10-Q 1 osmt-20210331x10q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38709

Osmotica Pharmaceuticals plc

(Exact name of registrant as specified in its charter)


Ireland		Not Applicable
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

400 Crossing Boulevard

Bridgewater, NJ 08807

(Address of principal executive offices)

(Zip Code)

(908) 809-1300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares	OSMT	Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐		Accelerated filer ☐

Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

There were 62,719,131 ordinary shares ($0.01 nominal value per share) outstanding as of May 12, 2021.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including the section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans, including the impact of the COVID-19 pandemic on the sufficiency of our product supply, and our objectives for future operations, are forward-looking statements. The words "believe," "may," "will," "plan," "should," "estimate," "continue," "anticipate," "intend," "expect" and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short- and long-term business operations and objectives and financial needs. Examples of forward-looking statements include, among others, statements we make regarding: our intentions, beliefs or current expectations concerning, among other things, future operations; future financial performance, trends and events, particularly relating to sales of current products and the development, approval and introduction of new products; U.S. Food and Drug Administration, or the FDA, and other regulatory applications, approvals and actions; the continuation of historical trends; our ability to manage costs and service our debt; and the sufficiency of our cash balances and cash generated from operating and financing activities for future liquidity and capital resource needs.

We may not achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place significant reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Important factors that could cause actual results and events to differ materially from those indicated in the forward-looking statements include the following:

●

if we are unable to successfully develop or commercialize new products, or do so on a timely or cost effective basis, our operating results will suffer;

●

due to our dependence on a limited number of products, our business could be materially adversely affected if one or more of our key products do not perform as well as expected;

●

failures of or delays in clinical trials could result in increased costs to us and could jeopardize or delay our ability to obtain regulatory approval and commence sales of new products;

●

we are, and will continue to be in the future, a party to legal proceedings that could result in adverse outcomes;

●

as of March 31, 2021, we had total outstanding debt of approximately $219.8 million (net of deferred financing costs), and we had unused commitments of $50.0 million under our senior secured credit facilities. Our substantial debt could adversely affect our liquidity and our ability to raise additional capital to fund operations and could limit our ability to pursue our growth strategy or react to changes in the economy or our industry;

●

we face intense competition from both brand and generic companies, which could significantly limit our growth and materially adversely affect our financial results;

●

a business interruption at our manufacturing facility, our warehouses or at facilities operated by third parties that we rely on could have a material adverse effect on our business;

●

our profitability depends on our major customers, and if our relationships with them do not continue as expected, our business, prospects and results of operations could materially suffer;

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●

if we are unable to develop or maintain our sales capabilities, we may not be able to effectively market or sell our products;

●

our competitors and other third parties may allege that we are infringing their intellectual property, forcing us to expend substantial resources in resulting litigation, and any unfavorable outcome of such litigation could have a material adverse effect on our business;

●

our profitability depends on coverage and reimbursement by governmental authorities and other third-party payors and healthcare reform and other future legislation creates uncertainty and may lead to reductions in coverage or reimbursement levels;

●

we are subject to extensive governmental regulation and we face significant uncertainties and potentially significant costs associated with our efforts to comply with applicable regulations;

●

our products or product candidates may cause adverse side effects that could delay or prevent their regulatory approval, or result in significant negative consequences following regulatory approval;

●

manufacturing or quality control problems may damage our reputation, require costly remedial activities or otherwise negatively impact our business;

●

our business may be adversely affected by the continuing coronavirus pandemic; and

●

other factors that are described in the "Risk Factors" section of our Annual Report on Form 10-K that was filed on March 30, 2021.

The forward-looking statements included in this Quarterly Report on Form 10-Q are made only as of the date hereof. You should not rely upon forward-looking statements as predictions of future events. We cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Except as required by applicable law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.

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TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (unaudited).	5
Condensed Consolidated Balance Sheets – March 31, 2021 and December 31, 2020	5
Condensed Consolidated Statements of Operations and Comprehensive Loss – Three months ended March 31, 2021 and 2020	6
Condensed Consolidated Statement of Shareholders’ Equity – Three months ended March 31, 2021 and 2020	7
Condensed Consolidated Statements of Cash Flows - Three months ended March 31, 2021 and 2020	8
Notes to Condensed Consolidated Financial Statements	9
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	24
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.	41
ITEM 4. Controls and Procedures.	42
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings.	42
ITEM 1A. Risk Factors.	43
ITEM 6. Exhibits.	44

SIGNATURES	44

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PART I – FINANCIAL INFORMATION

Item 1.Financial Statements.

OSMOTICA PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	March 31, 2021		December 31, 2020
		(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	109,212	$	114,053
Trade accounts receivable, net		22,592		26,412
Inventories, net		16,950		17,934
Prepaid expenses and other current assets		12,600		14,755
Total current assets		161,354		173,154
Property, plant and equipment, net		27,123		28,054
Operating lease assets		2,386		2,755
Intangibles, net		63,124		65,758
Goodwill		100,855		100,855
Other non-current assets		326		373
Total assets	$	355,168	$	370,949
Liabilities and Shareholders' Equity
Current liabilities:
Trade accounts payable	$	4,522	$	6,768
Accrued liabilities		42,720		47,517
Current portion of obligation under finance leases		27		40
Current portion of lease liability		1,375		1,457
Income taxes payable - current portion		6		2
Total current liabilities		48,650		55,784
Long-term debt, net of non-current deferred financing costs		219,755		219,525
Long-term portion of obligation under finance leases		2		4
Long-term portion of lease liability		1,136		1,436
Income taxes payable - long term portion		1		—
Deferred taxes		427		344
Total liabilities		269,971		277,093
Commitments and contingencies (See Note 11)
Shareholders' equity:
Ordinary shares ($0.01 nominal value 400,000,000 shares authorized, 62,719,131 and 62,545,832 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)		627		625
Preferred shares ($0.01 nominal value 40,000,000 shares authorized, no shares issued and outstanding)		—		—
Euro deferred shares (€1.00 nominal value 25,000 shares authorized, no shares issued and outstanding)		—		—
Additional paid in capital		549,021		548,070
Accumulated deficit		(462,222)		(452,610)
Accumulated other comprehensive loss		(2,229)		(2,229)
Total shareholders' equity		85,197		93,856
Total liabilities and shareholders' equity	$	355,168	$	370,949

See accompanying notes to unaudited condensed consolidated financial statements

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OSMOTICA PHARMACEUTICALS PLC

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended March 31,
	2021		2020

Net product sales	$	22,529	$	47,308
Royalty revenue		1,123		869
Licensing and contract revenue		228		472
Total revenues		23,880		48,649
Cost of goods sold (inclusive of amortization of intangibles)		13,490		20,590
Gross profit		10,390		28,059
Selling, general and administrative expenses		18,922		21,176
Research and development expenses		3,310		5,688
Total operating expenses		22,232		26,864
Gain on sales of product rights, net		5,636		—
Operating (loss) income		(6,206)		1,195
Interest expense and amortization of debt discount		2,960		4,064
Other non-operating gain		(87)		(746)
Total other non-operating expense		2,873		3,318
Loss before income taxes		(9,079)		(2,123)
Income tax expense		533		960
Net and other comprehensive loss	$	(9,612)	$	(3,083)
Loss per share attributable to shareholders
Basic and Diluted	$	(0.15)	$	(0.05)
Weighted average shares basic and diluted
Basic and Diluted		62,678,130		58,257,191

See accompanying notes to unaudited condensed consolidated financial statements

SEC Form 10-Q filed by Osmotica Pharmaceuticals plc