Assertio Holdings, Inc. (NASDAQ:ASRT) Q1 2024 Earnings Call Transcript May 6, 2024
Assertio Holdings, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good afternoon, and welcome to Assertio Holdings First Quarter 2024 Financial Results Call. [Operator Instructions] I would now like to turn the call over to Matt Kreps, Investor Relations for the company. Please go ahead.
Matthew Kreps: Thank you. Good afternoon, and thank you everyone for joining us today to discuss Assertio’s first quarter 2024 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 the tables in conjunction with today’s discussion. With me today are Heather Mason, Interim CEO; Ajay Patel, CFO; and Paul Schwichtenberg, CCO. In just a moment, Heather will open the remarks and provide an overview of the business, then Ajay will cover our financial results and guidance, followed by Paul with an update on our commercial strategies. After that, we will take questions from our covering research analysts.
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 this afternoon’s press release as well as Assertio’s filings with the SEC. These and other risks are more fully described in the risk factors section and other sections of our annual report on Form 10-K. 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. And with that, I will now turn the call over to Heather. Please go ahead.
Heather Mason: Thank you, Matt. Welcome everyone and thank you for joining us today. Since stepping into the interim CEO role in January, I am encouraged by the progress we are making at the business and I am deeply grateful to all of my colleagues at Assertio, who continually — who continue to work tirelessly for our patients and clinicians and to drive long-term value for our shareholders. We are off to a good start this year. Our first quarter is tracking with our full year guidance, calling for sales of $110 million to $125 million and EBITDA of $20 million to $30 million. There is demonstrated execution across several fronts. Rolvedon Q1 sales are up 32% quarter-over-quarter. This is Rolvedon’s fifth consecutive quarter of demand growth, a critical success measure in the intensely competitive long-acting G-CSF category.
Additionally, we completed enrollment of Rolvedon’s same-day dosing trial early in Q2. We expect the data readout before year-end and the results could lead to an opportunity for product differentiation through medical society guidelines. Paul will expand on Rolvedon performance and further growth plans. Indocin still has one generic competitor and our share of the overall molecule is approximately 50%. And we are working to maintain our volume at a competitive price while anticipating a second generic. We have successfully rightsized our organization, cut operating expenses and have ensured we have the right team in place to deliver results. Additionally, we generated $7.5 million in cash in the quarter important as we look to add accretive cash generating assets that fit our lean commercial model.
I also want to be clear, we are not satisfied with where our stock price is. But we believe that driving sustainable long-term shareholder value is best achieved by growing sales and profitability by diversifying our revenue streams and by generating more predictable cash flows. These are the tasks we are focused on every day. Finally, our CEO search is on track. The Board is committed to finding the best candidate with a balance of commercial, financial and business development skills. We’ve identified strong candidates, and I look forward to announcing our next CEO soon. And with that, I’ll pass the call over to Ajay to cover financials.
Ajay Patel: Thanks, Heather. Today, I would like to cover our financial results for the first quarter of 2024. Before I begin, I want to note that my commentary will focus on sequential comparisons to fourth quarter 2023, given the acquisition of Spectrum and the generic competition of Indocin that occurred in the prior year [technical difficulty] quarter. Rolvedon is now our lead asset and brings with it associated changes in margin and operating cost structure. For the first quarter of 2024, our total sales were $31.9 million, down slightly from $32.5 million in the fourth quarter. Rolvedon sales were $14.5 million and achieved 32% growth compared to $11 million in the fourth quarter, primarily due to volume. Indocin sales were $8.7 million compared to $10.8 million in the fourth quarter.
As expected, the decline was due to the impact on volume and pricing from generic competition. Excluding the impact of inventory step up, gross margin in the first quarter was 78% compared to 79% in the fourth quarter. Inventory step up was materially complete at the end of the first quarter. Turning to operating expenses. SG&A expense was $18.5 million in the first quarter, down 23% from $24 million in the fourth quarter. Excluding stock compensation, adjusted OpEx was $17.3 million in the first quarter and reflects the benefits from actions the company has taken to reduce and align expenses to its current asset portfolio. GAAP net income for the first quarter was a loss of $4.5 million, down from a loss of $57.4 million in the fourth quarter.
Both quarters included the impact of noncash adjustments, making them difficult to compare. However, adjusted EBITDA is a good indicator of the operating performance of the core business. Q1 adjusted EBITDA was a positive $7.4 million increased from Q4 adjusted EBITDA of $4.5 million due to the sales and OpEx favorability just noted. Please refer to our press release for a detailed reconciliation of our adjusted EBITDA results. Crossing over to cash flows and our balance sheet, we generated $7.5 million in cash flow from operations in the first quarter. As we’ve previously noted, quarterly operating cash flows will fluctuate due to the timing of working capital, royalties and interest payments. Additionally, similar to the P&L results, as we shift from Indocin to Rolvedon, there is a pronounced impact to operating cash flows, which will take a few quarters to be realized.
Rolvedon carries a higher gross revenue profile than Indocin, which results in higher upfront cash collections. But at the same time, Rolvedon also has a higher gross to net rate, which results in higher rebate settlements down the road. Cash at the end of the first quarter was $80.7 million and debt was $40 million. And looking at our cash deployment opportunities, as Heather stated, we are focused on investments that can grow sales and profitability in a manner that increases durability and predictability of the business. We are pleased with Q1 results, but also recognize that stabilization and growth in the business is a multistage process that requires focus on execution and ensuring appropriate capital access is maintained based on internal liquidity as well as external availability.
We are maintaining our previously announced guidance for 2024. We expect net product sales in a range of $110 million to $125 million. We anticipate adjusted EBITDA in a range of $20 million to $30 million. I’ll now turn the call over to Paul to give commercial update.
Paul Schwichtenberg: Thank you, Ajay. Over the past few years, we’ve built a diversified cash flow generating asset portfolio focused on commercial assets aligned to our low cost, efficient sales and marketing approach. Last fall, we saw two major changes around our lead assets, Indocin and Rolvedon, which occurred in short order, but we continue to maintain our commitment to generating cash flow and new opportunities within our existing product set. I know that many of you are very focused on our commercial plans and in particular, our growth efforts around Rolvedon. We reported a strong start to 2024 as Rolvedon net sales increased 32% over the prior quarter, including a 24% sequential increase in unit demand. Q1 2024 reflected our fifth sequential quarter of demand growth and the largest quarterly percentage growth since its first full quarter after launch.
ASP erosion has been in line with expectations holding to low single digits, and we currently have the second highest ASP in the class. We believe our market share in the clinic Medicare Part B market we currently serve is approximately 34%. Our success to date has been driven by excellent performance in the clinic space due to our dedicated contracting and commercial access capabilities, even with strong competition from the biosimilars. Our strategy is to continue to drive growth in this important segment, which is about one-third of the total market through both further market penetration into new sites as well as volume gains at existing clinics. We are leveraging our commercial sales team as well as digital promotion efforts to achieve further market penetration.
We are also looking to expand into new hospital customers as we continually work towards building Rolvedon into greater than a $100 million asset in the years ahead. Moving to Indocin. Q1 performance was in line with our expectations as we continue to adapt to a competitive market. Our efforts to date have resulted in approximately a 50% volume share in the market, although the generic competitor has priced aggressively. We remain focused on protecting our share and maximizing the value of Indocin as a cash flow generating asset. Turning to Sympazan. Q1 performance was in line with our expectations. While the active ingredient is widely known and well understood, Sympazan is particularly appealing with certain targeted hard to control patients due to its delivery mechanism.
This is in part why it’s a good fit to Assertio’s platform and why we see additional opportunity in this asset. We are making an incremental strategic investment in Sympazan to change our marketing wet [ph] mix and raise awareness with the goal to drive incremental volume growth starting in 2025. Lastly, I’d like to commend and thank our entire commercial team as they continue to execute well and deliver results. With that, I’ll turn the call back to the operator for Q&A from our covering research analysts.
Operator: [Operator Instructions] The first question comes from the line of Jim Sidoti from Sidoti & Co. Please go ahead.
See also 20 Best Business Ideas for Solopreneurs in 2024 and 25 Richest Billionaires in Sports Industry.
To continue reading the Q&A session, please click here.