Connetics Second Quarter Revenues Increase 19 Percent; OLUX, Soriatane and Evoclin Achieve All-Time Quarterly Prescription Highs; Company Increases Full-Year Revenue Guidance.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 NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :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 total revenues for the second quarter of 2005 were $45.4 million, an increase of 19% compared with 2004 second quarter total revenues of $38.3 million. During the second quarter of 2005 prescriptions written for OLUX(R), Soriatane(R) and Evoclin(TM) reached all-time quarterly highs. Second quarter sales of Soriatane were $18.3 million. Evoclin, launched in the fourth quarter of 2004, continued its strong introduction with sales of $7.0 million during the quarter, of which nearly $1 million represented sales to a U.S.-based distributor that exports branded pharmaceutical products to select international markets. This distributor relationship has been in place for Soriatane, OLUX and Luxiq(R) since 2004. Sales of OLUX during the quarter totaled $14.0 million. The product continues to enjoy strong prescription growth; however, 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 for the second quarter reflect a charge for unusually high wholesaler returns of approximately $2.3 million. The product returns are related to expired ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. and estimated expiring product inventory at wholesalers, arising from past distribution practices by the wholesalers that are not expected to repeat under recently entered distribution service agreements. With these agreements in place, Connetics believes it has taken an appropriate one-time provision to address the OLUX returns. Sales of Luxiq during the quarter totaled $5.8 million. Selling, general and administrative expenses for the second quarter of 2005 increased to $25.1 million from $17.2 million in the same period last year, reflecting expenses related to a near doubling of the Company's sales force, marketing and promotional activities related to the launch of Evoclin, and expenses related to the anticipated launch of Velac(R). Research and development expenses for the second quarter of 2005 were $8.8 million, compared with $5.0 million last year, reflecting increased clinical activities including ongoing 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 trials for Desilux(TM) VersaFoam-EF(TM) and Primolux(TM) VersaFoam-EF. Net income for the second quarter of 2005 was $2.5 million, or $0.07 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 $7.5 million, or $0.19 per diluted share, for the second quarter of 2004, and primarily reflects anticipated higher costs in 2005 associated with planned sales, marketing and product development programs. The Company completed a Phase III Desilux clinical trial and expects to announce results in the third quarter of 2005. Assuming successful results, the Company anticipates filing a New Drug Application (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 ) in the fourth quarter of 2005. The Primolux clinical development program involves two separate Phase III trials; patient enrollment in the 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 trial is complete while patient enrollment in the 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 trial continues. The Company expects to report Primolux Phase III results for both trials during the fourth quarter of 2005 and to submit an NDA 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. during the first quarter of 2006. Connetics' cash and investments, including restricted cash, as of June 30, 2005 totaled $256.3 million. "This quarter marked another solid performance by Connetics, with strong prescription growth across all of our products," said Thomas G. Wiggans, Chief Executive Officer of Connetics. "We are very pleased with the continued adoption of Evoclin as well as the refill refill noun A second allotment of a prescription agent obtained from a pharmacy, which is allowed by the original prescription verb Pharmacology To obtain more of a particular drug, after the initially prescribed amount of the agent has been used or prescriptions we are beginning to see. For the second half of the year, we anticipate an increased contribution from our co-promotion partnership with Ventiv, and will continue to focus on pipeline projects including the commencement of the Extina Phase III program in the third quarter of 2005. We are disappointed with the non-approvable letter we received for Velac in June. Addressing the FDA issues remains our highest priority as we work with the agency to determine requirements to obtain product approval for Velac." Year-to-Date Financials For the six months ended June 30, 2005 total revenues were $87.7 million, an increase of 39% compared with total revenues of $63.2 million for the first half of 2004. SG&A expenses were $52.7 million compared with $32.3 million in the first half of 2004, reflecting the larger sales force, and marketing and promotional activities related to Evoclin and Velac. R&D expenses year to date were $14.6 million, up from $9.2 million last year as pivotal trials for Desilux and Primolux commenced this year. Net income was $3.5 million, or $0.09 per diluted share, compared with net income of $9.3 million, or $0.25 per diluted share, for the comparable period last year. Financial Guidance For the third quarter of 2005, Connetics projects total revenues of $47.5 million to $49.5 million, and combined SG&A and R&D expenses in the range of $30 million to $31 million. Earnings per diluted share for the third quarter of 2005 are projected to be $0.22 to $0.24. For the full year, the Company is increasing revenue and expense guidance and now anticipates total revenues to be in the range of $185 million to $190 million, compared with prior guidance of $182 million to $188 million. Combined SG&A and R&D expenses are now projected to be in the range of $125 million to $127 million, compared with prior guidance of $121.5 million to $125 million. Earnings per diluted share guidance for 2005 remains unchanged and is expected to be $0.66 to $0.70. 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 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 Connetics will host a conference call to review key updates on areas including quarterly product performance, commercialization activities, the Ventiv co-promotion partnership, product pipeline, and financial highlights 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 replay will be available for 30 days. The telephone replay will be available for 48 hours beginning today at 6:30 p.m. Eastern Time/3:30 p.m. Pacific Time by dialing (800) 642-1687 from the U.S. and (706) 645-9291 from outside the U.S. The Conference ID# is 7643227. 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 clobetasol propionate (klōbā´t  sol´ prō´pē ) 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 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. to treat atopic dermatitis, Primolux(TM) (clobetasol propionate) VersaFoam-EF, 0.05%, a super high-potency topical steroid formulation formulation /for·mu·la·tion/ (for?mu-la´shun) the act or product of formulating. American Law Institute Formulation to treat atopic dermatitis and plaque plaque (plak) 1. any patch or flat area. 2. a superficial, solid, elevated skin lesion. attachment plaques psoriasis, and Extina(R), a foam formulation of the antifungal drug An antifungal drug is medication used to treat fungal infections such as athlete's foot, ringworm, candidiasis (thrush), serious systemic infections such as cryptococcal meningitis, and others. Such drugs are usually obtained by a doctor's prescription or purchased over-the-counter. ketoconazole ketoconazole /ke·to·co·na·zole/ (ke?to-kon´ah-zol) a derivative of imidazole used as an antifungal agent. ke·to·co·na·zole n. . 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. . In Connetics' marketed products, these 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 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 and form 10-Q Form 10-Q See 10-Q. for the quarter ended March 31, 2005. 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 Six Months
Ended Ended
June 30, June 30,
----------------- -----------------
Revenues: 2005 2004 2005 2004
-------- -------- -------- --------
Product $45,239 $37,999 $87,429 $61,565
Royalty and contract 130 254 311 1,670
-------- -------- -------- --------
Total revenues 45,369 38,253 87,740 63,235
Operating costs and expenses:
Cost of product revenues 4,982 3,578 8,748 5,146
Research and development 8,808 4,957 14,571 9,243
Selling, general and
administrative 25,076 17,239 52,677 32,311
Depreciation and amortization 3,829 3,767 7,571 5,415
-------- -------- -------- --------
Total operating costs
and expenses 42,695 29,541 83,567 52,115
Income from operations 2,674 8,712 4,173 11,120
Interest and other income
(expense), net (19) (608) (372) (900)
-------- -------- -------- --------
Income before income taxes 2,655 8,104 3,801 10,220
Provision for income taxes 153 647 258 890
-------- -------- -------- --------
Net income $2,502 $7,457 $3,543 $9,330
======== ======== ======== ========
Net income per share:
Basic $0.07 $0.21 $0.10 $0.27
======== ======== ======== ========
Diluted(1) $0.07 $0.19 $0.09 $0.25
======== ======== ======== ========
Shares used to calculate net income
per share:
Basic 34,825 35,242 35,259 34,439
======== ======== ======== ========
Diluted(1) 37,093 41,627 37,785 40,925
======== ======== ======== ========
(1) In accordance with SFAS No. 128, using the If-Converted Method,
interest expense and amortized deal costs of $649,000 related to 2.25%
convertible senior notes due in 2008 has been added back to net income
for purposes of calculating net income per diluted share for the three
month period ended June 30, 2004. Shares used to calculate net income
per diluted share for the three month period ended June 30, 2004
include the dilutive effect of shares issuable upon exercise of
outstanding stock options and warrants plus the effect of $90.0
million 2.25% convertible senior notes, which convert to approximately
4.2 million shares. No adjustment for the 2.25% convertible senior
notes was made to the shares for the six months ended June 30, 2004 or
the three or six months ended June 30, 2005 as the effect was
antidilutive to earnings per share.
CONNETICS CORPORATION
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
June 30, Dec. 31,
2005 2004
----------- ----------
Assets
Assets:
Cash, cash equivalents and short-term
investments $252,211 $72,383
Restricted cash 4,059 3,963
Accounts receivable and other current assets 34,401 35,750
Other intangible assets, net 115,589 122,388
Property and equipment, net 14,045 11,830
Other long-term assets 17,733 9,978
----------- ----------
Total assets $438,038 $256,292
=========== ==========
Liabilities and Stockholders' Equity
Liabilities and stockholders' equity:
Current liabilities $46,454 $37,952
Other liabilities 290,471 90,420
Stockholders' equity 101,113 127,920
----------- ----------
Total liabilities and stockholders' equity $438,038 $256,292
=========== ==========
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