Kos Reports 56% Increase in Revenue to a Record $205 Million, Earnings Per Share of $0.74 and Continued Solid Cash Flow From Operations.CRANBURY, N.J. -- Kos Pharmaceuticals, Inc. (Nasdaq: KOSP): Financial Highlights --Third quarter revenue increased 56% to a record $205.1 million --Generated net income of $36.6 million, an increase of 32% on an adjusted basis --Earnings 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 of $0.74, an increase of 19% on an adjusted basis --Generated $61.6 million in cash from operations in the third quarter; 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 $322.6 million at quarter-end --Company enhances full year guidance to $730-$740 million in revenue; expects $2.70 -$2.75 in 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. Kos Pharmaceuticals, Inc. (Nasdaq: KOSP) today announced financial results for the third quarter and nine months ended September 30, 2005. For the third quarter of 2005, revenue increased 56% to a record $205.1 million, up from $131.9 million for the third quarter of 2004. This significant increase is a result of double-digit prescription and revenue growth versus the comparable period in 2004, of Niaspan(R) and Advicor(R), Kos' unique cholesterol products, coupled with solid revenue generation from Cardizem Car·di·zem A trademark for the drug diltiazem hydrochloride. diltiazem hydrochloride Adizem (UK), Angitil (UK), Apo-Diltiaz (CA), Apo-Diltiazem (CA), Calcicard (UK), Cardizem, Cardizem CD, Cardizem LA, Cartia XT, (R)LA, Teveten(R) and Teveten(R)HCT Hct abbr. hematocrit HCT Hematocrit, see there . Revenue for the nine months ended September 30, 2005, increased 55% to $537.8 million, from $346.4 million in the comparable period in 2004. Pre-tax income for the third quarter of 2005 increased 27% over the third quarter of 2004 to $57.0 million. Kos recorded net income of $36.6 million, or $0.74 per share, a 32% increase in net income and a 19% increase in earnings per share compared with pro-forma, fully-taxed net income of $27.8 million, or $0.62 per share, during the 2004 period (as adjusted to reflect a 38% effective tax rate). Reported net income and earnings per share during the third quarter of 2004, which did not reflect a full effective tax rate, were $42.7 million and $0.94 per share, respectively. For the nine-month period in 2005, net income was $91.9 million, or $1.93 per share. During the third quarter and nine-month period in 2005, the Company generated $61.6 million and $141.7 million respectively, in cash from operations. At quarter-end, Kos had cash and marketable securities of $322.6 million, the highest such position in the Company's history, and remains debt-free. Revenue for Kos' cholesterol franchise grew 34% to $147.3 million for the third quarter of 2005, up from $110.3 million recorded during the same period of 2004. Niaspan revenue grew 39% from the comparable 2004 period to $114.3 million and Advicor accounted for $33 million of franchise revenue, an 18% increase from the same period last year. For the nine-month period in 2005, total prescriptions for the Company's cholesterol franchise grew 16%, growing 1.3 times faster than the overall cholesterol market. Azmacort(R) achieved revenues of $19.4 million for the third quarter of 2005, compared to $21.6 million for the comparable 2004 quarter. Since acquiring Azmacort in 2004, the Company has slowed the previous four-year prescription decline and has returned the product to year-to-date growth within its target group of physicians. The Company's 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). portfolio also contributed significantly to revenue growth. Specifically, third quarter 2005 revenue for Cardizem LA was $28.6 million and Teveten franchise revenue was $9.8 million, representing the first full quarter contribution of these products to revenues. Total prescription growth for Cardizem LA increased 22% year-to-date versus a market growth of only one percent. Teveten and Teveten HCT demonstrated year-to-date total prescription growth of 19%, 1.8 times the rate of the market. "We continue to deliver high quality operating and financial results," said Adrian Adams, President and Chief Executive Officer. "We remain pleased with the continued, above market prescription performance of our cholesterol franchise and the significant contributions from our recent corporate development initiatives involving Azmacort, Cardizem LA, the Teveten franchise and the Barr Laboratories co-promotion alliance in women's healthcare. Our earnings momentum has resulted in the generation of almost $142 million in cash from operations over the past nine months, placing us in our strongest cash position to date. This, in turn, will help facilitate continued measured investments in research and development in addition to aggressively pursuing corporate development initiatives. Such initiatives should enable Kos to continue its excellent growth momentum in the short, medium and long-term." As a result of the Company's strong financial performance achieved this quarter, Kos now expects full year earnings per share to be in the range of $2.70 - $2.75, and full year revenue to increase in excess of 47% from 2004 to a range of $730 to $740 million. In addition to the record financial results, the Company achieved several research and development milestones during the third quarter. Specifically, Kos completed 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 , and expects to have study results available in early 2006. The Company also continues to make significant progress in two of its Phase III clinical trial Noun 1. phase III clinical trial - 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 programs, with patient recruitment completed in one of the two pivotal studies for its new fixed-dose combination of Niaspan 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 , and in one of the two pivotal studies for its Niaspan/lovastatin development program in peripheral arterial arterial /ar·te·ri·al/ (-al) pertaining to an artery or to the arteries. ar·te·ri·al adj. 1. Of or relating to one or more arteries or to the entire system of arteries. 2. disease. Additionally, the Company has made significant progress in its sponsored research activities with Triad Pharmaceuticals, Inc. This research collaboration has produced several promising new chemical entity compounds in the area of 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. therapy, currently undergoing early stage trials 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. . 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 913-981-5542, confirmation code 7974804. A replay will also be available on the website at www.kospharm.com or by calling 888-203-1112 domestic or international, and entering 7974804 from 2:00 PM ET today until 12:00 AM ET on Monday, November 7, 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 with a particular focus on the cardiovascular cardiovascular /car·dio·vas·cu·lar/ (-vas´ku-ler) pertaining to the heart and blood vessels. car·di·o·vas·cu·lar adj. Abbr. , metabolic met·a·bol·ic adj. Of, relating to, or resulting from metabolism. Metabolic Refers to the chemical processes of an organ or organism. and respiratory disease Noun 1. respiratory disease - a disease affecting the respiratory system respiratory disorder, respiratory illness adult respiratory distress syndrome, ARDS, wet lung, white lung - acute lung injury characterized by coughing and rales; inflammation of the areas. 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, and patient compliance. Kos' strategy also includes making increased, measured investments in new chemical entity research through in-house and sponsored research, scientific in-licensing and general corporate development activities. 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 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 Teveten and Teveten HCT for the treatment of hypertension. Kos has a strong and growing research and development pipeline including proprietary drug delivery technologies in solid-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. 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 device administration to help fuel sustained, organic sales growth into the future. 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 develop or acquire additional products, the Company's ability to successfully commercialize and develop the products acquired through its strategic alliances, the Company's increased expectations regarding revenue and earnings per share in future periods, the Company's ability to make continued measured investments in research and development, ability to aggressively pursue corporate development activities, ability to continue excellent growth momentum in the short, medium and long-term, 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 and licensed products, the ability to build awareness for Niaspan, Advicor, Azmacort, 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 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. 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 gov·ern v. gov·erned, gov·ern·ing, gov·erns v.tr. 1. To make and administer the public policy and affairs of; exercise sovereign authority in. 2. 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, 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 establish a footprint The amount of geographic space covered by an object. A computer footprint is the desk or floor surface it occupies. A satellite's footprint is the earth area covered by its downlink. See form factor. 1. and generate sales in the hypertension and angina markets, the Company's ability to successfully negotiate additional important strategic business development opportunities, the progress of the Company's research and development pipeline, fluctuating fluc·tu·ate v. fluc·tu·at·ed, fluc·tu·at·ing, fluc·tu·ates v.intr. 1. To vary irregularly. See Synonyms at swing. 2. To rise and fall in or as if in waves; undulate. v. buying patterns by the Company's wholesalers and distributors, the Company's ability to maintain coverage of its products by government agencies, such as the Centers for Medicare and Medicaid Services The Centers for Medicare and Medicaid Services (CMS), previously known as the Health Care Financing Administration (HCFA), is a federal agency within the United States Department of Health and Human Services (DHHS) that administers the Medicare program and , 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 ATTENDANT. One who owes a duty or service to another, or in some sort depends upon him. Termes de la Ley, h.t. As to attendant terms, see Powell on Morts. Index, tit. Attendant term; Park on Dower, c. 1 7. 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 Nine Months Ended
September 30, September 30,
--------------------- ----------------------
2005 2004 2005 2004
--------- --------- --------- ---------
(unaudited) (unaudited)
Condensed
Consolidated
Statement of
Operations
(in thousands,
except per share
data)
Revenues $205,095 $131,876 $537,784 $346,394
Cost of Sales 25,980 9,561 55,886 26,502
--------- --------- --------- ---------
179,115 122,315 481,898 319,892
--------- --------- --------- ---------
Operating
Expenses:
Research and
development 25,809 17,148 82,583 (II) 90,588 (III)
Selling,
general and
administrative 98,454 60,383 265,151 169,423 (IV)
--------- --------- --------- ---------
Total
operating
expenses 124,263 77,531 347,734 260,011
--------- --------- --------- ---------
Income from
Operations 54,852 44,784 134,164 59,881
Interest and
Other Income (2,103) (119) (4,372) (4,395)(IV)
Provision
for/(Benefit
from) Income
Taxes 20,312 2,157 46,655 (25,018)(V)
--------- --------- --------- ---------
Net Income $ 36,643 $ 42,746 $ 91,881 $ 89,294
========= ========= ========= =========
Net Income per
Share:
Basic $ 0.80 $ 1.14 $ 2.16 $ 2.39
Diluted 0.74 (I) 0.94 (I) 1.93 (I) 1.97 (I)
Shares Used in
Computing Net
Income per
Share:
Basic 45,995 37,614 42,506 37,292
Diluted 49,635 45,667 47,860 45,728
September 30, December 31,
2005 2004
------------- ------------
Condensed (unaudited)
Consolidated
Balance Sheet
(in thousands)
Cash and Cash
Equivalents $321,363 $258,703
Marketable
Securities 1,255 -
Accounts
Receivable, net 147,144 74,568
Deferred Tax
Asset, current 42,827 41,186
Inventories, net 19,820 10,649
Other Current
Assets 15,065 11,572
Fixed Assets, net
of depreciation 27,710 23,341
Deferred Tax
Asset, non-
current 18,074 13,346
Intangible
Assets 238,568 150,079
Other Assets 3,320 3,482
--------- ---------
Total assets $835,146 $586,926
========= =========
Current
Liabilities $201,493 $151,575 (VI)
Other Long-Term
Liabilities 1,933 209
Shareholders'
Equity 631,720 435,142
--------- ---------
Total
liabilities
and
shareholders'
equity $835,146 $586,926
========= =========
-----
Notes:
(I) Calculation of fully diluted EPS reflects net income excluding
$339,000 in interest expense for the quarter ended September
30, 2004, and $520,000 and $945,000 for the nine months ended
September 30, 2005 and 2004, respectively, associated with the
Company's convertible credit facilities.
(II) Includes a $4 million write-off associated with an equity
investment in Triad Pharmaceuticals, Inc.
(III) Includes the effect of a one-time, $38 million write-off
associated with the acquisition of the Azmacort product.
(IV) 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.
(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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