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Home > Press > Abraxis BioScience Reports Financial Results for the Second Quarter of 2008
Abstract: Abraxis BioScience Reports Financial Results for the Second Quarter of 2008LOS ANGELES, CA | Posted on August 13th, 2008Net revenue for the second quarter of 2008 was $77.6 million, compared with $83.2 million for the prior year period. Revenue from sales of ABRAXANE(R) (paclitaxel protein-bound particles for injectable suspension) (albumin-bound) was $73.8 million for the second quarter of 2008, compared with $78.7 million for the same period in 2007. Revenue for the most recent quarter was impacted by a delay of product orders that had been anticipated for the period. Net revenue for the second quarter of 2008 included recognized deferred revenue of $10.2 million relating to the co-promotion agreement with AstraZeneca and the license agreements with Taiho of Japan and Green Cross of South Korea, compared with $9.8 million of recognized deferred revenue for the same quarter last year.
1H 2008 1H 2007
(millions) (millions)
---------- ----------
Adjusted net income (loss) $15.9 $ (1.4)
Adjusted net income (loss) per diluted
share $0.39 $(0.03)
(Reconciliation tables appear below.)
RECENT COMPANY HIGHLIGHTS In July, Biocon Limited, a biotechnology company in India, and Abraxis launched ABRAXANE in India for the treatment of breast cancer after failure of combination therapy for metastatic disease or relapse within six months of adjuvant chemotherapy. ABRAXANE is now available in India as a single-use 100 mg vial (as a lyophilized powder, to be reconstituted for intravenous administration). In August 2007, Abraxis established a licensing agreement with Biocon for the commercialization of ABRAXANE in India, Pakistan, Bangladesh, Sri Lanka, the United Arab Emirates, Saudi Arabia, Kuwait and certain other South Asian and Persian Gulf countries. In July, Abraxis also received approval from the China State Food and Drug Administration to market ABRAXANE for the treatment of breast cancer after failure of standard chemotherapy for metastatic disease or relapse within six months of adjuvant chemotherapy. Abraxis has three issued Chinese patents covering ABRAXANE, as well as five additional pending patent applications in China. In April, the Korean FDA granted marketing approval for ABRAXANE for the treatment of breast cancer after failure of standard chemotherapy for metastatic disease. As previously announced, Abraxis granted an exclusive license to Green Cross Corporation for the commercialization of ABRAXANE in Korea. Green Cross currently expects to launch ABRAXANE in Korea in the first quarter of 2009. Also in April, Abraxis completed the acquisition of Shimoda Biotech and Platco Technologies, gaining a pipeline of novel cyclodextrin-based products and next-generation platinum-based oncology compounds. As part of the acquisition, Abraxis also gained a revenue stream from Shimoda's Dyloject(R) product (diclofenac sodium solution for injection), an injectable painkiller for the treatment of post-surgical pain. Dyloject(R) was launched in December 2007 in the United Kingdom by Javelin Pharmaceuticals under an exclusive worldwide license from Shimoda. In May, David O'Toole was appointed Executive Vice President and Chief Financial Officer. Mr. O'Toole comes to Abraxis with 24 years of experience providing financial, consulting and international tax services to global companies, with particular expertise in the life sciences industry. Mr. O'Toole was with Deloitte & Touche LLP for the past 16 years, last serving as Partner - Strategic Client Group, where he was responsible for providing solutions to issues facing the life sciences industry for biotechnology clients, including enterprise cost reduction, commercialization and distribution of drugs, human resources, Sarbanes Oxley compliance and tax compliance and planning. RESEARCH AND DEVELOPMENT HIGHLIGHTS There are currently 30 company-sponsored clinical studies and approximately 90 investigator-initiated studies planned or underway, of which more than 25 have active patient enrollment. At the American Association for Cancer Research (AACR) Annual Meeting in April 2008, Abraxis presented preclinical data demonstrating the effect of ABRAXANE in combination with Avastin(R) (bevacizumab) to eradicate large-sized (up to 600 mm3) orthotopic breast tumors and lymphatic and systematic metastasis. The findings presented suggest a novel mechanism through which ABRAXANE can overcome a newly discovered phenomenon of reactionary angiogenesis. At AACR, Abraxis also presented data from a Phase I trial showing clinical benefit of ABRAXANE in combination with Gemzar(R) (gemcitabine) in more than 70 percent of patients with advanced pancreatic cancer. Based on the results, Abraxis plans to conduct additional studies to evaluate the safety and efficacy of ABRAXANE in patients with first- and second-line pancreatic cancer. At the 44th Annual Meeting of the American Society of Clinical Oncology (ASCO) in May 2008, Abraxis reported clinical results from 23 company and investigator-sponsored studies. Highlights included data from studies on the potential utility of ABRAXANE in combination with the targeted agents bevacizumab and trastuzumab, and other chemotherapeutic agents, for neoadjuvant and first-line treatment of metastatic breast cancer. At ASCO, a preliminary analysis of an ongoing single-arm, open-label, Phase II clinical trial evaluating solvent-free ABRAXANE in combination with bevacizumab for the first-line treatment of metastatic breast cancer was presented. This analysis showed that ABRAXANE (125 mg/m2) given weekly for three weeks combined with bevacizumab (10 mg/kg) given weekly on the first and third week of a four-week treatment cycle demonstrated a 33 percent overall response rate and a median progression-free survival of 7.4 months. Additionally, a preliminary analysis of an ongoing single-arm, open-label, Phase II clinical trial evaluating solvent-free ABRAXANE in combination with trastuzumab and carboplatin for the first-line treatment of patients with HER2-positive metastatic breast cancer was presented at ASCO. This analysis showed that weekly ABRAXANE (100 mg/m2 three weeks on treatment, one week off) followed by carboplatin (AUC of 6 every four weeks) plus trastuzumab (4 mg/kg loading dose followed by 2 mg/kg on subsequent visits) demonstrated a 53 percent overall response rate and median progression free survival of nearly 16 months. Note The company completed its separation from APP Pharmaceuticals, Inc. in November 2007. The accompanying unaudited consolidated and combined financial information reflect the consolidated operations of Abraxis BioScience, Inc. and its subsidiaries as an independent, publicly-traded company as of and subsequent to November 13, 2007 and a combined reporting entity comprising the assets and liabilities that constituted the proprietary business of Abraxis BioScience, Inc. (formerly American Pharmaceuticals, Inc.) for periods prior to November 13, 2007. The unaudited consolidated and combined financial information for periods prior to and including November 13, 2007 may not be indicative of future performance and do not necessarily reflect what the consolidated and combined results of operations, financial position and cash flows would have been had Abraxis BioScience operated as an independent, publicly-traded company during the periods presented, including changes in capitalization as a result of the separation. To the extent that an asset, liability, revenue or expense is directly associated with the company, it is reflected in the accompanying unaudited consolidated and combined financial information. Certain general corporate overhead and other expenses for periods prior to the separation have been allocated to the company. Management believes such allocations were reasonable; however, they may not be indicative of actual results had Abraxis BioScience been operating as an independent, publicly traded company for the periods presented. Conference Call Information On Wednesday, August 13, 2008, the company will host a conference call with interested parties beginning at 8:30 a.m. PDT/11:30 a.m. EDT to review its results of operations for the second quarter of 2008. The conference call may be heard by interested parties through a live audio Internet broadcast at www.abraxisbio.com and www.thomsonone.com. For those unable to listen to the live broadcast, a playback of the webcast will be available at both websites 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 income and adjusted net income per 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 income (loss) to adjusted net income (loss) for the three and six months ended June 30, 2008 and June 30, 2007 is included with this news release. #### About Abraxis BioScience, Inc.
Abraxis BioScience, Inc.
Condensed Consolidated and Combined Statements of Operation (1)
(Unaudited, in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Abraxane revenue $ 73,833 $ 78,670 $153,765 $149,553
Other revenue 3,789 4,547 5,999 5,557
--------- --------- --------- ---------
Net revenue 77,622 83,217 159,764 155,110
Cost of sales 9,945 6,899 18,552 14,558
--------- --------- --------- ---------
Gross profit 67,677 76,318 141,212 140,552
Operating expenses
Research and development 21,693 16,947 42,515 32,660
Selling, general and
administrative 52,666 73,209 97,966 122,247
Litigation costs 58,257 - 58,257 -
Acquired in-process
research and development
charge 13,900 - 13,900 -
Amortization of acquired
intangible assets 9,958 9,653 19,611 19,305
Equity in net loss (income)
of Drug Source Co, LLC (24) (1,178) 224 (1,896)
--------- --------- --------- ---------
Total operating expenses 156,450 98,631 232,473 172,316
--------- --------- --------- ---------
Loss from operations (88,773) (22,313) (91,261) (31,764)
Interest income and other 4,829 43 11,651 339
--------- --------- --------- ---------
Loss before income taxes (83,944) (22,270) (79,610) (31,425)
Provision (benefit) for income
taxes 199 (8,299) 224 (11,783)
--------- --------- --------- ---------
Net loss $(84,143) $(13,971) $(79,834) $(19,642)
========= ========= ========= =========
Basic and diluted net loss per
common share $ (2.10) $ (0.35) $ (2.00) $ (0.49)
========= ========= ========= =========
Basic and diluted weighted
average common shares
outstanding 40,018 39,990 40,007 39,990
========= ========= ========= =========
The composition of stock-based
compensation included above
is as follows:
Cost of sales $ 114 $ 412 $ 165 $ 927
Research and development 1,209 1,218 2,399 3,612
Selling, general and
administrative 2,786 2,325 4,539 5,919
--------- --------- --------- ---------
Total stock-based
compensation $ 4,109 $ 3,955 $ 7,103 $ 10,458
========= ========= ========= =========
Selected ratios as a
percentage of net revenue:
Gross margin 87.2% 91.7% 88.4% 90.6%
Research and development 28.0% 20.4% 26.6% 21.1%
Selling, general and
administrative 67.8% 88.0% 61.3% 78.8%
(1) The consolidated and combined financial information reflects the
consolidated operations of Abraxis BioScience and its subsidiaries as
an independent, publicly-traded company as of and subsequent to
November 13, 2007 and a combined reporting entity comprising the
assets and liabilities that constituted the proprietary business of
Old Abraxis for periods prior to November 13, 2007. The consolidated
and combined financial information for periods prior to and including
November 13, 2007 may not be indicative of our future performance and
do not necessarily reflect what our consolidated and combined results
of operations, financial position and cash flows would have been had
we operated as an independent, publicly-traded company during those
periods.
-0-
Abraxis BioScience, Inc.
GAAP to Adjusted Net Income (Loss) Per Share Reconciliation
(Unaudited, in thousands, except per share amounts)
Adjusted net income (loss) and adjusted net income (loss) per share
are defined as net income (loss) and net income (loss) per share,
respectively, in each case excluding in-process research and
development charges, amortization of acquired intangible assets,
litigation costs, Phoenix pre-launch costs 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 are in addition
to, and not a substitute for or superior to, measures of financial
performance calculated in accordance with GAAP. Reconciliation of net
income (loss) and net income (loss) per share to adjusted net income
(loss) and adjusted net income (loss) per share for each of the three
and six months ended June 30, 2008 and 2007 is below:
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Net loss $(84,143) $(13,971) $(79,834) $(19,642)
Amortization of acquired
intangible assets 8,786 5,929 13,872 11,858
Acquired in-process
research and development
charge (a) 13,900 - 13,900 -
Litigation costs (b) 58,257 - 58,257 -
Phoenix pre-launch costs
(c) 3,209 - 4,645 -
Stock compensation expense 3,625 2,429 5,024 6,424
--------- --------- --------- ---------
Adjusted net income (loss) $ 3,634 $ (5,613) $ 15,864 $ (1,360)
========= ========= ========= =========
Adjusted net income (loss) per
diluted share (d) $ 0.09 $ (0.14) $ 0.39 $ (0.03)
========= ========= ========= =========
Weighted - average common
diluted shares outstanding 40,217 39,990 40,197 39,990
========= ========= ========= =========
Net loss per share $ (2.09) $ (0.35) $ (1.99) $ (0.49)
Amortization of acquired
intangible assets 0.22 0.15 0.35 0.30
Acquired in-process
research and development
charge (a) 0.34 - 0.34 -
Litigation costs (b) 1.45 - 1.45 -
Phoenix pre-launch costs
(c) 0.08 - 0.12 -
Stock compensation expense 0.09 0.06 0.12 0.16
--------- --------- --------- ---------
Adjusted net income (loss) per
diluted share $ 0.09 $ (0.14) $ 0.39 $ (0.03)
========= ========= ========= =========
-0-
Abraxis BioScience, Inc.
GAAP to Adjusted Pretax Net Income Reconciliation
(unaudited, in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Loss before income tax $(83,944) $(22,270) $(79,610) $(31,425)
Pretax amortization of
acquired intangible assets 9,958 9,653 19,611 19,305
Acquired in-process
research and development
charge (a) 13,900 - 13,900 -
Litigation costs (b) 58,257 - 58,257 -
Phoenix pre-launch costs
(c) 3,637 - 6,566 -
Stock compensation expense 4,109 3,955 7,103 10,458
--------- --------- --------- ---------
Adjusted income (loss) before
income tax $ 5,917 $ (8,662) $ 25,827 $ (1,662)
========= ========= ========= =========
(a) In connection with the purchase of Shimoda Biotech and Platco
Technologies in April 2008, we acquired certain research and
development projects that were required to be expensed in accordance
with generally accepted accounting principles. Approximately $13.9
million of the purchase price was expensed as in-process research and
development for projects that, as of the acquisition date, had not
yet reached technological or regulatory feasibility and had no
alternative future uses in their current states.
(b) On June 13, 2008, a jury ruled that we infringed upon one of
Elan's patents, which runs until 2011, and awarded Elan $55.2 million
in damages for sales of Abraxane(R) through the judgment date. We are
in the process of appealing the jury ruling. As of June 30, 2008, we
recorded $58.3 million for this matter, which includes $2.2 million
of pre-judgment interest.
(c) Represents pre-launch costs associated with our Phoenix, Arizona
manufacturing facility.
(d) Taxable adjustments to net loss were tax effected using an
incremental tax rate of 38.58%
-0-
Abraxis BioScience, Inc.
Condensed Consolidated and Combined Balance Sheets
(In thousands)
June 30, December 31,
2008 2007
----------- ------------
Assets (Unaudited)
Current assets:
Cash and cash equivalents $ 656,969 $ 705,125
Accounts receivable, net of chargebacks 32,192 43,944
Related party receivable 2,516 1,958
Inventories 67,641 73,677
Prepaid expenses and other current assets 14,421 18,572
Deferred income taxes 58,562 33,696
----------- ------------
Total current assets 832,301 876,972
Property, plant and equipment, net 152,644 145,120
Investment in Drug Source Company, LLC 9,051 9,275
Intangible assets, net of accumulated
amortization 193,984 205,231
Goodwill 241,361 241,361
Other non-current assets 33,147 24,296
----------- ------------
Total assets $1,462,488 $1,502,255
=========== ============
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 26,454 $ 33,579
Accrued liabilities 44,113 54,927
Accrued litigation settlement 58,257 -
Accounts payable to related parties - 6,986
Income taxes payable - 5,010
Deferred revenue 42,501 41,289
----------- ------------
Total current liabilities 171,325 141,791
----------- ------------
Deferred income taxes, non-current 57,262 32,396
Long-term portion of deferred revenue 99,257 121,138
Other non-current liabilities 14,844 9,543
----------- ------------
Total liabilities 342,688 304,868
Stockholders' equity
Common stock 40 40
Additional paid-in capital 1,196,316 1,192,461
Retained earnings (deficit) (75,752) 4,082
Accumulated other comprehensive income (loss) (804) 804
----------- ------------
Total stockholders' equity 1,119,800 1,197,387
----------- ------------
Total liabilities and stockholders'
equity $1,462,488 $1,502,255
=========== ============
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