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8-K - FORM 8-K - MEDICIS PHARMACEUTICAL CORP | p18854e8vk.htm |
Exhibit 99.1
CONTACT: | 7720 N. Dobson Road | |
Kara Stancell (media) | Scottsdale, AZ 85256 | |
(480) 291-5454 Sean Andrews (investors) |
(602) 808-8800 www.Medicis.com |
|
(480) 291-5854 |
MEDICIS REPORTS FIRST QUARTER 2011 RESULTS
SCOTTSDALE, Ariz.May 5, 2011Medicis (NYSE:MRX) today announced revenues of approximately $164.9
million for the three months ended March 31, 2011, compared to revenues of approximately $165.5
million for the three months ended March 31, 2010, which represents a decrease of approximately
$0.6 million, or approximately 0.4%. In April 2011, the Company received notice from its contract
manufacturer that one lot of ZIANA® Gel went out of specifications. As a result, the
Company booked a $3.9 million reserve against sales in the three months ended March 31, 2011,
related to a targeted recall of product from this lot.
Non-generally accepted accounting principles (non-GAAP, defined below) diluted earnings per share
(EPS, defined below) for the three months ended March 31, 2011, was $0.50, compared to non-GAAP
diluted EPS of $0.61 for the three months ended March 31, 2010, which represents a decrease of
$0.11 per diluted share, or approximately 18.8% (see Unaudited Reconciliation of Non-GAAP
Adjustments in the financial tables of this press release). GAAP diluted EPS for the three months
ended March 31, 2011, was $0.30, compared to GAAP diluted EPS of $0.54 for the three months ended
March 31, 2010, which represents a decrease of $0.24 per diluted share, or approximately 45.2%.
The Companys achievement of approximately $164.9 million in revenues and non-GAAP diluted EPS of
$0.50 is consistent with the Companys published guidance of $160-$170 million in revenues and
$0.45-$0.50 in non-GAAP diluted EPS for the three months ended March 31, 2011.
We are pleased to announce a solid first quarter, said Jonah Shacknai, Chairman and Chief
Executive Officer. With the announcement of our recent settlement with Teva, issuance of the
7,919,483 patent and approximately 95% of new prescriptions for SOLODYN® being written
in the latest five strengths, we remain confident in the SOLODYN franchise for the foreseeable
future. Additionally, we eagerly await FDAs decision on an expanded label for
RESTYLANE®, following the recent FDA advisory panel recommendation to approve an
indication for lip augmentation. We entered the second quarter with a significant focus on
business development opportunities within our core heritage of medical dermatology and facial
aesthetics, and look forward to the potential value these opportunities may yield.
Non-GAAP net income for the three months ended March 31, 2011, was approximately $32.9 million,
compared to non-GAAP net income of approximately $40.0 million for the three months ended March 31,
2010, which represents a decrease of approximately $7.1 million, or approximately 17.8%. Non-GAAP
net income for the three months ended March 31, 2011, excludes charges totaling approximately $20.5
million (pre-tax), consisting of a $7.0 million research and development (R&D) milestone payment
to a Medicis partner, a loss from discontinued operations of approximately $11.4 million associated
with the
LipoSonix business and $2.1 million related to additional expenses from fluctuations in
the Companys stock price and the resulting effect on the Companys Stock Appreciation Rights
(SARs). Non-GAAP net income for the three months ended March 31, 2010, excluded a loss from
discontinued operations of approximately $7.3 million (pre-tax) associated with the LipoSonix
business.
GAAP net income for the three months ended March 31, 2011, was approximately $19.4 million,
compared to GAAP net income of approximately $35.4 million for the three months ended March 31,
2010, which represents a decrease of approximately $16.0 million, or approximately 45.3%.
Acne Products
Medicis recorded revenues of approximately $103.5 million from sales of its acne products for the
three months ended March 31, 2011, compared to revenues of approximately $120.2 million for the
three months ended March 31, 2010, which represents a decrease of approximately $16.7 million, or
approximately 13.9%. This decrease is due primarily to returns reserves associated with the 45 mg,
90 mg and 135 mg strengths of SOLODYN, reserves related to ZIANA and the impact from the early 2011
discontinuation of TRIAZ® and the Companys decision to no longer promote
PLEXION®. The Medicis Acne Products category includes primarily SOLODYN and ZIANA.
Non-Acne Products
Medicis recorded revenues of approximately $52.2 million associated with its non-acne products for
the three months ended March 31, 2011, compared to revenues of approximately $34.3 million for the
three months ended March 31, 2010, which represents an increase of approximately $17.9 million, or
approximately 52.5%. This increase is due primarily to increased sales of DYSPORT®, the
RESTYLANE franchise and VANOS®, offset by decreased sales of LOPROX® due to
generic competition. The Medicis Non-Acne Products category includes primarily DYSPORT,
PERLANE®, RESTYLANE and VANOS.
Other Non-Dermatological Products
Medicis recorded revenues of approximately $9.2 million associated with its other
non-dermatological products for the three months ended March 31, 2011, compared to revenues of
approximately $11.1 million for the three months ended March 31, 2010, which represents a decrease
of approximately $1.9 million, or approximately 16.7%. The Medicis Other Non-Dermatological
Products category includes primarily AMMONUL®, BUPHENYL® and contract
revenue.
Other Income Statement Items
Gross profit margin for the three months ended March 31, 2011, was approximately 91.3%.
Selling, general and administrative (SG&A) expense for the three months ended March 31, 2011, was
approximately $84.6 million, or approximately 51.3% of revenues, compared to approximately $72.3
million, or approximately 43.7% of revenues, for the three months ended March 31, 2010. SG&A
expense for the three months ended March 31, 2011, includes a $1.9 million charge related to
additional expenses from fluctuations in the Companys stock price and the resulting effect on the
Companys SARs.
R&D expense for the three months ended March 31, 2011, was approximately $14.3 million, compared to
approximately $6.6 million for the three months ended March 31, 2010. R&D expense for the three
months ended March 31, 2011, includes a $7.0 million purchased R&D charge associated with a
milestone payment to a Medicis partner and a $0.2 million charge related to additional expenses
from fluctuations in the Companys stock price and the resulting effect on the Companys SARs. The
Company recorded no special R&D charges for the three months ended March 31, 2010.
Cash Flow
The Companys cash flow from operations for the three months ended March 31, 2011, was
approximately $91.2 million, consisting of approximately $96.7 million from continued operations,
partially offset by cash used of approximately $5.5 million from discontinued operations.
2011 Guidance
Based upon information available currently to the Companys management, the Companys financial
guidance for the remainder of 2011 is anticipated as follows:
Calendar 2011
(in millions, except per share amounts)
(in millions, except per share amounts)
First | Second | Third | Fourth | Calendar | ||||||||||||||||
Quarter | Quarter | Quarter | Quarter | Year-End | ||||||||||||||||
(3/31/11) | (6/30/11) | (9/30/11) | (12/31/11) | 2011 | ||||||||||||||||
Actual | Estimated | Estimated | Estimated | Estimated | ||||||||||||||||
Revenue |
$ | 165 | $ | 185-$197 | $ | 190-$202 | $ | 195-$206 | $ | 735-$770 | ||||||||||
Non-GAAP diluted
EPS objectives |
$ | 0.50 | $ | 0.61-$0.66 | $ | 0.63-$0.68 | $ | 0.71-$0.76 | $ | 2.45-$2.60 |
Additional 2011 Guidance Considerations
| Revenue and non-GAAP diluted EPS objectives include certain assumptions associated with: |
| continued acceptance of newer strengths of SOLODYN by physicians; | ||
| the Companys early 2011 discontinuation of TRIAZ and decision to no longer promote PLEXION; | ||
| the exclusion of all revenue and expenses associated with LipoSonix as the Company is classifying the LipoSonix business as a discontinued operation beginning in the first quarter of 2011; | ||
| competition in the dermal filler and botulinum toxin markets; | ||
| gross profit margins of approximately 90-92% of revenues; | ||
| SG&A expenses of approximately 45-47% of revenues; | ||
| R&D expenses of approximately 6-7% of revenues; | ||
| depreciation and amortization of approximately $30-$32 million for the year; | ||
| effective tax rate of approximately 38-39%; and |
| fully diluted weighted average shares outstanding of approximately 65-66 million shares. |
The above guidance does not take into account the following:
| disposition of the LipoSonix business; | ||
| special charges associated with R&D milestones or contract payments; | ||
| the financial impact of fluctuations in the Companys stock price and the resulting effect on the Companys SARs; | ||
| additional recognized losses on our auction rate securities investments; | ||
| recognized losses resulting from impairments on our intangible assets; | ||
| the impact of accounting for new collaborative arrangements with Medicis partners; | ||
| the financial impact of changes in accounting or governmental pronouncements; | ||
| charges related to the accounting for our investment in Revance or Hyperion; | ||
| material changes to the demand for ZIANA associated with the launch of a competitive product; | ||
| material changes to our assumptions regarding sales of SOLODYN to wholesalers and the demand for SOLODYN associated with the anticipated November 2011 launch of generic versions of SOLODYN in 45 mg, 90 mg and 135 mg strengths; | ||
| material changes to our assumptions regarding prescription trends toward the newer strengths of SOLODYN; | ||
| the timing of additional SOLODYN patent allowances, if any; | ||
| uncertainty relating to the reduction of the average selling price, including reserves, for covered products as a result of the rise in costs associated with consumer rebate programs, including MediSAVE, RESTYLANE Rewards® and other point-of-sale offers; | ||
| changes in reimbursement policies of health plans and other health insurers; | ||
| the impact of the U.S. economy on the Companys aesthetic and therapeutic franchises; and | ||
| significant changes in assumptions and estimates used for calculating various sales reserves. |
At the time of this disclosure, Medicis believes these objectives are attainable based upon
information currently available to the Companys management.
Diluted Earnings Per Share
Diluted earnings per share amounts are calculated using the if-converted method of accounting
regardless of whether the Companys outstanding convertible bonds meet the criteria for conversion
and regardless of whether the bondholders actually convert their bonds into shares.
Use of Non-GAAP Financial Information
The Company has disclosed non-GAAP financial information in this press release to provide
meaningful supplemental information regarding its operational performance and to enhance its
investors overall
understanding of its core financial performance. Management measures the
Companys performance using non-GAAP financial measures, such as those that are disclosed in this
press release. This information facilitates managements internal comparisons to the Companys
historical core operating results and competitors core operating results, and is a basis for
financial decision making. Management believes that Medicis investors benefit from seeing the
Companys results on the same basis as management, in addition to the GAAP presentation. In our
view, the non-GAAP financial measures are informative to investors, allowing them to focus on the
ongoing operations and core results of Medicis business. Historically, Medicis has reported
similar non-GAAP information to its investors and believes that the inclusion of comparative
numbers provides consistency in the Companys financial disclosures. This information is not in
accordance with, or an alternative for, information prepared using GAAP. Non-GAAP net income
excludes certain items, such as R&D charges which result from payments made to Medicis partners,
transaction costs, the impairment of long-lived assets, gains resulting from the sale of
subsidiaries, charges related to the accounting for our investment in Revance or Hyperion and
litigation reserves. These items may have a material effect on the Companys net income and
diluted earnings per common share calculated in accordance with GAAP. The Company excludes such
charges and the related tax benefits when analyzing its financial results as the items are
distinguishable events. Management believes that, by viewing the Companys results of operations
excluding these charges, investors are given an indication of the ongoing results of the Companys
operations.
About Medicis
Medicis is the leading independent specialty pharmaceutical company in the United States focusing
primarily on the treatment of dermatological and aesthetic conditions. The Company is dedicated to
helping patients attain a healthy and youthful appearance and self-image. Medicis has leading
branded prescription products in a number of therapeutic and aesthetic categories. The Companys
products have earned wide acceptance by both physicians and patients due to their clinical
effectiveness, high quality and cosmetic elegance.
The Companys products include the brands DYSPORT® (abobotulinumtoxinA) 300 Units for
Injection, PERLANE® Injectable Gel, PERLANE-L® Injectable Gel with 0.3%
Lidocaine, RESTYLANE® Injectable Gel, RESTYLANE-L® Injectable Gel with 0.3%
Lidocaine, DYNACIN® (minocycline HCl Tablets, USP), LOPROX® (ciclopirox) Gel
0.77% and Shampoo 1%, SOLODYN® (minocycline HCl, USP) Extended Release Tablets,
VANOS® (fluocinonide) Cream 0.1%, ZIANA® (clindamycin phosphate 1.2% and
tretinoin 0.025%) Gel, AMMONUL® (sodium phenylacetate and sodium benzoate) Injection
10%/10%, BUPHENYL® (sodium phenylbutyrate) Tablets and Powder and the over-the-counter
brand ESOTERICA®.
For more information about Medicis, please visit the Companys website at www.Medicis.com. Printed
copies of the Companys complete audited financial statements are available free of charge upon
request.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act. All statements included in this press release that address
activities, events or developments that Medicis expects, believes or anticipates will or may occur
in the future are forward-looking statements, including:
| the Companys future prospects; |
| revenues, gross profit margin, expense, tax rate and earnings guidance; |
| information regarding business development activities and future regulatory approval of the Companys products; |
| timing of FDA approval of the LipoSonix system1, if at all; |
| the commercial success of the Companys products; | ||
| the patentability of certain intellectual property; | ||
| the potential for generic competition to SOLODYN and other Medicis products; | ||
| the future expansion of the aesthetics market; | ||
| the occurrence, timing and financial terms or effect of the Companys proposed disposition of LipoSonix and other potential business development transactions; and | ||
| expectations relating to the Companys product development pipeline. |
These statements are based on certain assumptions made by the Company based on its experience and
perception of historical trends, current conditions, expected future developments and other factors
it believes are appropriate in the circumstances. No assurances can be given, however, that these
activities, events or developments will occur or that such results will be achieved. Such
statements are subject to a number of assumptions, risks and uncertainties, many of which are
beyond the control of the Company. The Companys business is subject to all risk factors outlined
in the Companys most recent annual report on Form 10-K for the year ended December 31, 2010, and
other documents we file with the Securities and Exchange Commission (SEC). At the time of this
press release, the Company cannot, among other things, assess the likelihood, timing or forthcoming
results of R&D projects, the risks associated with the FDA approval process and risks associated
with significant competition within the Companys industry, nor can the Company validate its
assumptions of the full impact on its business of the approval of competitive generic versions of
the Companys primary brands, and any future competitive product approvals that may affect the
Companys brands.
Additionally, Medicis may acquire and/or license products or technologies from third parties to
enter into new strategic markets. The Company periodically makes up-front, non-refundable payments
to third parties for R&D work that has been completed and periodically makes additional
non-refundable payments for the achievement of various milestones. There can be no certainty about
the periods in which these potential payments could be made, nor if any payments such as these will
be made at all. Any estimated future guidance does not include, among other things, the potential
payments associated with any such transactions.
There are a number of additional important factors that could cause actual results to differ
materially from those projected, including:
| the anticipated size of the markets and demand for the Companys products; | ||
| the availability of product supply or changes in the costs of raw materials; | ||
| the receipt of required regulatory approvals; | ||
| competitive developments affecting our products; | ||
| product liability claims; | ||
| the introduction of federal and/or state regulations relating to the Companys business; | ||
| dependence on sales of key products; |
| changes in the treatment practices of physicians that currently prescribe the Companys products, including prescription levels; |
| the uncertainty of future financial results and fluctuations in operating results, and the factors that may attribute to such fluctuations as set forth in our SEC filings; | ||
| dependence on the Companys strategy (including the uncertainty of license payments and/or other payments due from third parties); | ||
| changes in reimbursement policies of health plans and other health insurers; | ||
| decreases in revenues associated with the FDAs requirement, effective March 2011, that prescription benzoyl peroxide products that are not approved through a New Drug Application, such as TRIAZ, not be sold as prescription products; | ||
| the timing and success of new product development by the Company or third parties; | ||
| the inability to secure patent protection from filed patent applications, inadequate protection of the Companys intellectual property or challenges to the validity or enforceability of the Medicis proprietary rights; | ||
| the risks of pending and future litigation or government investigations; and | ||
| other risks described from time to time in the Companys filings with the SEC. |
Forward-looking statements represent the judgment of the Companys management as of the date of
this release and the Company disclaims any intent or obligation to update any forward-looking
statements contained herein, which speak as of the date hereof.
NOTE: Full prescribing information for any of the Companys prescription products is available by
contacting the Company. All trademarks are the property of their respective owners.
1 | The LipoSonix system is not approved or cleared for sale in the U.S. |
Medicis Pharmaceutical Corporation
Summary Statements of Operations (Unaudited)
(in thousands, except per share data)
Three months ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Product revenues |
$ | 163,896 | $ | 163,592 | ||||
Contract revenues |
1,017 | 1,950 | ||||||
Total revenues |
164,913 | 165,542 | ||||||
Cost of revenues |
14,331 | 15,106 | ||||||
Gross profit |
150,582 | 150,436 | ||||||
Operating expenses: |
||||||||
Selling, general and administrative |
84,630 | 72,284 | ||||||
Research and development |
14,273 | 6,558 | ||||||
Depreciation and amortization |
7,324 | 6,733 | ||||||
Total operating expenses |
106,227 | 85,575 | ||||||
Operating income |
44,355 | 64,861 | ||||||
Interest (income) expense, net |
(216 | ) | (102 | ) | ||||
Other expense, net |
| 258 | ||||||
Income from continuing operations before income tax expense |
44,571 | 64,705 | ||||||
Income tax expense |
17,886 | 24,683 | ||||||
Net income from continuing operations |
26,685 | 40,022 | ||||||
Loss from discontinued operations, net of income tax benefit |
7,325 | 4,650 | ||||||
Net income |
$ | 19,360 | $ | 35,372 | ||||
Basic net income per common share |
$ | 0.32 | $ | 0.59 | ||||
Diluted net income per common share |
$ | 0.30 | $ | 0.54 | ||||
Shares used in basic net income per common share |
59,124 | 58,049 | ||||||
Shares used in diluted net income per common share |
65,381 | 64,192 | ||||||
Cash flow from operations |
$ | 91,232 | $ | 38,217 |
Medicis Pharmaceutical Corporation
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands, except per share data)
Three months ended | Three months ended | |||||||||||||||
March 31, 2011 | March 31, 2010 | |||||||||||||||
Dollar Value | EPS Impact | Dollar Value | EPS Impact | |||||||||||||
GAAP net income |
$ | 19,360 | $ | 35,372 | ||||||||||||
Less: income allocated to participating securities |
(562 | ) | (1,163 | ) | ||||||||||||
GAAP net income attributable to common shareholders |
18,798 | $ | 0.32 | 34,209 | $ | 0.59 | ||||||||||
Less: net undistributed earnings allocated to unvested shareholders |
(3 | ) | (6 | ) | ||||||||||||
Interest expense and associated bond offering costs (tax-effected) |
666 | {a} | 666 | {a} | ||||||||||||
GAAP if-converted net income and diluted EPS |
19,461 | $ | 0.30 | 34,869 | $ | 0.54 | ||||||||||
Non-GAAP adjustments: |
||||||||||||||||
Research and development expenses
related to our collaborations |
7,000 | $ | 0.11 | | | |||||||||||
Loss from discontinued operations |
11,428 | $ | 0.17 | 7,291 | $ | 0.11 | ||||||||||
Impact of stock price fluctuation on SARs |
2,078 | $ | 0.03 | |||||||||||||
Income tax effects related to the above
transactions |
(6,986 | ) | $ | (0.11 | ) | (2,641 | ) | $ | (0.04 | ) | ||||||
Less: income allocated to participating
securities and net undistributed
earnings allocated to unvested
shareholders related to the above
transactions |
(435 | ) | | (156 | ) | | ||||||||||
Non-GAAP if-converted net income and diluted EPS |
$ | 32,546 | $ | 0.50 | $ | 39,363 | $ | 0.61 | ||||||||
Shares used in basic net income per
common share |
59,124 | 58,049 | ||||||||||||||
Shares used in diluted net income per
common share |
65,381 | 64,192 |
{a} | In order to determine if-converted net income, the tax-effected net interest on the 2.5% and 1.5% contingent convertible notes of $0.7 million are added back to GAAP net income for the three months ended March 31, 2011 and March 31, 2010. |
Medicis Pharmaceutical Corporation
Balance Sheets
(in thousands)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Assets |
||||||||
Cash, cash equivalents & short-term investments |
$ | 775,534 | $ | 703,554 | ||||
Accounts receivable, net |
99,584 | 130,622 | ||||||
Inventory, net |
34,404 | 35,282 | ||||||
Deferred tax assets |
79,351 | 70,461 | ||||||
Other current assets |
18,150 | 15,268 | ||||||
Assets held for sale from discontinued operations |
10,054 | 13,127 | ||||||
Total current assets |
1,017,077 | 968,314 | ||||||
Property & equipment, net |
24,077 | 24,435 | ||||||
Intangible assets, net |
294,891 | 287,706 | ||||||
Deferred tax assets |
33,103 | 36,898 | ||||||
Long-term investments |
32,193 | 21,480 | ||||||
Other assets |
2,991 | 2,991 | ||||||
Total assets |
$ | 1,404,332 | $ | 1,341,824 | ||||
Liabilities and stockholders equity |
||||||||
Current liabilities of continuing operations |
$ | 372,602 | $ | 332,616 | ||||
Liabilities held for sale from discontinued operations |
5,936 | 7,276 | ||||||
Total current liabilities |
378,538 | 339,892 | ||||||
Contingent convertible senior notes 2.5%, due 2032 |
169,145 | 169,145 | ||||||
Contingent convertible senior notes 1.5%, due 2033 |
181 | 181 | ||||||
Other liabilities |
4,960 | 5,084 | ||||||
Stockholders equity |
851,508 | 827,522 | ||||||
Total liabilities and stockholders equity |
$ | 1,404,332 | $ | 1,341,824 | ||||
Working capital |
$ | 638,539 | $ | 628,422 | ||||
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