Biosite Announces Settlement of Patent Litigation With Roche
SAN DIEGO, July 26 /PRNewswire-FirstCall/ -- Biosite(R) Incorporated
(Nasdaq: BSTE) today reported financial results for the second quarter of
2006. The quarter was marked by a 45 percent increase in sales of Biosite's
non-BNP cardiovascular products, compared with the same quarter of 2005,
and by continued market leadership of the Triage(R) BNP Test, which is
primarily used to aid in the diagnosis of heart failure. The Company also
announced that it has resolved all outstanding patent litigation with Roche
Diagnostics and several of its affiliates (Roche).
Under the terms of a settlement agreement announced today, Biosite and
Roche have each agreed to file appropriate requests to dismiss their
respective complaints pending in Federal District Courts in Indianapolis
and San Diego. In addition to dismissal of the legal actions, the
settlement involves a worldwide, royalty-free, non-exclusive cross-license
of the patents involved in the two pending cases. As part of the
cross-license agreement Biosite has also agreed to make a one-time license
payment to Roche of $8.5 million.
The Company noted that second quarter GAAP and Non-GAAP earnings and
operating income included expense of $2.9 million, or $0.10 per diluted
share, related to the portion of the license payment to Roche pertaining to
prior sales. The remainder of the license payment will be recognized in the
future based on actual sales of the affected products through 2013.
Key Financial Results
* Revenues for the second quarter of 2006 totaled $77.8 million, a
5 percent increase from $73.8 million in the comparable period of 2005.
The increase in revenues was primarily attributed to growth in sales
unit volumes of the Triage BNP Tests and Triage Profiler Panels. The
Company also benefited from a lower-than-expected decline in the
average sales price of the Triage BNP Tests in the second quarter of
2006. In addition, sales from international operations for the
second quarter of 2006 increased 32 percent, compared with the
second quarter of 2005, and accounted for 15 percent of total product
sales.
* For the second quarter of 2006, GAAP diluted earnings per share was
$0.43, and Non-GAAP diluted earnings per share was $0.70, including in
each case the $0.10 effect of the one-time license payment to Roche.
By comparison, in the second quarter of 2005 the Company's diluted
earnings per share was $0.76.
* Non-GAAP results in the first half of 2006 exclude the impact of
FAS 123R, Share-Based Payment, which relates to the expensing of
non-cash stock-based compensation, such as stock options. The Company
adopted FAS 123R as of January 1, 2006 on a modified prospective basis.
See the tables included at the end of this release for a reconciliation
of Non-GAAP financial results to GAAP financial results. See also
"About Non-GAAP Financial Measures" below.
* GAAP operating income for the second quarter of 2006 was $13.2
million. Non-GAAP operating income for the second quarter of
2006 was $19.6 million. In the comparable period of 2005, operating
income was $21.7 million.
* Cash generated from operations was $6.6 million for the second quarter
of 2006, a decline from the second quarter of 2005. The decrease was
primarily related to fluctuations in accounts receivables resulting
from the timing of distributor orders and to higher payments of
estimated taxes in the second quarter of 2006 compared with 2005.
Following are financial highlights pertaining to revenues and cash flow
for the quarters ended June 30, 2006 and 2005:
($ in 000's)
Three months ended Six months ended
6/30/06 6/30/05 Change 6/30/06 6/30/05 Change
Triage(R) BNP
Test sales $50,678 $49,058 3% $103,242 $98,829 4%
Other
cardiovascular
product sales 13,266 9,146 45% 25,372 17,208 47%
Other product
sales 12,428 13,694 (9%) 25,915 26,357 (2%)
Total product
sales 76,372 71,898 6% 154,529 142,394 9%
Total revenues 77,767 73,764 5% 157,099 145,610 8%
Cash flow from
operations $6,566 26,752 (75%) $37,590 $58,394 (36%)
Cash used for
stock repurchases --- --- 30,000 ---
6/30/06 12/31/05 Change
Cash and
marketable
securities
balance $138,844 $132,412 5%
"The second quarter was on track with our expectations," said Kim
Blickenstaff, Biosite chairman and chief executive officer. "We are pleased
with the continued solid performance and stability in our BNP franchise and
with growth in our other cardiovascular products.
"As for our litigation with Roche, we believe the settlement is a
reasonable trade-off against the expense and management time that would
have been required to prevail over an opponent with far greater resources
than ours."
Financial Guidance Update
Commenting on expectations for 2006, Biosite management updated its
2006 total revenue target to $316 million from $318 million, citing a mild
softness in its drugs of abuse testing business and revisions to launch
timelines for its potential myeloperoxidase (MPO) products. The Company has
also updated its Non-GAAP diluted earnings per share target from $3.34 to
approximately $3.30 to reflect the net effect of its settlement with Roche.
Biosite's GAAP diluted earnings per share target remains at $2.30.
See the Biosite Incorporated Guidance Data table included at the end of
this release for additional details regarding the Company's financial
guidance data, a reconciliation of Non-GAAP financial guidance to GAAP
financial guidance and a description of certain factors that could affect
the Company's actual financial results. See also "About Non-GAAP Financial
Measures" below.
Research and Development
In the area of research and development, the Company confirmed that it
continues to make progress in development of a sepsis panel and has
initiated activities aimed at enrolling clinical trial sites to commence a
study that is intended to support a future regulatory submission. The
Company also continued to advance projects related to the development of a
test for protein-C and acute kidney injury panel.
Biosite also presented selected data on its MPO assay earlier today at
the American Association of Clinical Chemistry meeting currently underway
in Chicago. The data demonstrate that Biosite's assay performs consistently
in blood or plasma samples and can detect elevated levels of MPO which are
associated with major adverse cardiac events within 30 days of
presentation. Biosite filed a 510(k) premarket notification for its MPO
assay with the U.S. Food and Drug Administration earlier this year.
Litigation Background
In November 2004, Roche Diagnostics Corporation, together with certain
of its affiliates, filed a complaint in the United States District Court,
Southern District of Indiana, Indianapolis Division alleging Biosite is
infringing two patents, U.S. Patent 5,366,609 and U.S. Patent 4,816,224,
owned by Roche and/or its affiliates. Also, in November 2004, Biosite filed
a complaint in the United States District Court, Southern District of
California alleging that Roche Diagnostics Corporation and Roche
Diagnostics GmbH are infringing two patents, U.S. Patent 6,174,686 and U.S.
Patent 5,795,725, owned by Biosite. Biosite later amended its complaint to
also allege infringement of one additional patent owned by Biosite, U.S.
Patent 6,939,678.
About Biosite(R) Incorporated
Biosite Incorporated is a leading bio-medical company commercializing
proteomics discoveries for the advancement of medical diagnosis. The
Company's products contribute to improvements in medical care by aiding
physicians in the diagnosis of critical diseases and health conditions.
Biosite's Triage(R) rapid diagnostics are used in more than 50 percent of
U.S. hospitals and in more than 60 international markets. Information on
Biosite can be found at http://www.biosite.com.
Investor Conference Call
Biosite will host an investor conference call to discuss financial
results and research and development progress. The call will take place
today, July 26, 2006, at 1:30 p.m. PDT. A live webcast of the call can be
accessed via the Internet at http://www.biosite.com. The phone number for U.S. and
international callers is (617) 614-3529. The conference call code for the
live call is 40366532. The call will be archived on the Biosite website for
at least 21 days. The phone replay number is (888) 286-8010. International
callers, please dial (617) 801-6888. Please reference the conference call
code 42427503.
About Non-GAAP Financial Measures
This press release contains financial results and guidance that
excludes the effects of FAS 123R, Share-Based Payment, which relates to
stock-based compensation, and is not in accordance with U.S. generally
accepted accounting principles (GAAP). The Company believes that this
non-GAAP financial measure provides meaningful supplemental information to
both management and investors that is indicative of the Company's core
operating results and facilitates comparison of operating results across
reporting periods. The Company uses this non-GAAP measure when evaluating
its financial results as well as for internal resource management, planning
and forecasting purposes. This non-GAAP measure should not be viewed in
isolation from or as a substitute for the Company's financial results or
guidance in accordance with GAAP. Assumptions regarding the valuation of
stock-based compensation and the timing of events, such as the issuance of
new stock-based compensation awards and the realization of tax benefits,
may differ from actual results. For more information, please see the
guidance table included at the end of this release.
Forward Looking Statements
This press release contains forward-looking statements that involve
risks and uncertainties that could cause actual results to differ
materially from any future results, performance or achievements expressed
or implied by such statements. Examples of forward-looking statements are
financial targets and growth objectives and also include but are not
limited to statements that are preceded by, followed by, or that include
the words "will"; "believes"; "should"; "intend"; "anticipates"; "plans";
"expects"; "estimates"; or similar statements. Forward-looking statements
in this press release include statements regarding the Company's expected
financial performance for the 2006 fiscal year, such as anticipated
revenues and earnings per share, and the Company's plans to complete the
development of a sepsis panel and commence a clinical trial for a potential
sepsis product. Risks and uncertainties include risks associated with
Biosite's ability to commence and complete clinical trials as currently
planned; Biosite's ability to adequately respond to the FDA's questions
regarding the pending 510(k) filing for MPO; Biosite's ability to complete
the development of a satisfactory Protein C test; Biosite's ability to
obtain regulatory approvals and complete other pre-market activities needed
to launch new products as currently planned, including the MPO test, a
sepsis panel, a panel for acute kidney injury and a Protein C test;
Biosite's ability to effectively promote and market acceptance of any new
products; the continued growth of the BNP market generally, including the
physician office market; and other risks associated with changing market
conditions and the effect of competition from companies with greater
capital and resources. Other risks that should be considered are detailed
in the Company's most recent Annual Report on Form 10-K and other SEC
filings. The Company disclaims, however, any intent or obligation to update
these forward-looking statements. Copies of the Company's SEC filings are
available from the Investor Relations department or from the Company's
website.
Biosite(R), Cardio Profiler(R), Triage(R) and New Dimensions in
Diagnosis(R) are registered trademarks of Biosite Incorporated.
Biosite Incorporated
Unaudited Statements of Income Data - GAAP
(in thousands, except per share data and margins)
Three months ended Six months ended
June 30, June 30,
2006 2005 % Change 2006 2005 % Change
Total revenues:
Product sales $76,372 $71,898 6% $154,529 $142,394 9%
Contract revenue 1,395 1,866 (25%) 2,570 3,216 (20%)
Total revenues 77,767 73,764 5% 157,099 145,610 8%
Gross margin on
product sales 69% 68% 70% 70%
Operating expenses:
Cost of product
sales 23,437 23,015 2% 46,542 43,255 8%
Selling,
general and
administrative 24,836 18,515 34% 48,802 37,072 32%
Research and
development 13,144 10,192 29% 26,842 20,960 28%
License and
patent disputes 3,101 343 804% 3,142 552 469%
Total operating
expenses 64,518 52,065 24% 125,328 101,839 23%
Operating income 13,249 21,699 (39%) 31,771 43,771 (27%)
Operating income as
% of total revenue 17% 29% 20% 30%
Interest and other
income, net 994 515 93% 2,242 574 291%
Income before
provision for
income taxes 14,243 22,214 (36%) 34,013 44,345 (23%)
Provision for
income taxes (6,321) (8,242) (23%) (13,534) (16,581) (18%)
Net income $7,922 $13,972 (43%) $20,479 $27,764 (26%)
Diluted earnings
per share $0.43 $0.76 (43%) $1.11 $1.52 (27%)
Diluted shares
used in
calculating
per share amounts 18,275 18,343 18,434 18,282
Share-based compensation expense for stock options and the employee stock
purchase plan recorded in accordance with FAS 123R for continuing
operations:
Cost of
product sales $781 $-- $1,003 $--
Selling,
general and
administrative 3,827 -- 7,849 --
Research and
development 1,787 -- 3,597 --
Subtotal $6,395 $-- $12,449 $--
Tax benefit (1,778) -- (3,417) --
Total $4,617 $-- $9,032 $--
Biosite Incorporated
Unaudited Statements of Income Data - Non-GAAP
(in thousands, except per share data and margins)
NOTE: Non-GAAP results exclude the impact of FAS 123R, which relates to
the expensing of non-cash stock-based compensation
Three months ended Six months ended
June 30, June 30,
2006 2005 % Change 2006 2005 % Change
Total revenues:
Product sales $76,372 $71,898 6% $154,529 $142,394 9%
Contract revenue 1,395 1,866 (25%) 2,570 3,216 (20%)
Total revenues 77,767 73,764 5% 157,099 145,610 8%
Gross margin on
product sales 70% 68% 71% 70%
Operating expenses:
Cost of product
sales 22,656 23,015 (2%) 45,539 43,255 5%
Selling,
general and
administrative 21,009 18,515 13% 40,953 37,072 10%
Research and
development 11,357 10,192 11% 23,245 20,960 11%
License and
patent disputes 3,101 343 804% 3,142 552 469%
Total operating
expenses 58,123 52,065 12% 112,879 101,839 11%
Operating income 19,644 21,699 (9%) 44,220 43,771 1%
Operating income as
% of total revenue 25% 29% 28% 30%
Interest and other
income, net 994 515 93% 2,242 574 291%
Income before
provision for
income taxes 20,638 22,214 (7%) 46,462 44,345 5%
Provision for
income taxes (8,099) (8,242) (2%) (16,951) (16,581) 2%
Net income $12,539 $13,972 (10%) $29,511 $27,764 6%
Diluted earnings
per share $0.70 $0.76 (8%) $1.62 $1.52 7%
Diluted shares
used in
calculating
per share amounts 18,023 18,343 18,231 18,282
Biosite Incorporated
Unaudited Reconciliation of Consolidated Statements of Income Data - Non-GAAP
to Consolidated Statements of Income Data - GAAP
(in thousands, except per share data and margins)
Three months ended Three months ended
June 30, 2006 June 30, 2005
Non-GAAP Adjmts GAAP Non-GAAP Adjmts GAAP
Total revenues:
Product sales $76,372 $-- $76,372 $71,898 $-- $71,898
Contract
revenue 1,395 -- 1,395 1,866 -- 1,866
Total
revenues 77,767 -- 77,767 73,764 -- 73,764
Gross margin on
product sales 70% (1%) 69% 68% 0% 68%
Operating expenses:
Cost of product
sales 22,656 781 [a] 23,437 23,015 -- 23,015
Selling,
general and
administrative 21,009 3,827 [a] 24,836 18,515 -- 18,515
Research and
development 11,357 1,787 [a] 13,144 10,192 -- 10,192
License and
patent disputes 3,101 -- 3,101 343 -- 343
Total
operating
expenses 58,123 6,395 64,518 52,065 -- 52,065
Operating income 19,644 (6,395) 13,249 21,699 -- 21,699
Operating income
as % of
total revenue 25% (8%) 17% 29% 0% 29%
Interest and other
income, net 994 -- 994 515 -- 515
Income before
provision for
income taxes 20,638 (6,395) 14,243 22,214 -- 22,214
Provision for
income taxes (8,099) 1,778 [a] (6,321) (8,242) -- (8,242)
Net income $12,539 $(4,617) $7,922 $13,972 $-- $13,972
Diluted earnings
per share $0.70 $(0.27) $0.43 $0.76 $-- $0.76
Diluted shares
used in
calculating
per share
amounts 18,023 252 18,275 18,343 -- 18,343
[a] - Adjustments to exclude from Non-GAAP financial measures the impact
of FAS 123R, which relates to the expensing of non-cash stock-based
compensation, beginning the first quarter of 2006
Biosite Incorporated
Unaudited Reconciliation of Consolidated Statements of Income Data - Non-GAAP
to Consolidated Statements of Income Data - GAAP
(in thousands, except per share data and margins)
Six months ended Six months ended
June 30, 2006 June 30, 2005
Non-GAAP Adjmts GAAP Non-GAAP Adjmts GAAP
Total revenues:
Product sales $154,529 $-- $154,529 $142,394 $-- $142,394
Contract
revenue 2,570 -- 2,570 3,216 -- 3,216
Total
revenues 157,099 -- 157,099 145,610 -- 145,610
Gross margin on
product sales 71% (1%) 70% 70% 0% 70%
Operating expenses:
Cost of product
sales 45,539 1,003 [a] 46,542 43,255 -- 43,255
Selling,
general and
administrative 40,953 7,849 [a] 48,802 37,072 -- 37,072
Research and
development 23,245 3,597 [a] 26,842 20,960 -- 20,960
License and
patent disputes 3,142 -- 3,142 552 -- 552
Total
operating
expenses 112,879 12,449 125,328 101,839 -- 101,839
Operating income 44,220 (12,449) 31,771 43,771 -- 43,771
Operating income
as % of
total revenue 28% (8%) 20% 30% 0% 30%
Interest and other
income, net 2,242 -- 2,242 574 -- 574
Income before
provision for
income taxes 46,462 (12,449) 34,013 44,345 -- 44,345
Provision for
income taxes (16,951) 3,417 [a] (13,534) (16,581) -- (16,581)
Net income $29,511 $(9,032) $20,479 $27,764 $-- $27,764
Diluted
earnings
per share $1.62 $(0.51) $1.11 $1.52 $-- $1.52
Diluted shares
used in
calculating
per share
amounts 18,231 203 18,434 18,282 -- 18,282
[a] - Adjustments to exclude from Non-GAAP financial measures the impact
of FAS 123R, which relates to the expensing of non-cash stock-based
compensation, beginning the first quarter of 2006
Biosite Incorporated
Selected Product Data
(in thousands, except margins and %'s)
Sales by Product:
Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006
Triage(R) Drugs
of Abuse
Products $10,283 $11,341 $12,408 $11,018 $11,547 $10,464
Triage Cardiac
Panel l5,985 6,439 7,142 6,629 6,616 7,188
Triage BNP Tests 49,771 49,058 43,892 46,893 52,564 50,678
Triage Profiler
Products 1,946 2,226 2,852 3,465 4,036 4,598
Triage D-Dimer
Test 131 481 757 1,489 1,417 1,450
Triage Parasite
Panel 255 283 355 269 286 337
Triage C.
difficile Panel 1,349 1,377 942 988 1,029 1,088
Triage Meter 776 693 538 724 625 539
Triage Stroke
Panel (EU) -- -- 2 15 37 30
Total Product
Sales $70,496 $71,898 $68,888 $71,490 $78,157 $76,372
International
Sales:
Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006
International
Sales as % of
Product Sales 13% 12% 12% 13% 14% 15%
BNP International
Sales as % of
BNP Total Sales 10% 9% 9% 10% 11% 11%
Margin by Product
Type (a), (b):
Q1 2005 Q2 2005 Q3 2005 Q4 2005 Q1 2006 Q2 2006
Triage Drugs
of Abuse
Product Line 82% 78% 82% 81% 79% 77%
Triage
Cardiovascular
Product Line
(incl. BNP) 72% 69% 69% 70% 71% 70%
(a) These margins do not include all products. The Triage Meter, Triage
Micro Product Line and Triage Stroke Panel are not included.
(b) Includes the impact of FAS 123R, which relates to the expensing of
non-cash stock-based compensation, beginning the first quarter of 2006
Biosite Incorporated
Unaudited Balance Sheet Data - GAAP
(in thousands)
June 30, 2006 December 31, 2005
Unaudited
Assets
Cash, cash equivalents &
marketable securities $138,844 $132,412
Accounts receivable 35,589 30,303
Inventories 32,097 32,627
Other current assets 8,602 9,422
Total current assets 215,132 204,764
Property, equipment and leasehold
improvements, net 152,483 151,018
Patents and license rights, net 4,941 4,764
Other assets 10,994 7,380
Total assets $383,550 $367,926
Liabilities and Stockholders' Equity
Current liabilities $39,091 $39,104
Long-term liabilities 10,800 13,457
Stockholders' equity 333,659 315,365
Total liabilities and
stockholders' equity $383,550 $367,926
Biosite Incorporated
Guidance Data
(in thousands, except per share data, margins and %'s)
The financial guidance provided below is an estimate based on information
available as of July 26, 2006. The Company's future performance and
financial results are subject to risks and uncertainties, and actual
results could differ materially from the guidance set forth below. Some
of the factors that could affect the Company's actual financial results
are stated above in the section entitled "Forward Looking Statements" and
in the Company's filings with the SEC. The Company assumes no obligation
to update the guidance set forth below.
Three months ended September 30, 2006
Non-GAAP Estimate Adjustments (a) GAAP Estimate
BNP product sales $49,500 -- $49,500
Total product sales $76,000 -- $76,000
Total revenues $77,000 -- $77,000
International product
sales % of Total
product sales 15.0% -- 15.0%
Gross margin on
product sales 69.5% (1.0%) (b) 68.5%
Operating expenses
(excl. Cost of sales)
% of Revenue 41.0% 7.0% (b) 48.0%
Operating income as % of
total revenues 29.0% (8.0%) (b) 21.0%
Diluted earnings per share $0.80 $(0.26) (b) $0.54
Income tax rate 38.4% 4.0% (b) 42.4%
Cash flow from operations $20,000 -- $20,000
Year ended December 31, 2006
Non-GAAP Estimate Adjustments (a) GAAP Estimate
BNP product sales $203,000 -- $203,000
Total product sales $311,000 -- $311,000
Total revenues $316,000 -- $316,000
International sales
% of total sales 15.0% -- 15.0%
Gross margin on
product sales 70.0% (1.0%) (b) 69.0%
Operating expenses
(excl. Cost of sales)
% of Revenue 41.5% 7.0% (b) 48.5%
Operating income as
% of total revenues 29.0% (8.0%) (b) 21.0%
Diluted earnings per share $3.30 $(1.00) (b) $2.30
Income tax rate 37.5% 3.5% (b) 41.0%
Cash flow from operations $80,000 -- $80,000
(a) These adjustments reconcile the Company's non-GAAP financial
guidance to its GAAP financial guidance for the next quarter and
full year 2006. See the section entitled "About Non-GAAP Financial
Measures" above.
(b) Reflects the estimated non-cash compensation expense attributable to
stock-based compensation awards including stock options and employee
stock purchase plan shares and their estimated impact on income taxes
and diluted shares used in calculating EPS. This amount reflects the
total estimated expense from the application of FAS 123R, which the
Company adopted in the first quarter of 2006.
SOURCE Biosite Incorporated
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Related links:
http://www.biosite.com
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CONTACT:
Nadine Padilla, VP, Corporate & Investor
Relations of Biosite Incorporated, +1-858-805-2820,
npadilla@biosite.com
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