DUSA Pharmaceuticals Reports Fourth Quarter and Full Year 2002 Financial Results and Corporate Highlights.Business Editors/Health/Medical Writers WILMINGTON, Mass.--(BUSINESS WIRE)--March 11, 2003 DUSA DUSA Deputy Under Secretary of the Army DUSA Deakin University Student Association DUSA Dundee University Students' Association (Scotland) DUSA Designated Unclassified Subject Area Pharmaceuticals, Inc. (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 NMS See NetWare Management System. : DUSA) reported today its Q4 and full year 2002 audited financial results, and corporate highlights. 2002 Corporate Highlights The most important event for DUSA during 2002 was the September 1st termination of the Marketing, Development and Supply Agreement with Schering AG of Germany, covering DUSA's Levulan(R) PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT technology for dermatology dermatology (dûrmətŏl`əjē), branch of medicine concerned with diagnosis and treatment of diseases and disorders of the skin. indications. As of that date, DUSA reacquired full responsibility for all future dermatology development and marketing activities and all other rights granted to Schering AG under the agreement. DUSA has now begun to institute its own marketing program, based on education of physicians, supporting efforts to improve reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. to physicians for our therapy from Medicare and other third-party payers, and development of clinical studies which, if successful, could expand our AK market. Following the termination, the Company also decided to stop funding certain clinical development programs and reduced headcount by approximately 20%, in order to control costs and focus the Company on meeting our core sales, development and spending objectives. The termination also resulted in a net profit for the year (see details below), although the Company expects to report future net losses until such time as sales of our products increase significantly. Net cash burn for 2002 was approximately $11.8 million, and DUSA finished the year with approximately $52.9 million of cash and cash equivalents and short-term investments, leaving the Company in a very solid financial position to proceed with its current development and marketing programs. Kerastick(R) end user sales during the fourth quarter totaled 1,722 units, similar to average sales levels seen throughout the year. For the full year, Kerastick(R) end user sales totaled 7,116 units, up slightly from the 2001 level of 7,071 units. BLU-U(R) placements at year-end totaled 328 units, up from 282 at year-end 2001. DUSA is hopeful that Kerastick(R) usage will increase during 2003, especially later in the year as our new marketing and educational programs begin to take effect. For the first time, DUSA will have its own booth at the upcoming meeting of the American Academy of Dermatology The American Academy of Dermatology (AAD) is the largest organization of dermatologists in the world. The Academy grants Fellowships and Associate Memberships, as well as Fellowships for Nonresidents (of the United States of America or Canada). , and expects to actively participate at other educational meetings throughout the year. The Company also continues to make progress on its Phase I/II program using Levulan(R) PDT in the treatment of Barrett's esophagus Bar·rett's esophagus n. Chronic peptic ulcer of the lower esophagus due to the presence of columnar epithelium resembling the mucosa of the gastric cardia. dysplasia dysplasia Abnormal formation of a bodily structure or tissue, usually bone, that may occur in any part of the body. Several types are well-defined diseases in humans. . Recent follow-up data from 5 high grade dysplasia (HGD HGD High Grade Dysplasia HGD High-Grade Dysplasia (abnormal cells, such as those found when doing a biopsy) HGD Human Growth and Development HGD High Gain Device HGD Hour Glass Device ) patients showed a continued absence of dysplasia (i.e. complete ablation ablation /ab·la·tion/ (-shun) 1. separation or detachment; extirpation; eradication. 2. removal or destruction, especially by cutting. ab·la·tion n. ), no strictures, and no signs of mucosal overgrowth overgrowth Rapid growth in the sales of a mutual fund's shares to the extent that the fund has difficulty finding promising new investments or it must take such large positions in individual investments that its trading flexibility is reduced. , with 12 months of follow-up in 4 patients, and 6 months follow-up in 1 patient. DUSA is currently seeking a development and marketing partner for this indication. In January 2003, the Company announced that it had entered into license and development, and supply agreements for ALA fluorescence fluorescence (fl  rĕs`əns), luminescence in which light of a visible color is emitted from a substance under stimulation or excitation by light or other forms of electromagnetic guided resection resection /re·sec·tion/ (-sek´shun) excision.root resection apicoectomy. transurethral resection of the prostate (TURP), transurethral prostatic resection of brain cancer, with Photonamic GmbH and Co. KG and medac GmbH of Germany. These agreements provide for the licensing to DUSA of Photonamic's proprietary technology related to aminolevulinic acid aminolevulinic acid /ami·no·lev·u·lin·ic ac·id/ (ALA) (-lev?u-lin´ik) d-aminolevulinic acid; an intermediate in the synthesis of heme; blood and urinary levels are increased in lead poisoning, and urinary levels are increased in some (ALA), the compound used in DUSA's Levulan(R) Photodynamic Therapy photodynamic therapy n. A type of phototherapy in which a nontoxic light-sensitive compound that has been injected into a patient is exposed selectively to light, whereupon it becomes toxic to targeted malignant and other diseased cells. (PDT) and Photodetection (PD), for brain cancer and includes rights to use certain pre-clinical data for other indications. Financial Highlights: Schering AG Termination Accounting: In September 2002, and again at year-end, DUSA evaluated certain items on its Consolidated Balance Sheet consolidated balance sheet A balance sheet in which assets and liabilities of a parent company and its controlled subsidiaries are combined, thereby presenting balance sheet items for the parent and its subsidiaries as if they were a single firm. for the timing of revenue recognition and potential impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. due to the termination of the Schering AG agreement. These items included unamortized deferred revenue related to non-refundable milestone payments previously received under the Schering AG agreement, the Company's nearly completed manufacturing facility, raw material and finished goods inventories, commercial light units in the field, and deferred charges and royalties. As a result of this analysis, in addition to normal amortization recorded prior to the termination of the Schering AG agreement, DUSA recorded the following in its Condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. Consolidated Statements of Operations during the year ended December 31, 2002:
Revenue
Statement of Operations Item Balance Sheet Item Recognition/
Asset Impairment
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Revenues:
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Research grant
and milestone revenue Deferred Revenue $20,990,274
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Operating Costs:
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Cost of product sales Deferred Charges 542,766
Inventory 1,705,364
Commercial Light
Sources Under
Lease or Rental 389,647
Research and
development costs Deferred Royalty 639,051
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Total Charges
to Operating Costs $3,276,828
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We concluded that the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of our nearly completed manufacturing facility is more likely than not to be fully recoverable after considering the effects of the change in business circumstances caused by the termination of the former collaboration arrangement. Therefore, no impairment charges associated with the facility were recorded in 2002; however, we will continue to periodically review the carrying value of the facility. Other Financial Highlights: DUSA's net income for the year ended December 31, 2002 was $5,763,000, or $0.42 per share, as compared to a net loss of ($7,358,000), or ($0.53) per share for 2001. Net income for 2002 included the aforementioned one-time recognition of approximately $17,713,000 of certain items in its Consolidated Statement of Operations See Income statement. based on the termination of the Schering AG agreement. Total research and development costs for 2002 were $12,122,000, compared to $10,790,000 in the prior year. The increase includes a $500,000 milestone charge under the license agreement signed on December 30, 2002 between DUSA and Photonamic GmbH & Co. KG, and the recognition of $639,000 of previously deferred royalties associated with payments to PARTEQ, the Company's licensor, due to the termination of the Schering AG agreement. Lower spending on dermatological dermatological, dermatologic pertaining to dermatology; of or affecting the skin. indications were offset by higher third-party expenditures in support of our 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. mandated Phase IV clinical study of the long-term efficacy of our marketed product, and our Phase I/II clinical studies on the safety and efficacy of Levulan PDT treatment of Barrett's esophagus with and without dysplasia. General and administrative expenses increased to $5,591,000 in 2002 as compared to $3,655,000 in 2001, as legal expenses have increased dramatically, due primarily to the challenge to our Australian patent and related patent issues, and the termination of the Schering AG agreement. It is expected that these costs will stay elevated as long as the patent dispute continues. Other income for 2002 decreased to $3,245,000, as compared to $3,845,000 in 2001, due mainly to a $1,008,000 decline in interest income attributed to lower investable cash balances as DUSA uses its cash to support its operating activities, and lower yields. The decline in interest income was partly offset by a $408,000 increase in realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. on the sale of U.S. Government Securities in 2002 as compared to 2001.
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Three Months Ended Dec. 31 Year Ended Dec. 31
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2002 2001 2002 2001
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$162,008 $1,247,456 Revenues $25,483,238 $5,390,736
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$557,329 $330,930 Cost of Product $5,253,424 $2,148,994
Sales and Royalties
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$2,801,715 $3,733,526 Research and $12,121,606 $10,789,906
Development Costs
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$1,486,529 $740,111 General and $5,591,039 $3,654,792
Administrative Costs
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$990,327 $831,439 Other Income, net $3,245,349 $3,844,860
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$(3,693,238) $(2,725,672) Net Income (Loss) $5,762,518 $(7,358,096)
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($0.27) ($0.20) Income (Loss) $.42 ($.53)
Per Share
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13,887,612 13,854,765 Weighted Average 13,877,566 13,791,735
Number of Common
Shares Outstanding
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$52,879,543 $64,709,625 Cash and U.S. $52,879,543 $64,709,625
Government Securities
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$5,100 $22,585,856 Deferred Revenue $5,100 $22,585,856
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$1,787,500 $0 Long-term Debt $1,787,500 $0
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$56,057,730 $49,834,537 Shareholders' $56,057,730 $49,834,537
Equity
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(All figures are in US dollars and the year end figures are audited) DUSA Pharmaceuticals, Inc. is a biopharmaceutical company engaged primarily in the development of Levulan(R) Photodynamic Therapy (PDT) and Photodetection (PD) for multiple medical conditions See carpal tunnel syndrome, computer vision syndrome, dry eyes and deep vein thrombosis. . PDT and PD utilize light-activated compounds to induce a therapeutic or detection effect. DUSA is a world leader in topically or locally applied PDT and PD. The Company is based in Wilmington, MA, with satellite offices in Valhalla, NY and Toronto, Ontario. Except for historical information, this news release contains certain 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. that involve known and unknown risk and uncertainties, which may cause actual results to differ materially from any future results, performance or achievements, expressed or implied, by the statements made. These forward-looking statements relate to expectations for expanding the AK market, future net losses, increase in Kerastick(R) usage, participation at educational meetings, including the American Academy of Dermatology, continued elevated legal expenses and intention to review the carrying value of its manufacturing facility. Such risks and uncertainties include, but are not limited to, our limited marketing experience, regulatory compliance and approval of our facility, reliance on third-party manufacturers, acceptance of our products by the medical and consumer constituencies, sufficiency of funds to defend and maintain our patents and other risks identified in DUSA's SEC filings from time to time, including its 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. |
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