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INSYS Therapeutics Reports First Quarter 2018 Results

Cannabinoid and spray-technology focused pipeline continues to advance,
while efforts to stabilize SUBSYS
® revenue continue

PHOENIX, May 08, 2018 (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 March 31, 2018.

OVERALL HIGHLIGHTS

  • Achieved gross revenue in first quarter of $38.5 million, down 26% versus prior year driven by decline in overall TIRF market.
  • Net revenue in first quarter was $23.9 million and was unfavorably impacted year-over-year by $3.8 million due to product returns from wholesalers.
  • Continued to advance product pipeline with total R&D investment in first quarter of $12.3 million.
  • Commenced enrollment in Phase 2 clinical trial of cannabidiol (CBD) oral solution as potential treatment for childhood absence epilepsy.
  • Initiated Phase 3 clinical trial of CBD oral solution as potential treatment for infantile spasms.
  • Initiated Phase 2 clinical trial of CBD oral solution as potential treatment for Prader-Willi syndrome in pediatric patients.
  • Announced collaboration with University of California San Diego’s Center for Medicinal Cannabis Research to study CBD oral solution as potential treatment for severe symptoms of autism in pediatric patients.
  • Completed enrollment in proof-of concept study of epinephrine nasal spray as potential treatment for anaphylaxis (severe allergic reaction).
  • Submitted additional safety data to FDA for previously accepted NDA on buprenorphine sublingual spray as potential treatment for moderate-to-severe acute pain.
  • Completed end-of-Phase 2 meeting with FDA regarding previously accepted IND for naloxone nasal spray as potential treatment for opioid overdose.
  • Announced plans to study dronabinol inhalation with novel, proprietary breath-actuated device.

“The continued momentum in our pipeline in the first quarter of 2018 is indicative of the strong foundation we established in 2017 that will enable the company to shift its focus from opioids to become a leader in pharmaceutical cannabinoids and spray technologies,” said Saeed Motahari, president and chief executive officer of INSYS Therapeutics. “Our recently launched clinical trials for the use of CBD in patients with infantile spasms and Prader-Willi syndrome, combined with our collaboration with the University of California San Diego, gives us strong confidence in our future leadership position in the use of cannabinoids to develop potential solutions for patients in need.”

Motahari continued, “In terms of our current commercial products, SUBSYS® revenue declined sequentially, as did the TIRF market overall, and was unfavorably affected by higher than expected sales returns. We continue to take steps to stabilize SUBSYS® revenue and believe our actions in the first quarter to realign our salesforce and expand our managed care access will be effective over the long-term.  We have also taken steps to address our inventory dating issue and saw positive results with our in-house inventory in the first quarter, but these benefits will require additional time to work their way through our distribution channel.”

Motahari added, “Prescriptions of SYNDROS® remained relatively flat in the first quarter; however, we continue to have discussions with managed care providers.  As we look toward the balance of fiscal 2018, we remain intensely focused on executing against our product pipeline.”

Motahari concluded, “Lastly, we made progress in reducing our operating expenses in the areas where we have direct control.  Excluding legal and settlement costs, our operating expenses were down 19 percent from the first quarter of last year as we work to improve our cost base.”

Financial & Operating Highlights

  • Gross revenue for the first quarter of 2018 of $38.5 million, compared to $51.8 million for the first quarter of 2017 driven primarily we believe by the decline in the use of TIRF products, including SUBSYS®.
  • Net revenue for the first quarter of 2018 was $23.9 million, compared to $36.0 million for the first quarter of 2017 and was negatively impacted by an increase in sales returns of $3.8 million.
  • Gross margin was 90.8 percent for the first quarter of 2018, compared to 87.1 percent in the same period of 2017. Gross margin in the first quarter improved year-over-year due to lower levels of expired inventory within INSYS’ warehouses.
  • Sales and marketing investment was $9.1 million for the first quarter of 2018, compared to $15.7 million for the first quarter of 2017. This reduction was mainly the result of a salesforce realignment due to lower volume coupled with tight cost management.
  • Research and development investment decreased to $12.3 million for the first quarter of 2018, compared to $12.9 million for the first quarter of 2017, which was primarily the result of timing of clinical trial costs as the Company remains committed to executing against its robust pipeline. 
  • General and administrative expense increased to $19.9 million for the first quarter of 2018 from $15.0 million for the first quarter of 2017. The increase was primarily driven by an increase in legal expenses.
  • Income tax expense was $0.2 million for the first quarter of 2018 compared to a benefit of ($5.3) million during the first quarter of 2017.
  • Net loss for the first quarter of 2018 was $20.4 million, or ($0.28) per basic and diluted share, compared to a net loss of $6.5 million, or ($0.09) per basic and diluted share, for the first quarter of 2017.  Adjusted net loss for the quarter was ($0.19) per basic and diluted share.
  • Adjusted EBITDA loss for the first quarter of 2018 was $14.9 million, compared to Adjusted EBITDA loss of $6.5 million in the prior-year quarter. The reconciliation of net income to Adjusted EBITDA is included at the end of this news release.
  • The Company had $146.1 million in cash, cash equivalents and short-term and long-term investments with no debt as of March 31, 2018.

Webcast Information

A conference call is scheduled for 5:00 p.m. Eastern Standard Time on May 8, 2018, to discuss the financial and operational results for the first quarter 2018. Interested parties can listen to the call live via the Company’s website, https://www.insysrx.com/, on the INVESTORS section Presentations & Events page; or by dialing 844-263-8304 (from inside the U.S.) or 213-358-0958 (from outside the U.S.), and using the Conference ID 6338979. A webcasted replay of the call will be available on the site a few hours after the event.

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 addiction to opioids, opioid overdose, epilepsy 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 forward-looking statements, including discussions about stabilizing and generating future revenue, our future leadership position in the use of cannabinoids to develop potential solutions for patients in need and expectation around research and clinical product development. These forward-looking statements are based on management’s expectations and assumptions as of the date of this news release; actual results may differ materially from those in these forward-looking statements as a result of various factors, many of which are beyond our control. These factors include, but are not limited to, risk factors described in our filings with the United States Securities and Exchange Commission, including those factors discussed under the caption “Risk Factors” in our Annual Report on Form 10-K for the year ended Dec. 31, 2017 and subsequent updates that may occur in our Quarterly Reports on Form 10-Q. Forward-looking statements speak only as of the date of this news release, and we undertake no obligation to publicly update or revise these statements, except as may be required by law.

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:

  • Interest income (expense), net;
  • The recorded provision for income taxes;
  • Depreciation and amortization; and
  • Non-cash expenses, such as stock compensation expense and accruals for expected litigation settlements.

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:

  • The recorded provision for income taxes;
  • Non-cash expenses, such as stock compensation expense, non-cash interest, and non-cash other expense (i.e., accruals for expected litigation settlements); and;
  • Less an estimated cash tax provision, net of the benefit from utilizing NOL carry-forwards and windfalls from employee stock option exercises.

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,  
      2018       2017    
Net revenue $ 23,911     $ 35,962    
Cost of revenue   2,204       4,639    
Gross profit   21,707       31,323    
           
Operating expenses:        
  Sales and marketing   9,051       15,658    
  Research and development   12,260       12,934    
  General and administrative   19,889       15,042    
  Charges related to litigation award and settlements   740       -    
Total operating expenses   41,940       43,634    
           
Loss from operations   (20,233 )     (12,311 )  
Other income (expense), net   (469 )     26    
Interest income   503       435    
Loss before income taxes   (20,199 )     (11,850 )  
Income tax expense (benefit)   171       (5,326 )  
Net loss $ (20,370 )   $ (6,524 )  
           
Net loss per common share:        
  Basic $ (0.28 )   $ (0.09 )  
  Diluted $ (0.28 )   $ (0.09 )  
           
Shares used in computing net income per common share:        
  Basic   73,745,202       71,945,743    
  Diluted   73,745,202       71,945,743    
           
           
Percentage of Net revenue:        
           
Net revenue   100.0 %     100.0 %  
Cost of revenue   9.2 %     12.9 %  
Gross profit   90.8 %     87.1 %  
           
Operating expenses:        
  Sales and marketing   37.9 %     43.5 %  
  Research and development   51.3 %     36.0 %  
  General and administrative   83.2 %     41.8 %  
  Charges related to litigation award and settlements   3.1 %     0.0 %  
Total operating expenses   175.5 %     121.3 %  
           
Loss from operations   -84.7 %     -34.2 %  
Other income (expense),net   -1.9 %     0.1 %  
Interest income   2.1 %     1.2 %  
Loss before income taxes   -84.5 %     -32.9 %  
Income tax expense (benefit)   0.7 %     -14.8 %  
Net loss   -85.2 %     -18.1 %  
           


INSYS THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
         
    March 31,   December 31,
    2018   2017
ASSETS:      
Cash and cash equivalents $ 18,549   $ 31,999
Short-term investments   95,895     85,189
Accounts receivable, net   15,761     21,513
Inventories   16,300     17,408
Prepaid expenses and other current assets   20,189     19,833
Long-term investments   31,633     46,733
Other non-current assets   55,612     56,405
Total assets $ 253,939   $ 279,080
         
LIABILITIES AND STOCKHOLDERS' EQUITY:      
Liabilities $ 206,576   $ 215,798
Stockholders' equity   47,363     63,282
Total liabilities and stockholders' equity $ 253,939   $ 279,080
         


INSYS THERAPEUTICS, INC.
RECONCILIATION OF NET LOSS TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(unaudited)
           
    Three Months Ended March 31,  
      2018       2017    
Net loss $ (20,370 )   $ (6,524 )  
Adjustments to arrive at EBITDA:        
  Interest income   (503 )     (435 )  
  Income tax expense (benefit)   171       (5,326 )  
  Depreciation and amortization expense   1,938       1,774    
EBITDA   (18,764 )     (10,511 )  
  Non-cash stock compensation expense   3,170       3,992    
  Charges related to litigation award and settlements   740       -    
Adjusted EBITDA $ (14,854 )   $ (6,519 )  
           
           


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,  
      2018       2017    
Net loss $ (20,370 )   $ (6,524 )  
Income tax expense (benefit)   171       (5,326 )  
Loss before income taxes   (20,199 )     (11,850 )  
Adjustments to arrive at Adjusted net loss:        
  Non-cash stock compensation expense   3,170       3,992    
  Charges related to litigation award and settlements   740       -    
Adjusted loss before income taxes   (16,289 )     (7,858 )  
  Less: Adjusted income tax provision   (2,261 )     (1,095 )  
Adjusted net loss $ (14,028 )   $ (6,763 )  
           
Adjusted net loss per diluted share $ (0.19 )   $ (0.09 )  
           


CONTACT: Corporate Communications Investor Relations
  Joe McGrath Jackie Marcus or Chris Hodges
  INSYS Therapeutics Alpha IR Group
  480-500-3101 312-445-2870
  [email protected] [email protected]

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