First Quarter 2018 Earnings Call Financial Results & Corporate Update. May 8, 2018

Transcription

1 First Quarter 2018 Earnings Call Financial Results & Corporate Update May 8, 2018

2 Disclaimer This presentation includes certain statements that constitute forward-looking statements within the meaning of applicable securities laws. Forwardlooking statements include, but are not limited to, statements regarding new strategic direction for the Company, including a focus on the Company s Canadian business, supported by revenues from the Toprol-XL Franchise, Vimovo royalties and other products; closure of the U.S. commercial operations; solid revenue and positive Adjusted EBITDA of Aralez Canada; portfolio growth drivers and resiliency of Canadian portfolio; focus on driving organic growth and maintaining an efficient, productive and profitable business in Canada, and future product and line extension launches; objectives and benefits of the Company s new strategic direction, including significantly reduced cost structure, improved balance sheet and cash flow; VA contract; expectations and estimates regarding cost savings; maintaining a tax efficient structure; increased generic competition with respect to Toprol-XL Franchise and evaluation of market dynamics; Toprol-XL Franchise remains an important revenue stream; exploration of opportunities to enhance liquidity, including divesting or outlicensing Zontivity, Yosprala, Fibricor, and Bezalip SR; broader strategic alternatives for its business; liquidity may not be sufficient to fund operations through the next 12 months; the Company s strategies, plans, objectives, goals, prospects, future performance or results of current and anticipated products; and other statements that are not historical facts, and such statements are typically identified by use of terms such as may, will, would, should, could, expect, plan, intend, anticipate, believe, estimate, predict, likely, potential, continue or the negative or similar words, variations of these words or other comparable words or phrases, although some forward-looking statements are expressed differently. You should be aware that the forward-looking statements included herein represent management s current judgment and expectations, and are based on current estimates and assumptions made by management in light of its experience and perception of historical trends, current conditions and expected future developments, as well as other factors that it believes are appropriate and reasonable under the circumstances, but there can be no assurance that such estimates and assumptions will prove to be correct and, as a result, the forward-looking statements based on those estimates and assumptions could prove to be incorrect. Accordingly, actual results, level of activity, performance or achievements or future events or developments could differ materially from those expressed or implied in the forward-looking statements. In addition, the Company s operations involve risks and uncertainties, many of which are outside of the Company s control, and any one or any combination of these risks and uncertainties could also affect whether the forward-looking statements ultimately prove to be correct and could cause the Company s actual results, level of activity, performance or achievements or future events or developments to differ materially from those expressed or implied by the forward-looking statements. These risks and uncertainties include, without limitation, the risks and uncertainties outlined under the caption Cautionary Note Regarding Forward-Looking Statements in our press releases dated May 8, 2018 announcing results for the first quarter ended March 30, 2018 and our new strategic direction and those risks detailed from time-to-time under the caption Risk Factors and elsewhere in the Company s Securities and Exchange Commission (SEC) filings and reports and Canadian securities law filings, including in the Company s Annual Report on Form 10-K for the year ended December 31, 2017 and Quarterly Report on Form 10-Q for the three month period ended March 30, 2018, which are or will be available on EDGAR at on SEDAR at and on the Company s website at and those described from time to time in the Company s future reports filed with the SEC and applicable securities regulatory authorities in Canada. You should not place undue importance on forward-looking statements and should not rely upon this information as of any other date. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, unless required by law. This presentation was provided on May 8, 2018 as part of an oral presentation and is qualified thereby. 2

3 Today s Agenda Portfolio Performance Zontivity Toprol-XL Franchise Canadian Business Financial Performance Overview Q1 Financial Results Overview of New Strategic Direction Key Next Steps Q&A 3 All amounts referenced in this presentation are in US$ Millions

4 Zontivity: Quarterly Prescription Performance For Q1 18, NRx s increased 5% over Q4 17, TRx s increased 20% and RPE s increased 12% 12,000 NRx TRx RPE 10,000 8,000 Merck Ceased Promotion (Aug 2016) Aralez Launch Commenced (June 2017) PRESCRIPTIONS 6,000 4,000 2,000 0 Q1'16 Q2'16 Q3'16 Q4'16 Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 As announced earlier today, Aralez will cease promotion of Zontivity effective immediately 4 RPE = Pill count divided by 30, which management believes is a more accurate reflection of use Source: Symphony Health

5 Toprol-XL Franchise: Update Franchise Updates Strong 1Q performance for the Toprol-XL Franchise VA contract renewed for an additional year, effective April 28, 2018 As expected, the AG retail Rx market share has improved and moved toward historical levels, and currently stands at ~22% Market and Product Outlook Very recently experienced increased generic competition with respect to the Toprol-XL Franchise, which may cause a negative impact on the business Ongoing evaluation of market dynamics and outlook for the Toprol-XL Franchise Toprol-XL Franchise remains an important revenue stream 5 Important Safety Information Available at Toprol-XL.com

6 Aralez: Canadian Performance $8 Canadian Portfolio Net Revenue Solid revenue performance Canadian business continues to generate positive Adjusted EBITDA $7 $6 $5.7M $6.7M Portfolio growth drivers primarily include Blexten and Cambia Amounts in US $M $5 $4 $3 $2 $1 $0 Q Q The business, driven particularly by the growth drivers, remains resilient despite generic erosion of some other brands such as Fiorinal and Bezalip SR during 2017 Focus on driving organic growth and maintaining an efficient, productive and profitable business 6

7 Blexten: Quarterly Prescription Performance Q1 2018, NRx increased 18% over Q4 2017, TRx increased 16% March 2018 TRx market share grew to ~7.5% 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 NRx TRx - Q1'17 Q1'18 7 Source: IQVIA CompuScript Database, March-2018

8 Cambia: Quarterly Prescription Performance 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Growing since focused promotion commenced in 2017 Q1 2018, NRx increased 4% over Q4 2017, TRx increased 5% March 2018 TRx market share ~3.4% NRx TRx - Q1'17 Q2'17 Q3'17 Q4'17 Q1'18 8 Source: IQVIA CompuScript Database, March-2018

9 9 Q Financial Results

10 1Q 2018 Revenue Growth 1Q 2018 Net Revenue (Option 2) $45 $40 $38.1M $35 +$12.1M* Amounts in US $M $30 $25 $20 $15 $26.0M $16.6 $27.5 $10 $5 $0 $5.7 $6.7 $3.7 $3.9 Q Q Royalties/License Fees Canadian Products US Core Business 10 Note 1: 2018 US Core Business includes net product sales from the Toprol-XL Franchise, Zontivity, and Fibricor. Note 2: 2017 US Core Business includes net revenues from the Toprol-XL Franchise and Zontivity (during their respective transition periods), and net product sales from Fibricor, Yosprala, and Zontivity (after the transition period). * The increase was primarily driven by the change in accounting for revenues from the Toprol-XL Franchise.

11 Q GAAP Financial Results Amounts in US $M Q Q Total revenues, net $38.1 $26.0 Cost of product revenues $11.5 $2.8 Selling, general and administrative $26.5 $30.8 Research and development $0.1 $0.1 Amortization of intangible assets $9.0 $8.5 Change in FV of contingent consideration $5.1 $4.4 Interest expense $6.7 $6.7 Other (income) expense, net $0.1 ($0.4) Income tax expense (benefit) ($1.2) $0.6 Net loss ($19.7) ($27.5) 11

12 Q1 2018: Improved Adjusted EBITDA vs. Q Adjusted EBITDA grew by $8.6M in 1Q 2018 compared to 1Q Amounts in US $M Q Q Net loss ($19.7) ($27.5) Share-based compensation expense $1.8 $2.8 Restructuring expense $1.0 - Discontinuation of Yosprala $1.7 - Depreciation and amortization expense $9.3 $8.9 Interest expense $6.7 $6.7 Change in FV of contingent consideration $5.1 $4.4 Transaction related expenses $0.1 $0.8 Other (income) expense $0.1 ($0.4) Income tax expense (benefit) ($1.2) $0.6 Adjusted EBITDA * $4.9 ($3.7) * Adjusted EBITDA is a non-gaap measure and defined as net income (loss) before income taxes, interest expense and financing costs, depreciation and amortization, sharebased compensation, gains or losses related to warrants, changes to the fair value of contingent consideration, retention, severance and other restructuring costs, impact of an acquisition of a business or product, transaction costs related to (i) acquisitions (ii) business development opportunities (iii) debt refinancing options and (iv) certain agreement termination costs, acquired in-process R&D, tax equalization payments, interest income, the impact of changes in foreign currency rates, asset impairment charges, losses or gains on sale of assets, losses or gains on extinguishment or modification of debt and the impact of a sale or disposition of a business or product, including discontinued operations. GAAP to Non-GAAP reconciliations are included within the tables accompanying our press release attached as an exhibit to our Current Report on Form 8-K filed on May 8, 2018, copies of which are available on EDGAR at on SEDAR at and on our website at

13 Adjusted EBITDA Improvements $6M $4.9M $4M $2M $- $0.4M $2.1M Amounts in US $M ($2M) ($4M) ($6M) ($8M) ($3.7M) ($3.3M) ($10M) ($12M) ($14M) ($11.9M) Q Q Q Q Q Q Achieved Positive Adj. EBITDA in 3Q 2017, 4Q 2017 & 1Q

14 Aralez: New Strategic Direction New Strategic Direction to Streamline Business and Reduce Costs A focus on the Company s Canadian business, supported by the Toprol-XL Franchise as well as Vimovo royalties Immediate, decisive actions are being taken to close U.S. commercial operations Maintain our tax efficient structure Rationale and Assessment Factors: Despite a successful launch, momentum from Zontivity alone is insufficient to sustain or leverage the commercial infrastructure and overcome liquidity pressures We have been unable to fully leverage the cost of our U.S. Sales Force Very recent increased generic competition to the Toprol-XL Franchise; may cause a negative impact on future business Consequently, liquidity may not be sufficient to fund operations through next 12 months Exploring opportunities to enhance liquidity, including the possible sale or license of Zontivity, Fibricor, Yosprala and BezalipSR Exploring Strategic Alternatives for the Business 14

15 Aralez: Next Steps Comprehensive restructuring plan designed to significantly reduce our cost base, improve balance sheet and cash flow Focus on driving organic growth in Canada with Blexten and Cambia and future product and line extension launches Supported by ongoing revenue generation from numerous other products and from the Toprol-XL Franchise and royalties from Vimovo Plans underway to explore divesting or out-licensing U.S. rights to Zontivity, Yosprala, Fibricor and Bezalip SR Explore broader strategic alternatives 15

16 16 Q&A Session

17 First Quarter 2018 Earnings Call Financial Results & Corporate Update May 8, 2018