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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 SyndrosTM (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 SyndrosTM (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 SyndrosTM 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. Wilson President, In-Site Communications, Inc. 212-452-2793

Source:Insys Therapeutics, Inc.