BRIDGEWATER, N. J., Nov. 10, 2020 (GLOBE NEWSWIRE) -- Osmotica Pharmaceuticals plc (Nasdaq: OSMT), a fully integrated biopharmaceutical company, today announced business highlights and financial results for the three months ended September 30, 2020.

“With the commercial introduction of Upneeq, the Company’s transformation to a specialty branded pharmaceutical company is well underway. Through nine weeks of a carefully crafted launch, where our sales team focused on a select group of prescribers, we are off to a strong start. Eye care physicians have embraced the product and patients appreciate the result. In short, acceptance to the Upneeq early experience program has exceeded our expectations. With the launch of Upneeq well underway and our December user fee goal date for arbaclofen ER approaching, we have a lot to look forward to,” stated Brian Markison, Chief Executive Officer.

Third Quarter 2020 Financial Highlights

• Total revenues were $57.2 million, compared to $65.5 million in the third quarter of 2019;
• Net loss was $8.6 million, compared to a net loss of $112.7 million in the third quarter of 2019 inclusive of $19.5 million and $128.1 million, respectively, of intangible asset impairment charges;
• Adjusted EBITDA¹ was $26.1 million, compared to Adjusted EBITDA of $22.9 million in the third quarter of 2019; and
• Cash and cash equivalents were $126.1 million and debt (net of deferred financing costs) was $219.3 million as of September 30, 2020.

¹Adjusted EBITDA is a non-GAAP measure. Adjusted EBITDA is more fully described and reconciled from net loss determined under U.S. generally accepted accounting principles (“GAAP”) in “Presentation of Non-GAAP Measures” and the attached table “Osmotica Pharmaceuticals plc GAAP to Non-GAAP Reconciliations.”

Third Quarter 2020 Financial Results

Total revenues for the three months ended September 30, 2020 were $57.2 million, compared to $65.5 million for the three months ended September 30, 2019, primarily due to a decrease in net product sales, partially offset by higher licensing and contract revenue. Net product sales decreased by $32.8 million to $31.2 million for the three months ended September 30, 2020, as compared to $64.0 million for the three months ended September 30, 2019. Approximately $15.3 million of this decrease is attributable to lower realized net prices, and $17.5 million was due to lower volumes of products sold. Net sales of methylphenidate ER (including M-72) and Venlafaxine ER Tablets (VERT) decreased 65% and 84%, respectively during the quarter due to price erosion from generic competitors resulting in significantly lower net selling prices and volumes. We expect that additional competition for both methylphenidate ER and VERT from current competitors, as well as additional generic product approvals and launches in the future will continue to negatively affect our sales of these products during the remainder of 2020 and in future years. VERT sales were favorably impacted by $1.6 million in the aggregate related to product returns during the three months ended September 30, 2020 based on actual experience. There can be no assurance that actual product returns experience and other adjustments will continue to favorably impact net sales in 2020 and in future periods.

Product sales of Divigel increased 22% during the period partly due the launch of a new product strength, while product sales of nitrofurantoin increased due to higher volumes of product sold. Sales of the OBC Complete line of pre-natal vitamins fell by 37% due to lower pricing and volumes, while sales of other products increased 5%.

Licensing and contract revenue increased $25.5 million during the quarter primarily due to milestone payments received under the license agreement with Santen Pharmaceutical Co. Ltd.

Selling, general and administrative expenses decreased $1.3 million during the three months ended September 30, 2020 to $23.5 million as compared to $24.8 million in the three months ended September 30, 2019. The decrease in our selling, general and administrative expenses reflects salesforce reductions in the first quarter of 2020, offset by higher costs related to the launch of Upneeq and costs associated with the Santen license transaction.

Research and development expenses decreased by $4.6 million in the three months ended September 30, 2020 to $3.7 million as compared to $8.3 million in the three months ended September 30, 2019. The decrease primarily reflects the completion of clinical studies related to arbaclofen ER and the NDA filing fees for Upneeq, which were incurred in the third quarter of 2019.

During the three months ended September 30, 2020 we recognized intangible asset impairment charges of $19.5 million, reflecting write downs of product rights.

Net loss for the third quarter of 2020 was $8.6 million, compared to a net loss of $112.7 million in the third quarter of 2019.

Adjusted EBITDA for the third quarter of 2020 was $26.1 million, compared to Adjusted EBITDA of $22.9 million for the third quarter of 2019.

For a reconciliation of Adjusted EBITDA to net loss (income), the most comparable GAAP financial measure, please see the “Osmotica Pharmaceuticals plc GAAP to Non-GAAP Reconciliations” table at the end of this press release.

Liquidity

As of September 30, 2020, we had cash and cash equivalents of $126.1 million and borrowing capacity under our revolving credit facility of $50.0 million. As of September 30, 2020, we also had $221.4 million aggregate principal amount borrowed under our term loans following the prepayment of $50.0 million of term loans during the quarter.

Irish Takeover Rule 2.4 Announcement of Strategic Review, including sale process

The Board of the Company today announces that it is undertaking a comprehensive review of strategic options to maximize shareholder value. The options under consideration include asset disposals, re-financings, commercialization or collaboration agreements. The review will also include the initiation of a process for the sale of the Company, which will commence shortly.

The Board has a strong conviction in the value of the Company's assets especially Upneeq and arbaclofen, its management and its business plan, and is considering all options available to maximize value to shareholders. “We believe we are successfully building the early market for Upneeq and in the future potential of arbaclofen. However, given what we believe is the potential of these assets we are considering all options available to support the growth and success of these and future products,” said Markison.

The Board has appointed Barclays Capital Inc. and Jefferies LLC to assist with the strategic review. Ropes & Gray LLP and A&L Goodbody will act as the Company's legal counsel.

Parties with a potential interest in participating in the sale process should contact Barclays or Jefferies (contact details as set out below).

It is currently expected that any party interested in participating in the proposed sale process will, at the appropriate time, enter into a non-disclosure agreement with Osmotica on terms satisfactory to the Board of Osmotica and agree to comply with the terms and conditions of the process. The Company then intends to provide such interested parties with certain information on the business, following which interested parties shall be invited to submit their proposals to Barclays and Jefferies.

The Irish Takeover Panel (the "Panel") has confirmed that as a result of this announcement, the Company is now considered to be in an "offer period", as defined in the Irish Takeover Panel Act 1997, Takeover Rules 2013 (the "Irish Takeover Rules"). The dealing disclosure requirements summarized below will therefore apply.

The Panel has also confirmed that any interested party participating in the process will not be required, solely by reason of the fact that it participates in the process, to be publicly identified as a result of this announcement, but that such parties should nonetheless be mindful of their obligations under the Irish Takeover Rules, including in particular with respect to confidentiality under Rule 2.1 and the circumstances in which an announcement may be required under Rule 2.2. If an interested party has any doubts about its obligations pursuant to the Irish Takeover Rules, it should contact its financial adviser(s) to discuss this and where applicable, it should also consult with the Panel. The Company is not in receipt of any approaches at the time of this announcement.

The Company's review of its strategic alternatives may or may not lead to an offer for the Company or the consummation of any other transaction. Further announcements will be made as and when appropriate.

Dealing Disclosure Requirements under the Irish Takeover Rules

Under the provisions of Rule 8.3 of the Irish Takeover Rules, if any person is, or becomes, "interested" (directly or indirectly) in 1% or more of any class of "relevant securities" of Osmotica, all "dealings" in any "relevant securities" of Osmotica (including by means of an option in respect of, or a derivative referenced to, any such "relevant securities") must be publicly disclosed by not later than 3:30 p.m. (Irish time) on the "business day" following the date of the relevant transaction. This requirement will continue until the date on which the "offer period" ends. If two or more persons co-operate on the basis of any agreement, either express or tacit, either oral or written, to acquire an "interest" in "relevant securities" of Osmotica, they will be deemed to be a single person for the purpose of Rule 8.3 of the Irish Takeover Rules.

A disclosure table, giving details of the companies in whose "relevant securities" "dealings" should be disclosed can be found on the Panel's website at www.irishtakeoverpanel.ie.

"Interests in securities" arise, in summary, when a person has long economic exposure, whether conditional or absolute, to changes in the price of securities. In particular, a person will be treated as having an "interest" by virtue of the ownership or control of securities, or by virtue of any option in respect of, or derivative referenced to, securities.

Terms in quotation marks are defined in the Irish Takeover Rules, which can also be found on the Panel’s website. If you are in any doubt as to whether or not you are required to disclose a dealing under Rule 8, please consult the Panel’s website at www.irishtakeoverpanel.ie or contact the Panel on telephone number +353 1 678 9020 or fax number +353 1 678 9289.

For the purposes of Rule 2.10 of the Irish Takeover Rules, the Company confirms that, as of November 9, 2020, it has in issue 62,585,832 ordinary shares of US$0.01 each. The ISIN for the shares is IE00BF2HDL56.

About Osmotica Pharmaceuticals plc
Osmotica Pharmaceuticals plc (Nasdaq: OSMT) is a fully integrated biopharmaceutical company focused on the development and commercialization of specialty products that target markets with underserved patient populations. The company has a diverse portfolio consisting of promoted and non-promoted products, several of which incorporate Osmotica’s proprietary Osmodex® drug delivery system. RVL Pharmaceuticals, Inc. is the Company’s ophthalmic subsidiary supporting Upneeq. Vertical Pharmaceuticals, LLC represents the Company’s diversified branded portfolio and Trigen Laboratories, LLC represents the Company’s non-promoted products, including complex generic formulations.