Delivering Value To Those We Serve

Assertio Therapeutics Announces Third-Quarter 2019 Results

November 6, 2019 at 4:05 PM EST

-- Company Implements New Cost Savings Initiatives Expected to Deliver Annualized Savings of $20.0 Million --

-- Raises Full-Year 2019 Earnings Guidance Ranges --

-- Lowers Full-Year 2019 Neurology Franchise Net Sales Guidance --

-- Reduces Total Debt by $200.0 Million Year to Date --

 -- Extends Significant Portion of Convertible Debt Maturity to 2024 --

LAKE FOREST, Ill., Nov. 06, 2019 (GLOBE NEWSWIRE) -- Assertio Therapeutics, Inc. (NASDAQ: ASRT) today reported financial results for the quarter ended September 30, 2019 and provided an update on its business performance and strategic initiatives.

Third-Quarter Financial Highlights:
(unaudited)

   Third Quarter 2019
(in millions, except earnings per share) GAAP Non-GAAP(1)
Total Revenues $55.1
Net Income $3.3 $23.2
Earnings Per Share $0.05 $0.24
Adjusted EBITDA $34.3

(1) All non-GAAP measures included in this earnings release are reconciled to the corresponding GAAP measures in the schedules attached.

“We reported another quarter of strong earnings growth, exceeding non-GAAP adjusted EBITDA expectations for the fifth time in the last six quarters, despite some softness in our top line,” said Arthur Higgins, President and CEO of Assertio. “As a result of this strong performance, as well as our outlook for the fourth quarter, today we are raising our non-GAAP adjusted EBITDA guidance range for the full year. We have achieved significant operational efficiencies over the past two years - and today we are announcing additional initiatives that we expect will deliver $15.0 million in annual savings beginning in 2020 and $20.0 million in annual savings thereafter. Our priority was, and remains, delivering strong cash flows as we rapidly de-lever the Company and better position it to pursue new growth opportunities.”

Third-Quarter Business Highlights:

  • Acceleration of Cost Savings Initiatives: Today the Company announced an acceleration of cost savings initiatives that it expects will deliver $15.0 million in savings beginning in 2020 and $20.0 million in annual savings thereafter. The Company will take a charge of approximately $4.0 million in the fourth quarter of 2019 related to these initiatives. This acceleration in cost savings was completed after a thorough review of the Company’s organizational structures, budgets, capital projects and capabilities.

  • Announced Debt Refinancing: The Company announced in August that it entered into separate, privately negotiated exchange agreements (Exchange Agreements) with a limited number of holders of Assertio’s currently outstanding 2.50% Convertible Notes due 2021 (2021 Notes). Pursuant to the Exchange Agreements, Assertio exchanged approximately $200.0 million aggregate principal amount of 2021 Notes for a combination of (a) $120.0 million of its 5.00% Convertible Senior Notes due August 15, 2024 (2024 Notes), (b) $30.0 million in cash plus accrued but unpaid interest on the 2021 Notes, and (c) the issuance of 15.8 million shares of Assertio’s common stock. This transaction reduces total outstanding debt, de-levers the balance sheet, extends maturity of a substantial portion of the Company’s convertible debt, and makes Assertio a potentially more attractive business development partner.

  • Significant Reduction in Secured Debt: As of September 30, 2019, the Company has made scheduled principal repayments of $100.0 million in 2019, reducing the Company’s senior secured debt to $182.5 million. The Company also paid an additional $20.0 million principal payment in October 2019, further reducing its senior secured debt to $162.5 million. Combined with the $80.0 million of debt reduced in our debt refinancing, the Company has reduced its gross debt leverage to 3.4x of the mid-point of its adjusted EBITDA guidance range.

  • Favorable NUCYNTA® Patent Ruling Upheld: In the third quarter, there was a period during which the defendants could have petitioned the U.S. Supreme Court for writ of certiorari. That period has now passed. As a result, the District Court’s favorable decision is final and non-appealable. Previously, the United States Court of Appeals for the Federal Circuit ruled in favor of Assertio with respect to the Company’s patent litigation against three filers of Abbreviated New Drug Applications (ANDAs) for the NUCYNTA franchise. The Federal Circuit’s ruling affirms the decision of the United States District Court (D.N.J.), which found U.S. patent No. 7,994,364 (the ’364 Patent) to be valid and infringed by the defendants. The ’364 Patent covers the entire NUCYNTA franchise until December 2025.*  The NUCYNTA franchise is commercialized by Collegium Pharmaceutical, Inc. (Collegium). The Company receives royalties from Collegium based on net sales of the franchise.

  • Cosyntropin: The Company announced on October 21, 2019 that its development partner West Therapeutic Development, LLC (West) has received a Complete Response Letter (CRL) from the U.S. Food and Drug Administration (FDA) for its New Drug Application (NDA) for its injectable formulation of long-acting cosyntropin (synthetic adrenocorticotropic hormone, or ACTH). West is seeking approval for use as a diagnostic drug in the screening of patients presumed to have adrenocortical insufficiency. The primary focus of the CRL relates to the FDA determination that certain pharmacodynamic parameters were not adequately achieved. West and Assertio will work together to determine if the FDA’s comments set forth in the CRL can be adequately addressed.

*Patent expiration dates reflect the addition of six months of pediatric patent term extension Assertio anticipates securing from the United States Food and Drug Administration.

Revenue Summary:
(in thousands, unaudited)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
Product sales, net              
Gralise $ 14,931     $ 14,630     $ 46,008     $ 43,272  
CAMBIA 8,135     10,365     23,701     24,870  
Zipsor 3,273     4,441     9,028     13,175  
Total neurology product sales, net 26,339     29,436     78,737     81,317  
NUCYNTA products 1,254     11     1,153     18,782  
Lazanda (91 )   (12 )   (1 )   528  
Total product sales, net 27,502     29,435     79,889     100,627  
Commercialization agreement:              
Commercialization rights and facilitation services 27,304     27,781     89,163     87,055  
Revenue from transfer of inventory             55,705  
Royalties and Milestone Revenue 341     20,277     1,226     25,784  
Total revenues $ 55,147     $ 77,493     $ 170,278     $ 269,171  

2019 Financial Guidance:
The Company is raising its previous 2019 earnings guidance range and lowering its Neurology Franchise Net Sales guidance to $102 to $105 million.

  Prior 2019 Guidance Current 2019 Guidance
Neurology Franchise
Net Sales
Low Single Digit Growth $102 to $105 million
GAAP Net Loss(1) ($68) to ($58) million ($47) to ($42) million
Non-GAAP
Adjusted EBITDA(1)(2)
$118 to $128 million $124 to $129 million

(1) Guidance includes $2.8 million of non-cash Collegium warrant related income and excludes any future warrant mark-to-market adjustments, which cannot be estimated.

(2) Guidance excludes any Collegium warrant mark-to-market adjustments.

Conference Call and Webcast:
Assertio will host a conference call today, Wednesday, November 6, 2019 beginning at 4:30 p.m. ET to discuss its results. This event can be accessed in three ways:

  • From the Assertio website: http://investor.assertiotx.com. Please access the website 15 minutes prior to the start of the call to download and install any necessary audio software.
     
  • By telephone: Participants can access the call by dialing (877) 550-3745 (United States) or (281) 973-6277 (International) referencing Conference ID 8382875.
     
  • By replay: A replay of the webcast will be located under the Investor Relations section of Assertio’s website approximately two hours after the conclusion of the live call.

About Assertio Therapeutics, Inc.
Assertio Therapeutics is committed to providing responsible solutions to advance patient care in the Company’s core areas of neurology, orphan and specialty medicines. Assertio currently markets three FDA-approved products and continues to identify, license and develop new products that offer enhanced options for patients that may be under served by existing therapies. To learn more about Assertio, visit www.assertiotx.com.

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
This news release contains forward-looking statements. These statements involve inherent risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including risks related to regulatory approval and clinical development of long-acting cosyntropin, expectations regarding royalties to be received based on sales of NUCYNTA and NUCYNTA ER, expectations regarding potential business opportunities and other risks outlined in the Company’s public filings with the Securities and Exchange Commission, including the Company’s most recent annual report on Form 10-K and subsequent Quarterly Reports on Form 10-Q. All information provided in this news release speaks as of the date hereof. Except as otherwise required by law, the Company undertakes no obligation to update or revise its forward-looking statements.

Investor and Media Contact:
John B. Thomas
Senior Vice President, Investor Relations and Corporate Communications
jthomas@assertiotx.com

Non-GAAP Financial Measures
To supplement the Company’s financial results presented on a U.S. generally accepted accounting principles (GAAP) basis, the Company has included information about non-GAAP revenue, non-GAAP adjusted earnings, non-GAAP adjusted diluted earnings per share, non-GAAP adjusted EBITDA and other non-GAAP financial measures as useful operating metrics. The Company believes that the presentation of these non-GAAP financial measures, when viewed with results under GAAP and the accompanying reconciliation, provides supplementary information to analysts, investors, lenders, and the Company’s management in assessing the Company’s performance and results from period to period. The Company uses these non-GAAP measures internally to understand, manage and evaluate the Company’s performance, and in part, in the determination of bonuses for executive officers and employees. These non-GAAP financial measures should be considered in addition to, and not a substitute for, or superior to, net income or other financial measures calculated in accordance with GAAP. Non-GAAP financial measures used by us may be calculated differently from, and therefore may not be comparable to, non-GAAP measures used by other companies.

Specified Items
Non-GAAP measures presented within this release exclude specified items. The Company considers specified items to be significant income/expense items not indicative of current operations, including the related tax effect. Specified items include non-cash adjustment to Collegium agreement revenue and cost of sales, release of NUCYNTA and Lazanda sales reserves for products the Company is no longer selling, interest income, interest expense, amortization, acquired in-process research and development and non-cash adjustments related to product acquisitions, stock-based compensation expense, non-cash interest expense related to debt, depreciation, taxes, transaction costs, CEO transition, restructuring costs, adjustments to net sales related to reserves recorded prior to the Company’s exit of opioid commercialization activities, legal costs and expenses incurred in connection with opioid-related litigation, investigations and regulations pertaining to the company’s historical commercialization of opioid products, certain types of legal settlements, disputes, fees and costs, gains or losses resulting from debt refinancing transactions and disposal or impairment of long-lived assets, and to adjust for the tax effect related to each of the non-GAAP adjustments.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(unaudited)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
Revenues:              
Product sales, net $ 27,502     $ 29,435     $ 79,889     $ 100,627  
Commercialization agreement, net 27,304     27,781     89,163     142,760  
Royalties and milestones 341     20,277     1,226     25,784  
Total revenues 55,147     77,493     170,278     269,171  
Costs and expenses:              
Cost of sales (excluding amortization of intangible assets) 2,243     2,975     6,942     17,772  
Research and development expenses 1,476     2,127     4,531     5,835  
Selling, general and administrative expenses 36,117     33,409     85,917     93,750  
Amortization of intangible assets 25,444     25,443     76,331     76,331  
Restructuring charges     3,911         18,742  
Total costs and expenses 65,280     67,865     173,721     212,430  
(Loss) income from operations (10,133 )   9,628     (3,443 )   56,741  
Other income (expense):              
Litigation settlement     62,000         62,000  
Gain on debt extinguishment 26,385         26,385      
Interest expense (13,872 )   (17,190 )   (45,268 )   (52,268 )
Other (expense) income, net (764 )   677     (2,613 )   973  
Total other expense (income) 11,749     45,487     (21,496 )   10,705  
Net income (loss) before income taxes 1,616     55,115     (24,939 )   67,446  
Income tax benefit (expense) 1,715     (6,845 )   364     (6,400 )
Net income (loss) $ 3,331     $ 48,270     $ (24,575 )   $ 61,046  
Basic net income (loss) per share 0.05     0.76     (0.36 )   0.96  
Diluted net income (loss) per share 0.05     0.65     (0.36 )   0.93  
Shares used in computing basic net income (loss) per share 72,747     63,917     67,332     63,714  
Shares used in computing diluted net income (loss) per share 72,747     82,690     67,332     82,282  
                       

 CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)

  September 30, 2019   December 31, 2018
ASSETS      
Current assets:      
Cash and cash equivalents $ 54,181     $ 110,949  
Accounts receivable, net 43,427     37,211  
Inventories, net 3,314     3,396  
Prepaid and other current assets 23,480     56,551  
Total current assets 124,402     208,107  
Property and equipment, net 3,873     13,064  
Intangible assets, net 615,768     692,099  
Investments 7,244     11,784  
Other long-term assets 5,579     7,812  
Total assets $ 756,866     $ 932,866  
LIABILITIES AND SHAREHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable $ 22,700     $ 6,138  
Accrued rebates, returns and discounts 60,979     75,759  
Accrued liabilities 33,270     31,361  
Current portion of Senior Notes 80,000     120,000  
Interest payable 6,687     11,645  
Other current liabilities 2,096     1,133  
Total current liabilities 205,732     246,036  
Contingent consideration liability 981     1,038  
Senior Notes 94,661     158,309  
Convertible Notes 190,923     287,798  
Other long-term liabilities 16,135     19,350  
Total liabilities 508,432     712,531  
Commitments and contingencies      
Shareholders’ equity:      
Common stock 8     6  
Additional paid-in capital 455,601     402,934  
Accumulated deficit (207,175 )   (182,600 )
Accumulated other comprehensive loss     (5 )
Total shareholders’ equity 248,434     220,335  
Total liabilities and shareholders' equity $ 756,866     $ 932,866  
               

RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
(in thousands)
(unaudited)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
GAAP net (loss)/income $ 3,331     $ 48,270     $ (24,575 )   $ 61,046  
Commercialization agreement revenues (1) 3,804     2,862     7,667     (46,426 )
Commercialization agreement cost of sales (2)             6,200  
NUCYNTA and Lazanda revenue reserves (3) (1,163 )   2     (1,152 )   (11,249 )
Expenses for opioid-related litigation, investigations and regulations (4) 2,174     1,313     7,024     4,360  
Intangible amortization related to product acquisitions 25,444     25,443     76,331     76,331  
Contingent consideration related to product acquisitions     (117 )   (142 )   (658 )
Purdue litigation settlement     (62,000 )       (62,000 )
Stock-based compensation 3,004     2,944     8,340     7,890  
Interest and other income (218 )   (677 )   (915 )   (973 )
Interest expense 13,872     17,190     45,268     52,268  
Depreciation 278     (1,252 )   894     1,677  
Income tax (benefit) expense (1,715 )   6,845     (364 )   6,400  
Restructuring and related costs  (5)     4,079         19,383  
Other costs     75         123  
Loss on disposal of equipment (6) 10,070         10,076      
Gain on debt extinguishment, net (7) (25,968 )       (25,968 )    
Change in fair value of warrants 1,423         4,900      
Non-GAAP adjusted EBITDA $ 34,336     $ 44,977     $ 107,384     $ 114,372  

(1) For the period from January 8, 2018 through November 8, 2018, the adjustment relates to the non-cash value assigned to inventory transferred to Collegium.  As of the date of the Commercialization Amendment, on November 8, 2018, the Company ceased recognition of fixed revenues and began the recognition of variable revenues when they become due beginning in January 2019. The adjustment for the three and nine months ended September 30, 2019 relates to non-cash expense for third-party royalties, which are expected to have no net impact for the full year period, as well as the amortization of the contract asset.

(2) Represents the cash received for inventory transferred to Collegium at the commencement of the Commercialization Agreement.

(3) Removal of the impact of revenue adjustment estimates related to products that we are no longer commercializing. The three months ended March 31, 2018 included a $12.5 million benefit related to the release of sales reserves for which the Company is no longer financially responsible, net of $1.8 million in royalties payable to a third party.

(4) Legal costs/expenses related to opioid-related litigation, investigations and regulations pertaining to the Company’s historical commercialization of opioid products.

(5) Restructuring and other costs represents non-recurring costs associated with the Company’s restructuring, reincorporation, headquarters relocation and CEO transition.

(6) Recognition of $10.1 million loss on the September 2019 disposal of equipment residing at a manufacturing supplier that will no longer be used in future production.

(7)  In connection with the August 2019 debt refinancing of the convertible notes the Company recognized a net gain of $26.0 million, comprised of a $26.4 million gain on debt extinguishment offset by approximately $0.4 million of nonrecurring related expenses.

RECONCILIATION OF GAAP NET INCOME/(LOSS) TO NON-GAAP ADJUSTED EARNINGS
(in thousands, except per share amounts)
(unaudited) 

  Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
GAAP net (loss)/income $ 3,331     $ 48,270     $ (24,575 )   $ 61,046  
Commercialization agreement revenues (1) 3,804     2,862     7,667     (46,426 )
Commercialization agreement cost of sales (2)             6,200  
Non-cash interest expense on debt 5,870     5,490     18,090     16,298  
Nucynta and Lazanda revenue reserves (3) (1,163 )   2     (1,152 )   (11,249 )
Expenses for opioid-related litigation, investigations and regulations (4) 2,174     1,313     7,024     4,360  
Purdue litigation settlement     (62,000 )       (62,000 )
Intangible amortization related to product acquisitions 25,444     25,443     76,331     76,331  
Contingent consideration related to product acquisitions     (117 )   (142 )   (658 )
Stock-based compensation 3,004     2,944     8,340     7,890  
Restructuring and related costs (5)     4,079         19,383  
Other costs     75     (332 )   123  
Loss on disposal of equipment  (6) 10,070         10,076      
Gain on debt extinguishment, net (7) (25,968 )       (25,968 )    
Change in fair value of warrants 1,423         4,900      
Income tax effect of non-GAAP adjustments (8) (4,800 )   4,551     (20,963 )   (1,159 )
Non-GAAP adjusted earnings $ 23,189     $ 32,912     $ 59,296     $ 70,139  
Add interest expense of convertible debt, net of tax (9) 1,770     1,704     5,176     5,110  
Numerator $ 24,959     $ 34,616     $ 64,472     $ 75,249  
Shares used in calculation (9) 105,322     82,690     90,198     82,282  
Non-GAAP adjusted diluted earnings per share $ 0.24     $ 0.42     $ 0.71     $ 0.91  

(1) For the period from January 8, 2018 through November 8, 2018, the adjustment relates to the non-cash value assigned to inventory transferred to Collegium.  As of the date of the Commercialization Amendment, on November 8, 2018, the Company ceased recognition of fixed revenues and began the recognition of variable revenues when they become due beginning in January 2019. The adjustment for the three and nine months ended September 30, 2019 relates to non-cash expense for third-party royalties, which are expected to have no net impact for the full year period, as well as the amortization of the contract asset.

(2) Represents the cash received for inventory transferred to Collegium at the commencement of the Commercialization Agreement.

(3) Removal of the impact of revenue adjustment estimates related to products that we are no longer commercializing. The three months ended March 31, 2018 included a $12.5 million benefit related to the release of sales reserves for which the Company is no longer financially responsible, net of $1.8 million in royalties payable to a third party.

(4) Legal costs/expenses related to opioid-related litigation, investigations and regulations pertaining to the Company’s historical commercialization of opioid products.

(5) Restructuring and other costs represents non-recurring costs associated with the Company’s restructuring, reincorporation, headquarters relocation and CEO transition.

(6) Recognition of $10.1 million loss on the September 2019 disposal of equipment residing at a manufacturing supplier that will no longer be used in future production.

(7)  In connection with the August 2019 debt refinancing of the convertible notes the Company recognized a net gain of $26.0 million, comprised of a $26.4 million gain on debt extinguishment offset by approximately $0.4 million of nonrecurring related expenses.

(8) Calculated by taking the pre-tax non-GAAP adjustments and applying the statutory tax rate.

(9) The Company uses the if-converted method to compute diluted earnings per share with respect to its convertible debt.

RECONCILIATION OF GAAP NET INCOME (LOSS) PER SHARE TO
NON-GAAP ADJUSTED EARNINGS PER SHARE
(unaudited)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2019   2018   2019   2018
               
GAAP net (loss)/income per share $ 0.05     $ 0.76     $ (0.36 )   $ 0.96  
Conversion from basic shares to diluted shares (0.02 )   (0.17 )   0.08     (0.22 )
Commercialization agreement revenues 0.04     0.03     0.09     (0.57 )
Commercialization agreement cost of sales             0.08  
Non-cash interest expense on debt 0.06     0.07     0.20     0.20  
NUCYNTA and Lazanda revenue reserves (0.01 )       (0.01 )   (0.14 )
Expenses for opioid-related litigation, investigations and regulations 0.02     0.01     0.08     0.05  
Purdue litigation settlement     (0.75 )       (0.75 )
Intangible amortization related to product acquisitions 0.24     0.31     0.85     0.92  
Contingent consideration related to product acquisitions              
Stock based compensation 0.03     0.03     0.09     0.10  
Restructuring and related costs     0.05         0.23  
Loss on disposal of equipment 0.10         0.11      
Gain on debt extinguishment, net (0.25 )       (0.29 )    
Change in fair value of warrants 0.01         0.05      
Income tax effect of non-GAAP adjustments (0.05 )   0.06     (0.24 )   (0.01 )
Add interest expense of convertible debt, net of tax 0.02     0.02     0.06     0.06  
Non-GAAP adjusted diluted earnings per share $ 0.24     $ 0.42     $ 0.71     $ 0.91  
                               

RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
For the three months ended September 30, 2019
(in thousands)
(unaudited)

    Commercialization agreement revenues   Product Sales   Royalties and milestones   Cost of sales   Research and development expense   Selling, general
and administrative expense
  Amortization
of intangible assets
  Interest expense   Other
(Expense) Income, Net
  Income taxes
(expense) benefit
GAAP as reported   $ 27,304     $ 27,502     $ 341     $ 2,243     $ 1,476     $ 36,117     $ 25,444     $ (13,872 )   $ 25,621     $ 1,715  
Commercialization agreement revenues and cost of sales   3,804                                      
Non-cash interest expense on debt                               5,870          
NUCYNTA and Lazanda revenue reserves       (1,163 )                                
Expenses for opioid-related litigation, investigations and regulations                       (2,174 )                
Intangible amortization related to product acquisitions                           (25,444 )            
Stock based compensation               (28 )   (165 )   (2,811 )                
Restructuring and other costs                                        
Loss on disposal of equipment                       (10,070 )                
Gain on debt extinguishment, net                                   (25,968 )    
Change in fair value of warrants                                   1,423      
Income tax effect of non-GAAP adjustments                                       (4,800 )
Non-GAAP adjusted   $ 31,108     $ 26,339     $ 341     $ 2,215     $ 1,311     $ 21,062     $     $ (8,002 )   $ 1,076     $ (3,085 )
                                                                                 

RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
For the nine months ended September 30, 2019
(in thousands)
(unaudited)

    Commercialization agreement
revenues
  Product Sales   Royalties and milestones   Cost of sales   Research and development expense   Selling, general
and administrative expense
  Amortization
of intangible assets
  Interest expense   Other
(Expense) Income, Net
  Income taxes
(expense) benefit
GAAP as reported   $ 89,163     $ 79,889     $ 1,226     $ 6,942     $ 4,531     $ 85,917     $ 76,331     $ (45,268 )   $ 23,772     $ 364  
Commercialization agreement revenues and cost of sales   7,667                                      
Non-cash interest expense on debt                               18,090          
NUCYNTA and Lazanda revenue reserves       (1,152 )                                
Expenses for opioid-related litigation, investigations and regulations                       (7,024 )                
Intangible amortization related to product acquisitions                           (76,331 )            
Contingent consideration related to product acquisitions                       142                  
Stock based compensation               (78 )   (514 )   (7,748 )                
Restructuring and other costs                                        
Loss on disposal of equipment                       (10,076 )                
Gain on debt extinguishment, net                                   (25,968 )    
Change in fair value of warrants                                   4,900      
Other costs                                   (332 )    
Income tax effect of non-GAAP adjustments                                       (20,963 )
Non-GAAP adjusted   $ 96,830     $ 78,737     $ 1,226     $ 6,864     $ 4,017     $ 61,211     $     $ (27,178 )   $ 2,372     $ (20,599 )
                                                                                 

RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
For the three months ended September 30, 2018
(in thousands)
(unaudited)

    Commercialization agreement revenues   Product Sales   Royalties and milestones   Cost of sales   Research and development expense   Selling, general
and administrative expense
  Restructuring Charges   Amortization of intangible assets   Interest expense   Other (Expense) Income, Net   Income taxes (expense) benefit
GAAP as reported   $ 27,781     $ 29,435     $ 20,277     $ 2,975     $ 2,127     $ 33,409     $ 3,911     $ 25,443     $ (17,190 )   $ 62,677     $ (6,845 )
Commercialization agreement revenues and cost of sales   2,862                                          
Non-cash interest expense on debt                                   5,490          
NUCYNTA and Lazanda revenue reserves       2                                      
Expenses for opioid-related litigation, investigations and regulations                       (1,313 )                    
Intangible amortization related to product acquisitions                               (25,443 )            
Contingent consideration related to product acquisitions                       117                      
Stock based compensation                   (270 )   (2,674 )   173                  
Restructuring and other costs                       (243 )   (4,084 )                
Purdue litigation settlement                                       (62,000 )    
Income tax effect of non-GAAP adjustments                                           4,551  
Non-GAAP adjusted   $ 30,643     $ 29,437     $ 20,277     $ 2,975     $ 1,857     $ 29,296     $     $     $ (11,700 )   $ 677     $ (2,294 )
                                                                                         


RECONCILATIONS OF GAAP REPORTED TO NON-GAAP ADJUSTED INFORMATION
For the nine months ended September 30, 2018
(in thousands)
(unaudited)

    Commercialization agreement revenues   Product Sales   Royalties and milestones   Cost of sales   Research and development expense   Selling, general and administrative expense   Restructuring Charges   Amortization
of intangible assets
  Interest expense   Other (Expense) Income, Net   Income taxes (expense) benefit
GAAP as reported   142,760     100,627     25,784     17,772     5,835     93,750     18,742     76,331     (52,268 )   62,973     (6,400 )
Commercialization agreement revenues and cost of sales   (46,426 )           (6,200 )                            
Non-cash interest expense on debt                                   16,298          
NUCYNTA and Lazanda revenue reserves       (11,249 )                                    
Expenses for opioid-related litigation, investigations and regulations                       (4,360 )                    
Intangible amortization related to product acquisitions                               (76,331 )            
Contingent consideration related to product acquisitions                       658                      
Stock based compensation               (30 )   (337 )   (7,523 )   (2,385 )                
Restructuring and other costs                       (764 )   (16,357 )                
Purdue litigation settlement                                       (62,000 )    
Income tax effect of non-GAAP adjustments                                           (1,159 )
Non-GAAP adjusted   96,334     89,378     25,784     11,542     5,498     81,761             (35,970 )   973     (7,559 )
                                                                   

FULL-YEAR 2019 NON-GAAP GUIDANCE RECONCILATION
(in millions)
(unaudited)

  Earnings (1)
  Low End High End
GAAP   $ (47 )   $ (42 )
Specified Items(2)   $ 171     $ 171  
Non-GAAP   $ 124     $ 129  

(1) GAAP net loss guidance refers to GAAP net loss and non-GAAP earnings guidance refers to non-GAAP adjusted EBITDA.

(2) For purposes of this forward-looking reconciliation, a description of the categories of specified items included in this reconciliation are detailed in the tables above.

SENIOR SECURED NOTE COVENANT DISCLOSURES

The Company was in compliance with its covenants, including the Senior Secured Debt Leverage Ratio and Net Sales covenants, with respect to the Company’s senior secured notes as of September 30, 2019.  Set forth below are additional disclosures that the Company is required to make in connection with the senior secured notes.

RECONCILIATION OF GAAP NET INCOME (LOSS) TO NON-GAAP ADJUSTED EBITDA
For the Rolling Twelve Month Period Ended September 30, 2019
(in thousands)
(unaudited)

The below reconciliation discloses the calculation of Adjusted EBITDA (as defined in the Company’s senior secured notes) on a rolling twelve month basis to support covenant compliance in connection with our senior secured notes.

  Twelve Months Ended
  September 30, 2019
GAAP net (loss)/income $ (48,713 )
Commercialization agreement revenues (1) 28,929  
Nucynta and Lazanda revenue reserves (2) (2,176 )
Expenses for opioid-related litigation, investigations and regulations (3) 10,561  
Intangible amortization related to product acquisitions 101,774  
Contingent consideration related to product acquisitions 1  
Stock-based compensation 10,889  
Interest and other income (1,139 )
Interest expense 61,881  
Depreciation 1,148  
Income taxes expense (benefit) (5,697 )
Restructuring and related costs  (4) 1,881  
Loss on disposal of equipment (5) 10,076  
Gain on debt extinguishment, net (6) (25,968 )
Change in fair value of warrants 4,900  
Adjusted EBITDA $ 148,347  

(1) The adjustment for the twelve months ended September 30, 2019 relates to non-cash expense for third-party royalties, which are expected to have no net impact for the full year period, as well as the amortization of the contract asset.

(2) Removal of the impact of revenue adjustment estimates related to products that we are no longer commercializing.

(3) Legal costs/expenses related to opioid-related litigation, investigations and regulations pertaining to the Company’s historical commercialization of opioid products.

(4) Restructuring and other costs represents non-recurring costs associated with the Company’s restructuring, reincorporation, headquarters relocation and CEO transition.

(5) Recognition of $10.1 million loss on the September 2019 disposal of equipment residing at a manufacturing supplier that will no longer be used in future production.

(6)  In connection with the August 2019 debt refinancing of the convertible notes the Company recognized a net gain of $26.0 million, comprised of a $26.4 million gain on debt extinguishment offset by approximately $0.4 million of nonrecurring related expenses.

Additional Covenant Disclosures

Long-acting cosyntropin has not yet been launched for commercial sale and therefore no revenue in respect of this product was recognized by the Company as of September 30, 2019.

During the rolling twelve month period ended September 30, 2019, the Company collected $123.4 million in cash receipts, net of cash payments made, in connection with the Company’s Commercialization Agreement with Collegium.

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Source: Assertio Therapeutics, Inc.