Connetics Announces First Quarter Results with Product Sales up 79 Percent.PALO ALTO Palo Alto, city, California Palo Alto (păl`ō ăl`tō), city (1990 pop. 55,900), Santa Clara co., W Calif.; inc. 1894. Although primarily residential, Palo Alto has aerospace, electronics, and advanced research industries. , Calif. -- Connetics Corporation (Nasdaq:CNCT CNCT Connect CNCT Certified Network Computer Technician ), a specialty pharmaceutical company that develops and commercializes dermatology dermatology (dûrmətŏl`əjē), branch of medicine concerned with diagnosis and treatment of diseases and disorders of the skin. products, announced today net income for the first quarter ended March 31, 2005 of $1.0 million, or $0.03 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share. This compares with net income of $1.9 million, or $0.05 per diluted share, for the first quarter of 2004. Total revenues for the first quarter of 2005 were $42.4 million, compared with total revenues of $25.0 million for the comparable period in 2004. Total product sales for the first quarter of 2005 increased 79% to $42.2 million, compared with $23.6 million for the comparable period in 2004, reflecting growth in sales of OLUX(R) and Luxiq(R), a full quarter of sales of Soriatane(R), which was acquired in March 2004, and our first full quarter of sales of Evoclin(TM), which was introduced in December 2004. First quarter 2005 sales of OLUX and Luxiq were $21.4 million, representing an increase of 8% over the same period in 2004. Soriatane sales were $17.6 million during the quarter and Evoclin sales were $3.1 million. Royalty and contract revenues for the first quarter of 2005 were $181,000 lower as compared with $1.4 million in the first quarter of 2004, primarily as a result of the final royalty payment from S.C. Johnson in the first quarter of 2004. Selling, general and administrative expenses for the first quarter of 2005 increased to $27.6 million from $15.1 million in the same period last year, reflecting a more than doubling of the sales force, non-dermatology promotional activities provided by UCB UCB - University of California at Berkeley Pharma, Inc. as well as marketing and promotional activities related to the launch of Evoclin. Research and development expenses were $5.8 million during the quarter, compared with $4.3 million during the same period last year, due to increased clinical activities related to the ongoing Desilux(TM) VersaFoam-EF(TM) trials and the initiation of trials for Primolux(TM) VersaFoam-EF. The Company had cash and investments, including restricted cash, as of March 31, 2005 of $237.8 million, including $159.0 million in net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from the private placement of convertible senior notes late in the first quarter. "I am very pleased to report on a busy first quarter that included sales from our newly launched Evoclin product and the successful completion of a $200 million convertible financing," said Thomas (language) Thomas - A language compatible with the language Dylan(TM). Thomas is NOT Dylan(TM). The first public release of a translator to Scheme by Matt Birkholz, Jim Miller, and Ron Weiss, written at Digital Equipment Corporation's Cambridge Research Laboratory runs G. Wiggans, Chief Executive Officer of Connetics. "We expect further revenue gains from our expanded sales force and new contract sales agreement with Ventiv for three of our products. Additionally, we have a number of near-term regulatory and clinical milestones as outlined during our Analyst and Investor Day event held on April 14, 2005." Significant activities in the first quarter of 2005 and subsequent weeks included: --Signing an agreement with Ventiv Commercial Services Group (VCS (1) (Verilog Computer Simulator) See Verilog. (2) (Version Control System) See version control. ), a division of Ventiv Health, Inc., to deploy a sales force dedicated to provide sales support for OLUX, Luxiq and Evoclin to primary care physicians and pediatricians through 2006. Product promotional activities under the agreement commenced on April 18, 2005. --Commencing the Phase III Noun 1. phase III - a large clinical trial of a treatment or drug that in phase I and phase II has been shown to be efficacious with tolerable side effects; after successful conclusion of these clinical trials it will receive formal approval from the FDA clinical program for Primolux VersaFoam-EF (formerly referred to as OLUX-EF), a super high-potency topical topical /top·i·cal/ (top´i-k'l) pertaining to a particular area, as a topical antiinfective applied to a certain area of the skin and affecting only the area to which it is applied. top·i·cal adj. steroid, formulated for·mu·late tr.v. for·mu·lat·ed, for·mu·lat·ing, for·mu·lates 1. a. To state as or reduce to a formula. b. To express in systematic terms or concepts. c. with 0.05% clobetasol propionate clobetasol propionate (klōbā´t  sol´ prō´pē in the
Company's proprietary emulsion emulsion: see colloid. emulsion Mixture of two or more liquids in which one is dispersed in the other as microscopic or ultramicroscopic droplets (see colloid). Emulsions are stabilized by agents (emulsifiers) that (e.g. foam delivery vehicle. The clinical program will consist of two Phase III trials focusing on atopic dermatitis Atopic Dermatitis Definition Eczema is a general term used to describe a variety of conditions that cause an itchy, inflamed skin rash. Atopic dermatitis, a form of eczema, is a non-contagious disorder characterized by chronically inflamed skin and and psoriasis psoriasis (sôrī`əsĭs), occasionally acute but usually chronic and recurrent inflammation of the skin. The exact cause is unknown, but the disease appears to be an inherited, possibly autoimmune disorder that causes the both of which are actively enrolling. --Raising $200 million in an offering of convertible senior unsecured Unsecured A loan or equity interest that is given without any guarantee of payment, performance, satisfaction or opportunity for return from the recipient. No property, interest or security is used as collateral in either a guarantee or a pledge. notes. Connetics used $35 million of the net proceeds from the offering to complete an open market purchase of the Company's common stock. --Presenting 11 posters at the American Academy The American Academy in Berlin is a non-partisan academic institution in Berlin. It was founded in September 1994 by a group of prominent Americans and Germans, among them Richard Holbrooke, Henry Kissinger, Richard von Weizsäcker, Fritz Stern and Otto Graf Lambsdorff and opened in of Dermatology's 63rd annual meeting. Financial Guidance For the second quarter of 2005, Connetics projects total revenue of $45 million to $47 million. Second quarter combined SG&A and R&D expenses are projected to be in the range of $34 million to $36 million. Earnings per diluted share for the second quarter of 2005 are projected to be $0.06 to $0.08. Reiterating 2005 financial guidance as updated on April 14, 2005, the Company anticipates total revenues to be in the range of $195 million to $206 million and combined SG&A and R&D expenses to be in the range of $121 million to $128 million. Earnings per diluted share for 2005 are expected to be $0.88 to $0.92. 2005 guidance assumes the launch of Velac in the third quarter. In determining the Company's financial guidance, Connetics' management considered many factors and assumptions including, but not limited to, current and projected prescription information; sales trend data of the Company's products; the potential generic availability of, and competitive threats to, the Company's products; size, reach and call frequency of the Company's selling organization; status, timing and progression of the Company's development projects; current and projected spending levels to support sales, marketing, development, and administrative activities; and other risk factors discussed in Connetics' publicly filed documents. The above guidance does not take into account conversion of the Company's convertible senior notes, the effect of expensing stock options or the potential impact of other components of Connetics' growth strategy, including possible future acquisitions of products, businesses and/or technologies. Conference Call On the conference call, Connetics management will review key updates on areas including quarterly product performance, commercialization activities, the Ventiv co-promotion partnership, product pipeline, and financial highlights. In addition, management will provide an update on the regulatory status of Velac. Connetics will host a conference call to discuss first quarter financial results beginning at 4:30 p.m. Eastern Time/1:30 p.m. Pacific Time today. To participate in the live call by telephone, domestic callers should dial (888) 328-2575, and international callers should dial (706) 643-0459. To listen to the conference call live via the Internet, go to the investor relations Investor relations The process by which the corporation communicates with its investors. section of www.connetics.com. A telephone replay will be available for 48 hours beginning today at 6:30 p.m. Eastern Time/3:30 p.m. Pacific Time. To access the replay from the U.S., please dial (800) 642-1687; and from outside the U.S. please dial (706) 645-9291. The Conference ID# is 5419652. The internet replay of the call will be available for 30 days at www.connetics.com. About Connetics Connetics Corporation is a specialty pharmaceutical company focused on the development and commercialization of innovative therapeutics therapeutics Treatment and care to combat disease or alleviate pain or injury. Its tools include drugs, surgery, radiation therapy, mechanical devices, diet, and psychiatry. for the dermatology market. Connetics has branded its proprietary foam drug delivery vehicle VersaFoam(R). The Company's marketed products are OLUX(R) (clobetasol propionate) Foam, 0.05%, Luxiq(R) (betamethasone betamethasone /be·ta·meth·a·sone/ (ba?tah-meth´ah-son) a synthetic glucocorticoid, the most active of the antiinflammatory steroids; used topically as the benzoate, dipropionate, or valerate salts as an antiinflammatory, topically or valerate) Foam, 0.12%, Soriatane(R) (acitretin) capsules and Evoclin(TM) (clindamycin) Foam, 1%. Connetics is developing Velac(R) (a combination of 1% clindamycin and 0.025% tretinoin tretinoin /tret·i·noin/ (tret´i-noin?) the all-trans stereoisomer of retinoic acid, used as a topical keratolytic in the treatment of acne vulgaris and disorders of keratinization and administered orally in the treatment of acute ) Gel, for treating acne acne, common inflammatory disease of the hair follicles and sebaceous glands characterized by blackheads, whiteheads, pustules, nodules and, in the more severe forms, by cysts and scarring. The lesions appear on the face, neck, back, chest, and arms. , Desilux(TM) (desonide) VersaFoam-EF, 0.05% a low-potency topical steroid formulated to treat atopic dermatitis, and Primolux(TM) (clobetasol propionate) VersaFoam-EF, 0.05%, a super high-potency topical steroid formulated to treat atopic dermatitis and plaque plaque (plak) 1. any patch or flat area. 2. a superficial, solid, elevated skin lesion. attachment plaques psoriasis. Connetics' product formulations aim to improve the management of dermatological dermatological, dermatologic pertaining to dermatology; of or affecting the skin. diseases and provide significant product differentiation Product Differentiation A source of competitive advantage that depends on producing some item that is regarded to have unique and valuable characteristics. . Connetics' proprietary formulations have earned wide acceptance by both physicians and patients due to their clinical effectiveness, high quality and cosmetic cosmetic /cos·met·ic/ (koz-met´ik) 1. pertaining to cosmesis. 2. a beautifying substance or preparation. cos·met·ic n. elegance. For more information about Connetics and its products, please visit www.connetics.com. Forward Looking Statements Except for historical information, this press release includes "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. " within the meaning of the Securities 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. Reform Act. All statements included in this press release that address activities, events or developments that Connetics expects, believes or anticipates will or may occur in the future, including, particularly, statements about earnings estimates, future financial performance, and financial guidance, are forward-looking statements. Statements pertaining per·tain intr.v. per·tained, per·tain·ing, per·tains 1. To have reference; relate: evidence that pertains to the accident. 2. to revenue expectations, revenue growth, and sales and marketing success of, and regulatory and clinical milestones associated with, Connetics' products or product candidates are also forward-looking statements. These forward-looking statements are based on certain assumptions made by Connetics' management based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond Connetics' control, and which could cause actual results or events to differ materially from those expressed in such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, risks and other factors that are discussed in documents filed by Connetics with the Securities and Exchange Commission from time to time, including Connetics' Annual Report on 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, 2004. Forward-looking statements represent the judgment of the Company's management as of the date of this release, and Connetics disclaims any intent or obligation to update any forward-looking statements. Press Release Code: (CNCT-F)
CONNETICS CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
Three Months Ended
March 31,
------------------------------
Revenues: 2005 2004
-------------- --------------
Product $42,190 $23,566
Royalty and contract 181 1,416
-------------- --------------
Total revenues 42,371 24,982
Operating costs and expenses:
Cost of product revenues 3,766 1,568
Research and development 5,763 4,286
Selling, general and administrative 27,601 15,072
Depreciation and amortization 3,742 1,648
-------------- --------------
Total operating costs and
expenses 40,872 22,574
Income from operations 1,499 2,408
Interest and other income
(expense), net (353) (292)
Provision for income taxes (105) (243)
-------------- --------------
Net income $1,041 $1,873
============== ==============
Net income per share:
Basic $0.03 $0.06
============== ==============
Diluted $0.03 $0.05
============== ==============
Shares used to calculate net income
per share:
Basic 35,699 33,587
============== ==============
Diluted 38,014 35,887
============== ==============
CONNETICS CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
March 31, December 31,
2005 2004
-------------- --------------
Assets
Assets:
Cash, cash equivalents and short-
term investments $233,705 $72,383
Restricted cash 4,109 3,963
Accounts receivable and other
current assets 26,847 25,099
Other intangible assets, net 118,988 122,388
Property and equipment, net 12,813 11,830
Other long-term assets 17,879 10,065
-------------- --------------
Total assets $414,341 $245,728
============== ==============
Liabilities and Stockholders' Equity
Liabilities and stockholders' equity:
Current liabilities $28,438 $27,388
Other liabilities 290,446 90,420
Stockholders' equity 95,457 127,920
-------------- --------------
Total liabilities and
stockholders' equity $414,341 $245,728
============== ==============
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