A.P. Pharma Reports Fourth Quarter and Year-End 2002 Results.Business Editors/Health/Medical Writers REDWOOD CITY Redwood City, city (1990 pop. 66,072), seat of San Mateo co., W Calif., on San Francisco Bay; inc. 1868. Manufactures include commmunications, electrical, electronic, and medical equipment. , Calif.--(BUSINESS WIRE)--Feb. 27, 2003 A.P. Pharma, Inc. (Nasdaq:APPA), a specialty pharmaceutical company focusing on the development of prescription pharmaceutical products using its proprietary Biochronomer(TM) drug delivery system, today reported financial results for the three and twelve months ended December 31, 2002. Recent Highlights: -- A plan has been implemented to enable APF112 to enter Phase II clinical testing for the treatment of pain in abdominal surgery in mid 2003. -- Preclinical studies with a modified APF112 formulation have been initiated. -- Eight reimbursed feasibility studies involving the Biochronomer system are proceeding with various corporate partners of which five have now entered in vivo testing. -- 2002 royalty revenue exceeded $4 million, which is an increase of 25% over 2001. -- Retin-A Micro(R) royalties grew 23% in 2002 as the product's share of the topical retinoid market increased to its highest level ever as a result of the launch of a low-dose formulation and a direct-to-consumer advertising campaign. -- Carac(TM) royalties grew by 29% in 2002 as the product continued to maintain share in the growing topical actinic keratoses market, despite strong competition. -- The Analytical Standards division, a non-core business, was sold in February 2003 for $2.1 million in cash and the right to receive royalties on net sales for a five-year period. -- The Company has approximately $16 million in cash, cash equivalents and short-term investments at February 27, 2003, with a current annual cash burn rate of approximately $4 to $6 million. "We remain enthusiastic about the prospects for APF APF, n the abbreviation for acidulated phosphate fluoride. 112 for the treatment of post-surgical pain. The challenges that we faced in 2002 with this program have now been resolved with the agreement of a plan with the FDA FDA abbr. Food and Drug Administration FDA, n.pr See Food and Drug Administration. FDA, n.pr the abbreviation for the Food and Drug Administration. . With positive outcomes of the preclinical testing now underway, this should allow the product to reenter re·en·ter also re-en·ter v. re·en·tered, re·en·ter·ing, re·en·ters v.tr. 1. To enter or come in to again. 2. To record again on a list or ledger. v.intr. the clinic in mid 2003," commented Michael O'Connell, A.P. Pharma's President and Chief Executive Officer. The initial Phase II studies will address the treatment of pain in patients following surgery for inguinal hernias inguinal hernia n. A hernia into the inguinal canal. inguinal hernia Surgery The prolapse of a loop of intestine into a patent inguinal canal . With the demonstration of efficacy of APF112 in post-surgical pain, the Company believes that there will be substantial potential for this product as there are approximately 20 million surgical procedures Surgical procedures have long and possibly daunting names. The meaning of many surgical procedure names can often be understood if the name is broken into parts. For example in splenectomy, "ectomy" is a suffix meaning the removal of a part of the body. "Splene-" means spleen. performed annually in the U.S. where the product could be utilized. Using the Company's Biochronomer bioerodible drug delivery system, APF112 is designed to provide 24-36 hours of post-surgical pain relief and to minimize the use of morphine-like drugs (opioids Opioids One of the major classes of semi or fully synthetic psycho-active drugs that includes methadone. Mentioned in: Cancer Therapy, Palliative, Methadone opioid ), which are used extensively in post-surgical pain management. Opioids are associated with a wide range of side effects Side effects Effects of a proposed project on other parts of the firm. , such as nausea, sedation Sedation Definition Sedation is the act of calming by administration of a sedative. A sedative is a medication that commonly induces the nervous system to calm. Purpose The process of sedation has two primary intentions. , dizziness, constipation, vomiting vomiting, ejection of food and other matter from the stomach through the mouth, often preceded by nausea. The process is initiated by stimulation of the vomiting center of the brain by nerve impulses from the gastrointestinal tract or other part of the body. , urinary retention Urinary retention The result of progressive obstruction of the urethra by an enlarging prostate, causing urine to remain in the bladder even after urination. , and in some situations, life-threatening respiratory depression. APF112 incorporates mepivacaine, a local anesthetic local anesthetic n. An agent that, when applied directly to mucous membranes or when injected about the nerves, produces loss of sensation by inhibiting nerve excitation or conduction. with analgesic analgesic (ăn'əljē`zĭk), any of a diverse group of drugs used to relieve pain. Analgesic drugs include the nonsteroidal anti-inflammatory drugs (NSAIDs) such as the salicylates, narcotic drugs such as morphine, and synthetic drugs properties that has been used extensively in clinical practice for several years for short-term pain relief. In animal studies, APF112 incorporating the Biochronomer bioerodible drug delivery system has demonstrated prolonged analgesic effect. A.P. Pharma has also initiated a significant number of feasibility studies for other Biochronomer product applications in a wide array of clinical areas as diverse as ophthalmology ophthalmology (ŏf'thălmŏl`əjē), branch of medicine specializing in the anatomy, function and diseases of the eye. Ophthalmologists specialize in the medical and surgical treatment of eye disorders, vision measurements for , cardiovascular stents and DNA DNA: see nucleic acid. DNA or deoxyribonucleic acid One of two types of nucleic acid (the other is RNA); a complex organic compound found in all living cells and many viruses. It is the chemical substance of genes. delivery. The Company's collaborators range from biotechnology companies Top 100 Biotechnology Companies The following is a list of the top 100 biotechnology companies ranked by revenue. The first nine companies qualify for the list of the top 50 pharmaceutical companies. to Fortune 500 companies. A.P. Pharma believes that the successful completion of in vivo in vivo /in vi·vo/ (ve´vo) [L.] within the living body. in vi·vo adj. Within a living organism. in vivo adv. studies is the final stage before entering into licensing arrangements. Financial Results The Company reported total revenues for 2002 of $5,815,000, an increase of $1,428,000 or 33% compared with the prior year. The increase in revenues was primarily attributable to contract revenues earned in collaborations with prospective corporate partners, a 25% increase in royalties and the recognition of deferred revenues resulting from the forfeiture The involuntary relinquishment of money or property without compensation as a consequence of a breach or nonperformance of some legal obligation or the commission of a crime. The loss of a corporate charter or franchise as a result of illegality, malfeasance, or Nonfeasance. by a partner of certain rights to a proprietary Microsponge(R) formulation. The Company reported total revenues for the fourth quarter of 2002 of $1,986,000, compared with $1,448,000 for the fourth quarter of 2001. For the year ended December 31, 2002, royalties increased by $799,000 or 25% to $4,026,000. Royalties from Retin-A Micro(R) (licensed to Ortho Neutrogena, a Johnson and Johnson Company) grew by 23% and royalties from Carac (licensed to Dermik Laboratories, an Aventis Company) grew by 29% compared with the prior year. For the fourth quarter ended December 31, 2002, royalties grew by $97,000 or 8% to $1,258,000. Research and development expense for the 12 months ended December 31, 2002 decreased by $649,000 or 9% to $6,699,000 reflecting the delayed entry of APF112 into Phase II clinical trials Noun 1. phase II clinical trial - a clinical trial on more persons than in phase I; intended to evaluate the efficacy of a treatment for the condition it is intended to treat; possible side effects are monitored phase II compared with the expenses incurred in the prior year as the Company prepared for the filing of an IND, together with the costs associated with the scale-up of GMP GMP (guanosine monophosphate): see guanine. materials. Research and development expense for the fourth quarter of 2002 decreased by $983,000 or 40% to $1,456,000 due to the higher costs incurred in the prior year's fourth quarter related to preclinical trials pursuant to the filing of the IND for the post-surgical pain product. The loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the 12 months ended December 31, 2002 was $4,165,000, compared with a loss from continuing operations for the prior year of $5,929,000. The loss from continuing operations in the fourth quarter of 2002 was $404,000, compared with a loss from continuing operations in the fourth quarter of the prior year of $1,669,000. Conference Call Information Management will be hosting an investment community conference call beginning at 11:00 a.m. Eastern Time (8:00 a.m. Pacific Time) on Thursday, February 27, 2003 to discuss the results and to answer questions. To participate in the live call by telephone, please dial 888/803-8275 from the U.S., and for international callers, please dial 706/634-1287. A telephone replay will be available for 48 hours by dialing 800/642-1687 from the U.S., or 706/645-9291 for international callers, and entering reservation number 8689235. Individuals interested in listening to the conference call via the Internet may do so by visiting www.appharma.com. A replay will be available on the Company's Web site for 14 days. About A.P. Pharma A.P. Pharma is a specialty pharmaceutical company focused on the development of ethical (prescription) pharmaceuticals utilizing its proprietary polymer-based drug delivery systems. The Company's primary focus is the development and commercialization of its bioerodible injectable in·ject·a·ble adj. Capable of being injected. Used of a drug. n. A drug or medicine that can be injected. and implantable systems under the trade name Biochronomer. Initial targeted areas of application for the Company's drug delivery technology include pain management, inflammation, oncology and ophthalmology applications. The Company's product development programs are funded by royalties from topical products currently marketed by pharmaceutical partners and by proceeds from the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of its cosmeceutical cos·me·ceu·ti·cal n. A cosmetic that has or is purported to have medicinal properties. product lines as well as fees it receives from collaborative partners. For further information visit the Company's Web site at www.appharma.com. Forward-looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Except for historical information, this news release contains certain forward-looking statements that involve risks and uncertainties, including among others, uncertainty associated with timely development, approval, launch and acceptance of new products, establishment of new corporate alliances and progress in research and development programs. Other risks and uncertainties associated with the Company's business and prospects are identified in the Company's filings with the Securities and Exchange Commission. The Company does not undertake to revise these forward-looking statements to reflect events or circumstances occurring in the future.
A.P. PHARMA, INC.
Income Statement Highlights
(in thousands, except per share data)
Three Months Twelve Months
Ended Dec. 31, Ended Dec. 31,
2002 2001 2002 2001
(Unaudited)(Unaudited)(Unaudited) (1)
Royalties $1,258 $1,161 $4,026 $3,227
Contract Revenues 452 4 644 38
Product Revenues 276 283 1,145 1,122
Total Revenues 1,986 1,448 5,815 4,387
Cost of Sales 114 146 445 440
Operating Expenses:
Research & Development 1,456 2,439 6,699 7,348
Selling, General
& Administrative 917 797 3,494 3,720
Total Operating Expenses 2,373 3,236 10,193 11,068
Operating Loss (501) (1,934) (4,823) (7,121)
Interest and Other, Net 97 265 658 1,192
Loss from Continuing Operations (404) (1,669) (4,165) (5,929)
Income (Loss) from Discontinued
Operations 177 (17) 387 3,415
Net Loss ($227) ($1,686) ($3,778) ($2,514)
Basic and Diluted Loss Per Share:
Loss from Continuing Operations (0.02) (0.08) (0.20) (0.29)
Net Loss (0.01) (0.08) (0.19) (0.12)
Shares Used in Calculating
Loss Per Share:
Basic and Diluted 20,456 20,327 20,409 20,276
(1) Information derived from audited financial statements included
in the Company's 2001 Form 10-K.
A.P. PHARMA, INC.
Balance Sheet Highlights
(in thousands)
December 31, December 31,
2002 2001
(Unaudited) (1)
Assets
Cash, Cash Equivalents
and Marketable Securities $14,121 $19,494
Accounts Receivable, Net 1,504 1,468
Other Current Assets 349 662
Total Current Assets 15,974 21,624
Property, Plant & Equipment, Net 1,636 1,668
Other Non-Current Assets 189 215
Total Assets $17,799 $23,507
Liabilities and Shareholders' Equity
Current Liabilities $1,995 $3,550
Long-Term Deferred Revenues 345 785
Shareholders' Equity 15,459 19,172
Total Liabilities and
Shareholders' Equity $17,799 $23,507
(1) Information derived from audited financial statements included
in the Company's 2001 Form 10-K.
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