-Currently Implementing a Bold Program Aimed at Allowing All Patients to Access Yosprala for Only $10.00 Per Month-
MISSISSAUGA, Ontario, May 9, 2017 /PRNewswire/ -- Aralez Pharmaceuticals Inc. (NASDAQ: ARLZ) (TSX: ARZ) (Aralez or the Company) today announced financial results for the first quarter ended March 31, 2017. The Company also highlighted certain recent corporate and commercial achievements. All figures are in U.S. dollars.
"We are pleased to report a solid first quarter of 2017, together with important updates to our business addressing a number of the challenges we face," said Adrian Adams, Chief Executive Officer of Aralez. "We are making a bold and significant change to our pricing strategy for Yosprala® aimed at allowing all patients to access the product for only $10.00 per month. In addition, we continue to implement our cost savings plan to further improve our cost structure and balance sheet to maximize and preserve our financial flexibility. Our updated financial guidance for 2017 reflects our commitment to reaching break-even on an Adjusted EBITDA basis this year. We also continue to opportunistically look at business development opportunities with a strong focus on value creating and transformative M&A with the goal of enhancing shareholder value."
- The Company is currently implementing a bold, patient friendly program aimed at allowing all patients to access Yosprala for only $10.00 per month, regardless of coverage or copay level set by the insurer. This program will be available for all patients through retail pharmacies or through select national mail order partners.
The Company has begun implementing cost savings initiatives that are expected to reduce our 2017 operating expenses by approximately $23.0 million, of which approximately $9.0 million was included in our original 2017 Adjusted EBITDA guidance. In addition, the Company has also identified other initiatives to drive an increase in profitability, such as an increased focus on the Canadian core growth brands and the Board of Directors recent decision to reduce the cash portion of their fees for 2017 by half.
On May 8, 2017, Aralez subsidiary Pozen Inc. (Pozen) entered into a license agreement with a multi-national pharmaceutical company pursuant to which Pozen granted a non-exclusive license to such company under a Japanese patent owned by Pozen. The non-exclusive license is limited to Japan. In consideration for this non-exclusive license, Pozen will receive an upfront payment of $4.0 million, plus contingent milestone payments and royalties under certain circumstances.
On April 24, 2017, the Company commenced its phased launch of Zontivity® utilizing 15 sales representatives deployed to high volume physicians who treat post-myocardial infarction (MI) and Peripheral Artery Disease (PAD) patients. The Phase 2, full-scale launch is expected to begin in early June 2017 with 75 sales representatives targeting approximately 12,000 physicians made up of cardiologists, primary care and vascular surgeons.
On April 6, 2017, Aralez Pharmaceuticals US Inc. (APUS) and the United States Government (the Government) entered into a Modification of Contract for Toprol-XL® pursuant to which the Government exercised its first renewal option under the VA National Contract between APUS and the Government (the VA Contract), extending the term of the VA Contract by one year to April 28, 2018 with reduced pricing for the duration thereof.
"Deerfield Partners remains fully supportive of Aralez and its management team as the company navigates its way through recent challenges," said James Flynn, Managing Partner at Deerfield. "We are encouraged by the new pricing strategy for Yosprala and the prospects for Zontivity."
Cost Savings Initiatives
The Company previously announced in April 2017 that it had begun implementing cost savings initiatives as part of the Company's ongoing objective to maximize value from its assets and preserve financial flexibility. The total expected operating expense reduction in 2017 of approximately $23.0 million includes the previously announced 32% reduction in its U.S. sales force, which is expected to yield 2017 savings of approximately $5.5 million ($7.5 million on an annual basis), a decrease of approximately $9.0 million in 2017 commercial spend, which primarily relates to non-direct marketing spend on Yosprala, and decreased 2017 departmental expenses across the business of approximately $8.5 million. While Aralez has made significant reductions to its expenses, the Company plans to invest an additional $7.0 million to support a successful phased launch of Zontivity that commenced on April 24, 2017, which the Company views as an increasingly attractive opportunity. The Company also continues to assess various business development opportunities with the goal of providing improved cash flow and an enhanced platform for creating value.
First Quarter 2017 Financial Results
Aralez's financial results for the three months ended March 31, 2016 include the operations of Tribute Pharmaceuticals Canada Inc. (Tribute) from February 5, 2016, the closing date of the Pozen and Tribute merger transaction (the Merger), through March 31, 2016, but do not include the results of Zontivity or Toprol-XL and its currently marketed authorized generic (the Toprol-XL franchise) as these acquisitions were completed on September 6, 2016 and October 31, 2016, respectively. Aralez's financial results for the three months ended March 31, 2017 include the results of Tribute, Zontivity and the Toprol-XL franchise.
Total revenues for the three months ended March 31, 2017 were $26.0 million compared to $8.1 million for the three months ended March 31, 2016. Net product revenues of $6.7 million for the three months ended March 31, 2017 primarily related to the product portfolio acquired with the acquisition of Tribute as well as net product revenues from Yosprala and Fibricor®. Other revenues of $19.3 million for the three months ended March 31, 2017 were comprised of net revenues of $15.6 million from the acquisitions of the Toprol-XL franchise and Zontivity, which are recorded net of related cost of product revenues and fees paid during the respective transition service periods, and Vimovo® royalties of $3.7 million. Pursuant to the Company's agreement with Horizon in the U.S., subject to certain conditions described in our public filings, Aralez is guaranteed a quarterly minimum royalty amount (calculated based on a minimum annual royalty of $7.5 million), which was reflected in the Company's first quarter results. Net product revenues of $3.6 million for the three months ended March 31, 2016 related to the Tribute product portfolio acquired in the Merger, which was completed on February 5, 2016. Other revenues of $4.5 million for the three months ended March 31, 2016 were comprised solely of Vimovo royalties.
Cost of product revenues were $2.8 million for the three months ended March 31, 2017 compared to $2.5 million for the three months ended March 31, 2016. The increase related primarily to costs of product revenues for the full quarter in 2017 from the Company's product portfolio that was acquired as part of the Merger in February 2016.
SG&A expenses were $30.8 million for the three months ended March 31, 2017 compared to $37.5 million for the three months ended March 31, 2016. The decrease in SG&A expenses was primarily driven by costs related to the Merger in the prior year of approximately $19.4 million, partially offset by increased costs related to the build out of our U.S. sales force in 2016 and increased promotional expenses in the U.S. during the first quarter of 2017.
R&D expenses for the three months ended March 31, 2017 were $0.1 million compared to $4.4 million for the three months ended March 31, 2016. The decrease related primarily to higher costs incurred in the first quarter of 2016 for Yosprala in advance of its U.S. approval in September 2016.
Amortization of intangible assets of $8.5 million for the three months ended March 31, 2017 related to the acquisitions of Tribute, Zontivity and the Toprol-XL franchise. Amortization of intangible assets for the three months ended March 31, 2016 of $1.3 million related solely to the acquisition of Tribute.
The change in fair value of contingent consideration of $4.4 million for the three months ended March 31, 2017 related to accretion for the Toprol-XL franchise and Zontivity acquisitions. There was no expense related to fair value changes in contingent consideration for the three months ended March 31, 2016.
Interest expense of $6.7 million for the three months ended March 31, 2017 was primarily attributable to the borrowing of $200 million under the Company's credit facility in the fourth quarter of 2016 in connection with the acquisitions of Zontivity and the Toprol-XL franchise and $75 million convertible notes. Interest expense of $0.3 million for the three months ended March 31, 2016 related to the $75 million convertible notes.
Other income, net for the three months ended March 31, 2017, was $0.4 million compared to $4.8 million for the three months ended March 31, 2016, a decrease of $4.4 million. The decrease principally related to a $4.6 million decrease in the fair value of the warrants liability acquired from Tribute during the prior year, offset by a $0.3 million gain from the sale of a building in London, Ontario during the three months ended March 31, 2017.
The net loss for the three months ended March 31, 2017 was $27.5 million, or $0.42 loss per share on a fully diluted basis, compared to a net loss for the three months ended March 31, 2016 of $33.8 million, or $0.73 loss per share on a fully diluted basis.
Adjusted EBITDA was ($3.6) million for the three months ended March 31, 2017 compared to Adjusted EBITDA of ($11.1) million for the three months ended March 31, 2016.
As of March 31, 2017, approximately 65.8 million of the Company's common shares were issued and outstanding and the Company had cash and cash equivalents of approximately $73.7 million.
Updated 2017 Guidance
Aralez's estimates are based on projected results of the Company for the year ending December 31, 2017 and reflect management's current beliefs and expectations about, among other things, prescription trends, competition, pricing levels, inventory levels, and anticipated future events. The Company's guidance on Adjusted EBITDA includes, among other things, costs to support the commercialization efforts with respect to Yosprala, Zontivity and the Canadian product portfolio as well as costs to support the global corporate structure. It excludes share-based compensation expense and certain discrete costs, including merger and product acquisition-related expenses. See "Use of Non-GAAP Financial Measures" below.
For the year ending December 31, 2017, assuming, among other factors more particularly set out in "Cautionary Note Regarding Forward-Looking Statements" below, the Company currently expects:
- 2017 Net Revenues to be in a range of $80 million to $100 million; and
Updated 2017 Adjusted EBITDA to be in a range of $(5) million to $5 million.
See the table below for a comparison of the Company's original 2017 guidance compared to the updated 2017 guidance:
2017 Original Guidance
2017 Updated Guidance
$80 million to $100 million
$80 million to $100 million
$(25) million to $(10) million
$(5) million to $5 million
First Quarter Results Webcast
Aralez will host a webcast this morning, May 9, 2017 at 9:00 a.m. ET to present results for the first quarter 2017. The webcast can be accessed live and will be available for replay at www.aralez.com.
Conference Call Details
Date: Tuesday, May 9, 2017
Time: 9:00 a.m. ET
Dial-in (U.S.): 877-407-8037
Dial-in (International): 201-689-8037
About Aralez Pharmaceuticals Inc.
Aralez Pharmaceuticals Inc. (NASDAQ: ARLZ) (TSX: ARZ) is a global specialty pharmaceutical company focused on delivering meaningful products to improve patients' lives while creating shareholder value by acquiring, developing and commercializing products primarily in cardiovascular, pain and other specialty areas. Aralez's Global Headquarters is in Ontario, Canada, the U.S. Headquarters is in Princeton, New Jersey and the Irish Headquarters is in Dublin, Ireland. More information about Aralez can be found at www.aralez.com.