Wednesday February 28, 8:12 am Eastern Time
Press Release
SOURCE: Duramed Pharmaceuticals, Inc.
Duramed Pharmaceuticals, Inc. Reports Fourth Quarter and Full Year 2000 Results; Comments on Pipeline and 2001 Outlook
- Hormone sales lead company's return to profitability for the year
CINCINNATI, Feb. 28 /PRNewswire/ -- Duramed Pharmaceuticals, Inc. (Nasdaq: DRMD - news) announced today its results for the fourth quarter and fiscal year ended December 31, 2000. For the fourth quarter 2000, net sales were $23.8 million as compared to $15.9 million in the fourth quarter 1999. Net income for the period was $1.5 million, or 6 cents per share, compared to a net loss of $12.3 million, or 53 cents per share for the same period last year. For the full year 2000, net sales were $83.5 million, compared to $50.2 million for 1999, a 66 percent increase. Net income for the year 2000 was $164,000, or 1 cent per share, as compared to a net loss of $51.3 million, or $2.36 per share, for 1999.
E. Thomas Arington, Duramed Chairman and Chief Executive Officer said, ``The fourth quarter 2000 completed a solid year of progress for Duramed and marked the third consecutive quarter of sales and profit increases. The improvement throughout 2000 was led by solid oral dose hormone products and complemented by increased sales of other high-margin multi-source products.
``We are especially encouraged with the growing franchise that Cenestin® (synthetic conjugated estrogens, A) Tablets represent. From October 2000 through January 2001, total monthly new prescriptions were 20,000, 21,000, 26,000 and 33,000, respectively, representing growth of 65 percent. Based on 20,887 total prescriptions filled for the week ended February 16, 2001, Cenestin revenues are annualizing at approximately $22.4 million.
``We believe that the company is well-positioned for continued growth, led by currently-marketed hormone products and those that are expected to be approved in 2001 and beyond. The Cenestin family of products represents our most significant long-term growth opportunity and will require significant time and investment spending; in 2001, we intend to increase our research and development spending in order to build these products and concurrently intend to look at partnership opportunities for them.
``Turning to our ANDA (Abbreviated New Drug Application) pipeline, we now have five products filed and plan to file eight more products in 2001. We are pleased to report that we have received notification from the U.S. Food and Drug Administration (FDA) that we have first-to-file status on two hormone product applications. As evidenced by the success of our Apri(TM) (desogestrel and ethinyl estradiol) Tablets, being first to file is important in establishing market leadership.''
Fourth Quarter Results
Fourth quarter 2000 revenue of $23.8 million was split evenly between hormone products and non-hormone products. Hormone product sales for the fourth quarter of 2000 were $11.9 million, as compared to $8.4 million in the fourth quarter 1999 and $12.4 million in the third quarter 2000. The third quarter 2000 amount includes $2.0 million to recognize the final deferred revenue from the original Cenestin pipeline fill. Commencing with the fourth quarter 2000, Cenestin revenues are based on actual shipments. Cenestin shipments were $4.0 million in the fourth quarter, as compared to $2.2 million in the third quarter 2000.
For the quarter, gross profits totaled $10.2 million, representing 43 percent of net sales, an improvement of 93 percent, or $4.9 million, over fourth quarter 1999. In addition to the increase in gross profit, income for the quarter was positively impacted by the agreement reached with Solvay Pharmaceuticals whereby, effective January 1, 2000, Solvay Pharmaceuticals assumed responsibility for the Cenestin physicians' office promotion in exchange for a share of the Cenestin profits. As a result of the agreement, Duramed's brand marketing expenses in fourth quarter 2000 (which represent Solvay Pharmaceuticals' share of the Cenestin profits) were $2.7 million as compared to fourth quarter 1999 when Duramed incurred an expense of $10.2 million for the promotion of Cenestin.
Product development expenses for fourth quarter 2000 were $1.0 million, $700,000 less than fourth quarter 1999 due to the timing of biostudies and the savings realized by the consolidation of product development activities into the company's Cincinnati facility.
General and administrative expenses were $2.9 million, approximately $1.0 million less than fourth quarter 1999 due to 1999 expenses for Y2K compliance and a non-cash charge for stock options issued to non-employees.
Full Year Results
Revenue for the twelve months ended December 31, 2000, was $83.5 million with the increase over 1999 ($33 million, or 66 percent) being due primarily to Cenestin and Apri. The year 2000 marked the first full-year contribution for each of these products (as Cenestin was launched in May 1999 and Apri was launched in October 1999).
Gross profit for 2000 was $35.1 million, or 42 percent of net sales. This compares with $10.5 million in gross profit for 1999. This improvement was due primarily to increased sales of Cenestin, Apri, and other high-margin multi-source products. For the year 2000, brand marketing expenses were $10 million compared to $21 million in 1999 as a result of the aforementioned agreement with Solvay Pharmaceuticals.
Product development expenses in 2000 were $3.8 million, $3.4 million less than 1999 due to a reduction in biostudy expenses, the termination of the Tamoxifen project, and the savings realized by consolidating the company's product development activities in Cincinnati.
For the year, interest expense was $5.3 million, representing an increase of $1.7 million over 1999 interest expense of $3.6 million. This increase was due primarily to increased debt resulting from the refinancing of the company's Cincinnati manufacturing facility ($12 million of new debt) and increased borrowing on the company's revolving line of credit.
Duramed's working capital improved substantially from $2.6 million at the end of 1999 to $24.8 million at the end of 2000. As of December 31, 2000, shareholders' equity was $6.2 million compared to a deficit of $2.3 million as of December 31, 1999. Long-term debt has increased from $31.6 million as of year end 1999 to $40.7 million as of year end 2000 due primarily to the refinancing of the company's Cincinnati manufacturing facility.
Mandatory Redeemable Convertible Preferred Stock outstanding as of December 31, 1999, was converted into 1.3 million shares of the company's common stock. Also during 2000, the company issued $10 million of Series G convertible preferred stock, which is convertible into common stock at $5.06 per share.
Common shares outstanding at December 31, 2000, increased to 26.4 million from 24.8 million at December 31, 1999, due primarily to the conversion of the preferred stock.
Pipeline
Of the five products awaiting approval at the U.S. Food and Drug Administration (FDA), two represent ANDAs for which Duramed was first to file. In 2000, the combined brand product sales for these two products was approximately $250 million.
The company's filing on Mircette(TM)(1), one of its first-to-file products, is currently under litigation. The Mircette patent is held by Biotechnology General Corp., which has filed suit for declaratory and injunctive relief claiming Duramed's product infringes its patent. Duramed is vigorously defending this lawsuit, claiming that the patent at issue is invalid and not infringed. The Waxman-Hatch Act provides that Duramed will be awarded a 180-day period of generic marketing exclusivity should it prevail in the lawsuit.
In 2001, the company expects to file five additional ANDAs for hormones, including a progestin, an estrogen, and three oral contraceptives. Duramed also anticipates filing three non-hormone ANDAs.
Further, Duramed has four products, in various stages of development, that will likely be filed as New Drug Applications (NDAs). These products, including the combination of Cenestin with a natural progesterone, if approved, will expand the Cenestin brand franchise. Evaluation of the potential for patenting the technology used to develop these extensions of the Cenestin franchise is also in-process.
Completed Cenestin Phase IV Studies
The company remains committed to educating the scientific and lay communities about the advantages of the Cenestin product. Preclinical studies of Cenestin's ability to protect neurons from toxic agents believed to play a role in the development of Alzheimer's disease have been completed very recently. Results of these studies in neuroprotection and implications for memory have been positive, and Duramed is continuing work with researchers to gain more information in this area. Studies have also recently been completed showing Cenestin's positive impact on increasing bone strength and resistance to fracture in an animal model. In human trials, Cenestin has been shown to reduce bone turnover, favorably affecting markers of bone resorption and formulation. Additionally, Cenestin has been shown to have a beneficial improvement on lipid parameters, an important factor in the reduction of cardiovascular risk. Other phase IV studies will continue as part of Duramed's efforts to display all of Cenestin's expected beneficial attributes.
2001 Outlook
For the year 2001, Duramed expects net sales to be in the range of $110 million to $130 million. The company also anticipates net income before taxes to range between $7 million and $9 million. Hormone sales are expected to account for approximately 65 percent of the company's revenue stream.
Some of the factors that may positively affect these ranges include receiving approvals on key products earlier than anticipated; capturing greater-than-anticipated market share with current products; faster-than- projected Cenestin growth; and expanding the current product line through partnership(s). Some factors that could negatively affect these ranges include significant price erosion; changes in market share; new generic competition that has not been anticipated; and/or if the company should decide to invest more heavily in its R&D pipeline.
The company will continue to leverage its formulation and production capabilities to pursue opportunities for both branded and multi-source products in the women's healthcare market, as this field offers significant profit potentials. Duramed's top priority will be to focus on solid oral dose hormone products developed in-house. The company also plans to enter into strategic partnerships, where possible, so as to expand its product development capabilities.
Such partnering may occur in order to fund clinical studies that require large financial commitments. Other R&D projects will be funded internally, and Duramed's R&D spending in 2001 is projected to be approximately $10 million as compared to $3.8 million spent in 2000.
Additional Cenestin Phase IV Studies
As evidenced above, the company has initiated a comprehensive phase IV research program to investigate the potential multiple benefits of Cenestin. Studies highlighting the benefits of the product in the central nervous system, in bone metabolism and strength, and in the cardiovascular system are critical components of this research program. These types of projects are expected to commence in 2001.
Further, Duramed has shown that the patented formulation of Cenestin and its unique state-of-the art manufacturing process result in a product that provides consistent, predictable disintegration and dissolution in an in-vitro model. Blood levels that result from Cenestin treatment have also been shown to have favorable low variation. To ascertain the clinical significance of these observations, Duramed is supporting a major independent investigation to evaluate the actual experiences of postmenopausal women who have been treated with Cenestin and other estrogen replacement therapy (ERT) products.
About Duramed Pharmaceuticals, Inc.
Duramed Pharmaceuticals develops, manufactures and markets prescription drug products. The company's business strategy emphasizes products with attractive market opportunities and potentially limited competition due to technological barriers to entry, focusing on women's health and the hormone replacement therapy market. The company's mission is to be the premier supplier of solid oral dose hormone products.
Duramed's containment manufacturing facility for the production of hormones distinguishes the company from most competitors. The facility incorporates enclosed product flow and state-of-the-art environmental controls to ensure purity, stability, and tablet uniformity for its hormone products.
The company's stock is traded on Nasdaq using the symbol DRMD. Additional information about the company can be found on the World Wide Web at www.duramed.com and www.cenestin.com .
About Solvay Pharmaceuticals, Inc.
Solvay Pharmaceuticals, Inc., based in Marietta, Ga., is a research-based pharmaceuticals company, active in the therapeutic areas of cardiology, gastroenterology, mental health and women's health. Solvay Pharmaceuticals is the second largest pharmaceutical company in the U.S. hormone replacement therapy market, having advanced from its previous standing of sixth in the industry in 1996. It is a member of the worldwide Solvay Group of chemical and pharmaceutical companies, headquartered in Brussels, Belgium. The Group's members employ some 33,000 people in 46 countries. Its 1999 revenue worldwide was 7.9 billion EUR ($7.9 billion) from four operating sectors: Chemicals, Plastics, Processing, and Pharmaceuticals. Additional information about the Group can be found on the World Wide Web at solvay.com .
(1) Mircette is a trademark of Organon, Inc.
Like all estrogen drug products, CENESTIN® should not be used in women with known or suspected pregnancy, breast cancer, or estrogen-dependent neoplasia, undiagnosed abnormal genital bleeding, active thrombophlebitis, or thromboembolic disorders. Estrogens have been reported to increase the risk of endometrial carcinoma in postmenopausal women with an intact uterus. The most common adverse events reported in clinical experience with CENESTIN® included headache, insomnia, asthenia, nervousness, paresthesia, and depression. For additional information on CENESTIN®, please see full prescribing information.
The Securities and Exchange Commission (SEC) encourages companies to disclose forward-looking information so that investors can better understand a company's future prospects and make informed investment decisions. Due to changing market conditions, product competition, the nature of product development and regulatory approval processes, the achievement of forward- looking statements contained in this press release are subject to risks and uncertainties. For further details and a discussion of these risks and uncertainties, see Duramed's SEC filings, including its annual report on Form 1O-K.
(in thousands except
per share amounts
and shares outstanding)
Year Ended Fourth Quarter Ended
December 31, December 31,
2000 1999 2000 1999
Net sales $83,465 $50,220 $23,759 $15,866
Cost of goods sold 48,392 39,759 13,547 10,587
Gross profit 35,073 10,461 10,212 5,279
Operating expenses:
Product development 3,808 7,258 953 1,731
Brand marketing
expenses 10,058 20,909 2,702 10,160
Selling 3,972 2,505 587 595
General and
administrative 11,226 12,260 2,920 3,909
Litigation settlement --- 15,000 --- ---
Operating income (loss) 6,009 (47,471) 3,050 (11,116)
Interest expense 5,332 3,552 1,239 1,151
Income (loss) before
income tax and
dividends 677 (51,023) 1,811 (12,267)
Income tax provision
(credit) --- --- (31) ---
Net income (loss) 677 (51,023) 1,842 (12,267)
Preferred stock dividends 513 255 299 62
Net income (loss)
applicable to
common shareholders $164 $(51,278) $1,543 $(12,329)
Income (loss) per average
common and common
equivalent shares
(basic and diluted): $0.01 $(2.36) $0.06 $(0.53)
Weighted average number
of common and common
equivalent shares
outstanding:
Basic 26,175,883 21,742,123 26,329,858 23,107,979
Diluted 26,881,879 21,742,123 26,645,131 23,107,979
Note: Outstanding stock options and warrants are recognized for the
purpose of computing the weighted average number of diluted common
shares only when their effect would be dilutive. In the period in
which Duramed reported a profit, the resulting difference in basic
and diluted common shares outstanding was immaterial in the
calculation of earnings per share. In periods in which Duramed
reported a loss, no stock options or warrants were recognized as
their effect would be anti-dilutive.
Balance Sheet
(in thousands) December 31
2000 1999
Current Assets $51,428 $49,207
Property, Plant and Equipment and Other 30,538 31,566
Total Assets $81,966 $80,773
Current Liabilities $26,661 $46,627
Long Term Debt 40,748 31,556
Total Liabilities $67,409 $78,183
Mandatory Redeemable Convertible
Preferred Stock - Net 8,312 4,900
Shareholders' Equity (Deficit) 6,245 (2,310)
Total Liabilities and Equity $81,966 $80,773
SOURCE: Duramed Pharmaceuticals, Inc.
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