Company’s Position as a Leader and
Strategic Partner in Pharmaceutical Cannabinoids Strengthens with
Involvement in Seven CBD Clinical Trials
INSYS Therapeutics, Inc. (NASDAQ: INSY), a leader in the
development, manufacture and commercialization of pharmaceutical
cannabinoids and spray technology, today reported financial results
for its third quarter ended Sept. 30, 2018.
OVERALL HIGHLIGHTS
• Commenced a strategic alternatives review
process for the company’s opioid-related assets
• Expanded collaborative partnership with
University of California San Diego’s Center for Medicinal Cannabis
Research (CMCR) to study the company’s cannabidiol (CBD) oral
solution in two additional disease states (early psychosis and
anxiety in anorexia nervosa)
• Achieved net revenue of $18.3 million in the
third quarter of 2018
• Advanced R&D programs with a $14.5 million
investment in the third quarter of 2018:
- Received “Fast Track” designation from the FDA for epinephrine
nasal spray as an investigational treatment for anaphylaxis
- Continued enrollment of three company-sponsored CBD clinical
studies:• childhood absence epilepsy (Phase 2)• Prader-Willi
syndrome (Phase 2)• infantile spasms (Phase 3)
- Completed pharmacokinetic study of dronabinol inhalation
• Signed definitive licensing agreement with Lunatus to
commercialize SUBSYS® in the Middle East
• Received FDA approval of supplemental NDA for SYNDROS® to
expand label, enabling use of the product with feeding tubes for
patients with cancer and AIDS
• Appointed Elizabeth Bohlen to the Board of Directors and added
Mark Nance to the management team as chief legal officer and
general counsel
• Announced settlement agreement in principle with Department of
Justice consistent with previous public statement and
disclosures
• Optimized commercial organization and related support
functions to control operating costs in line with lower revenue
• Received confirmation from the SEC that it concluded its
investigation of the company, and does not intend to recommend an
enforcement action
“Our commitment to further establish our position as a leader in
pharmaceutical cannabinoids and spray technology was exemplified by
the achievement of several milestones in the third quarter,” said
Saeed Motahari, president and chief executive officer of INSYS
Therapeutics. “We continued to make progress on our pipeline and
expanded our collaborative partnerships with leading research
institutions, increasing the number of CBD clinical studies in
which we’re the sole sponsor or a key collaborator to seven.
Furthermore, our 99.5 percent pure pharmaceutical-grade CBD oral
solution allows INSYS to meet the needs of clinical study patients
and become a strategic partner across our industry and in the
medical community.”
Motahari concluded, “The decline in the overall
TIRF market continues to impact sales of our primary commercial
product, SUBSYS®. Our proactive efforts to expand managed care
access and educate appropriate HCPs have enabled us to maintain our
leading share of the branded TIRF market. However, this decline in
revenue has required us to contain costs and as a result, we have
taken actions to adjust our commercial organization to align with
the realities of the market. We will continue to be disciplined
with our cost structure, while appropriately investing in our
pipeline, which is the key to transforming INSYS into a leader in
pharmaceutical cannabinoids and spray technology.”
Financial & Operating
Highlights
During the preparation of the consolidated financial statements
as of and for the quarter ended Sept. 30, 2018, the company
identified errors that impacted the 2017 financial information,
which have been revised for the correction of this error.
• The company had $113.0 million in cash, cash equivalents and
short-term and long-term investments with no debt outstanding as of
Sept. 30, 2018
• Net revenue for the third quarter of 2018 was $18.3 million,
compared to $30.7 million for the third quarter of 2017, driven
primarily by declines in the TIRF market
• Gross margin was 87.0 percent for the third quarter of
2018, compared to 75.6 percent in the same period of 2017
• Sales and marketing investment was $7.4 million for the
third quarter of 2018, compared to $12.8 million for the third
quarter of 2017, as the company took action to better align its
commercial organization to the lower revenue base
• Research and development investment decreased to $14.5
million for the third quarter of 2018, compared to $19.6 million
for the third quarter of 2017, primarily as a result of the timing
of clinical trials
• General and administrative expense of $8.9 million for
the third quarter of 2018 declined compared to $11.3 million in the
third quarter of 2017, as the company continued to look for
opportunities to level-set its cost base
• Legal expense increased to $16.0 million for the third
quarter of 2018, compared to $4.4 million in the third quarter of
2017, as a result of the company’s legal proceedings, including
expenses associated with indemnification of former executives in
connection with their pending trial, which constitutes
approximately 60 percent of the total Q3 2018 expense. Management
is disputing the reasonableness of certain of these
indemnification-related expenses
• Income tax expense was $240 thousand for the third
quarter of 2018 compared to a benefit of ($9.0 million) during the
revised third quarter of 2017
• Net loss for the third quarter of 2018 was ($30.6
million), or ($0.41) per basic and diluted share, compared to a net
loss of ($166.3 million), or ($2.28) per basic and diluted share,
for the revised third quarter of 2017. Adjusted net loss for the
third quarter of 2018 was ($0.37) per basic and diluted share
• Adjusted EBITDA loss for the third quarter of 2018 was
($26.0 million), compared to Adjusted EBITDA loss of ($18.4
million) in the prior-year quarter. The reconciliation of net
income to Adjusted EBITDA is included at the end of this news
release
During the preparation of the consolidated
financial statements as of and for the quarter ended Sept. 30,
2018, the company identified errors within the company’s
consolidated financial statements for the year ended Dec. 31, 2017,
resulting from the company’s adoption of ASU 2016-09 “Compensation
– Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting” on Jan. 1, 2017, which impacted the
previously filed financial statements for the quarters ended March
31, June 30, and Sept. 30 of 2017 as well as the audited financial
statements for the year ended Dec. 31, 2017. In addition, we
identified an error in the calculation of our weighted average
shares outstanding, which impacted the previously filed financial
statements for the three and nine months ended Sept. 30, 2017, and
the year ended Dec. 31, 2017. The company evaluated the
errors and concluded that they were not material to the financial
statements previously issued. Accordingly, the Dec. 31, 2017
financial information has been revised to include a cumulative
adjustment of $2.9 million to correctly present uncertain tax
position liabilities and accumulated deficit, resulting in a
reduction to total liabilities and an increase in stockholders’
equity. These revisions will be reflected and disclosed in the
company’s Form 10-Q for the period ended Sept. 30, 2018 to be filed
with the SEC on or before Nov. 9, 2018. Additionally, in order to
correctly present income tax benefit and net loss in the
appropriate periods for comparative purposes, the financial results
for the three and nine months ended Sept. 30, 2017, have been
revised to include adjustments of $40,000 and $120,000,
respectively. These revisions resulted in net loss per share for
the three and nine months ended Sept. 30, 2017, and the year ended
Dec. 31, 2017, changing from $2.30 to $2.28, $2.51 to $2.50 and
$3.16 to $3.12, respectively.
Webcast Information
A conference call is scheduled for 5:00 p.m.
Eastern Standard Time on Nov. 5, 2018, to discuss the financial and
operational results for the third quarter 2018. Interested parties
can listen to the call live as it occurs via the company’s website,
https://www.insysrx.com/ , on the Investors section’s Presentations
& Events page; or by dialing 844-263-8304 (from inside the
U.S.) or 213-358-0958 (from outside the U.S.), and using the
Conference ID 6149699. A webcasted replay of the call will be
available on the site a few hours after the event.
About INSYS
INSYS Therapeutics is a specialty
pharmaceutical company that develops and commercializes innovative
drugs and novel drug delivery systems of therapeutic molecules that
improve patients’ quality of life. Using proprietary spray
technology and capabilities to develop pharmaceutical cannabinoids,
INSYS is developing a pipeline of products intended to address
unmet medical needs and the clinical shortcomings of existing
commercial products. INSYS is committed to developing medications
for potentially treating anaphylaxis, epilepsy, Prader-Willi
syndrome, opioid addiction and overdose, and other disease areas
with a significant unmet need.
SUBSYS® and SYNDROS® are trademarks of INSYS
Development Company, Inc., a subsidiary of INSYS Therapeutics,
Inc.
NOTE: All trademarks and registered trademarks
are the property of their respective owners.
Forward-Looking
Statements
This news release contains forward-looking
statements, including discussions about stabilizing and generating
future revenue, our future leadership position in the use of
cannabinoids to develop potential solutions for patients in need
and expectation around research and clinical product development
and our expectations around our pipeline products including
timelines and results related thereto. These forward-looking
statements are based on management’s expectations and assumptions
as of the date of this news release; actual results may differ
materially from those in these forward-looking statements as a
result of various factors, many of which are beyond our control.
These factors include, but are not limited to, risk factors
described in our filings with the United States Securities and
Exchange Commission, including those factors discussed under the
caption “Risk Factors” in our Annual Report on Form 10-K for the
year ended Dec. 31, 2017 and subsequent updates that may occur in
our Quarterly Reports on Form 10-Q. Forward-looking statements
speak only as of the date of this news release, and we undertake no
obligation to publicly update or revise these statements, except as
may be required by law.
Non-GAAP Financial Measures
In addition to reporting all financial
information required in accordance with generally accepted
accounting principles (GAAP), the company is also reporting
Adjusted EBITDA, Adjusted net loss and Adjusted net loss per
diluted share, which are non-GAAP financial measures. Since
Adjusted EBITDA, Adjusted net loss and Adjusted net loss per
diluted share are not GAAP financial measures, they should not be
used in isolation or as a substitute for consolidated statements of
comprehensive loss and cash flow data prepared in accordance with
GAAP. In addition, the company’s definitions of Adjusted EBITDA,
Adjusted net loss and Adjusted net loss per diluted share may not
be comparable to similarly titled non-GAAP financial measures
reported by other companies. For a full reconciliation of Adjusted
EBITDA and Adjusted net loss to GAAP net income, please see the
attachments to this earnings release.
Adjusted EBITDA, as defined by
the company, is calculated as follows:
Net loss, plus:
• Interest income (expense), net;
• The recorded provision for income taxes;
• Depreciation and amortization; and
• Non-cash expenses, such as stock compensation expense and
accruals for expected litigation settlements.
The company believes that Adjusted EBITDA can be
a meaningful indicator, to both company management and investors,
of the past and expected ongoing operating performance of the
company. EBITDA is a commonly used and widely accepted measure of
financial performance. Adjusted EBITDA is deemed by the company to
be a useful performance indicator because it includes an add-back
of non-cash and non-recurring operating expenses that may be
subject to uncontrollable factors not reflective of the company’s
true operational performance.
Adjusted net loss, as defined
by the company, is calculated as follows:
Net loss, plus:
• The recorded provision for income taxes;
• Non-cash expenses, such as stock compensation expense,
non-cash interest, and non-cash other expense (i.e., accruals for
expected litigation settlements); and;
• Less an estimated cash tax provision, net of the benefit
from utilizing NOL carry-forwards and windfalls from employee stock
option exercises.
Adjusted net loss per diluted
share is equal to Adjusted net loss divided by the diluted
share count for the applicable period.
The company believes that Adjusted net loss and
Adjusted net loss per diluted share are meaningful financial
indicators, to both company management and investors, in that they
exclude non-cash income and expense items, as well as other income
and expense items that are not expected to recur and therefore are
not reflective of continuing operating performance.
While the company uses Adjusted EBITDA, Adjusted
net loss and Adjusted net loss per diluted share in managing and
analyzing its business and financial condition and believes these
non-GAAP financial measures to be useful to investors in evaluating
the company’s performance, each of these financial measures has
certain shortcomings. Adjusted EBITDA does not take into account
the impact of capital expenditures on either the liquidity or the
GAAP financial performance of the company and likewise omits
share-based compensation expenses, which may vary over time and may
represent a material portion of overall compensation expense.
Adjusted net loss does not take into account non-cash expenses that
reflect the amortization of past expenditures, or include
stock-based compensation, which is an important and material
element of the company’s compensation package for its directors,
officers and other key employees. As a result of the inherent
limitations of each of these non-GAAP financial measures, the
company’s management utilizes comparable GAAP financial measures to
evaluate the business in conjunction with Adjusted EBITDA, Adjusted
net loss and Adjusted net loss per diluted share and encourages
investors to do likewise.
— Financial tables follow —
|
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS |
(In thousands, except share and per share
amounts) |
(unaudited) |
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
(As Revised) |
|
|
|
|
|
(As Revised) |
|
Net revenue |
$ |
18,346 |
|
|
$ |
30,670 |
|
|
$ |
65,723 |
|
|
$ |
109,208 |
|
Cost of revenue |
2,379 |
|
|
7,472 |
|
|
8,179 |
|
|
16,032 |
|
Gross profit |
15,967 |
|
|
23,198 |
|
|
57,544 |
|
|
93,176 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
Sales and
marketing |
7,358 |
|
|
12,825 |
|
|
25,488 |
|
|
41,775 |
|
Research
and development |
14,483 |
|
|
19,552 |
|
|
43,216 |
|
|
46,589 |
|
General
and administrative |
8,906 |
|
|
11,310 |
|
|
29,333 |
|
|
31,883 |
|
Legal |
16,009 |
|
|
4,404 |
|
|
37,494 |
|
|
15,999 |
|
Charges
related to litigation award and settlements |
30 |
|
|
150,850 |
|
|
770 |
|
|
155,300 |
|
Total operating
expenses |
46,786 |
|
|
198,941 |
|
|
136,301 |
|
|
291,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
(30,819 |
) |
|
(175,743 |
) |
|
(78,757 |
) |
|
(198,370 |
) |
Interest income |
483 |
|
|
510 |
|
|
1,470 |
|
|
1,410 |
|
Other income
(expense),net |
- |
|
|
(83 |
) |
|
(472 |
) |
|
(44 |
) |
Loss before income
taxes |
(30,336 |
) |
|
(175,316 |
) |
|
(77,759 |
) |
|
(197,004 |
) |
Income tax expense
(benefit) (a) |
240 |
|
|
(9,036 |
) |
|
537 |
|
|
(16,096 |
) |
Net loss (a) |
$ |
(30,576 |
) |
|
$ |
(166,280 |
) |
|
$ |
(78,296 |
) |
|
$ |
(180,908 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common
share (a): |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
(0.41 |
) |
|
$ |
(2.28 |
) |
|
$ |
(1.06 |
) |
|
$ |
(2.50 |
) |
Diluted |
$ |
(0.41 |
) |
|
$ |
(2.28 |
) |
|
$ |
(1.06 |
) |
|
$ |
(2.50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in
computing net loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
74,254,177 |
|
|
72,810,827 |
|
|
73,997,016 |
|
|
72,366,618 |
|
Diluted |
74,254,177 |
|
|
72,810,827 |
|
|
73,997,016 |
|
|
72,366,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Percentage of
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenue |
100.0% |
|
|
100.0% |
|
|
100.0% |
|
|
100.0% |
|
Cost of revenue |
13.0% |
|
|
24.4% |
|
|
12.4% |
|
|
14.7% |
|
Gross profit |
87.0% |
|
|
75.6% |
|
|
87.6% |
|
|
85.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses: |
|
|
|
|
|
|
|
|
|
|
|
Sales and
marketing |
40.1% |
|
|
41.8% |
|
|
38.8% |
|
|
38.3% |
|
Research
and development |
78.9% |
|
|
63.7% |
|
|
65.8% |
|
|
42.7% |
|
General
and administrative |
48.5% |
|
|
36.9% |
|
|
44.6% |
|
|
29.1% |
|
Legal |
87.3% |
|
|
14.4% |
|
|
57.0% |
|
|
14.7% |
|
Charges
related to litigation award and settlements |
0.2% |
|
|
491.9% |
|
|
1.2% |
|
|
142.2% |
|
Total operating
expenses |
255.0% |
|
|
648.7% |
|
|
207.4% |
|
|
267.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
operations |
-168.0% |
|
|
-573.1% |
|
|
-119.8% |
|
|
-181.7% |
|
Interest income |
2.6% |
|
|
1.7% |
|
|
2.2% |
|
|
1.3% |
|
Other income
(expense),net |
0.0% |
|
|
-0.3% |
|
|
-0.7% |
|
|
0.0% |
|
Loss before income
taxes |
-165.4% |
|
|
-571.7% |
|
|
-118.3% |
|
|
-180.4% |
|
Income tax expense
(benefit) |
1.3% |
|
|
-29.5% |
|
|
0.8% |
|
|
-14.7% |
|
Net loss |
-166.7% |
|
|
-542.2% |
|
|
-119.1% |
|
|
-165.7% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) 2017
amounts revised for the correction of immaterial errors as
documented above |
|
|
INSYS THERAPEUTICS,
INC. |
CONDENSED CONSOLIDATED BALANCE
SHEETS |
(In thousands) |
(unaudited) |
|
|
|
|
|
September 30, |
|
December 31, |
|
2018 |
|
2017 |
|
|
|
(As Revised) |
ASSETS: |
|
|
|
Cash and
cash equivalents |
$ |
20,845 |
|
$ |
31,999 |
Short-term
investments |
79,719 |
|
85,189 |
Accounts
receivable, net |
12,717 |
|
21,513 |
Inventories |
10,754 |
|
17,408 |
Prepaid
expenses and other current assets |
21,442 |
|
19,833 |
Long-term
investments |
12,451 |
|
46,733 |
Other
non-current assets |
59,563 |
|
56,405 |
Total
assets |
$ |
217,491 |
|
$ |
279,080 |
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY: |
|
|
|
Liabilities
(a) |
$ |
217,353 |
|
$ |
212,871 |
Stockholders' equity |
138 |
|
66,209 |
Total
liabilities and stockholders' equity |
$ |
217,491 |
|
$ |
279,080 |
|
|
|
|
(a) 2017
amounts revised for the correction of immaterial errors as
documented above |
|
|
|
|
|
INSYS THERAPEUTICS, INC. |
RECONCILIATION OF NET LOSS TO NON-GAAP
ADJUSTED EBITDA |
(In thousands) |
(unaudited) |
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
(As Revised) |
|
|
|
|
|
(As Revised) |
|
Net loss (a) |
$ |
(30,576 |
) |
|
$ |
(166,280 |
) |
|
$ |
(78,296 |
) |
|
$ |
(180,908 |
) |
Adjustments to arrive
at EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
Interest
income |
(483 |
) |
|
(510 |
) |
|
(1,470 |
) |
|
(1,410 |
) |
Income
tax expense (benefit) (a) |
240 |
|
|
(9,036 |
) |
|
537 |
|
|
(16,096 |
) |
Depreciation and amortization expense |
1,938 |
|
|
1,817 |
|
|
5,689 |
|
|
5,505 |
|
EBITDA |
(28,881 |
) |
|
(174,009 |
) |
|
(73,540 |
) |
|
(192,909 |
) |
Non-cash
stock compensation expense |
2,863 |
|
|
4,768 |
|
|
9,417 |
|
|
13,048 |
|
Charges
related to litigation award and settlements |
30 |
|
|
150,850 |
|
|
770 |
|
|
155,300 |
|
Adjusted EBITDA |
$ |
(25,988 |
) |
|
$ |
(18,391 |
) |
|
$ |
(63,353 |
) |
|
$ |
(24,561 |
) |
|
(a) 2017
amounts revised for the correction of immaterial errors as
documented above |
|
|
INSYS THERAPEUTICS, INC. |
RECONCILIATION OF NET LOSS TO NON-GAAP
ADJUSTED NET LOSS |
(In thousands, except per share
amounts) |
(unaudited) |
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
|
|
|
(As Revised) |
|
|
|
|
|
(As Revised) |
|
Net loss (a) |
$ |
(30,576 |
) |
|
$ |
(166,280 |
) |
|
$ |
(78,296 |
) |
|
$ |
(180,908 |
) |
Income tax expense
(benefit) (a) |
240 |
|
|
(9,036 |
) |
|
537 |
|
|
(16,096 |
) |
Loss before income
taxes |
(30,336 |
) |
|
(175,316 |
) |
|
(77,759 |
) |
|
(197,004 |
) |
Adjustments to arrive
at Adjusted net loss: |
|
|
|
|
|
|
|
|
|
|
|
Non-cash
stock compensation expense |
2,863 |
|
|
4,768 |
|
|
9,417 |
|
|
13,048 |
|
Charges
related to litigation award and settlements |
30 |
|
|
150,850 |
|
|
770 |
|
|
155,300 |
|
Adjusted loss before
income taxes |
(27,443 |
) |
|
(19,698 |
) |
|
(67,572 |
) |
|
(28,656 |
) |
Less:
Adjusted income tax provision |
300 |
|
|
(4,363 |
) |
|
(1,528 |
) |
|
(8,423 |
) |
Adjusted net loss |
$ |
(27,743 |
) |
|
$ |
(15,335 |
) |
|
$ |
(66,044 |
) |
|
$ |
(20,233 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net loss per
diluted share |
$ |
(0.37 |
) |
|
$ |
(0.21 |
) |
|
$ |
(0.89 |
) |
|
$ |
(0.28 |
) |
|
(a) 2017
amounts revised for the correction of immaterial errors as
documented above |
|
CONTACT: |
Corporate Communications |
Investor Relations |
|
Joe McGrath |
Jackie Marcus or Chris Hodges |
|
INSYS Therapeutics |
Alpha IR Group |
|
480-500-3101 |
312-445-2870 |
|
jmcgrath@insysrx.com |
INSY@alpha-ir.com |
INSYS THERAPEUTICS, INC. (NASDAQ:INSY)
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