John Thomas - SVP of IR and Corporate Communications Arthur Higgins - President and CEO Phil Donenberg - SVP and CFO Dan Peisert - SVP and CFO.

Mickey Ingerman - Piper Jaffray.

And good afternoon. My name is Artezia and I will be your conference operator today. At this time I would like to welcome everyone to the Assertio Therapeutics Third Quarter 2018 Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to our host Mr.

John Thomas, Senior Vice President of Investor Relations and Corporate Communications. Sir, you may begin your conference..

Thank you Artezia. Good afternoon and welcome to our investor conference call to discuss Assertio’s third quarter 2018 financial results announced this afternoon. A news release and investor presentation covering our earnings for this period are now available on the investor page of our website at assertiotx.com.

I also encourage you to take a look at the presentation slides. As there are a few that are particular that may be particularly helpful to today's discussion.

With me today are Arthur Higgins, President and Chief Executive Officer; Phil Donenberg, our retiring Senior Vice President and Chief Financial Officer; and Dan Peisert, our newly appointed Senior Vice President and Chief Financial Officer.

I would like to remind you that the matters discussed on this call contain forward-looking statements that involve risks and uncertainties, including those related to the commercialization of Gralise, CAMBIA and Zipsor.

Our collaborative arrangements including with Collegium Pharmaceutical, the company’s financial outlook for 2018, development plans including those for cosyntropin depot and other statements that are not historical facts.

Actual results may differ materially from the results predicted and recorded should not be considered an indication of future performance. These and other risks are more fully described in the Risk Factors section and other sections of our Quarterly Reports on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2017.

Assertio disclaims any obligation to update or revise any forward-looking statements made on this call as a result of new information or future developments.

Assertio’s policy is to only provide financial guidance for the current fiscal year and to provide updates or reconfirm its guidance only by issuing a news release or filing updated guidance with the SEC in a publicly accessible document. References of the current cash and cash equivalents are based on balances as of September 30, 2018.

All guidance including that related to the company’s expected total product revenues, operating expenses, adjusted non-GAAP earnings and non-adjusted EBITDA are as of today.

The non-GAAP financial measures Assertio uses are not based on any standardized methodology prescribed by GAAP and maybe calculated differently from and, therefore, may not be comparable to non-GAAP measures used by other companies. With that, I will turn the call over to Arthur.

Arthur?.

Thank you John and good afternoon and welcome everyone.

First I am pleased to report that we delivered a very solid third quarter, in terms of all of our net sales as well as our adjusted EBITDA as a result, we are in a comfortable position today to reaffirm our full year as a result, we are in a comfortable position state to reaffirm our full year 2018 guidance range for both our Neurology Franchise Net Sales as well as our adjusted EBITDA.

In addition, we raised our full year GAAP earning guidance to reflect our settlement with Purdue. Overall, we continue to make excellent progress, executing our three-pillar strategy of maintain, grow and build. Despite our significant progress, we realize that some investors have specific questions about our business.

It is our responsibility as a senior management team to better address these questions. We plan to do that on today's call and we will continue addressing your questions over the next month as we participate in three different New York investor conferences. Information on these conferences is available on our website.

The main point is that it we will be highly visible and available to the end of the year. So I’d encourage you to seek advantage of our outreach. So let me begin with our three-pillar and specifically our agreement with Collegium. This has been the source of some market rumors and speculation that Collegium might takes a s size its termination rates.

Clearly that's not happening. I'm very pleased to announce today we've amended and strengthened our partnership agreement such that no longer allows for termination prior to the end of 2021.

Exchange for this adjustment and to address, the lower NUCYNTA sales that are cut earlier in this year as a result of supply interruptions, Collegium will now receive slightly better economics.

It is however worth noting if in the future, NUCYNTA sales were approximately $233 million, which we believe is an achievable goal, the economics of the amended agreement are essentially identical to the current agreement.

With no question, it is in our best interest to ensure that Collegium that being properly rewarded for its commitment to grow the NUCYNTA franchise.

For Assertio, this agreement provides greater certainty of NUCYNTA income and importantly by the moving early termination of act makes the arrangement more valuable for us in any future financing our business.

In summary, our partnership is strong, both companies remained committed and confident with the Collegium can first stabilize and then grew the NUCYNTA franchise. Our amended agreement underscores our commitment and better serves both companies. Don will provide more details on the Collegium agreement in a moment following [indiscernible].

Turning now to our growth pillar, there are questions about our ability to return on neurology franchise to growth. As we discussed in the past, our first priority was to stabilize this business and then return to growth. In the third quarter, we are pleased to report quarter-over-quarter 12 total prescriptions growth for both Zipsor and CAMBIA.

For Gralise, we stabilize the brand we stabilized the plan, we believe however that the new commercial initiatives began rolling out initially will help return Gralise to prescription growth in 2019. The progress we made in neurology business is also evident in a reported sales of $29.4 million in the third quarter up from $25.9 million in Q2.

As a result, we are pleased to reaffirm our full year sales guidance for our neurology business. Moving now to our build pillar, we continue to hear questions about our strategy to initially pursue a diagnostic indication with cosyntropin depot by filing a 505(b)(2) application.

We consider our approach as both innovative and cost effective, all new products face regulatory and commercial hurdles. However, if we are successful, we'll have the opportunity to launch a much needed low cost synthetic cosyntropin depot into the U.S. market at early as 2020. We strongly believe in our strategy for a number of good reasons.

For example, we've already conducted advisory board, the healthcare providers and payers to gauge the level of interest of acceptance. And we've learned that they're generally aware that this cosyntropin depot sold by Mallinckrodt outside the U.S. has similar indications to Acthar Gel sold in the U.S.

Their feedback leads us to believe that providers and peers will be open to using our synthetic product for bathing a straight cosyntropin. And remember, we don't need all peers or physicians on board to have a successful new product launch.

In fact even with limited adoption of our synthetic products, we will be adding an attractive asset to our Assertio portfolio. Finally we continue to get some questions regarding our leverage and our ability to service a secure debt.

So let me directly address that by reminding you that over the last 12 months, we secured 97 million of non-dilutive, non-recourse capital through our Collegium, PDL, Ironwood and Purdue agreements. That's a remarkable achievement for a company of our size.

Through these major cash inflows as well as our own cash flow generation curve, we’ve been able to use our total secured debt from $375 million 12 months ago to $282.5 million as of the end of October this year. And our total secured leverage ratio from 2.9x next 2.2x over a same period. Going forward, we're very comfortable leveraging our debt.

By the end of 2019, we’re targeting our secured leverage to be approximately 1.3 tonnes. But our ability to de-leverage using our own cash also means that we no longer are under any pressure to do any take on refinancing. We will of course continue to evaluate financing options that we consider beneficial to the company and the shareholders.

So in summary, I hope you'll take away from this call five important messages. First, we delivered a solid quarter in which we can continue to make excellent progress executing first new three-pillar strategy of Maintain, Grow and Build. As a result, today we affirmed our full year guidance.

Second, we amended and strengthened our Collegium of units to eliminate any concerns regarding [indiscernible]. In addition, we further strengthened our partnership by providing greater incentive for Collegium to grow in NUCYNTA franchise.

Third, we made good progress on neurology franchise to growth and we are confident that you’ll see our total neurology business including Gralise return to growth in 2019.

Fourth, we remain on track to file for FDA approval of cosyntropin by year end, I mean but we have got a regulatory strategy and another way to introduce a much needed world class product to the U.S. market in a timely manner.

And fifth, regarding our debt, we continue to make excellent progress leveraging for the target of 1.3x comes by the end of 2019. As a result, with limitation in concerning our best to address our future financing needs. Finally, I remind you the time John and I will be very active and visible over the next 30 days.

We wanted to share that our current shareholders and potential new investors better understand the excellent progress we are making executing our three-pillar strategy. With that, I’ll turn the call over to Phil to discuss our third quarter performance in greater detail, and then Dan will review a - of the Collegium.

I’ll also like to take this opportunity to thank Phil for his contributions I wish him well in his retirement. Over to you Phil..

Thank you, Arthur. In addition to Arthur's comments I wanted to address my departure and provide a little perspective. This was a personal decision before starting with Assertio after my previous company was sold I struggled with starting work right away or taking some time off.

I’ve realized at this point in my life I want to enjoy more time with my family and know that Assertio is well poised for success as evidenced by this quarter's solid results.

As Arthur outlined the company is delivering on its goals and Dan Peisert is a very experienced and talented executive who has been pivotal to the company's success and transformation. Moving on, today I'll review financial highlights from our third quarter and provide comments on our guidance.

Then Dan will discuss the financial aspects of the amended Collegium agreement. My discussions afternoon will primarily focus on our non-GAAP results. Please refer to today's earnings news release for an explanation of our non-GAAP financial measures and tables that reconcile the company's non-cat measures to GAAP measurers.

Adjusted the top for the quarter was $45 million, up from $31.1 million in the third order of 2017. Total revenues adjusted for the $3.7 million royalty payment to Grunenthal were $81.2 million for the quarter ended September 30, 2018. There were three principal elements to our revenues.

One net sales of our neurology products of $29.4 million, two; revenue under the commercialization agreement with Collegium in the amount of $27.8 million, net of the Grunenthal royalty of $3.7 million and three, $20 million from the monetization of a royalty stream from PDL Biopharma.

Starting with our neurology portfolio, released third quarter sales were $14.6 million, up sequentially from $13.8 million in the second quarter. CAMBIA had third quarter net sales of $10.4 million, up sequentially from $8.1 million in the second quarter.

And Zipsor had third quarter net sales of $4.4 million, up sequentially from $4 million in the second quarter of 201. Sequentially, all three products group and our neurology product net sales increased more than 14%.

Quarter-over-quarter, we've stabilized our core neurology brands and are seeing positive sequential total prescription growth for the franchise, but we still have more work to do with release. And as Arthur outlined, we have a plan in place to address release. That said, our core products were in line with our expectations.

And from a profitability perspective, we remain vigilant in managing expenses. For prospective, total company non-GAAP SG&A expenses are down approximately 35% year-over-year. Now, I’ll discuss some additional positive developments. We were successful in securing $82 million in the third quarter through strategic transactions.

As previously announced on August 2, 2018, we sold to PDL Biopharma for approximately $20 million. Our remaining interest in royalty payments payable under license agreements relating to the company's Acuform Technology and the type 2 diabetes therapeutic area.

Substantially, all of the company’s interested in such royalty payments were initially sold to PDL in October of 2013. Next as previously announced on August 28, 2018,the company entered into an agreement with Purdue Pharma with regard to the company's patent infringement lawsuit against Purdue in the U.S.

District Court for the District of New Jersey, in which the company alleged infringement by Purdue of certain of the company's patents in relation to produce commercialization of Oxycontin.

Under the terms of the agreement, Purdue will pay Assertio a total of $62 million with $30 million paid on August 28 of 2018 and an additional $32 million to be paid on February 1, 2019. The agreement resolves all pending claims between the two parties.

These actions combined with a $5 million milestone payment from Ironwood in the second quarter, and a $10 million upfront payment from Collegium in the first quarter have allowed us to secure $97 million in non-dilutive cash this year. This significantly improves our cash and leverage position.

Days on hand at wholesalers as of September 30, 2018 for our products were 16 days versus 19 days at the end of the second quarter of 2018. Cost of goods for our neurology portfolio in the third quarter of 2018 was approximately 10% of revenue. And this is consistent with prior quarters.

Turning to our third quarter expenses, GAAP selling general and administrative expenses were $33.4 million for the third quarter of 2018, down approximately 32% from $48.9 million in the third quarter of 2017.

GAAP R&D expenses for the third quarter were $2.1 million, and non-GAAP R&D expenses were $1.9 million, restructuring costs were minimal in the third quarter, year-to-date restructuring costs were approximately $18.7 million associated with the relocation reincorporation, severance in our corporate name change. Moving on to the balance sheet.

As of September 30, 2018 cash and cash equivalents were $129.9 million. Recently in the fourth quarter the company made a scheduled secure debt payment of $25 million At quarter end, we had $652.5 million of debt outstanding consisting of $345 million of convertible debt and three of them $7.5 million of secured debt.

We expect to improve our leverage ratios going forward as we continue to pay down our secured debt and have sufficient cash flow and cash on hand to meet all obligations for the foreseeable future.

Now moving on to our guidance, this afternoon we confirmed full year adjusted EBITDA range of $145 million to $155 million and neurology franchise net sales of $105 million to $110 million.

This non-GAAP adjusted EBITDA guidance excludes specified items which have been defined in our earnings news release issued this afternoon such as increased opioid-related litigation investigation and regulatory costs of $7 million to $10 million.

As a result of contributions from PDL and legal settlement we are raising full year net loss income guidance to be within the range of $40 million to $50 million net income from the previous range of $8 million net loss to $18 million net loss. I will now turn it over to Dan for an update on the amended Collegium commercial agreement. Dan..

Thanks Phil. As noted by Arthur, this amended agreement strengthens our relationship with our partner Collegium and provides us with even greater certainty of net income.

As you'll recall when we entered into this agreement earlier this year, this was a key enabling event for Assertio to execute on its new strategy and maintain the profitability of NUCYNTA. A critical component of maintain is ensuring that we have a committed and financially motivated marketing.

Together, we started the amendment to Collegium to account for the agreement in a more favorable way so that they can improve their economics and maintain balance sheet flexibility. We strengthened the arrangement by providing Assertio greater certainty as to the term of the agreement or preserving most of our economics. A few key things to note.

This ensures a minimum term of the commercialization agreement through at least December 31, 2021 prior to which Collegium may not terminate. In addition, if the Collegium elects to terminate prior to December 31, 2022 they will pay $5 million termination payment to Assertio.

The economic effect of the amendment will take place next year leaving all economics for 2018 as is.

Despite the removal of the guaranteed minimum the amendment provides greater certainty to Assertio’s cash flow from NUCYNTA by ensuring that if annual sales are between $180 million and $233 million, the financial impact to Assertio will be no greater than $9 million relative to what we would have received under the current arrangement for 2019, 2020 and 2021.

This has been accomplished by substituting the annual guaranteed minimums for a tiered royalty and Collegium reimbursing Assertio for the Grünenthal matco payments under our existing agreement. I’ll walk you through an example.

If NUCYNTA annual net sales were $210 million under the prior arrangement Assertio whatever received the guaranteed minimum of $135 million from Collegium and would have paid $4.6 million to Grünenthal for a net of $135.4 million as amended, we would receive $121.2 million of royalties from Collegium.

We would be also responsible for reimbursing us the additional royalty to Grunenthal and that difference to Assertio is $9.2 million in gross profits. There's also minor benefit cost sharing between the parties resulting in an impact no greater than $9 million.

On slide 6 of the investor presentation and the company’s earnings release, which was posted to our website. You'll find a depiction of this example if the annual $210 million revenue scenario applied for the first four years of the agreement.

I also want to be clear that this $9 billion impact only applies to sales between $180 million and $210 million and was intended to account for the extended supply disruption at the start of our agreement. Collegium remains committed to growing the new center franchise and is financially incented to do so.

Assuming their successful growing sales back to $233 million, financially backed between the current deal and the amendment, is neutral.

This further evidenced of the strength of the partnership between the companies, Collegium will issue a four-year warrant to purchase approximately $20 million of Collegium common stock with and an exercise price of $19.20.

This will allow us to Assertio and its shareholders an opportunity to realize further value as for collaboration and the value accrete to Collegium. For more information about the amendment, please see our 8-K filed earlier this afternoon.

Before back over to John, and with regard to business development we remain committed to pursuing additional business development opportunities to further both our growth and our pillars.

We are an active dialog with a few parties and are hopeful that the transaction will materialize, but we cannot predict to certainty nor commit to completing a deal at this time. With that, I'll now turn the call back over to John..

Thanks, Dan. Artezia, can you hear us okay? Okay. We were ready to start the Q&A portion, please..

[Operator Instructions] And we do have a question, our first question comes from the line of Randall Stanicky..

This is [indiscernible] on for Randall. I understand that there's a bit of a tradeoff for the longer commitment in terms of economics and the minimum payment, customer move. But I guess, I just wanted to talk about Collegium reported that NUCYNTA’s scripts for the franchise declined again sequentially.

Has the longer term outlook for this product change? And just to clarify today, do you still need to provide 12 months’ notice if they want to terminate the deal?.

I'm sorry. The longer term outlook has not changed and they still do need to provide 12 months’ notice for termination. But the first they could provide that would be January 1, 2022..

And then just switching to Cosyntropin can you talk a little bit about how you see the kind of competitive landscape they're developing. I know you'll be launching ahead of ANI, but they're targeting to be on market kind of by the back half of 2020.

So, can you talk a little bit about how you see that market kind of shaking out and that your ability of it and maybe a little bit further color and the potential contribution you could see in 2020? Thanks..

Happy to do so. First of all, I mean, I don’t think we can provide much color on the competitive landscape apart from reiterating we’re highly confident that we will be pursuing to the market.

The physician will probably continue to take comfort from the workshops he’d be having with peers and physicians and as I mentioned in my prepared remarks, it remains at a level of interest and a stated willingness to consider using this product again pervading its price appropriately.

I don’t think that should be a surprise to the teenagers as they’re aware of it. The synthetic form is available outside the U.S. marketed by Mallinckrodt with the same sort of - same indication with Mallinckrodt. So we're still very excited about the opportunity to bring this product to the U.S.

and believe it will be a very valuable option for physicians and peers to consider..

Just one last one on lease if I can. Can you just talk a little bit about how the new strategy has been playing out? I know that you're still expecting to see growth next year.

Are you seeing the new kind of simplified message resonating with physicians and has there been any improvement in the leakage in scripts between getting written and being sold? Thank you..

I think first of all we are seeing the new simplified message providing better with decisions. I think there’s still a little bit of work to do with the leakage, but again I can tell you that our understanding of what we need to do is improving daily and hence our confidence in and we’ll get this brand back to growth in 2019..

Thank you. Appreciate it. Artezia, we’ll take the next question..

And our next question comes from the line of David Amsellem..

This is Mickey Ingerman on for David.

Can you guys provide any updates regarding the pace of enrollment in the infantile spasm studies? And then given that all these several years before it is available, could you provide your thinking around exploring other therapeutic indications ahead of the infantile spasms?.

So, the infantile spasms trial, I don't have the exact number, I know we're in the double digits, so let me try to get back to you on exact number. And then with regard to therapeutic indications, we're obviously still pursuing those in addition to the diagnostic indications.

And in addition to DIS therapeutic work, we're still evaluating opportunities for possibly exploring other ways to get a therapeutic indication with the product..

And then to the extent, if cosyntropin is approved in the near future for the diagnostic indication, can you speak to the extent of which you think the product will be off label in therapeutic settings?.

Again, if you look at comment on the label use, I think what we try to articulate is that our workshops with physicians and payers see that, they understand that possible - available for a diagnostic and we would certainly have a consider using it for therapeutic indications..

And if I may sneak in one follow-up. Given that LYRICA is going off patent at the end of the year can you guys discuss your views on the [indiscernible] and the extent to which you anticipate creating the price - greater pricing and volume pressure on Gralise? Thanks..

I think we gave you a pretty good visibility to next year so we don't see any issue in 2019.

And as far as LYRICA going generic I think everyone is aware that the gabapentin market is already highly genericized and almost 90%, so we really don’t see this as being significant event anything that will be neutral as clearly LYRICA is currently being promoted and we expect that promotion to be logistic once it goes generic..

[Operator Instructions].

Okay. Artezia, thank you very much for your help, and that wraps up our call today. Before we and I know, Arthur, you wanted to say a quick closing comment..

Just to say again that we're going to be very active in the coming 30 days, and thank you for your participation in today's call.

I hope to see many of you in the coming 30 days but we continue to make sure we’re answering your questions clearly, and hopefully also share with you our confidence in our execution of our strategy and in our ability to drive shareholder value. So again thank you for participating, and good evening..

Thank you, everyone. And please call me if you have any follow-up questions and all of our materials are posted to our website and there will be a replay available at a later point in time. Thank you..

And this concludes today's conference call. You may now disconnect..