Eyetech Pharmaceuticals, Inc. Reports Third Quarter 2005 Financial Results
Published: Nov 01, 2005
NEW YORK, Oct. 31 /PRNewswire-FirstCall/ -- Eyetech Pharmaceuticals, Inc. , a biopharmaceutical company that specializes in the development and commercialization of novel therapeutics to treat diseases of the eye, today reported its consolidated financial results for the third quarter of 2005. Key results and developments included:
* Total revenue was $67.4 million. Net product revenue for Macugen was $55.5 million, an 18% increase over the previous quarter. GAAP net loss was $5.2 million, compared to a GAAP net loss of $24.7 million for the comparable period in 2004. The GAAP net loss included a $5.3 million non-cash charge for restricted stock primarily issued in June 2005 and $2.7 million of merger and other non-recurring charges. Excluding these charges, Eyetech achieved operating profitability during the quarter, with non-GAAP net income of $2.8 million. * On August 21, 2005, Eyetech entered into a definitive merger agreement with OSI Pharmaceuticals, Inc. , whereby OSI has agreed to acquire Eyetech. On November 10, 2005, Eyetech will hold a special meeting of stockholders to vote on the acquisition by OSI. Assuming a positive vote, Eyetech anticipates that the transaction will close shortly thereafter. (Logo: http://www.newscom.com/cgi-bin/prnh/20050407/EYETLOGO )
"Macugen continued to capture an increasing share of a growing market, allowing Eyetech to achieve operating profitability for the first time, excluding certain charges," noted David R. Guyer, M.D., Chief Executive Officer of Eyetech. "We have set a solid financial foundation as we approach our next phase of growth and development as part of OSI Pharmaceuticals."
Macugen is the most prescribed treatment for neovascular age-related macular degeneration (neovascular AMD), with more than 50,000 patients treated since the product was launched in January 2005. Twice as many patients were treated with Macugen than with photodynamic therapy during July, according to the most recent data from Verispan, a firm that tracks physician claims submitted to Medicare and private insurers. More than 138,000 patients were treated for neovascular AMD year-to-date through July, a 44% increase over the same period in 2004.
"Recently published data provide new insight into Macugen's efficacy in patients with early disease, and also points to Macugen's potential in the treatment of diabetic eye complications," noted Paul Chaney, Chief Operating Officer of Eyetech. A retrospective analysis published in the October/November issue of Retina suggests that treatment with Macugen may provide better results in patients with early stage neovascular AMD. Results of a Phase 2 study of Macugen for the treatment of diabetic macular edema (DME) were published in the October issue of Ophthalmology.
The clinical development program for Macugen continues. Eyetech and Pfizer have completed enrollment of a Phase 2 study of Macugen for the treatment of retinal vein occlusion (RVO). As announced earlier this month, Eyetech and Pfizer enrolled the first patient in a Phase 3 study of Macugen for the treatment of DME and diabetic retinopathy. During the quarter, Eyetech and Pfizer also announced that they expect the European Medicines Agency to approve Macugen for the treatment of neovascular AMD, based on a positive opinion from an advisory committee.
Eyetech will not hold a conference call to discuss quarterly results. Third Quarter 2005 Financial Highlights Three Months Ended September 30, 2005 2004 Revenue: Gross product revenue $58,649 $--- Less: Distribution service fees, allowance and returns (3,171) --- Net product revenue 55,478 --- License fees 3,061 1,408 Reimbursement of development costs 7,678 12,058 Other revenue 1,161 --- Total revenue $67,378 $13,466 * For the third quarter of 2005, total revenue was $67.4 million. Gross product revenue from Macugen was $58.6 million, while net product revenue was $55.5 million. On September 30, we estimate that there was less than two weeks of Macugen supply in the wholesale distribution network, which is consistent with prior periods. * Collaboration revenues were $10.8 million for the third quarter of 2005, compared to $13.5 million for the same period in 2004. Collaboration revenue in the third quarter of 2005 comprises $7.7 million in reimbursement of development costs from Pfizer Inc and $3.1 million from the amortization of deferred license fees, compared to $12.1 million and $1.4 million, respectively, for the same period in 2004. * Cost of goods sold for the third quarter of 2005 includes costs associated with the manufacture of Macugen, royalty expenses and other fees. Royalty expenses are paid under our agreements with Gilead Sciences, Isis Pharmaceuticals and Nektar Therapeutics and are based on net Macugen sales. Gross margins on net sales of Macugen continued at 79% in the third quarter of 2005. * Research and development expenses were $23.3 million for the third quarter of 2005, compared to $25.9 million for the same period in 2004. The change in research and development expenses was primarily attributable to a $3.0 million reduction in licensing fees incurred in connection with regulatory filings in 2004 and a $2.4 million reduction in manufacturing related costs, which prior to the approval of Macugen had been included in research and development expenses. These reductions were partially offset by an increase of $3.4 million in expenditures related to clinical trials for the use of Macugen in the treatment of neovascular AMD, DME and retinal vein occlusion (RVO) and pre-trial costs for a Phase 4 combination trial of Macugen and Visudyne versus Macugen, as well as discovery and development of other product candidates. * Sales and marketing expenses increased to $10.7 million for the third quarter of 2005 from $9.3 million for the same quarter in 2004. The increase in sales and marketing expenses of $1.4 million was primarily related to an increase of $3.1 million in expenses relating to our sales field force and a non-cash charge for the restricted stock, which was offset by a reduction of $1.7 million incurred in non-personnel promotional and marketing expenses from the same period in 2004. * General and administrative expenses were $6.9 million for the third quarter of 2005, compared to $4.0 million for the same quarter in 2004. General and administrative expense in the third quarter of 2005 includes $2.0 million of expenses related to our pending merger with OSI Pharmaceuticals, a $2.1 million non-cash charge for restricted stock and a $0.7 million write-off of previously capitalized assets related to changes in our manufacturing build plan. * Collaboration profit sharing of $22.0 million consists of Pfizer's share of net product sales of Macugen less cost of goods sold within the United States. * GAAP net loss attributable to common stockholders decreased to $5.2 million for the third quarter of 2005, compared to $24.7 million for the same period in 2004. The GAAP net loss of $5.2 million in 2005 included a non-cash charge of $5.3 million related to the restricted stock primarily issued in June 2005, merger expenses of $2.0 million and other non-recurring charges of $0.7 million. Excluding these charges, we had non-GAAP net income for the third quarter of $2.8 million. * Basic and diluted net loss per common share for the quarter ended September 30, 2005, was $0.12, compared to $0.60 in 2004. * On September 30, 2005, Eyetech had $231.5 million in cash, cash equivalents and marketable securities. Accounts receivable and inventory totaled $92.6 million and $10 million, respectively, at September 30, 2005. Outlook
For the year ending December 31, 2005, we maintain our forward-looking guidance for net product revenue from the sale of Macugen at a range of $175-$190 million and anticipate a continued trend toward profitability in the fourth quarter.
Eyetech Pharmaceuticals, Inc. is a biopharmaceutical company that specializes in the development and commercialization of novel therapeutics to treat diseases of the eye. Eyetech's initial focus is on diseases affecting the back of the eye. Eyetech is commercializing and further developing Macugen(R) (pegaptanib sodium injection) with Pfizer Inc for the treatment of neovascular AMD. Macugen is also being studied for other indications, including DME, diabetic retinopathy and RVO.
Additional Information About the Merger and Where to Find It
OSI and Eyetech have entered into a definitive merger agreement whereby OSI has agreed to acquire Eyetech. OSI filed a registration statement on Form S-4 with the Securities and Exchange Commission (SEC) containing a proxy statement/prospectus in connection with the proposed merger. The registration statement has been declared effective and the proxy statement/prospectus has been mailed to the stockholders of Eyetech to consider and vote upon the proposed merger at a special meeting scheduled for November 10, 2005. Investors and stockholders are urged to carefully read the proxy statement/prospectus and other relevant materials filed with the SEC because they contain important information about OSI, Eyetech, the merger, and other related matters. Investors and stockholders may obtain free copies of these documents and other documents filed with the SEC at the SEC's web site at http://www.sec.gov. These documents can also be obtained for free from OSI by directing a request to OSI Investor Relations at 631-962-2000 and for free from Eyetech by directing a request to Eyetech Investor Relations at 212-824- 3100.
Participants in the Merger
OSI, Eyetech and their respective executive officers, directors and other members of management or employees may be deemed to be participants in the solicitation of proxies from Eyetech stockholders with respect to the transactions contemplated by the merger agreement. Information regarding OSI's executive officers and directors is available in OSI's Annual Report on Form 10-K for the year ended September 30, 2004 and its proxy statement dated February 2, 2005 for its 2005 Annual Meeting of Stockholders, which are filed with the SEC. Information regarding Eyetech's executive officers and directors is available in Eyetech's Annual Report on Form 10-K for the year ended December 31, 2004, its proxy statement dated April 11, 2005 for its 2005 Annual Meeting of Stockholders and its Current Report on Form 8-K dated June 15, 2005, which are filed with the SEC. You can obtain free copies of these documents from OSI and Eyetech using the contact information above. Additional information regarding interests of such participants are included in the registration statement containing the proxy statement/prospectus that has been filed with the SEC and is available free of charge as indicated above.
In addition, in connection with the execution of the merger agreement, Dr. David Guyer, Eyetech's Chief Executive Officer, Paul G. Chaney, Eyetech's Chief Operating Officer, and Dr. Anthony P. Adamis, Eyetech's Chief Scientific Officer, have entered into letter agreements with OSI setting forth the terms under which these individuals will continue their employment with OSI following the merger. Furthermore, in connection with the execution of the merger agreement, Eyetech's Board of Directors authorized the payment of transaction completion bonuses in the aggregate amount of $350,000. The recipients of these bonuses, and the amounts they may receive, are determined by Eyetech's Board of Directors based on the recommendation of its Compensation Committee. Such recipients may include executive officers of Eyetech. Additional information regarding these arrangements and the interests of such participants is included in the registration statement containing the proxy statement/prospectus that has been filed with the SEC and is available free of charge as indicated above.
Safe Harbor Statement
This press release contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this press release regarding our strategy, future operations, future clinical trials, future financial position, future sales, future revenues, future profitability, projected costs, prospects, plans and objectives of management are forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Various important factors could cause actual results or events to differ materially from the forward-looking statements that we make, including risks related to the closing of the pending merger with OSI, continued acceptance of Macugen by the medical community, by patients receiving therapy and by third party payors; supplying sufficient quantities of Macugen to meet anticipated market demand; our dependence on third parties to manufacture Macugen; the impact of competitive products and potentially competitive product candidates; our dependence on our strategic collaboration with Pfizer; obtaining, maintaining and protecting the intellectual property incorporated into our product candidates; new information arising out of clinical trial results; successful recruitment of patients for the clinical development of Macugen in other indications; successful outcomes in the further clinical development of Macugen; regulatory approval of Macugen for other indications; and the success of Macugen's recent launch generally. These and other risks are described in greater detail in the "Risk Factors" section of the proxy statement/prospectus on Form S-4 filed by OSI Pharmaceuticals, Inc. with the United States Securities and Exchange Commission. Our forward-looking statements do not reflect the potential impact of any future acquisitions, our pending acquisition by OSI, dispositions, joint ventures or investments we may make. We do not assume any obligation to update any forward-looking statements.
EYETECH PHARMACEUTICALS, INC. Condensed Consolidated Statements of Operations (All amounts in thousands) (Unaudited) Quarter Ended Nine Months Ended September 30, September 30, 2005 2004 2005 2004 Gross product revenue $58,649 $- $133,725 $- Less: Distribution service fees, allowance and returns (3,171) - (7,594) - Net product revenue 55,478 - 126,131 - Collaboration revenue 11,900 13,466 32,932 37,729 Total revenue 67,378 13,466 159,063 37,729 Costs and expenses: Cost of goods sold 11,640 - 26,158 - Research and development 23,326 25,879 67,388 81,723 Sales and marketing 10,698 9,342 33,062 19,320 Collaboration profit sharing 22,005 - 50,226 - General and administrative 6,921 3,962 15,365 9,924 Total costs and expenses 74,590 39,183 192,199 110,967 Operating loss (7,212) (25,717) (33,136) (73,238) Interest income, net 2,010 1,000 5,477 2,488 Loss before income taxes (5,202) (24,717) (27,659) (70,750) Provision for income taxes - - - - Net loss (5,202) (24,717) (27,659) (70,750) Preferred stock accretion - - - (816) Net loss attributable to common stockholders $(5,202) $(24,717) $(27,659) $(71,566) Basic and diluted net loss per common share $(0.12) $(0.60) $(0.64) $(1.97) Weighted average common shares outstanding 43,801 40,912 43,349 36,294 Pro forma basic and diluted net loss per common share $(1.83) Pro forma weighted average common shares outstanding 39,059
Each outstanding share of preferred stock of the company automatically converted into one share of common stock upon completion of the company's initial public offering in February 2004. Accordingly, pro forma basic and diluted net loss per common share has been calculated assuming the preferred stock was converted as of the original date of issuance of the preferred stock. Pro forma common shares outstanding for the quarter ended September 30, 2004 of 39,059 is based on the conversion of 2,765 shares of our convertible preferred stock on a weighted average basis as of September 30, 2004. All shares were converted at September 30, 2005 and have been included in the weighted average common shares outstanding.
EYETECH PHARMACEUTICALS, INC. Condensed Consolidated Balance Sheets (All amounts in thousands) (Unaudited) September 30, December 31, 2005 2004 Cash and cash equivalents $40,664 $40,780 Marketable securities 190,814 170,715 Other current assets 114,796 99,834 Net fixed assets and other assets 37,964 28,130 Total assets $384,238 $339,459 Current liabilities $93,197 $41,294 Long-term liabilities 8,159 7,321 Deferred revenue, less current portion 149,820 159,706 Stockholders' equity 133,062 131,138 Total liabilities and stockholders' equity $384,238 $339,459
The press release contains both GAAP and non-GAAP financial measures for the three months ended September 30, 2005. The non-GAAP financial measure included in the press release is GAAP net income excluding $5.3 million of non-cash restricted stock charges, $2.0 million of direct merger costs and $0.7 million of other non-recurring expenses. The equity charge of $5.3 million is related primarily to the June 28, 2005 issuance of 1,481,611 shares of restricted stock with a purchase price of $0.01 per share to most employees and directors of the Company. The restricted stock has a one year vesting requirement. The direct merger costs of $2.0 million were incurred for due diligence activities related to the proposed acquisition of the Company by OSI Pharmaceuticals, Inc., such as external accounting and legal fees. The non- recurring expenses of $0.7 million related to changes in our manufacturing build plan. Non-GAAP financial measures should be considered in addition to, and not as a substitute for, or superior to, financial measures prepared in accordance with GAAP. The table of reconciliation is attached.
The press release includes non-GAAP financial measures because our management uses this information to monitor and evaluate Eyetech's operating results and trends on an on-going basis. Our management believes the non-GAAP information is also useful for investors because the charges relating to the recently issued restricted stock and direct merger related expenses are both unusual due to their size and infrequency. Consequently, excluding those items from our net income provides users of the financial statements an important insight into our operating results and related trends that affect our business. In addition, our management uses non-GAAP financial information and measures internally for operating, budgeting and financial planning purposes.
EYETECH PHARMACEUTICALS, INC. Condensed Consolidated Statements of Operations (All amounts in thousands) (Unaudited) Quarter Ended September 30, 2005 Merger Other Non-cash related non- Non- GAAP compensation costs recurring GAAP Net product revenue $55,478 $- $- $- $55,478 Collaboration revenue 11,900 - - - 11,900 Total revenue 67,378 - - - 67,378 Costs and expenses: Cost of goods sold 11,640 - - - 11,640 Research and development 23,326 1,819 - - 21,507 Sales and marketing 10,698 1,387 - - 9,311 Collaboration profit sharing 22,005 - - - 22,005 General and administrative 6,921 2,061 2,015 701 2,145 Total costs and expenses 74,590 5,268 2,015 701 66,607 Operating loss (7,212) (5,268) (2,015) (701) 771 Interest income, net 2,010 - - - 2,010 Loss before income taxes (5,202) (5,268) (2,015) (701) 2,781 Provision for income taxes - - - - - Net loss (5,202) (5,268) (2,015) (701) 2,781 Preferred stock accretion Net loss attributable to common stockholders $(5,202) $(5,268) $(2,015) $(701) $2,781 Basic and diluted net loss per common share $(0.12) Weighted average common shares outstanding 43,801Photo: http://www.newscom.com/cgi-bin/prnh/20050407/EYETLOGOEyetech Pharmaceuticals, Inc.
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