique prescribers > 50% patients Medicare Part D 70% success rate of getting Part D patients on treatment via specialty pharmacy partner “cash pay” program 11
NOCTIVA™: Increasing Awareness 1st >10 % To market in Have nocturia and Less than 10% are Over 60% unaided indication never wake 2 or more diagnosed and brand awareness, before approved times per night to being treated2-8 up from 15%, in 2 urinate1 months promotion 1. Bosch JLH, Weiss JP. The prevalence and causes of nocturia. J Urol. 2010;184(2):440-446. 2. QuintilesIMS Secondary Research. 3. Lee LK, Goren A, Zou KH, et al. Potential benefits of diagnosis and treatment on health outcomes among elderly people with symptoms of overactive bladder. Int J Clin Pract. 2016;70(1):66-81. 4. Decision Resources, Treatment Algorithm in OAB. 5. Vuichoud C, Loughlin KR. Benign prostatic hyperplasia: epidemiology, economics and evaluation. J Urol. 2015;22(51):1-6. 6. Helfand BT, Evans RM, McVary KT. A comparison of the frequencies of medical therapies for overactive bladder in men and women: analysis of more than 7.2 million aging patients. Eur Urol. 2010;57(4):586-591. 7. Goldman HB, Anger JT, Esinduy CB, et al. Real-world patterns of care for the overactive bladder syndrome in the United States. Urology. 2016;87:64-69. 12 8. Data on file.
NOCTIVA™: Keys to Success ➢ Increase relevance of nocturia and condition to be treated independently • Up to 9 new publications over coming months to highlight innovation of Noctiva and importance of treating nocturia ➢ Increase trial and experience for physicians and patients • Over 7,000 full-size samples in market – potential catalyst for future script growth ➢ Improve preferred brand status, especially in Medicare Part D, to increase revenue generating prescriptions 13
NOCTIVA™: Life Cycle Management & Market Expansion • Decision to pursue approval for NOCTIVA in Canada • Initiated formulation and regulatory work to seek approval for primary nocturnal enuresis (PNE) and other new formulation • NOCTIVA peak revenue opportunity $250M-400M peak revenue from $250 - $750+ million opportunity Assumes 6% to 10% penetration • $147 million cash and marketable of currently treated pool at peak $500M-750M+ revenue opportunity securities - capitalized to pursue Assumes 11% to 15+% penetration and strategic acquisitions or in-licensing to a 20% growth in the treated patient expand urology franchise pool at peak 14
Second Quarter 2018 Financial Results 15
Non-GAAP Financial Results Three Months Ended (in $000s, except for per share amounts 06/30/18 03/31/18 06/30/17 Total revenues $ 29,230 $ 33,293 $ 47,411 Cost of products 3,512 6,592 4,561 Research and development expenses 11,890 9,951 6,792 Selling, general and admin expenses 27,843 24,487 12,429 Operating expenses 43,245 41,030 23,782 Contingent consideration payments and accruals 5,060 5,790 8,516 Operating income (loss) (19,075) (13,527) 15,113 Investment income and other income (expense), net 478 185 527 Interest expense, net (1,617) (941) (263) Other expense - contingent consideration payments and accruals (751) (797) (1,166) Income (loss) before income taxes (20,965) (15,080) 14,211 Income tax (benefit) provision (704) (2,082) 6,046 Net income (loss) $ (20,261) $ (12,998) $ 8,165 Diluted earnings (loss) per share $ (0.55) $ (0.34) $ 0.19 Weighted average number of shares outstanding - diluted 36,772 38,559 42,487 *Reconciliations from GAAP to Non-GAAP can be found in the appendix 16
GAAP Financial Results Three Months Ended (in $000s, except for per share amounts 06/30/18 03/31/18 06/30/17 Total revenues $ 29,230 $ 33,293 $ 46,311 Cost of products 3,512 6,592 4,561 Research and development expenses 11,890 9,951 6,792 Selling, general and admin expenses 27,843 24,487 12,429 Intangible asset amortization 1,609 1,767 564 Restructuring costs 50 153 1,069 Operating expenses 44,904 42,950 25,415 (Gain) loss - changes in fair value of related party contingent consideration (12,889) 2,968 (13,230) Operating income (loss) (2,785) (12,625) 34,126 Investment income and other income (expense), net 583 54 764 Interest expense, net (2,980) (1,597) (263) Other (expense) income - changes in fair value of related party payable 1,402 (395) 1,670 Income (loss) before income taxes (3,780) (14,563) 36,297 Income tax (benefit) provision (342) (2,327) 7,370 Net income (loss) $ (3,438) $ (12,236) $ 28,927 Diluted earnings (loss) per share $ (0.09) $ (0.32) $ 0.68 Weighted average number of shares outstanding - diluted 36,772 38,559 42,487 17
Cash Flow Summary in $000's Six Months ended June 30, 2018 2017 TOTAL Cash and Marketable Securities Beginning Balance $ 94,075 $ 154,195 Operating cash flows (excl earnouts and tax payments) (24,802) 62,608 Earnout payments (12,731) (19,467) Tax Payments (409) (9,605) Total Operating Cash Flows (37,942) 33,536 Issuance of exchangeable notes, net of issuance costs 137,990 - Share repurchases (27,637) (13,081) Purchases of intangible assets (20,000) - Warrant and stock option exercises 3,446 376 Royalty payments (645) (665) Other (2,180) (564) Total Investing and Financing Cash Flows 90,974 (13,934) Total Change in Cash and Marketable Securities 53,032 19,602 Ending Balance $ 147,107 $ 173,797 18
Guidance Updated Guidance 2018 Guidance Revenue - Total $90M - $105M Revenue - Noctiva $5M - $10M R&D Expense $40M - $50M SG&A Expense $80M - $90M Cash Interest Expense $6M Income Tax Benefit – Non-GAAP 0% - 10% 19
Question & Answer 20
Appendix 21
GAAP to NON-GAAP Reconciliations (in $000s, except for per share amounts) GAAP to Non-GAAP adjustments for the three months ended June 30, 2018 Exclude Include Contingent Equity securities Amortization of related party Contingent Foreign unrealized debt discount payable related party Intangible asset exchange Restructuring (gain)/loss and debt fair value payable Total GAAP amortization (gain)/loss impacts impact issuance costs remeasurements paid/accrued Adjustments Adjusted GAAP Product sales $ 29,116 $ - $ - $ - $ - $ - $ - $ - $ - $ 29,116 License revenue 114 - - - - - - - - 114 Total revenue 29,230 - - - - - - - - 29,230 Cost of products 3,512 - - - - - - - - 3,512 Research and development expenses 11,890 - - - - - - - - 11,890 Selling, general and administrative expenses 27,843 - - - - - - - - 27,843 Intangible asset amortization 1,609 (1,609) - - - - - - (1,609) - Changes in fair value of related party contingent consideration (12,889) - - - - - 12,889 5,060 17,949 5,060 Restructuring costs 50 - - (50) - - - - (50) - Total operating expenses 32,015 (1,609) - (50) - - 12,889 5,060 16,290 48,305 Operating income (loss) (2,785) 1,609 - 50 - - (12,889) (5,060) (16,290) (19,075) Investment and other income (expense), net 583 - 7 - (112) - - - (105) 478 Interest Expense (2,980) - - - - 1,363 - - 1,363 (1,617) Other Expense - changes in fair value of related party payable 1,402 - - - - - (1,402) - (751) - (2,153) (751) Income (loss) before income taxes (3,780) 1,609 7 50 (112) 1,363 (14,291) (5,811) (17,185) (20,965) Income tax provision (benefit) (342) 338 - - (2) - (471) (227) (362) (704) Net income (loss) $ (3,438) $ 1,271 $ 7 $ 50 $ (110) $ 1,363 $ (13,820) $ (5,584) $ (16,823) $ (20,261) Net income (loss) per share - diluted $ (0.09) $ 0.03 $ - $ - $ - $ 0.04 $ (0.38) $ (0.15) $ (0.46) $ (0.55) Weighted average number of shares outstanding - Diluted 36,772 36,772 36,772 36,772 36,772 36,772 36,772 36,772 36,772 36,772 22
GAAP to NON-GAAP Reconciliations (in $000s, except for per share amounts) GAAP to Non-GAAP adjustments for the three months ended March 31, 2018 Exclude Include Contingent Amortization of related party Contingent Foreign Equity Securities debt discount payable related party Intangible asset exchange (loss) Restructuring unrealized and debt fair value payable GAAP amortization gain impacts gain/loss issuance costs remeasurements paid/accrued Total Adjustments Adjusted GAAP Product sales $ 33,161 $ - $ - $ - $ - $ - $ - $ - $ - $ 33,161 License revenue 132 - - - - - - - - 132 Total revenue 33,293 - - - - - - - - 33,293 - - - - - - - Cost of products 6,592 - - - - - - - - 6,592 Research and development expenses 9,951 - - - - - - - - 9,951 Selling, general and administrative expenses 24,487 - - - - - - - - 24,487 Intangible asset amortization 1,767 (1,767) - - - - - - (1,767) - Changes in fair value of related party contingent consideration 2,968 - - - - - (2,968) 5,790 2,822 5,790 Restructuring costs 153 - - (153) - - - - (153) - Total operating expenses 45,918 (1,767) - (153) - - (2,968) 5,790 902 46,820 Operating income (loss) (12,625) 1,767 - 153 - - 2,968 (5,790) (902) (13,527) - - - - - - Investment and other income (expense), net 54 - (167) - 298 - - - 131 185 Interest Expense (1,597) - - - - 656 - - 656 (941) Other Expense - changes in fair value of related party payable (395) - - - - - 395- (797) - (402) (797) Income (loss) before income taxes (14,563) 1,767 (167) 153 298 656 3,363 (6,587) (517) (15,080) Income tax provision (benefit) (2,327) 371 - - (3) - 123 (246) 245 (2,082) Net (loss) income $ (12,236) $ 1,396 $ (167) $ 153 $ 301 $ 656 $ 3,240 $ (6,341) $ (762) $ (12,998) Net (loss) income per share - diluted $ (0.32) $ 0.04 $ - $ - $ 0.01 $ 0.02 $ 0.08 $ (0.15) $ (0.02) $ (0.34) Weighted average number of shares outstanding - Diluted 38,559 38,559 38,559 38,559 38,559 38,559 38,559 38,559 38,559 38,559 23
GAAP to NON-GAAP Reconciliations (in $000s, except for per share amounts) GAAP to Non-GAAP adjustments for the three months ended June 30, 2017 Exclude Include Contingent related party Contingent Foreign payable related party Intangible asset exchange (loss) Restructuring License revenue fair value payable Total GAAP amortization gain impacts adjustment remeasurements paid/accrued Adjustments Adjusted GAAP Product sales $ 47,105 $ - $ - $ - $ - $ - $ - $ - $ 47,105 License revenue (794) - - - 1,100 - - 1,100 306 Total revenue 46,311 - - - 1,100 - - 1,100 47,411 Cost of products 4,561 - - - - - - - 4,561 Research and development expenses 6,792 - - - - - - - 6,792 Selling, general and administrative expenses 12,429 - - - - - - - 12,429 Intangible asset amortization 564 (564) - - - - - (564) - Changes in fair value of related party contingent consideration (13,230) - - - - 13,230 8,516 21,746 8,516 Restructuring costs 1,069 - - (1,069) - - - (1,069) - Total operating expenses 12,185 (564) - (1,069) - 13,230 8,516 20,113 32,298 Operating income (loss) 34,126 564 - 1,069 1,100 (13,230) (8,516) (19,013) 15,113 Investment and other income (expense), net 764 - (237) - - - - (237) 527 Interest Expense (263) - - - - - - - (263) Other Expense - changes in fair value of related party payable 1,670 - - - - (1,670) (1,166) (2,836) (1,166) Income (loss) before income taxes 36,297 564 (237) 1,069 1,100 (14,900) (9,682) (22,086) 14,211 Income tax provision (benefit) 7,370 201 - - - (909) (616) (1,324) 6,046 Net income (loss) $ 28,927 $ 363 $ (237) $ 1,069 $ 1,100 $ (13,991) $ (9,066) $ (20,762) $ 8,165 Net income (loss) per share - diluted $ 0.68 $ 0.01 $ (0.01) $ 0.03 $ 0.03 $ (0.33) $ (0.21) $ (0.49) $ 0.19 Weighted average number of shares outstanding - Diluted 42,487 42,487 42,487 42,487 42,487 42,487 42,487 42,487 42,487 24