ASRT - NASDAQ

Good day, ladies and gentlemen. Welcome to Assertio Holdings First Quarter 2025 Results Conference Call. Just a reminder that today's call is being recorded. I would now like to hand things over to Mr. Matt Kreps. Please go ahead, sir.

Thank you and good afternoon. Thank you all for joining us today to discuss Assertio’s first quarter 2025 financials. The news release covering our results for this period is now available on the investor page of our website at investor.assertiotx.com. I would encourage you to review the release and tables in conjunction with today's discussion. With me today are Brendan O'Grady, our Chief Executive Officer; and Ajay Patel, Chief Financial Officer. Brendan will open the remarks and provide an overview of the business, including an update on Assertio's long-term business strategy. After Brendan, Ajay will cover our financial results and guidance. Brendan will then provide some closing comments before we take questions from our covering research analysts. Please note that during this call, management will make projections and other forward-looking statements regarding our future performance. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in today’s -- this afternoon's press release, as well as the Assertio's filings with the SEC. These and other risk factors are more fully described in the risk factors section and other sections of our annual report on Form 10K and in our Form 10Q filings. Our actual results may differ materially from those projected in the forward-looking statements. Assertio specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. With that, I will now turn the call over to Brendan. Please go ahead.

Thank you Matt, and thank you to everyone who has joined today's call. I'll begin today with a quick overview of our first quarter financial results, which are in line with the full-year 2025 net product sales and adjusted EBITDA expectations that were set forth during the March earnings call. In the first quarter, net product sales came in slightly ahead of plan at 26 million, and we are tracking to our full year net product sales and adjusted EBITDA outlook. As I signaled in March, Rolvedon results in the first quarter were impacted by sell through of fourth quarter initial stocking activity that supported customer and volume expansion, which we expect to benefit us from Q2 onward. In addition, we are continuing to add new customers and have strengthened our payer coverage that started in February with Cigna and expect to further expand our payer coverage going into the second half of this year. Overall Rolvedon demand remains strong and combined with our focused execution, we foresee net sales to continue increasing throughout the year. In addition, our revised Sympazan promotional strategy is proving effective with total Sympazan prescriptions in the first quarter up 6.5% year-over-year. This is a very positive trend that we expect will continue building in the quarters ahead. Lastly, Indocin remained stable in the first quarter, achieving our expectation for net sales and contribution. These results, along with expected performance throughout 2025 are influenced by the substantial progress Assertio has achieved to date, implementing the long-term business strategy that I put into place last year. As I approach my 1-year anniversary with Assertio, I think it's important to recognize the team's progress and address our expectations moving forward. As previously stated, our strategy includes 3 phases characterized as stabilization, transformation, and growth. Stabilization was successfully completed in 2024 and has adapted our organization to the changing operating environment. We strengthened our balance sheet, repositioned our portfolio to focus on Rolvedon and Sympazan as core growth drivers, and rebalanced our talent and promotional resources. These significant achievements pave the way for us to begin implementing our current phase transformation. This phase is occurring throughout 2025 as we implement actions intended to catalyze a shift in future growth potential. I will cover this in more detail in just a minute. Finally, the growth phase of our strategy is expected to start in 2026, during which time we intend to become a leading commercially focused specialty pharma company that creates top tier value over the long term. Now, coming back to the transformation phase of our strategy, we set forth the following priorities for 2025. First, reduce legal exposure; second, simplify our corporate structure and processes; third, prioritize investment and growth assets; fourth, divest non-core assets; and fifth, use the strength of our balance sheet to close a strategic transaction. These 5 transformation priorities are well underway with the goal of completing each by the end of this year. And I'm encouraged by our progress in just the first 4 months. I'll address several notable achievements and we'll start with reducing our legal exposure. Assertio has settled multiple prior legal matters, including the previously disclosed 2017 Department of Justice False Claims Act qui tam lawsuit, the last remaining Glumetza antitrust action, and Spectrum’s legacy Luau securities class action. It is important to note that we admit to no wrongdoing in any of these cases, but decided to settle rather than continue to litigate and incurring the cost to defend as well as the distraction to our business. In addition, we obtained a dismissal of the company's Edwards Securities class action pending court approval. Our overall progress in reducing our legal exposure improves our ability to optimize operating expenses by reducing legal costs and refocusing those resources back to the business. As noted in our earnings release, we have also begun simplifying our corporate holding structure by transferring all of our assets in our Assertio Therapeutic Subsidiary to ATIH Industries LLC. At the closing of this transaction, Assertio Therapeutics held approximately 8.2 million in cash, a single digit royalty in Indocin, and certain legal liabilities, including those related to opioid litigation, which ATIH has assumed responsibility for managing and defending. As a result of this transaction, neither Assertio Holdings nor any of its current subsidiaries remain named defendants in any opioid-related litigation. As we move throughout the year, we will also progress our strategy to divest some non-core assets, which will further improve our ability to reallocate corporate resources to focus on growth and bolster our balance sheet to acquire or in license new growth assets. Already we have added new marketing support for Rolvedon and rebalanced promotional efforts for Sympazan by augmenting our omnichannel activities with select in-person support for the largest markets and key high decile prescribers. As a result, we are seeing improved efficiency and sales performance as previously mentioned. The actions I have just touched on allow Assertio to optimize operating expenses so that we can better invest in the future and advance our strategic activities as we move through the transformation and into the growth phase. I want to conclude my remarks by stating that Assertio's underlying business is strong and will be most successful by pivoting to a more sustained operating model driven by not only cash flow assets, but by growth assets. To be clear, our strategy is to focus on specialty pharma assets with the potential to grow over a sustained period of time within a commercially focused operating model, that is why we are implementing a long-term business strategy that we are confident can create sustained near-term growth and increase long-term value. I look forward to providing you with continued updates on our progress as we head through 2025. I will now hand over to our CFO, Ajay Patel, to walk us through the details of our first quarter performance.

Thanks, Brendan. Today, I'll walk through our financial results for the first quarter of 2025. My commentary will resume the use of year-over-year comparisons as we have now completed the stabilization phase that Brendan discussed regarding the 2023 Spectrum acquisition and Indocin’s generic competition, which made year-over-year comparisons difficult in 2024. Q1 2025 product sales came in at $26 million compared to $31.9 million in the prior year quarter. Rolvedon sales were $13.1 million, a decrease from $14.5 million in the prior year first quarter, driven by lower pricing, partially offset by higher volume. As Brendan mentioned, the current year first quarter was impacted by fourth quarter stocking. Indocin net product sales were $5.5 million down from $8.7 million in the prior year quarter due to the impacts of generic competition. The prior year first quarter was still in the early stages of the generic impact. Sympazan sales were $2.2 million compared to $2.6 million in the prior year period, impacted slightly by pricing and volume. Reported gross margin increased to 70% from 65% a year ago. The prior year reported gross margin included Rolvedon inventory step up amortization, excluding the impact of the inventory step up, prior year gross margin was 78%. The year-over-year gross margin decline was driven by the impact of higher Rolvedon volumes and cost of sales. Turning to operating expenses. Reported SG&A expense was $22 million up from $18.5 million in the prior year quarter, primarily driven by higher legal charges, including a net settlement charge of $2.8 million for the Luau shareholder matter. R&D expense was $0.4 million down from $0.7 million a year ago due to the completion of the same-day dosing trial at the end of 2024. Adjusted operating expenses, which exclude stock compensation, DNA, and non-reoccurring restructuring and legal settlement charges were $18.5 million compared to $17.3 million in the prior year period due to higher external litigation costs. GAAP net income for the first quarter was a loss of $13.5 million compared to a loss of $4.5 million in the prior year. In addition to the impacts just discussed, GAAP net income was affected by higher intangible amortization expense due to a change in [indiscernible] at the end of 2024. Adjusted EBITDA for the first quarter was $0.2 million compared to $7.4 million in the prior year quarter, primarily reflecting the impact of lower net sales and gross margin as discussed. Turning to our balance sheet and cash flow statements. As of March 31, 2025, cash and investments totaled $87.3 million compared to $100.1 million as of December 31, 2024. Cash flow from operations during the first quarter was impacted by the timing of approximately $12 million of accounts receivable collected in early April. At the end of April 2025, cash and investment stood at approximately $96.7 million. Debt at March 31, 2025 remains unchanged at $40 million comprised of the company's 6.5% convertible notes with no maturities until September 2027. With that, I will turn the call back to Brendan.

Thanks Ajay. In the first quarter, the Assertio team delivered strong financial performance on track to the expectations that we set for 2025. We also demonstrated outstanding execution on the transformation phase of our business strategy with notable achievements that keep us on a path to realizing our goal of creating sustainable near-term growth and increased long-term value. I am confident that the strengths of our underlying financials, ongoing business performance, and business strategy will enable our success. With that, let's go ahead and open the call for questions from our analysts.

[Operator Instructions] Our first question today com es from Thomas Flaten, Lake Street.

Hey, good afternoon, guys. Thanks for taking the questions. Brendan, congrats on offloading the opioid litigation matters. Were there, just out of curiosity on that, was there value in either direction on that? Did you guys pay them to take it? Did they pay you to accept it? Was there any value movement there?

Yeah, just nominal value they paid us Thomas.

Okay. And a quick one for Ajay. Ajay, you guys have some relative to the beginning of last year, your accrued rebates, returns, accrued liabilities are up. How do we think about you guys using cash to bring those -- bring those balances back down again? Will that occur pretty evenly over the course of the year or how should we think about that?

Yeah, Thomas, thanks for the question. Yeah, I would think about that relatively evenly. As you know, the primary factor of that is Rolvedon with its ASP based pricing. So, as the rebates increase for that, the payments typically occur in the subsequent quarter.

Excellent. I'll hop back in the queue. Thank you.

Sure.

We'll take the next question from Naz Rahman, Maxim Group.

The next question will come from Ram Selvaraju, H.C. Wainwright

Our next question today comes from Scott Henry, Alliance Global Partners.

Okay, thank you for that color. And then with regards to SG&A, I believe you said that the base SG&A is around $18.5 million quarterly. I guess the question is, did I hear that correct? And as well, what would you expect for the legal wind down, particularly given that you've had this divestment, should that start to be declined materially in the coming quarters or how long should some of that other litigation take?

Yeah, thanks for the question, Scott. You're right. So, the base adjusted OpEx for the first quarter was 18.5 million. Now in the first quarter we were burdened, we typically have kind of 2 components of litigation exposure. Legacy matters and shareholder matters. As Brendan kind of alluded to in his comments right, the legacy matters for the most part have been mitigated now with the divestment of Assertio therapeutics. We are expecting kind of on an annualized front that to benefit us in the neighborhood of $2 million to $3 million annually. And then from a shareholder litigation, as we continue to resolve, settle and exit those cases, the ongoing burden does decrease over time.

[Operator Instructions] Up next is Jim Sidoti, Sidoti & Company.