Assertio Holdings, Inc. (ASRT) Earnings Call Transcript & Summary

Good day, and welcome to the iAccess Alpha Virtual Best Ideas Spring Investment Conference 2025. The next presenting company is Assertio Holdings, Inc. I'd now like to turn the floor over to today's host, Mr. Nelson Cox of Lake Street Capital, who will be moderating today's call. Sir, the floor is yours.

Great. Thank you, and welcome to the Assertio fireside chat. My name is Nelson Cox, Equity Research analyst at Lake Street Capital Markets. Today, I'm joined by Assertio's CEO, Brendan O’Grady. It's a pleasure to speak with you today, Brendan. Before we get started, I'm going to quickly run through some brief disclosures. Lake Street Capital Markets provides equity research coverage for Assertio. The covering analysts at Lake Street do not own shares of Assertio and are not being compensated for today's event. And lastly, Lake Street has not received compensation for investment banking services within the past 12 months. All right. And with that, we can get started.

Brendan, you joined the company about 9 months ago. Maybe to kick things off, provide us with a quick overview of yourself and your experience.

Well, sure, Nelson, and thanks for the question, and it's a pleasure to be here today. I guess I would just start saying that I've been in the industry now, the pharmaceutical industry for more than 30 years. I started out at Sanofi predecessor companies, really carrying the bag in field sales and then worked into medical affairs where I spent some time on market development and kind of premarket commercialization. From there, I had an opportunity to join a joint venture, which would later be completely bought by Teva. So I joined Teva in 2001 and really joined on the specialty side. Most people think of Teva as a generic company, but in the U.S., Teva built a significant branded business, and I was -- played a key role in that. And then through the course of 20 years, had increasing levels of responsibility and eventually came back to Teva -- to North America to lead the North American business unit in 2017, which at the time was a $9 billion P&L. About half of that was specialty. The other half was generic. And much of that specialty portfolio was built through M&A. A significant amount of it was 505(b)(2), but there was some biologics, some biosimilars in there. So it was a great 20 years. I learned a ton and would like to think that I played a significant role in stabilizing Teva and putting them on the track that they are today. But after that, I left -- did a little bit of work in digital health care technology before landing at Glenmark as a global CEO. And then after leaving Glenmark, found this interesting opportunity with Assertio and decided to come to Assertio.

Great. Yes, that's perfect. And given that you have come from much larger companies with larger portfolios and P&Ls, I think it would be interesting to hear what attracted you to take the helm at Assertio, and what you have learned since joining so far?

Well, no, thanks, and it's a great question. It's one I get a lot. And I think that again, when I look at my past with Teva, a lot of -- almost all of Teva's branded business was built through business development and M&A. And when I look at Assertio, it's very similar, right? Assertio is a commercial specialty pharmaceutical company with 7 assets, approved assets, in various different therapeutic areas. So it seemed very familiar territory to me. And when I looked at the financials, right, a strong balance sheet, and really a company that needed just a focus and a little bit of a turnaround. So I felt like this is something that was very doable to me, something that was exciting. And to me to be able to take a company that was doing well, hit some rough waters, but has a good a good plan, good people and some good base assets to work with. I thought this was a very unique and interesting opportunity for me and one that I decided was a good match for my skill set.

That's perfect. Let's turn to the strategy a bit more and talk about that. The company delivered solid results and positive cash flow in '24, but you've characterized 2024 as more of a stabilization year. Can you kind of clarify for us in the audience what that means exactly?

Yes. So the time period from 2024, which maybe it's mid-2023 to about 2026 is a really interesting time as I see it in the evolution of Assertio. So going back in time to mid-2023, Assertio had just completed the acquisition of Spectrum Pharmaceuticals and Rolvedon as part of that. And Indocin was the company's lead asset at the time, doing over $100 million in sales. Two months after that, in August of 2023, Indocin lost exclusivity and a generic formulation was launched. And this really kind of put the company back on its heels a little bit. It was just in the process of really launching Rolvedon, at the same time, dealing with the loss of exclusivity of Indocin. So there was this transition period, and Indocin was largely supported through a very, very small commercial effort and a lot of nonpersonal promotion. And Rolvedon was somewhat of a different asset. It needed in-person promotion, not a huge sales force, but some kind of commercial in-person presence. So there was this transition that took place and very different assets. As we entered 2024, it was about stabilizing the organization and getting used to this, right? Putting a little bit more emphasis on in-person promotion, wrapping that around the nonpersonal to have more of an omnichannel approach, and then adjusting to the different margins between Indocin and Rolvedon. Indocin had a much higher margin than Rolvedon, although Rolvedon is still good at 70% plus, but certainly not what Indocin was. So we stabilized the organization in 2024, went through that kind of learning curve, so to speak. And really now as we get into 2025, it's more about positioning the company for that growth that we see that's coming in 2026.

That's perfect. Okay. Makes sense. And then maybe we just go from there. I mean as we move into 2025 and then shift into growth in '26, let's maybe unpack those themes a bit more for us at a high level. I think that would be helpful.

Yes. I get a lot of questions about what do you mean when you say the transformation you're in 2025 and where you're headed with growth in 2026? So for me, there's really 4 key points to the transformation. And number one is really just simplifying our structure and processes. We have a complicated holdco structure for the size of an organization that we are. And I think there's some opportunity to streamline this a little bit, become more efficient, which will allow us to be more nimble. It will allow us to focus better. It will also have a positive impact on OpEx. I brought in a new Chief Commercial Officer, who has a ton of experience in the space that we're in. She has already made significant changes to the sales and marketing organization. We'll continue to evolve that to align it with our priorities. And then our previous Chief Commercial Officer was also before that Chief Financial Officer. So I moved him into a Chief Transformation Officer role, so he can work with me and the rest of the management team to really streamline the overall structure and processes, and really kind of enable that successful transformation of our business. So that's one. Two is focusing on our growth assets. Today, those growth assets are primarily Rolvedon and Sympazan. We'll talk a little bit about -- more about those, but really making sure that we position those products for continued growth and hoping to build upon that. Three is reducing our legal exposure and the associated OpEx with that. And like many companies that have grown through M&A like we have, we've inherited a significant amount of legal baggage from some of those M&A transactions. We've made a lot of progress reducing our exposure in 2024, and we'll continue to do so in 2025. And as I said, this will ultimately have a beneficial effect on our OpEx and EBITDA going forward. And then lastly, it's really looking at the capital that we have and deploying that in a smart and accretive way to generate long-term value. So as you might expect, we're in the process of evaluating numerous strategic opportunities, to position the company for near term and really sustainable growth. And we'll be saying more about that as the year progresses. I can't really get into that more at this point, but I'm very excited about some of the opportunities that are presenting themselves and really positioning ourselves for that growth that we'll see in the back half of this year heading into 2026.

Got it. Makes sense. And we touched on it briefly when we're talking about stabilization in 2024, but I think it would be beneficial to talk about the digital marketing piece of the story, which has been a distinguishing factor at Assertio versus the in-person approach. You have a sales team now as well with Rolvedon. Maybe just walk through how investors should think about this kind of evolving in the coming years?

Yes. No, great question. Thanks, Nelson. And I think this is part of this transformation that I talk about is that the prior model was to buy mature assets that may have a few years of exclusivity left and they occupy a certain niche in the market. Strip the sales and marketing, the in-person sales and marketing around it to improve the profitability, and then kind of try to maintain that with nonpersonal promotion. And where you can, if you start to see volume declines, you can offset that with a little bit of pricing at times. I think that model is getting harder and harder to continue to execute. I think there's fewer available assets where that is possible. And I think the payer market is more difficult, and I think that that's a challenging model going forward. So when we bought Rolvedon, that really somewhat pivoted the company, not completely away from nonpersonal promotion -- I'm sorry, digital promotion, but really put us back into the situation where we need to have some in-person promotion. So I think there's a balance there. And I think you take the nonpersonal promotion, you surround it with assets where you don't need sales forces in the hundreds or thousands, you need small targeted focused in-person promotion. And then you augment that with nonpersonal promotion for more of a -- what we call an omnichannel approach. And I think we're migrating away from exclusive nonpersonal promotion to more of this omnichannel approach which I think will yield benefits. It will make us more effective. And instead of seeing kind of this flatness of top line with some of these assets and a temporary increase in bottom line, we hope to see growth in top and bottom line over time.

That's great. Great overview. And then maybe switching over to Rolvedon, one of the growth assets we're focused on today. I mean, let's talk about that asset in more detail. Can you just give a quick overview of that drug and its markets?

Yes, sure. So Rolvedon is a long-acting G-CSF. And of course, the slide that you see here shows the evolution of the G-CSF market. 1991, Neupogen was launched as filgrastim and -- I guess, the other way around, filgrastim was launched as Neupogen. And then in 2002, pegfilgrastim was approved and launched. And you can see the change in the structure there where it went from the blue part of that molecule and the gold structure was added. It was 20 years later that eflapegrastim was approved, which is Rolvedon. And you can see the addition of the green structure in the molecule, which is an Fc fragment of human immunoglobulin. That increases the uptake and retention, and we've seen a threefold increase in potency. Now what that means clinically, I guess, remains to be determined. So while Rolvedon was approved as a BLA, and it is not a biosimilar copy of Neulasta, which all the other GCS long-acting G-CSFs on the market today are, I don't know we still compete in a biosimilar marketplace. So I think we have some advantages of being a BLA and being approved that way. But the reality is we still compete in a biosimilar marketplace. So all of the challenges in managing ASP and sustaining long-term growth are present for us.

Right, right. And you've produced steady volume growth since launching Rolvedon. How do you think about your current market share today?

Yes. So managing ASP is a key component. And there's a couple of ways to do it. I mean you can -- there's a couple of ways to think about products that compete in the biosimilar market. You can come out and you can go after share quickly, which you'll see a spike in top line growth. And that's short term. That's only sustainable for a year or 2 because to do that, you erode ASP quickly. And by 3 years into it, the product is less relevant. We've taken a different approach, and we focused on the community oncology clinic space, specifically in Medicare Part B. We provide the value via rebates and discounts back to the community oncology clinics. And so we're trying to manage sustained long-term growth. We did a little over $60 million last year in Rolvedon net sales and -- which we think is a great accomplishment. We kind of bounced around in the mid-30s share, so 33%, 34%, 35%. We've hit 40% share recently in that community oncology clinic Part B space. But to really kind of further unlock the growth of Rolvedon, we're going to have to pivot outside of that. We're going to have to get more commercial business, more business in the hospitals. And we're in the process of doing that as we speak, and that's part of this year's transformation and positioning for Rolvedon in growth in 2026 is making sure that we have the access in those other segments of the market to truly gain some market share there and continue to grow Rolvedon.

Great. Great. And then you also reported on the same-day dosing trial results at the end of last year. Can you kind of walk us through why the same-day dosing study is important and the key findings of that trial?

Yes. No, thanks for the question. I mean I think just to kind of start with the end and then I'll come back is we're very happy with the results of the same-day dosing trial. And we look forward to seeing the impact of that, which we haven't seen yet. But I think if you think about the use of long-acting G-CSF products, there's -- typically, a patient receives chemotherapy and they'll either come back the following day for their injection or they can leave with an on-body. And on-body injections have some issues and can be a challenge for some patients. So a lot of patients elect to come back the next day. If a physician can give the product the same day as finishing chemotherapy, there's an advantage, both the convenience of the patient as well as the physician. So this was a kind of a key study for us. It's not a study that was big enough to generate a change in label, but it did show that Rolvedon was safe and effective when given the same day as it was given the following day. So it's given physicians some more comfort. We hope to approach NCCN and maybe get a mention in the NCCN guidelines. We presented the data at 2 breast cancer conference symposiums to date. We're seeking publication in a peer-reviewed journal. And so the noise around this is mounting, and we do hope that we'll see an upside with Rolvedon and physicians will feel more comfortable giving it the same day because there is a -- certainly a benefit to the patients as well as the providers in doing so.

Yes. Yes, definitely. Let's maybe shift gears over to neurology. You have an exciting asset in Sympazan, which we've touched on a little bit. But maybe just to start, maybe a quick summary of that drug and what differentiates that from the competitors would be helpful.

Yes. When I was looking at the company and looking at joining, this is one product that jumped out at me. I mean, I have a background in neurology and movement disorder. So this is something that was familiar to me. Sympazan is an oral film formulation of clobazam. And clobazam is used in this patient population. This is for a subset of, kind of a rare, epilepsy seizure disorder called Lennox-Gastaut syndrome. It affects about 50,000 patients in the U.S. And it is -- typically children will present with seizure starting around 2, 3, 4. And as this syndrome evolves and patients progress by the time they hit adolescents, it could be accompanied with significant disability, unfortunately. So keeping -- swallowing a clobazam tablet, or keeping the liquid solution down and making sure that they get it all is a challenge for parents who are the caregivers. So Sympazan, because it is an oral dissolvable film similar to a listerine strip, is a -- really represents an advantage to patients to be able to make sure they get their medication, make sure they get their dose, they don't spit it back out. And it really is well received by both patients that has a good taste to it, as well as caregivers. So this is a product we acquired a few years ago, again, put nonpersonal promotion behind it, and it was relatively flat in sales. And so we did a pilot right about the time just after I came on board last year to see if it would respond to in-person promotion. It does. It has. And so we put a very small targeted sales force around it. These patients tend to be clustered in certain geographic markets and around neurology centers where they're getting treatment. So again, this is where you can make an impact with a relatively small sales force without having to put hundreds of people behind it. So we see some upside here. I'm hoping that we'll see a double-digit growth in Sympazan this year. And ultimately, I think that this is an asset that could do $20 million, $25 million, $30 million going forward. So we'll see.

Perfect. That's great. Great background. think we can maybe switch over to kind of strategic priorities. We've gone over a few of them. You've mentioned Rolvedon growing -- Rolvedon and Sympazan while managing Indocin. Can we kind of assume acquisitions/licensing are a key part of the long-term growth strategy going forward?

Yes, definitely. I mean I think that, that is a significant part of it. I mean it certainly is to grow Rolvedon and Sympazan, and it's to manage and optimize the other assets in our portfolio. But to truly get the organization to where we want to get it to, and this is really in the $250 million to $300 million range in the next couple of years, we're going to have to do some business development, or maybe even M&A deals, but to really truly grow the company. And so if you look at the financials that you have up here on the screen, I think we're -- we have a good trajectory. We have a little over $100 million in cash. We have some long-term debt that is very manageable. It's $40 million in long-term convertible debt. It doesn't convert until 2027. And today, that's not much of a concern. It's got a favorable coupon note on it. So we've got some capital to go out into the market and look for assets. It's significantly more than when I came on board just 9 months ago. And so we're able to cast a little bit wider net. So definitely, business development and/or M&A is part of the plan. And as I said, a lot of good discussions going on there. I can't really say much more about it. But I'm optimistic that we will have something happen in this calendar year, which could help in the back half of this year, but will definitely help in 2026.

Great. Yes, that's helpful. And then kind of like the characteristics you're looking at for a potential new asset, let's maybe talk about those. Do they need to fit a specific financial profile or end market? Or what are the attributes that you are looking for?

Yes. Again, a great question. I mean I think ideally, we're looking for -- at least for the first round, we're looking for commercial assets that will add both top line and EBITDA growth. So I think that that's one. We're also looking for assets that have some IP left. And that also occupy -- kind of fit our model of this omnichannel approach. So we're not looking to build out hundreds of sales representatives. But I find it personally, I think it's very difficult to grow an asset just through nonpersonal promotion alone. So I do think we're looking for assets that complement our model, that you can reach a good amount of the high-decile prescribers with a really small targeted sales force, meets an unmet medical need. I think that's also a critical piece. And of course, we're going to be looking in oncology and oncology supportive care where we have a foothold. We're going to be looking in neurology where we have a foothold. But we're also looking at other rare disease and other opportunities as well. So I think we have capabilities across different therapeutic areas. It's really more about what fits our model and this focus on omnichannel than it is necessarily a specific therapeutic area, if that makes sense.

Yes. Yes. Understood. And we talked about it too already on the slide, but maybe with the strong balance sheet, produced $26 million of cash last year. I mean do you see that as a fund for BD? Or are there any other -- besides BD, are there any other plans to deploy that capital?

Well, I mean, I think we're looking at, as I said, all the options. And I don't want to go into too much detail, but BD is, by far and away, probably the highest priority. There are other things we could do with that capital. I mean we get questions about why don't you pay down your debt? Why don't you do a stock buyback given where our share price is today. And those are all things that we look at. But right now, I think the best use of our capital is to really deploy it to bring other -- another asset or other assets on board that really help us on our mission to position Assertio back to a growth company, and back to a growth company sooner rather than later. And that's really been my primary focus since I came on board and continues to be my primary focus.

Perfect. Understood. And then maybe just looking at your current portfolio today, are there any assets in there that you would potentially consider selling to pay down debt, or to fund an acquisition? Or how do you think about that?

Yes. So again, a good question and one that I get frequently. And I mean I'm kind of the opinion that everything is always for sale. But to be serious about it, again, we're focused on Rolvedon and Sympazan, the other assets less so. So I mean, I think that as I think about divestitures, if there's something that makes sense that could either be better optimized in somebody else's hands, and we can get a decent amount of cash to deploy that to a growth asset, then that's certainly something that I would consider. And there may be 1 or 2 products in our portfolio that, that would make sense for. And of course, any kind of deal that we did there on a divestment would just give us more cash to deploy and bring something else in. So again, part of the transformation process and part of some of the strategic options we're considering, but we'll see how that goes. But certainly, acquisitions and divestitures could be part of the strategy going forward.

Very helpful. Very helpful. And as we approach time here, just to be mindful of the clock, I'd like to hand it back to you, Brendan, for any closing thoughts.

Well, just a couple of closing thoughts. So -- and I mentioned this a little bit when we started the discussion here. I mean I think that Assertio has some some things that really set it aside from other companies in this space. I think Rolvedon, although people understand that it competes in the biosimilar marketplace, and it has ASP challenges like all the other biosimilars to manage. I think Rolvedon is a sustainable growth asset for the next 4 or 5 years. And we also have -- because it is a BLA, we also have the opportunity to add potential indications to it that the other biosimilars don't. So I'm excited about that. I'm excited about our plans for Rolvedon and where we see that going. I'm excited about Sympazan. I think that Sympazan meets a very specific unmet medical need in the marketplace, and I think that there's some growth that we can achieve there. I also think that we have a very experienced management team in this space in bringing new products on board, commercializing them and getting value for those products. I'm happy with the team that we've assembled. I think that we are pivoting the organization to growth. And again, we've talked about the stronger balance sheet and the opportunity to go into the marketplace and bring some additional assets on board. So when I look at the foundation and the fundamentals of Assertio, I think we're in -- take the stock price aside. We all know that we're drastically undervalued. And I think people are starting to take note here and realize that there's some value in maybe getting on board now, as opposed to waiting until the growth has happened, and getting on board at the beginning of that wave because that's really where I believe that we are. And I think starting the back half of 2025, moving into 2026, we are going to be a much different company, and I look forward to being a part of that.

That's great. That's great. Thank you again, Brendan, for the time today, and thank you, everyone, for tuning in. Operator?

Thank you, Nelson, and thank you, everybody, for listening.

Ladies and gentlemen, that concludes Assertio Holdings, Inc.'s presentation. You may now disconnect. Please consult the conference agenda for the next presenting company.