Zyla Life Sciences Reports Fourth Quarter and Full Year 2019 Financial Results

Publisher: The Insight Partners

Zyla Life Sciences, a commercial-stage life sciences company, today reported financial results for the fourth quarter and full-year ended December 31, 2019, including net sales from commercial products: SPRIX® (ketorolac tromethamine) Nasal Spray, VIVLODEX® (meloxicam), ZORVOLEX® (diclofenac)), INDOCIN® (indomethacin) suppositories, INDOCIN® oral suspension and OXAYDO® (oxycodone HCI, USP) tablets for oral use only –CII.    

"We more than doubled net product sales in the fourth quarter 2019 compared to the fourth quarter 2018 with our expanded product portfolio while reducing expenses and met our projections for the full year with $81.3 million in net product sales," said Todd Smith, president, chief executive officer (CEO) and director of Zyla. "We believe that these promising fourth quarter results reinforce the rationale for our recently announced proposed merger with Assertio Therapeutics. With our strong revenue-generating portfolio and Assertio's complementary portfolio and cash position, together the proposed combined company should be well positioned to be a leading specialty pharmaceutical company focused on commercial excellence and growth." 

2019 and Recent Highlights

• Announced merger with Assertio Therapeutics on March 16, 2020 and created integration team to work toward proposed second quarter close;
• Had $81.3 million in 2019 net product sales in line with guidance;
• Cash flow positive from April 1 through December 31, 2019;
• Achieved positive adjusted EBITDA for 2019 with net income of $60.6 million;
• Appointed Todd Smith CEO, president and director of Zyla in October 2019; and
• Acquired Iroko products in January 2019 in connection with a financial restructuring.

2019 Fourth Quarter and Full-Year Financial Results

• Cash Position: As of December 31, 2019, Zyla had cash and restricted cash totaling $12.4 million.
• Net Product Sales: Net product sales increased $50.9 million to $81.3 million for the year ended December 31, 2019 compared to $30.4 million for the year ended December 31, 2018. Net product sales were $19.3 million for the three months ended December 31, 2019 compared to $8.5 for the same period in 2018. The increase was largely due to the addition of the acquired Iroko products at the end of January 2019.   
• Cost of Sales (excluding amortization of product rights): Cost of sales was $41.1 million for the year ended December 31, 2019 compared to $7.4 million for the year ended December 31, 2018. The cost of sales for the fourth quarter 2019 was $3.5 million compared to $2.0 million for the same period in 2019. The increase was driven by higher product sales as a result of the new products acquired at the end of January 2019 and the revaluation of inventory in connection with the restructuring.
• G&A Expenses: General and administrative expenses were $27.7 million for the year ended December 31, 2019 compared to $24.1 million for the year ended December 31, 2018. The general and administration expenses were $5.5 million for the three months ended December 31, 2019 compared to $4.8 million for the same period in 2018. The increase in general and administrative expenses in 2019 compared to 2018 was primarily attributable to $2.1 million of higher stock compensation expense, $1.2 million of higher intellectual property and related costs, and $1.5 million of higher legal, accounting, tax and insurance costs, partially offset by lower salary and related costs.
• S&M Expenses: Sales and marketing expenses were $35.3 million for year ended December 31, 2019 compared to $33.7 million for the year ended December 31, 2018. The sales and marketing expenses were $9.0 million for the three months ended December 31, 2019 compared to $7.7 million for the same period in 2018. The increase was primarily due to higher spending for consultants and marketing programs to support our Iroko acquired products of $1.0 million and $0.8 million, respectively, partially offset by lower employee compensation and related costs, including travel and fleet expenses, of $0.5 million.
• R&D Expenses: Research and development expenses were essentially zero for the year and the three months ended December 31, 2019 compared to $3.5 million for the year and just under $0.3 million for the three months ended December 31, 2018. This decrease from 2018 to 2019 was driven by a discontinuation of R&D programs that did not directly support the growth of Zyla's commercial business.
• Restructuring and Other Charges: The restructuring charges for the year ended December 31, 2019 were $2.7 million which reflect costs of severance payments related to the reduction of executive officers and a reduction in force in our Denmark facility in January 2019. This amount was significantly less than the $17.0 million for the full year 2018 which reflected costs related to the discontinuation of ARYMO ER of $8.2 million and a termination payment to Halo Pharmaceuticals of $3.1 million, and legal and other professional fees of $5.8 million. The restructuring and other charges during the three months ended December 31, 2019 were $1.3 million compared to $3.2 million for the three months ended December 31, 2018.
• Interest Expense: Interest expense was $13.3 million for the year ended December 31, 2019 compared to $41.3 million for the year ended December 31, 2018. Interest expense for the three months ended December 31, 2019 was $3.8 million compared to $1.0 million for the same period ended December 31, 2018. The interest expense for the 2019 full year includes non-cash interest and amortization of debt discount totaling $6.1 million. The interest expense for the full year ended December 31, 2018 includes non-cash interest and amortization of debt discount totaling $38.3 million
• Other Gain: Other gain was $3.5 million for the year ended December 31, 2019 compared to less than $0.1 million for the year ended December 31, 2018.
• Net Loss: Net income for the year ended December 31, 2019 was $60.6 million compared to a net loss of $95.5 million for the year ended December 31, 2018. The net loss for the quarter ended December 31, 2019 was $6.2 million compared to $19.9 million for the fourth quarter 2018.

Earnings Conference Call Information

Zyla's management will host a conference call to discuss the fourth quarter 2019 financial results today:

Note Regarding Use of Non-GAAP Financial Measures
Zyla provides non-GAAP adjusted EBITDA or earnings before interest, taxes, depreciation and amortization as a financial measure. Zyla believes that this non-GAAP financial measure, when considered together with the GAAP figures, can enhance an overall understanding of Zyla's financial performance. The non-GAAP financial measure is included with the intent of providing investors with a more complete understanding of operational results and trends. In addition, this non-GAAP financial measure is among the indicators Zyla's management uses for planning and forecasting purposes and measuring the company's performance. It should be considered in addition to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. This non-GAAP financial measure may be calculated differently from, and therefore may not be comparable to, non-GAAP financial measures used by other companies.

Proposed Merger
On March 16, 2020 Assertio Therapeutics and Zyla announced that they have entered into a definitive merger agreement. The boards of directors of both companies have approved the Merger and the Agreement. The Merger is currently expected to close in the second quarter of 2020, subject to approval by Assertio stockholders and by Zyla stockholders and the satisfaction of other customary closing conditions. Additional details can be found in Assertio's and Zyla's respective Current Reports of Form 8-K filed with the Securities and Exchange Commission on March 17, 2020.