FREMONT, Calif., May 2 /PRNewswire-FirstCall/ -- Protein Design Labs, Inc.
(PDL) (Nasdaq: PDLI) today reported a net loss of $83.9 million, or $0.87 per
basic and diluted share, for the three months ended March 31, 2005, compared
with a net loss of $12.6 million, or $0.13 per basic and diluted share, for
the three months ended March 31, 2004. Excluding certain non-cash charges
described in more detail below, the non-GAAP net loss for the first quarter of
2005 would have been $2.7 million, or $0.03 per basic and diluted share,
compared with a non-GAAP net loss of $12.0 million, or $0.13 per basic and
diluted share in the 2004 first quarter. Results for the period include
financial performance for ESP Pharma, Inc. (ESP Pharma) for the brief
operating period from March 23, 2005, the closing date of the previously
announced acquisition, through the end of the calendar quarter.
Total operating revenues in the first three months of 2005 were $38.8
million, an increase of 40% over total revenues of $27.6 million in the first
three months of 2004. The largest contributor to this revenue growth was a
51% increase in royalties, which totaled $33.2 million in the 2005 first
quarter, compared with royalty revenues of $22.0 million in the 2004 first
quarter. License and other revenues of $4.7 million in the first quarter of
2005 decreased from $5.6 million in the same three months in 2004. In
addition, as a result of the ESP Pharma acquisition, PDL recognized net
product sales revenues, which totaled $0.9 million for the last six days of
the 2005 first quarter. PDL product revenues for the period reflected net
sales of Cardene(R) IV for the control of hypertension when oral therapy is
neither feasible or desirable; IV Busulfex(R), a conditioning agent used in
connection with bone marrow transplants; and four off-patent branded products.
Sales of Retavase(R), a product acquired in connection with the ESP Pharma
acquisition, were not recorded in the quarter due to the timing of the product
transition to ESP Pharma.
As of March 31, 2005, PDL had cash, cash equivalents, marketable
securities and restricted investments totaling approximately $183.7 million,
compared with $397.1 million at December 31, 2004. The March 31, 2005
balances reflected approximately $435 million in expenditures in the first
quarter of 2005 related to the ESP Pharma and Retavase acquisitions, repayment
of outstanding indebtedness of ESP Pharma of approximately $14 million, and
planned capital expenditures of approximately $16.0 million in the quarter,
which included approximately $8.0 million related to planned ongoing
construction and validation of PDL's manufacturing plant at Brooklyn Park,
Minnesota. PDL received net proceeds of approximately $242 million from its
February 2005 placement of convertible senior notes.
Total costs and expenses were $123.5 million in the first quarter of 2005,
compared with $41.1 million in the same three months of 2004. Excluding
certain non-cash charges, which consisted primarily of an acquired in-process
research and development charge of $79.4 million related to the ESP Pharma
acquisition, as well as the amortization of intangible assets associated with
the Eos Biotechnology, Inc. and ESP Pharma acquisitions and the re-acquisition
of rights to manufacture and market Zenapax(R) (daclizumab) in 2003, and
stock-based compensation charges, non-GAAP total costs and expenses in the
2005 first quarter would have been $42.3 million compared to non-GAAP expenses
of $40.5 million for the first quarter of 2004.
Research and development expenses increased slightly to $35.3 million in
the 2005 first quarter, compared with $33.0 million in the same three months
of 2004. The increase in research and development expenses reflected
additional headcount and associated costs required to pursue research and
clinical development programs, contract manufacturing and direct scale-up and
manufacturing expense, and increased facility and equipment-related costs.
Selling, general and administrative expenses of $7.7 million were essentially
unchanged in the first quarter of 2005 compared to the first quarter of 2004.
Reconciliations of PDL's GAAP results to non-GAAP results are included in
the financial results tables accompanying this release.
Recent Corporate Developments
On March 24, 2005, PDL announced that it had completed its acquisition of
ESP Pharma, a privately held, hospital-focused pharmaceutical company. ESP
Pharma was founded in April 2002 around the acquisition of several
therapeutics from Wyeth, including ESP Pharma's leading product, Cardene IV.
Under the terms of the ESP Pharma acquisition agreement, all shares of ESP
Pharma common and preferred stock were exchanged for 9,853,770 shares of PDL
common stock and $325 million in cash. PDL also completed, through the
purchase of ESP Pharma, the acquisition of certain product rights and assets
relating to Retavase (reteplase) from Centocor, Inc., a biopharmaceutical
operating company of Johnson & Johnson. Centocor received $110 million for
the rights to manufacture, develop, market and distribute Retavase in the
United States and Canada. Additional milestone payments of up to $45 million
will be made if additional conditions relating to the ongoing clinical trials
and manufacturing arrangements are satisfied. The total purchase price for
ESP Pharma and Retavase was approximately $582 million.
2005 Forward-looking Guidance
The following statements are based on expectations as of May 2, 2005.
These statements are forward-looking, and actual results may differ
materially. Except for those assumptions and as expressly set forth below,
these statements do not include the potential impact of new collaborations,
material licensing arrangements or other strategic transactions.
We are updating our guidance from that previously provided on March 14
with respect to our projected GAAP results, in particular as they were
expected to affect operating expenses. Specifically, our GAAP adjustments
reflect (a) elimination of estimated stock compensation expenses of $10 to $15
million as a result of recent changes in the U.S. Securities and Exchange
Commission position on the timing of mandatory stock option expense reporting
which we do not plan to adopt until January 1, 2006; (b) adjustment to the
estimated amount of acquired in-process research and development expenses
related to the purchase of ESP Pharma and Retavase which we have decreased to
$79.4 million from approximately $88 million; and (c) adjustment of the
amortization of intangibles related to the acquisitions of Eos, ESP Pharma,
Retavase and to our February 2005 convertible notes offering to $39 million
from approximately $31 million. Our 2005 projected non-GAAP results do not
include the foregoing expenses required under GAAP.
We are also updating our guidance from that previously provided on March
14 with respect to our projected non-GAAP results. We are not revising our
previously provided guidance on total revenues for 2005. PDL anticipates that
our total revenues will be in the range of approximately $250 to $260 million.
Royalty revenues are expected to be in the range of approximately $112 to $115
million, and license and other revenues are anticipated to be approximately
$30 million, an increase from the previously estimated $20 to $25 million.
Royalty revenue estimates do not include further royalties in 2005 based on
sales of Tysabri(R) antibody product from Biogen Idec and Elan, which is
licensed under PDL's humanization patents but was withdrawn from the market on
February 28, 2005, and we have not increased our estimated royalties based on
recently announced positive results for Genentech's Herceptin(R) or
Avastin(TM) antibody products. Consistent with our previous guidance, PDL
currently believes that royalty revenues for each year from 2006 through 2008
should grow approximately 25% per year.
On a non-GAAP basis, net product sales for Cardene(R) IV, Retavase(R) and
IV Busulfex(R) are expected to total approximately $93 to $95 million for the
approximately nine-month period of sales following the close of the
acquisition of ESP Pharma. Additionally, PDL anticipates compound annual
growth rates of approximately 25% for net product sales of this group of three
marketed products for each year from 2006 through 2008. Also for this group
of products, PDL currently anticipates gross margins of at least 80% over the
2005 through 2008 period. We are reducing our estimates for net product sales
of off-patent products from $25 million to a range of $16 to $20 million.
On a non-GAAP basis, during 2005 we anticipate research and development
expenses in the range of $181 to $183 million, a reduction from previously
estimated $184 to $186 million. We continue to expect to spend approximately
$100 million to advance our clinical development programs for Nuvion(R),
daclizumab and M200. We continue to anticipate sales and marketing expenses
in the range of $42 to $44 million resulting primarily from the ESP Pharma
acquisition. Finally, we anticipate general and administrative expenses for
the full year 2005 in the range of $33 to $36 million, an increase from $31 to
$33 million.
In addition, we expect interest income of approximately $7 million and
interest expense of approximately $8 million.
Overall, for the full year 2005 we anticipate a GAAP net loss in the range
of approximately $1.30 to $1.37 per basic and diluted share, and a non-GAAP
net loss in the range of approximately $0.17 to $0.25 per basic and diluted
share.
PDL now estimates that its year-end cash balances will be approximately
$180 million, a change from the prior estimate of $200 million. This estimate
takes into account anticipated capital expenditures of $38 to $42 million,
approximately half of which represents final validation and completion of our
new Brooklyn Park, Minnesota manufacturing facility; cash payments during 2005
of $325 million and $110 million for the acquisitions of ESP Pharma and
Retavase, respectively; the receipt of approximately $242 million from the
February 2005 sale of convertible notes, net of fees and expenses; and the
repayment of approximately $14 million in ESP Pharma-related debt.
By year-end 2005, we estimate that our headcount will be in the range of
900 to 950, split approximately 70% in research and development, 15% in sales
and marketing and 15% in general and administrative functions.
Clinical Development Update
Nuvion(R) (visilizumab, anti-CD3). On March 22, PDL reported that it had
discussed with the U.S. Food and Drug Administration (FDA) the future
development pathway for Nuvion for the treatment of intravenous steroid-
refractory ulcerative colitis.
Following these discussions, PDL now expects to conduct two pivotal
clinical trials and a retreatment study of Nuvion in the setting of
intravenous steroid-refractory ulcerative colitis. The first pivotal study
will be a Phase II / III clinical trial and is expected to begin this year.
Assuming certain protocol-defined criteria are met at the time of the interim
analysis, the second pivotal trial would be initiated. PDL anticipates
initiating the retreatment study at the time of the Phase II / III study. The
proposed protocols are expected to be reviewed in detail by the FDA. PDL
expects to provide a further development update by the end of May 2005.
Additional data from an ongoing Phase I / II study of Nuvion will be
presented in an oral presentation by Stephan A. Targan, M.D., Director,
Cedars-Sinai Division of Gastroenterology and Professor, UCLA School of
Medicine, on May 17 beginning at 11:30 a.m. at the Digestive Disease Week
meeting to be held in Chicago.
Daclizumab (Zenapax(R), anti-CD25). PDL began in the first quarter of
2005 a single-dose Phase I study of PDL-manufactured daclizumab administered
subcutaneously in healthy volunteers. This trial is expected to be followed
by a multiple-dose study in healthy volunteers anticipated to be initiated
this summer. A Phase II dose range-finding study of subcutaneously
administered, PDL-manufactured daclizumab in asthma patients remains on
schedule to begin in the first quarter of 2006. PDL also continues to
evaluate the opportunity to develop daclizumab further in the setting of solid
organ transplantation.
A randomized, placebo-controlled, Phase II study of daclizumab in patients
with multiple sclerosis is pending initiation. We anticipate the first
patient accrual in the second quarter of 2005. In this study, patients with
active relapsing forms of MS will receive subcutaneous daclizumab at one of
two dosage levels, or placebo, for six months in addition to their current
beta-interferon treatment. The three-arm study is planned to enroll a total
of 270 patients.
Ularitide. PDL on April 18 reported positive results from a Phase II
clinical study, known as the SIRIUS II trial, of the atrial natriuretic
peptide ularitide in patients with decompensated congestive heart failure
(DHF).
The SIRIUS II trial was a randomized, double-blind, placebo-controlled
clinical trial conducted at 19 centers in Europe. Primary endpoints in the
study were change of pulmonary capillary wedge pressure (PCWP) and change in
dyspnea (shortness of breath) score, both at six hours. A total of 221
patients were randomized equally to receive ularitide 7.5, 15, or 30 ng/kg/min
given intravenously as a 24-hour infusion, or placebo. In the assessment of
the primary endpoints, ularitide significantly reduced PCWP (p<0.05) and
improved dyspnea score (p<0.05) in all three dose groups compared to placebo.
The main adverse events through day three were dose-dependent decreases in
blood pressure compared to placebo. Serum creatinine levels were unchanged
during and after ularitide treatment when compared to placebo. The incidence
of serious adverse events was similar for all three treatment groups and the
placebo group.
The SIRIUS II clinical trial was conducted by CardioPep Pharma GmbH.
Through the ESP Pharma acquisition, PDL acquired from CardioPep exclusive
rights to conduct all subsequent development and exclusive marketing rights
for ularitide for all indications in the United States, Canada, the European
Union and Switzerland. To date, the clinical development of ularitide has
taken place in Europe. A U.S. Investigational New Drug (IND) application has
not yet been filed by CardioPep.
M200 (volociximab, anti-alpha5beta1 integrin antibody). Currently, M200
is being developed as an anti-angiogenic therapy for the treatment of solid
tumors in open-label pilot Phase II studies. These trials, each of up to 40
patients, will further assess the tolerability of prolonged administration of
M200 and look for evidence of clinical activity. Three clinical trials have
now been opened and are enrolling patients. An additional pilot Phase II
study is expected to open in the second quarter of 2005. Data from at least
two of the initial Phase II studies is expected to be available for
presentation during the ASCO meeting in June 2006.
In addition, PDL is planning a pilot Phase II trial of M200 administered
intravenously in patients with age-related macular degeneration (AMD), which
is expected to begin during the second half of 2005.
Terlipressin. PDL and privately held Orphan Therapeutics, LLC on April 20
reported that the FDA had granted Fast Track status to the development of
terlipressin for the treatment of patients with type 1 hepatorenal syndrome
(HRS).
Designation as a Fast Track product indicates that the FDA will facilitate
the development and expedite the review of a new drug that is intended to
treat a serious or life-threatening condition and that demonstrates the
potential to address an unmet medical need. However, Fast Track designation
does not mean that the FDA will expedite approval of the product nor does it
increase the likelihood of approval of the product.
Through its acquisition of ESP Pharma, PDL acquired from Orphan
Therapeutics exclusive marketing, sales and distribution rights for
terlipressin in the United States and Canada. Orphan Therapeutics holds the
U.S. IND for terlipressin and is conducting a Phase III clinical trial in the
United States and Europe. Orphan Therapeutics has obtained Orphan Drug status
for this program.
Webcast Information
PDL will webcast a conference call live at 4:30 p.m. Eastern time today to
review its financial results for the first quarter ended March 31, 2005, the
status of its clinical development programs and its forward-looking
information and guidance with respect to future results. Financial and
statistical information to be discussed in the call will be available on the
PDL website immediately prior to the commencement of the call. A link to the
conference call webcast will be available through the PDL website:
http://www.pdl.com. Please connect to this website at least 15 minutes prior to the
conference call to ensure adequate time for any software download that may be
needed to hear the webcast. The webcast will be archived at http://www.pdl.com
starting approximately one hour after completion of the webcast. A replay of
the conference call will also be available by telephone from approximately 7
p.m. Eastern time on May 2 through 11:59 p.m. Eastern time on May 6, 2005. To
access the replay, dial 800-633-8284 from inside the United States and
402-977-9140 from outside the United States and enter conference ID number
21245638.
The foregoing contains forward-looking statements involving risks and
uncertainties and PDL's actual results may differ materially from those,
express or implied, in the forward-looking statements. The forward-looking
statements include our expectations regarding financial results and the timing
of clinical developments as well as other statements regarding our
expectations. Factors that may cause differences between current expectations
and actual results include, but are not limited to, the following: The
successful integration of ESP Pharma and Retavase as part of PDL; fluctuations
in sales that may result from our integration of newly acquired operations,
from changes in the market due to alternative treatments or other actions by
competitors; and variability in expenses particularly on a quarterly basis,
due, in principal part, to total headcount of the organization and the timing
of expenses. In addition, PDL revenues depend on the success and timing of
sales of our licensees and partners, including in particular the continued
successful launch of Avastin(TM) antibody product by Genentech as well as the
seasonality of sales of Synagis(R) from MedImmune, Inc. In addition,
quarterly revenues may be impacted by our ability to maintain and increase our
revenues from collaborative arrangements such as our co-development agreement
with Roche. Our revenues and expenses would also be affected by new
collaborations, material patent licensing arrangements or other strategic
transactions.
Further, there can be no assurance that results from completed and ongoing
clinical studies, described above, will be successful or that ongoing or
planned clinical studies will be completed or initiated on the anticipated
schedules. Other factors that may cause our actual results to differ
materially from those, express or implied, in the forward-looking statements
in this press release are discussed in our filings with the Securities and
Exchange Commission. PDL expressly disclaims any obligation or undertaking to
release publicly any updates or revisions to any forward-looking statements
contained herein to reflect any change in our expectations with regard thereto
or any change in events, conditions or circumstances on which any such
statements are based.
About PDL
Protein Design Labs is a fully-integrated biopharmaceutical company
focused on the development and commercialization of novel therapies for
treatment of inflammation and autoimmune diseases, acute cardiac conditions
and cancer. As a leader in the development of humanized antibodies, PDL has
licensed its patents to numerous pharmaceutical and biotechnology companies,
some of which are now paying royalties on net sales of licensed products. PDL
markets several biopharmaceutical products in the United States through its
wholly-owned subsidiary, ESP Pharma, Inc. Further information on PDL is
available at http://www.pdl.com or by contacting James R. Goff, Senior Director, PDL
Corporate Communications, (510) 574-1421 or jgoff@pdl.com.
NOTE: Protein Design Labs, the PDL logo and Nuvion are registered U.S.
trademarks of Protein Design Labs, Inc. Zenapax is a registered trademark of
Roche. Cardene is a registered trademark of Roche Palo Alto. Retavase and
Busulfex are registered trademarks of ESP Pharma, Inc., a wholly-owned
subsidiary of PDL. Synagis is a registered U.S. trademark of MedImmune, Inc.
Herceptin is a registered U.S. trademark and Avastin is a trademark of
Genentech, Inc. Tysabri is a trademark of Elan.
PROTEIN DESIGN LABS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data )
Three months ended March 31,
2005 2004
Revenues:
Product sales, net $948 $--
Royalties 33,164 22,010
License and other 4,703 5,618
Total revenues 38,815 27,628
Costs and expenses:
Costs of product sales 1,137 --
Research and development 35,261 33,029
Selling, general and administrative 7,666 8,068
Acquired in-process research and
development 79,417 --
Total costs and expenses 123,481 41,097
Operating loss (84,666) (13,469)
Interest and other income, net 2,935 2,284
Interest expense (2,142) (1,385)
Loss before income taxes (83,873) (12,570)
Provision for income taxes 22 48
Net loss $(83,895) $(12,618)
Basic and diluted net loss per share $(0.87) $(0.13)
Shares used in computation of basic and
diluted net loss per share 96,754 94,000
CONSOLIDATED BALANCE SHEET DATA
(Unaudited)
March 31, December 31,
2005 2004*
(In thousands) (unaudited)
Cash, cash equivalents, marketable
securities, and restricted investments $183,666 $397,080
Total assets 1,048,777 713,732
Total stockholders' equity 470,543 412,510
* Derived from the December 31, 2004 audited consolidated financial
statements.
PROTEIN DESIGN LABS, INC.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
We use non-GAAP amounts that exclude charges related to acquired in-
process research and development and certain other non-cash charges, including
amortization of intangible assets, and stock-based compensation, as well as
other non-recurring charges, such as costs incurred in connection with the
extinguishment of our debt and restructuring charges. Management believes
that these non-GAAP measures enhance an investor's overall understanding of
our financial performance and future prospects by reconciling more closely to
the actual cash expenses of the company in its operations, as well as
excluding expenses that, in management's view, are unrelated to our core
operations, the inclusion of which may make it more difficult for investors
and financial analysts reporting on the company to compare our results from
period to period. Our management uses these non-GAAP financial measures along
with the most directly comparable GAAP financial measures in evaluating the
company's operating performance and for budgeting and planning purposes.
(In thousands, except per share data)
Three months ended March 31,
2005 2004
GAAP Adjustment Non-GAAP GAAP Adjustment Non-GAAP
Revenues:
Product
sales, net $948 $948 $-- $--
Royalties 33,164 33,164 22,010 22,010
License and
other 4,703 4,703 5,618 5,618
Total
revenues 38,815 38,815 27,628 27,628
Costs and
expenses:
Costs of
product
sales 1,137 $(1,060)(1) 77 -- --
Research
and
development 35,261 (713)(2) 34,548 33,029 $(619)(2) 32,410
Selling,
general and
admini-
strative 7,666 (23)(2) 7,643 8,068 (14)(2) 8,054
Acquired
in-process
research and
development 79,417 (79,417)(3) -- -- -- --
Total costs
and
expenses 123,481 (81,213) 42,268 41,097 (633) 40,464
Operating
loss (84,666) 81,213 (3,453) (13,469) 633 (12,836)
Interest and
other income,
net 2,935 -- 2,935 2,284 -- 2,284
Interest
expense (2,142) -- (2,142) (1,385) -- (1,385)
Loss before
income
taxes (83,873) 81,213 (2,660) (12,570) 633 (11,937)
Provision
for income
taxes 22 -- 22 48 -- 48
Net loss $(83,895) $81,213 $(2,682)$(12,618) $633 $(11,985)
Basic and
diluted net
loss per
share $(0.87) $(0.03) $(0.13) $(0.13)
Shares used in
computation
of basic and
diluted net
loss per
share 96,754 96,754 94,000 94,000
(1) To exclude the ongoing, non-cash amortization of acquired product
rights related to the ESP and Retavase acquisitions.
(2) To exclude (i) the ongoing, non-cash amortization of acquired
intangible assets, including workforce, related to the Eos acquisition, and
core technology, related to the purchase of certain patent rights from Roche
and (ii) stock-based compensation charges related to modifications of stock
options and stock options issued to non-employees.
(3) To exclude the non-cash charges of acquired in-process research and
development, which relate to the ESP acquisition and the purchase of certain
technology, that has not achieved technological feasibility.
SOURCE Protein Design Labs, Inc.
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Related links:
http://www.pdl.com
CONTACT:
James R. Goff, Senior Director, Corporate
Communications of Protein Design Labs, Inc., +1-510-574-1421, or
jgoff@pdl.com
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