Strong revenue growth reflects addition of net product sales and increased
royalties versus prior year quarter
Company increases full-year revenue guidance for marketed products and
royalties
FREMONT, Calif., Nov. 1 /PRNewswire-FirstCall/ -- Protein Design Labs,
Inc. (PDL) (Nasdaq: PDLI) today reported financial results for the third
quarter and first nine months of 2005. Financial highlights included:
-- Third quarter net product sales of $43.1 million, an increase of 22%
versus the prior quarter in 2005.
-- A 52% increase in royalty revenues to $26.0 million from $17.1 million
in the third quarter of 2004.
-- Total costs and expenses included an asset impairment charge of $15.2
million related to the reduced value of off-patent branded products,
expected to be divested, and $7.3 million for fees and milestones to
collaborative partners.
-- GAAP net loss of $39.4 million in the third quarter compared with a net
loss of $13.6 million in the third quarter of 2004; non-GAAP net loss
of $11.5 million compared with a non-GAAP net loss of $12.6 million in
the 2004 third quarter.
-- GAAP net loss of $126.7 million for the first nine months of 2005,
compared to a $38.7 million net loss in the same period of 2004; non-
GAAP net loss for the first nine months of 2005 was $5.0 million, a
substantial improvement compared to the $35.7 million non-GAAP loss
incurred in the first nine months of 2004.
-- Total cash, cash equivalents, marketable securities and restricted
investments of approximately $332.7 million as of September 30, 2005.
Mark McDade, Chief Executive Officer, PDL, said, "Our third quarter
financial results are reflective of our ongoing integration of a focused, new
commercial capability. We're seeing solid combined net sales growth of our
three actively marketed, recently acquired products, with both Cardene(R) and
IV Busulfex(R) experiencing strong unit and dollar growth for the period. We
have established greater presence in the hospital marketplace by adding
roughly 40 sales representatives, bringing our total sales force to 105
talented individuals. Meanwhile, our partners' success with breakthrough
antibody products such as Avastin(TM), Herceptin(R) and Synagis(R) continues
to grow PDL's royalty revenues. Coupled with the positive economic impact of
our new alliances with Biogen Idec, and with this morning's announcement,
Roche, we believe we are tracking well toward our stated aim of turning cash
flow positive in the fourth quarter and sustainably on a full-year basis in
2006."
Total Operating Revenues and Cash Balances:
Total operating revenues increased 288% to $76.7 million in the third
quarter of 2005 from $19.8 million in the third quarter of 2004.
PDL achieved net product sales of $43.1 million in the third quarter of
2005. Of this, net sales of Cardene(R) IV, Retavase(R) and IV Busulfex(R) for
the quarter totaled approximately $38.0 million, while net sales of the four
off-patent branded products, marketed by PDL's wholly-owned subsidiary, ESP
Pharma, Inc., were approximately $5.1 million for the quarter.
Royalty revenues increased 52% to $26.0 million, compared with royalty
revenues of $17.1 million in the third quarter of 2004. PDL currently
receives royalties based on worldwide net sales of seven antibody products
licensed under PDL's antibody humanization patents: Avastin(TM),
Herceptin(R), Xolair(R) and Raptiva(R) from Genentech, Inc.; Synagis(R) from
MedImmune, Inc.; Mylotarg(R) from Wyeth and Zenapax(R), marketed by Roche.
License and other revenues increased 184% to $7.5 million, compared with $2.7
million in the comparable quarter of 2004, primarily as a result of revenue
recognized under the new Biogen Idec collaboration.
Cash, cash equivalents, marketable securities and restricted investments
totaled approximately $332.7 million as of September 30, 2005. The September
30, 2005 balances include a $40.0 million upfront payment from Biogen Idec and
proceeds of the sale of approximately 4.0 million shares of common stock to
Biogen Idec of approximately $100 million, related to the companies'
collaborative agreement for the co-development, manufacture and
commercialization of three Phase II antibodies.
Costs and Expenses:
The cost of product sales was $22.2 million in the third quarter of 2005.
Excluding non-cash amortization of product costs associated with the purchases
of ESP Pharma and Retavase, pro forma cost of product sales was $10.3 million.
Selling, general and administrative expenses increased to $26.8 million,
compared to $7.7 million in the third quarter of 2004, primarily due to sales
expenses associated with PDL's newly acquired and growing sales team as well
as the initiation of new Retavase promotional efforts late in the third
quarter of 2005.
Research and development expenses increased to $49.5 million in the third
quarter of 2005, compared with $27.3 million in the same three months of 2004.
The third quarter 2005 research and development expenses include expenses of
$42.2 million consisting of increased clinical trial efforts, manufacturing-
related efforts and planned growth in personnel in these areas. In addition,
research and development expenses included approximately $7.3 million of fees
and milestone payments related to product-related assets and new technology.
These payments included roughly $6.0 million related to the acquisition of
additional commercial and development rights for ularitide and milestone
payments to partners for continued successful clinical development of
ularitide and terlipressin.
Total costs and expenses were $113.7 million in the third quarter of 2005,
compared with $35.0 million in the third quarter of 2004, reflecting the full
integration of ESP Pharma and Retavase, and support of wholly new marketing
efforts. Total costs and expenses in the third quarter included a $15.2
million impairment charge related to a revaluation of the off-patent branded
products acquired as part of the ESP Pharma acquisition; a sale of these off-
patent branded products is expected to be concluded during the fourth quarter
of 2005. On a non-GAAP basis, total costs and expenses in the 2005 third
quarter were $85.9 million compared to non-GAAP expenses of $34.0 million in
the third quarter of 2004.
For the nine months ended September 30, 2005, GAAP total costs and
expenses were $317.5 million compared with $115.5 million for the comparable
2004 period, and non-GAAP total costs and expenses were $195.8 million
compared with $112.6 million for the comparable 2004 period.
Note: Non-GAAP results for the three- and nine-month periods reported
exclude certain non-cash charges, which consisted primarily of an acquired in-
process research and development charge in the first quarter of 2005 related
to the ESP Pharma acquisition, an asset impairment charge related to the off-
patent branded products as well as the amortization of intangible assets
associated with the Eos Biotechnology, Inc. and ESP Pharma and Retavase
acquisitions and the re-acquisition of rights to manufacture and market
Zenapax(R) (daclizumab) in 2003, and stock-based compensation charges.
Reconciliations of GAAP results to non-GAAP results for periods presented are
included in the tables accompanying this release. The forward-looking guidance
set forth in the 2005 full-year guidance discussion below excludes certain
non-cash charges identified above based on current estimates for the full year
as follows: $79.4 million for an acquired in-process research and development
charge; $15.2 million asset impairment charge for off-patent branded products;
$39.0 million for amortization of intangible assets; and $1.0 million in stock
compensation charges. In total, these adjustments are expected to reduce the
GAAP reported operating loss by approximately $134.6 million.
Full-year 2005 Forward-looking Guidance:
The following statements are based on current expectations as of November
1, 2005, and PDL undertakes no obligation to update this information. These
statements are forward-looking and do not include the potential impact of
additional collaborations, material licensing arrangements or other strategic
transactions.
-- PDL now anticipates that total operating revenues for 2005 will be in
the range of approximately $266 to $282 million.
-- For the approximately nine-month period of sales following the close
of the acquisition of ESP Pharma in March 2005, net product sales
for Cardene(R) IV, Retavase(R) and IV Busulfex(R) are expected to
total approximately $108 to $113 million. PDL reaffirms previously
guided compound annual growth rates of approximately 25% for net
product sales of this group of products for each year from 2006
through 2008.
-- Royalty revenues are expected to be in the range of approximately
$125 to $130 million, and license and other revenues are expected to
fall in a range of approximately $25 to $30 million, including
approximately $20 million in reimbursements and payments from Roche
and Biogen Idec under our collaborative arrangements. PDL reaffirms
our previously stated guidance that royalty revenues for each year
from 2006 through 2008 should grow at least 25% per year on a
compounded basis.
-- PDL expects to divest the off-patent branded products, and their
expected contribution to net product sales for the remainder of the
year is minor. Guidance for full-year sales has been reduced to $8
to $9 million for 2005.
-- PDL continues to anticipate gross margins on a non-GAAP basis of
approximately 80% for Cardene IV, Retavase and IV Busulfex over the
2005 through 2008 period.
-- Non-GAAP expenses are anticipated to be as follows: cost of product
sales is expected to total approximately $26 million; research and
development expenses are anticipated to be in a range of approximately
$163 to $168 million; and selling, general and administrative expenses
for the full year 2005 are expected to be in a range of $78 to $80
million.
-- For the full year 2005, PDL anticipates a GAAP net loss in the range of
approximately $1.26 to $1.38 per basic and diluted share, and on a non-
GAAP basis, in a range from net income of $0.03 cents to a net loss of
approximately $0.04 cents per share. Per share basic calculations are
anticipated to be based on a weighted average of approximately 103
million shares outstanding for the year. Quarterly results are
expected to continue to vary due to some seasonality in the sales of
certain royalty-bearing products. PDL reaffirms our expectation of
positive cash flow for the fourth quarter of 2005, and on a full-year
basis for 2006.
-- PDL estimates that its year-end 2005 cash balances will be
approximately $350 million.
-- PDL expects that headcount at year-end 2005 will be approximately 975,
at the high end of previous guidance as additional headcount are added
to support collaborations and clinical development of the pipeline, in
particular in preparation for the first half of 2006 and the planned
initiation of potentially pivotal studies for Nuvion(R) and completion
of the Phase III study of terlipressin.
Webcast:
PDL will webcast a conference call live at 4:30 p.m. Eastern time today to
review its financial results for the third quarter ended September 30, 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
6:30 p.m. Eastern time on November 1, 2005 through 6:30 p.m. Eastern time on
November 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 21266718.
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, our
expectations regarding the continuation of existing and new collaborative
agreements, the possibility that the off-patent branded products will be sold
and the anticipated sale price for those products, 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 continued successful
integration of ESP Pharma and Retavase as part of PDL, including the retention
of the sales force; changes in our development plans as we and our
collaborators consider development plans and alternatives; factors affecting
the clinical timeline such as enrollment rates and availability of clinical
materials; fluctuations in sales that may result from our integration of newly
acquired operations; 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, including in particular the
continued success of Avastin and Herceptin antibody products by Genentech,
Inc. as well as the seasonality of sales of Synagis 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 agreements with Biogen Idec and Roche. Our net income will be
affected by state and federal taxes, and our revenues and expenses would 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 expressed 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:
PDL is a biopharmaceutical company focused on the research, development
and commercialization of novel therapies for inflammation and autoimmune
diseases, acute cardiac conditions and cancer. PDL markets several
biopharmaceutical products in the United States through its hospital sales
force and wholly-owned subsidiary, ESP Pharma, Inc. 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. Further information on PDL is
available at http://www.pdl.com.
Protein Design Labs, the PDL logo and Nuvion are registered U.S.
trademarks and HuZAF is a trademark 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. Herceptin and Raptiva are registered
trademarks and Avastin is a trademark of Genentech, Inc. Xolair is a
trademark of Novartis AG. Synagis is a registered U.S. trademark of
MedImmune, Inc. Mylotarg is a registered U.S. trademark of Wyeth.
Financial tables attached
PROTEIN DESIGN LABS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
Three months ended Nine months ended
September 30, September 30,
2005 2004 2005 2004
Revenues:
Product sales, net $43,144 $-- $79,437 $--
Royalties 26,003 17,131 96,695 63,872
License and other 7,536 2,653 17,127 9,323
Total revenues 76,683 19,784 193,259 73,195
Costs and expenses:
Costs of product sales 22,209 -- 43,481 --
Research and development 49,480 27,326 125,080 92,364
Selling, general and
administrative 26,795 7,664 54,267 23,182
Asset impairment charge 15,225 -- 15,225 --
Acquired in-process research
and development -- -- 79,417 --
Total costs and expenses 113,709 34,990 317,470 115,546
Operating loss (37,026) (15,206) (124,211) (42,351)
Interest and other income, net 2,027 2,822 6,835 7,689
Interest expense (2,671) (1,193) (7,522) (3,929)
Loss before income taxes (37,670) (13,577) (124,898) (38,591)
Provision for income taxes 1,680 12 1,767 68
Net loss $(39,350) $(13,589) $(126,665) $(38,659)
Basic and diluted net loss per
share $(0.37) $(0.14) $(1.24) $(0.41)
Shares used in computation of
basic and diluted net loss per
share 105,272 95,196 101,910 94,771
PROTEIN DESIGN LABS, INC.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
We use non-GAAP amounts that exclude certain non-cash charges, including
amounts related to the amortization of intangible assets, asset impairment
charge and stock-based compensation. 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. Our management uses these
non-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 September 30,
2005 2004
Adjust- Adjust-
GAAP ment Non-GAAP GAAP ment Non-GAAP
Revenues:
Product Sales $43,144 $43,144 $-- $--
Royalties 26,003 26,003 17,131 17,131
License and
other 7,536 7,536 2,653 2,653
Total revenues 76,683 76,683 19,784 19,784
Costs and
expenses:
Cost of Product
Sales 22,209 $(11,907) 10,302
Research
and
development 49,480 (554) 48,926 27,326 $(958) 26,368
Selling,
general
and
administrative 26,795 (118) 26,677 7,664 (14) 7,650
Asset
impairment
charge 15,225 (15,225) --
Total costs and
expenses 113,709 (27,804) 85,905 34,990 (972) 34,018
Operating loss (37,026) 27,804 (9,222) (15,206) 972 (14,234)
Interest and
other income,
net 2,027 2,027 2,822 2,822
Interest
expense (2,671) (2,671) (1,193) (1,193)
Loss before
income taxes (37,670) 27,804 (9,866) (13,577) 972 (12,605)
Provision for
income taxes 1,680 1,680 12 12
Net loss $(39,350) $27,804 $(11,546) $(13,589) $972 $(12,617)
Net loss per
basic and
diluted
share: $(0.37) $(0.11) $(0.14) $(0.13)
Shares used in
computation of
net loss per
basic and
diluted
share: 105,272 105,272 95,196 95,196
PROTEIN DESIGN LABS, INC.
NON-GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
We use non-GAAP amounts that exclude certain non-cash charges, including
amounts related to the amortization of intangible assets, asset impairment
charge and stock-based compensation. 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. Our management uses these
non-GAAP financial measures in evaluating the Company's operating performance
and for budgeting and planning purposes.
(In thousands, except per share data)
Nine months ended September 30,
2005 2004
Adjust- Adjust-
GAAP ment Non-GAAP GAAP ment Non-GAAP
Revenues:
Product
Sales $79,437 $79,437 $-- $--
Royalties 96,695 96,695 63,872 63,872
License
and other 17,127 17,127 9,323 9,323
Total
revenues 193,259 193,259 73,195 73,195
Costs and
expenses:
Costs of
product
sales 43,481 $(24,870) 18,611
Research
and
development 125,080 (1,721) 123,359 92,364 $(2,954) 89,410
Selling,
general and
admini-
strative 54,267 (428) 53,839 23,182 (42) 23,140
Asset
impairment
charge 15,225 (15,225) --
Acquired
in-process
research and
development 79,417 (79,417) -- -- --
Total costs
and expenses 317,470 (121,661) 195,809 115,546 (2,996) 112,550
Operating loss (124,211) 121,661 (2,550) (42,351) 2,996 (39,355)
Interest and
other income,
net 6,835 6,835 7,689 7,689
Interest
expense (7,522) (7,522) (3,929) (3,929)
Loss before
income
taxes (124,898) 121,661 (3,237) (38,591) 2,996 (35,595)
Provision for
income taxes 1,767 1,767 68 68
Net loss $(126,665) $121,661 $(5,004) $(38,659) $2,996 $(35,663)
Net loss per
basic and
diluted
share: $(1.24) $(0.05) $(0.41) $(0.38)
Shares used
in
computation
of net loss
per basic
and diluted
share: 101,910 101,910 94,771 94,771
CONSOLIDATED BALANCE SHEET DATA
(Unaudited)
(In thousands)
September 30, December 31,
2005 2004*
Cash, cash equivalents, marketable securities
and restricted investments $332,678 $397,080
Total assets 1,176,127 713,732
Total stockholders' equity 551,974 412,510
*Derived from the December 31, 2004 audited consolidated financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOW DATA
(Unaudited)
(In thousands)
Three months ended Nine months ended
September 30, 2005 September 30, 2005
Net loss $(39,350) $(126,665)
Adjustments to reconcile net loss
to net cash provided by operating
activities 42,540 144,631
Changes in assets and liabilities 28,452 11,252
Net cash provided by operating
activities $31,642 $29,218
SOURCE Protein Design Labs, Inc.
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Related links:
http://www.pdl.com
CONTACT:
James R. Goff, Senior Director, Investor
Relations, of Protein Design Labs, Inc., +1-510-574-1421 or
jgoff@pdl.com
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