On November 5, 2018 INSYS Therapeutics, Inc. (NASDAQ: INSY), a leader in the development, manufacture and commercialization of pharmaceutical cannabinoids and spray technology, reported financial results for its third quarter ended Sept. 30, 2018 (Press release, Insys Therapeutics, NOV 5, 2018, View Source [SID1234530857]).
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OVERALL HIGHLIGHTS
Commenced a strategic alternatives review process for the company’s opioid-related assets
Expanded collaborative partnership with University of California San Diego’s Center for Medicinal Cannabis Research (CMCR) to study the company’s cannabidiol (CBD) oral solution in two additional disease states (early psychosis and anxiety in anorexia nervosa)
Achieved net revenue of $18.3 million in the third quarter of 2018
Advanced R&D programs with a $14.5 million investment in the third quarter of 2018:
Received "Fast Track" designation from the FDA for epinephrine nasal spray as an investigational treatment for anaphylaxis
Continued enrollment of three company-sponsored CBD clinical studies:
childhood absence epilepsy (Phase 2)
Prader-Willi syndrome (Phase 2)
infantile spasms (Phase 3)
Completed pharmacokinetic study of dronabinol inhalation
Signed definitive licensing agreement with Lunatus to commercialize SUBSYS in the Middle East
Received FDA approval of supplemental NDA for SYNDROS to expand label, enabling use of the product with feeding tubes for patients with cancer and AIDS
Appointed Elizabeth Bohlen to the Board of Directors and added Mark Nance to the management team as chief legal officer and general counsel
Announced settlement agreement in principle with Department of Justice consistent with previous public statement and disclosures
Optimized commercial organization and related support functions to control operating costs in line with lower revenue
Received confirmation from the SEC that it concluded its investigation of the company, and does not intend to recommend an enforcement action
"Our commitment to further establish our position as a leader in pharmaceutical cannabinoids and spray technology was exemplified by the achievement of several milestones in the third quarter," said Saeed Motahari, president and chief executive officer of INSYS Therapeutics. "We continued to make progress on our pipeline and expanded our collaborative partnerships with leading research institutions, increasing the number of CBD clinical studies in which we’re the sole sponsor or a key collaborator to seven. Furthermore, our 99.5 percent pure pharmaceutical-grade CBD oral solution allows INSYS to meet the needs of clinical study patients and become a strategic partner across our industry and in the medical community."
Motahari concluded, "The decline in the overall TIRF market continues to impact sales of our primary commercial product, SUBSYS. Our proactive efforts to expand managed care access and educate appropriate HCPs have enabled us to maintain our leading share of the branded TIRF market. However, this decline in revenue has required us to contain costs and as a result, we have taken actions to adjust our commercial organization to align with the realities of the market. We will continue to be disciplined with our cost structure, while appropriately investing in our pipeline, which is the key to transforming INSYS into a leader in pharmaceutical cannabinoids and spray technology."
Financial & Operating Highlights
During the preparation of the consolidated financial statements as of and for the quarter ended Sept. 30, 2018, the company identified errors that impacted the 2017 financial information, which have been revised for the correction of this error.
The company had $113.0 million in cash, cash equivalents and short-term and long-term investments with no debt outstanding as of Sept. 30, 2018
Net revenue for the third quarter of 2018 was $18.3 million, compared to $30.7 million for the third quarter of 2017, driven primarily by declines in the TIRF market
Gross margin was 87.0 percent for the third quarter of 2018, compared to 75.6 percent in the same period of 2017
Sales and marketing investment was $7.4 million for the third quarter of 2018, compared to $12.8 million for the third quarter of 2017, as the company took action to better align its commercial organization to the lower revenue base
Research and development investment decreased to $14.5 million for the third quarter of 2018, compared to $19.6 million for the third quarter of 2017, primarily as a result of the timing of clinical trials
General and administrative expense of $8.9 million for the third quarter of 2018 declined compared to $11.3 million in the third quarter of 2017, as the company continued to look for opportunities to level-set its cost base
Legal expense increased to $16.0 million for the third quarter of 2018, compared to $4.4 million in the third quarter of 2017, as a result of the company’s legal proceedings, including
expenses associated with indemnification of former executives in connection with their pending trial, which constitutes approximately 60 percent of the total Q3 2018 expense. Management is disputing the reasonableness of certain of these indemnification-related expenses
Income tax expense was $240 thousand for the third quarter of 2018 compared to a benefit of ($9.0 million) during the revised third quarter of 2017
Net loss for the third quarter of 2018 was ($30.6 million), or ($0.41) per basic and diluted share, compared to a net loss of ($166.3 million), or ($2.28) per basic and diluted share, for the revised third quarter of 2017. Adjusted net loss for the third quarter of 2018 was ($0.37) per basic and diluted share
Adjusted EBITDA loss for the third quarter of 2018 was ($26.0 million), compared to Adjusted EBITDA loss of ($18.4 million) in the prior-year quarter. The reconciliation of net income to Adjusted EBITDA is included at the end of this news release
During the preparation of the consolidated financial statements as of and for the quarter ended Sept. 30, 2018, the company identified errors within the company’s consolidated financial statements for the year ended Dec. 31, 2017, resulting from the company’s adoption of ASU 2016-09 "Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" on Jan. 1, 2017, which impacted the previously filed financial statements for the quarters ended March 31, June 30, and Sept. 30 of 2017 as well as the audited financial statements for the year ended Dec. 31, 2017. In addition, we identified an error in the calculation of our weighted average shares outstanding, which impacted the previously filed financial statements for the three and nine months ended Sept. 30, 2017, and the year ended Dec. 31, 2017. The company evaluated the errors and concluded that they were not material to the financial statements previously issued. Accordingly, the Dec. 31, 2017 financial information has been revised to include a cumulative adjustment of $2.9 million to correctly present uncertain tax position liabilities and accumulated deficit, resulting in a reduction to total liabilities and an increase in stockholders’ equity. These revisions will be reflected and disclosed in the company’s Form 10-Q for the period ended Sept. 30, 2018 to be filed with the SEC on or before Nov. 9, 2018. Additionally, in order to correctly present income tax benefit and net loss in the appropriate periods for comparative purposes, the financial results for the three and nine months ended Sept. 30, 2017, have been revised to include adjustments of $40,000 and $120,000, respectively. These revisions resulted in net loss per share for the three and nine months ended Sept. 30, 2017, and the year ended Dec. 31, 2017, changing from $2.30 to $2.28, $2.51 to $2.50 and $3.16 to $3.12, respectively.
Webcast Information
A conference call is scheduled for 5:00 p.m. Eastern Standard Time on Nov. 5, 2018, to discuss the financial and operational results for the third quarter 2018. Interested parties can listen to the call live as it occurs via the company’s website, View Source, on the Investors section’s 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 6149699. A webcasted replay of the call will be available on the site a few hours after the event.