Very nice results from KOSP today (albeit skewed by their abandonment of their previous very conservative accounting for possible returns).
This is a significant holding for me.
Kos Announces Second Consecutive Quarter of Profitability And Reports Earnings Per Share of $0.35
6 May 2003, 08:38am ET
Financial Highlights
* First Quarter Earnings of $12.7 million
* First Quarter Revenue Increased 101% to a Record $68.3 million
* Cash Generation of $11.1 million; Reduced Debt by $4 million
* Improved Overall Gross Margin by 5 percentage points
* Strong quarterly results improve full year outlook; Company now
expects to earn $0.65- $0.75 per share
MIAMI, May 6 /PRNewswire-FirstCall/ -- Kos Pharmaceuticals, Inc. (Nasdaq: KOSP) today announced financial results for the first quarter ended March 31, 2003.
For the first quarter of 2003, revenue increased 101% to a record $68.3 million, up from $33.9 million for the first quarter of 2002. The significant increase reflected solid growth of its lead product, Niaspan(R) and its second-launched cholesterol product, Advicor(TM), as well as a one- time revenue benefit resulting from a change in accounting estimate related to the Company's product return expectations. Sales of Niaspan grew 78% from the first quarter of 2002 and accounted for $53.0 million of revenue for the first quarter of 2003, while Advicor, celebrating its first anniversary on the market, accounted for $15.3 million of revenue, a 273% increase from $4.1 million in the first quarter of 2002. More than 162,000 total prescriptions were written for Advicor during the quarter, and 923,000 for Niaspan. Total prescriptions for the combined Niaspan and Advicor franchise grew 36% from the comparable period in 2002 or six times greater than the overall cholesterol market.
Revenue in the first quarter of 2003 included approximately $11 million of net revenue from 2002 that was not recognized during 2002 because of the Company's previous return risk expectations. Kos' previous return risk expectations were based on its limited product return experience given the early stage nature of the products and of the Company. Accordingly, Kos established a specific return risk estimate based on certain inventory levels that determined the amount of revenue that could be recorded during a given period. As a result of the significant history of minimal returns for both products since their introduction, Kos, in accordance with Generally Accepted Accounting Principles (GAAP), believes it now appropriate to revise such return risk estimates to reflect the historically low return pattern. Such revised risk estimate is also consistent with general pharmaceutical industry norms. Had the Company maintained its previous product return risk estimates for recording revenue, the Company still would have recognized a strong increase in total revenue of 67% to about $57 million for the first quarter of 2003, with sales for Niaspan and Advicor accounting for $46 million and $11 million, respectively. Kos' management believes that the financial results the Company would have achieved without the change in product return risk estimates is meaningful to investors because it provides a consistent comparison with prior period results.
The Company recorded its second consecutive quarter of profitability, reporting net income of $12.7 million for the first quarter of 2003, or $0.35 per fully diluted share, compared with a net loss of $16.2 million, or $0.79 per share, for the same period in 2002. Excluding the effect of the change in product return estimates described previously, the Company still would have recorded better than expected results by reporting a profit, with $2.2 million in net income or $0.08 per fully diluted share for the quarter ended March 31, 2003. Additionally, the Company showed strong gains with respect to overall gross margin, achieving a record 94% in the quarter, an increase of 5 percentage points from the first quarter in 2002. During the quarter, the Company improved its financial position by adding $11.1 million in cash from operations and by reducing debt by $4 million. As of March 31, 2003, the Company had $76 million of cash and available credit. Of this amount, $26 million was cash, including monies pledged as collateral for the Company's letters of credit.
"Our financial performance this quarter, and specifically our sustained profitability, demonstrate our continued ability to deliver superior financial results," said Adrian Adams, President and Chief Executive Officer. "During the quarter, we generated strong gains in sales and gross margins, contributing to the second consecutive quarter of bottom line profitability, a quarter in which we made measured investments in research and development and sales and marketing. While our 2003 initiatives include plans to further expand the sales force and make R&D investments to fortify our pipeline, we are confident that we will generate our first full year of profitability derived from operating activities in 2003."
As a result of the one-time benefit resulting from a change in accounting estimate during the first quarter of 2003, Kos now projects that revenue for 2003 will increase about 60% from 2002, with an expected decrease in the second quarter from reported net revenue in the first quarter. Additionally, as a result of the better than expected performance in the first quarter of 2003 and the increased revenue expectation, the Company is enhancing its overall profitability outlook and now expects to earn between $0.65 - $0.75 per share on a full year basis in 2003, notwithstanding the additional investments the Company plans to make in sales force expansion and research and development.
"From a financial perspective, we showed excellent gains in earnings and fortified our balance sheet," said Christopher P. Kiritsy, Senior Vice President and Chief Financial Officer. "Our products continue to show solid revenue growth and have experienced negligible returns from customers. Based on this substantial product return experience, we have adjusted our product return estimates to properly reflect our low return risk exposure. We also expect that this change will help investors by simplifying how revenue is booked in the future."
During the first quarter of 2003, several meaningful research and development milestones were also achieved. In March, the results of the ADVOCATE safety and efficacy study were published in the American Journal of Cardiology. Specifically, the ADVOCATE results demonstrated that Advicor's efficacy in lowering LDL was comparable to the two leading statin drugs, but far superior than the statins in modulating all other lipid parameters. Also in March, results from a pivotal Advicor trial were published in Clinical Cardiology, highlighting the safety and efficacy of several doses of Advicor in patients with dyslipidemia.
During the quarter, the Company had a significant presence at the American College of Cardiology (ACC) scientific sessions. At this important session, held in March, Kos presented results from the IMPACT phase IV safety study, which showed that Advicor is safe and tolerable across dose ranges up to 1000/40 mg in patients who principally had elevated LDL cholesterol and elevated triglycerides. Also at this ACC event, additional data from the Coronary Drug Project were presented, showing that niacin's effect on clinical outcomes was similar or better in patients with metabolic syndrome as compared to those without metabolic syndrome. "The data presented at the ACC, combined with the recently published results of ADVOCATE, are expected to increase the medical awareness of the powerful utility of therapies treating multiple lipid disorders and further fuel the growth of Niaspan and Advicor," concluded Adams.
Following the release, Kos' senior management will host a conference call at 10:00 a.m. ET to discuss the Company's quarterly results. The conference call will be available live via the Internet by accessing Kos' website at www.kospharm.com . Please go to the website at least fifteen minutes prior to the call to register, download and install any necessary audio software. For those who cannot access the webcast, you can participate via telephone by calling 719-457-2625, confirmation code 491454. A replay will also be available on the website at www.kospharm.com or by calling 719-457-0820 domestic or international, and entering 491454 from 1:30 PM ET until 12:00 midnight ET on Thursday, May 8, 2003. You will find the financial information to be discussed during the conference call on Kos' website in the Investor Relations section. |
