Andrx Corporation Reports 2003 First Quarter Results.Business Editors/Health/Medical Writers FORT LAUDERDALE Fort Lauderdale (lô`dərdāl), residential, commercial, and resort city (1990 pop. 149,377), seat of Broward co., SE Fla., on the Atlantic coast; settled around a fort built (c.1837) in the Seminole War, inc. 1911. , Fla.--(BUSINESS WIRE)--April 29, 2003 Andrx Corporation (Nasdaq:ADRX ADRX Andrx Corporation (stock symbol) ) ("Andrx" or the "Company") today announced its financial results for the quarter ended March 31, 2003, summarized as follows (in thousands, except per share amounts): -0-
Three Months Ended
March 31,
-------------------
2003 2002
--------- ---------
Total revenues $237,185 $183,319
Net income $6,356 $4,513
Net income allocated to Andrx (1) $6,356 $8,395
Andrx diluted earnings per share (1) $0.09 $0.12
Net loss allocated to Cybear (1) $(3,882)
Cybear diluted loss per share (1) $(0.58)
(1) See Note 2 in the accompanying Unaudited Condensed
Consolidated Statements of Income.
The 2003 first quarter income before income taxes of $10.3 million includes, among other things, $30.4 million in licensing revenues from Kremers Urban Development Co. ("KUDCo") and as previously disclosed in the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2002, a $5.7 million charge to cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold related to pre-launch production of Andrx's bioequivalent bi·o·e·quiv·a·lent n. A value indicating the rate at which a substance enters the bloodstream and becomes available to the body. versions of Wellbutrin Well·bu·trin A trademark for the drug bupropion hydrochloride, used to treat depression. bupropion hydrochloride Budeprion SR, Budeprion XL, Wellbutrin, Wellbutrin SR, Wellbutrin XL, Zyban (R) SR/Zyban(R) placed into production during the quarter. Andrx's Chief Executive Officer, Richard J. Lane, commented: "We have advised investors that we intend to deliver positive earnings in 2003, and today's first quarter results are but the first step in fulfilling that commitment. This quarter's results include increases in revenues of 29% and gross profit of 38%, compared to the first quarter of 2002. Equally as important, we have continued to invest in our future by spending $13.3 million in R&D this quarter, which has resulted in 1 NDA (Non Disclosure Agreement) An agreement signed between two parties that have to disclose confidential information to each other in order to do business. In general, the NDA states why the information is being divulged and stipulates that it cannot be used for any and 3 ANDA ANDA abbr. abbreviated new drug application filings in the first quarter. Subsequent to March 31, 2003, we received approval of our bioequivalent version of Tiazac Tiazac® Diltiazem, see there (R). Sales resulting from the launch of our generic version of Tiazac, when combined with the continued strength of our distribution business and sales of our Cartia Cartia® Diltiazem HCl Cardiology A generic Cardizem® used for angina and HTN. See Angina, Hypertension. XT(TM) product, licensing revenues from KUDCo, and revenues from our branded Altocor Al·to·cor A trademark for the drug lovastatin. product and the anticipated launch of our generic OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). Claritin Clar·i·tin A trademark for the drug loratadine. loratadine Alavert, Claritin, Claritin RediTabs, Clarityn (UK) Pharmacologic class: Histamine1-receptor antagonist (second-generation) D(R)-24, lead me to believe that we will fulfill ful·fill also ful·fil tr.v. ful·filled, ful·fill·ing, ful·fills also ful·fils 1. To bring into actuality; effect: fulfilled their promises. 2. our commitment in both the second quarter and the rest of 2003. Nevertheless, we will continue to conserve our cash and improve on the execution of our business plans, in order to maximize the value of our Company for our shareholders."
Revenues and Cost of Goods Sold
Three Months Ended
March 31,
(in thousands)
-------------------
2003 2002
--------- ---------
Distributed Products
Revenues $154,617 $127,045
Cost of goods sold 125,027 103,755
Gross profit 29,590 23,290
Gross margin 19.1% 18.3%
Andrx Products - Bioequivalent
Revenues $40,503 $48,988
Cost of goods sold 28,753 17,668
Gross profit 11,750 31,320
Gross margin 29.0% 63.9%
Andrx Products - Brand
Revenues $7,929 $5,548
Cost of goods sold 2,516 2,541
Gross profit 5,413 3,007
Gross margin 68.3% 54.2%
Licensing and Royalties
Revenues $31,138 $114
Gross margin 100.0% 100.0%
Other
Revenues $2,998 $1,624
Cost of goods sold 2,737 2,553
Gross profit (loss) 261 (929)
Gross margin (loss) 8.7% (57.2%)
Total
Revenues $237,185 $183,319
Cost of goods sold 159,033 126,517
Gross profit 78,152 56,802
Gross margin 32.9% 31.0%
For the 2003 quarter, total revenues increased by 29.4% to $237.2 million, compared to $183.3 million for the 2002 quarter. Total gross profit increased by 37.6% to $78.2 million for the 2003 quarter, compared to total gross profit of $56.8 million in the 2002 quarter. In the first quarter of 2003, revenues from distributed products increased to an all time high of $154.6 million with a gross margin of 19.1%, which is at the higher end Coordinates: For other places with the same name, see Billinge. Higher End or Billinge Higher End is a district of the Metropolitan Borough of Wigan, in Greater Manchester, England. of the historical range of 14% to 21%. Revenues of Andrx's bioequivalent products in the 2003 quarter declined from the 2002 first quarter, primarily due to the price erosion of bioequivalent product revenues due to competition. Andrx did not launch any new bioequivalent products in the 2003 quarter. Gross margin for bioequivalent products was 29.0% in the 2003 first quarter, as compared to 63.9% for the 2002 first quarter. During the 2003 quarter, cost of goods sold for bioequivalent products included charges of $7.9 million, primarily relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc pre-launch production of Andrx's bioequivalent versions of Wellbutrin SR/Zyban placed into production after December 31, 2002. Andrx also recorded a total of $1.6 million in charges directly to cost of goods sold relating to its Weston, Florida Weston is a city located in Broward County, Florida, USA. Established as a city in 1996, much of the community was developed by Arvida/JMB Partners and is located near the western developmental boundary of Broward County. As of 2006, the city had a total population of 65,793. manufacturing facility, which is in the start-up Start-up The earliest stage of a new business venture. phase, the Morrisville, North Carolina Morrisville is a town in Wake County, North Carolina, USA. The population was 5,208 at the 2000 census. A Special Census was conducted by the United States Census Bureau in March 2004, when the population was enumerated at 11,915. manufacturing facility, which the Company plans to renovate and utilization issues at its Davie, Florida Davie is a town in Broward County, Florida, United States. In 2006, the U.S. Census Bureau estimated the city's population at 84,350.[3] It is part of the South Florida metropolitan area, which is home to 5,463,857 people. manufacturing facilities. The increase in revenues of Andrx's brand products in the 2003 first quarter to $7.9 million, from $5.5 million in the 2002 first quarter, primarily results from net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $4.1 million of Altocor(TM), which was launched during the 2002 third quarter, offset by decreases in revenues from Andrx's brand cough cough, sudden, forceful expiration of air from the lungs caused by an involuntary contraction of the muscles controlling the process of breathing. The cough is a response to some irritating condition such as inflammation or the presence of mucus (sputum) in the and cold product lines and the Embrex product. Licensing and royalties revenues for the 2003 first quarter of $31.1 million primarily consist of $30.4 million of estimated licensing revenues from an agreement with KUDCo, related to KUDCo's 2003 first quarter net profits, as defined, generated from its sale of its generic version of Prilosec Pri·lo·sec A trademark for the drug omeprazole. omeprazole Losec (CA) (UK), Heartburn Relief (UK), Prilosec, Prilosec OTC, Zegerid, Zanprol (UK) Pharmacologic class: Proton pump inhibitor . Other revenues consist of $3.0 million associated with Andrx's Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the businesses, primarily from an arrangement between Andrx and Aventis relating to Andrx's Physicians' Online ("POL") web portal See portal. , as well as from the contract manufacture of products from Andrx's Massachusetts Massachusetts (măsəch  `sĭts), most populous of the New England states of the NE United States. aerosol aerosol (âr`əsōl,–sŏl): see colloid. aerosol System of tiny liquid or solid particles evenly distributed in a finely divided state through a gas, usually air. manufacturing facility. In the first quarter of 2003, cost of goods sold related to other revenues includes $1.7 million relating primarily to excess capacity at its Massachusetts aerosol manufacturing facilities. As previously disclosed, the Company is considering, among other things, divesting both its physician Internet operations and its Massachusetts aerosol manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. . Selling, General and Administrative ("SG&A") Expenses SG&A expenses of $55.5 million in the 2003 first quarter increased from $41.3 million from the 2002 first quarter, primarily as a result of the increase in total revenues, a change in product mix, and an increase in the brand sales force expenses including an increase to approximately 425 sales representatives as of March 31, 2003. Research and Development ("R&D") Expenses R&D expenses were $13.3 million in the 2003 first quarter, as compared to $9.9 million for the 2002 quarter. During the first quarter of 2003, Andrx submitted three ANDAs to 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. and one NDA for a valproate valproate /val·pro·ate/ (val-pro´at) a salt of valproic acid; the sodium salt has the same uses as the acid. val·pro·ate n. product. Additionally, in the first quarter of 2003, the FDA accepted as filed Andrx's NDA for metformin metformin /met·for·min/ (met-for´min) an antihyperglycemic agent that potentiates the action of insulin, used in the treatment of type 2 diabetes mellitus. met·for·min n. XT. Balance Sheet and Cash Flows As of March 31, 2003, the Company had approximately $67 million in cash, cash equivalents and investments available-for-sale, $284 million of working capital and $103 million available under the Company's $185 million secured line of credit. As of March 31, 2003, no borrowings were outstanding under the secured line of credit. Net cash flows used in operating activities for the 2003 quarter were $18 million, compared to cash provided by operating activities of $2 million for the 2002 quarter. Significant 2003 first quarter uses of cash included an increase in inventories of approximately $22 million primarily related to inventories held for distribution, the investment of $14 million in capital expenditures and as previously announced, the funding of a portion of litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. settlements. In the 2003 second quarter, Andrx anticipates receiving, among other things, KUDCo licensing payments of $30 million for the 2003 first quarter, the April 2003 KUDCo licensing payment, and collecting its 2002 income taxes receivable. Outlook In its distribution operations, growth in revenues will continue to be primarily a function of the Company's participation in the distribution of new generic products launched by other generic manufacturers, offset by the typical price declines on existing distributed products. In its bioequivalent products operations, growth in revenues of bioequivalent products will be generated from the launch of new products, including the Company's bioequivalent version of Tiazac, which the Company began selling in April 2003, and is currently competing with one other generic product, as well as its bioequivalent version of Claritin-D 24. Though the timing remains uncertain, the Company has been advised by L. Perrigo Company ("Perrigo"), that Perrigo could launch the Company's bioequivalent version of Claritin-D 24 in June 2003. Final approval and Perrigo's launch of the Company's bioequivalent versions of Claritin-D(R)12 and Claritin Reditabs(R) are awaiting, among other things, the expiration EXPIRATION. Cessation; end. As, the expiration of, a lease, of a contract, or statute. 2. In general, the expiration of a contract puts an end to all the engagements of the parties, except to those which arise from the non- fulfillment of obligations created of the exclusivity rights of other generic manufacturers. Sales of Andrx's current bioequivalent products are not expected to increase and may decrease as a result of many factors. The Company is continuing to communicate with the FDA and USP USP - unique sales point on the issues affecting ANDAs for its bioequivalent versions of Wellbutrin SR/Zyban. Though cautiously optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op , Andrx cannot at this time accurately predict or advise whether or when such issues will be satisfactorily resolved and these products will be introduced. In its brand products operations, net sales of Altocor continued to grow to $4.1 million for the 2003 first quarter. Though current sales and marketing trends would equate e·quate v. e·quat·ed, e·quat·ing, e·quates v.tr. 1. To make equal or equivalent. 2. To reduce to a standard or an average; equalize. 3. to net sales of Altocor of approximately $35 million for 2003, a number of new sales and marketing initiatives have been or are in the process of being implemented which management believes may increase such sales to approximately $50 million. Andrx expects to continue to generate significant licensing revenues from its agreement with KUDCo. Future KUDCo licensing revenues will be dependent on a number of factors, including, among other things, KUDCo's profits from its sales of its generic Prilosec, the licensing rate due to Andrx (which reduces from 15% to 9% in June 2003), the outcome of the various appeals involving generic Prilosec and other factors outside of Andrx's control. Andrx will continue to focus on improving its pharmaceutical manufacturing operations. Andrx's Weston, Florida manufacturing facility is expected to become fully operational by 2004 and is intended to produce specialty, niche and immediate-release products, including oral contraceptives Oral Contraceptives Definition Oral contraceptives are medicines taken by mouth to help prevent pregnancy. They are also known as the Pill, OCs, or birth control pills. . Andrx will begin to renovate its manufacturing facility in Morrisville, North Carolina and is exploring alternatives for its Massachusetts aerosol manufacturing facilities including, as previously disclosed, a possible 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). . Until all of these efforts come to fruition fru·i·tion n. 1. Realization of something desired or worked for; accomplishment: labor finally coming to fruition. 2. Enjoyment derived from use or possession. 3. , Andrx will continue to incur To become subject to and liable for; to have liabilities imposed by act or operation of law. Expenses are incurred, for example, when the legal obligation to pay them arises. An individual incurs a liability when a money judgment is rendered against him or her by a court. charges directly to cost of goods sold related to these facilities. Andrx's operating results for the second quarter of 2003 will continue to be highly dependent on KUDCo license revenues, Andrx's ability to manufacture and generate net sales of its generic version of Cardizem Car·di·zem A trademark for the drug diltiazem hydrochloride. diltiazem hydrochloride Adizem (UK), Angitil (UK), Apo-Diltiaz (CA), Apo-Diltiazem (CA), Calcicard (UK), Cardizem, Cardizem CD, Cardizem LA, Cartia XT, CD and, to a lesser extent, its generic versions of Tiazac, Dilacor Di·la·cor A trademark for the drug diltiazem hydrochloride. XR(R) and Glucophage(R), and its brand Altocor product. Future operating results will also be affected by future product introductions, the value of which are dependent on a number of factors including successful scale-up, final FDA marketing approval, satisfactory resolution of patent litigation, manufacturing capabilities, competition and the other factors described in Andrx's SEC filings. Andrx intends to deliver positive earnings in 2003 and will conserve cash and otherwise manage its distribution operations, bioequivalent products operations and brand products operations based upon the results delivered by, or expected for, each of such operations. Webcast Investors will have the opportunity to listen to management's discussion of this release in a conference call to be held on April 29, 2003 at 8:00 AM Eastern Time. This call is being webcast and can be accessed at Andrx's website http://www.andrx.com. The webcast will be available for replay. About Andrx Corporation Andrx Corporation develops and commercializes: bioequivalent versions of controlled-release brand name pharmaceuticals using its proprietary drug delivery technologies; bioequivalent versions of specialty, niche and immediate-release pharmaceutical products, including oral contraceptives; and brand name or proprietary controlled-release formulations of existing immediate-release or controlled-release drugs where it believes the application of Andrx's drug delivery technologies may improve the efficacy or other characteristics of those products. Andrx's distribution operations purchase primarily generic pharmaceuticals manufactured by third parties and sells them primarily to independent pharmacies An independent pharmacy is a retail pharmacy that is not directly affiliated with any chain pharmacy, such as CVS/pharmacy, Walgreens or Eckerd. However, owners of independent pharmacies will often form alliances with other independents and use their power in numbers to bargain for , pharmacy pharmacy, art of compounding and dispensing drugs and medication. The term is also applied to an establishment used for such purposes. Until modern times medication was prepared and dispensed by the physician himself. In the 18th cent. chains which do not maintain their own central warehousing facilities, pharmacy buying groups and, to a lesser extent, physicians' offices. 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. (statements which are not historical facts) in this release are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. For this purpose, any statements contained herein or which are otherwise made by or on behalf of the Company that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality gen·er·al·i·ty n. pl. gen·er·al·i·ties 1. The state or quality of being general. 2. An observation or principle having general application; a generalization. 3. of the foregoing, words such as "may," "will," "to," " plan," "expect," "believe," "anticipate," "intend," "could," "would," "estimate," or "continue" or the negative other variations thereof or comparable terminology are intended to identify forward-looking statements. Investors are cautioned that all forward-looking statements involve risk and uncertainties, including but not limited to, the Company's dependence on a relatively small number of products, licensing revenues, the timing and outcome of litigation and future product launches, government regulation, competition, and manufacturing results. Andrx Corporation is also subject to other risks detailed herein or detailed from time to time in its filings with the U.S. Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the year ended December 31, 2002. This release and additional information about Andrx Corporation is also available on the Internet at: http://www.andrx.com.
ANDRX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
Three Months Ended
March 31,
-------------------
2003 2002 (1)
--------- ---------
Revenues
Distributed products $154,617 $127,045
Andrx products 48,432 54,536
Licensing and royalties 31,138 114
Other 2,998 1,624
--------- ---------
Total revenues 237,185 183,319
--------- ---------
Operating expenses
Cost of goods sold 159,033 126,517
Selling, general and administrative 55,480 41,285
Research and development 13,340 9,922
--------- ---------
Total operating expenses 227,853 177,724
--------- ---------
Income from operations 9,332 5,595
Other income, net 919 2,231
--------- ---------
Income before income taxes 10,251 7,826
Income taxes 3,895 3,313
--------- ---------
Net income $6,356 $4,513
========= =========
EARNINGS PER SHARE
ANDRX COMMON STOCK (2):
Net income allocated to Andrx $6,356 $8,395
========= =========
Net income per share of Andrx common stock:
Basic $0.09 $0.12
========= =========
Diluted $0.09 $0.12
========= =========
Weighted average shares of Andrx common stock
outstanding:
Basic 71,597 70,552
========= =========
Diluted 72,059 72,317
========= =========
CYBEAR COMMON STOCK (2):
Net loss allocated to Cybear Group $(3,882)
=========
Basic and diluted net loss per share of Cybear
common stock $(0.58)
=========
Basic and diluted weighted average shares of
Cybear common stock outstanding 6,743
=========
(1) Certain prior period amounts have been reclassified to conform
to the current period presentation. Among other things, operating
expenses related to Andrx's Internet operations, except for costs of
goods sold, are classified as selling, general and administrative
expense for all periods presented.
(2) Effective May 17, 2002, all outstanding shares of Cybear
common stock were converted to Andrx common stock. For periods
subsequent to the conversion, Andrx Corporation will only report per
share results for Andrx common stock which includes all of the former
Cybear's operating results from the effective date of the conversion
and will no longer report separate per share results for the former
Cybear common stock.
ANDRX CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, Dec. 31,
2003 2002
--------- ---------
Assets
Cash, cash equivalents and investments available-
for-sale $66,947 $97,394
Accounts receivable, net 137,553 130,044
Inventories, net 169,678 147,967
Income tax receivable 28,317 33,710
Deferred income tax assets, net 68,148 68,148
Other current assets 9,675 12,371
--------- ---------
Total current assets 480,318 489,634
Property, plant and equipment, net 241,156 233,828
Goodwill, intangibles and other assets, net 65,755 66,017
--------- ---------
Total assets $787,229 $789,479
========= =========
Liabilities and Stockholders' Equity
Current liabilities $196,558 $208,058
Non-current liabilities 16,356 15,714
--------- ---------
Total liabilities 212,914 223,772
Commitments and contingencies
Total stockholders' equity 574,315 565,707
--------- ---------
Total liabilities and stockholders' equity $787,229 $789,479
========= =========
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