ASRT - NASDAQ

Thank you for standing by. My name is Mark, and I will be your conference operator. At this time, I would like to welcome everyone to the Assertio Holdings Second Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker remarks, there will be a question-and-answer session. [Operator Instructions] Thank you. I would now like to turn the call over to Matt Kreps, Investor Relations. Matt, the floor is yours.

Thanks Brendan. Today, I would like to cover our financial results for the second quarter 2024. Before I begin, I want to note that my commentary, similar to last quarter, will focus on sequential comparisons for the first quarter. Comparisons to prior year are less relevant given the acquisition of Spectrum and the generic competition of Indocin that occurred in the prior year third quarter. Also, I want to remind everyone that Rolvedon is now our lead asset and brings with it associated changes in margin, operating cost structure and cash flows that you are seeing in our results this year as compared to the prior year. For the second quarter of 2024, our total product sales were $30.7 million, down slightly from $31.9 million in the first quarter. The decline is due to the growth in Rolvedon being offset by expected decline in Indocin as there is a difference in growth trajectory of Rolvedon in its lifecycle compared to the erosion of Indocin which went generic less than a year ago. Rolvedon sales in the second quarter were $15.1 million, up from $14.5 million in the prior quarter. The increase is due to continued volume growth that was partially offset by lower net pricing. Demand volume for Rolvedon grew again sequentially and set another high during the second quarter. Published ASP change during the quarter for Rolvedon was in line with our expectations and we continue to have the second highest ASP in the class. Indocin sales were $6.9 million compared to $8.7 million in the first quarter. Generic competition, which is still in its first year, continues to impact both volume and pricing. Reported gross margin in the second quarter was 71% compared to 65% in the first quarter. Both quarters were impacted by purchase accounting inventory step up amortization for Rolvedon, which is now complete. Excluding this step-up amortization, gross margin in the second quarter was 73% compared to 78% in the first quarter. The second quarter was impacted by an increase in inventory write downs in late-stage products, which had a three-percentage point impact. Turning to operating expenses. SG&A expense was $18.4 million in the second quarter, down slightly from $18.5 million in the first quarter. Second quarter SG&A expense benefited from a $1.9 million gain on a settlement of insurance reimbursement claims, which was offset by higher legal spend on new and ongoing matters and other expenses. R&D expense in the second quarter was flat and primarily included costs for Rolvedon trials. On an adjusted basis, excluding stock compensation and depreciation expenses, total operating expenses were $17.7 million in the second quarter versus $18 million in the first quarter. GAAP net income for the first quarter was a loss of $3.7 million, down from a loss of $4.5 million in the first quarter. Because GAAP net income includes a number of non-cash expenses, we also use adjusted EBITDA as a good indicator of operating performance of the core business. Q2 adjusted EBITDA was a positive $5 million compared to Q1 adjusted EBITDA of $7.4 million. The change was primarily due to the impact of lower product sales and increase in inventory write-down expense. Please refer to our press release for additional reconciliation of our adjusted EBITDA results. Crossing over to cash flow and our balance sheet, we generated $7.4 million in cash flow from operations in the second quarter on top of the $7.5 million in the first quarter. As we have previously noted, quarterly cash flows will fluctuate due to the timing of working capital, royalties and interest payments, as well as shift in product mix from Indocin to Rolvedon. Cash and short-term investments at the end of the second quarter were $88.4 million, up from $80.7 million in the first quarter, and debt was unchanged at $40 million. In the second quarter, we invested cash into short-term investments, leading to a change in our balance sheet tables. Our total cash position referenced in our commentary today includes the line items, cash and cash equivalents, plus a new line item for short-term investments. We are also maintaining our previously announced guidance for 2024, which provided for net product sales in a range of $110 million to $125 million, an adjusted EBITDA in a range of $20 million to $30 million. With that, we will open the floor to questions from our covering research analyst. Operator, please go ahead with the instructions.

We will now begin the question-and-answer session. Your first question comes from the line of Thomas Flaten with Lake Street Capital Markets. Thomas, your line is now open.

Your next question comes from the line of Ram Selvaraju with H.C. Wainwright. Ram, your line is now open.

Your next question comes from the line of Naz Rahman with Maxim Group. Naz, your line is now open.

Yeah, yeah. Naz, thanks for the question. I'll probably echo what Brendan said in terms of how we're looking at assets that fit our capabilities. I think we're looking at acquisition size that fit our capabilities. Obviously, we'll start with from a capital perspective, we have several avenues, but we'll start with the lowest cost of capital, which for us will be our cash on our balance sheet. And I think from there, we have opportunities to look at either mixed structured from a debt perspective, but I think we see ourselves utilizing cash first and then going down the line in terms of capital structure.

Your next question comes from the line of Scott Henry with Alliance Global Partners. Scott, your line is now open.

Yeah, Scott, you'll see our 10-Q filed later today, but both of them in aggregate approximated $4.7 million. And as I kind of said in my commentary, the entirety of our product portfolio, revenue change between Q1 and Q2 was the plus and minus from Rolvedon and Indocin. The rest of the product portfolio was fairly flat.

Your next question comes from the line of Jim Sidoti with Sidoti and Company. Jim, your line is now open.

Okay. And for Rolvedon, AJ, were there any inventory step up charges in the quarter?

There was an inventory step up charge. It was about $400,000.

Okay. And can you just repeat what the write-down charge, what the write-down charge you took was?

Yeah. The inventory write-down charges that we took during the quarter were for our late-stage product assets, and the increase quarter-over-quarter was approximately a $1 million.

Okay. All right. Thank you.