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Avadel Pharmaceuticals Reports Third Quarter 2017 Results

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Total Revenues for the Third Quarter Were $39.7 Million

Full Year Revenue Guidance of $165-$175 Million Unchanged

Acquired License for Noctiva

DUBLIN, Ireland, Nov. 08, 2017 (GLOBE NEWSWIRE) -- Avadel Pharmaceuticals plc (NASDAQ:AVDL) today announced its financial results for the third quarter ended September 30, 2017.

Highlights Include:

  • Total revenues for the third quarter 2017 were $39.7 million, compared to $32.1 million in the third quarter 2016.

  • GAAP net income for the third quarter of 2017 was $21.7 million, or $0.52 per diluted share, compared to GAAP net loss of $20.0 million, or $0.48 per diluted share, in the third quarter of 2016.

  • Adjusted net income for the third quarter of 2017 was $3.7 million, or $0.09 per diluted share, compared to an adjusted net loss of $3.5 million, or $0.08 per diluted share, in the third quarter of 2016. (1)

  • On September 1, 2017, the Company acquired the commercial license for Noctiva™, the first and only product approved by the U.S. Food & Drug Administration (FDA) for the treatment of nocturia due to nocturnal polyuria in adults.

  • Cash and marketable securities at September 30, 2017 were $115.6 million, down from $173.8 million at June 30, 2017, largely as a result of cash used for the Noctiva license acquisition.

  • Cash used for share repurchases totaled $16.7 million for the nine months ended September 30, 2017.

Mike Anderson, Avadel's Chief Executive Officer, said, "The third quarter of 2017 was another strong quarter for Avadel. Operationally, the Company continues to execute. We have generated $30 million in operating cash flow year-to-date, and we have maintained our full year revenue guidance of $165-$175 million. Our strong financial performance over the last few years has allowed us to invest in the development and acquisition of proprietary specialty products that will provide the Company with long-term growth opportunities."

Mr. Anderson continued, "In early September, we took another step forward in the continued pursuit of becoming a fully integrated specialty pharmaceutical company when we acquired the license to commercialize Noctiva. Noctiva is the first and only product approved by the FDA for the treatment of nocturia, and aligns with our mission to offer patients differentiated specialty products that are safe and effective. We also believe Noctiva is an excellent strategic growth opportunity for Avadel, as it is the only available FDA approved product for this indication and has excellent patent protection through 2030 with the potential to deliver meaningful shareholder value."

Third Quarter 2017 Results

Revenues during the third quarter of 2017 were $39.7 million, compared to $32.1 million during the same period last year. The increase in revenues was due to Akovaz®, which was not fully launched in the third quarter of 2016. However, this increase was partially offset by a decline in Bloxiverz® revenues, primarily as a result of additional competition to neostigmine in the form of an alternative molecule, sugammadex, and continued pricing pressure due to four competing neostigmine products. On a GAAP basis, net income was $21.7 million during the third quarter of 2017, or $0.52 per diluted share, compared to a net loss of $20.0 million, or $0.48 per diluted share, for the same period last year. This increase in net income on a year-over-year basis was attributed to $9.9 million of gains related to changes in the fair value of related party contingent consideration for the third of quarter 2017, compared to $20.8 million of expense in the same period last year. Changes in the fair value of related party contingent consideration are non-cash items, and do not reflect the cash amount paid to related parties. Cash payments can be found in the Consolidated Statement of Cash Flows.

Research and development expenses totaled $8.1 million for the third quarter of 2017, flat compared to the same period last year.  Sequentially, research and development expenses were up from $6.8 million in the second quarter of 2017 as a result of increased spend on the REST-ON clinical trial. Research and development expenses are expected to increase in the fourth quarter of 2017 as the Company continues to open clinical sites in the United States and looks to add sites in new countries.

Selling, general and administrative expenses were $11.6 million in the third quarter of 2017, compared to $12.7 million in the same period last year. This decrease was largely due to a lower in stock based compensation expense period over period, partially offset by higher payroll and benefit costs as the Company continues to hire new employees to support future growth of the business.

Adjusted net income for the third quarter of 2017 was $3.7 million, or $0.09 per diluted share, compared to an adjusted net loss of $3.5 million, or $0.08 per diluted share, in the same period last year.(1) The increase in adjusted net income is largely attributable to an increase in revenues from Akovaz® and a lower adjusted effective tax rate of 58% compared to 283% in the prior year period. Please see the Supplemental Information section within this document for a reconciliation of adjusted net income and adjusted diluted EPS to the respective GAAP amounts.

2017 Guidance

The Company reiterated its full year revenue guidance of between $165 and $175 million. During the fourth quarter of 2017, the Company expects to spend approximately $15 million on launch preparation costs for Noctiva, and between $8 to $10 million in research and development costs, principally associated with the REST-ON clinical trial. For the full year, research and development costs are now expected to be in the range of $30 to $35 million and selling, general & administrative costs are expected to be in the range of $60 to $65 million, inclusive of the Noctiva launch preparation costs. As a result of the Noctiva costs, the Company slightly lowered its full year adjusted diluted EPS guidance to $0.25 to $0.35, down from $0.30 to $0.45.

Conference Call

A conference call to discuss these results has been scheduled for Wednesday, November 8, 2017 at 10:00 a.m. EST. A question and answer period will follow management's prepared remarks. To access the conference call, investors are invited to dial (844) 388-0559 (U.S. and Canada) or (216) 562-0393 (International). The conference ID number is 6289129.  A live audio webcast can be accessed by visiting the Investors section of the Company's website, www.avadel.com. A replay of the webcast will be archived on Avadel's website for 90 days following the event.

About Avadel Pharmaceuticals plc:

Avadel Pharmaceuticals plc (NASDAQ:AVDL) is a specialty pharmaceutical company that seeks to develop differentiated pharmaceutical products that are safe, effective and easy to take through formulation development, by utilizing its proprietary drug delivery technology and in-licensing / acquiring new products; ultimately, helping patients adhere to their prescribed medical treatment and see better results. The Company is headquartered in Dublin, Ireland with operations in St. Louis, Missouri, United States and Lyon, France. For more information, please visit www.avadel.com.

About Noctiva™
Noctiva is the first and only formulation of desmopressin acetate, a vasopressin analog, approved by the FDA for the treatment of nocturia due to nocturnal polyuria in adults who awaken at least two times per night to void. It is a proprietary low-dose formulation of desmopressin acetate administered through a patent-protected preservative-free intranasal delivery system. Noctiva is dosed as a single spray in one nostril 30 minutes before bedtime, and is approved in two dosage forms of 0.83 mcg and 1.66 mcg. Noctiva is expected to become available to patients in the second quarter of 2018. (Full Prescribing Information available here).

Important Safety Information and Indication for Noctiva (desmopressin acetate)
WARNING: HYPONATREMIA

  • NOCTIVA can cause hyponatremia. Severe hyponatremia can be life-threatening, leading to seizures, coma, respiratory arrest, or death.

  • NOCTIVA is contraindicated in patients at increased risk of severe hyponatremia, such as patients with excessive fluid intake, illnesses that can cause fluid or electrolyte imbalances, and in those using loop diuretics or systemic or inhaled glucocorticoids.

  • Ensure serum sodium concentrations are normal before starting or resuming NOCTIVA. Measure serum sodium within seven days and approximately one month after initiating therapy or increasing the dose, and periodically during treatment. More frequently monitor serum sodium in patients 65 years of age and older and in patients at increased risk of hyponatremia.

  • If hyponatremia occurs, NOCTIVA may need to be temporarily or permanently discontinued.

Safe Harbor: This press release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words "will," "may," "believe," "expect," "anticipate," "estimate," "project" and similar expressions, and the negatives thereof, identify forward-looking statements, each of which speaks only as of the date the statement is made. Although we believe that our forward-looking statements are based on reasonable assumptions within the bounds of our knowledge of our business and operations, our business is subject to significant risks and as a result there can be no assurance that actual results of our research, development and commercialization activities and our results of operations will not differ materially from the results contemplated in such forward-looking statements. These risks include: (i) risks relating to our license agreement with Serenity Pharmaceuticals, LLC including that our internal analyses may overstate the market opportunity in the United States for the drug desmopressin acetate (the "Drug") or we may not effectively exploit such market opportunity, that significant safety or drug interaction problems could arise with respect to the Drug, that we may not successfully increase awareness of nocturia and the potential benefits of the Drug, and that the need for management to focus attention on the development and commercialization of the Drug could cause our ongoing business operations to suffer; and (ii) the other risks, uncertainties and contingencies described in the Company's filings with the U.S. Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2016, in particular under the captions "Forward-Looking Statements" and "Risk Factors," including without limitation: our dependence on a small number of products and customers for the majority of our revenues; the possibility that our Bloxiverz®,Vazculep® and Akovaz® products, which are not patent protected, could face substantial competition resulting in a loss of market share or forcing us to reduce the prices we charge for those products; the possibility that we could fail to successfully complete the research and development for pipeline products we are evaluating for potential application to the FDA pursuant to our "unapproved-to-approved" strategy, or that competitors could complete the development of such products and apply for FDA approval of such products before us; the possibility that our products may not reach the commercial market or gain market acceptance; our need to invest substantial sums in research and development in order to remain competitive; our dependence on certain single providers for development of several of our drug delivery platforms and products; our dependence on a limited number of suppliers to manufacture our products and to deliver certain raw materials used in our products; the possibility that our competitors may develop and market technologies or products that are more effective or safer than ours, or obtain regulatory approval and market such technologies or products before we do; the challenges in protecting the intellectual property underlying our drug delivery platforms and other products; and our dependence on key personnel to execute our business plan. Except as may be required by law, we disclaim any obligation to publicly update any forward-looking statements to reflect events after the date of this press release.

Non-GAAP Disclosures and Adjustments

Avadel discloses certain non-GAAP financial measures, including adjusted net income and loss and adjusted net income and loss per diluted share, as management believes that a comparison of its current and historical results would be difficult if the disclosures were limited to financial measures prepared only in accordance with generally accepted accounting principles (GAAP) in the U.S.  In addition to reporting its financial results in accordance with GAAP, Avadel reports certain non-GAAP results that exclude, if any, fair value remeasurements of its contingent consideration, impairment of intangible assets, amortization of intangible assets, restructuring costs, foreign exchange gains and losses on assets and liabilities denominated in foreign currencies, but includes the operating cash flows plus any unpaid accrued amounts associated with the  contingent consideration, in order to supplement investors' and other readers' understanding and assessment of the Company's financial performance.  The Company's management uses these non-GAAP measures internally for forecasting, budgeting and measuring its operating performance.  Investors and other readers should review the related GAAP financial measures and the reconciliation of non-GAAP measures to their most closely applicable GAAP measure set forth below and should consider non-GAAP measures only as a supplement to, not as a substitute for or as a superior measure to, measures of financial performance prepared in accordance with GAAP. The table provided within the following "Supplemental Information" section reconciles GAAP net income and loss and diluted earnings or loss per share to the corresponding adjusted amounts.

___________________________

1Non-GAAP financial measure: Descriptions of Avadel's non-GAAP financial measures are included under the caption Non-GAAP Disclosures and Adjustments included within this press release and reconciliations of such non-GAAP financial measures to their most closely applicable GAAP financial measures are found in the Supplemental Information section herein.

Contacts: Michael F. Kanan
  Chief Financial Officer
  Phone: (636) 449-1844
  Email: mkanan@avadel.com
   
  Lauren Stival
  Sr. Director, Investor Relations & Corporate Communications
  Phone: (636) 449-5866
  Email: lstival@avadel.com


AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(In thousands, except per share data)
    Three Months Ended September 30,   Nine Months Ended September 30,
    2017   2016   2017   2016
                 
Revenues:                
Product sales and services   $ 39,147     $ 31,340     $ 138,009     $ 104,858  
License and research revenue   528     747     484     2,303  
Total   39,675     32,087     138,493     107,161  
Operating expenses:                
Cost of products and services sold   3,790     2,844     12,253     10,657  
Research and development expenses   8,095     8,143     22,093     21,135  
Selling, general and administrative expenses   11,563     12,740     35,804     33,491  
Intangible asset amortization   564     3,702     1,692     10,918  
(Gain)/loss - changes in fair value of related party contingent consideration   (9,906 )   20,848     (30,107 )   52,989  
Restructuring (income) costs   (549 )       3,173      
Total operating expenses   13,557     48,277     44,908     129,190  
Operating income (loss)   26,118     (16,190 )   93,585     (22,029 )
Investment income, net   1,110     490     2,689     1,080  
Interest expense, net   (263 )   (264 )   (789 )   (702 )
Other income (expense) - changes in fair value of related party payable   768     (1,828 )   2,988     (6,135 )
Foreign exchange gain (loss)   (133 )   1,249     (127 )   (12 )
Income (loss) before income taxes   27,600     (16,543 )   98,346     (27,798 )
Income tax provision   5,921     3,451     21,830     18,212  
Net income (loss)   $ 21,679     $ (19,994 )   $ 76,516     $ (46,010 )
                 
Net income (loss) per share - basic   $ 0.54     $ (0.48 )   $ 1.87     $ (1.12 )
Net income (loss) per share - diluted   0.52     (0.48 )   1.81     (1.12 )
                 
Weighted average number of shares outstanding - basic   40,061     41,241     40,839     41,241  
Weighted average number of shares outstanding - diluted   41,339     41,241     42,194     41,241  


AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
    September 30, 2017   December 31, 2016
         
ASSETS        
Current assets:        
Cash and cash equivalents   $ 37,449     $ 39,215  
Marketable securities   78,161     114,980  
Accounts receivable   24,080     17,839  
Inventories, net   5,870     3,258  
Prepaid expenses and other current assets   3,373     5,894  
Total current assets   148,933     181,186  
Property and equipment, net   3,180     3,320  
Goodwill   18,491     18,491  
Intangible assets, net   94,256     22,837  
Research and development tax credit receivable   3,547     1,775  
Income tax deferred charge       10,342  
Other   9,020     7,531  
Total assets   $ 277,427     $ 245,482  
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current liabilities:        
Current portion of long-term debt   $ 301     $ 268  
Current portion of long-term related party payable   30,986     34,177  
Accounts payable   8,564     7,105  
Deferred revenue   1,927     2,223  
Accrued expenses   47,997     17,222  
Income taxes   7,026     1,200  
Other   507     226  
Total current liabilities   97,308     62,421  
Long-term debt, less current portion   614     547  
Long-term related party payable, less current portion   76,131     135,170  
Other   6,911     5,275  
Total liabilities   180,964     203,413  
         
Shareholders' equity:        
Preferred shares, $0.01 nominal value; 50,000 shares authorized; none issued or outstanding at September 30, 2017 and December 31, 2016, respectively        
Ordinary shares, nominal value of $0.01; 500,000 shares authorized; 41,435 and 41,371 issued and outstanding at September 30, 2017 and December 31, 2016, respectively   414     414  
Treasury shares, at cost, 1,673 and 0 shares held at September 30, 2017 and December 31, 2016, respectively   (17,506 )    
Additional paid-in capital   391,416     385,020  
Accumulated deficit   (254,440 )   (319,800 )
Accumulated other comprehensive loss   (23,421 )   (23,565 )
Total shareholders' equity   96,463     42,069  
Total liabilities and shareholders' equity   $ 277,427     $ 245,482  


AVADEL PHARMACEUTICALS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
    Nine Months Ended September 30,
    2017   2016
         
Cash flows from operating activities:        
Net income (loss)   76,516     (46,010 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Depreciation and amortization   2,664     11,555  
Loss on disposal of property and equipment       110  
Loss (gain) on sale of marketable securities   (550 )   666  
Foreign exchange loss   127     12  
Grants recognized in research and development expenses       (70 )
Remeasurement of related party acquisition-related contingent consideration   (30,107 )   52,989  
Remeasurement of related party financing-related contingent consideration   (2,988 )   6,135  
Change in deferred tax and income tax deferred charge   322     (5,680 )
Stock-based compensation expense   6,019     10,541  
Increase (decrease) in cash from:        
Accounts receivable   (6,240 )   (7,594 )
Inventories   (2,612 )   2,080  
Prepaid expenses and other current assets   1,924     671  
Research and development tax credit receivable   (1,576 )   (1,794 )
Accounts payable & other current liabilities   804     1,291  
Deferred revenue   (283 )   (2,198 )
Accrued expenses   9,324     2,700  
Accrued income taxes   5,826      
Earn-out payments for related party contingent consideration in excess of acquisition-date fair value   (24,729 )   (14,486 )
Royalty payments for related party payable in excess of original fair value   (3,446 )   (1,790 )
Other long-term assets and liabilities   (517 )   2,032  
Net cash provided by operating activities   30,478     11,160  
         
Cash flows from investing activities:        
Purchases of property and equipment   (533 )   (1,000 )
Acquisitions of businesses       628  
Purchase of intangible assets   (52,139 )    
Proceeds from sales of marketable securities   153,398     46,483  
Purchases of marketable securities   (115,893 )   (96,199 )
Net cash used in investing activities   (15,167 )   (50,088 )
         
Cash flows from financing activities:        
Earn-out payments for related party contingent consideration   (961 )   (6,834 )
Royalty payments for related party payable       (1,117 )
Reimbursement of loans       (61 )
Cash proceeds from issuance of ordinary shares and warrants   376      
Share repurchases   (16,707 )    
Net cash used in financing activities   (17,292 )   (8,012 )
         
Effect of foreign currency exchange rate changes on cash and cash equivalents   215     656  
         
Net decrease in cash and cash equivalents   (1,766 )   (46,284 )
Cash and cash equivalents at January 1,   39,215     65,064  
Cash and cash equivalents at September 30,   $ 37,449     $ 18,780  


AVADEL PHARMACEUTICALS PLC
UNAUDITED SUPPLEMENTAL INFORMATION
(In thousands, except per share data)
         
    Three Months Ended September 30,   Nine Months Ended September 30,
Revenues by Product:   2017   2016   2017   2016
                 
Bloxiverz   $ 9,920     $ 15,591     $ 37,541     $ 65,958  
Vazculep   9,573     9,340     29,906     29,167  
Akovaz   18,561     5,568     65,110     5,568  
Other   1,093     841     5,452     4,165  
Total product sales and services   39,147     31,340     138,009     104,858  
License and research revenue   528     747     484     2,303  
Total revenues   $ 39,675     $ 32,087     $ 138,493     $ 107,161  


                 
        GAAP to Non-GAAP adjustments for the three-months ended September 30, 2017        
        Exclude   Include        
    GAAP   Intangible asset amortization   Foreign exchange (gain)/loss   Restructuring impacts   Contingent related party payable fair value adjustment   Contingent related party payable paid/accrued   Total adjustments   Adjusted GAAP
                                 
Revenues:                                
Product sales and services   $ 39,147     $     $     $     $     $     $     $ 39,147  
License and research revenue   528                             528  
Total   39,675                             39,675  
Operating expenses:                                
Cost of products and services sold   3,790                             3,790  
Research and development   8,095                             8,095  
Selling, general and administrative   11,563                             11,563  
Intangible asset amortization   564     (564 )                   (564 )    
Changes in fair value of related party contingent consideration   (9,906 )               9,906     7,264     17,170     7,264  
Restructuring costs   (549 )           549             549      
Total   13,557     (564 )       549     9,906     7,264     17,155     30,712  
Operating income (loss)   26,118     564         (549 )   (9,906 )   (7,264 )   (17,155 )   8,963  
Investment and other income   1,110                             1,110  
Interest expense   (263 )                           (263 )
Other expense - changes in fair value of related party payable   768                 (768 )   (963 )   (1,731 )   (963 )
Foreign exchange gain   (133 )       133                 133      
Income (loss) before income taxes   27,600     564     133     (549 )   (10,674 )   (8,227 )   (18,753 )   8,847  
Income tax provision (benefit)   5,921     201             (507 )   (515 )   (821 )   5,100  
Net income (loss)   $ 21,679     $ 363     $ 133     $ (549 )   $ (10,167 )   $ (7,712 )   $ (17,932 )   $ 3,747  
                                 
Net income (loss) per share - diluted(1)   0.52     $ 0.01     $     $ (0.01 )   $ (0.25 )   $ (0.19 )   $ (0.43 )   $ 0.09  
Weighted average number of shares outstanding - diluted   41,339     41,339     41,339     41,339     41,339     41,339     41,339     41,339  

(1)  Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.

                 
        GAAP to Non-GAAP adjustments for the three-months ended September 30, 2016        
        Exclude   Include        
    GAAP   Intangible asset amortization   Foreign exchange (gain)/loss   Contingent related party payable fair value adjustment   Contingent related party payable paid/accrued   Total adjustments   Adjusted GAAP
                             
Revenues:                            
Product sales and services   $ 31,340     $     $     $     $     $     $ 31,340  
License and research revenue   747                         747  
Total   32,087                         32,087  
Operating expenses:                            
Cost of products and services sold   2,844                         2,844  
Research and development   8,143                         8,143  
Selling, general and administrative   12,740                         12,740  
Intangible asset amortization   3,702     (3,702 )               (3,702 )    
Changes in fair value of related party contingent consideration   20,848             (20,848 )   5,884     (14,964 )   5,884  
Restructuring costs                            
Total   48,277     (3,702 )       (20,848 )   5,884     (18,666 )   29,611  
Operating income (loss)   (16,190 )   3,702         20,848     (5,884 )   18,666     2,476  
Investment and other income   490                         490  
Interest expense   (264 )                       (264 )
Other expense - changes in fair value of related party payable   (1,828 )           1,828     (785 )   1,043     (785 )
Foreign exchange gain   1,249         (1,249 )           (1,249 )    
Income (loss) before income taxes   (16,543 )   3,702     (1,249 )   22,676     (6,669 )   18,460     1,917  
Income tax provision (benefit)   3,451     1,329         1,021     (385 )   1,965     5,416  
Net income (loss)   $ (19,994 )   $ 2,373     $ (1,249 )   $ 21,655     $ (6,284 )   $ 16,495     $ (3,499 )
                             
Net income (loss) per share - diluted(1)   (0.48 )   $ 0.06     $ (0.03 )   $ 0.53     $ (0.15 )   $ 0.40     $ (0.08 )
Weighted average number of shares outstanding - diluted   41,241     41,241     41,241     41,241     41,241     41,241     41,241  

(1)  Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.

                 
        GAAP to Non-GAAP adjustments for the nine-months ended September 30, 2017        
        Exclude   Include        
    GAAP   Intangible asset amortization   Foreign exchange (gain)/loss   Restructuring impacts   Purchase accounting adjustment - FSC   License revenue   Contingent related party payable fair value adjustment   Contingent related party payable paid/accrued   Total adjustments   Adjusted GAAP
adjustment
                                         
Revenues:                                        
Product sales and services   $ 138,009     $     $     $     $     $     $     $     $     $ 138,009  
License and research revenue   484                     1,100             1,100     1,584  
Total   138,493                     1,100             1,100     139,593  
Operating expenses:                                        
Cost of products and services sold   12,253                 (46 )               (46 )   12,207  
Research and development   22,093                                     22,093  
Selling, general and administrative   35,804                                     35,804  
Intangible asset amortization   1,692     (1,692 )                           (1,692 )    
Changes in fair value of related party contingent consideration   (30,107 )                       30,107     25,396     55,503     25,396  
Restructuring charges   3,173             (3,173 )                   (3,173 )    
Total   44,908     (1,692 )       (3,173 )   (46 )       30,107     25,396     50,592     95,500  
Operating income (loss)   93,585     1,692         3,173     46     1,100     (30,107 )   (25,396 )   (49,492 )   44,093  
Investment and other income   2,689                                     2,689  
Interest expense   (789 )                                   (789 )
Other expense - changes in fair value of related party payable   2,988                         (2,988 )   (3,428 )   (6,416 )   (3,428 )
Foreign exchange gain   (127 )       127                         127      
Income (loss) before income taxes   98,346     1,692     127     3,173     46     1,100     (33,095 )   (28,824 )   (55,781 )   42,565  
Income tax provision (benefit)   21,830     603             17         (1,776 )   (1,822 )   (2,978 )   18,852  
Net income (loss)   $ 76,516     $ 1,089     $ 127     $ 3,173     $ 29     $ 1,100     $ (31,319 )   $ (27,002 )   $ (52,803 )   $ 23,713  
                                         
Net income (loss) per share - diluted(1)   1.81     $ 0.03     $     $ 0.08     $     $ 0.03     $ (0.74 )   $ (0.64 )   $ (1.25 )   $ 0.56  
Weighted average number of shares outstanding - diluted   42,194     42,194     42,194     42,194     42,194     42,194     42,194     42,194     42,194     42,194  

(1)  Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.

                 
        GAAP to Non-GAAP adjustments for the nine-months ended September 30, 2016        
        Exclude   Include        
    GAAP   Intangible asset amortization   Foreign exchange (gain)/loss   Purchase accounting adjustments - FSC   Contingent related party payable fair value adjustment   Contingent related party payable paid/accrued   Total adjustments   Adjusted GAAP
                                 
Revenues:                                
Product sales and services   $ 104,858     $     $     $     $     $     $     $ 104,858  
License and research revenue   2,303                             2,303  
Total   107,161                             107,161  
Operating expenses:                                
Cost of products and services sold   10,657             (1,525 )           (1,525 )   9,132  
Research and development   21,135                             21,135  
Selling, general and administrative   33,491                             33,491  
Intangible asset amortization   10,918     (10,918 )                   (10,918 )    
Changes in fair value of related party contingent consideration   52,989                 (52,989 )   19,321     (33,668 )   19,321  
Total   129,190     (10,918 )       (1,525 )   (52,989 )   19,321     (46,111 )   83,079  
Operating income (loss)   (22,029 )   10,918         1,525     52,989     (19,321 )   46,111     24,082  
Investment and other income   1,080                             1,080  
Interest expense   (702 )                           (702 )
Other expense - changes in fair value of related party payable   (6,135 )               6,135     (2,618 )   3,517     (2,618 )
Foreign exchange gain   (12 )       12                 12      
Income (loss) before income taxes   (27,798 )   10,918     12     1,525     59,124     (21,939 )   49,640     21,842  
Income tax provision (benefit)   18,212     3,920         533     2,986     (1,165 )   6,274     24,486  
Net income (loss)   $ (46,010 )   $ 6,998     $ 12     $ 992     $ 56,138     $ (20,774 )   $ 43,366     $ (2,644 )
                                 
Net income (loss) per share - diluted(1)   (1.12 )   $ 0.17     $     $ 0.02     $ 1.36     $ (0.50 )   $ 1.05     $ (0.07 )
Weighted average number of shares outstanding - diluted   41,241     41,241     41,241     41,241     41,241     41,241     41,241     41,241  

(1)  Net income (loss) per share - diluted is calculated by dividing Net income (loss) by the Weighted average number of shares outstanding - diluted. Note, when recalculated using this method, the balances in the Total adjustment and Adjusted GAAP columns may not cross-foot as a result of rounding to full precision.

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