Teligent, Inc. (NASDAQ: TLGT), a New Jersey-based specialty generic
pharmaceutical company, today announced its financial results for
the third quarter ended September 30, 2020.
Financial Highlights
Third Quarter 2020 vs. Second Quarter 2020
- Revenues of $14.3 million, an increase of $0.8 million or 6%,
on stronger demand for US topical products
- Gross profit of $0.1 million, a decrease of $2.4 million driven
by additional inventory reserves and write offs
- Product development and research expenses of $2.4 million, an
increase of $0.5 million due to API write offs for development
programs not being pursued
- Selling, general and administrative expenses of $6.5 million,
an increase of $1.6 million or 31% driven by increased professional
fee for debt and strategic consulting and bad debt expense
- Operating loss of $8.8 million, an increase of $4.4 million
driven by an increase of $3.1 million of cost of revenue and $1.5
million selling, general and administrative expenses
- Net loss of $0.5 million, a decrease of $13.8 million driven by
gain on debt restructuring
- Adjusted EBITDA gain of $4.1 million, an increase of $6.3
million
Third Quarter 2020 vs. Third Quarter 2019
- Revenues of $14.3 million, a decrease of $4.1 million or 22%,
driven by lost contract volume and price erosion
- Gross profit of $0.1 million, a decrease of $7.2 million,
driven by inventory reserves and increased absorption allocations
due to lower contract volume and price erosion in light of
COVID-19
- Product development and research expenses of $2.4 million, an
increase of $0.3 million or 15% driven by API write offs for
development programs not being pursued
- Selling, general and administrative expenses of $6.5 million,
an increase of $1.5 million or 31% driven by increased professional
fee for debt and strategic consulting and bad debt expense
- Operating loss of $8.8 million, an increase of $9 million
driven by a $4.1 drop in revenue and increase of $3 million cost of
revenue and $1.5 million selling, general and administrative
expenses
- Net loss of $0.5 million, a decrease of $6.6 million driven by
gain on debt restructuring
- Adjusted EBITDA gain of $4.1 million, an increase of $2.0
million
Warning Letter Update
As part of the Company’s efforts to remediate
the issues identified in the FDA’s warning letter and to strengthen
its quality systems, the Company has undertaken a comprehensive
review of all of its products that was completed December 15th,
2020. While the review did not identify material issues with many
of the Company’s products, it did identify issues of
non-conformance with respect to certain products that the Company
is actively reviewing and remediating. The Company believes there
will be supply disruptions or process changes with respect to these
products including product recalls, long-term production pauses,
short-term clear path to market production pauses, and continued
production with minor process corrections. The Company believes
disruptions with respect to certain of its products and the
diversion of resources to remediate the product quality issues will
have a negative impact on the Company’s business, financial
position, results of operations and cash flows during the fourth
quarter of 2020 and during 2021, including reducing its revenue,
negatively impacting operating/(loss), and possibly resulting in
impairment and other charges. Further, the Company anticipates that
the FDA’s issuance of the warning letter and review of the
Company’s processes will continue to delay the FDA’s pre-approval
inspection for commercial production on the newly installed
injectable line at the Buena, NJ facility. The continued failure to
address the issues identified by the FDA in its warning letter and
those subsequently identified by the Company in its comprehensive
product quality review as well as the continued delay in obtaining
the FDA’s pre-approval inspection for commercial production on the
newly installed injectable line at the Buena, NJ facility will have
a negative impact on the Company’s business, financial position,
results of operations and cash flows.
COVID-19 Response Summary
In alignment with the directives in the state of
New Jersey, as a Pharmaceutical manufacturing facility, we are
considered "essential". We have and will continue to remain open as
long as permitted and conditions remain safe for our employees in
order to continue to supply our products to the patients that need
them. Teligent has taken several preventative measures to help
ensure business continuity, while maintaining safe and stable
operations. We have directed all non-production, Quality or R&D
employees, to continue working from home in accordance with state
and local guidelines. We have implemented social distancing
measures on-site at our manufacturing facility to protect employees
and our products. Our employees are provided daily personal
protective equipment upon their arrival to the site and we have
implemented temperature monitoring services at our newly
established single point of entrance. We have also implemented a
more frequent sanitization process of the facility.
In order to preserve cash and align
manufacturing-related resources with downward adjustments made to
our production schedule, we initiated a reduction in force at our
Buena, NJ manufacturing facility effective June 19, 2020. In
connection with the reduction, the Company terminated 53 employees
and furloughed another 15 employees. The Company’s employee base
after these actions, coupled with the Company-wide effort to reduce
recruitment initiated earlier in the year, is down 31% from the
start of the year.
The Company provided terminated employees with a
severance package and will continue to provide health insurance
coverage to its furloughed employees. The associated one-time
employee severance costs totaled $0.3 million, which were recorded
in cost of revenues and product development and research expenses
in the Company’s Condensed Consolidated Statement of Operations and
is adjusted in the Non-GAAP measurement tables on the other
one-time expense line in the nine months ended September 30, 2020.
In addition, the Company decided to shift its research and
development operation being performed in its Tallinn, Estonia
office to its US manufacturing site at Buena, New Jersey and
subsequently to wind-down its Estonia operation. In September of
2020, the Company entered into a letter of intent with its former
Chief Executive Officer, a related party of the Company to sell
certain of Estonia's assets, primarily lab machinery, equipment and
office furniture for a sales price of $125 thousand in cash.
Other Matter
2023 Series D Convertible
Notes
On September 22, 2020, the Company completed the
issuance of approximately $27.5 million aggregate principal amount
of 2023 Series D Convertible Notes in exchange for approximately
$59.0 million in aggregate principal amount, plus accrued but
unpaid interest, of 2023 Series A Convertible Notes, giving effect
to a 53.4% discount on the principal amount of the 2023 Series A
Convertible Notes exchanged. The Company also issued approximately
$0.4 million aggregate principal amount of the 2023 Series D
Convertible Notes in exchange for approximately $0.5 million in
aggregate principal amount, plus accrued but unpaid interest, of
the Company’s outstanding 2023 Series B Convertible Notes, giving
effect to a 31.9% discount on the principal amount of the 2023
Series B Convertible Notes exchanged.
Following the issuance of the 2023 Series D
Convertible Notes, all amounts owed with respect to the 2023 Series
A Convertible Notes and 2023 Series B Convertible Notes had been
paid and the related indentures and the Company’s obligations
thereunder were satisfied and discharged.
Holders of the 2023 Series D Convertible Notes
are entitled to convert principal and accrued, unpaid interest on
the 2023 Series D Convertible Notes into, at the Company’s
election, cash, shares of the Company’s common stock, or a
combination thereof, subject to certain limitations, at an initial
conversion price per share of common stock equal to $1.50, subject
to adjustment under certain circumstances.
Outlook for Three Months Ending December
31, 2020
For the three months ending December 31, 2020,
the Company is forecasting (i) revenue of $11.0 - $12.5 million,
(ii) an operating loss in the range of $5.0 - $6.0 million, (iii)
negative EBITDA in the range of $1.2 - $1.5 million and (iv)
negative Adjusted EBITDA in the range of $4.5 - $4.8 million.
The information included above in respect of the
Company’s forecasts of operating results is subject to a number of
uncertainties and risks based on the relevant assumptions and
expectations, including those described below in “Cautionary Note
Concerning Forward-Looking Statements.” Specifically, there is a
high level of uncertainty associated with the COVID-19 pandemic
along with our quality review of our product portfolio and the
effects thereof on the Company’s future performance and results of
operations. Any of these risks or uncertainties, including in
respect of the COVID-19 pandemic and quality review of our
products, could cause the Company’s actual results, performance or
achievements to differ materially from those expressed or implied
by the Company’s forecasts above.
The above forecasts are based upon the Company’s
current estimates and is subject to completion of its financial
closing procedures. Moreover, this forecasted financial information
has been prepared solely on the basis of information that is
currently available to management. Finally, the above forecasts
should not be construed as financial guidance and should not be
relied upon as such.
About Teligent, Inc.
Teligent is a specialty generic pharmaceutical
company. Our mission is to be a leading player in the specialty
generic prescription drug market. Learn more on our website
www.teligent.com.
Forward-Looking Statements
This press release includes certain
“forward-looking statements” within the meaning of the Private
Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, plans, objectives,
expectations and intentions, and other statements contained in this
press release that are not historical facts and statements
identified by words such as “plan,” “believe,” “continue,” “should”
or words of similar meaning. Factors that could cause actual
results to differ materially from these expectations include, but
are not limited to: our inability to meet current or future
regulatory requirements in connection with existing or future
ANDAs; our inability to achieve profitability; our failure to
obtain FDA approvals as anticipated; our inability to execute and
implement our business plan and strategy; the potential lack of
market acceptance of our products; our inability to protect our
intellectual property rights; changes in global political,
economic, business, competitive, market and regulatory factors; and
our inability to successfully complete future product acquisitions.
These statements are based on our current beliefs or expectations
and are inherently subject to various risks and uncertainties,
including those set forth under the caption “Risk Factors” in
Teligent, Inc.’s most recent Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and other periodic reports we file with the
Securities and Exchange Commission. Teligent, Inc. does not
undertake any obligation to update any forward-looking statements
contained in this document as a result of new information, future
events or otherwise, except as required by law.
Non-GAAP Financial Measures
In addition to reporting financial information
required in accordance with U.S. generally accepted accounting
principles (GAAP), Teligent is also presenting EBITDA, Adjusted
EBITDA and Adjusted EBITDA before product development and research
costs which are non-GAAP financial measures. Since EBITDA, Adjusted
EBITDA and Adjusted EBITDA before product development and research
costs are non-GAAP financial measures, they should not be used in
isolation or as a substitute for consolidated statements of
operations and cash flow data prepared in accordance with GAAP. In
addition, Teligent's definition of EBITDA, Adjusted EBITDA,
Adjusted EBITDA before product development and research costs, and
adjusted net loss may not be comparable to similarly titled
non-GAAP financial measures reported by other companies.
Adjusted EBITDA, as defined by the Company, is
calculated as follows:
Net loss, plus:
Depreciation expense
Amortization of intangibles
Interest expense and other expenses, net
Amortization of debt issuance costs, debt discounts and debt
extinguishment
Impairment charges
Provision for income taxes
Foreign currency exchange loss
Changes in the fair value of derivatives
Non-cash stock-based compensation expense
Other one-time expense
The Company believes that Adjusted EBITDA is a
meaningful indicator, to both 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 adds back non-cash and
non-recurring operating expenses which have little to no bearing on
the Company's cash flows, may subject to uncontrollable factors and
not reflective of the Company's true operational performance.
The Company uses EBITDA, Adjusted EBITDA, and
Adjusted EBITDA before product development and research costs in
managing and analyzing its business and financial condition. Even
though it believes that these financial measurements are useful to
investors in evaluating the Company's performance, it also believes
these financial measurements are subject to certain shortcomings.
EBITDA, Adjusted EBITDA and Adjusted EBITDA before product
development and research costs do not take into account the impact
of capital expenditures on either the liquidity or the financial
performance of the Company or omitting share-based compensation
expenses that may vary over time but represent a material portion
of the overall compensation expense. Due to the inherent
limitations of EBITDA, Adjusted EBITDA, and Adjusted EBITDA before
product development and research costs, the Company's management
utilizes comparable GAAP financial measures to evaluate the
business in conjunction with EBITDA, Adjusted EBITDA and Adjusted
EBITDA before product, development and research costs and
encourages investors to do likewise.
The Company also presents a non-GAAP financial
measures of adjusted net income/(loss) and adjusted net
income/(loss) per diluted share, to show the adjusted net
income/(loss) when EBITDA adjustments are added back or subtracted
out of the traditional GAAP reported net income/(loss). Adjusted
diluted earnings per share, as defined by the Company, is
equal to adjusted net income/(loss) divided by the actual or
anticipated diluted share count for the applicable period.
TELIGENT, INC. AND
SUBSIDIARIESCONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except shares and per
share information)
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
Revenue, net |
$ |
14,339 |
|
|
$ |
18,466 |
|
|
$ |
35,372 |
|
|
$ |
49,929 |
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
Cost of revenues |
14,225 |
|
|
11,186 |
|
|
33,919 |
|
|
28,346 |
|
Selling, general and administrative expenses |
6,543 |
|
|
5,007 |
|
|
18,249 |
|
|
15,707 |
|
Impairment charges |
— |
|
|
— |
|
|
8,373 |
|
|
— |
|
Product development and research expenses |
2,370 |
|
|
2,064 |
|
|
6,050 |
|
|
7,721 |
|
Total costs and expenses |
23,138 |
|
|
18,257 |
|
|
66,591 |
|
|
51,774 |
|
Operating income/(loss) |
(8,799 |
) |
|
209 |
|
|
(31,219 |
) |
|
(1,845 |
) |
|
|
|
|
|
|
|
|
Other Expense: |
|
|
|
|
|
|
|
Foreign currency exchange gain/(loss) |
1,856 |
|
|
(2,167 |
) |
|
2,384 |
|
|
(2,458 |
) |
Debt partial extinguishment of 2019 Notes |
— |
|
|
— |
|
|
— |
|
|
(185 |
) |
Interest and other expense, net |
(8,056 |
) |
|
(5,160 |
) |
|
(21,452 |
) |
|
(15,262 |
) |
Gain on debt restructuring |
10,882 |
|
|
— |
|
|
10,882 |
|
|
— |
|
Inducement loss |
(701 |
) |
|
— |
|
|
(701 |
) |
|
— |
|
Change in the fair value of derivatives |
4,326 |
|
|
— |
|
|
(1,523 |
) |
|
— |
|
Loss before income tax
expense/(benefit) |
(492 |
) |
|
(7,118 |
) |
|
(41,629 |
) |
|
(19,750 |
) |
|
|
|
|
|
|
|
|
Income tax
expense/(benefit) |
18 |
|
|
(5 |
) |
|
49 |
|
|
76 |
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(510 |
) |
|
$ |
(7,113 |
) |
|
$ |
(41,678 |
) |
|
$ |
(19,826 |
) |
|
|
|
|
|
|
|
|
Basic and diluted loss per share |
$ |
(0.08 |
) |
|
$ |
(1.32 |
) |
|
$ |
(7.32 |
) |
|
$ |
(3.68 |
) |
|
|
|
|
|
|
|
|
Weighted average shares of
common stock outstanding: |
|
|
|
|
|
|
|
Basic and diluted shares |
6,082,517 |
|
|
5,385,041 |
|
|
5,690,164 |
|
|
5,383,531 |
|
|
(a |
) |
|
|
|
(b |
) |
|
|
(a ) In accordance with ASC
260-10-45-13, the Company includes the Warrants issued to its Term
Loan lenders to purchase 134,667 shares of the Company’s common
stock at an exercise price of $0.01 per share, from July 20, 2020
to September 30, 2020, in the number of outstanding shares used to
calculate the basic and diluted loss per share for the three months
ended September 30, 2020.
(b) The Company includes the
Warrants issued to its Term Loan lenders to purchase 134,667 shares
of the Company's common stock at an exercise price of $0.01 per
share from July 20, 2020 to September 30, 2020 and 538,995 shares
of the Company’s common stock at an exercise of $0.01 per share
from May 28, 2020 to September 30, 2020, in the number of
outstanding shares used to calculate the basic and diluted loss per
share for the nine months ended September 30, 2020.
TELIGENT, INC. AND
SUBSIDIARIESGROSS TO NET
DEDUCTIONS(in thousands)
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
Gross product sales |
$ |
44,264 |
|
|
$ |
41,814 |
|
|
$ |
104,147 |
|
|
$ |
108,550 |
|
|
|
|
|
|
|
|
|
Reduction to gross product
sales: |
|
|
|
|
|
|
|
Chargebacks and billbacks |
24,585 |
|
|
14,573 |
|
|
54,091 |
|
|
37,285 |
|
Wholesaler fees for service |
1,445 |
|
|
2,355 |
|
|
4,191 |
|
|
6,303 |
|
Sales discounts and other allowances |
4,302 |
|
|
6,658 |
|
|
11,769 |
|
|
16,371 |
|
Total reduction to gross
product sales |
30,332 |
|
|
23,586 |
|
|
70,051 |
|
|
59,959 |
|
|
|
|
|
|
|
|
|
Product sales, net |
13,932 |
|
|
18,228 |
|
|
34,097 |
|
|
48,591 |
|
|
|
|
|
|
|
|
|
Contract manufacturing product
sales |
306 |
|
|
167 |
|
|
813 |
|
|
1,097 |
|
|
|
|
|
|
|
|
|
Research and development
services and other income |
100 |
|
|
71 |
|
|
462 |
|
|
241 |
|
|
|
|
|
|
|
|
|
Total product sales, net |
$ |
14,339 |
|
|
$ |
18,466 |
|
|
$ |
35,372 |
|
|
$ |
49,929 |
|
TELIGENT, INC. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP
MEASURES(in thousands)
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(510 |
) |
|
$ |
(7,113 |
) |
|
$ |
(41,678 |
) |
|
$ |
(19,826 |
) |
|
|
|
|
|
|
|
|
|
Depreciation |
|
961 |
|
|
922 |
|
|
2,933 |
|
|
2,700 |
|
Amortization of
intangibles |
|
664 |
|
|
746 |
|
|
2,032 |
|
|
2,260 |
|
Impairment charges |
|
— |
|
|
— |
|
|
8,373 |
|
|
— |
|
Interest expense (1) |
|
5,673 |
|
|
3,585 |
|
|
15,198 |
|
|
10,605 |
|
Amortization of debt issuance
costs, debt discounts and debt extinguishment |
|
2,383 |
|
|
1,575 |
|
|
6,254 |
|
|
4,842 |
|
Provision for income
taxes |
|
18 |
|
|
(5 |
) |
|
49 |
|
|
76 |
|
EBITDA |
|
9,189 |
|
|
(290 |
) |
|
(6,839 |
) |
|
657 |
|
|
|
|
|
|
|
|
|
|
Foreign currency exchange
(gain)/loss |
|
(1,856 |
) |
|
2,167 |
|
|
(2,384 |
) |
|
2,458 |
|
EBITDA after foreign currency
exchange (gain)/loss |
|
7,333 |
|
|
1,877 |
|
|
(9,223 |
) |
|
3,115 |
|
Non-cash stock-based
compensation expense |
|
137 |
|
|
212 |
|
|
795 |
|
|
896 |
|
Change in the fair value of
derivatives |
|
(4,326 |
) |
|
— |
|
|
1,523 |
|
|
— |
|
Other one-time expense |
|
928 |
|
|
— |
|
|
1,238 |
|
|
— |
|
Adjusted EBITDA (2) |
|
4,072 |
|
|
2,089 |
|
|
(5,667 |
) |
|
4,011 |
|
|
|
|
|
|
|
|
|
|
Product development and
research expenses |
|
2,177 |
|
|
1,837 |
|
|
5,444 |
|
|
6,832 |
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA before product
development and research expenses |
|
$ |
6,249 |
|
|
$ |
3,926 |
|
|
$ |
(223 |
) |
|
$ |
10,843 |
|
(1) Includes $13.0 million and $6.4 million of
non-cash interest expense during the nine months ended September
30, 2020 and 2019, respectively.
(2) Adjusted EBITDA excludes certain add backs
available to the Company in calculating Consolidated Adjusted
EBITDA under the terms of the Ares Loan Agreement used for
determining covenant compliance.
TELIGENT, INC. AND
SUBSIDIARIESRECONCILIATION OF NON-GAAP ADJUSTED
NET LOSS(in thousands, except share and per share
information)
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
|
|
|
|
|
|
|
|
Net loss |
$ |
(510 |
) |
|
$ |
(7,113 |
) |
|
$ |
(41,678 |
) |
|
$ |
(19,826 |
) |
|
|
|
|
|
|
|
|
Amortization of debt issuance
costs, debt discounts and debt extinguishment |
2,383 |
|
|
1,575 |
|
|
6,254 |
|
|
4,842 |
|
Provision for income
taxes |
18 |
|
|
(5 |
) |
|
49 |
|
|
76 |
|
Amortization of
intangibles |
664 |
|
|
746 |
|
|
2,032 |
|
|
2,260 |
|
Impairment charges |
— |
|
|
— |
|
|
8,373 |
|
|
— |
|
Foreign currency exchange
(gain)/ loss |
(1,856 |
) |
|
2,167 |
|
|
(2,384 |
) |
|
2,458 |
|
Non-cash stock-based
compensation expense |
137 |
|
|
212 |
|
|
795 |
|
|
896 |
|
Change in the fair value of
derivative liabilities |
(4,326 |
) |
|
— |
|
|
1,523 |
|
|
— |
|
Other one-time expense |
928 |
|
|
|
|
1,238 |
|
|
— |
|
Adjusted net loss |
$ |
(2,562 |
) |
|
$ |
(2,418 |
) |
|
$ |
(23,798 |
) |
|
$ |
(9,294 |
) |
|
|
|
|
|
|
|
|
Non-GAAP adjusted net loss per
basic and diluted share |
$ |
(0.42 |
) |
|
$ |
(0.45 |
) |
|
$ |
(4.18 |
) |
|
$ |
(1.73 |
) |
Contact: |
Philip K. YachmetzTeligent, Inc.(856) 776-4632www.teligent.com |
Grafico Azioni Teligent (NASDAQ:TLGT)
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