Abraxis BioScience Reports 2009 Third Quarter Financial Results
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Third Quarter Highlights:
-- Sales of ABRAXANE(R)Grows to $83 Million, Representing a 10 Percent
Sequential Quarterly Increase
-- The Independent Data Monitoring Committee for the ABRAXANE Non-Small
Cell Lung Cancer Phase III Clinical Trial Has Recommended the Trial
Proceed to Completion Without Changes to the Sample Size
-- The FDA Has Granted ABRAXANE Orphan Drug Status for the Treatment of
Pancreatic Cancer and Stage IIb-IV Melanoma
-- Pivotal Phase III Clinical Trials in Non-Small Cell Lung Cancer,
Pancreatic Cancer and Melanoma Continue to Move Forward
LOS ANGELES--(BUSINESS WIRE)-- Abraxis BioScience, Inc. (NASDAQ: ABII), a fully integrated biotechnology company, today reported unaudited financial results for the third quarter ending September 30, 2009.
As of January 2, 2009, the company re-acquired the exclusive rights to market ABRAXANE(R) for Injectable Suspension (paclitaxel protein-bound particles for injectable suspension) (albumin-bound) in the U.S. As a result, beginning in 2009, the company no longer recognizes deferred revenue related to the original co-promotion agreement.
Net revenue for the third quarter of 2009 was $96.6 million compared with $93.4 million for the third quarter of 2008. ABRAXANE revenue for the third quarter of 2009 was $82.9 million compared with $92.0 million for the same period in 2008, which included recognition of deferred revenue of $9.1 million related to the co-promotion agreement. Excluding the recognition of deferred revenue, total revenue from sales of ABRAXANE remained steady at $82.9 million for both the third quarter of 2009 and 2008. Other revenue for the third quarter of 2009 increased to $13.8 million from $1.3 million in the comparable period last year, primarily due to increased sales of raw material.
Gross profit for the third quarter of 2009 was $76.9 million, or 80 percent of net revenue, compared with $82.3 million, or 88 percent of net revenue, for the third quarter of 2008. Excluding the recognition of deferred revenue, gross margin for the third quarter of 2009 was 80 percent versus 87 percent for the same period in 2008. The decrease in gross margin was primarily due to an increase in the sales volume of lower margin products, a voluntarily initiated recall of certain lots of ABRAXANE and increased sales of ABRAXANE outside of the United States.
"We have ambitious plans for ABRAXANE and the nab(R) technology franchise and continue to optimize our global and U.S. commercial resources to support growth in our current markets as well as those we are targeting for 2010," said Lonnie Moulder, President and Chief Executive Officer of Abraxis BioScience. "Additionally, we are advancing three pivotal Phase III studies for ABRAXANE, in non-small cell lung cancer, pancreatic cancer and melanoma, which could enable us to broaden the utility of this important oncology product. We have an exciting future before us as we continue to bring this important therapy to cancer patients worldwide."
Research and development expense for the third quarter of 2009 was $51.0 million compared with $21.0 million for the same period in 2008. The majority of the increase was due to additional spending on Phase III clinical trials for non-small cell lung cancer, pancreatic cancer and melanoma. The remainder of the increase was primarily attributable to investments in early stage discovery and other research and development projects.
Selling, general and administrative (SG&A) expenses for the third quarter of 2009 were $58.0 million versus $56.3 million for the same period in 2008. The re-acquisition of ABRAXANE marketing rights in the U.S. yielded savings due to the elimination of commission payments. These savings were primarily offset by increased investment in the global expansion of ABRAXANE primarily in China and the European Union, and increased spending on U.S. sales and marketing.
On a GAAP basis, net loss for common shareholders for the third quarter of 2009 was $37.7 million, or $0.94 per share, compared with net loss for common shareholders of $15.1 million, or $0.38 per share, for the third quarter of 2008.
Adjusted net loss for common shareholders for the third quarter of 2009 was $24.2 million, or $0.60 per share, compared to adjusted net income for common shareholders of $10.5 million, or $0.26 per share, for the third quarter of the prior year. Adjusted net (loss) income for common shareholders excludes amortization of acquired intangible assets, litigation costs, acquired in-process research and development, impairment charge, realized loss on marketable securities and non-cash stock-based compensation expense.
(Reconciliation tables are provided below)
Financial Results: Nine Months Ended September 30, 2009
Net revenue for the first nine months of 2009 was $254.3 million compared with $253.1 million for the same period of 2008. ABRAXANE revenue for the first nine months of 2009 was $228.6 million compared with $245.8 million for the same period in 2008, which included recognition of deferred revenue of $27.3 million related to the co-promotion agreement. Excluding the recognition of deferred revenue, total revenue from the sales of ABRAXANE for the first nine months of 2009 grew $10.1 million, or 5 percent, to $228.6 million compared with $218.5 million for the same period in 2008. Incremental revenue from the continued global expansion into China, Australia, and European markets, as well as a higher average net selling price in the United States, contributed to the increase in revenue compared to the prior year.
Other revenue for the first nine months of 2009 increased to $25.7 million from $7.3 million in the comparable period last year, primarily due to raw materials sales beginning in the second quarter of 2009.
Gross profit for the first nine months of 2009 was $210.9 million, or 83 percent of net revenue, compared with $223.5 million, or 88 percent of net revenue, for the comparable period of 2008. Excluding the recognition of deferred revenue, gross margin for the first nine months of 2009 was 83 percent versus 87 percent for the same period in 2008. The decrease in gross margin was primarily due to an increase in the sales volume of lower margin products, a voluntarily initiated recall of certain lots of ABRAXANE and increased sales of ABRAXANE outside of the United States.
Research and development expense for the first nine months of 2009 was $122.8 million compared with $61.3 million for the same period in 2008. An increase in spending on Phase III clinical trials for non-small cell lung cancer, pancreatic cancer and melanoma accounted for approximately 50% of the increase in R&D expense. The remainder of the increase is primarily attributable to investments in early stage discovery and other research and development projects.
Selling, general and administrative (SG&A) expenses for the first nine months of 2009 were $150.7 million versus $157.3 million for the same period in 2008. The reacquisition of ABRAXANE marketing rights in the U.S. yielded savings due to elimination of commission payments. These savings were primarily offset by increased investment in the global expansion of ABRAXANE primarily in China and the European Union, and increased spending on U.S. sales and marketing.
On a GAAP basis, net loss for common shareholders for the first nine months of 2009 was $84.1 million, or $2.10 per share, compared with net loss for common shareholders of $94.9 million, or $2.37 per share, for the first nine months of 2008. Adjusted net loss for common shareholders for the first nine months of 2009 was $39.9 million, or $1.00 per share, compared to adjusted net income for common shareholders of $28.7 million, or $0.71 per share, for the first nine months of the prior year.
Recent Company Highlights
-- According to IntrinsiQ data for September 2009, in all lines of
metastatic breast cancer (MBC), ABRAXANE use has increased for two
consecutive quarters from 34.8 percent to 36.7 percent of the taxane
market. On a rolling 12-month basis, the ABRAXANE share of the total MBC
taxane market was 31.7 percent. In second line + MBC, ABRAXANE has
increased for two consecutive quarters from 42.6 percent to 46.2
percent. ABRAXANE continues to be a leader in the taxane market in the
third line + setting of the MBC market with a 51 percent market share.
-- The company has targeted the previously announced spin-off of Abraxis
Health to occur during the first quarter of 2010.
-- The Independent Data Monitoring Committee for the Phase III clinical
trial with ABRAXANE in NSCLC, recently notified the company that it
recommends the trial proceed to completion as per the current protocol
without changes to the sample size.
-- Abraxis BioScience was recently notified that the FDA's Office of Orphan
Products Development (OOPD) has granted ABRAXANE with orphan drug status
in the treatment of pancreatic cancer and melanoma stage IIb-IV.
Conference Call Information
On Thursday, November 5, 2009, the company will host a conference call with interested parties beginning at 8:30 a.m. PST/11:30 a.m. EST to review its results of operations for the third quarter of 2009. The conference call may be heard by interested parties through a live audio Internet broadcast at www.abraxisbio.com and www.earnings.com. For those unable to listen to the live broadcast, a playback of the webcast will be available at both Web sites for approximately six months beginning shortly after the conclusion of the call.
Non-GAAP Financial Measures
The company believes that its presentation of non-GAAP financial measures, such as adjusted net (loss) income for common shareholders and adjusted net (loss) income per common share, provide useful supplementary information to investors in understanding the underlying operating performance of the company and facilitates additional analysis by investors. The company also uses non-GAAP financial measures internally for operating, budgeting and financial planning purposes. The non-GAAP financial measures presented by the company may not be comparable to similarly titled measures reported by other companies. The non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance calculated in accordance with GAAP. A reconciliation of GAAP net loss to adjusted net (loss) income for common shareholders for the three and nine months ended September 30, 2009 and 2008 is included with this news release.
About ABRAXANE(R)
ABRAXANE(R) is a solvent-free chemotherapy treatment option for metastatic breast cancer which was developed using Abraxis BioScience's proprietary nab(R) technology platform. This protein-bound chemotherapy agent combines paclitaxel with albumin, a naturally-occurring human protein. By wrapping the albumin around the active drug, ABRAXANE can be administered to patients at higher doses, delivering higher concentrations of paclitaxel to the tumor site than solvent-based paclitaxel. ABRAXANE is currently in various stages of investigation for the treatment of the following cancers: expanded applications for metastatic breast, non-small cell lung, malignant melanoma and pancreatic.
The U.S. Food and Drug Administration approved ABRAXANE for Injectable Suspension (paclitaxel protein-bound particles for injectable suspension) (albumin-bound) in January 2005 for the treatment of breast cancer after failure of combination chemotherapy for metastatic disease or relapse within six months of adjuvant chemotherapy. Prior therapy should have included an anthracycline unless clinically contraindicated. For the full prescribing information for ABRAXANE please visit www.abraxane.com.
About Abraxis BioScience, Inc.
Abraxis BioScience is a fully integrated global biotechnology company dedicated to the discovery, development and delivery of next-generation therapeutics and core technologies that offer patients safer and more effective treatments for cancer and other critical illnesses. The company's portfolio includes the world's first and only protein-bound nanoparticle chemotherapeutic compound (ABRAXANE(R)), which is based on the company's proprietary tumor targeting technology known as the nab(R) platform. The first FDA approved product to use this nab platform, ABRAXANE, was launched in 2005 for the treatment of metastatic breast cancer and is now approved in 38 countries. The company continues to expand the nab platform through a robust clinical program and deep product pipeline. Abraxis trades on the NASDAQ Global Market under the symbol ABII. For more information about the company and its products, please visit www.abraxisbio.com.
FORWARD-LOOKING STATEMENTS
The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements in this press release include statements regarding our expectations, beliefs, hopes, goals, intentions, initiatives or strategies, including statements regarding the clinical development plan, and the timing and scope of clinical studies and trials, for ABRAXANE and the global commercialization of ABRAXANE. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the fact that results from pre-clinical studies may not be predictive of results to be obtained in other pre-clinical studies or future clinical trials; delays in commencement and completion of clinical studies or trials, including slower than anticipated patient enrollment and adverse events occurring during the clinical trials; decisions by regulatory authorities regarding whether and when to approve ABRAXANE or product candidates for various indications as well as their decisions regarding labeling and other matters that could affect the availability or commercial potential of ABRAXANE and other products and product candidates; unexpected safety, efficacy or manufacturing issues with respect to ABRAXANE or product candidates; the need for additional data or clinical studies for ABRAXANE or product candidates; regulatory developments (domestic or foreign) involving the company's manufacturing facilities; the market adoption and demand of ABRAXANE and other products, the costs associated with the ongoing launch of ABRAXANE; research and development associated with the nab(R) technology platform; the impact of pharmaceutical industry regulation; the impact of competitive products and pricing; the availability and pricing of ingredients used in the manufacture of pharmaceutical products; the ability to successfully manufacture products in a time-sensitive and cost effective manner; the acceptance and demand of new pharmaceutical products; and the impact of patents and other proprietary rights held by competitors and other third parties. Additional relevant information concerning risks can be found in the company's Annual Report on Form 10-K for the year ended December 31, 2008 and in other documents it has filed with the Securities and Exchange Commission.
The information contained in this press release is as of the date of this release. Abraxis assumes no obligations to update any forward-looking statements contained in this press release as the result of new information or future events or developments.
Abraxis BioScience, Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands, except per share amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Abraxane revenue $ 82,854 $ 92,045 $ 228,627 $ 245,810
Other revenue 13,774 1,336 25,712 7,335
Net revenue 96,628 93,381 254,339 253,145
Cost of sales 19,714 11,128 43,457 29,680
Gross profit 76,914 82,253 210,882 223,465
Operating expenses
Research and development 51,030 21,015 122,772 61,325
Selling, general and 58,013 56,273 150,708 157,313
administrative
Litigation costs - 221 - 57,609
Acquired in-process - - - 13,900
research and development
Impairment charge - 9,214 - 9,214
Amortization of 9,952 9,872 29,859 29,483
intangible assets
Equity in net income loss (1,090 ) (469 ) (2,450 ) (245 )
of Drug Source Co, LLC
Total operating expenses 117,905 96,126 300,889 328,599
Loss from operations (40,991 ) (13,873 ) (90,007 ) (105,134 )
Interest income 614 4,274 2,501 15,385
Other income (expenses) 743 (5,481 ) 240 (4,941 )
Loss before income taxes (39,634 ) (15,080 ) (87,266 ) (94,690 )
(Benefit) provision for (1,590 ) (21 ) (1,641 ) 203
income taxes
Net loss $ (38,044 ) $ (15,059 ) $ (85,625 ) $ (94,893 )
Net loss for (330 ) - (1,557 ) -
non-controlling interests
Net loss for common $ (37,714 ) $ (15,059 ) $ (84,068 ) $ (94,893 )
shareholders
Basic and diluted net $ (0.94 ) $ (0.38 ) $ (2.10 ) $ (2.37 )
loss per common share
Basic and diluted
weighted average common 40,100 40,048 40,098 40,021
shares outstanding
The composition of
stock-based compensation
included above is as
follows:
Cost of sales $ 61 $ 108 $ 251 $ 273
Research and development 1,333 555 3,618 2,954
Selling, general and 2,148 1,342 7,451 5,881
administrative
Total stock-based $ 3,542 $ 2,005 $ 11,320 $ 9,108
compensation
Selected ratios as a
percentage of net
revenue:
Gross profit 79.6 % 88.1 % 82.9 % 88.3 %
Research and development 52.8 % 22.5 % 48.3 % 24.2 %
Selling, general and 60.0 % 60.3 % 59.3 % 62.1 %
administrative
Abraxis BioScience, Inc. GAAP Net Loss to Adjusted Net Income (Loss) for Common Shareholders and Per Share Reconciliation (Unaudited, in thousands, except per share amounts) Adjusted net income (loss) for common shareholders and adjusted net income (loss) per common share are defined as net loss for common shareholders and net loss per common share, respectively, in each case excluding amortization of intangible assets, litigation costs, acquired in-process research and development, impairment charge, realized loss on marketable securities and non-cash stock compensation expense. We believe that our presentation of non-GAAP financial measures provides useful supplementary information to investors in understanding our underlying operating performance and facilitates additional analysis by investors. We also use non-GAAP financial measures internally for operating, budgeting and financial planning purposes. The non-GAAP financial measures below may not be comparable to similarly titled measures reported by other companies. The non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance calculated in accordance with GAAP. Reconciliation of net loss and net loss per common share to adjusted net income (loss) for common shareholders and adjusted net income (loss) per common share for each of the three and nine months ended September 30, 2009 and 2008 is below:
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Net loss for common $ (37,714 ) $ (15,059 ) $ (84,068 ) $ (94,893 )
shareholders
Amortization of 9,952 9,872 29,859 29,483
intangible assets
Litigation costs (a) - 221 - 57,609
Acquired in-process
research and development - - - 13,900
(b)
Impairment charge (c) - 9,214 - 9,214
Realized loss on
marketable securities - 4,247 2,944 4,247
(d)
Stock compensation 3,542 2,005 11,320 9,108
expense
Adjusted net (loss)
income for common $ (24,220 ) $ 10,500 $ (39,945 ) $ 28,668
shareholders
Adjusted net (loss) $ (0.60 ) $ 0.26 $ (1.00 ) $ 0.71
income per common share
Weighted average common
diluted shares 40,100 40,309 40,098 40,247
outstanding (e)
Net loss per common $ (0.94 ) $ (0.38 ) $ (2.10 ) $ (2.37 )
share
Amortization of 0.25 0.25 0.75 0.74
intangible assets
Litigation costs (a) - 0.01 - 1.44
Acquired in-process
research and development - - - 0.34
(b)
Impairment charge (c) - 0.23 - 0.23
Realized loss on
marketable securities - 0.10 0.07 0.10
(d)
Stock compensation 0.09 0.05 0.28 0.23
expense
Adjusted net (loss) $ (0.60 ) $ 0.26 $ (1.00 ) $ 0.71
income per common share
(a) In 2008, we accrued $57.6 million for a litigation matter, which we will appeal. (b) Represents in-process research and development projects expensed in connection with the acquisition of Shimoda Biotech and Platco Technologies in April 2008. (c) As a result of an anticipated sale of property, plant and equipment, we recorded an asset impairment charge totaling $9.2 million during the three months ended September 30, 2008. In March 2009, we sold the shares of our subsidiary, which held the property, plant and equipment. (d) Represents write-down of marketable securities whose decline in values were determined to be other than temporary. (e) Because there is adjusted net income for common shareholders in 2008, the calculation of weighted average common diluted shares includes potentially dilutive common shares of 261,000 and 226,000 for the three and nine months ended September 30, 2008, respectively.
Abraxis BioScience, Inc.
Condensed Consolidated Balance Sheets
(In thousands)
September 30, December 31,
2009 2008
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 188,287 $ 306,390
Cash collateral for reacquisition agreement - 300,631
Accounts receivable, net of chargebacks 47,930 37,011
Related party receivable 2,184 1,915
Inventories 50,951 63,506
Prepaid expenses and other current assets 48,179 33,795
Deferred income taxes 64,882 65,585
Total current assets 402,413 808,833
Property, plant and equipment, net 239,585 166,720
Investment in Drug Source Company, LLC 12,633 10,183
Intangible assets, net of accumulated 155,111 175,291
amortization
Goodwill 241,361 241,361
Other non-current assets 51,349 36,196
Total assets $ 1,102,452 $ 1,438,584
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 20,864 $ 39,142
Accrued liabilities 79,998 53,020
Accrued litigation costs 57,711 57,635
Reacquisition payable - 268,000
Income taxes payable 567 679
Deferred revenue 3,141 4,209
Total current liabilities 162,281 422,685
Deferred income taxes, non-current 66,686 62,685
Long-term portion of deferred revenue 5,652 8,223
Other non-current liabilities 8,821 15,519
Total liabilities 243,440 509,112
Equity:
Stockholders' equity
Common stock 40 40
Additional paid-in capital 1,209,680 1,203,092
Accumulated deficit (356,757 ) (272,689 )
Accumulated other comprehensive income (loss) 2,451 (971 )
Total stockholders' equity 855,414 929,472
Non-controlling interest 3,598 -
Total equity 859,012 929,472
Total liabilities and equity $ 1,102,452 $ 1,438,584
Source: Abraxis BioScience, Inc.
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