Angiotech Pharmaceuticals, Inc. announces results for the quarter
and year ended December 31, 2004 VANCOUVER, Feb. 28
/PRNewswire-FirstCall/ -- Angiotech Pharmaceuticals, Inc. (NASDAQ:
ANPI; TSX: ANP) today announced financial results for the quarter
and year ended December 31, 2004. Amounts, unless specified
otherwise, are expressed in U.S. dollars. Effective January 1,
2004, we changed our functional currency to the U.S. dollar from
the Canadian dollar in order to more accurately represent the
currency of the economic environment in which we operate. In
addition, we elected to report our consolidated financial
statements in accordance with U.S. GAAP and changed our reporting
currency to the U.S. dollar from the Canadian dollar. The
consolidated financial statements for the comparative periods ended
on or before December 31, 2003 which were based on a Canadian
functional currency, have been translated into the U.S. reporting
currency using the current rate method. CONDENSED FINANCIAL RESULTS
Fourth quarter results Adjusted net income for the quarter ended
December 31, 2004 was $26.4 million ($0.31 income per common
share), as compared to adjusted net income of $0.6 million ($0.01
income per common share) for the same period in the prior year. The
increase in income for the period was primarily a result of an
increase in royalty revenues derived from the sale of TAXUS(R)
Express2(TM) ("TAXUS") coronary paclitaxel-eluting stent systems by
Boston Scientific Corporation ("Boston Scientific"), partially
offset by an increase in operating expenditures. Net income for the
quarter ended December 31, 2004 according to GAAP was $41.5 million
($0.49 income per common share), as compared to a net loss of $17.2
million ($0.21 loss per common share) for the same period in the
prior year. Cash provided by operating activities for the quarter
ended December 31, 2004 was $46.5 million. Financial results used
in this press release include non-GAAP measures that exclude
certain items. Adjusted operating net income/loss excludes stock
based compensation expense, foreign exchange gains or losses
relating to our domiciling of cash balances, acquisition related
amortization charges, acquired in-process research and development
relating to license agreements and acquisitions and other
non-recurring items. Adjusted operating net income/loss does not
have any standardized meaning prescribed by GAAP and therefore may
not be comparable to similar measures presented by other issuers.
Management uses non-GAAP or adjusted operating measures to
establish operational goals, and believes that these measures may
assist investors in analyzing the underlying trends in our business
over time. Investors should consider these non-GAAP measures in
addition to, not as a substitute for, or as superior to, financial
reporting measures prepared in accordance with GAAP. We have
provided a reconciliation of adjusted operating net income to net
income according to GAAP in the attached tables. Revenue of $61.2
million for the quarter ended December 31, 2004 included $43.8
million of royalty revenue received from Boston Scientific under
our license agreement relating to sales of the TAXUS
paclitaxel-eluting coronary stent system. License fees included
$13.9 million received from Boston Scientific for the right to
sublicense our paclitaxel-eluting coronary stent technology to
third parties. TAXUS related royalties of $43.8 million received
during the fourth quarter were based on $574.8 million of worldwide
TAXUS net sales, as reported to us by Boston Scientific for their
third quarter ended September 30, 2004. The gross royalty rate
earned in the quarter was 8.2% for sales in the U.S. and 5.6% for
sales in other countries. We expect the average royalty rate will
continue to increase during the first half of calendar 2005 as
sales volumes increase, due to the tiered royalty rate calculations
on net sales as provided for in the license agreement and the
additional 1% increase in royalty rates effective November 23, 2004
when Boston Scientific exercised its option for exclusivity to the
technology in the coronary vascular field. For the quarter ended
December 31, 2004 Boston Scientific publicly reported worldwide
revenue from the sale of TAXUS paclitaxel-eluting coronary stent
systems of $691 million, of which $503 million was revenue realized
from sales of paclitaxel-eluting coronary stent systems in the U.S.
We expect to realize royalties related to Boston Scientific's
fourth quarter TAXUS paclitaxel-eluting coronary stent system sales
during our quarter ended March 31, 2005. Research and development
expenditures increased by $4.4 million when compared to the same
quarter in the prior year. This increase was primarily due to $2.3
million of restructuring and termination costs related to the
consolidation of research and development activities at our Palo
Alto facility. There was also an increase in salary and benefit
costs due to the inclusion of employee costs for acquired
companies, an increase in stock based compensation and an increase
in patent related costs. Selling, general and administrative
expenses increased by $2.4 million when compared to the same
quarter in the prior year. The increase is mainly due to an
increase in salaries and benefits due to the inclusion of employees
from acquisitions and an increase in professional fees due to
incremental audit costs relating to Sarbanes-Oxley compliance and
legal fees to support our intellectual property portfolio. For the
quarter ended December 31, 2004, the reported foreign exchange gain
of $2.3 million was due to a stronger Canadian dollar relative to
the U.S. dollar (from 0.791:1 to 0.831:1) when translating our
Canadian dollar denominated cash, cash equivalents and short-term
investments at period end. For the three month period ended
December 31, 2003, the reported foreign exchange loss of $9.9
million is a translation of the amount previously reported in
Canadian dollars. Investment and other income increased by $158,000
when compared to the same quarter in the prior year due to a higher
average investment balance held during the quarter. Annual results
Throughout this section, we have used the unaudited 12 month period
ended December 31, 2003, rather than the audited 15 month period
ended December 31, 2003, for prior period comparative numbers in
order to match the periods of operations. Adjusted operating net
income for the year ended December 31, 2004 was $53.3 million
($0.64 income per common share), as compared to an adjusted
operating net loss of $13.1 million ($0.18 loss per common share)
for the period ended December 31, 2003. The increase in the income
for the period was primarily a result of an increase in royalty
revenues derived from TAXUS sales by Boston Scientific, partially
offset by an increase in operating expenditures. Net income for the
year ended December 31, 2004 according to GAAP was $52.5 million
($0.63 income per common share), as compared to a net loss of $49.4
million ($0.68 loss per common share) for the period ended December
31, 2003. Cash provided by operating activities for the year ended
December 31, 2004 was $78.1 million. Revenue of $130.8 million for
the year ended December 31, 2004 included royalty revenue of $100.8
million, $98.4 million of which was derived from TAXUS sales.
License fees of $17.3 million included $13.9 million received from
Boston Scientific for the right to sublicense our
paclitaxel-eluting coronary stent technology to third parties.
Product sales included sales of approved products by our
subsidiaries of $12.7 million. Research and development
expenditures increased by $13.6 million when compared to the same
12 month period in the prior year. Salaries and benefits increased
by $7.8 million due to an increase in stock based compensation of
$2.0 million, restructuring and termination costs related to the
consolidation of research and development activities at our Palo
Alto facility of $2.3 million, the inclusion of employee costs for
acquired companies and incremental costs associated with hiring new
employees to support our continued expanding research and
development efforts. Other significant increases included $1.9
million for clinical trial expenditures mainly due to an increase
in expenses relating to the paclitaxel-eluting Vascular Wrap(TM)
drug-loaded bioresorbable surgical mesh clinical trials and $1.1
million for patent costs. Selling, general and administrative
expenses increased by $6.2 million compared to the same 12 month
period in the prior year. The increase was mainly due to an
increase in salaries and benefits, primarily due to the inclusion
of employee costs for acquired companies and costs associated with
hiring new employees to assist with achieving our corporate
objectives. Professional service fees increased by $3.2 million
primarily due to an increase in external consulting and incremental
audit costs relating to Sarbanes-Oxley compliance and an increase
in legal services to support our intellectual property portfolio.
Sales and marketing costs decreased by $2.7 million due to the
elimination of the sales and marketing staff at our Palo Alto
facility in April 2003. For the year ended December 31, 2004, the
reported foreign exchange gain of $2.1 million was due to a
stronger Canadian dollar relative to the U.S. dollar (from 0.774:1
to 0.831:1) when translating our Canadian dollar denominated cash,
cash equivalents and short-term investments at period end. For the
12 month period ended December 31, 2003, the reported foreign
exchange loss of $19.9 million was a translation of the amount
previously reported in Canadian dollars. Investment and other
income increased by $3.4 million when compared to the same 12 month
period in the prior year due to the significant increase in cash
and cash equivalents and short-term and long-term investments
received from the public offering in October 2003. "We are proud to
have delivered these outstanding results for Angiotech's
shareholders," said Dr. William Hunter, President and CEO of
Angiotech. "Our substantial revenue growth and positive operating
results represent significant financial milestones, and we look
forward to continued growth in 2005. With over one million TAXUS
stents implanted to date, we are proud that we, together with our
partner Boston Scientific, have been able to impact the quality of
life for so many patients with coronary artery disease. We hope
that our continued product development efforts in 2005 and beyond
can lead to many other product opportunities that improve the
practice of medicine and patient outcomes." Clinical Update The non
drug-loaded Adhibit(TM) for adhesion prevention program is
progressing well in the myomectomy indication and we expect to
present final pivotal data in the first half of 2005. The
feasibility study in the treatment of endometriosis has concluded.
The data demonstrated that it was safe to use in patients with
endometriosis and also demonstrated some moderate effect,
particularly in patients with less aggressive disease. It is now
believed that a drug-loaded version of Adhibit(TM) will be the most
appropriate for this challenging condition. We expect to commence
formal preclinical work on our new drug-loaded Adhibit(TM) program
for adhesion prevention, potentially in endometriosis as well as
other selected indications, in the second half of 2005. CONDENSED
FINANCIAL RESULTS ANGIOTECH PHARMACEUTICALS, INC. CONDENSED
CONSOLIDATED STATEMENTS OF INCOME AND DEFICIT (Unaudited) (in
thousands of $, Three Months Ended Three Months Ended except share
and December 31, 2004 December 31, 2003 per share data) $ $ $ $ $ $
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Reported Adjust- Adjusted Repor- Adjust- Adjusted ments ted(x)
ments REVENUE Royalty revenue 44,892 44,892 2,714 2,714 Product
sales 2,381 2,381 2,615 2,615 License fees 13,954 (13,900)a 54
4,977 4,977
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61,227 (13,900) 47,327 10,306 - 10,306
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EXPENSES License and royalty fees 8,519 (1,529)a 6,990 966 966 Cost
of goods sold - product sales 2,319 2,319 1,360 1,360 Research and
development 8,903 (630)b 5,954 4,516 (170)b 4,346 (2,319)c Selling,
general and administrative 7,569 (714)b 6,528 5,166 (1,386)b 3,780
(327)c Amortization 2,606 (1,835)d 771 3,865 (3,339)d 526 Acquired
in-process research and development - - - 3,084 (3,084)e -
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29,916 (7,354) 22,562 18,957 (7,979) 10,978
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Operating income (loss) 31,311 (6,546) 24,765 (8,651) 7,979 (672)
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Other income (expenses): Foreign exchange gain (loss) 2,308
(2,308)f - (9,889) 9,889 f - Investment and other income 1,478
1,478 1,320 1,320 Interest expense - capital lease - - - -
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Total other income (expenses) 3,786 (2,308) 1,478 (8,569) 9,889
1,320
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Income (loss) for the period before income taxes 35,097 (8,854)
26,243 (17,220) 17,868 648 Income tax (expense) recovery 6,384
(6,229)g 155 - -
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Net income (loss) for the period 41,481 (15,083) 26,398 (17,220)
17,868 648
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Basic net income (loss) per common share 0.49 (0.18) 0.31 (0.21)
0.22 0.01 Diluted net income (loss) per common share 0.48 (0.17)
0.31 (0.21) 0.22 0.01
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Weighted average shares outstanding (000's) - Basic 83,886 83,886
82,637 82,637 Weighted average shares outstanding (000's) - Diluted
85,904 85,904 n/a 86,809
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(x) Restated to reflect change to U.S. dollar reporting currency
and U.S. GAAP a. Adjustment for one-time payment received from
Boston Scientific for right to sublicense the paclitaxel-eluting
coronary stent technology to third parties, net of license fees due
to licensors. b. Adjustment for stock based compensation expense.
c. Adjustment for restructuring and termination costs relating to
consolidation of research and development activities at Palo Alto
facility. d. Adjustments for amortization of acquisition related
intangible assets and medical technologies. For the three months
ended December 31, 2004, adjustments include $389,000, $400,000 and
$374,000 for amortization of intangible assets related to the
acquisitions of Cohesion, STS and NeuColl respectively; and
$672,000 for amortization of medical technologies, primarily
relating to the $25.0 million license payment made to Cook
Incorporated. e. Adjustment for in-process research and development
acquired. f. Adjustment for foreign exchange fluctuations related
to domiciling of cash balances. g. Adjustment for deferred tax
recovery on recognition of deferred income tax assets. ANGIOTECH
PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME
AND DEFICIT (Unaudited) (in thousands of $, Year Ended 12 Months
Ended except share and December 31, 2004 December 31, 2003 per
share data) $ $ $ $ $ $
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Reported Adjust- Adjusted Repor- Adjust- Adjusted ments ted(x)
ments REVENUE Royalty revenue 100,788 100,788 4,343 4,343 Product
sales 12,680 12,680 8,027 8,027 License fees 17,312 (13,900)a 3,412
7,970 7,970
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130,780 (13,900) 116,880 20,340 - 20,340
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EXPENSES License and royalty fees 18,231 (1,529)a 16,702 1,858
1,858 Cost of goods sold - product sales 7,866 7,866 4,825 4,825
Research and development 27,132 (2,549)b 22,264 13,546 (574)b
12,972 (2,319)c Selling, general and administrative 22,997 (2,634)b
20,036 16,791 (2,453)b 14,338 (327)c Amortization 10,310 (7,361)d
2,949 8,404 (6,695)d 1,709 Acquired in-process research and
development 6,375 (6,375)e - 6,639 (6,639)e -
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92,911 (23,094) 69,817 52,063 (16,361) 35,702
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Operating income (loss) 37,869 9,194 47,063 (31,723) 16,361
(15,362)
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Other income (expenses): Foreign exchange gain (loss) 2,140
(2,140)f - (19,899) 19,899 f - Investment and other income 5,666
5,666 2,296 2,296 Interest expense - capital lease - - (72) (72)
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Total other (expenses) income 7,806 (2,140) 5,666 (17,675) 19,899
2,224
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Income (loss) for the period before income taxes 45,675 7,054
52,729 (49,398) 36,260 (13,138) Income tax recovery 6,777 (6,229)g
548 - -
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Net income (loss) for the period 52,452 825 53,277 (49,398) 36,260
(13,138)
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Basic net income (loss) per common share 0.63 0.01 0.64 (0.68) 0.50
(0.18) Diluted net income (loss) per common share 0.61 0.01 0.62
(0.68) 0.50 (0.18)
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Weighted average shares outstanding (000's) - Basic 83,678 83,678
72,342 72,342 Weighted average shares outstanding (000's) - Diluted
85,697 85,697 n/a n/a
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(x) Restated to reflect the change to U.S. dollar reporting
currency and U.S. GAAP, and only for 12 months of the 15 month
period reported in December 31, 2003 a. Adjustment for one-time
payment received from Boston Scientific for right to sublicense the
paclitaxel-eluting coronary stent technology to third parties, net
of license fees due to licensors. b. Adjustment for stock based
compensation expense. c. Adjustment for restructuring and
termination costs relating to consolidation of research and
development activities at Palo Alto facility. d. Adjustments for
amortization of acquisition related intangible assets and medical
technologies. For the year ended December 31, 2004, adjustments
include $4,306,000, $1,600,000 and $577,000 for amortization of
intangible assets related to the acquisitions of Cohesion, STS and
NeuColl respectively; and $878,000 for amortization of medical
technologies, primarily relating to the $25.0 million license
payment made to Cook Incorporated. e. Adjustment for in-process
research and development acquired. f. Adjustment for foreign
exchange fluctuations related to domiciling of cash balances. g.
Adjustment for deferred tax recovery on recognition of deferred
income tax assets. ANGIOTECH PHARMACEUTICALS, INC. CONDENSED
CONSOLIDATED BALANCE SHEETS In accordance with U.S. generally
accepted accounting principles (in thousands of $) December 31,
December 31, As at 2004 2003 $ $
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ASSETS (Restated)(x) Cash and short-term investments 271,484
296,794 Other current assets 21,185 10,836 Long-term investments
71,711 16,801 Property and equipment, net 15,677 10,136 Intangible
assets, net 65,246 30,094 Goodwill 33,346 30,486 Other assets 428
575
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479,077 395,722
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LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities 24,369
11,543 Deferred revenue - long term portion 2,000 2,090 Deferred
leasehold inducement 2,860 2,272 Deferred income taxes 8,022 2,446
Shareholders' equity 441,826 377,371
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479,077 395,722
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(x) Restated to reflect change to U.S. dollar reporting currency
and U.S. GAAP This press release contains the condensed financial
statements derived from the consolidated financial statements for
the year ended December 31, 2004 and the 15 month period ended
December 31, 2003. If you require a copy of Angiotech's audited
consolidated financial statements for the year ended December 31,
2004 or the 15 month period ended December 31, 2003, please contact
the Company or visit our website at http://www.angiotech.com/. A
conference call on Angiotech's Financials will be held on Monday,
February 28, 2005 at 2 PM PST (5 PM EST). The call will be webcast
on Angiotech's website at http://www.angiotech.com/ under Investor
Relations or by dialling toll-free at (800) 299-7928 (North
America) or (617) 614-3926 (International) and entering Access Code
66825761. A recording of the call will be available until Monday,
March 7, 2005 by calling (888) 286-8010 (North America) or (617)
801-6888 (International) and entering Access Code 46063027.
Statements in this press release regarding future financial and
operating results of Angiotech and its subsidiaries, future
opportunities for the companies, discovery and development of
products, potential acquisitions, strategic alliances and
intellectual property, and any other statements about Angiotech or
its subsidiaries managements' future expectations, beliefs, goals,
plans or prospects constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Any statements that are not statements of historical fact
(including statements containing the words "believes," "plans,"
"anticipates," "expects," estimates and similar expressions) should
also be considered to be forward-looking statements. There are a
number of important factors that could cause actual results or
events to differ materially from those indicated by such forward-
looking statements, including: the inability to obtain assignment
for licenses with third parties; adverse results in drug discovery
and clinical development processes; failure to obtain patent
protection for discoveries; commercialization limitations imposed
by patents owned or controlled by third parties; dependence upon
strategic alliance partners to develop and commercialize products
and services based on our work; difficulties or delays in obtaining
regulatory approvals to market products and services resulting from
the combined company's development efforts; the requirement for
substantial funding to conduct research and development and to
expand commercialization activities; general economic and business
conditions, both nationally and in regions in which Angiotech
operates; technology changes; competition; changes in business
strategy or development plans; the ability to attract and retain
qualified personnel; existing governmental regulations and changes
in, or the failure to comply with, governmental regulations;
liability and other claims asserted against Angiotech or its
subsidiaries; other factors referenced in Angiotech's regulatory
filings with the United States Securities and Exchange Commission
or the Canadian securities regulators and any other factors that
may affect performance. Given these uncertainties, readers are
cautioned not to place undue reliance on such forward-looking
statements. Angiotech and its subsidiaries disclaim any obligation
to update any such factors or to publicly announce the result of
any revisions to any of the forward-looking statements contained
herein to reflect future results, events or developments. FOR
ADDITIONAL INFORMATION: --------------------------- Analysts: Rui
Avelar, Angiotech Pharmaceuticals, Inc. (604) 221-7676 ext 6996
Investors: Todd Young, Angiotech Pharmaceuticals, Inc. (604)
221-7676 ext 6933 Media: Eric Starkman, Starkman & Associates
(212) 252-8545 ext 12 DATASOURCE: Angiotech Pharmaceuticals, Inc.
CONTACT: Analysts: Rui Avelar, Angiotech Pharmaceuticals, Inc.,
(604) 221-7676 ext 6996; Investors: Todd Young, Angiotech
Pharmaceuticals, Inc., (604) 221-7676 ext 6933; Media: Eric
Starkman, Starkman & Associates, (212) 252-8545 ext 12
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