LA JOLLA, Calif., Feb. 23 /PRNewswire/ -- Advanced Tissue Sciences, Inc.
(Nasdaq: ATIS) today announced its financial results for the fourth quarter
and year ended December 31, 1999. Total revenues were $8.9 million for the
fourth quarter ended December 31, 1999 as compared to $6.3 million for the
fourth quarter ended December 31, 1998. Revenues for the year ended
December 31, 1999 and 1998 were $42.8 million and $20.5 million, respectively.
Revenues in the fourth quarter and year ended December 31, 1999 include the
recognition of $2.2 million and $16.4 million, respectively, related to
payments previously received relating to the expansion of the Company's
Dermagraft Joint Venture with Smith & Nephew plc and the acquisition of
licensing rights by Inamed Corporation for certain aesthetic and
reconstructive surgery applications.
The Company reported a net loss to common stockholders for the fourth
quarter ended December 31, 1999 of $8.2 million or $0.15 per common share as
compared to $9.0 million or $0.23 per common share for the fourth quarter
ended December 31, 1998. The net loss to common stockholders for the year
ended December 31, 1999 was $21.9 million or $0.45 per share compared to
$43.9 million or $1.11 per share for the year ended December 31, 1998. The
net loss to common stockholders includes the Company's share in the losses of
joint ventures of $6.2 million and $4.9 million for the fourth quarter ended
December 31, 1999 and 1998, respectively. The Company's share in the losses
of joint ventures was $21.6 million for the year ended December 31, 1999 as
compared to $17.6 million for the year ended December 31, 1998. These amounts
represent the Company's share of losses of its Dermagraft and Cartilage Joint
Ventures with Smith & Nephew.
Separately, total combined third-party customer sales by both the
Dermagraft Joint Venture and the Company for the fourth quarter and year ended
December 31, 1999 were $668,000 and $2.6 million, respectively, which compares
to $402,000 and $1.7 million in the corresponding periods of 1998. These
figures include TransCyte(TM) sales for the fourth quarter and year ended
December 31, 1999 of $587,000 and $2.2 million, respectively, which compares
to $369,000 and $1.4 million in the corresponding periods of 1998. As
previously reported, the sales and marketing of TransCyte was transferred to
the Dermagraft Joint Venture in October 1998.
As of December 31, 1999, the Company had cash, cash equivalents and
short-term investments of approximately $26.1 million. In addition, in
January 2000, the Company received $7.0 million from the exercise of warrants
to purchase 1,750,000 shares of Common Stock at $4.00 per share. These
warrants were a component of the units sold pursuant to a public offering in
November 1999.
Advanced Tissue Sciences and Smith & Nephew also announced they have
agreed in principle to restructure certain payments associated with their
Dermagraft Joint Venture as a result of delays in the commercial introduction
of Dermagraft(R) in the United States. The requirement for the on-going
clinical trial by the U.S. Food and Drug Administration has substantially
increased the partners' investments necessitating the restructuring. In light
of the continuing investments required by both partners, the objective of the
restructuring is to defer the potential payments of certain milestones by
Smith & Nephew while providing Advanced Tissue Sciences a royalty stream and
an opportunity for an increase in its long-term return from the venture.
Specifically, except for $10 million in regulatory approval and
reimbursement milestones related to Dermagraft in the treatment of diabetic
foot ulcers, Advanced Tissue Sciences has agreed to make all other approval,
reimbursement and sales milestones subject to, and payable from, joint venture
earnings exceeding certain minimum levels. In return, the Dermagraft Joint
Venture will pay Advanced Tissue Sciences royalties on joint venture product
sales. Other than these changes, revenues and expenses of the Dermagraft
Joint Venture will continue to be shared. In addition, as a part of the
agreement, Advanced Tissue Sciences will sell the Dermagraft manufacturing
assets that it currently owns to a company jointly owned with Smith & Nephew,
and will also sell its raw material inventories to the joint venture.
Advanced Tissue Sciences and Smith & Nephew also agreed that certain of
the proceeds from the sale of the Company's manufacturing plant assets and raw
material inventory discussed above will be used to pay down a portion of the
outstanding balance of the loan from Smith & Nephew related to the Cartilage
Joint Venture. The remaining outstanding principal and interest due at the
June 30, 2000 maturity will be paid in Advanced Tissue Sciences' common stock
at the then current market price for the common stock.
In a joint statement, Arthur J. Benvenuto, Chairman and Chief Executive
Officer of Advanced Tissue Sciences, and Chris O'Donnell, Chief Executive of
Smith & Nephew, stated, "It is our belief that this restructuring is in the
best interests of both partners, providing each with the opportunity and
incentive to make the joint venture successful. Despite our delays in
obtaining U.S. regulatory approval for Dermagraft, both partners continue to
be encouraged by the product's clinical performance. We continue to be
committed to the partnership and to obtaining long-term value for our
respective shareholders."
In summarizing the restructuring, Mr. Benvenuto added, "While the
restructuring has benefits to both partners, specific benefits to Advanced
Tissue Sciences now include a stream of royalty payments. It also
consolidates the ownership of the manufacturing plant and preserves our cash
through the repayment of the loan related to the cartilage joint venture with
common stock and net proceeds from the restructuring. The restructuring does
not change our ability to use the manufacturing plant to produce products for
other strategic alliances using fibroblast-based products, such as our
alliance with Inamed. Additionally, this gives us an opportunity to achieve a
higher overall return."
Advanced Tissue Sciences is a tissue engineering company utilizing its
proprietary core technology to develop and manufacture human-based tissue
products for tissue repair and transplantation. The Company has two joint
ventures with Smith & Nephew. The first covers the application of Advanced
Tissue Sciences' tissue engineering technology for skin wounds and includes
Dermagraft(R) for the treatment of diabetic foot ulcers, TransCyte(TM) for the
temporary covering of second and third-degree burns and future developments
for venous ulcers, pressure ulcers, burns and other non-aesthetic wound care
treatments. The second joint venture is developing tissue-engineered
orthopedic cartilage, initially focusing on the repair of cartilage in knee
joints. The Company also has a strategic alliance with Inamed Corporation for
the development and marketing of several of Advanced Tissue Sciences'
human-based, tissue-engineered products for aesthetic and certain
reconstructive applications. In addition, the Company is developing products
for cardiovascular applications.
Smith & Nephew is a leading worldwide medical device company with a highly
successful track record in developing, manufacturing and marketing a wide
variety of innovative and technologically advanced tissue repair products,
primarily in the areas of bone, joints, skin and other soft tissue. Smith &
Nephew have extensive marketing and distribution capabilities, with an
established sales force in more than 90 countries.
Statements in this press release that are not strictly historical may be
"forward-looking" statements which involve risks and uncertainties. No
assurances can be given that the Company will successfully develop its
products, complete clinical trials, obtain regulatory approvals (or that any
such approvals will be obtained on a timely basis), or be able to manufacture
or successfully commercialize such products. In particular, the Company will
need to successfully complete an additional controlled clinical trial for
Dermagraft in the treatment of diabetic foot ulcers and submit a revised
premarket approval application to the U.S. Food and Drug Administration.
Actual results may differ from those described in this press release due to
risks and uncertainties that exist in the Company's operations, including,
without limitation, the ability to obtain additional financing to continue
operations when needed, a history of operating losses and accumulated
deficits, the Company's reliance on collaborative relationships, and
uncertainties related to clinical trials, the ability to obtain the
appropriate regulatory approvals, patent protection, and market acceptance, as
well as other risks detailed from time to time in publicly available filings
with the Securities and Exchange Commission such as Advanced Tissue Sciences'
Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. The
Company undertakes no obligation to release publicly the results of any
revision to these forward-looking statements to reflect events or
circumstances arising after the date hereof.
Advanced Tissue Sciences, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
1999 1998 1999 1998
(Unaudited) (Unaudited)
Revenues:
Product sales
Related parties (1) $3,533 $4,242 $13,717 $10,927
Others (2) -- -- -- 1,035
Contracts and fees (3) 5,367 2,042 29,086 8,519
Total revenues 8,900 6,284 42,803 20,481
Costs and expenses:
Research and development 4,008 3,306 16,300 15,096
Selling, general and
administrative 2,467 2,721 11,095 14,884
Cost of goods sold (1) 3,533 4,040 13,717 15,135
Total costs and
expenses 10,008 10,067 41,112 45,115
Income (loss) from
operations before
equity in losses
of joint ventures (1,108) (3,783) 1,691 (24,634)
Equity in losses of
joint ventures (6,209) (4,922) (21,558) (17,628)
Loss from operations (7,317) (8,705) (19,867) (42,262)
Other income (expense),
net (819) 14 (1,439) (1,023)
Net loss (8,136) (8,691) (21,306) (43,285)
Dividends on preferred
stock (64) (297) (558) (578)
Net loss applicable
to common stock $(8,200) $(8,988) $(21,864) $(43,863)
Basic and diluted loss
per common share $(0.15) $(0.23) $(0.45) $(1.11)
Weighted average shares 54,900 39,903 48,507 39,373
Condensed Consolidated Balance Sheets
(In thousands)
December 31,
1999 1998
(Unaudited)
Assets:
Cash, cash equivalents
and short-term
investments (4) $26,079 $23,054
Other current assets 7,621 5,776
Property, net 16,627 20,624
Other assets (5) 8,536 4,531
Total assets $58,863 $53,985
Liabilities and
stockholders' equity:
Current liabilities $23,049 $8,388
Long-term liabilities 9,351 28,070
Redeemable preferred
stock 5,040 5,000
Stockholders' equity 21,423 12,527
Total liabilities and
stockholders' equity $58,863 $53,985
(1) Product sales to related parties include sales of Dermagraft(R) and
TransCyte(TM) to a joint venture between the Company and Smith &
Nephew plc at cost.
(2) Product sales to others include sales of TransCyte to outside
customers in the United States by the Company for the year ended
December 31, 1998. Since October 1998, TransCyte has been sold to
outside customers exclusively through the Dermagraft Joint Venture,
and, accordingly, sales since that time have been reflected in the
joint venture's separate financial statements and not included herein.
(3) Contract revenues for the fourth quarter and year ended December 31,
1999 include the recognition of $1.4 million and $15 million,
respectively, relating to a milestone payment received in January 1999
in conjunction with an expansion of the Company's Dermagraft Joint
Venture with Smith & Nephew. Similarly, $863,000 and $1.4 million of
the $5 million in payments received for the licensing of certain
product applications to Inamed have been recognized as revenue in the
fourth quarter and year ended December 31, 1999, respectively, as the
related financial commitments have been made.
(4) In January 2000, the Company received an additional $7 million from
the exercise of warrants to purchase 1,750,000 shares of common stock
at $4.00 per share.
(5) Includes $5 million in restricted cash received in connection with the
Company's November 1999 public offering. The restricted cash is
reserved for the redemption of the Company's Series B Preferred Stock
submitted for conversion at or below $3.58 per share.
SOURCE Advanced Tissue Sciences, Inc.
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800-758-5804, ext. 532975
CONTACT:
Jana Stoudemire, Senior Director, Corporate
Communications, of Advanced Tissue Sciences, Inc., 858-713-7802
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