ASRT - NASDAQ

Thank you for standing by. My name is John, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Assertio Holdings Third Quarter Results Conference Call. All lines have been placed in mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Matt Kreps, Investor Relations. Please go ahead.

Thanks, Brendan. Today, I would like to cover our financial results for the third quarter of 2024. Before I begin, I want to note that my commentary will focus on sequential comparisons to the prior quarter. Comparisons to the prior year are less relevant given the acquisition of Spectrum and 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 throughout this year. For the third quarter of 2024, our total product sales were $28.7 million, down slightly from $30.7 million in the second quarter, primarily due to ROLVEDON sales being offset by the expected decline in INDOCIN. ROLVEDON sales were $15 million in the third quarter compared to $15.1 million in the second quarter. The change was driven by continued volume growth, offset by lower net pricing. We continue to hold about one-third share in our served markets. INDOCIN sales were $5.7 million in the third quarter, down from $6.9 million in the second quarter, driven by lower net pricing as a result of generic competition. In terms of volume, we continue to target and hold an approximate market share split. Reported gross margin in the third quarter improved to 74%, compared to 71% in the second quarter, primarily due to level of inventory step-up amortization and write-downs from prior quarter, not repeating. Turning to operating expenses. SG&A expense was $16.7 million in the third quarter, decreased from $18.4 million in the second quarter. R&D expense in the third quarter was relatively flat at approximately $1 million. On an adjusted basis, excluding stock compensation, D&A and change in fair value, adjusted operating expense was $16.4 million in the third quarter, down from $17.7 million in the second quarter. The decrease was primarily due to lower sales and marketing and other G&A costs, partially offset by net higher legal related charges. GAAP net income for the third quarter was a loss of $2.9 million, down from a loss of $3.7 million in the second quarter. Because GAAP net income includes a number of non-cash expenses, we also use adjusted EBITDA as the good indicator of the operating performance of core business. Q3 adjusted EBITDA was a positive $5.3 million, increased from $5 million in the second quarter due to lower operating expenses, partially offset by lower product sales. Please refer to our press release for a detailed reconciliation of our adjusted EBITDA results. Crossing over to cash flow and our balance sheet. As a reminder, we invest cash into short-term investments. Therefore, our reference to total cash position includes both cash and cash equivalents and short-term investments. Total cash at the end of the quarter was $88.6 million, effectively flat to the $88.4 million in the second quarter and debt remained unchanged at $40 million. As we previously noted, quarterly operating cash flows will fluctuate due to timing of working capital in terms of cash receipts and payments due to shift in product mix from INDOCIN to ROLVEDON. Third quarter operating cash flows were negligible and were impacted by timing of working capital from cash collection and lower product sales. Year-to-date, we have generated $15 million in cash flows from operations. With that, we will open the floor to questions from our covering research analysts. Operator, please go ahead with the instructions.

Thank you, Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Thomas Flaten with Lake Street Capital Markets. Please go ahead.

Hey. Good afternoon, guys. Congrats on the quarter. Ajay, you didn't mention anything about guidance. Any thoughts on that for us?

Yeah. Thanks for the question, Thomas. You're right. At this point, we would have liked to narrow the range but we still see a flux in a few key areas for the remainder of the year. Therefore, we're going to keep the remaining guidance range that's out there. Some of the areas we'll continue to focus on is, first, focus on stabilizing the business as we cross over from INDOCIN into ROLVEDON. Secondly, as we continue to monitor the generic competitive landscape of INDOCIN. And then third is the dynamic pricing and volume activity occurring in the GCSF market landscape.

Your next question comes from the line of Naz Rahman with Maxim Group. Please go ahead.

Hi. Thank you for taking my question. They're both on ROLVEDON. I'll start with this. In regards to pricing, where do you think the pricing decline sort of stabilized? Do you think you -- you've reached stable prices or do you think there's still room for the pricing -- that pricing to decline?

Yeah. Hey, Naz. This is Ajay. Thanks for the question. I would say the GCSF landscape is very competitive, especially with the biosimilars and some of the more recent entrants in the last few years really driving pricing. Therefore, in this market, we are somewhat hindered by what the market competitors will continue to do. We have seen pricing declines over the last few quarters, which we anticipate the trend would continue as market share starts to equalize. But one of the things we're absolutely focused on is the market that we operate in from a Medicare Part B perspective and maintaining one of our leading market share position there.

[Operator Instructions] Our next question comes from the line of Scott Henry with AGP. Please go ahead.

Okay. Great. And SG&A in the quarter was on the -- it seemed pretty low. It's a good thing. Do you think that's a fair number to extrapolate going forward? Is that kind of the run rate you have currently?

Yeah. Scott, good question. Yes, I would say, generally, in our business, the second half of the year from an SG&A is generally lower as a lot of our S&M initiatives occur in the first half of the year. With that, we also additionally had additional kind of restructuring and we -- transition we did with the company in the beginning in the first quarter of the year. So that kind of reflected on a higher run rate. I would say the average of the last two quarters is sufficient for the remainder of the year.

Our next question comes from the line of Ram Selvaraju with H.C. Wainwright. Please go ahead.

No, I think Brendan hit it spot on, right? The former in terms of the appeal of the product itself helps us get kind of into the door and then the second on the contracting side, it helped us with the stickiness of sustaining our leading market share in the oncology space.

And then just as a follow-up, I just wanted to see if, Ajay, you wanted to comment on what you see as future trends on the gross margin front, if you think that sustainably maintaining gross margins in the sort of low to mid-70s is possible as the product and revenue mix evolves? Thanks.

Yeah. No, thanks for that question. Yes, I think, as I mentioned to Thomas, right, I think we're keeping our previously announced guidance for '24 in line. We're not ready yet to comment anything beyond kind of '24 here. So previously stated comments on gross margin that year-over-year, there will be a gross margin erosion as we shift from INDOCIN, which was a highly accretive gross margin product with very little commercial activity behind it, to ROLVEDON, which is a biologic and carries a higher COGS rate. And additionally, we have the commercial spend behind it. So we do continue to see that shift occurring into Q4 as well. But we are absolutely focused on from a pricing standpoint, maintaining that blended between 70% and 75% gross margin rate for 2024.

Thank you.