CollaGenex Pharmaceuticals Reports Revenues and Earnings for the Second Quarter of 2004
Thursday July 22, 7:00 am ET
Net Income Allocable to Common Stockholders of $0.11 Per Share after $0.03 Per Share Restructuring Charge
NEWTOWN, Pa.--(BUSINESS WIRE)--July 22, 2004-- CollaGenex Pharmaceuticals, Inc. (NASDAQ:CGPI - News) today reported financial results for the second quarter ended June 30, 2004. Total revenues increased 14% to $14.4 million compared to $12.7 million in the second quarter of 2003. Net product sales were $14.4 million in the second quarter of 2004, a 22% increase over net product sales of $11.8 million recorded in the second quarter of 2003.
During the second quarter of 2004, the Company reported net income of $2.0 million compared to net income of $1.6 million during the second quarter of 2003. Net income allocable to common stockholders for the second quarter of 2004 was $1.6 million, or $0.11 per basic and diluted share, compared to net income of $1.2 million, or $0.10 per basic and diluted share, in the second quarter of 2003. The net income in the second quarter of 2004 included a charge of $480,000, or $0.03 per basic and diluted share, for a charge related to the realignment of the sales force to focus on high-potential prescribers in dental and dermatological markets.
Research and development (R&D) expenses in the second quarter of 2004 increased 49% to $2.5 million, compared with $1.7 million in the second quarter of 2003. This increase reflects the Company's commitment to developing its proprietary product pipeline through the clinical development of Periostat MR for adult periodontitis and rosacea and the development of products based on the Restoraderm® technology platform.
Highlights for the second quarter of 2004:
* Began patient screening and enrollment of a multicenter 240 patient Phase III clinical study of Periostat MR for adult periodontitis.
* Initiated two Phase III clinical trials to evaluate Col-101 for the treatment of rosacea. The two double-blinded, placebo-controlled Phase III clinical studies are the largest ever conducted for a systemic treatment for rosacea and will each enroll up to 264 patients at a total of 22 investigational centers. Col-101 is also known as Periostat MR, and CollaGenex is currently developing a brand name specifically for the use of Col-101 in dermatology.
* Settled all pending litigation between CollaGenex and United Research Laboratories, Inc./Mutual Pharmaceutical Company, Inc ("Mutual"). In the settlement, Mutual asserted and acquiesced to the validity of the patents protecting Periostat, and CollaGenex entered into a License and Supply Agreement with Mutual. The settlement reduces the uncertainty regarding challenges to the Periostat patent estate, and provides another industry acquiescence to the validity of the Periostat patents.
* Restructured its pharmaceutical sales organization into dedicated dental and dermatology sales forces. The restructuring is intended to increase the Company's sales focus on high-prescribing dentists and dermatologists while reducing its cost base.
* Reported positive outcome of Phase II clinical study evaluating Metastat, a Col-3 compound, in Kaposi's sarcoma. The results indicated that patients can tolerate Col-3 for a prolonged period of time, and certain patients had a markedly prolonged duration of disease remission. CollaGenex plans to continue working with the National Cancer Institute to determine how best to capitalize on this opportunity to make a new treatment available for patients with Kaposi's sarcoma.
Recent Events:
* Reported statistically and clinically significant results from Periostat + Atridox study in patients with periodontitis. This combination treatment approach resulted in up to a 48% average increase in attachment level and a 44% mean reduction in periodontal pocket depth compared to the control arm of the study.
"In the second quarter of 2004, we moved forward on several key initiatives to secure our position in the marketplace and the potential for the future growth of our product pipeline," commented Colin W. Stewart, president and chief executive officer of CollaGenex. "We are very pleased that we continued to achieve key milestones and initiated two Phase III clinical trials of Col-101, our once daily, modified-release formulation of doxycycline, 40 mg, for the treatment of rosacea as well as a Phase III clinical study to evaluate the efficacy of Periostat® MR for the treatment of adult periodontitis. These trials support our strategy to have a once-daily version of Periostat for both periodontal disease and rosacea on the market in 2006 prior to our Periostat patent expiring in May 2007."
Nancy C. Broadbent, chief financial officer of CollaGenex, stated, "Our settlement agreement with Mutual was highly favorable to CollaGenex and resolved the inherent risk and uncertainty involved with this outstanding litigation, allowing us to move forward to continue to invest in and grow our business. Second quarter revenues included an initial stocking order to Mutual of $4.7 million, which reflects a significant promotional discount from the price Mutual is contractually obliged to pay for their branded version of Periostat on all subsequent orders. This is a one-time event related to our agreement with Mutual. The effect of this stocking order was to reduce the average selling price and gross profit on Periostat net sales during the quarter and, as previously disclosed, we anticipate sales in the third quarter of 2004 to be lower than the second quarter since Mutual is not expected to reorder until its inventories are reduced. During the fourth quarter of 2004, we anticipate that our reported sales will more closely reflect end-user demand, and we expect to generate gross margins in the range of 86% to 88% of our total net sales of Periostat, including Mutual's branded version."
Ms. Broadbent continued, "During the quarter, we took several key steps to address the market more effectively and support our growth initiatives. With the realignment of our sales force, we have increased our focus on high prescribing dentists and dermatologists and positioned ourselves to be more effective in licensing and launching new products. We continue to remain focused on improving our operating efficiency over the next 12 to 18 months while increasing our investment in research and development to support the development of IMPACS for current and future indications and for the development of products based on our Restoraderm technology platform."
As previously discussed, CollaGenex anticipates a decrease in its selling, general, and administrative (SG&A) expenses for 2004. The expected savings resulting from the reorganization of the sales force and lower legal expenses following the settlement with Mutual should reduce the Company's 2004 SG&A expenses, excluding the $2 million one-time charge for the Mutual settlement, to approximately $30 million compared to $33.7 million during 2003. CollaGenex is entitled to deduct costs incurred in defense of its patents, including the one-time payment to Mutual, from current and future royalties due to the State University of New York on sales of Periostat®.
CollaGenex anticipates its total R&D investment during 2004 to be in the range of $8.5 to $9.0 million compared to $5.5 million in 2003.
Conference Call Information
As previously announced, CollaGenex will hold a conference call on Thursday, July 22, 2004, at 11:00 a.m. Eastern Time to discuss the Company's second quarter 2004 financial results. Investors and other interested parties may access the conference call by dialing (888) 394-8045 in the U.S. or (973) 409-9260 internationally, or via a live Internet broadcast on the Company's website at www.collagenex.com.
For those who cannot listen to the live broadcast, a replay will be available shortly after the call at www.collagenex.com for 90 days. Additionally, a recording of the call will be available by telephone until 11:59 p.m. on August 5, 2004 by dialing (877) 519-4471 in the U.S. or (973) 341-3080 internationally, and entering access code 4974437.
About CollaGenex
CollaGenex Pharmaceuticals, Inc. is a specialty pharmaceutical company focused on providing innovative medical therapies to the dental and dermatology markets. Currently, the Company's professional dental pharmaceutical sales force markets Periostat, which is indicated as an adjunct to scaling and root planing for the treatment of adult periodontitis. Periostat is the first and only pharmaceutical to treat periodontal disease by inhibiting the enzymes that destroy periodontal support tissues, and by enhancing bone protein synthesis. The dental sales force also promotes Atridox®, Atrisorb FreeFlow® and Atrisorb-D FreeFlow®, Atrix Laboratories, Inc.'s products for the treatment of adult periodontitis, to the dental market. The Company's professional dermatology sales force markets Pandel®, a prescription topical corticosteriod licensed from Altana, Inc.
Research has shown that certain unique properties of the tetracyclines discovered during the development of Periostat® may be applicable to other diseases involving inflammation and/or destruction of the body's connective tissues. CollaGenex is further evaluating Periostat®, as well as the new IMPACS® compounds, to assess whether they are safe and effective in these other applications. In addition, CollaGenex has licensed the Restoraderm® technology, a unique, proprietary dermal drug delivery system, in order to develop a range of topical dermatological products with enhanced pharmacologic and cosmetic properties.
To receive additional information on the Company, please visit our Web site at www.collagenex.com, which does not form part of this press release.
-0-
Summary Financial Data
(Unaudited)
(In thousands, except share amounts)
Three Months Ended June 30,
----------------------------
2004 2003
------------ -------------
Consolidated Statement of Operations:
Revenues:
Net product sales $14,372 $11,750
Contract revenues 60 503
License revenues 13 433
------------ -------------
Total revenues 14,445 12,686
Operating Expenses:
Cost of product sales 2,052 1,738
Research and development 2,457 1,654
SG&A, other 7,530 7,718
SG&A, restructuring 480 -
------------ --------------
Total operating expenses 12,519 11,110
Other Income (Expense):
Interest income 69 25
Other income (expense) 3 (4)
------------- -------------
Net income 1,998 1,597
Preferred stock dividend 400 400
------------ -------------
Net income allocable to common
stockholders $1,598 $1,197
============ =============
Net income per basic share allocable to
common stockholders $0.11 $0.10
============ =============
Weighted average shares used in computing
net income per basic share allocable to
common stockholders 14,310,289 11,427,420
============ =============
Net income per diluted share allocable to
common stockholders $0.11 $0.10
============ =============
Weighted average shares used in computing
net income per diluted share allocable
to common stockholders 14,741,845 12,369,971
============ =============
Six Months Ended June 30,
-------------------------
2004 2003
------------ ------------
Revenues:
Net product sales $27,700 $23,120
Contract revenues 120 1,053
License revenues 31 670
------------ ------------
Total revenues 27,851 24,843
Operating Expenses:
Cost of product sales 4,053 3,652
Research and development 3,845 2,621
SG&A, other 15,648 15,791
SG&A, legal settlement 2,000 -
SG&A, restructuring 480 -
------------ ------------
Total operating expenses 26,026 22,064
Other Income (Expense):
Interest income 140 56
Other expense - (10)
------------ ------------
Net income 1,965 2,825
Preferred stock dividend 800 800
------------ ------------
Net income allocable to common stockholders $ 1,165 $ 2,025
============ ============
Net income per basic share allocable to
common stockholders $ 0.08 $ 0.18
============ ============
Weighted average shares used in computing
net income per basic share allocable to
common stockholders 14,140,509 11,410,914
============ ============
Net income per diluted share allocable to
common stockholders $ 0.08 $ 0.17
============ ============
Weighted average shares used in computing
net income per diluted share allocable to
common stockholders 14,668,578 12,252,893
============ ============
Consolidated Selected Balance Sheet Data: June 30, December 31,
2004 2003
-------------------------------------------- ----------- -------------
Cash, cash equivalents and short-term
investments $30,655 $32,670
Total current assets 43,103 41,860
Total assets 45,152 44,132
Total current liabilities 6,715 9,850
Long-term liabilities 310 326
----------- -------------
Total liabilities 7,025 10,176
Total stockholders' equity 38,127 33,956
|
