Shares of Assertio Therapeutics (NASDAQ: ASRT) fell over 18% today after the company announced it had reached a settlement in a patent infringement dispute with Purdue Pharma over specific formulations of the pain drug Oxycontin. The small cap company, formerly known as Depomed, will receive a total of $62 million. A little more than half ($32 million) will be paid this week, while the remaining $30 million will be received in February 2019.
Analysts were apparently expecting a much larger payment and have a legitimate reason for concern. Assertio Therapeutics exited June 2018 with $57 million in cash and cash equivalents, reported a net loss of $21 million during that quarterly period, and reported operating cash flow of negative $14 million for the first half of this year.
As of 12:24 p.m. EDT, the stock had settled to a 12% loss.
That said, Wall Street may be overreacting just a bit. Assertio Therapeutics entered into a huge commercialization agreement with Collegium for the opioid drug Nucynta. The deal will provide a minimum of $132 million in revenue in 2018 and at least $135 million per year through 2021. It may only replace sales that were formerly counted as product revenue, but the agreement transfers a lot of sales and marketing overhead to Collegium and provides a predictable revenue stream from a drug franchise that was in decline. That should help the newly named pharma company pivot its business away from opioid drugs and move closer to profitable operations, although it could take a few more years to complete the transition.
There are a lot of moving parts at Assertio Therapeutics right now, which makes it a little difficult to assess the company's financial statements and near-term potential. While there's an opportunity for the company to get on the right track, it may be a little too early for investors to know for sure. That's why it may be better for most individual investors to stick on the sidelines until more progress is demonstrated.