Insys Therapeutics Reports Third Quarter 2016 Results

PHOENIX, Nov. 03, 2016 (GLOBE NEWSWIRE) -- Insys Therapeutics, Inc. (NASDAQ:INSY) ("Insys" or "the Company") today announced financial results for the three-month period ended September 30, 2016.

Highlights of and subsequent to the third quarter of 2016 include:
  • Total net revenue was $55.2 million, compared to $91.3 million for the third quarter of 2015;
  • Net income totaled $190,000, or $0.00 per basic and $0.00 per diluted share, compared to net income of $26.1 million, or $0.36 per basic and $0.34 per diluted share, for the third quarter of 2015;
  • Cash, cash equivalents and investments were $217.2 million as of September 30, 2016; and
  • Insys received FDA approval for the marketing of Syndros TM (dronabinol oral solution), a proprietary, orally administered liquid formulation of dronabinol.

"Although Subsys volumes declined in the quarter, we are pleased to have maintained a mid-40%  market share and believe the product will continue to provide a solid financial foundation for growth and to support our R&D efforts," said Dr. John N. Kapoor, Chairman, President and Chief Executive Officer of Insys Therapeutics. "We are currently awaiting DEA scheduling of Syndros, our recently FDA approved product for cancer induced nausea and vomiting and anorexia associated with weight loss in AIDS patients. We look forward to launching Syndros, our second commercial product, which we believe has distinct advantages over the current formulation of dronabinol in soft gel capsule. We remain excited about our pipeline and believe that both our spray and cannabinoid platform products will provide opportunities for future growth," he concluded.

Third Quarter 2016 Financial Results

Net revenue for the third quarter of 2016 was $55.2 million compared to $91.3 million for the third quarter of 2015, a decrease of 39.5%. The results reflect a decline in Subsys prescription volumes due to softness in overall demand in the TIRF category, including Subsys, and continued pressure from third-party payers.

Gross margin was 92% for the third quarter of 2016 compared with 92% for the comparable quarter of 2015.

Sales and marketing expense was $16.7 million during the third quarter of 2016, or 30% of net revenue, compared to $19.2 million, or 21% of net revenue, for the third quarter of 2015.

Research and development expense increased to $16.5 million for the third quarter of 2016, compared to $12.3 million for the third quarter of 2015, as we continue to advance the multistage products in our pipeline.

General and administrative expense increased to $17.7 million for the third quarter of 2016, up from $13.7 million for the third quarter of 2015, and included a non-cash equity compensation charge of approximately $4 million in connection with the departure of a former executive.

Net income for the third quarter of 2016 was $190,000, or $0.00 per basic and $0.00 per diluted share, compared to net income of $26.1 million, or $0.36 per basic and $0.34 per diluted share, for the third quarter of 2015. Non-GAAP adjusted net income for the third quarter of 2016 was $5.0 million, or $0.07 per diluted share, compared to non-GAAP adjusted net income of $38.0 million, or $0.50 per diluted share, in the prior-year quarter. The reconciliation of net income to non-GAAP adjusted net income is included at the end of this press release.

Liquidity

The Company had $217.2 million in cash, cash equivalents, and short-term and long-term investments, no debt, and $269 million in stockholders' equity as of September 30, 2016.

Conference Call

Insys management will host its third quarter 2016 conference call as follows:

Date: Thursday, November 3, 2016 Time:  10:00 a.m. EDT Toll free (U.S): (844) 263-8304 International: (213) 358-0958 Live webcast:  www.insysrx.com under the "Investor Relations" section

A telephone replay will be available shortly after the completion of the call for one week by dialing (855) 859-2056 (U.S.) or (404) 537-3406 (International) and entering conference call ID number 9540411.

A live audio webcast and archive of the call will also be available at www.insysrx.com.

About Insys Therapeutics, Inc.

Insys Therapeutics is a specialty pharmaceutical company that develops and commercializes innovative drugs and novel drug delivery systems of therapeutic molecules that improve the quality of life of patients. Using proprietary sublingual spray technology and capabilities to develop pharmaceutical cannabinoids, Insys addresses the clinical shortcomings of existing commercial products. Insys currently markets one product, Subsys ® (fentanyl sublingual spray) but has received approval for the marketing of Syndros TM (dronabinol oral solution), a proprietary, orally administered liquid formulation of dronabinol that Insys believes has distinct advantages over the current formulation of dronabinol in soft gel capsule. Insys is developing a pipeline of sublingual sprays, as well as pharmaceutical cannabidiol. Insys is committed to developing medications for potentially treating addiction to opioids, opioid overdose, epilepsy, and other disease areas with high unmet need.

Subsys ® and Syndros TM are trademarks of Insys Therapeutics, Inc.

Forward-Looking Statements

This press release contains forward-looking statements including regarding our (i) belief that Subsys will continue to provide a very solid financial foundation for growth and to support our R&D efforts, (ii) belief that Syndros has distinct advantages over the current formulation of dronabinol in soft gel capsule, (iii) belief that our spray and cannabinoid platform products will provide opportunities for future growth and (iv) our belief that our non-GAAP measures can be a meaningful indicator to both our management and investors. These forward-looking statements are based on management's expectations and assumptions as of the date of this press 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 December 31, 2015, 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 press 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 accounting principles generally accepted in the United States of America(GAAP), the Company is also reporting Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share, which are non-GAAP financial measures. Since Adjusted EBITDA, Adjusted net income and Adjusted net income per diluted share are not GAAP financial measures, they should not be used in isolation or as a substitute for consolidated statements of comprehensive income (loss) and cash flow data prepared in accordance with GAAP. In addition, the Company's definitions of Adjusted EBITDA, Adjusted net income and Adjusted net income 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 income to GAAP net income, please see the attachments to this earnings release.

Adjusted EBITDA, as defined by the Company, is calculated as follows:

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

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 income, as defined by the Company, is calculated as follows:

Net income, 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., accrual for expected litigation judgment); 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 income per diluted share is equal to Adjusted net income divided by the diluted share count for the applicable period.

The Company believes that Adjusted net income and Adjusted net income per diluted shares 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 income and Adjusted net income 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 income 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 income and Adjusted net income per diluted share and encourages investors to do likewise.

— Financial tables follow —

 
 
INSYS THERAPEUTICS, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
(In thousands, except share and per share amounts)
(unaudited)
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
      2016       2015       2016       2015  
Net revenue $   55,180     $   91,259     $   184,263     $   239,663  
Cost of revenue     4,677         7,707         15,588         22,387  
Gross profit     50,503         83,552         168,675         217,276  
                 
Operating expenses:              
 Sales and marketing     16,662         19,217         56,153         62,119  
 Research and development     16,516         12,322         59,940         40,720  
 General and administrative     17,653         13,681         46,275         42,212  
 Charges related to litigation award     -          (789 )       -          9,515  
Total operating expenses     50,831         44,431         162,368         154,566  
                 
Income (loss) from operations     (328 )       39,121         6,307         62,710  
Other income (expense),net     0         (37 )       44         (8 )
Interest income     281         128         762         360  
Income (loss) before income taxes     (47 )       39,212         7,113         63,062  
Income tax expense (benefit)     (237 )       13,084         134         21,596  
Net income $   190     $   26,128     $   6,979     $   41,466  
                 
Net income per common share:              
 Basic $   0.00     $   0.36     $   0.10     $   0.58  
 Diluted $   0.00     $   0.34     $   0.09     $   0.55  
                 
Shares used in computing net income per common share:            
 Basic     71,640,536         71,905,183         71,592,145         71,446,485  
 Diluted     74,328,963         75,991,330         74,545,823         75,542,173  
                 
                 
Percentage of Net revenue:              
                 
Net revenue   100.0 %     100.0 %     100.0 %     100.0 %
Cost of revenue   8.5 %     8.4 %     8.5 %     9.3 %
Gross profit   91.5 %     91.6 %     91.5 %     90.7 %
                 
Operating expenses:              
 Sales and marketing   30.2 %     21.1 %     30.5 %     25.9 %
 Research and development   29.9 %     13.5 %     32.5 %     17.0 %
 General and administrative   32.0 %     15.0 %     25.1 %     17.6 %
 Charges related to litigation award   0.0 %     -0.9 %     0.0 %     4.0 %
Total operating expenses   92.1 %     48.7 %     88.1 %     64.5 %
                 
Income from operations   -0.6 %     42.9 %     3.4 %     26.2 %
Other income (expense),net   0.0 %     0.0 %     0.0 %     0.0 %
Interest income   0.5 %     0.1 %     0.4 %     0.2 %
Income before income taxes   -0.1 %     43.0 %     3.9 %     26.3 %
Income tax expense   -0.4 %     14.3 %     0.1 %     9.0 %
Net income   0.3 %     28.6 %     3.8 %     17.3 %
                 

 
INSYS THERAPEUTICS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
         
    September 30,   December 31,
      2016       2015  
ASSETS:      
Cash and cash equivalents $   93,529     $   79,515  
Short-term investments     76,122         79,576  
Accounts receivable, net     33,911         48,459  
Inventories     27,982         41,715  
Prepaid expenses and other current assets     3,684         3,973  
Long-term investments     47,524         43,219  
Other non-current assets     70,381         54,739  
Total assets $   353,133     $   351,196  
         
LIABILITIES AND STOCKHOLDERS' EQUITY:      
Liabilities $   84,330     $   97,494  
Stockholders' equity     268,803         253,702  
Total liabilities and stockholders' equity $   353,133     $   351,196  
         

 
INSYS THERAPEUTICS, INC.
RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED EBITDA
(In thousands)
(unaudited)
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
      2016       2015       2016       2015  
Net income $   190     $   26,128     $   6,979     $   41,466  
Adjustments to arrive at EBITDA:              
 Interest (income)     (281 )       (128 )       (762 )       (360 )
 Income tax expense     (237 )       13,084         134         21,596  
 Depreciation and amortization expense     1,511         1,368         4,534         3,825  
EBITDA     1,184         40,452         10,884         66,527  
 Non-cash stock compensation expense     8,400         4,321         18,971         12,268  
 Charges related to litigation award     -          (789 )       -          9,515  
Adjusted EBITDA $   9,583     $   43,984     $   29,855     $   88,310  
                 
                 

 
INSYS THERAPEUTICS, INC.
RECONCILIATION OF NET INCOME TO NON-GAAP ADJUSTED NET INCOME
(In thousands, except per share amounts)
(unaudited)
                 
    Three Months Ended September 30,   Nine Months Ended September 30,
      2016       2015       2016       2015  
Net income $   190     $   26,128     $   6,979     $   41,466  
Income tax expense     (237 )       13,084         134         21,596  
Income (loss) before income taxes     (47 )       39,212         7,112         63,062  
Adjustments to arrive at Adjusted net income (loss):            
 Non-cash stock compensation expense     8,400         4,321         18,971         12,268  
 Charges related to litigation award     -          (789 )       -          9,515  
Adjusted income before income taxes     8,353         42,744         26,084         84,845  
 Adjusted income tax provision     3,385         4,840         3,385         7,872  
Adjusted net income $   4,968     $   37,904     $   22,699     $   76,973  
                 
Adjusted net income per diluted share $   0.07     $   0.50     $   0.30     $   1.02  
                 

Contact:Lisa M. WilsonPresident, In-Site Communications, Inc. 212-452-2793

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