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INSYS Therapeutics Reports First Quarter 2019 Results

May 10, 2019 7:05 PM

Company Continues to Execute Against Pipeline-Focused StrategyNew Drug Application Submitted for Proprietary Naloxone Nasal Spray FormulationCompany Provides Liquidity Update

PHOENIX, May 10, 2019 (GLOBE NEWSWIRE) -- INSYS Therapeutics, Inc. (NASDAQ: INSY), a leader in the development, manufacture and commercialization of pharmaceutical cannabinoids and spray technology, today reported financial results for its first quarter ended Mar. 31, 2019.

RECENT HIGHLIGHTS

Financial Highlights

Liquidity Update

As further discussed in our Form 10-Q for the period ended Mar. 31, 2019 (the “Form 10-Q”), while the company has no outstanding debt, available liquidity is limited to $87.6 million in cash and cash equivalents and investments as of Mar. 31, 2019, and the company expects to have continued negative cash flows from operating activities. The company has experienced recurring and increasing losses from operations over the previous 18 months due to significant declines in the TIRF market and significant legal expenses resulting from the investigation by the U.S. Department of Justice (“DOJ”) and other significant litigation matters to which we are subject. As reported in the Form 10-Q, we have estimated liabilities of approximately $240.3 million as of Mar. 31, 2019 for proposed settlements of our various litigation matters, and there are other matters for which we have not been able to determine a reasonable estimated loss. Furthermore, we are uncertain if we will be able to complete a final settlement with the DOJ because of the Company’s inability to fulfill demands made by the DOJ, including the execution of a security agreement related to the assets of the company to collateralize payments under the settlement. These factors raise substantial doubt about the company’s ability to continue as a going concern within one year of the issuance date of the unaudited condensed consolidated financial statements.

If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited consolidated financial statements, and it is likely that investors will lose all or a part of their investment.

Management’s plans, in order to meet our operating cash flow requirements, include the pursuit of strategic alternatives related to the sale or licensing of the Company’s assets. As previously disclosed, on November 5, 2018, the company announced a process to review strategic alternatives for its portfolio of opioid-related assets, including SUBSYS®, as well as formulations of buprenorphine and the combination of buprenorphine/naloxone. There are no assurances that the company will be successful in implementing a strategic plan for the sale of its assets in order to address its impending liquidity constraints. If the company cannot successfully implement its strategic plan for the sale of its assets, and/or reach an agreement with the DOJ, its liquidity, financial condition and business prospects will be materially and adversely affected. Accordingly, it may be necessary for the company to file a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in order to implement a restructuring. Therefore, trading in our securities is highly speculative. Our Board of Directors has not made any decisions related to any strategic alternatives at this time.

About INSYS

INSYS Therapeutics is a specialty pharmaceutical company that develops and commercializes innovative drugs and novel drug delivery systems of therapeutic molecules that improve patients’ quality of life. Using proprietary spray technology and capabilities to develop pharmaceutical cannabinoids, INSYS is developing a pipeline of products intended to address unmet medical needs and the clinical shortcomings of existing commercial products. INSYS is committed to developing medications for potentially treating anaphylaxis, epilepsy, Prader-Willi syndrome, opioid addiction and overdose, and other disease areas with a significant unmet need.

SUBSYS® and SYNDROS® are trademarks of INSYS Development Company, Inc., a subsidiary of INSYS Therapeutics, Inc.

NOTE: All trademarks and registered trademarks are the property of their respective owners.

Forward-Looking Statements

This news release contains both historical information and forward-looking statements. Forward-looking statements are based on management's current expectations and assumptions as of the date of this presentation, and actual results may differ materially from those in these forward-looking statements as a result of various factors, including many which are beyond INSYS’ control.

Such factors include, but are not limited to risks regarding: the expenses, impact and potential outcomes of pending claims, litigation and other legal proceedings, including our ability to finalize a settlement with the DOJ;INSYS' indemnification obligations for former executives; the heightened attention on the use of opioids; INSYS' ability to secure additional funding as needed; INSYS' ability to consummate a strategic alternative for its portfolio of opioid-related assets; INSYS’ ability to continue as a going concern; a potential Chapter 11 filing; INSYS' ability to commercialize products successfully; INSYS’ ability to successfully manage its commercial relationships and sales infrastructure; INSYS’ ability to obtain anticipated governmental or regulatory approvals; INSYS’ failure to comply with post-approval regulatory and governmental requirements; the actual sales potential and opportunity of identified markets; and INSYS’ ability to realize the expectations of its pipeline and product candidate plans and timelines. For a further description of these and other risks facing INSYS, please see the risk factors described in the company's filings with the United States Securities and Exchange Commission, including those factors discussed under the caption “Risk Factors” in the company’s Annual Report on Form 10-K for the year ended December 31, 2018, as updated in the company’s Quarterly Report on Form 10-K for the quarter ended March 31, 2019, and subsequent filings. All the information included herein is dated information concerning the company. The company disclaims and does not undertake any obligation to update or revise any forward-looking statements or historical information contained herein.

Non-GAAP Financial Measures

In addition to reporting all financial information required in accordance with generally accepted accounting principles (GAAP), the company is also reporting Adjusted EBITDA, Adjusted net loss and Adjusted net loss per diluted share, which are non-GAAP financial measures. Since Adjusted EBITDA, Adjusted net loss and Adjusted net loss per diluted share are not GAAP financial measures, they should not be used in isolation or as a substitute for consolidated statements of comprehensive loss and cash flow data prepared in accordance with GAAP. In addition, the company’s definitions of Adjusted EBITDA, Adjusted net loss and Adjusted net loss per diluted share may not be comparable to similarly titled non-GAAP financial measures reported by other companies. For a full reconciliation of Adjusted EBITDA and Adjusted net loss to GAAP net income, please see the attachments to this earnings release.

Adjusted EBITDA, as defined by the company, is calculated as follows:

Net loss, plus:

The company believes that Adjusted EBITDA can be a meaningful indicator, to both company management and investors, of the past and expected ongoing operating performance of the company. EBITDA is a commonly used and widely accepted measure of financial performance. Adjusted EBITDA is deemed by the company to be a useful performance indicator because it includes an add-back of non-cash and non-recurring operating expenses that may be subject to uncontrollable factors not reflective of the company’s true operational performance.

Adjusted net loss, as defined by the company, is calculated as follows:

Net loss, plus:

Adjusted net loss per diluted share is equal to Adjusted net loss divided by the diluted share count for the applicable period.

The company believes that Adjusted net loss and Adjusted net loss per diluted share are meaningful financial indicators, to both company management and investors, in that they exclude non-cash income and expense items, as well as other income and expense items that are not expected to recur and therefore are not reflective of continuing operating performance.

While the company uses Adjusted EBITDA, Adjusted net loss and Adjusted net loss per diluted share in managing and analyzing its business and financial condition and believes these non-GAAP financial measures to be useful to investors in evaluating the company’s performance, each of these financial measures has certain shortcomings. Adjusted EBITDA does not take into account the impact of capital expenditures on either the liquidity or the GAAP financial performance of the company and likewise omits share-based compensation expenses, which may vary over time and may represent a material portion of overall compensation expense. Adjusted net loss does not take into account non-cash expenses that reflect the amortization of past expenditures, or include stock-based compensation, which is an important and material element of the company’s compensation package for its directors, officers and other key employees. As a result of the inherent limitations of each of these non-GAAP financial measures, the company’s management utilizes comparable GAAP financial measures to evaluate the business in conjunction with Adjusted EBITDA, Adjusted net loss and Adjusted net loss per diluted share and encourages investors to do likewise.

— Financial tables follow —

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share amounts)
(unaudited)
Three Months Ended March 31,
2019 2018
Net revenue$ 7,630 $ 23,911
Cost of revenue 4,575 2,204
Gross profit 3,055 21,707
Operating expenses:
Sales and marketing 4,119 9,051
Research and development 10,523 12,260
General and administrative 10,986 9,552
Legal 25,677 10,337
Charges related to litigation award and settlements 73,863 740
Total operating expenses 125,168 41,940
Loss from operations (122,113) (20,233)
Interest income 423 503
Other expense, net (908) (469)
Loss before income taxes (122,598) (20,199)
Income tax expense 1,246 171
Net loss$ (123,844) $ (20,370)
Net loss per common share:
Basic$ (1.66) $ (0.28)
Diluted$ (1.66) $ (0.28)
Shares used in computing net loss per common share:
Basic 74,426,030 73,745,202
Diluted 74,426,030 73,745,202
Percentage of Net revenue:
Net revenue 100.0% 100.0%
Cost of revenue 60.0% 9.2%
Gross profit 40.0% 90.8%
Operating expenses:
Sales and marketing 54.0% 37.9%
Research and development 137.9% 51.3%
General and administrative 144.0% 39.9%
Legal 336.4% 43.3%
Charges related to litigation award and settlements 968.1% 3.1%
Total operating expenses 1640.4% 175.5%
Loss from operations -1600.4% -84.7%
Interest income 5.5% 2.1%
Other income (expense),net -11.9% -1.9%
Loss before income taxes -1606.8% -84.5%
Income tax expense (benefit) 16.3% 0.7%
Net loss -1623.1% -85.2%

INSYS THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
March 31, December 31,
2019 2018
ASSETS:
Cash and cash equivalents$ 36,513 $ 31,552
Short-term investments 47,380 64,126
Accounts receivable, net 6,087 12,610
Inventories 7,246 8,608
Prepaid expenses and other current assets 8,501 9,396
Long-term investments 3,726 8,446
Other non-current assets 63,147 57,789
Total assets$ 172,600 $ 192,527
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Liabilities$ 336,324 $ 235,627
Stockholders' deficit (163,724) (43,100)
Total liabilities and stockholders' deficit$ 172,600 $ 192,527

INSYS THERAPEUTICS, INC.
RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(unaudited)
Three Months Ended March 31,
2019 2018
Net loss$ (123,844) $ (20,370)
Adjustments to arrive at EBITDA:
Interest income (423) (503)
Income tax expense 1,246 171
Depreciation and amortization expense 1,961 1,938
EBITDA (121,060) (18,764)
Non-cash stock compensation expense 3,109 3,170
Charges related to litigation award and settlements 73,863 740
Adjusted EBITDA$ (44,088) $ (14,854)

INSYS THERAPEUTICS, INC.
RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED NET LOSS
(In thousands, except per share amounts)
(unaudited)
Three Months Ended March 31,
2019 2018
Net loss$ (123,844) $ (20,370)
Income tax expense 1,246 171
Loss before income taxes (122,598) (20,199)
Adjustments to arrive at Adjusted net loss:
Non-cash stock compensation expense 3,109 3,170
Charges related to litigation award and settlements 73,863 740
Adjusted loss before income taxes (45,626) (16,289)
Less: Adjusted income tax provision (4,402) (2,261)
Adjusted net loss$ (41,224) $ (14,028)
Adjusted net loss per diluted share$ (0.55) $ (0.19)

CONTACT:Investor Relations & Corporate Communications
Jackie Marcus or Chris Hodges
Alpha IR Group
312-445-2870
[email protected]

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Source: INSYS Therapeutics, Inc.

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