VANCOUVER, March 2 /PRNewswire-FirstCall/ -- Angiotech
Pharmaceuticals, Inc. (NASDAQ: ANPI; TSX: ANP) today announced
financial results for the quarter and year ended December 31, 2005.
Amounts, unless specified otherwise, are expressed in U.S. dollars.
Financial results are reported under United States generally
accepted accounting principles ("U.S. GAAP") unless otherwise
noted. Certain financial results presented in this press release
include non- GAAP measures that exclude certain items. Adjusted
operating net income/loss and adjusted earnings before interest,
taxes, depreciation and amortization ("EBITDA") exclude stock based
compensation expense, foreign exchange gains or losses relating to
translation of foreign currency cash and investment balances,
acquisition related amortization charges, acquired in-process
research and development relating to license agreements and
acquisitions and other non-recurring items. Adjusted EBITDA also
does not include certain litigation expenses related to defending
intellectual property. Adjusted operating net income/loss and
adjusted EBITDA do 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,
and have provided a definition and calculation of adjusted EBITDA,
in the attached tables. The following discussion and analysis of
results from our operations excludes the financial results from our
Dutch subsidiaries (MCTec Holdings BV and MCTec BV) and NeuColl,
Inc. which are reported as discontinued operations. All discussions
and analyses pertain to continuing operations only, unless
otherwise noted. CONDENSED FINANCIAL RESULTS Fourth quarter results
Adjusted operating net income for the quarter ended December 31,
2005 was $11.6 million ($0.14 basic income per common share),
compared to adjusted operating net income of $26.4 million ($0.32
basic income per common share) for the same period in the prior
year. The decrease in net income for the quarter ended December 31,
2005 compared to the same period in the prior year was primarily a
result of an increase in income tax expense as the Company became
fully taxable in 2005, an increase in certain litigation
expenditures and a decrease in royalty revenue derived from the
sale of paclitaxel-eluting coronary stent systems by our partner
Boston Scientific Corporation ("BSC"). Excluding certain litigation
expenses, adjusted basic operating net income per common share for
the quarter would have been $0.17. Under U.S. GAAP, we recorded a
net loss from continuing operations of $42.7 million ($0.51 basic
loss per common share) for the quarter ended December 31, 2005
compared to net income from continuing operations of $41.9 million
($0.50 basic income per common share) for the same period in the
prior year. This decrease was primarily the result of incurring
in-process research and development expenses of $54.0 million, an
investment write-down of $6.0 million, an increase in income tax
expense, increases in certain litigation expenditures and a
decrease in royalty revenue derived from the sale of
paclitaxel-eluting coronary stent systems. Cash provided by
operating activities for the quarter ended December 31, 2005 was
$8.2 million and adjusted EBITDA for the quarter was $20.4 million.
Revenue of $43.8 million for the quarter ended December 31, 2005
included royalty revenue of $39.0 million derived from sales of
paclitaxel-eluting coronary stent systems by our partner BSC and
other royalty, product and license-related revenue of $4.8 million.
Paclitaxel-eluting coronary stent system related royalties of $39.0
million received during the quarter were derived from $532 million
of worldwide paclitaxel-eluting coronary stent net sales, as
reported to us by BSC for their third quarter ended September 30,
2005. BSC's publicly reported worldwide paclitaxel-eluting stent
system sales of $601 million included sales of the balloon
component of the system for which we do not receive any royalty
revenue. The royalty rate earned in the quarter on net stent sales
was 7.9% for sales in the U.S. and 6.2% for sales in other
countries. For the quarter ended December 31, 2005, BSC publicly
reported worldwide revenue from sales of paclitaxel-eluting
coronary stent systems of $606 million, including the balloon
component of the system, of which $398 million was revenue realized
from sales of systems in the U.S. We expect to realize royalties
related to BSC's fourth quarter sales during our first quarter
ended March 31, 2006. Research and development expenditures for the
quarter totaled $9.1 million, an increase of $0.4 million as
compared to the same quarter in the prior year. This increase was
primarily due to higher external clinical trial costs and costs
associated with our new clinical and regulatory office in Virginia,
partially offset by a reduction in salaries and benefits expense
due to consolidation of research and development activities and
lower stock based compensation expense. Selling, general and
administrative expenses for the quarter totaled $9.9 million, an
increase of $3.3 million compared to the same quarter in the prior
year. This increase was primarily due to higher professional fees
related to certain patent and litigation activities and an increase
in the number of employees required to support our growing
business. In-process research and development expense of $54.0
million was incurred during the quarter and is related to
previously announced transactions completed during the quarter with
CombinatoRx, Incorporated and Afmedica, Inc. The amounts allocated
to the licensed and acquired technologies were written- off, as the
technologies were at an early stage of development and had no
alternative future use. Investment and other income increased by
$1.1 million compared to the same quarter in the prior year, due to
higher cash balances available for investment and improved
investment yields. The investment write-down of $6.0 million
related to our investment in CABG Medical, Inc. Annual results
Adjusted operating net income for the year ended December 31, 2005
was $68.8 million ($0.82 basic income per common share), compared
to adjusted operating net income of $52.9 million ($0.63 basic
income per common share) for the same period in the prior year. The
increase in net income for the year ended December 31, 2005
compared to the same period in the prior year was primarily a
result of higher royalty revenue derived from the sale of
paclitaxel-eluting coronary stent systems by our partner BSC,
partially offset by increases in operating expenditures and income
tax expense as the Company became fully taxable in 2005. Excluding
certain litigation expenses, adjusted basic operating net income
per common share for the year would have been $0.91. Under U.S.
GAAP, we recorded net income from continuing operations of $8.4
million ($0.10 basic income per common share) for the year ended
December 31, 2005 compared to net income from continuing operations
of $53.0 million ($0.63 basic income per common share) for the same
period last year. This decrease was primarily due to in-process
research and development expenses of $55.0 million, an investment
write-down of $6.0 million, income tax expense of $28.1 million and
increases in operating expenses, partially offset by an increase in
royalty revenue derived from the sale of paclitaxel- eluting
coronary stent systems. Cash provided by operating activities for
the year ended December 31, 2005 was $88.9 million and adjusted
EBITDA for the year was $114.8 million. Revenue of $199.6 million
for the year ended December 31, 2005 included royalty revenue of
$183.6 million derived from sales of paclitaxel-eluting coronary
stent systems by our partner BSC and other royalty, product and
license-related revenue of $16.0 million. Research and development
expenditures for the year totaled $32.0 million, an increase of
$5.3 million when compared to the prior year. The increase was
primarily due to higher patent procurement costs related to patent
filing activity, and increases in operating costs due to increased
research and development activity. Selling, general and
administrative expenses for the year totaled $37.8 million, an
increase of $16.6 million compared to the prior year. The increase
in expenditures was primarily due to higher professional fees
related to certain patent and litigation related activities, a
one-time cost relating to a European patent opposition proceeding
and an increase in salaries and benefits (including stock-based
compensation) reflecting the increase in the number of employees
required to support our growing business. In-process research and
development expense of $55.0 million was incurred during the year
and is related to previously announced transactions with
CombinatoRx, Incorporated and Afmedica, Inc. in the fourth quarter,
and a license payment made to Poly-Med Inc., in the first quarter
pursuant to a milestone being met. Investment and other income
increased by $4.3 million compared to the same quarter in the prior
year due to higher cash balances available for investment and
improved investment yields. The investment write-down of $6.0
million related to our investments in CABG Medical, Inc. SUBSEQUENT
EVENTS Acquisition of American Medical Instruments Holdings, Inc.
On February 1, 2006, we announced that we entered into a definitive
agreement to acquire 100% of privately held American Medical
Instruments Holdings, Inc. ("AMI"), a leading provider of specialty
and single-use medical devices, for cash consideration of $785
million. The AMI transaction will significantly increase and
diversify our revenue base, provide us with global manufacturing,
marketing and sales capabilities and provide a portfolio of medical
device products that we may combine with our drugs, drug delivery
and surface modification materials and other medical biomaterials
to create new medical device and pharmaceutical product offerings.
We have $600 million in fully committed term loan facilities and
revolving credit facilities, subject to the satisfaction of
customary closing conditions, and expect to finance the transaction
through a combination of these facilities, cash on hand or other
debt financings. The proposed transaction is expected to close in
the second quarter of 2006, and we expect to report our first
quarter of combined results when we announce our June 30, 2006
operating and financial results. PRELIMINARY FULL YEAR 2006
FINANCIAL OUTLOOK Full Year 2006 - Angiotech Standalone For the
full year ended December 31, 2006, we estimate Angiotech total
revenues, excluding the impact of the acquisition of AMI, could
range between $197 and $208 million. These figures are derived
based on a United States market share assumption for TAXUS
paclitaxel-eluting stents of 50%, and a range of drug-eluting stent
total market size in the United States ranging from $3.4 to $3.8
billion. Our preliminary full year 2006 revenue outlook also
includes revenue from other sources of approximately $14 million,
and assumed revenue from potential sales of our Vascular Wrap in
combination with the Lifespan vascular graft in Europe of
approximately $15 million. Our Vascular Wrap revenue outlook
assumes we may achieve a CE mark that would allow us to market and
sell this product in the European Union in the latter half of 2006.
It is uncertain as to whether we would receive such approval in
2006, and if we were not to receive such CE mark approval, then we
would not expect to achieve the Angiotech standalone total revenue
outlook for 2006 as indicated above. With respect to certain
budgeted expenses for 2006, we would expect research expenses to be
approximately $23 to $25 million; product development expenses to
be approximately $18 to $20 million; and selling, general and
administrative expenses, excluding the impact of any potential
litigation expenses, to be approximately $21 to $23 million.
Assuming these estimated expense ranges and related assumptions and
the TAXUS market share assumptions as indicated above, our diluted
adjusted earnings per share could approximate $0.76 to $0.84. Full
Year 2006 - Angiotech/AMI Pro Forma Combined For the full year
2006, we expect a total pro forma combined revenue range of
approximately $390 to $401 million and an adjusted EBITDA range of
approximately $151 to $160 million. These figures are derived based
on a United States market share assumption for TAXUS
paclitaxel-eluting stents of 50%, a range of drug-eluting stent
total market size in the United States ranging from $3.4 to $3.8
billion, and product sales revenue contribution from AMI of
approximately $193 million. Adjusted EBITDA figures exclude the
impact of any potential litigation expenses or any other potential
one-time or non- recurring items, including potential transaction
fees and other expenses related to the AMI acquisition. Upon
closing of the AMI acquisition and completion of the related
financing transactions, we will plan to update our 2006 and 2007
financial outlook at our Analyst Day, currently scheduled for May
25, 2006. ANGIOTECH PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED
STATEMENTS OF INCOME (Unaudited) (in thousands of U.S.$, except
share and per Three Months Ended Three Months Ended share data)
December 31, 2005 December 31, 2004
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Adjust- Adjust- Reported ments Adjusted Reported ments Adjusted
REVENUE Royalty revenue 40,588 40,588 44,818 44,818 Product sales
2,209 2,209 586 586 License fees 1,049 (1,049)a - 13,954 (13,900)b
54
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43,846 (1,049) 42,797 59,358 (13,900) 45,458
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EXPENSES License and royalty fees 6,405 6,405 8,462 (1,529)b 6,933
Cost of goods sold - product sales 2,550 (208)d 2,342 1,228 1,228
Research and development 9,129 (537)c 8,592 8,693 (630)c 5,744
(2,319)d Selling, general and administrative 9,934 (804)c 8,925
6,647 (714)c 5,606 (205)d (327)d Depreciation and amortization
2,921 (2,327)e 594 2,100 (1,345)e 755 In-process research and
development 53,957 (53,957)f - - -
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84,896 (58,038) 26,858 27,130 (6,864) 20,266
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Operating income (loss) (41,050) 56,989 15,939 32,228 (7,036)
25,192
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Other income (expenses): Foreign exchange gain 4 (4)g - 2,239
(2,239)g - Investment and other income 2,610 2,610 1,479 1,479
Write-down of investment (5,967) 5,967h - - -
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(3,353) 5,963 2,610 3,718 (2,239) 1,479
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Income (loss) from continuing operations before income taxes
(44,403) 62,952 18,549 35,946 (9,275) 26,671 Income tax expense
(recovery) (1,683) 8,600i 6,917 (5,987) 6,229i 242
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Net income (loss) from continuing operations (42,720) 54,352 11,632
41,933 (15,504) 26,429
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Net loss from discontinued operations, net of income taxes (8,540)
8,540 - (452) 452 -
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Net income (loss) for the period (51,260) 62,892 11,632 41,481
(15,052) 26,429
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Basic net income per common share from continuing operations (0.51)
0.14 0.50 0.32 Diluted net income per common share from continuing
operations (0.50) 0.14 0.49 0.31
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Weighted average shares out- standing (000's) - basic 84,130 84,130
83,886 83,886 Weighted average shares out- standing (000's) -
diluted 85,505 85,505 85,904 85,904
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a. Non-recurring license fee revenue relating to license agreement
with Baxter Healthcare Corporation ($1.0 million) and other license
fee revenue. b. 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.
c. Stock based compensation expense. d. Termination costs relating
to consolidation activities at Palo Alto facility. e. Amortization
of acquisition related intangible assets and medical technologies.
For the quarter ended December 31, 2005, adjustments include
$1,174,000 and $285,000 for amortization of intangible assets
related to the acquisitions of Cohesion Technologies, Inc. (now
called Angiotech BioMaterials Corp.) and STS Biopolymers, Inc. (now
called Angiotech BioCoatings Corp.) respectively; and $868,000 for
amortization of medical technologies, primarily relating to the
$25.0 million license payment made to Cook Incorporated in 2004. f.
In-process research and development expense of $30.6 million and
$23.4 million related to transactions with CombinatoRx Incorporated
and Afmedica, Inc., respectively. g. Foreign exchange fluctuations
on foreign currency cash balances. h. Write-down of investment in
CABG Medical, Inc. i. Non-recurring tax adjustments and tax effects
of adjustments a. through h. ANGIOTECH PHARMACEUTICALS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in
thousands of U.S.$, except share and per Year Ended Year Ended
share data) December 31, 2005 December 31, 2004
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Adjust- Adjust- Reported ments Adjusted Reported ments Adjusted
REVENUE Royalty revenue 189,203 189,203 100,638 100,638 Product
sales 5,334 5,334 8,281 8,281 License fees 5,111 (5,014)a 97 17,312
(13,900)b 3,412
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199,648 (5,014) 194,634 126,231 (13,900) 112,331
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EXPENSES License and royalty fees 28,345 (478)a 27,867 18,072
(1,529)b 16,543 Cost of goods sold - product sales 5,653 (415)d
5,238 5,632 5,632 Research and development 31,988 (2,052)c 28,882
26,659 (2,549)c 21,791 (1,054)d (2,319)d Selling, general and
administrative 37,837 (3,332)c 29,779 21,180 (2,634)c 18,219
(1,097)d (327)d (3,629)e Depreciation and amortization 9,540
(6,983)f 2,557 9,235 (6,322)f 2,913 In-process research and
development 54,957 (54,957)g - 6,375 (6,375)g -
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168,320 (73,997) 94,323 87,153 (22,055) 65,098
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Operating income 31,328 68,983 100,311 39,078 8,155 47,233
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Other income (expenses): Foreign exchange gain 1,092 (1,092)h -
2,050 (2,050)h - Investment and other income 10,006 10,006 5,668
5,668 Write-down of investment (5,967) 5,967i - - -
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Total other income (expenses) 5,131 4,875 10,006 7,718 (2,050)
5,668
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Income from continuing operations before income taxes 36,459 73,858
110,317 46,796 6,105 52,901 Income tax expense (recovery) 28,055
13,423j 41,478 (6,183) 6,229j 46
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Net income from continuing operations 8,404 60,435 68,839 52,979
(124) 52,855
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Net loss from discontinued operations, net of income taxes (9,591)
9,591 - (527) 527 -
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Net income (loss) for the period (1,187) 70,026 68,839 52,452 403
52,855
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Basic net income per common share from continuing operations 0.10
0.82 0.63 0.63 Diluted net income per common share from continuing
operations 0.10 0.80 0.62 0.62
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Weighted average shares out- standing (000's) - basic 84,121 84,121
83,678 83,678 Weighted average shares out- standing (000's) -
diluted 85,724 85,724 85,697 85,697
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a. Non-recurring license fee revenue relating to license agreement
with CABG Medical, Inc. ($3.3 million), Broncus Technologies, Inc.
($0.5 million), Baxter Healthcare Corporation ($1.0 million) and
other license fee revenue, net of license fees due to licensors. b.
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. c. Stock based
compensation expense. d. Termination costs relating to
consolidation activities at Palo Alto facility. e. One-time payment
to an opposition party in the European patent opposition
proceedings. f. Amortization of acquisition related intangible
assets and medical technologies. For the year ended December 31,
2005, adjustments include $2.3 million, and $1.1 million for
amortization of intangible assets related to the acquisitions of
Cohesion Technologies, Inc. (now called Angiotech BioMaterials
Corp.) and STS Biopolymers, Inc. (now called Angiotech BioCoatings
Corp.) respectively; and $3.5 million for amortization of medical
technologies, primarily relating to the $25.0 million license
payment made to Cook Incorporated in 2004. g. In-process research
and development expense of $30.6 million and $23.4 million related
to CombinatoRx and Afmedica transactions, respectively and for
payment of $1.0 million to Poly-Med, Inc. h. Foreign exchange
fluctuations on foreign currency cash balances. i. Write-down of
investment in CABG Medical, Inc. j. Non-recurring tax adjustments
and tax effects of adjustments a. through i. ANGIOTECH
PHARMACEUTICALS, INC. CALCULATION OF ADJUSTED EBITDA (Unaudited)
Three Months Ended Year ended December 31, December 31, (in
thousands of U.S.$) 2005 2005
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Operating income (loss) from continuing operations per GAAP
(41,050) 31,328 Depreciation and amortization 3,054 9,999
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EBITDA (37,996) 41,328 Adjustments: In-process research and
development 53,957 54,957 Stock-based compensation 1,341 5,384 Palo
Alto consolidation expenses 413 2,566 Payment relating to European
patent opposition - 3,629 Non-recurring revenue, net of license
fees (1,049) (4,536) Litigation expenses 3,704 11,521
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Adjusted EBITDA 20,370 114,849
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ANGIOTECH PHARMACEUTICALS, INC. CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited) As at December 31, December 31, (in thousands of
U.S.$) 2005 2004
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ASSETS Cash and short-term investments 195,442 271,484 Other
current assets 13,430 21,185 Long-term investments 170,578 71,711
Property and equipment, net 11,042 15,677 Intangible assets, net
45,447 65,246 Goodwill 46,071 33,346 Deferred income taxes 11,350 -
Other assets 1,334 428
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494,694 479,077
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LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities 27,555
24,369 Deferred revenue - long term portion 1,632 2,000 Deferred
leasehold inducement 2,827 2,860 Deferred income taxes - 8,022
Stockholders' equity 462,680 441,826
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494,694 479,077
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This press release contains the condensed financial statements
derived from the consolidated financial statements for the years
ended December 31, 2005 and December 31, 2004. If you require a
copy of Angiotech's audited consolidated financial statements for
the year ended December 31, 2005 or December 31, 2004, please
contact the Company or visit our website at
http://www.angiotech.com/. A conference call on Angiotech's
Financials will be held on Thursday, March 2, 2006 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 1-866-362-4820 (North America) or 617-597-5345
(International) and entering Access Code 19190201. A recording of
the call will be available until Thursday, March 9, 2006 by calling
1-888-286-8010 (North America) or 617-801-6888 (International) and
entering Access Code 32435888. Statements contained herein that are
not based on historical fact, including without limitation
statements containing the words "believes," "may," "will,"
"estimate," "continue," "anticipates," "intends," "expects" and
words of similar import, constitute "forward-looking statements"
within the meaning of the U.S. Private Securities Litigation Reform
Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the
actual results, events or developments to be materially different
from any future results, events or developments expressed or
implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business
conditions, both national and in the region in which the Company
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;
adverse results or unexpected delays in drug discovery and clinical
development processes; failure to obtain patent protection for
discoveries; loss of patent protection resulting from third party
challenges to our patents; 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 the Company's work; patents liability and
other claims asserted against the Company; the requirement for
substantial funding to conduct research and development and to
expand commercialization activities or consummate acquisitions; and
other factors referenced in the Company's filings with the
Securities and Exchange Commission. In addition, certain
forward-looking statements contained in this report relate to the
proposed acquisition of American Medical Instruments Holdings, Inc.
and the related transactions, including the incurrence of
approximately $600 million of indebtedness to finance the
acquisition. The closing of the acquisition is subject to the
satisfaction of customary closing conditions. There can be no
assurance that the acquisition will close on the expected schedule
or that the acquisition will be consummated at all. There can be no
assurance that (i) the operational and other synergies, (ii) the
projected or expected financial or commercial benefits, or (iii)
the potential for future product sales or product development
activities related to the acquisition will be realized in the
amounts or times contemplated. Given these uncertainties, readers
are cautioned not to place undue reliance on such forward-looking
statements. The Company disclaims 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 and Investors: Rui Avelar,
Angiotech Pharmaceuticals, Inc. (604) 221-7676 ext 6996 Media:
Colleen Beauregard, Waggener Edstrom Bioscience, (503) 443-7863,
Email: DATASOURCE: Angiotech Pharmaceuticals, Inc. CONTACT:
Analysts and Investors: Rui Avelar, Angiotech Pharmaceuticals,
Inc., (604) 221-7676 ext 6996; Media: Colleen Beauregard, Waggener
Edstrom Bioscience, (503) 443-7863, Email:
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