InKine Reports Second Quarter 2005 Financial Results.BLUE BELL, Pa. -- InKine Pharmaceutical Company, Inc. (Nasdaq: INKP): Highlights --Entered into a definitive merger agreement with Salix Pharmaceuticals, Ltd. --Filed 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 ) for next generation purgative purgative /pur·ga·tive/ (purg´it-iv) cathartic (1, 2). pur·ga·tive n. An agent used for purging the bowels. adj. Tending to cause evacuation of the bowels. product - INKP-102 --Grew quarterly revenues by 16% to $5.7 million for Q2 2005, compared to $4.9 million for Q2 2004 --Generated quarterly prescription growth of approximately 23% for Q2 2005 compared to Q2 2004 InKine Pharmaceutical Company, Inc. (Nasdaq: INKP) today announced its second quarter 2005 financial results, reporting second quarter product revenue of $5.7 million, compared to $4.9 million for the same period a year ago. The Company was not profitable for the quarter and six-months ended June 30, 2005 as a result of its decision to accelerate the development and filing of its NDA to 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. for its next generation purgative product, INKP-102. InKine incurred losses of $0.6 million or $0.01 per share and $0.3 million or $0.01 per share for the quarter and six-months ended June 30, 2005, compared to net income of $1.0 million or $0.02 per share for both the quarter and six-months ended June 30, 2004. "During the second quarter, in addition to entering into a definitive merger agreement with Salix Pharmaceuticals, Ltd., we submitted and the FDA recently accepted for filing our NDA for our next generation purgative tablet See digitizer tablet and tablet computer. TABLET - A query language. ["Human Factor Comparison of a Procedural and a Non-procedural Query Language", C. Welty et al, ACM Trans Database Sys 6(4):626-649 (Dec 1981)]. , INKP-102," said Leonard S Leon·ard , Ray Charles Known as "Sugar Ray." Born 1956. American boxer who won the 1976 Olympic light welterweight title. He held five world titles as both a welterweight and middleweight between 1979 and 1987. Noun 1. . Jacob, M.D., Ph.D., Chairman and Chief Executive Officer of InKine. "We believe that although the acceleration of our research and development efforts for INKP-102 affected our ability to be profitable for the six-months ended June 30, 2005, if INKP-102 is approved by FDA, our investment in this important drug will positively impact the revenue growth of the franchise," Dr. Jacob added. Gross Profit: --Product revenues were $5.7 and $10.9 million for the quarter and six-months ended June 30, 2005, a 16% and 18% increase, respectively, over product revenues of $4.9 and $9.2 million for the same periods a year ago. Prescription levels have escalated as a result of increased sales and marketing efforts, which continue to grow market awareness and acceptance of Visicol(R). Approximately 145,000 prescriptions were filled for Visicol(R) during the second quarter of 2005, which represents an increase of approximately 23% over prescriptions of 118,000 for the second quarter of 2004. --In addition to product revenue, the Company realized $818,000 in other revenue for the first half of 2005, which was primarily attributable to a milestone payment received from Zeria Pharmaceutical Company, our licensee licensee n. a person given a license by government or under private agreement. (See: license, licensor) LICENSEE. One to whom a license has been given. 1 M. Q. & S. 699 n. for the use and sale of Visicol(R) in Japan. --Gross profit was $4.8 and $10.0 million for the quarter and six-months ended June 30, 2005, compared to $4.6 and $8.8 million for the same periods a year ago. Gross profit as a percentage of sales for product revenue was 85% and 84% for the three and six-months ended June 30, 2005, compared to 87% and 88% for the same periods a year ago. The decreases in gross profit as a percentage of product sales were the result of increased royalty expense recognized along with distribution costs distribution costs distribute npl → Vertriebskosten pl payable to wholesalers. "Prescriptions grew by 25% for the first half of 2005, compared to the first half of 2004," said Robert F. Apple, Chief Operating and Financial Officer of InKine. "As of June 30, 2005, we had approximately $13.0 million in cash and investments, 41 days outstanding in receivables, sufficient inventory to meet customer demand and no outstanding debt," added Mr. Apple. Costs and Expenses: --Research and development costs were $2.0 and $3.8 million for the quarter and six-months ended June 30, 2005, compared to $1.0 and $2.0 million for the same periods a year ago. The increases were the result of development costs associated with the clinical studies and NDA filing of InKine's next generation MCC-free purgative tablet, INKP-102, along with higher costs related to an increased scale of development activity. --Sales and marketing costs were $2.6 and $4.9 million for the quarter and six-months ended June 30, 2005, compared to $2.2 and $4.1 million for the same periods a year ago. The increases were the result of continued growth in the size of InKine's sales force, along with increased marketing campaigns related to Visicol(R). As of June 30, 2005, the InKine's sales force covered 50 territories with five district managers, compared to 45 territories and four district managers as of June 30, 2004. --General and administrative costs administrative costs, n.pl the overhead expenses incurred in the operation of a dental benefits program, excluding costs of dental services provided. were $1.0 and $1.9 million for the quarter and six-months ended June 30, 2005, compared to $0.7 and $1.5 million for the same periods a year ago. The increases were the result of higher personnel, patent and insurance costs, along with increased legal and accounting fees associated with maintaining compliance with the Sarbanes-Oxley Act See SOX. of 2002. --During the quarter ended June 30, 2005, InKine received final court approval in connection with its 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. with a class of holders of InKine equity shares who alleged they were denied certain claimed preemptive rights The privilege of a stockholder to maintain a proportionate share of the ownership of a corporation by purchasing a proportionate share of any new stock issues. In most jurisdictions, an existing stockholder has the right to buy additional shares of a new issue to preserve . In addition, during the quarter ended June 30, 2005, InKine received final reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. from a third-party for costs incurred in connection with the class action litigation and accordingly, InKine reversed its $200,000 insurance deductible That which may be taken away or subtracted. In taxation, an item that may be subtracted from gross income or adjusted gross income in determining taxable income (e.g., interest expenses, charitable contributions, certain taxes). accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. upon receipt of the final reimbursement from the third-party. Balance Sheet: --InKine had $13.0 million in cash and investments and no balance outstanding on its line of credit at June 30, 2005. Merger Update: --As previously announced on June 23, 2005, InKine entered into a definitive agreement and plan of merger with Salix Pharmaceuticals, Ltd. (Salix) and Metal Acquisition Corp., a wholly-owned subsidiary of Salix. Consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like. 2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the merger is subject to approval by InKine's shareholders of adoption of the merger agreement and approval by Salix's stockholders of the issuance of Salix common shares in the merger, 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 or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act The Hart-Scott-Rodino Antitrust Improvements Act of 1976 (Public Law 94-435, known commonly as the HSR Act) is a set of amendments to the antitrust laws of the United States, principally the Clayton Antitrust Act. The HSR Act was signed into law by President Gerald R. of 1976, as amended (HSR HSR homogeneously staining regions. Act) and other customary closing conditions. Also as previously announced, the pending merger with Salix is currently expected to close during the fourth quarter of 2005, however, InKine cannot assure you that the merger will be consummated con·sum·mate tr.v. con·sum·mat·ed, con·sum·mat·ing, con·sum·mates 1. a. To bring to completion or fruition; conclude: consummate a business transaction. b. . --On July 19, 2005, Salix filed with the Securities and Exchange Commission (SEC) a registration statement on Form S-4 containing a joint proxy statement/prospectus relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the proposed merger. --On July 28, 2005, InKine received notification of early termination of the waiting period under the HSR Act. About InKine Pharmaceutical InKine Pharmaceutical Company, Inc. is a publicly traded specialty pharmaceutical company focused on developing and commercializing pharmaceutical products for the diagnosis and treatment of gastrointestinal disorders Noun 1. gastrointestinal disorder - illness caused by poisonous or contaminated food food poisoning illness, sickness, unwellness, malady - impairment of normal physiological function affecting part or all of an organism . The InKine's development strategy has been to acquire late-stage drug candidates with short time lines to commercialization. InKine's franchise product, Visicol(R) is the only tablet purgative preparation indicated for bowel cleansing prior to colonoscopy Colonoscopy Definition Colonoscopy is a medical procedure where a long, flexible, tubular instrument called the colonoscope is used to view the entire inner lining of the colon (large intestine) and the rectum. . InKine's second product, IB-Stat(R), is an oral hyoscyamine hyoscyamine /hyo·scy·amine/ (hi?o-si´ah-men) an anticholinergic alkaloid that is the levorotatory component of racemic atropine and has similar actions but twice the potency; used as an antispasmodic in gastrointestinal and urinary tract spray for the treatment of a variety of indications. Additionally, InKine is developing INKP-102, an advanced generation purgative, for which we recently submitted a new drug application to FDA for bowel cleansing prior to colonoscopy and developing Visicol(R) for use as a laxative laxative, drug or other substance used to stimulate the action of the intestines in eliminating waste from the body. The term laxative usually refers to a mild-acting substance; substances of increasingly drastic action are known as cathartics, purgatives, in treating patients with chronic constipation constipation, infrequent or difficult passage of feces. Constipation may be caused by the lack of adequate roughage or fluid in the diet, prolonged physical inactivity, certain drugs, or emotional disturbance. . For further information, please visit InKine on its web site http://www.inkine.com. This press release contains 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. , including statements regarding our expectations regarding INKP-102 and its potential positive impact on our revenue, our proposed merger with Salix, including the timing of consummation, if any, of the proposed merger, and the sufficiency of our inventory. Such forward-looking statements are based on InKine's current expectations or forecasts of future events. InKine's performance could differ materially from those reflected in these forward-looking statements due to general financial, economic, regulatory and political conditions affecting the biotechnology and pharmaceutical industries the timing of FDA review of INKP-102, InKine's ability to commercialize INKP-102 and grow product revenue and the effects of the other risks and uncertainties set forth in InKine's reports on Form 10-Q Form 10-Q See 10-Q. and 10-K filed with the U.S. Securities and Exchange Commission. Given these risks and uncertainties, any or all of these forward-looking statements may prove to be incorrect. Therefore, you should not rely on any such factors or forward-looking statements. Furthermore, InKine may elect to update forward-looking statements, but InKine disclaims any obligation to do so. Additional Information In connection with the merger between Salix and InKine, Salix has filed with the SEC a registration statement on Form S-4, containing a joint proxy statement/prospectus and other relevant materials. INVESTORS AND SECURITY HOLDERS OF SALIX AND INKINE ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND THE OTHER RELEVANT MATERIALS BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT SALIX, INKINE AND THE MERGER. The joint proxy statement/prospectus and other relevant materials, and any other documents filed by Salix or InKine with the SEC, may be obtained free of charge at the SEC's web site at www.sec.gov. In addition, investors and security holders may obtain free copies of the documents filed with the SEC by Salix by directing a request to: Salix Pharmaceuticals, Ltd., 1700 Perimeter Park Drive, 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. 27560, Attn: Investor Relations Investor relations The process by which the corporation communicates with its investors. . Investors and security holders may obtain free copies of the documents filed with the SEC by InKine by contacting InKine Pharmaceutical Company, Inc., 1787 Sentry Parkway West, Building 18, Suite 440, Blue Bell, Pennsylvania Blue Bell is a census-designated place (CDP) in Whitpain Township in Montgomery County, Pennsylvania, in the United States. As of the 2000 census, its population was 6,395. 19422, Attn: Investor Relations Salix, InKine and their respective executive officers and directors may be deemed to be participants in the solicitation solicitation In criminal law, the act of asking, inducing, or directing someone to commit a crime. The person soliciting another becomes an accomplice to the crime. The term also refers to the act of obtaining bribes, as well as to the crime of a prostitute who offers sexual of proxies from the stockholders of Salix and shareholders of InKine in favor of upon the side of; favorable to; for the advantage of. See also: favor the merger. Information about the executive officers and directors of Salix and their ownership of Salix common stock is set forth in the proxy statement Proxy Statement A document containing the information that a company is required by the SEC to provide to shareholders so they can make informed decisions about matters that will be brought up at an annual stockholder meeting. for Salix's 2005 Annual Meeting of Stockholders, which was filed with the SEC on April 29, 2005. Information about the executive officers and directors of InKine and their ownership of InKine common stock is set forth in the proxy statement for InKine's 2005 Annual Meeting of Shareholders, which was filed with the SEC on May 2, 2005. Investors and holders of Salix and InKine common stock may obtain more detailed information regarding the direct and indirect interests of Salix, InKine and their respective executive officers and directors in the merger by reading the joint proxy statement/prospectus regarding the merger.
InKine Pharmaceutical Company, Inc.
CONDENSED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share amounts)
(unaudited)
Three-Months Six-Months
Ended Ended
June 30, June 30,
-------------- ---------------
2005 2004 2005 2004
-------------- ---------------
Product revenue $5,650 $4,891 $10,868 $9,241
Other revenue --- 375 818 658
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Revenue 5,650 5,266 11,686 9,899
Cost of goods sold (862) (652) (1,710)(1,143)
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Gross profit 4,788 4,614 9,976 8,756
Cost and expenses:
Research and development 1,993 1,036 3,762 1,958
Sales and marketing 2,621 2,160 4,909 4,109
General and administrative 1,031 692 1,908 1,477
Withdrawn public offering and
litigation (200) (338) (200) 229
-------------- ---------------
Operating expenses 5,445 3,550 10,379 7,773
-------------- ---------------
Income (loss) from operations (657) 1,064 (403) 983
Interest income and expense 80 15 140 18
-------------- ---------------
Net income (loss) $(577)$1,079 $(263)$1,001
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Net income (loss) per share - basic
and diluted $(0.01) $0.02 $(0.01) $0.02
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Weighted average shares
outstanding - basic 49,111 48,676 49,109 48,611
Weighted average shares
outstanding - diluted 49,111 53,504 49,109 53,737
CONDENSED BALANCE SHEETS
(amounts in thousands)
June 30, December 31,
2005 2004
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ASSETS (unaudited)
Cash and investments $13,018 $13,053
Accounts receivable 2,550 2,264
Inventory 1,635 1,445
Other assets 817 622
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Total assets $18,020 $17,384
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LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $3,735 $3,016
Shareholders' equity 14,285 14,368
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Total liabilities and shareholders'
equity $18,020 $17,384
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