arlzAralez Pharmaceuticals Inc (NASDAQ:ARLZ) announced financial results for the third quarter ended September 30, 2016. The Company also highlighted certain corporate and commercial updates. All figures are in U.S. dollars.

Corporate Updates:

  • On October 31, 2016, the Company completed its acquisition of the U.S. rights to Toprol-XL® (metoprolol succinate) and its Authorized Generic (AG) from AstraZeneca AB (AstraZeneca). AstraZeneca recorded U.S. net revenues from Toprol-XL and its AG of $91 million in 2014, $89 million in 2015 and $53 million for the six-month period ended June 30, 2016. The transaction is expected to be immediately EBITDA accretive and to move profitability forward to 2017, in each case on an adjusted EBITDA basis.
  • On October 3, 2016, the Company announced the commencement of the commercialization and availability of once-daily YOSPRALA™ (aspirin and omeprazole), the only prescription fixed-dose combination of aspirin, an anti-platelet agent, and omeprazole, a proton pump inhibitor, in the U.S. YOSPRALA is being promoted by 110 high quality, experienced sales representatives in the U.S.
  • On September 15, 2016, the Company announced that the U.S. Food and Drug Administration (FDA) approved YOSPRALA for patients who require aspirin for the secondary prevention of cardiovascular and cerebrovascular events and who are at risk of developing aspirin associated gastric ulcers.
  • On September 6, 2016, the Company completed its acquisition of the U.S. and Canadian rights to ZONTIVITY® (vorapaxar) from Merck & Co., Inc., known as MSD outside of the U.S. and Canada. ZONTIVITY is the first and only approved therapy shown to inhibit the protease-activated receptor-1 (PAR-1), the primary receptor for thrombin, which is considered to be the most potent activator of platelets. In the U.S., ZONTIVITY is indicated for the reduction of thrombotic cardiovascular events in patients with a history of heart attack (myocardial infarction) or in patients with narrowing of leg arteries, called peripheral arterial disease, and should be used in combination with daily aspirin and/or clopidogrel according to their indications or standard of care.

“We continue to make excellent progress in delivering against the expectations that we outlined upon the formation of Aralez in the early part of this year,” said Adrian Adams, Chief Executive Officer of Aralez. “We have strengthened our anchor position in cardiovascular disease with the approval and launch of YOSPRALA and leveraged our competitive platform by executing on our growth strategy of diversifying our product offerings and revenue stream with the acquisitions of ZONTIVITY, Toprol-XL and its Authorized Generic. This has been achieved while maintaining a sound financial position through disciplined decision making and we are delighted to be in a position to improve our 2016 financial guidance by increasing our expected revenues and decreasing our projected spending.”

Third Quarter 2016 Financial Results

On February 5, 2016, the Company completed its acquisition of Tribute Pharmaceuticals Canada Inc. (“Tribute”) (the “Tribute Acquisition”). The accompanying financial information for the three and nine months ended September 30, 2016 includes the operations of Tribute from the date of the Tribute Acquisition through September 30, 2016.

On September 6, 2016, the Company completed its acquisition of the U.S. and Canadian rights to ZONTIVITY. The accompanying financial information for the three and nine months ended September 30, 2016 includes the results of ZONTIVITY from the date of its acquisition through September 30, 2016.

The financial information for the three and nine months ended September 30, 2015 reflects only the results of the Company’s predecessor company, POZEN Inc. (Pozen).

Total net revenues for the three months ended September 30, 2016 were $13.6 million compared to $5.8 million for the three months ended September 30, 2015. Net product revenues for the three months ended September 30, 2016 were $8.1 million, consisting entirely of revenues from products acquired through the Tribute Acquisition. Other revenues for the three months ended September 30, 2016 were $5.5 million, primarily comprised of VIMOVO® royalties, compared to $5.8 million for the prior year comparable period. Royalty revenues for the three months ended September 30, 2016 include a decrease in U.S. net sales of VIMOVO primarily due to lower net pricing recorded by our commercialization partner, Horizon Pharma USA, Inc., partially offset by an increase in the royalty rate received from our ex-U.S. commercialization partner, AstraZeneca, on net sales outside of the U.S. from 6% to 10% commencing in 2016.

GAAP selling, general and administrative (SG&A) expenses were $25.4 million for the three months ended September 30, 2016compared to $12.2 million for the three months ended September 30, 2015. The increase in SG&A expenses was primarily driven by increased commercialization costs incurred in the U.S., predominantly related to the launch of YOSPRALA in October 2016, costs to support the build out of the Aralez global corporate structure, continued operational expenses in Canada, product acquisition-related expenses and higher share based compensation expenses. The increase in expenses was partially offset by a decrease in transaction fees compared to the three months ended September 30, 2015.

GAAP research and development (R&D) expenses for the three months ended September 30, 2016 were $2.0 million compared to$1.8 million for the three months ended September 30, 2015.

Non-GAAP SG&A expenses, which represent our ongoing cash-based operating expenses and exclude transaction fees, severance and retention, product acquisition-related expenses and share-based compensation expense, were $20.7 million for the three months ended September 30, 2016 compared to $6.1 million for the three months ended September 30, 2015. The increase in non-GAAP SG&A expenses is primarily driven by commercialization costs incurred principally related to YOSPRALA, expenses incurred to support the build out of the Aralez global corporate structure and continued operational expenses in Canada. Non-GAAP R&D expenses, which exclude severance and retention and share-based compensation expense, were $2.0 million for the three months ended September 30, 2016 compared to $1.5 million for the three months ended September 30, 2015.

The GAAP net loss for the three months ended September 30, 2016 was $20.6 million, or $0.32 loss per share on a fully diluted basis, compared to a net loss of $8.1 million, or $0.25 loss per share on a fully diluted basis, for the three months ended September 30, 2015.

Balance Sheet

As of September 30, 2016, approximately 65.4 million of the Company’s common shares were issued and outstanding and the Company had cash and cash equivalents of approximately $56.5 million, after paying $25 million to acquire ZONTIVITY. On October 31, 2016, the Company drew down $25 million under its existing credit facility with Deerfield Management to replenish the $25 million upfront cash payment previously made in connection with the ZONTIVITY acquisition and drew down an additional $175 million to finance the upfront cash closing payment for the acquisition of Toprol-XL and its Authorized Generic. The lenders under the Company’s credit facility have also agreed to provide Aralez access to up to an additional $250 million in capital to fund future mutually agreeable transactions.

2016 Financial Guidance

Aralez’s estimates are based on projected results of the Company for the year ending December 31, 2016 and reflect management’s current beliefs about, among other things, prescription trends, competition, pricing levels, inventory levels, and the anticipated timing of future events. The Company’s updated 2016 guidance on non-GAAP SG&A expenses and non-GAAP R&D expenses includes, among other things, YOSPRALA launch costs, taking into account the hiring of a total of approximately 110 sales professionals (inclusive of the 25 sales professionals hired to initially market Fibricor®), costs incurred in connection with receivingFDA approval of YOSPRALA, and the costs to build the necessary infrastructure in the U.S. and Ireland. It excludes share-based compensation expense and certain discrete costs, including merger and product acquisition-related expenses. The Company’s updated 2016 guidance on net revenues includes revenues from Tribute from February 6, 2016 through December 31, 2016, revenues from ZONTIVITY from September 6, 2016 through December 31, 2016 and revenues from Toprol-XL from October 31, 2016 through December 31, 2016. See “Cautionary Note Regarding Forward-Looking Statements” below.

For the year ending December 31, 2016, assuming, among other things, foreign currency exchange rates remain at or near current levels, the Company currently expects:

  • 2016 net revenue guidance to increase to a range of $54 million to $62 million;
  • 2016 non-GAAP SG&A expense guidance to decrease to a range of $78 million to $86 million; and
  • 2016 non-GAAP R&D expense guidance to decrease to a range of $8 million to $10 million. (Original Source)

Shares of Aralez closed last Friday at $3.83. ARLZ has a 1-year high of $6.80 and a 1-year low of $3.10. The stock’s 50-day moving average is $5.04 and its 200-day moving average is $4.28.

On the ratings front, Aralez has been the subject of a number of recent research reports. In a report issued on October 11, Chardan analyst Keay Nakae reiterated a Buy rating on ARLZ, with a price target of $10, which represents a potential upside of 161% from where the stock is currently trading. Separately, on October 10, Guggenheim’s Louise Chen maintained a Buy rating on the stock and has a price target of $12.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Keay Nakae and Louise Chen have a yearly average loss of 34.2% and 18.5% respectively. Nakae has a success rate of 18% and is ranked #3988 out of 4162 analysts, while Chen has a success rate of 27% and is ranked #3984.

Aralez Pharmaceuticals, Inc. operates as a pharmaceutical company. The company focuses on developing cardiovascular and pain therapies.