EXHIBIT 99.1
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 | | 11777 San Vicente Blvd., Suite 550 Los Angeles, CA 90049 |
News Release
ABRAXIS BIOSCIENCE REPORTS SECOND QUARTER 2006
ADJUSTED EARNINGS PER SHARE, EXCLUDING
MERGER-RELATED ITEMS AND STOCK
COMPENSATION EXPENSE, OF $0.17 VERSUS $0.06 IN THE PRIOR YEAR
NET SALES INCREASE 29 PERCENT TO $160.7 MILLION VERSUS THE PRIOR-YEAR QUARTER COMPANY; REVISES GUIDANCE FOR ABRAXANE®
LOS ANGELES, Calif. (August 3, 2006) – Abraxis BioScience, Inc. (NASDAQ:ABBI), an integrated, global biopharmaceutical company, today reported financial results for the second quarter ended June 30, 2006. The financial results represent the combined company formed as a result of the merger of American Pharmaceutical Partners and its parent company, American BioScience, which was completed in the second quarter.
Adjusted net income per diluted share, which excludes merger-related items and non-cash stock compensation expense, was $0.17 versus $0.06 in the prior year period. Adjusted net income per diluted share for the first six months of 2006 was $0.27, reflecting in part the higher effective reported tax for American BioScience in the first quarter of 2006, versus $0.22 per share in the same period of 2005. On a reported basis and calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP), the company reported a net loss of $90.8 million, or $0.57 per diluted share, for the second quarter of 2006, versus net income of $1.0 million, or $0.01 per diluted share, in the second quarter of last year. For the first six months of 2006, net loss was $88.9 million, or $0.56 per diluted share, versus net income of $16.9 million, or $0.11 per diluted share. Refer to the attached table for additional information regarding the basis for the adjusted net income per diluted share calculation.
Financial results in 2006 included pre-tax costs of $149.2 million related to the merger, the majority of which were incurred in the second quarter. These charges include the $105.8 million charge resulting from the write-off of acquired in-process research and development, amortization of merger-related intangible assets totaling $11.3 million,
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$15.3 million of merger and transaction related legal and consulting costs, a $7.8 million charge included in cost of goods sold resulting from the write-up of finished goods inventory to fair market value in the merger and a $9.0 million merger-related stock compensation charge. The merger also resulted in a $17.9 million income tax benefit in the second quarter resulting from the recognition of previously reserved net operating loss carryforwards.
For the 2006 second quarter, net sales grew 29 percent to $160.7 million. ABRAXANE® (paclitaxel protein-bound particles for injectable suspension) (albumin-bound) revenue increased 87 percent to $36.3 million. Hospital-based product sales increased 15 percent to $120.6 million versus the prior year period. Research-related revenue, resulting from the licensing of ABRAXANE in Japan, totaled $3.8 million in the second quarter of 2006. For the first six months of 2006, net sales increased 24 percent to $305.3 million. ABRAXANE sales increased 23 percent to $66.4 million. Hospital-based sales increased 23 percent to $234.2 million, versus the first six months of 2005. Research revenue in the first six months of 2006 totaled $4.6 million. Sales for the hospital-based business in the second quarter did not include sales of the eight products (over 100 SKUs) acquired from AstraZeneca on June 28, 2006.
The company has revised guidance for ABRAXANE and now anticipates sales in 2006 to be in the range of $170 to $190 million versus the previously announced guidance, however, the company believes the underlying demand for ABRAXANE is strong. According to IMS, ABRAXANE growth in the first half of 2006 compared to the second half of 2005 was 19 percent while the overall growth of the taxane market for the same period was 10 percent.
“I am very proud of the growth we have made this quarter and we will continue to invest in a comprehensive development program for both ABRAXANE as well as our hospital-based business, and pursue strategic acquisitions and partnerships to augment capabilities and product offerings,” said Patrick Soon-Shiong, M.D., chairman and chief executive officer of Abraxis BioScience.
Gross margin for the second quarter of 2006 was 57.9 percent, or 62.7 percent excluding a $7.8 million merger-related inventory write-up charge, versus 54.7 percent in
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the comparable 2005 quarter. Improved gross margin was due to continued strong margins in the core hospital products business, a greater proportion of higher-margin ABRAXANE sales, and $3.8 million derived from the licensing of ABRAXANE in Japan. Gross margin for the first six months of 2006 was 61.4 percent excluding a $7.8 million merger related inventory write-up charge, compared with gross margin for the first half of 2005 of 58.1 percent.
Operating expenses related to ABRAXANE totaled $18.4 million and $16.7 million in the 2006 and 2005 second quarters, respectively.
Adjusted net income per diluted share is comprised of reported diluted earnings per share excluding the impact of merger-related purchase accounting, other merger and transaction-related direct costs, non-cash stock compensation, minority interests, non-cash amortization of acquired intangible assets and other significant non-operating items. The company believes that this non-GAAP measure is relevant to investors in understanding the underlying operating performance of the company and uses this measure internally to monitor, measure and reward performance. Please refer to the attached reconciliation between U.S. GAAP net income and diluted earnings per share and adjusted net income and adjusted net income per diluted share for each of the three and six month periods ending June 30, 2006 and 2005 for additional information.
Second Quarter Product and Pipeline Updates
ABRAXANE
In June 2006, the company received approval for ABRAXANE from the Therapeutic Products Directorate of Health Canada under a Notice of Compliance for the treatment of metastatic breast cancer in Canada. Canada is the first major commercial market to grant an approval for ABRAXANE that includes first-line treatment of metastatic breast cancer.
On July 1, 2006, Abraxis and AstraZeneca successfully launched its five and a half year U.S. co-promotion of ABRAXANE. This agreement effectively doubles the sales force and promotional investment in ABRAXANE and allows for the sharing of cost of certain portions of the ABRAXANE clinical development program.
In July, Élan Corp. filed a lawsuit against Abraxis alleging patent infringement in relation to ABRAXANE and asserting that ABRAXANE uses technology protected by two Élan-
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owned patents. Abraxis is confident in the integrity of its patents and believes that ABRAXANE does not infringe on the patent rights of Élan. The company intends to vigorously defend against this lawsuit to protect its patent rights.
Hospital-Based Products
In the second quarter, the Abraxis Pharmaceutical Products division launched three new products, carboplatin 600 mg, mitoxantrone and octreotide. This follows the launch of two products in the first quarter, azithromycin and ceftriaxone, for a total of five products launched in the first six months of 2006.
In late June, the company completed its acquisition of the AstraZeneca U.S. branded anesthetic and analgesic injectable product portfolios for a purchase price of $334 million. These products are complementary to the company’s existing hospital-based products and encompass more than 100 additional dosage forms.
The company has received eight ANDA approvals in 2006. Abraxis currently has 24 ANDAs pending at the FDA and is well on its way to achieving its goal of approximately 10 approvals per year.
Pipeline Updates
ABRAXANE was approved under Section 505(b)(2) of the federal Food, Drug and Cosmetic Act which permitted Abraxis to rely on safety and efficacy information in the approved New Drug Application (NDA) for Taxol® and on a direct comparative trial of ABRAXANE versus Taxol that resulted in an approval for ABRAXANE in metastatic breast cancer that is identical to that of Taxol.
At a recent meeting between Abraxis and the FDA’s Division of Oncology Drug Products, the FDA decided to seek the advice of the Oncologic Drugs Advisory Committee (ODAC) regarding the evaluation of ABRAXANE for the treatment of women with node-positive breast cancer in the adjuvant setting. The ODAC meeting has been scheduled for September 7, 2006.
The company continues to study the use of ABRAXANE in a variety of oncology settings where it has demonstrated a high degree of activity, including early stage breast cancer,
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lung, ovarian, melanoma, prostate, pancreatic and head and neck cancers. Abraxis is also targeting six Investigational New Drug (IND) submissions over the next 12 to 18 months for new molecules which use the provennab™ technology platform, includingnab™ docetaxel.
In June, the company presented data at the American Society of Clinical Oncology (ASCO) Annual Meeting from three Phase II studies confirming activity of ABRAXANE as first line treatment in non-small cell lung cancer (NSCLC) and showing higher tumor response rates than current standard of care.
COROXANE™ (nab- paclitaxel) is currently in clinical development for both coronary and peripheral artery restenosis. Use of COROXANE in coronary artery disease with bare metal stents is in Phase II studies, peripheral arterial disease is in Phase II/III and shunt patency in hemodialysis patients in Phase I.
Conference Call Information
On Thursday, August 3, 2006, the company will host a conference call with interested parties beginning at 11:30 a.m. (EDT) to review the results of operations for the second quarter ended June 30, 2006. The conference call may be heard by interested parties through a live audio Internet broadcast at www.abraxisbio.com and www.earnings.com. For those unable to listen to the live broadcast, a playback of the webcast will be available at both websites for approximately six months beginning shortly after the conclusion of the call.
About ABRAXANE
The U.S. Food and Drug Administration approved ABRAXANE® for Injectable Suspension (paclitaxel protein-bound particles for injectable suspension) (albumin-bound) in January 2005 for the treatment of breast cancer after failure of combination chemotherapy for metastatic disease or relapse within six months of adjuvant chemotherapy. Prior therapy should have included an anthracycline unless clinically contraindicated. For the full prescribing information for ABRAXANE® please visit www.abraxane.com.
About Abraxis BioScience, Inc.
Abraxis BioScience, Inc. is an integrated global biopharmaceutical company dedicated to meeting the needs of critically ill patients. The company develops, manufactures and markets one of the broadest portfolios of injectable products and leverages revolutionary technology such as itsnab™ platform to discover and deliver breakthrough therapeutics
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that transform the treatment of cancer and other life-threatening diseases. The first FDA approved product to use thisnab platform, ABRAXANE®, was launched in 2005 for the treatment of metastatic breast cancer. Abraxis trades on the Nasdaq National Market under the symbol ABBI. For more information about the company and its products, please visit www.abraxisbio.com.
FORWARD-LOOKING STATEMENT
The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements in this press release include statements regarding our expectations, beliefs, hopes, goals, intentions, initiatives or strategies, including statements regarding the benefits of the merger with American BioScience, the benefits of the co promotion and product acquisition agreements with AstraZeneca and guidance on operations in 2006. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause actual results to differ materially from those in the forward- looking statements. These factors include, without limitation, failure of the benefits of the merger to materialize, difficulties in integrating the businesses and operations of the two companies, the adverse impact of production delays on the sales and marketing of the combined company’s products, the costs associated with the ongoing launch of ABRAXANE and research and development associated with the nab™ technology platform, the continued market adoption and demand of ABRAXANE in North America and its potential market penetration outside of the U.S., difficulties or delays in developing, testing, obtaining regulatory approval of, and producing and marketing any other products, including those in Abraxis BioScience’s pipeline, the impact of pharmaceutical industry regulation, the impact of competitive products and pricing, the availability and pricing of ingredients used in the manufacture of pharmaceutical products, the ability to successfully manufacture products in a time-sensitive and cost effective manner, the acceptance and demand of new pharmaceutical products, the impact of patents and other proprietary rights held by competitors and other third parties. Additional relevant information concerning risks can be found in Abraxis BioScience’s Form 10-K for the year ended December 31, 2005 and other documents it has filed with the Securities and Exchange Commission.
Taxol® is a registered trademark of Bristol-Myers Squibb Company.
CONTACT (Investor and Media Inquiries):
Christine Cassiano
Director, Corporate Communications
(310) 826-5102
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ABRAXIS BIOSCIENCE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except per share amounts)
| | | | | | | | | | | | | | | | |
| | Three months ended June 30, | | | Six months ended June 30, | |
| | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Hospital-Based Products | | | | | | | | | | | | | | | | |
Anti-infective | | $ | 53,782 | | | $ | 48,815 | | | $ | 106,628 | | | $ | 89,676 | |
Critical Care | | | 47,978 | | | | 42,211 | | | | 93,252 | | | | 76,821 | |
Oncology | | | 16,302 | | | | 14,099 | | | | 30,146 | | | | 24,349 | |
Contract manufacturing | | | 2,547 | | | | — | | | | 4,195 | | | | 120 | |
| | | | | | | | | | | | | | | | |
Total hospital-based products | | | 120,609 | | | | 105,125 | | | | 234,221 | | | | 190,966 | |
Abraxane | | | 36,301 | | | | 19,384 | | | | 66,443 | | | | 54,224 | |
Research revenue | | | 3,829 | | | | 324 | | | | 4,603 | | | | 392 | |
| | | | | | | | | | | | | | | | |
Net sales | | | 160,739 | | | | 124,833 | | | | 305,267 | | | | 245,582 | |
Cost of sales | | | 67,677 | | | | 56,530 | | | | 125,757 | | | | 102,807 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 93,062 | | | | 68,303 | | | | 179,510 | | | | 142,775 | |
| | | | | | | | | | | | | | | | |
Percent to sales | | | 57.9 | % | | | 54.7 | % | | | 58.8 | % | | | 58.1 | % |
Research and development | | | 21,918 | | | | 17,468 | | | | 41,526 | | | | 26,976 | |
Selling, general and administrative | | | 43,619 | | | | 34,130 | | | | 79,252 | | | | 68,049 | |
Amortization of merger related intangible assets | | | 11,258 | | | | — | | | | 11,258 | | | | — | |
Merger-related in-process research and development charge | | | 105,777 | | | | — | | | | 105,777 | | | | — | |
Merger and transaction expense | | | 18,628 | | | | — | | | | 24,267 | | | | — | |
Equity income | | | (307 | ) | | | (986 | ) | | | (783 | ) | | | (1,525 | ) |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 200,893 | | | | 50,612 | | | | 261,297 | | | | 93,500 | |
| | | | | | | | | | | | | | | | |
Percent to sales | | | 125.0 | % | | | 40.5 | % | | | 85.6 | % | | | 38.1 | % |
(Loss) income from operations | | | (107,831 | ) | | | 17,691 | | | | (81,787 | ) | | | 49,275 | |
Percent to sales | | | -67.1 | % | | | 14.2 | % | | | -26.8 | % | | | 20.1 | % |
Interest income | | | 1,490 | | | | 278 | | | | 2,340 | | | | 641 | |
Interest expense | | | (2,034 | ) | | | (895 | ) | | | (5,055 | ) | | | (1,209 | ) |
Minority interests | | | (2,041 | ) | | | (6,065 | ) | | | (11,383 | ) | | | (13,447 | ) |
| | | | | | | | | | | | | | | | |
(Loss) income before income taxes | | | (110,416 | ) | | | 11,009 | | | | (95,885 | ) | | | 35,260 | |
Income tax (benefit) expense | | | (19,629 | ) | | | 10,050 | | | | (6,982 | ) | | | 18,355 | |
| | | | | | | | | | | | | | | | |
Net (loss) income | | $ | (90,787 | ) | | $ | 959 | | | $ | (88,903 | ) | | $ | 16,905 | |
| | | | | | | | | | | | | | | | |
Net (loss) income per share: | | | | | | | | | | | | | | | | |
Basic | | $ | (0.57 | ) | | $ | 0.01 | | | $ | (0.56 | ) | | $ | 0.11 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | (0.57 | ) | | $ | 0.01 | | | $ | (0.56 | ) | | $ | 0.11 | |
| | | | | | | | | | | | | | | | |
Weighted - average common shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 158,765 | | | | 157,658 | | | | 158,643 | | | | 157,241 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 158,765 | | | | 159,975 | | | | 158,643 | | | | 159,883 | |
| | | | | | | | | | | | | | | | |
The composition of stock-based compensation included above is as follows: | | | | | | | | | | | | | | | | |
Cost of sales | | $ | 786 | | | $ | 963 | | | $ | 1,514 | | | $ | 1,792 | |
Research and development | | | 1,438 | | | | 205 | | | | 1,593 | | | | 381 | |
Selling, general and administrative | | | 3,269 | | | | 2,446 | | | | 5,118 | | | | 4,550 | |
Merger related stock compensation | | | 8,999 | | | | — | | | | 8,999 | | | | — | |
| | | | | | | | | | | | | | | | |
| | $ | 14,492 | | | $ | 3,614 | | | $ | 17,224 | | | $ | 6,723 | |
| | | | | | | | | | | | | | | | |
Adjusted Net Income and Adjusted Net Income per Diluted Share are defined as reported net income and reported diluted earnings per share excluding the impact of merger-related purchase accounting, merger- and transaction-related costs, stock compensation, minority interests, non-cash amortization of acquired intangible assets and other significant items. We believe that these non-GAAP measures are relevant to investors in understanding the underlying operating performance of the company and we use the measure internally to monitor, measure and reward performance. The Adjusted Net Income and Adjusted Net Income per Diluted Share metrics should be used in conjunction with United States Generally Accepted Accounting Principles, or GAAP, net income and diluted earnings per share and are not substitutes or alternatives for U.S. GAAP net income or diluted earnings per share. Reconciliation between U.S. GAAP net income and diluted earnings per share and Adjusted Net Income and Adjusted Diluted Net Income per Diluted Share for each of the three and six month periods ending each of June 30, 2006 and 2005 are as follows:
GAAP TO ADJUSTED NET (LOSS) INCOME RECONCILIATION
(unaudited, in thousands, except per share amounts)
| | | | | | | | | | | | | | |
| | Three months ended June 30, | | Six months ended June 30, |
| | 2006 | | | 2005 | | 2006 | | | 2005 |
Reported net (loss) income | | $ | (90,787 | ) | | $ | 959 | | $ | (88,903 | ) | | $ | 16,905 |
Merger related items | | | | | | | | | | | | | | |
In-process research and development charge | | | 105,777 | | | | — | | | 105,777 | | | | — |
Sale of inventory written up to fair-market value | | | 4,817 | | | | — | | | 4,817 | | | | — |
Intangible amortization | | | 6,952 | | | | — | | | 6,952 | | | | — |
Stock compensation charge | | | 5,901 | | | | — | | | 5,901 | | | | — |
Merger and transaction expense | | | 6,346 | | | | — | | | 10,011 | | | | — |
| | | | | | | | | | | | | | |
Total merger related costs | | | 129,792 | | | | — | | | 133,457 | | | | — |
Stock compensation (FAS 123®) | | | 3,617 | | | | 2,349 | | | 5,393 | | | | 4,370 |
Minority interests | | | 2,041 | | | | 6,065 | | | 11,383 | | | | 13,447 |
Merger related income tax benefit | | | (17,884 | ) | | | — | | | (17,884 | ) | | | — |
| | | | | | | | | | | | | | |
Adjusted net income | | $ | 26,779 | | | $ | 9,373 | | $ | 43,446 | | | $ | 34,722 |
| | | | | | | | | | | | | | |
Adjusted net income per diluted share | | $ | 0.17 | | | $ | 0.06 | | $ | 0.27 | | | $ | 0.22 |
| | | | | | | | | | | | | | |
Weighted - average common shares outstanding diluted | | | 158,765 | | | | 159,975 | | | 158,643 | | | | 159,883 |
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ABRAXIS BIOSCIENCE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
| | | | | | | |
| | June 30, 2006 | | | December 31, 2005 |
ASSETS | | (Unaudited) | | | (Audited) |
Current assets: | | | | | | | |
Cash and cash equivalents | | $ | 54,051 | | | $ | 28,818 |
Short-term investments | | | 231 | | | | 54,455 |
Accounts receivable, net | | | 34,002 | | | | 61,868 |
Inventory, net | | | 203,151 | | | | 175,282 |
Prepaid expenses and other | | | 15,137 | | | | 13,553 |
Deferred income taxes | | | 42,869 | | | | 16,936 |
| | | | | | | |
Total current assets | | | 349,441 | | | | 350,912 |
| | | | | | | |
Property, plant and equipment, net | | | 175,301 | | | | 152,630 |
Goodwill | | | 401,600 | | | | — |
Intangible and other non-current assets, net | | | 780,305 | | | | 10,641 |
Other assets | | | 10,962 | | | | 10,046 |
| | | | | | | |
Total assets | | $ | 1,717,609 | | | $ | 524,229 |
| | | | | | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | | | | |
Current liabilities: | | | | | | | |
Accounts payable | | $ | 51,707 | | | $ | 35,593 |
Deferred revenue | | | 39,225 | | | | 0 |
Accrued expenses | | | 51,571 | | | | 67,035 |
Notes payable | | | 69,597 | | | | 0 |
| | | | | | | |
Total current liabilities | | | 212,100 | | | | 102,628 |
Long-term debt | | | 175,500 | | | | 190,000 |
Long-term portion of deferred revenue | | | 177,823 | | | | — |
Long-term deferred income tax liability | | | 165,876 | | | | — |
Other non-current liabilities | | | 1,089 | | | | 1,400 |
| | | | | | | |
Total liabilities | | | 732,388 | | | | 294,028 |
Minority interests | | | — | | | | 162,061 |
Stockholders’ Equity | | | | | | | |
Common stock | | | 165 | | | | 15,131 |
Additional paid-in capital | | | 1,076,962 | | | | — |
Deferred stock-based compensation | | | — | | | | — |
Retained earnings | | | (37,522 | ) | | | 51,380 |
Accumulated other comprehensive income | | | 1,890 | | | | 1,629 |
Less treasury stock, at cost | | | (56,274 | ) | | | — |
| | | | | | | |
Total stockholders’ equity | | | 985,221 | | | | 68,140 |
| | | | | | | |
Total liabilities and stockholders’ equity | | $ | 1,717,609 | | | $ | 524,229 |
| | | | | | | |