Second Quarter 2003 Highlights
* Revenues Increase 15% over the Prior Year Quarter to $70.8 Million
* Pharmaceutical Product Sales Increase to $45.8 Million
* Earnings Rise to $0.28 Per Diluted Share, an Increase of 33% over the
Second Quarter of 2002
* Launched Darvon(R) Compound 32, the Company's First
Darvon(R)/Darvocet(TM) Line Extension
WILMINGTON, N.C., July 23 /PRNewswire-FirstCall/ -- aaiPharma Inc.
(Nasdaq: AAII), a science-based specialty pharmaceutical company, today
reported financial results for the second quarter ended June 30, 2003.
"Our positive second quarter financial performance was driven by strong
revenue growth in our pharmaceutical products division," stated Dr. Philip S.
Tabbiner, President and Chief Executive Officer. "We are very pleased with
the strategic and operational milestones we achieved in the first six months
of 2003 which reflect our continued focus on our core strategy of being a
science-based, specialty pharmaceutical company."
Financial Results
Total revenues for the second quarter were $70.8 million, representing
organic growth of 15% above the $61.4 million recorded in the second quarter
of 2002. For the six-month period ended June 30, 2003, revenues increased 26%
to $134.8 million, compared with revenues of $107.1 million in the first half
of 2002. Net income and earnings per diluted share increased 31% to $8.0
million and 33% to $0.28, respectively, as compared to the second quarter of
2002, driven by a continued shift toward higher margin pharmaceutical
products. The Company reported net income of $15.1 million for the first half
of 2003, or $0.53 per diluted share, an increase of 85% over income before
extraordinary loss in the year ago period of $8.2 million, or $0.29 per
diluted share.
Gross margin (excluding depreciation) for the second quarter of 2003
improved 12% to $45.2 million, compared with $40.4 million last year.
Selling, general and administrative expenses represented 28% of net revenues
in the second quarter of 2003, up from 26% in the 2002 quarter, primarily
driven by the build-out of our pharmaceutical sales force. Research and
development spending was on plan at $5.6 million, or 8% of total revenues for
the quarter.
aaiPharma's strong second quarter product sales reflected market share
gains of M.V.I. Pediatric(R), increased demand for Brethine(R) injectable and
continued performance in line with expectations for our pain management
franchise. Product sales grew organically to $45.8 million, an increase of
32% versus the same period in 2002. Sequentially, product sales were up 14%
over the first quarter of 2003. Product sales, including the acquisition of
the Darvon(R)/Darvocet(TM) family late in the first quarter of 2002, increased
56% to $85.8 million in the first six months of 2003 as compared with the same
period in 2002. Product development revenues (royalties and fees) remain in
line with management's expectations at $3.9 million for the second quarter
2003. Development services revenues for the second quarter of 2003 increased
to $21.1 million, as compared to $20.3 million in the prior year period,
driven primarily by increased demand for our analytical services and contract
manufacturing capabilities.
During the second quarter of 2003, the Company paid down an additional
$8.5 million of debt, bringing the amount of debt repaid to $17.0 million for
the first six months of 2003. By the end of the quarter, the Company again
reduced its total leverage ratio as a result of increasing earnings before
interest, taxes, depreciation and amortization, and decreasing its debt
balance. At June 30, 2003, aaiPharma's cash position was $8.1 million.
Business Highlights
Subsequent to the end of the second quarter, on July 17, 2003, aaiPharma
announced the acquisition of a unique Darvocet(TM) line extension from Athlon
Pharmaceuticals. Upon FDA approval, which is expected before the end of this
year, this unique line extension is expected to be the only propoxyphene
napsylate/acetaminophen combination product on the market offering this
particular dose combination. The total propoxyphene market, generic and
branded, is valued at more than $500 million, according to 2002 Verispan data.
This new, unique Darvocet(TM) line extension is expected to add substantial
value to aaiPharma's growing pain management franchise.
On June 24, 2003, aaiPharma launched its first line extension of the
Darvon(R)/Darvocet(TM) family, Darvon(R) Compound 32 (propoxyphene
hydrochloride, aspirin and caffeine). Darvon(R) Compound 32 offers a lower
dose (i.e., 32 mg of propoxyphene) alternative to Darvon(R) Compound 65 (i.e.,
65 mg of propoxyphene), providing physicians with more options and increased
titration flexibility to aid in the management of headache pain.
"In the last fifteen months since we acquired the Darvon(R)/Darvocet(TM)
franchise from Eli Lilly & Company, we have successfully executed our strategy
to grow the prescription volume for the semi-exclusive products and slow the
decline of the genericized portion of the franchise while also progressing
with the development of key line extensions to the portfolio," indicated Dr.
Tabbiner. "Furthermore, we remain on track to launch another Darvon(R) line
extension, separate from the recently announced Darvocet(TM) acquisition,
before the end of this year. We believe that these factors, coupled with our
continued sales force expansion and targeted pain management promotional
campaigns, substantiate continued revenue growth for the
Darvon(R)/Darvocet(TM) brand family, consistent with our strategic
objectives."
On June 25, 2003, the Company filed a supplemental new drug application
(SNDA) for Brethine(R) Ampuls with the U.S. Food and Drug Administration (FDA)
seeking approval for a new and safer vial presentation of injectable
Brethine(R) and certification of aaiPharma's sterile manufacturing facility in
Charleston, South Carolina as an alternate production site for the product.
On April 16, 2003, aaiPharma announced the acquisition of the exclusive
rights to a parenterally administered methadone product, formerly branded as
Dolophine(R) Hydrochloride Injection, from Roxane Laboratories, Inc. The
Company remains on plan for re-branding this product under a new trade name
and launching it in 2003. This acquisition expands aaiPharma's pain management
product offerings into the severe pain, Schedule II class of pain products
while also complementing its existing portfolio of hospital-based injectable
products.
Outlook
The Company updated financial guidance for the 2003 third quarter by
stating that earnings per diluted share are expected to be in the range of
$0.28 to $0.30.
aaiPharma management will conduct a conference call to review the
financial results for the second quarter of 2003 tomorrow, Thursday, July 24,
2003 at 8:00 a.m., Eastern Daylight Time. A simultaneous web cast of the call
for interested investors and others may be accessed by visiting aaiPharma's
website at http://www.aaipharma.com. Presentation slides will accompany the web cast
and will be available for viewing just prior to the web cast. A replay of the
web cast will be available on this website shortly after the call through 5:00
p.m. on August 6, 2003.
About aaiPharma
aaiPharma Inc. is a science-based specialty pharmaceutical company with
more than 23 years of drug development experience. Focusing on targeted
therapeutic areas, the Company markets a growing portfolio of established
branded products and applies innovative technologies to increase the
commercial potential of these products. At the same time, aaiPharma's research
and development organization is developing a pipeline of products to position
the Company for near-term and long-term growth in its targeted therapeutic
areas. In addition to developing and marketing its own line of proprietary
pharmaceutical products, aaiPharma continues to be a leader in providing
contract pharmaceutical development services through its AAI Development
Services division. For more information on the Company, please visit us on
the web at http://www.aaipharma.com.
Forward Looking Statements
Information in this press release contains certain "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933
and Section 21E of the Securities and Exchange Act of 1934, including the
statements by Dr. Tabbiner and those pertaining to the Company's plans and
expectations as to earnings and revenues outlooks for the Company, for the
Darvon(R)/Darvocet(TM) brand family, and for its product development segment,
and as to the Company's future sales force expansion, targeted pain management
promotional campaigns, launch plans for the acquired methadone product and for
an additional Darvon(R) line extension later in 2003, uniqueness of the
acquired Darvocet(TM) product's dose combination, commercial and medical value
of the acquired Darvocet(TM) product, the acquired methadone product and
Darvon(R) Compound 32 to the medical and patient communities and to the
Company's branded pain management product portfolio, requested approvals in
its regulatory filings with the FDA, and development, commercialization,
commercial potential and growth of products and line extensions in the
Company's pipeline and its product portfolio. The "forward-looking statements"
herein involve risks and uncertainties that could cause actual results to
differ materially, including, without limitation, risks and uncertainties
pertaining to the Company's ability to timely and successfully find, acquire,
finance, develop, improve, enhance, obtain timely regulatory approval for,
maximize the value of, extend product life cycles of, conduct successful
research on, renew marketing of, and sell, on a commercially profitable basis,
pharmaceutical products without adversely affecting its client relationships
or business opportunities and without future litigation or resulting damages
or injunctive relief; the Company's ability to obtain, use, enforce, defend
and license valid and commercially valuable patents; the Company's ability to
obtain and enforce existing and future contracts with major pharmaceutical
companies for significant royalties and other consideration; the effect of
possible future acquisitions, dispositions and other strategic transactions
involving the Company; and the commercial success of the Company's
contemplated products. Additional factors that may cause the actual results
to differ materially are discussed in aaiPharma's recent filings with the
Securities and Exchange Commission, including, but not limited to, its Annual
Report on Form 10-K filed on March 28, 2003, including its Exhibit 99.1 and
other exhibits; its Form 10-Q filed on May 15, 2003; its Form 8-Ks; and its
other periodic filings.
Darvon(R), Darvocet-N(R), M.V.I. Pediatric(R), M.V.I.(R) and Brethine(R)
are registered trademarks, and Azasan(TM) and Darvocet(TM) are trademarks, of
aaiPharma Inc.
Dolophine(R) is a registered trademark of Roxane Laboratories.
aaiPharma Inc.
Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Product sales $45,752 $34,673 $85,760 $54,850
Product development (royalties & fees) 3,897 6,469 7,707 8,604
Development services 21,102 20,305 41,314 43,613
Total revenues 70,751 61,447 134,781 107,067
Operating costs and expenses:
Direct costs (excluding
depreciation):
Product sales 13,201 8,335 23,152 16,140
Development services 12,377 12,756 24,381 26,301
Total direct costs 25,578 21,091 47,533 42,441
Selling expenses 8,201 5,710 15,935 9,984
General and administrative expenses 11,289 10,161 21,318 18,919
Depreciation and amortization 2,711 2,671 5,362 4,472
Research and development 5,588 5,486 10,074 9,864
53,367 45,119 100,222 85,680
Income from operations 17,384 16,328 34,559 21,387
Other income (expense):
Interest, net (4,931) (6,553) (10,481) (8,376)
Other, net 226 69 143 203
(4,705) (6,484) (10,338) (8,173)
Income before income taxes and
extraordinary loss 12,679 9,844 24,221 13,214
Provision for income taxes 4,691 3,740 9,077 5,021
Income before extraordinary loss 7,988 6,104 15,144 8,193
Extraordinary loss, net of a tax
benefit of $2,714 -- -- -- (5,339)
Net income $7,988 $6,104 $15,144 $2,854
Basic earnings (loss) per share:
Income before extraordinary loss $0.29 $0.22 $0.55 $0.30
Extraordinary loss - - - (0.20)
Net income $0.29 $0.22 $0.55 $0.10
Weighted average shares outstanding 27,621 27,365 27,590 27,236
Diluted earnings (loss) per share:
Income before extraordinary loss $0.28 $0.21 $0.53 $0.29
Extraordinary loss -- -- -- (0.19)
Net income $0.28 $0.21 $0.53 $0.10
Weighted average shares outstanding 28,488 28,565 28,442 28,580
aaiPharma Inc.
Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2003 2002
ASSETS
Current assets:
Cash and cash equivalents $8,132 $6,532
Accounts receivable, net 39,438 29,467
Work-in-progress 12,249 10,515
Inventories 15,349 17,004
Prepaid and other current assets 7,613 7,633
Total current assets 82,781 71,151
Property and equipment, net 55,968 53,125
Goodwill, net 211,759 210,792
Intangibles, net 88,168 89,078
Other assets 13,318 16,179
Total assets $451,994 $440,325
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $6,553 $5,921
Accounts payable 17,309 17,671
Customer advances 18,726 15,051
Accrued wages and benefits 7,263 6,718
Interest payable 5,026 5,232
Other accrued liabilities 6,625 5,201
Total current liabilities 61,502 55,794
Long-term debt, less current portion 259,271 277,899
Other liabilities 13,512 7,182
Stockholders' equity:
Common stock 28 27
Paid-in capital 80,140 79,049
Retained earnings 35,736 20,592
Accumulated other comprehensive
income (loss) 1,805 (218)
Total stockholders' equity 117,709 99,450
Total liabilities and
stockholders' equity $451,994 $440,325
aaiPharma Inc.
Consolidated Statements of Cash Flows
(In thousands)
Six Months Ended
June 30,
2003 2002
Cash flows from operating activities:
Income before extraordinary loss $15,144 $8,193
Adjustments to reconcile income
before extraordinary loss to
net cash provided by (used in)
operating activities:
Depreciation and amortization 5,362 4,472
Other (78) 117
Changes in operating assets and
liabilities:
Accounts receivable, net (9,735) (13,427)
Work-in-progress (1,319) (761)
Inventories 1,718 (275)
Prepaid and other assets 1,038 (12,970)
Accounts payable (527) (32)
Customer advances 3,437 3,413
Interest payable (206) 6,245
Accrued wages and benefits and
other accrued liabilities 5,898 (104)
Net cash provided by (used in)
operating activities 20,732 (5,129)
Cash flows from investing activities:
Purchases of property and equipment (6,482) (4,402)
Purchase of property and equipment
previously leased -- (14,145)
Proceeds from sales of property and equipment 389 --
Acquisitions (600) (211,997)
Other (287) (151)
Net cash used in investing activities (6,980) (230,695)
Cash flows from financing activities:
Proceeds from long-term borrowings -- 248,755
Payments on long-term borrowings (17,000) (18,400)
Proceeds from interest rate swap, net 2,678 --
Issuance of common stock 1,091 3,031
Other 1,018 170
Net cash (used in) provided by
financing activities (12,213) 233,556
Net increase (decrease) in cash and
cash equivalents 1,539 (2,268)
Effect of exchange rate changes on cash 61 109
Cash and cash equivalents, beginning of period 6,532 6,371
Cash and cash equivalents, end of period $8,132 $4,212
SOURCE aaiPharma Inc.
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Related links:
http://www.aaipharma.com
CONTACT:
investors, William L. Ginna, Jr., EVP & CFO,
or James B. Sloan, Jr., SVP, Corporate Finance, +1-910-254-7000,
or media, Andrea L. Johnston, VP, Corporate Communications,
+1-910-254-7340, all of aaiPharma Inc.
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