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CST: 08/12/2019 21:09:05   

Osmotica Pharmaceuticals plc Reports Third Quarter 2019 Results

24 Days ago

Third quarter 2019 total revenue of $65.5 million

Submitted NDA for RVL-1201 (oxymetazoline hydrochloride ophthalmic solution, 0.1%) for acquired blepharoptosis, or droopy eyelid, to FDA

BRIDGEWATER, N.J, Nov. 14, 2019 (GLOBE NEWSWIRE) -- Osmotica Pharmaceuticals plc (Nasdaq: OSMT) (“Osmotica” or the “Company”), a fully integrated biopharmaceutical company, today announced business highlights and financial results for the quarter ended September 30, 2019.

“We are pleased with the progress we made on many fronts during the third quarter, beginning with the submission of our new drug application (NDA) for RVL-1201 (RVL) in September. We are currently engaged in productive follow-up discussions with the U.S. Food and Drug Administration (FDA) and believe we are on track for an acceptance to file during the fourth quarter. RVL, with its once-a-day ophthalmic formulation, has the potential to be a first-in-class pharmacologic treatment for acquired blepharoptosis, and a meaningful solution to patients with mild-to-moderate ptosis. In recent weeks, we presented Phase III efficacy and safety trial data for RVL at several global eye care conferences, where we received positive feedback from key opinion leaders. As we build out our medical education strategy for RVL, we are also turning our focus to messaging and pre-launch activities,” stated Brian Markison, Chief Executive Officer.

“We are also in communication with the FDA regarding arbaclofen ER, a treatment for spasticity in Multiple Sclerosis patients, with a potential NDA amendment submission in the first half of 2020. These advancements in our late-stage pipeline are encouraging as we continue to transition our business to a branded specialty pharmaceuticals company,” added Markison.  

Third Quarter 2019 Financial Highlights

  • Total revenues were $65.5 million, compared to $66.3 million in the third quarter of 2018;
  • Net loss was $112.7 million, reflecting an impairment charge of $128.1 million, compared to net loss of $3.6 million in the third quarter of 2018;
  • Adjusted EBITDA1 was $22.9 million, compared to Adjusted EBITDA of $25.8 million in the third quarter of 2018; and
  • Cash and cash equivalents were $98.0 million and debt (net of deferred financing costs) was $268.1 million as of September 30, 2019.

1Adjusted EBITDA is a non-GAAP measure. Adjusted EBITDA is more fully described and reconciled from net loss determined under U.S. generally accepted accounting principles (“GAAP”) in “Presentation of Non-GAAP Measures” and the attached table “Osmotica Pharmaceuticals plc GAAP to Non-GAAP Reconciliations.”

Third Quarter 2019 Financial Results

Total revenues decreased by $0.9 million to $65.5 million for the three months ended September 30, 2019, as compared to $66.3 million for the three months ended September 30, 2018 primarily due to a decrease in net product sales.

Net product sales decreased by $1.4 million to $64.0 million for the three months ended September 30, 2019, as compared to $65.4 million for the three months ended September 30, 2018.  Net sales of methylphenidate ER (including M-72) decreased 46% during the quarter due to additional competitors entering the market resulting in significantly lower net selling prices and volumes, partially offset by lower than estimated product returns.  Net sales of venlafaxine extended release tablets (VERT) increased 41% during the quarter compared to the prior year period as a result of higher realized net selling prices due to lower than estimated product returns combined with higher volumes. We expect that additional competition for both methylphenidate ER and VERT from current competitors, as well as additional generic product approvals and launches in the future, if any, will continue to negatively affect our sales of these products during the remainder of 2019 and in future years.  Methylphenidate and VERT net sales were favorably impacted by adjustments of approximately $11.6 million in the aggregate, primarily related to product returns reserves during the quarter based on actual product returns experience.  There can be no assurance that actual product returns experience and other adjustments will continue to favorably impact net sales in the remainder of 2019 and future years.

Selling, general and administrative expenses increased $7.3 million during the three months ended September 30, 2019 to $24.8 million as compared to $17.5 million in the three months ended September 30, 2018. The increase in our selling, general and administrative expenses reflects additions to salesforce headcount and marketing costs following the launch of Osmolex ER in the first quarter of 2019, severance costs associated with the salesforce realignment during the third quarter of 2019, and increased share compensation expense and higher costs associated with being a public company.

Research and development expenses decreased by $3.7 million in the three months ended September 30, 2019 to $8.3 million as compared to $12.0 million in the three months ended September 30, 2018. The decrease reflects the completion of the Phase III clinical trial for arbaclofen ER during the first quarter of 2019, partially offset by increased share compensation expense, and the cost of manufacturing development batches of Osmolex ER in the three month period ended September 30, 2018, which costs did not reoccur in 2019.

The Company incurred an impairment of intangible assets charge of $128.1 during the three months ended September 30, 2019, primarily related to the write down to fair value of methylphenidate due to price and volume decreases resulting from competing generic products. 

Net loss for the third quarter of 2019 was $112.7 million, compared to net loss of $3.6 million in the third quarter of 2018.

Adjusted EBITDA for the third quarter of 2019 was $22.9 million, compared to Adjusted EBITDA of $25.8 million in the third quarter of 2018.

For a reconciliation of Adjusted EBITDA to net loss (income), the most comparable GAAP financial measure, please see the “Osmotica Pharmaceuticals plc GAAP to Non-GAAP Reconciliations” table at the end of this press release.

Liquidity

As of September 30, 2019, we had cash and cash equivalents of $98.0 million and borrowing availability under our revolving credit facility of $50.0 million. The Company also had debt of $268.1 million (net of deferred financing costs).

Presentation of Non-GAAP Measures

In addition to the results provided in accordance with GAAP throughout this press release, the Company has presented Adjusted EBITDA, which is a non-GAAP measurement.  Adjusted EBITDA represents earnings before interest, taxes, depreciation and amortization (“EBITDA”) adjusted for (i) non-operating income or expense, and (ii) the impact of certain non-cash, nonrecurring or other items that are included in net loss and EBITDA that we do not consider indicative of our ongoing operating performance. In particular, Adjusted EBITDA excludes the following from EBITDA:  impairment of intangible assets, management fees, IPO expenses, severance expenses, foreign currency translation, legal settlements and share-based compensation expense. We use Adjusted EBITDA for business planning purposes, in assessing our performance and determining the compensation of substantially all of our employees, including our executive officers, and in measuring our performance relative to that of our competitors.  We also believe that Adjusted EBITDA provides investors with useful information to understand our operating results and analyze financial and business trends on a period-to-period basis.  Adjusted EBITDA has important limitations as an analytical tool, however, and you should not consider it in isolation or as a substitute for analysis of our results as reported under GAAP.  Adjusted EBITDA is not intended to replace, and should not be considered superior to, the presentation of our financial results in accordance with GAAP.  Our definition of Adjusted EBITDA may differ from similar measures reported by other companies and may not be comparable to other similarly titled measures.  Adjusted EBITDA is reconciled from the net loss as determined under GAAP in the attached table “Osmotica Pharmaceuticals plc GAAP to Non-GAAP Reconciliations.” 

Forward Looking Statements

This press release includes statements that express the Company’s opinions, expectations, beliefs, plans, objectives, assumptions or projections regarding future events or future results and therefore are, or may be deemed to be, “forward-looking statements.” The Company’s actual results may vary significantly from the results anticipated in these forward-looking statements, which can generally be identified by the use of forward-looking terminology, including the terms “believes,” “expects,” “may,” “will,” “should,” “seeks,” “projects,” “approximately,” “intends,” “plans,” “estimates” or “anticipates,” or, in each case, their negatives or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They include statements regarding the Company’s intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, financial guidance, growth plan, strategies, trends and other events, particularly relating to sales of current products and the development, approval and introduction of new products, FDA and other regulatory applications, approvals and actions, the continuation of historical trends, our ability to operate our business under our new capital and operating structure, and the sufficiency of our cash balances and cash generated from operating and financing activities for future liquidity and capital resource needs.  By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place significant reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make.  Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include the following: our ability to successfully develop or commercialize new products, or do so on a timely or cost effective basis; our dependence on a limited number of products; failures of or delays in clinical trials or other delays in obtaining regulatory approval or commencing product sales for new products; the impact of legal proceedings; our ability to service our substantial debt; our ability to raise additional capital; the impact of competition from both brand and generic companies; any interruption at our manufacturing facility, our warehouses or at facilities operated by third parties that we rely on for our products; our dependence on our major customers; our ability to develop and maintain our sales capabilities; the impact of any litigation related to allegations of infringement of intellectual property; any changes to the coverage and reimbursement levels for our products by governmental authorities and other third-party payors as a result of healthcare reform or otherwise; the impact of any changes in the extensive governmental regulation that we face; manufacturing or quality control issues that we may face; and other risks and uncertainties more fully described in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2018 and other filings that the Company makes with the Securities and Exchange Commission. These forward-looking statements speak only as of the time of this release and we do not undertake to publicly update or revise them, whether as a result of new information, future events or otherwise, except as required by law.

Conference Call

As previously announced, Osmotica management will host its third quarter 2019 conference call as follows:

Date Friday, November 15, 2019
   
Time 8:30 a.m. EST
   
Toll free (U.S.) (866) 672-5029
   
International (409) 217-8312
   
Webcast (live and replay) www.osmotica.com, under the “Investor & News” section
   
Conference call ID 8189498

The webcast will be archived for 30 days at the aforementioned URL.

About Osmotica Pharmaceuticals plc
Osmotica Pharmaceuticals plc is a fully integrated biopharmaceutical company focused on the development and commercialization of specialty products that target markets with underserved patient populations. Our diversified product portfolio in the specialty neurology and women's health therapeutic areas, together with our non-promoted complex formulations of generic drugs, form the foundation of our unwavering commitment to improve patients' lives. 

Osmotica has a late‑stage development pipeline highlighted by two NDA candidates that recently completed Phase III clinical trials: arbaclofen ER for spasticity in multiple sclerosis patients and RVL‑1201 for the treatment of acquired blepharoptosis, or droopy eyelid.

Osmotica has operations in the United States, Argentina, and Hungary. 

Investor and Media Relations for Osmotica Pharmaceuticals plc
Lisa M. Wilson
In-Site Communications, Inc.
T: 212-452-2793
E: lwilson@insitecony.com 

-Financial tables follow-

Osmotica Pharmaceuticals plc                          
GAAP to Non-GAAP Reconciliations                          
Adjusted EBITDA (Unaudited)                          
(in thousands)                          
                           
    Three Months Ended         Nine Months Ended
    September 30,         September 30,
    2019       2018           2019       2018  
                           
Net loss $ (112,704 )   $ (3,606 )       $ (244,260 )   $ (2,675 )
Interest expense and amortization of debt discount   4,504       5,311           13,555       15,396  
Income tax benefit   (14,623 )     (3,872 )         (26,824 )     (2,898 )
Depreciation and amortization expense   14,614       20,457           50,605       61,323  
                           
EBITDA   (108,209 )     18,290           (206,924 )     71,146  
                           
Impairment of intangibles   128,113       6,173           253,879       6,173  
Management fees   -       250           (43 )     770  
IPO expenses   -       1,038           -       1,982  
Consulting Fees                         -  
Severance expenses   1,275       -           1,638       484  
FX translation   363       -           575       -  
Legal settlements   -       -           1,002       333  
Share compensation expense   1,335       -           3,831       -  
                           
Adjusted EBITDA $ 22,877     $ 25,751         $ 53,958     $ 80,888  
                           


Osmotica Pharmaceuticals plc            
Condensed Consolidated Balance Sheets            
(in thousands)            
             
    September 30, 2019   December 31, 2018
    (Unaudited)    
             
Assets            
Current assets:            
  Cash and cash equivalents   $ 98,014     $ 70,834  
  Trade accounts receivable, net     33,862       56,424  
  Inventories, net     27,240       24,383  
  Prepaid expenses and other current assets     8,186       20,723  
    Total current assets     167,302       172,364  
Property, plant and equipment, net     30,325       31,263  
Operating lease assets     5,558       -  
Intangibles, net     189,324       490,390  
Goodwill     100,855       100,855  
Deferred taxes     198       -  
Other non-current assets     611       752  
    Total assets   $ 494,173     $ 795,624  
             
Liabilities and Shareholders' Equity            
Current liabilities:            
  Trade accounts payable   $ 9,905     $ 24,870  
  Accrued liabilities     66,076       87,238  
  Current portion of long-term debt, net of deferred financing costs   398       1,774  
  Current portion of lease liability     2,082       -  
  Current portion of obligation under finance leases     130       119  
    Total current liabilities     78,591       114,001  
Long-term debt, net of non-current deferred financing costs     267,661       266,803  
Long-term portion of obligation under finance leases     68       138  
Long-term portion of lease liability     3,677       -  
Income taxes payable-long term portion     2,479       2,541  
Deferred taxes     -       28,294  
    Total liabilities     352,476       411,777  
    Commitments and contingencies            
Shareholders' equity            
  Ordinary shares     522       525  
  Additional paid in capital     489,784       487,288  
  Accumulated deficit     (346,380 )     (102,120 )
  Accumulated other comprehensive loss     (2,229 )     (1,846 )
    Total shareholders' equity     141,697       383,847  
    Total liabilities and shareholders' equity   $ 494,173     $ 795,624  
             



Osmotica Pharmaceuticals plc                        
Condensed Consolidated Statements of Operations                  
(Unaudited)                        
(in thousands, except share and per share data)                      
                         
                         
    Three Months Ended September 30,     Nine Months Ended September 30,
      2019       2018       2019       2018  
                         
Net product sales   $ 64,041     $ 65,444     $ 176,657     $ 196,264  
Royalty revenue     1,325       903       2,826       1,656  
Licensing and contract revenue     95       (2 )     637       85  
  Total revenues     65,461       66,345       180,120       198,005  
Cost of goods sold (inclusive of amortization of intangibles)     27,312       33,356       89,160       102,495  
  Gross profit     38,149       32,989       90,960       95,510  
Selling, general and administrative expenses   24,751       17,452       71,919       51,290  
Research and development expenses     8,285       11,965       23,410       29,105  
Impairment of intangibles     128,113       6,173       253,879       6,173  
  Total operating expenses     161,149       35,590       349,208       86,568  
  Operating income (loss)     (123,000 )     (2,601 )     (258,248 )     8,942  
Interest expense and amortization of debt discount     4,504       5,311       13,555       15,396  
Other non-operating gain     (177 )     (434 )     (719 )     (881 )
  Total other non-operating expense     4,327       4,877       12,836       14,515  
Loss before income taxes     (127,327 )     (7,478 )     (271,084 )     (5,573 )
Income tax benefit     14,623       3,872       26,824       2,898  
Net loss   $ (112,704 )   $ (3,606 )   $ (244,260 )   $ (2,675 )
Other comprehensive loss, net                        
  Change in foreign currency translation                        
  adjustments     (383 )     (148 )     (383 )     (1,239 )
Comprehensive loss   $ (113,087 )   $ (3,754 )   $ (244,643 )   $ (3,914 )
Loss per share attributable to shareholders                        
  Basic and Diluted   $ (2.15 )   $ (0.08 )   $ (4.65 ) $   (0.06 )
Weighted average shares basic and diluted                        
  Basic and Diluted     52,477       42,862       52,505       42,862  



Osmotica Pharmaceuticals plc            
Condensed Consolidated Statements of Cash Flows            
(Unaudited)            
(in thousands)            
             
    Nine Months Ended September 30,
    2019     2018  
CASH FLOWS FROM OPERATING ACTIVITIES            
Net loss   $ (244,260 )   $ (2,675 )
Adjustments to reconcile net loss to net cash used in operating activities:            
  Depreciation and amortization     50,605       61,323  
  Share compensation     3,831       -  
  Loss on sale of fixed and leased assets     75       13  
  Impairment of intangibles     253,879       6,173  
  Deferred income tax benefit     (28,493 )     (7,508 )
  Bad debt provision     (160 )     (1,293 )
  Amortization of deferred financing and loan origination fees     1,000       1,261  
Change in operating assets and liabilities:            
  Trade accounts receivable, net     22,722       (33,821 )
  Inventories, net     (2,857 )     (8,647 )
  Prepaid expenses and other current assets     12,536       811  
  Trade accounts payable     (14,964 )     (9,063 )
  Accrued and other current liabilities     (21,022 )     600  
  Net cash provided by operating activities     32,892       7,174  
CASH FLOWS FROM INVESTING ACTIVITIES:            
  Proceeds from sale of fixed and leased assets     12       10  
  Payments on disposal of leased assets     (34 )     -  
  Purchase of property, plant and equipment     (3,042 )     (2,998 )
  Net cash used in investing activities     (3,064 )     (2,988 )
CASH FLOWS FROM FINANCING ACTIVITIES:            
  Payments to affiliates     -       (2 )
  Repurchases of ordinary shares     (1,338 )     -  
  Payments on finance lease obligations     (97 )     (82 )
  Proceeds from insurance financing loan     1,314       975  
  Repayment of insurance financing loan     (2,691 )     (484 )
  Repayment of debt     -       (6,140 )
  Net cash used in financing activities     (2,812 )     (5,733 )
Net change in cash and cash equivalents     27,016       (1,547 )
Effect on cash of changes in exchange rate     164       (993 )
Cash and cash equivalents, beginning of period     70,834       34,743  
Cash and cash equivalents, end of period   $ 98,014     $ 32,203  
             

 

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