- Reports 11% Increase in Income from Operations Before Interest
Expense to $32.5 Million
- Receives Four New Product Approvals from FDA in the 2008 First
Quarter
SCHAUMBURG, Ill.--(BUSINESS WIRE)--May 8, 2008--APP
Pharmaceuticals, Inc. (Nasdaq:APPX), a leading manufacturer of
multi-source and branded injectable pharmaceutical products, today
reported financial results for the first quarter ended March 31, 2008.
As a result of the separation of Abraxis BioScience from APP
Pharmaceuticals, APP's business is reported, for all periods
presented, on a continuing operations basis and Abraxis BioScience's
business is reported in discontinued operations.
"The foundation we have established as a company has demonstrated
our strength and ability to respond effectively to opportunities in
the marketplace," said Tom Silberg, APP Pharmaceuticals' recently
named president and chief executive officer. "We leveraged our
flexible manufacturing capabilities to rapidly increase the supply of
heparin toward the end of the first quarter and avert a potential
market shortage for this critical care product. We expect that our
strong core business, combined with recently introduced and
anticipated new product launches, should contribute to continued
revenue and earnings growth throughout the balance of the year."
For the 2008 first quarter, net revenues increased 6 percent to
$148.1 million, compared with $140.3 million in the first quarter of
2007. Gross profit was $70.1 million, or 47 percent of net revenues
for the first quarter of 2008, compared with $65.4 million, or 47
percent of net revenues, in the first quarter of 2007. Excluding $4.1
million for amortization of purchased products, gross profit was $74.2
million, or 50 percent of net revenues compared with $69.5 million or
50 percent of net revenues.
Total operating expenses were $37.6 million, compared with $36.2
million in the 2007 first quarter. Research and development expenses
were $12.3 million compared with $10.0 million in last year's first
quarter. SG&A expenses were $21.0 million, or 14 percent of net
revenues, compared with $22.1 million, or 16 percent of net revenues,
in the prior year first quarter.
Income from operations before interest expense for the 2008 first
quarter increased by 11% to $32.5 million compared with $29.2 million
in the 2007 first quarter. Net interest expense was $15.7 million
compared with $3.6 million in the last year's first quarter, primarily
reflecting the increase in borrowing following the separation that was
completed in November 2007.
As a result of increased net interest expense, net income was $9.2
million, or $0.06 per diluted share, versus first quarter 2007 net
income of $11.1 million, or $0.07 per diluted share, which includes a
loss from discontinued operations of $2.5 million, or $0.02 per share.
The company reported first quarter adjusted net income from continuing
operations of $22.0 million, or $0.14 per diluted share, which in each
case excludes Puerto Rico facility pre-launch costs, amortization
expense, non-cash stock compensation expense and other items (see
table at the end of this release).
In the first quarter of 2008, APP received final FDA approval on
four products and launched the following Polymixin B Sulfate, Caffeine
Citrate Oral Solution, and Irinotecan Hydrochloride. Additionally, the
company launched Cefepime Hydrochloride.
APP currently has more than 60 product candidates in various
stages of development, including 27 ANDAs pending with the FDA,
representing approximately $5 billion in 2007 annualized branded
sales.
Recent Events
On April 21, 2008, the company received FDA approval for
Colistimethate for Injection and has begun marketing and shipping
product.
On May 1, 2008, the company appointed Tom Silberg as president and
chief executive officer and Richard Tajak was named chief financial
officer.
2008 Financial Guidance
- Total net revenues are expected to be in the range of $730 to
$750 million;
- Gross margin is anticipated to be approximately 50 percent
relative to total net revenues. This excludes $16.4 million in
acquired product portfolio amortization, approximately $10
million of capacity optimization and product transfer costs
related to the Puerto Rico facility, as well as an additional
$7 million that was reclassified to R&D expense;
- R&D expense is now expected to be approximately $47 to $52
million, which includes the reclassification from gross
margin;
- SG&A expenses are anticipated to be in the range of $85 to $90
million, which includes expected non-cash stock compensation
expense of $8 to $10 million;
- Interest expense is expected to be approximately $58 million;
- Income tax rate is now expected to be approximately 45
percent;
- Depreciation expense is expected to be approximately $18 to
$23 million;
- Adjusted EBITDA is expected to be $285 to $300 million.
Adjustments include costs associated with the launch of the
Puerto Rico facility, separation expense, amortization expense
and non-cash compensation;
- Adjusted EPS is anticipated to be $0.80 to $0.90, which
includes approximately $0.22 per share after-tax interest
expense. Adjustments include costs associated with the launch
of the Puerto Rico facility, separation expense, amortization
expense and non-cash compensation.
Conference Call Information
On Thursday, May 8, 2008, the company will host a conference call
with interested parties beginning at 8:30 a.m. PT (11:30 a.m. ET) to
review the company's financial results. The conference call will be
available to interested parties through a live audio webcast at
www.APPpharma.com and www.thomsonone.com. The call will also be
archived and accessible at both sites for six months.
Non-GAAP Financial Measures
The company believes that its presentation of non-GAAP financial
measures, such as adjusted net income, adjusted income from continuing
operations, EBITDA and adjusted EBITDA, provides useful supplementary
information to investors in understanding the underlying operating
performance of the company and facilitates additional analysis by
investors. The company also uses non-GAAP financial measures
internally for operating, budgeting and financial planning purposes.
The non-GAAP financial measures are in addition to, and not a
substitute for or superior to, measures of financial performance
calculated in accordance with GAAP. A reconciliation of GAAP net
income to adjusted net income for the three months ending March 31,
2008 is included with this news release.
About APP Pharmaceuticals
APP is a specialty drug company that develops, manufactures and
markets injectable pharmaceutical products, focusing on oncology,
anti-infective and critical care markets. The company is one of the
largest producers of injectables, with more than 100 generic products
in more than 400 dosage formulations. APP, headquartered in
Schaumburg, Illinois, has offices in Canada and manufacturing
operations in Illinois, New York and Puerto Rico and is traded on the
Nasdaq Global Market under the symbol APPX. For more information about
APP and the products it provides, please visit www.APPpharma.com.
Forward-Looking Statement
The statements contained in this news release that are not purely
historical are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements in this news release include statements
regarding our expectations, beliefs, hopes, goals, intentions,
initiatives or strategies, including statements regarding financial
guidance for 2008 and the development and approval of product
candidates. Because these forward-looking statements involve risks and
uncertainties, there are important factors that could cause actual
results to differ materially from those in the forward- looking
statements. These factors include, but are not limited to, the
continued market acceptance and demand of new and existing products;
the difficulties or delays in developing, testing, obtaining
regulatory approval of, and producing and marketing of the company's
products; the impact of competitive products and pricing; the
availability and pricing of ingredients used in the manufacture of
pharmaceutical products; and the ability to successfully manufacture
products in a time-sensitive and cost effective manner. Additional
relevant information concerning risks can be found in APP
Pharmaceuticals Form 10-K for the year ended December 31, 2007 and
other documents it has filed with the Securities and Exchange
Commission.
The information contained in this news release is as of the date
of this release. APP assumes no obligations to update any
forward-looking statements contained in this news release as the
result of new information or future events or developments.
APP Pharmaceuticals, Inc.
Consolidated Statements of Operation
(unaudited, in thousands, except per share amounts)
Three Months Ended
March 31,
-------------------
2008 2007
--------- ---------
Net revenues:
Critical care $ 91,182 $ 84,695
Anti-infective 42,959 39,780
Oncology 11,021 11,277
Contract manufacturing 2,917 4,516
--------- ---------
Total net revenues 148,079 140,268
Cost of sales 78,017 74,831
--------- ---------
Gross profit 70,062 65,437
--------- ---------
Percent to total net revenues 47.3% 46.7%
Operating expenses
Research and development 12,330 9,964
Selling, general and administrative 21,020 22,061
Amortization of merger related intangibles 3,856 3,856
Separation related costs 391 352
--------- ---------
Total operating expenses 37,597 36,233
--------- ---------
Percent to total net revenues 25.4% 25.8%
Income from operations 32,465 29,204
Percent to total net revenues 21.9% 20.8%
Interest expense and other, net (15,737) (3,610)
--------- ---------
Income from continuing operations before income
tax 16,728 25,594
Income tax expense 7,571 11,977
--------- ---------
Income from continuing operations, net of income
tax 9,157 13,617
Loss from discontinued operations, net of tax - (2,502)
--------- ---------
Net income $ 9,157 $ 11,115
========= =========
Basic earnings (loss) per share:
Continuing operations $ 0.06 $ 0.09
========= =========
Discontinued operations $ - $ (0.02)
========= =========
Net income $ 0.06 $ 0.07
========= =========
Diluted earnings (loss) per share:
Continuing operations $ 0.06 $ 0.08
========= =========
Discontinued operations $ - $ (0.01)
========= =========
Net income $ 0.06 $ 0.07
========= =========
Weighted - average common shares outstanding:
Basic 160,273 159,356
========= =========
Diluted 161,222 160,356
========= =========
Selected ratios as a percentage of total net
revenues:
Research and development 8.3% 7.1%
Selling, general and administrative 14.2% 15.7%
APP Pharmaceuticals, Inc.
GAAP to Adjusted Earnings from Continuing Operations Reconciliation
(unaudited, in thousands, except per share amounts)
Adjusted income from continuing operations and adjusted income from
continuing operations per diluted share are defined as income from
continuing operations and diluted earnings from continuing operations
per share, respectively, in each case excluding the impact of, non-
cash stock compensation expense, separation related costs,
amortization of acquired intangible assets and merger related
intangibles and Puerto Rico pre-launch costs. We believe that our
presentation of non-GAAP financial measures provides useful
supplementary information to investors in understanding our
underlying operating performance and facilitates additional analysis
by investors. We also use non-GAAP financial measures internally for
operating, budgeting and financial planning purposes. The non-GAAP
financial measures are in addition to, and not a substitute for or
superior to, measures of financial performance calculated in
accordance with GAAP. A reconciliation of GAAP income from continuing
operations to adjusted income from continuing operations for the
three months ended March 31, 2008 is below:
March, 31
2008
---------
Income from continuing operations net of income tax $ 9,157
Stock compensation expense 1,862
Intangible amortization 2,739
Separation related costs 241
Amortization of purchased product rights 2,538
Puerto Rico pre-launch costs 5,496
---------
Adjusted income from continuing operations $ 22,033
=========
Adjusted income from continuing operations per diluted share $ 0.14
=========
Weighted - average common shares outstanding diluted 161,222
=========
Income from continuing operations per diluted share $ 0.06
Stock compensation expense 0.01
Minority interests 0.02
Separation related costs 0.00
Amortization of purchased product rights 0.02
Puerto Rico pre-launch costs 0.03
---------
Adjusted income from continuing operations per diluted share $ 0.14
=========
APP Pharmaceuticals, Inc.
Reconciliation of Income from Continuing Operations to Adjusted EBITDA
Three Months Ended March 31, 2008
(unaudited, in thousands)
We define Adjusted EBITDA from continuing operations as income from
continuing operations, excluding the impact of depreciation and
amortization, interest expense net of interest income and other
income, income tax expense, non-cash stock-based compensation
expense, separation related costs and pre-launch costs associated
with Puerto Rico manufacturing facility. We use adjusted EBITDA from
continuing operations to provide meaningful supplemental information
to investors in understanding the underlying operating performance of
the business and facilitate additional analysis by investors. We
believe that Adjusted EBITDA from continuing operations can assist
management and investors in assessing the financial operating
performance and underlying strength of our core business. Adjusted
EBITDA from continuing operations is not a recognized term under GAAP
and should not be considered in isolation of, or as a substitute for,
the information prepared and presented in accordance with GAAP.
Because not all companies calculate Adjusted EBITDA from continuing
operations identically, our definition of Adjusted EBITDA from
continuing operations may not be comparable to similarly titled
measures of other companies.
March, 31
2008
---------
Income from continuing operations net of income tax $ 9,157
Depreciation 4,492
Amortization 7,994
Interest expense, net of interest income 16,245
Provision for income taxes from continuing operations 7,571
---------
EBITDA from continuing operations 45,459
Stock-based compensation expense 3,015
Puerto Rico pre-launch costs, net of depreciation 4,946
Separation related costs 391
---------
Adjusted EBITDA from continuing operations $ 53,811
=========
APP Pharmaceuticals, Inc.
Consolidated Condensed Balance Sheets
(In thousands)
March 31, December 31,
2008 2007
----------- ------------
Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 60,837 $ 31,788
Accounts receivable, net of allowances 65,303 85,209
Inventories 161,545 149,191
Prepaid expenses and other current assets 11,523 13,531
Current receivables from related parties - 6,996
Income tax receivable 5,648 -
Deferred income taxes 14,507 17,109
----------- ------------
Total current assets 319,363 303,824
Property, plant and equipment, net 131,323 132,528
Intangible assets, net of accumulated
amortization 455,659 463,154
Goodwill 160,239 160,239
Deferred financing costs and other non-
current assets, net 17,727 17,842
----------- ------------
Total assets $1,084,311 $1,077,587
=========== ============
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $ 34,450 $ 36,502
Accrued liabilities 41,662 45,595
Current payable to related parties 3,647 -
Short term portion of long term debt 8,125 5,000
----------- ------------
Total current liabilities 87,884 87,097
----------- ------------
Long-term debt 990,625 995,000
Deferred income taxes, non-current 69,788 71,011
Other non-current liabilities 11,713 4,250
----------- ------------
Total liabilities 1,160,010 1,157,358
Total stockholders' deficit (75,699) (79,771)
----------- ------------
Total liabilities and stockholders'
deficit $1,084,311 $1,077,587
=========== ============
APP Contact
Debra Lynn Ross
Director, Communications
(847) 969-8026
dross@apppharma.com
Investor and Media Inquiries
Christine Cassiano
Hill & Knowlton
(310) 633-9495
christine.cassiano@hillandknowlton.com
SOURCE: APP Pharmaceuticals, Inc.
