On March 15, 2018 Novelion Therapeutics Inc. (NASDAQ: NVLN), a biopharmaceutical company dedicated to developing and commercializing therapies for individuals living with rare diseases ("Novelion" or the "Company"), reported financial results for the fourth quarter and full year ended December 31, 2017 and provided an overview of recent business activities (Press release, QLT, MAR 15, 2018, View Source [SID1234524839]).
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Chief Operating Officer Jeff Hackman said, "We are focused on executing near-term plans that we believe will position our company for sustainable future growth. These priorities include cost control and expense management, reviewing our holding and capital structure with a view toward optimizing our assets for shareholders, advancing the metreleptin development program, and continuing to provide important therapies to our patients."
Business Update
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JUXTAPID: Novelion reported net revenues of JUXTAPID of $20.1 million in the fourth quarter of 2017, $14.2 million, or 71%, of which were from prescriptions written in the U.S.
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MYALEPT: Novelion reported net revenues of MYALEPT of $18.8 million in the fourth quarter of 2017, $13.3 million, or 71%, of which were from prescriptions written in the U.S.
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Novelion reported total consolidated net revenues of $138.4 million for the year ended December 31, 2017.
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Novelion ended 2017 with $55.4 million in unrestricted cash, compared with $70.5 million at the end of the third quarter of 2017.
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As announced separately today, subsidiary Aegerion Pharmaceuticals entered into a new secured financing facility with affiliates of Sarissa Capital Management and Broadfin Capital LLC providing for a $20 million term loan to Aegerion, strengthening Aegerion’s balance sheet and liquidity, and positioning the Company for ongoing capital structure review.
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In January 2018, Novelion undertook significant cost reduction plans as it continues to manage its limited cash resources.
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With respect to its European application to register metreleptin for marketing authorization, after taking into account the results of an oral hearing of the European Medicines Agency’s Committee for Medicinal Products for Human Use ("CHMP"), which occurred in February
2018, the Company expects the opinion of the CHMP in the second quarter of 2018 and the European Commission’s approval decision in mid-2018.
Fourth Quarter 2017 Financial Results
On November 29, 2016, the Company completed its acquisition of Aegerion Pharmaceuticals, Inc. ("Aegerion"). The acquisition has been accounted for as a business combination in which Novelion was considered the acquirer of Aegerion. As such, under U.S. Generally Accepted Accounting Principles ("GAAP"), the financial statements of Novelion are treated as the historical financial statements of the consolidated companies, with the results of Aegerion being included from November 29, 2016. This release also includes pro forma adjusted non-GAAP financial information showing pro forma results of operations of Novelion as if the acquisition had occurred on January 1, 2016. Reconciliation of the financial results on a GAAP versus non-GAAP basis are provided below the financial information that follows.
GAAP total net revenues for the fourth quarter of 2017 were $38.9 million compared to the prior year’s fourth quarter net revenues of $13.6 million. GAAP net revenues for JUXTAPID in the fourth quarter of 2017 were $20.1 million compared to $8.6 million in the prior year. GAAP net revenues for MYALEPT in the fourth quarter of 2017 were $18.8 million compared to $5.0 million for the same period in 2016.
GAAP total operating expenses for the fourth quarter of 2017 were $35.9 million compared to total operating expenses of $22.0 million for the same period in 2016. GAAP SG&A expenses were $24.1 million in the fourth quarter of 2017 compared to $16.0 million for the same period in 2016. GAAP R&D expenses were $11.8 million in the fourth quarter of 2017 compared to $6.0 million for the same period in 2016.
On a pro forma basis, during the fourth quarter of 2017, SG&A expenses were $22.5 million compared to $55.9 million for the same period in 2016. The decrease in pro forma SG&A expenses in the fourth quarter of 2017 compared with the same period in 2016 was primarily related to a reduction in headcount and legal and consulting fees.
On a pro forma basis, during the fourth quarter of 2017, R&D expenses were $11.6 million compared to $14.2 million for the same period in 2016. The decrease in pro forma R&D expenses in the fourth quarter of 2017 compared with the same period in 2016 was primarily related to a reduction in headcount and the timing of vendor related activities.
GAAP net loss in the fourth quarter of 2017 was $24.6 million compared to GAAP net loss of $19.9 million during the same period in 2016.
On a pro forma basis, net loss in the fourth quarter of 2017 was $3.3 million, compared to $20.1 million for the same period in 2016.
Full Year 2017 Financial Results
GAAP total net revenues for the year ended December 31, 2017 were $138.4 million compared to $13.6 million in 2016. GAAP net revenues for JUXTAPID for the year ended December 31, 2017 were $72.1 million compared to $8.6 million in 2016. GAAP net revenues for MYALEPT for the year ended December 31, 2017 were $66.3 million compared to $5.0 million in 2016.
GAAP total operating expenses for the year ended December 31, 2017 were $148.0 million compared to total operating expenses of $44.3 million in 2016. GAAP SG&A expenses were $96.5 million for the year ended December 31, 2017 compared to $29.5 million in 2016. GAAP R&D expenses were $49.0 million for the year ended December 31, 2017 compared to $14.8 million in 2016.
Cost of product sales were $77.2 million in the year ended December 31, 2017. Cost of product sales in the current year includes $18.8 million reserves recorded for excess and obsolete inventory, which are derived from projected sales activities, respective product shelf-life and their respective fair value. Additionally, cost of product sales was also comprised of the cost of inventory sold, amortization of acquired product rights, which resulted from the acquisition of Aegerion, and estimated royalties payable related to the sales of lomitapide and metreleptin. We expect cost of product sales for metreleptin to increase in 2018 and for the next several years, due primarily to an increasing time-based royalty rate on net sales of metreleptin in the U.S.
On a pro forma basis, for the year ended December 31, 2017, SG&A expenses were $90.7 million compared to $200.1 million in 2016. For the year ended December 31, 2017, R&D expenses on a pro forma basis were $48.2 million compared to $52.1 million in 2016.
GAAP net loss for the year ended December 31, 2017 was $126.7 million compared to GAAP net loss of $52.9 million in 2016.
On a pro forma basis, net loss for the year ended December 31, 2017 was $30.0 million, compared to $136.0 million in 2016.
As of December 31, 2017, the Company’s consolidated unrestricted cash balance was $55.4 million, compared to $70.5 million at September 30, 2017 and $108.9 million at December 31, 2016. As of December 31, 2017, there were 18.7 million shares outstanding. At December 31, 2017, total debt principal was $325 million, reflecting the principal amount of convertible debt, before discount, issued by Aegerion and consolidated as a result of the acquisition.