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Angiotech Announces Financial Results for the Fourth Quarter Ended December 31, 2009
Thursday, March 4, 2010
Website | News Archive
Vancouver, BC, March 4, 2010--(T-Net)--Angiotech Pharmaceuticals, Inc. (NASDAQ: ANPI, TSX: ANP) today announced its financial results for the fourth quarter and year ended December 31, 2009.
"We were pleased to report a particularly strong quarter for product sales, which was driven by the continued strong performance of our Proprietary Medical Products, where we saw sales growth of 53% compared to the same period in 2008," said Dr. William Hunter, President and CEO of Angiotech. "We are particularly pleased by the continued success of our Quill(TM) SRS product line, which we believe will continue to be a strong performer during 2010."
Fourth Quarter Financial Highlights
- Total revenue was $63.6 million.
- Net product sales were $50.0 million. Sales of our Proprietary
Medical Products were $18.3 million, or 37% of total product sales.
Sales of our Base Medical Products were $31.7 million, or 63% of
total product sales.
- Royalty revenue was $13.5 million.
- Research and development expenses were $6.2 million.
- Selling, general and administrative expenses were $22.4 million.
- Net loss and net loss per share were $15.6 million and $0.18,
respectively.
- As of December 31, 2009, cash and short-term investments were
$57.3 million and net debt was $517.7 million.
Selected Non-GAAP Financial Measures
- Certain financial measures in this press release are prepared in
accordance with United States Generally Accepted Accounting
Principles ("GAAP"). In addition, certain financial measures
presented below and in the appendix to this press release are non-
GAAP, or adjusted, financial measures that exclude certain items.
Management uses certain non-GAAP, or adjusted, financial measures to
establish operational goals, and believes that these measures may
assist investors in evaluating the results of our business and
analyzing the underlying trends in our business over time. Investors
should consider these non-GAAP adjusted financial measures in
addition to, and not as a substitute for, or as superior to,
financial measures prepared in accordance with GAAP. A reconciliation
of the Company's non-GAAP adjusted financial measures to the
corresponding GAAP financial measures, and an explanation of the
Company's use of these non-GAAP adjusted financial measures and of
the excluded items, are included in the appendix to this press
release.
- Adjusted EBITDA (earnings before interest, taxes, depreciation and
amortization, adjusted to exclude certain non-cash and non-recurring
items) was $6.9 million.
- Adjusted revenue was $63.5 million.
- Adjusted costs of goods sold was $28.4 million.
- Adjusted research and development expenses were $5.6 million.
- Adjusted selling, general and administrative expenses were
$21.2 million.
- Adjusted net loss and adjusted net loss per share for the quarter
were $4.7 million and $0.06, respectively.
Fourth Quarter Highlights
Proprietary Medical Products. Our Proprietary Medical Products are marketed and sold by our two direct sales groups. We believe certain of these product lines contain technological advantages that have the potential for more substantial revenue growth potential as compared to our overall product portfolio. Our most significant commercial Proprietary Medical Products are our Quill(TM) SRS wound closure product line, Skater(TM) line of drainage catheters, Option(TM) Inferior Vena Cava Filter, HemoStream(TM) chronic dialysis catheter and BioPince(TM) full core biopsy device.
Consistent with recent prior quarters, our Proprietary Medical Products continued to demonstrate higher revenue growth as compared to our overall product portfolio in the fourth quarter. Revenue for these products in the fourth quarter of 2009 increased by 53% as compared to the fourth quarter of 2008, and by 23% as compared to the third quarter of 2009. Excluding the impact of foreign currency changes between the respective periods, the revenue growth figures indicated would have been 49% and 22%, respectively. Revenue for these products for the year ended December 31, 2009 increased by 32% as compared to the year ended December 31, 2008. Excluding the impact of foreign currency changes between the periods, the revenue growth figure would have been 35%.
Base Medical Products. Our Base Medical Products represent more mature finished goods product lines in the ophthalmology, biopsy and general surgery areas, or medical device components manufactured by us and sold to other third-party medical device manufacturers who assemble those components into finished medical devices. Sales of our Base Medical Products are supported by a small group of direct sales personnel, as well as a network of independent sales representatives and medical product distributors. Revenue from our Base Medical Products has recently exhibited greater volatility and slower relative growth as compared to our Proprietary Medical Products.
Revenue from our Base Medical Products declined by 7% in the fourth quarter of 2009 as compared to the fourth quarter of 2008 and by 6% as compared to the third quarter of 2009. Excluding the impact of foreign currency changes, revenue would have declined by 9% and 7%, respectively. Revenue for these products for the year ended December 31, 2009 declined by 9% as compared to the year ended December 31, 2008. Excluding the impact of foreign currency changes between the periods, the decline in revenue would have been 8%.
The decline in our Base Medical Products sales in 2009 was due primarily to lower sales of medical device components to other third party medical device manufacturers. We believe this aspect of our Base Medical Product sales were significantly impacted in 2009 by certain customers that unexpectedly postponed or cancelled orders, or that implemented inventory reduction programs in response to changing economic and credit market conditions. In addition, we believe our transfer of manufacturing of certain surgical needle component products to our facility in Aguadilla, Puerto Rico from our facility in Syracuse, New York may have contributed to more volatile customer ordering patterns in 2009 as compared to prior years. While we currently expect that certain of our customers may increase their order levels in 2010, there can be no assurance that we will record sales of surgical needles to these customers at levels observed in prior periods.
Royalty Revenue. We derive additional revenue from royalties paid to us by partners that develop, market and sell products incorporating certain of our proprietary technologies. Currently, the substantial majority of our royalty revenues are derived from sales by Boston Scientific Corporation ("BSC") of TAXUS(R) coronary stent systems incorporating the drug paclitaxel.
Royalty revenue derived from sales of TAXUS stent systems by BSC declined by 8% during the fourth quarter of 2009 as compared to the fourth quarter of 2008 and by 32% during the year ended December 31, 2009 as compared to the year ended December 31, 2008. The decline in royalty revenues during the fourth quarter and year ended December 31, 2009 was a result of lower sales of TAXUS stent systems by BSC, as sales of TAXUS continued to be negatively impacted by competitive pressure in the drug-eluting coronary stent market, most specifically by negative marketing campaigns conducted by BSC's competitors suggesting clinical advantages of their drug-eluting stent products as compared to TAXUS. Royalty revenue for year ended December 31, 2009 was based on BSC's net sales for the period October 1, 2008 to September 30, 2009 of $926 million, of which $411 million was in the United States, compared to net sales of $1.2 billion for the same period in the prior year, of which $637 million was in the United States. The average gross royalty rate earned in the year ended December 31, 2009 on BSC's net sales was 6.4% for sales in the United States and 6.1% for sales in other countries, compared to an average rate of 7.1% for sales in the United States and 6.4% for sales in other countries for the year ended December 31, 2008.
Shelf Registration Statement on Form S-3. On July 23, 2009, we announced that we had filed a shelf registration statement on Form S-3 with the U.S. Securities and Exchange Commission (the "SEC") and a corresponding preliminary short form base shelf prospectus with the securities commissions of British Columbia and Ontario. On December 7, 2009, the shelf registration statement on Form S-3 (as amended by Amendment No. 1 on Form S-3/A filed with the SEC on December 4, 2009) was declared effective by the SEC and we filed a final short form base shelf prospectus with the securities commissions of British Columbia and Ontario. These filings allow us to offer Common shares, Class I Preference shares, debt securities, warrants or units for initial aggregate proceeds of up to $250.0 million to potential purchasers in the U.S., British Columbia and Ontario.
Financial Information
---------------------
This press release contains financial data derived from the audited
consolidated financial statements for the year ended December 31, 2009 and
2008. Full audited consolidated financial statements and Management's
Discussion and Analysis for the year ended December 31, 2009 will be filed on
Form 10-K on or before March 16, 2010 with the relevant regulatory agencies,
as well as posted on our website at www.angiotech.com.
Amounts, unless specified otherwise, are expressed in U.S. dollars. Financial results are reported under U.S. GAAP unless otherwise noted. All per share amounts are stated on a diluted basis unless otherwise noted.
Conference Call Information
---------------------------
A conference call to discuss these financial results will be held
tomorrow, Thursday, March 4, 2010 at 9:00 AM ET (6:00 AM PT).
Dial-in information:
--------------------
North America (toll-free): (866) 770-7129
International: (617) 213-8067
Enter Passcode: 69484239
An archived replay of the call will be available until March 11, 2010.
North America (toll-free): (888) 286-8010
International: (617) 801-6888
Enter Passcode: 61713924
A live webcast will be available to all interested parties through the Investors section of Angiotech's website: www.angiotech.com/investors
ANGIOTECH PHARMACEUTICALS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) (Audited)
Three months ended Year ended
December 31, December 31,
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2009 2008 2009 2008
REVENUE
Product sales,
net $ 49,975 $ 46,054 $ 191,951 $190,816
Royalty revenue 13,533 15,676 62,171 91,546
License fees 53 352 25,556 910
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63,561 62,082 279,678 283,272
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EXPENSES
Cost of products
sold 29,010 23,622 104,616 101,052
License and royalty
fees 2,494 2,774 10,431 14,258
Research and
development 6,175 7,723 23,701 53,192
Selling, general
and administration 22,402 21,381 81,504 98,483
Depreciation and
amortization 8,406 8,421 33,251 33,998
In-process research
and development - - - 2,500
Write-down of
assets held for
sale 3,090 1,283 3,090 1,283
Write-down of
goodwill - 50,285 - 649,685
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71,577 115,489 256,593 954,451
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Operating income
(loss) (8,016) (53,407) 23,085 (671,179)
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Other income
(expenses):
Foreign exchange
(loss) gain (385) (1,032) (1,612) 540
Investment and other
income (expense) 304 (498) 378 1,192
Interest expense on
long-term debt (9,068) (10,639) (38,039) (44,490)
Write-down and
other deferred
financing charges - (3,000) (643) (16,544)
Write-down / loss on
redemption of
investments - (10,964) - (23,587)
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Total other expenses (9,149) (26,133) (39,916) (82,889)
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(Loss) / income
before income
taxes (17,165) (79,540) (16,831) (754,068)
Income tax expense
(recovery) (1,532) (2,577) 6,037 (12,892)
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Net loss $ (15,633) $ (76,963) $ (22,868) $ (741,176)
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Basic and diluted
net loss per
common share $ (0.18) $ (0.90) $ (0.27) $ (8.71)
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Basic and diluted
weighted average
number of common
shares outstanding
(in thousands) 85,130 85,118 85,130 85,118
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ANGIOTECH PHARMACEUTICALS INC.
CONSOLIDATED BALANCE SHEETS
(Audited)
December 31, December 31,
2009 2008
-------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents $ 49,542 $ 38,952
Short-term investments 7,780 848
Accounts receivable 28,167 25,524
Income tax receivable 1,090
Inventories 35,541 38,594
Deferred income taxes, current portion 4,284 3,820
Prepaid expenses and other current assets 3,294 5,234
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Total current assets 129,698 112,972
-------------------------------------------------------------------------
Assets held for sale 5,300 8,422
Property, plant and equipment 46,879 49,108
Intangible assets 173,019 195,477
Deferred financing costs 11,409 11,363
Other assets 3,754 7,855
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Total assets $ 370,059 $ 385,197
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LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Accounts payable and accrued liabilities $ 46,324 $ 46,620
Income taxes payable 10,858 8,071
Interest payable on long-term debt 6,004 6,514
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Total current liabilities 63,186 61,205
-------------------------------------------------------------------------
Deferred leasehold inducement 2,888 2,780
Deferred income taxes 36,778 40,577
Other tax liabilities 3,898 3,145
Long-term debt 575,000 575,000
Other liabilities 1,596 2,363
-------------------------------------------------------------------------
Total non-current liabilities 620,160 623,865
-------------------------------------------------------------------------
Shareholders' deficit
Share capital
Authorized:
200,000,000 Common shares, without par value
50,000,000 Class I Preference shares, without
par value
Common shares issued and outstanding:
December 31, 2009 - 85,138,081
December 31, 2008 - 85,121,983 472,742 472,739
Additional paid-in capital 33,687 32,107
Accumulated deficit (866,541) (843,673)
Accumulated other comprehensive income 46,825 38,954
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Total shareholders' deficit (313,287) (299,873)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total liabilities and shareholders' deficit $ 370,059 $ 385,197
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Forward Looking Statements
--------------------------
Statements contained in this press release that are not based on
historical fact, including without limitation statements containing the words
"believes," "may," "plans," "will," "estimates," "continues," "anticipates,"
"intends," "expects" and similar expressions, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and constitute "forward-looking information" within the meaning of
applicable Canadian securities laws. All such statements are made pursuant to
the "safe harbor" provisions of applicable securities legislation.
Forward-looking statements may involve, but are not limited to, comments with
respect to our objectives and priorities for the remainder of 2010 and beyond,
our strategies or future actions, our targets, expectations for our financial
condition and the results of, or outlook for, our operations, research and
development and product and drug development. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may
cause the actual results, events or developments to be materially different
from any future results, events or developments expressed or implied by such
forward-looking statements. Many such known risks, uncertainties and other
factors are taken into account as part of our assumptions underlying these
forward-looking statements and include, among others, the following: general
economic and business conditions in the United States, Canada and the other
regions in which we operate; market demand; technological changes that could
impact our existing products or our ability to develop and commercialize
future products; competition; existing governmental legislation and
regulations and changes in, or the failure to comply with, governmental
legislation and regulations; availability of financial reimbursement coverage
from governmental and third-party payers for products and related treatments;
adverse results or unexpected delays in pre-clinical and clinical product
development processes; adverse findings related to the safety and/or efficacy
of our products or products sold by our partners; decisions, and the timing of
decisions, made by health regulatory agencies regarding approval of our
technology and products; the requirement for substantial funding to conduct
research and development, to expand manufacturing and commercialization
activities; and any other factors that may affect our performance. In
addition, our business is subject to certain operating risks that may cause
any results expressed or implied by the forward-looking statements in this
press release to differ materially from our actual results. These operating
risks include: our ability to attract and retain qualified personnel; our
ability to successfully complete pre-clinical and clinical development of our
products; changes in our business strategy or development plans; our failure
to obtain patent protection for discoveries; loss of patent protection
resulting from third-party challenges to our patents; commercialization
limitations imposed by patents owned or controlled by third parties; our
ability to obtain rights to technology from licensors; liability for patent
claims and other claims asserted against us; our ability to obtain and enforce
timely patent and other intellectual property protection for our technology
and products; the ability to enter into, and to maintain, corporate alliances
relating to the development and commercialization of our technology and
products; market acceptance of our technology and products; our ability to
successfully manufacture, market and sell our products; the availability of
capital to finance our activities; our ability to restructure and to service
our debt obligations; and any other factors referenced in our other filings
with the applicable Canadian securities regulatory authorities or the SEC. For
a more thorough discussion of the risks associated with our business, see the
"Risk Factors" section in our annual report for the year ended December 31,
2008 filed with the SEC on Form 10-K, and our quarterly reports for the first,
second and third quarters of 2009 filed with the SEC on Form 10-Q.
Given these uncertainties, assumptions and risk factors, investors are cautioned not to place undue reliance on such forward-looking statements. Except as required by law, we disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained in this press release to reflect future results, events or developments. (C)2010 Angiotech Pharmaceuticals, Inc. All Rights Reserved.
About Angiotech Pharmaceuticals
Angiotech Pharmaceuticals, Inc. is a global specialty pharmaceutical and
medical device company. Angiotech discovers, develops and markets innovative
treatment solutions for diseases or complications associated with medical
device implants, surgical interventions and acute injury. To find out more
about Angiotech (NASDAQ: ANPI, TSX: ANP), please visit our website at
www.angiotech.com.
Appendix A: Presentation of Certain Non-GAAP Financial Information
and Reconciliations to Corresponding GAAP Financial Measures
The financial results presented in this press release include the
following non-GAAP, or adjusted, financial measures, which we believe provide
important supplemental information to management and investors about the
Company's financial condition and results of operations: (1) adjusted earnings
before interest expense, taxes, depreciation and amortization ("Adjusted
EBITDA"), (2) adjusted net income (loss), (3) adjusted net income (loss) per
share, (4) adjusted revenue, (5) adjusted cost of goods sold ("Adjusted
COGS"), (6) adjusted research and development expense ("Adjusted R&D
expense"), and (7) adjusted selling, general and administrative expense
("Adjusted SG&A expense").
Economic Substance of Non-GAAP Financial Measures
-------------------------------------------------
Our non-GAAP adjusted financial measures exclude certain non-cash,
non-recurring and non-operating items, which may be unpredictable, volatile
and not directly correlated to our operating performance. We believe exclusion
of these items from our GAAP financial measures may provide the following
advantages: (i) improved understanding of trends underlying our business and
performance; (ii) improved consistency across periods when measuring and
assessing our operating performance; (iii) improved understanding of the cash
flow and cash earnings generated by our business in a given period and as
compared to prior periods; and (iv) improved comparability of our operating
results to those of similar companies in our industry.
Examples of these certain non-cash, non-recurring and non-operating items include: financing charges, asset write-downs, impairment charges, foreign exchange fluctuations, stock-based compensation expense, acquisition related amortization charges, integration and restructuring expenses, in-process research and development costs, retrospective adjustments driven by accounting policy changes, and certain extraordinary litigation expenses. A detailed discussion of the excluded items is provided below (see "Description of Adjustments" below).
Investors are cautioned that Adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per share, adjusted revenue, Adjusted COGS, Adjusted R&D expense and Adjusted SG&A expense do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other issuers. Our non-GAAP financial measures are supplemental metrics and should not be viewed as a substitute for, or superior to, financial reporting measures prepared in accordance with GAAP. We have prepared a reconciliation of our non-GAAP adjusted financial measures to the comparable GAAP-based financial measures in the tables included in this Appendix. Management compensates for certain material limitations that may be relevant to our use of certain non-GAAP financial measures by reviewing our operating performance in accordance with GAAP concurrent with our review of our operating performance relative to certain adjusted financial measures during each relevant disclosure period.
Use of Non-GAAP Financial Measures
----------------------------------
Management uses Adjusted EBITDA, adjusted net income (loss), adjusted net
income (loss) per share, adjusted revenue, Adjusted COGS, Adjusted R&D expense
and Adjusted SG&A expense when setting corporate and operational goals, and
evaluating operating performance in connection with:
- Presenting, comparing and assessing the financial results and
forecasts reported to the Company's Board of Directors.
- Evaluating, managing and benchmarking the operating performance of
the Company.
- Analyzing underlying trends in the Company's business.
- Evaluating market position and performance relative to our
competitors, many of which use the same or similar performance
measures.
- Establishing internal operating budgets.
- Determining compensation under bonus or other incentive programs.
- Enhancing comparability from period to period.
- Assessing compliance with credit facility covenants.
- Providing vital information in assessing cash flows to service our
significant debt obligations.
- Comparing performance with internal forecasts and targeted business
models.
- Evaluating and valuing potential acquisition candidates.
The adjustments used to compute our non-GAAP financial measures are
consistent with those excluded from segmented operating results used by the
Company's chief operating decision makers to make operating decisions and
assess performance. We have provided this information to enable investors to
analyze our operating results in the same way that management uses this
information to assess our business relative to other periods, our business
objectives and similar companies in our industry.
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