Kos Reports 49% Increase in Revenue to $179.4 Million, Earnings Per Share of $0.61 and Strong Prescription Trends Across the Portfolio.CRANBURY, N.J. -- Kos Pharmaceuticals, Inc. (Nasdaq:KOSP): Financial Highlights --Second quarter revenue grew 49% to $179.4 million --Second quarter EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. at $0.61 per share --Generated over $51 million in cash from operations; cash and marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has balance of $247.3 million at quarter-end --No debt on balance sheet; final $19 million of debt converted to equity Other Recent Events --Cholesterol franchise achieved 17% total prescription growth --Successfully initiated Barr co-promotion in women's healthcare --Completed integration of products and sales force acquired from Biovail --Announced commencement of NIH-sponsored AIM-HIGH outcomes study Kos Pharmaceuticals, Inc. (Nasdaq: KOSP) today announced financial results for the second quarter and six months ended June 30, 2005. For the second quarter, revenue increased 49% to a record $179.4 million, up from $120.3 million for the second quarter of 2004. This significant increase reflects strong revenue and prescription growth of Kos' uniquely differentiated cholesterol products, Niaspan(R) and Advicor(R), which not only lower LDL-C LDL-C low-density-lipoprotein cholesterol ("bad" cholesterol) but also raise HDL-C HDL-C high-density-lipoprotein cholesterol. ("good" cholesterol). Also contributing to the record revenue were sales from the Company's asthma product, Azmacort(R) and the sales from the newly acquired products, Teveten(R), Teveten(R) HCT Hct abbr. hematocrit HCT Hematocrit, see there and Cardizem(R) LA. Revenue for the six months ended June 30, 2005, increased 55% to $332.7 million, from $214.5 million for the comparable 2004 period. Pre-tax income, adjusted to exclude the $6 million settlement received from Andrx Laboratories, Inc. during the 2004 quarter, increased by 19% to $41.2 million for the second quarter of 2005 over the comparable 2004 quarter. Kos recorded net income during the current quarter of $28.9 million, or $0.61 per share, a 33% increase compared with a pro-forma, fully-taxed net income of $21.4 million, or $0.46 per share, during the 2004 period (reflecting a 38% effective tax rate and the absence of the $6 million settlement). For the first half of 2005, net income was $55.2 million, or $1.19 per share. During the quarter, the Company generated over $51 million in cash from operations and was debt-free at quarter end. As of June 30, 2005, the Company had $247.3 million in cash and marketable securities, even after taking into effect the cost of the Barr transaction and the recent product acquisitions from Biovail. Niaspan revenue grew 41% to $106.0 million in the second quarter of 2005, from $75.2 million in the second quarter of 2004, while Advicor accounted for $30.2 million of revenue, a 16% increase from the second quarter of 2004. In the second quarter of 2005, total prescriptions for the Company's cholesterol franchise grew 17%, and Kos' market share for total prescriptions reached a new record of 3.4%, with noticeable increases in the large and high potential primary care physician universe. Azmacort revenue grew 23% to $23.6 million for the second quarter of 2005, compared with $19.2 million for the comparable 2004 quarter. Since acquiring Azmacort in 2004, the Company has arrested the previous four-year prescription decline of this asthma product from a 29% rate in the second quarter of 2004 to a 4% prescription decline during the second quarter of 2005, a significant turnaround Turnaround A situation where a company that has had poor performance for an extended period of time experiences a positive reversal. Notes: A speculator may profit from a turnaround if he or she accurately anticipates the improvement of a poorly performing company. since the re-launch of the product less than a year ago. In May 2005, the Company acquired from Biovail Corporation's affiliates an exclusive license to Teveten (eprosartan mesylate ep·ro·sar·tan mesylate n. An angiotensin II receptor antagonist used to treat hypertension. eprosartan mesylate Teveten Pharmacologic class: Angiotensin II receptor antagonist ) and Teveten HCT (eprosartan mesylate/hydrochlorothiazide) and obtained exclusive sales and marketing rights to Cardizem LA (diltiazem hydrochloride dil·ti·a·zem hydrochloride n. A calcium channel blocking agent used to dilate coronary blood vessels. diltiazem hydrochloride ) in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. . These cardiovascular products are complementary to the Company's existing cholesterol franchise, in that they further leverage Kos' sales force by broadening the Company's footprint in the large angina Angina Definition Angina is pain, "discomfort," or pressure localized in the chest that is caused by an insufficient supply of blood (ischemia) to the heart muscle. and hypertension hypertension or high blood pressure, elevated blood pressure resulting from an increase in the amount of blood pumped by the heart or from increased resistance to the flow of blood through the small arterial blood vessels (arterioles). markets. Kos recorded second quarter 2005 revenue for Teveten/ Teveten HCT of $4.8 million while Cardizem LA revenue was $14.8 million. Teveten and Teveten HCT, products that possess an impressive clinical profile, including significant systolic blood pressure Systolic blood pressure Blood pressure when the heart contracts (beats). Mentioned in: Hypertension reduction, demonstrated 29% total prescription growth with a total of 147,000 prescriptions written during the second quarter of 2005. Total prescription volume for Cardizem LA, a well-established calcium channel blocker calcium channel blocker n. Any of a class of drugs that inhibit movement of calcium ions across a cell membrane, used in the treatment of cardiovascular disorders. that provides 24-hour blood pressure control with peak protection during the early morning hours when adverse cardiac events cardiac event Coronary event Cardiology Any severe or acute cardiovascular condition including acute MI, unstable angina, or cardiac mortality are most likely to occur, increased 24% to 433,000 prescriptions written during the quarter. "We are delighted with the continued strong financial performance of Kos and the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. prescription trends being generated across our expanded portfolio of products. This is a direct manifestation man·i·fes·ta·tion n. An indication of the existence, reality, or presence of something, especially an illness. manifestation (man´ifestā´sh of our peak performance culture with a keen focus on measured investments, controlling costs and leveraging of our quality, targeted sales and marketing efforts," said Adrian Adams, President and Chief Executive Officer. "The recent announcements with respect to the Barr and Biovail transactions, coupled with the ongoing productivity of our Research and Development functions and increased sales force capacity, have put us in an excellent position for long-term growth and corporate development. We are particularly pleased with the announcement of the NIH-sponsored AIM-HIGH outcomes trial given the increasing interest and activity in the HDL (Hardware Description Language) A language used to describe the functions of an electronic circuit for documentation, simulation or logic synthesis (or all three). Although many proprietary HDLs have been developed, Verilog and VHDL are the major standards. market - a market that Kos helped create and pioneer. We have never been in such a strong position and we very much look forward to maximizing all opportunities for the further growth of our exciting Company." In addition to the solid financial and operational results, the Company achieved several other milestones during the second quarter of 2005, principally within the R&D area. Specifically, the Company completed enrollment of its phase IV comparison study entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "COMPELL," a 300-patient study that will assess Niaspan in combination with statins Statins A class of drugs commonly used to lower LDL cholesterol levels. Mentioned in: C-Reactive Protein (Lipitor(R) and Crestor(R)) versus the combination of ezetimibe and simvastatin simvastatin /sim·va·stat·in/ (sim´vah-stat?in) an antihyperlipidemic agent that acts by inhibiting cholesterol synthesis, used in the treatment of hypercholesterolemia and other forms of dyslipidemia and to lower the risks associated (now available as Vytorin(R)) and Crestor alone, with study results expected to be submitted for publication by the end of this year. The Company also continues to make significant progress in patient enrollment for its two pivotal clinical trials, SEACOAST and OCEANS to support the development of a new fixed dose combination A fixed dose combination (FDC) is a formulation of two or more active ingredients combined in a single dosage form available in certain fixed doses. Fixed dose combination drug products may improve medication compliance by reducing the pill burden of patients. of Niaspan with simvastatin. As previously mentioned, in conjunction with the National Institutes of Health (NIH "Not invented here." See digispeak. NIH - The United States National Institutes of Health. ), the Company announced the commencement of a landmark long-term coronary heart disease coronary heart disease: see coronary artery disease. coronary heart disease or ischemic heart disease Progressive reduction of blood supply to the heart muscle due to narrowing or blocking of a coronary artery (see atherosclerosis). outcomes study, entitled AIM-HIGH, designed to evaluate whether combination therapy with Kos' Niaspan and simvastatin is superior to simvastatin alone in preventing cardiovascular events, such as heart attack, stroke and acute coronary syndromes acute coronary syndrome n. A sudden, severe coronary event that mimics a heart attack, such as unstable angina. acute coronary syndrome . The NIH will fund and conduct the AIM-HIGH study with an additional grant from Kos. This study is of high interest to Kos given its ongoing development of the Niaspan/simvastatin fixed-dose combination, with a launch currently scheduled for 2007. As a result of the Company's strong financial performance, Kos is revising its full year 2005 EPS expectation to the upper end of the range previously provided, of $2.65 to $2.75. Importantly, the revised guidance includes the impact of one-time charges, which had been previously excluded from the Company's 2005 EPS expectations. As a result of increased operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. attributable principally to the Biovail and Barr transactions, Kos expects to earn about $0.70 per fully 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 in the third quarter of 2005. For the full year, Kos now expects to grow revenue in excess of 45% from 2004 to about $720 to $730 million. Following this release, Kos' senior management will host a conference call today at 11:00 a.m. ET to discuss the Company's quarterly results. The conference call will be available live via the Internet by accessing Kos' website at www.kospharm.com. Please go to the website at least fifteen minutes prior to the call to register, download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. For those who cannot access the webcast, you can participate via telephone by calling 913-981-5546, confirmation code 6640097. A replay will also be available on the website at www.kospharm.com or by calling 888-203-1112 domestic or international, and entering 6640097 from 2:00 PM ET today until 12:00 AM ET on Monday, August 8, 2005. You will find the financial information to be discussed during the conference call on Kos' website in the Investor Relations Investor relations The process by which the corporation communicates with its investors. section. Kos Pharmaceuticals, Inc. is a fully integrated specialty pharmaceutical company engaged in developing, commercializing, manufacturing and marketing proprietary prescription products for the treatment of chronic diseases. The Company's principal product development strategy is to reformulate Verb 1. reformulate - formulate or develop again, of an improved theory or hypothesis redevelop formulate, explicate, develop - elaborate, as of theories and hypotheses; "Could you develop the ideas in your thesis" existing pharmaceutical products with large market potential to improve safety, efficacy, or patient compliance. The Company currently markets Niaspan and Advicor for the treatment of cholesterol disorders, Azmacort for the treatment of asthma, Cardizem LA for the treatment of hypertension and angina, and Teveten and Teveten HCT for the treatment of hypertension. Kos is developing additional products, has proprietary drug delivery technologies in solid-dose and 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. metered-dose inhalation inhalation /in·ha·la·tion/ (in?hah-la´shun) 1. the drawing of air or other substances into the lungs.inhala´tional 2. the drawing of an aerosolized drug into the lungs with the breath. 3. administration and is pursuing certain strategic business development and licensing opportunities. Certain statements in this press release, including statements regarding the Company's ability to generate enhanced revenue and earnings and projected 2005 financial outlook, continue to grow sales of Niaspan, Advicor, Azmacort, Cardizem LA, and Teveten/ Teveten HCT, the Company's ability to remove the uncertainty of a possible generic Niaspan reaching market in the near term, its expectations regarding its effective tax rate, the Company's ability to develop or acquire additional products, the Company's ability to successfully commercialize and develop the products acquired through its strategic commercialization, and the success of the Company's research and development alliance with Biovail, the Company's ability to establish a footprint and generate sales in the hypertension and angina markets, the Company's ability to receive 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. approval for future products, such as the modified formulation formulation /for·mu·la·tion/ (for?mu-la´shun) the act or product of formulating. American Law Institute Formulation of Niaspan and others, the Company's ability to successfully negotiate additional important strategic business development opportunities, the progress of the Company's research and development pipeline, the Company's ability to protect and enforce its intellectual property and thus protect its products, the Company's increased expectations regarding revenue and earnings per share in future periods, and the Company's ability to continue to generate cash from operations are forward-looking and are subject to risks and uncertainties which may cause actual results to differ materially from those projected in a forward-looking statement 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. . These risks and uncertainties include, the Company's ability to grow revenue and control expenses, the protection afforded by the Company's patents and those related to the acquired products, ability to build awareness for Niaspan, Advicor, Azmacort and the newly acquired products, Cardizem LA, Teveten and Teveten HCT within the medical community, the continued success of the alliances with Takeda, Merck KGaA This article needs sources or references that appear in reliable, third-party publications. Alone, primary sources and sources affiliated with the subject of this article are not sufficient for an accurate encyclopedia article. , Oryx oryx (ôr`ĭks), name for several small, horselike antelopes, genus Oryx, found in deserts and arid scrublands of Africa and Arabia. They feed on grasses and scrub and can go without water for long periods. , Barr and Biovail, the continuing growth of the cardiovascular and respiratory markets, the Company's ability to maintain its compliance with FDA regulations and standards without adversely affecting the Company's manufacturing capability or ability to meet its production requirements or profit margins, the Company's ability to attract and retain sales professionals and successfully integrate the sales force obtained from Biovail, ensure compliance with prescription drug prescription drug Prescription medication Pharmacology An FDA-approved drug which must, by federal law or regulation, be dispensed only pursuant to a prescription–eg, finished dose form and active ingredients subject to the provisos of the Federal Food, Drug, sales and marketing laws and regulations, changes in the regulatory environment governing the Company's compliance with the FDA, PTO PTO abbr. 1. Parent Teacher Organization 2. or p.t.o. please turn over 3. power takeoff PTO or pto please turn over Noun 1. , tax and competition issues, the impact of a possible generic version of the Cardizem LA product or other products sold by the Company, the ability of third party suppliers to the Company continuing to be able to perform their supply obligations, the Company's ability to achieve regulatory approvals for its products under development in a timely manner, the effect of conditions in the pharmaceutical industry and the economy in general, as well as certain other risks. A more detailed discussion of risks attendant to the forward-looking statements included in this press release are set forth in the "Forward-Looking Information: Certain Cautionary Statements" section of the Company's 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, filed with the Securities and Exchange Commission, and in other reports filed with the SEC.
Kos Pharmaceuticals, Inc. and Subsidiaries
SELECTED FINANCIAL INFORMATION
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2005 2004 2005 2004
-------- -------- -------- --------
(unaudited) (unaudited)
Condensed
Consolidated
Statement of
Operations
(in thousands,
except per share
data)
Revenues $179,399 $120,250 $332,689 $214,518
Cost of Sales 19,057 10,187 29,907 16,941
-------- -------- -------- --------
160,342 110,063 302,782 197,577
-------- -------- -------- --------
Operating Expenses:
Research and
development 31,479 19,523 56,775(III) 73,440(IV)
Selling,
general and
administrative 88,681 53,864 166,696 109,040
-------- -------- -------- --------
Total
operating
expenses 120,160 73,387(II) 223,471 182,480(II)
-------- -------- -------- --------
Income from
Operations 40,182 36,676 79,311 15,097
Interest and
Other Income (1,039) (3,900)(II) (2,269) (4,276)(II)
Provision for/
(Benefit from)
Income Taxes 12,308 2,075 26,342 (27,175)(V)
-------- -------- -------- --------
Net Income $ 28,913 $ 38,501 $ 55,238 $ 46,548
======== ======== ======== ========
Net Income per
Share:
Basic 0.70 $ 1.03 $ 1.36 $ 1.25
Diluted 0.61(I) 0.83(I) 1.19(I) 1.00(I)
Shares Used in
Computing Net
Income per Share:
Basic 41,205 37,328 40,733 37,129
Diluted 47,911 46,975 46,964 47,384
June 30, Dec. 31,
2005 2004
-------- --------
(unaudited)
Condensed
Consolidated
Balance Sheet
(in thousands)
Cash and Cash
Equivalents $243,984 $258,703
Marketable
Securities 3,358 -
Accounts
Receivable, net 123,714 74,568
Deferred Tax Asset,
current 43,554 41,186
Inventories, net 15,705 10,649
Other Current
Assets 21,757 11,572
Fixed Assets, net
of depreciation 25,781 23,341
Deferred Tax Asset,
non-current 15,125 13,346
Intangible Assets 244,858 150,079
Other Assets 3,217 3,482
-------- --------
Total assets $741,053 $586,926
======== ========
Current
Liabilities $174,706 $151,575(VI)
Other Long-Term
Liabilities 1,827 209
Shareholders'
Equity 564,520 435,142
-------- --------
Total
liabilities
and
shareholders'
equity $741,053 $586,926
======== ========
-----
Notes:
(I) Calculation of fully diluted EPS reflects net income excluding
$262,000 and $303,000 in interest expense for the quarters
ended June 30, 2005 and 2004, respectively, and $520,000 and
$606,000 for the six months ended June 30, 2005 and 2004,
respectively, associated with the Company's convertible credit
facilities.
(II) Includes the effect of the $6 million settlement received
from Andrx, of which $2 million was recorded as reimbursement
of operating expenses and $4 million as other income.
(III) Includes a $4 million write-off associated with an equity
investment in Triad Pharmaceuticals, Inc.
(IV) Includes the effect of a one-time, $38 million write-off
associated with the acquisition of the Azmacort product.
(V) Includes a one-time, $15.8 million tax benefit
associated with the reversal of the Company's deferred tax
asset valuation allowance, and a one-time, $14.4 million
deferred tax benefit associated with the Azmacort
acquisition.
(VI) Includes $19 million of debt due to Michael Jaharis, Chairman
Emeritus of the Company's Board of Directors, which matured on
June 30, 2005.
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