VANCOUVER, April 29 /PRNewswire-FirstCall/ - Angiotech Pharmaceuticals, Inc. , a global specialty pharmaceutical and medical device company, today announced its financial results for the first quarter ended March 31, 2008.
“Our various initiatives delivered results during the first quarter,” said Dr. William Hunter, President and CEO of Angiotech. “Product sales grew across all of our business lines, our promoted brands had strong revenues across the board, sales for our Quill SRS product, which continues to generate excitement in the physician community, were in line with our expectations, and our 5-FU CVC product was approved by the FDA ahead of our expected timeline.”
“We believe our first quarter financial results represent a turning point for Angiotech,” said Thomas Bailey, Chief Financial Officer of Angiotech. “We were able to deliver solid sequential revenue growth as compared to the previous quarter, which we see as a milestone given the typical seasonal quarterly patterns, and we are beginning to see improvements in our operating margins ahead of schedule.”
On April 21, 2008 Angiotech announced the suspension of enrolment in clinical studies for its Vascular Wrap(TM) product candidate, pending a safety review to evaluate an imbalance of infections observed between the two study groups. As a result of this review and the associated delays with this program, we have elected to explore alternatives for the future funding and development of the Vascular Wrap (and potentially for certain other product candidates in our research programs targeted at the management of scar formation, or stenoses, as a complication related to surgical anastomoses), including potential partnerships. We intend to pursue this strategy regardless of the outcome of the current safety data review.
As a result of this decision, we plan to immediately implement certain expense reductions, with the objective of achieving positive free cash flow (after the incurrence of net interest expense), and net profitability (on an adjusted basis, excluding certain non-cash and non-recurring items, as described below) by the fourth quarter of 2008. Our ability to achieve this objective may be impacted by the levels of royalty revenue we receive from partners, primarily Boston Scientific Corporation (BSC).
During the quarter ended March 31, 2008, we made a number of changes to our internal control systems to remediate the material weakness that had existed in financial reporting related to tax, so as to provide reasonable assurance that errors and control deficiencies of this type will not occur again in the future. This material weakness was originally described in our release dated March 13, 2008 announcing the filing of our 2007 year-end audited financial results.
Specifically, we engaged a large public accounting firm to provide additional resources and assistance with the preparation of the quarterly tax provision for the quarter ended March 31, 2008 and, with their assistance, increased the level of technical review and discussion of significant tax issues and improved the level of supporting documentation concerning such issues. It is our intention to continue to use this large accounting firm to support the preparation of our tax provision. We will continue to monitor the effectiveness of these procedures and will make any changes that we deem appropriate.
As of this date, management believes it has taken adequate steps to remediate the material control weakness. Our tax-related internal controls will continue to undergo additional testing throughout the year, and it is anticipated that such additional testing will be completed in the fourth quarter of 2008.
Several material factors and assumptions were used to derive our original and revised 2008 outlook, including: (i) estimates of medical procedure and patient population growth rates for the various end markets relating to our medical products businesses; (ii) estimates of the impact of pricing changes, pricing strategies and competition with respect to certain of our currently marketed medical products; (iii) competitive analysis and estimates of relative market share with respect to certain key product lines; (iv) estimates of revenue growth and customer composition relating to our sales of medical device components to other medical products companies; (v) analysis of the impact of our manufacturing consolidation, product sales mix, product pricing and raw materials and labor costs on cost of goods sold; (vi) estimates of selling, general and administrative expenses necessary to support our revenue growth and overall business goals; and (vii) estimates of research, clinical and related expenses necessary to support our various new product development and research programs.
Our updated outlook contains estimates of certain expenses based on non-GAAP measures, and are prepared consistent with our current and previous presentations of our historical financial information. Specifically, our outlook for research and clinical expenses, sales and marketing expenses and general and administrative expenses exclude estimates for stock based compensation expenses, for certain non-recurring expenses expected to be incurred in the first half of 2008 related to the completion of the consolidation of our Syracuse, NY operations, and for certain litigation expenses. The estimates for these certain operating expenses are inherently unpredictable or subject to significant fluctuation for reasons unrelated to our business performance.
Our financial outlook is forward-looking information, and actual results may be materially different from any results, events or developments expressed or implied by our financial outlook. We expect our financial results may vary from the outlook provided as a result of several key factors, including the progress of our various research, clinical development and product launch initiatives, the achievement of selected sales growth targets and the timing of product sales growth, the outcome of various partnering, business development and financing discussions, and the level of royalty revenues we receive from our partner BSC in future periods and the impact such results may have on our election to pursue certain discretionary aspects of our budgeted expenses in 2008. It is expected that, at the present time, we will have adequate cash and liquidity resources to execute our various research, product development and growth initiatives in 2008.
Our financial outlook is provided to give investors an assessment of our expected financial results and our future business, and may not be appropriate for other purposes. Given the risks, uncertainties and assumptions associated with such information, readers are cautioned not to place undue reliance on our financial outlook. Except as required by law, we disclaim any obligation to update our financial outlook.
Financial Information
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This press release contains the condensed financial statements derived from the unaudited consolidated interim financial statements for the three-month periods ended March 31, 2008, and 2007. Full unaudited consolidated interim financial statements and Management’s Discussion and Analysis for the three-month period ended March 31, 2008, will be filed with the relevant regulatory agencies, as well as posted on our website at www.angiotech.com.
Amounts, unless specified otherwise, are expressed in U.S. dollars. Financial results are reported under GAAP unless otherwise noted. All per share amounts are stated on a diluted basis unless otherwise noted.
Use of Certain Non-GAAP Financial Measures
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Certain financial results presented in this press release include non-GAAP measures that exclude certain items. Adjusted net loss from continuing operations, adjusted net loss per share from continuing operations and adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) exclude certain non-cash and non-recurring items such as acquisition related amortization charges, acquired in-process research and development relating to license agreements and acquisitions, stock-based compensation expense, foreign exchange gains or losses relating to translation of foreign currency cash and investment balances and other non-recurring items. Adjusted net loss from continuing operations, adjusted net loss per share from continuing operations and adjusted EBITDA also exclude litigation expenses related to defending intellectual property claims. Revenue, as adjusted, excludes non-recurring, non-operating revenue derived from license agreements and other license revenue, net of license fees due to licensors and excludes amounts accrued for costs incurred. Adjusted net loss from continuing operations, adjusted net loss per share from continuing operations, revenue, as adjusted, and adjusted EBITDA do not have any standardized meaning prescribed by GAAP and therefore may not be comparable to similar measures presented by other issuers. Management uses these non-GAAP or adjusted operating measures to establish operational goals, and believes that these measures may assist investors in analyzing the underlying trends in our business over time. Investors should consider these non-GAAP measures in addition to, not as a substitute for, or as superior to, financial reporting measures prepared in accordance with GAAP. We have provided a reconciliation of these measures to GAAP in the attached tables.
The financial outlook referred to above presents certain forward-looking, non-GAAP financial information for which at this time there is no calculable comparable GAAP measure. As a result, such non-GAAP financial information cannot be quantitatively reconciled to comparable GAAP financial information. Specifically, the estimates for certain operating expenses referred to above exclude estimates of certain expenses that are inherently unpredictable or subject to significant fluctuation for reasons unrelated to our business performance, including stock-based compensation expenses, certain litigation expenses and foreign exchange gains or losses.
Conference Call Information
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A conference call to discuss these financial results will be held today, Tuesday, April 29, 2008 at 8:00 AM PT (11:00 AM ET).
A replay archive of the conference call will be available until May 6, 2008 by calling (888) 286-8010 (in North America) or (617) 801-6888 (International) and entering passcode 15562521.
A live webcast will be available to all interested parties through the Investors section of Angiotech’s website: www.angiotech.com
Statements contained in this press release that are not based on historical fact, including without limitation statements containing the words “believes,” “may,” “plans,” “will,” “estimate,” “continue,” “anticipates,” “intends,” “expects” and similar expressions, constitute “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and constitute “forward-looking information” within the meaning of applicable Canadian securities laws. All such statements are made pursuant to the “safe harbor” provisions of applicable securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our strategies or future actions, our targets, expectations for our financial condition and the results of, or outlook for, our operations, research development and product and drug development. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Many such risks, uncertainties and other factors are taken into account as part of our assumptions underlying these forward-looking statements and include, among others, the following: general economic and business conditions, both nationally and in the regions in which we operate; market demand; technological changes that could impact our existing products or our ability to develop and commercialize future products; competition; existing governmental regulations and changes in, or the failure to comply with, governmental regulations; adverse results or unexpected delays in drug discovery and clinical development processes; decisions, and the timing of decisions, made by health regulatory agencies regarding approval of our technology and products; the requirement for substantial funding to conduct research and development, to expand commercialization activities or consummate acquisitions or to service or repay debt obligations; the accuracy of our estimations of the size of the market, and the potential market, for our products in specific disease areas; sales numbers and future guidance publicly provided by Boston Scientific Corporation regarding sales of their paclitaxel-eluting coronary stent products; and any other factors that may affect performance. In addition, our business is subject to certain operating risks that may cause the actual results expressed or implied by the forward-looking statements in this report to differ materially from our actual results. These operating risks include: our ability to attract and retain qualified personnel; our ability to successfully complete preclinical and clinical development of our products; changes in business strategy or development plans; our failure to obtain patent protection for discoveries; loss of patent protection resulting from third party challenges to our patents; commercialization limitations imposed by patents owned or controlled by third parties; our ability to obtain rights to technology from licensors; liability for patent claims and other claims asserted against us; our ability to obtain and enforce timely patent and other intellectual property protection for our technology and products; the ability to enter into, and to maintain, corporate alliances relating to the development and commercialization of our technology and products; market acceptance of our technology and products; our ability to successfully manufacture, market and sell our products; the ability of Boston Scientific Corporation to successfully manufacture, market and sell their paclitaxel-eluting coronary stent products; the continued availability of capital to finance our activities; our ability to achieve the financial benefits expected as a result of the acquisition of American Medical Instruments Holdings, Inc.; and any other factors referenced in our annual information form and other filings with the applicable Canadian securities regulatory authorities or the Securities and Exchange Commission. Given these uncertainties, assumptions and risk factors, readers are cautioned not to place undue reliance on such forward-looking statements. We disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained in this press release to reflect future results, events or developments.
Angiotech Pharmaceuticals, Inc. is a global specialty pharmaceutical and medical device company with over 1,500 dedicated employees. Angiotech discovers, develops and markets innovative treatment solutions for diseases or complications associated with medical device implants, surgical interventions and acute injury. To find out more about Angiotech please visit our website at www.angiotech.com.
CONTACT: Deirdre Neary, Manager, Investor Relations and Corporate Communications, Angiotech Pharmaceuticals, Inc., (604) 222-7056, dneary@angio.com; Sage Baker, Investor Relations and Corporate Communications, Angiotech Pharmaceuticals, Inc., (604) 221-6933, sbaker@angio.com
CONTACT: Deirdre Neary, Manager, Investor Relations and Corporate
Communications, Angiotech Pharmaceuticals, Inc., (604) 222-7056,
dneary@angio.com; Sage Baker, Investor Relations and Corporate
Communications, Angiotech Pharmaceuticals, Inc., (604) 221-6933,
sbaker@angio.com
