Exhibit 99.1
11755 Wilshire Blvd., 20th Floor
Los Angeles, CA 90025
News Release
ABRAXIS BIOSCIENCE REPORTS RECORD REVENUE OF $765
MILLION IN 2006 VERSUS $521 MILLION FOR 2005
Fourth Quarter 2006 Revenue Totals a Record $257 Million versus $146 Million in the Prior Year Period
Fourth Quarter Adjusted Earnings Per Share Increases to $0.29 versus $0.09 in the Prior Year Period; GAAP Earnings Per Share for the Fourth Quarter Increases to $0.18 versus $0.02 in the Prior Year Period
LOS ANGELES, Calif. (February 26, 2007) – Abraxis BioScience, Inc. (NASDAQ:ABBI), an integrated, global biopharmaceutical company, today reported financial results for the full year and fourth quarter ended December 31, 2006.
Total revenue increased 47 percent in 2006 to a record $765.5 million from $520.8 in 2005. Revenue for company-wide, hospital-based products reached a record $584.4 million in 2006, a 52 percent increase from the prior year. Annual 2006 ABRAXANE® (paclitaxel protein-bound particles for injectable suspension) (albumin-bound) revenue increased to $174.9 million versus $133.7 million in 2005. Fourth quarter total revenue increased to $257.1 million from $145.6 million in the same period of 2005.
The company posted adjusted net income per diluted share, which excludes merger-related items and non-cash stock compensation expense, as follows:
| | | | | | | | |
| | | Q4 2006 | | Q4 2005 | | Full Year 2006 | | Full Year 2005 |
Adjusted Net Income (millions) | | $46.7 | | $14.8 | | $121.7 | | $59.4 |
Per diluted share | | $0.29 | | $0.09 | | $0.77 | | $0.37 |
On a reported basis and calculated in accordance with U.S. Generally Accepted Accounting Principles (GAAP), the company reported net income as follows:
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| | | | | | | | |
| | | Q4 2006 | | Q4 2005 | | Full Year 2006 | | Full Year 2005 |
Net Income / (Loss) (millions) | | $28.4 | | $2.6 | | $(46.9) | | $17.7 |
Per diluted share | | $0.18 | | $0.02 | | $(0.30) | | $0.11 |
The attached table provides additional information regarding the basis for the adjusted net income per diluted share calculation and the rationale for providing such information may be found toward the end of this document.
“Last year was a very important year for Abraxis,” said Patrick Soon-Shiong, M.D., chairman and chief executive officer of Abraxis BioScience. “In addition to achieving our highest revenues to date, we made strategic acquisitions that enhanced our product offerings and manufacturing capabilities; defined our divisions enabling each to capitalize on strategic opportunities and operate more efficiently; and, continued to drive sales of ABRAXANE while advancing our clinical programs. As we explore additional partnerships and other strategic opportunities, we believe 2007 will prove to be another important year in the evolution of Abraxis.”
Segment Reporting
Abraxis BioScience is comprised of Abraxis Pharmaceutical Products, Abraxis Oncology and Abraxis Research. Beginning in the fourth quarter of 2006, the company re-aligned its segment presentation to better reflect how the business is managed. Abraxis intends to continue to report its business in two segments: Abraxis BioScience (ABI) representing the combined operations of Abraxis Oncology and Abraxis Research; and Abraxis Pharmaceutical Products (APP), representing the hospital-based operations. ABI focuses primarily on the company’s internally developed proprietary products including ABRAXANE and its proprietary pipeline. APP manufactures and markets one of the broadest portfolio of injectable drugs including oncology, critical care and anti-infectives. The attached tables provide additional detail on segment reporting.
ABI Segment
ABRAXANE revenue for the full year increased 31 percent to $174.9 million, which includes $156.7 million of net sales, versus revenue of $133.7 million in 2005. Fourth quarter 2006 ABRAXANE revenue was $56.1 million, which includes $9.1 million in
deferred revenue related to the AstraZeneca co-promotion agreement in the United States. ABRAXANE net sales in the fourth quarter of 2005 were $47.4 million.
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ABRAXANE continues to show a positive trend in market penetration for metastatic breast cancer. NDC data for January 2007 reports that ABRAXANE demand sales have increased by 33 percent in units versus January 2006. According to IMS, ABRAXANE experienced a 52 percent unit volume increase for the period of February 2006 to December 2006 versus the same period in the prior year. This compares favorably to Taxotere® and Taxol® with growth rates for that same period of -2 percent and +9 percent, respectively.
In the second line and second line plus metastatic breast cancer settings, market share for ABRAXANE was 28 percent and 43 percent, respectively. In these settings, ABRAXANE market share continues its positive trend and is taking market share from Taxotere® and Taxol®.
In January 2007, ABRAXANE received compendia listing for first-line use of ABRAXANE in metastatic breast cancer.
Full-year selling and marketing expenses increased to $80.0 million, or 44 percent of revenue, versus $52.8 million, or 39 percent of revenue in 2005. In the fourth quarter of 2006, selling and marketing expenses were $21.5 million versus $14.4 million in the prior-year period. The increase primarily reflects the ABRAXANE commission expense relating to the co-promotion agreement with AstraZeneca and the recent expansion and activities of Abraxis Oncology.
ABI segment gross margin for the full year 2006 and fourth quarter was 85 percent and 86 percent, respectively, including the recognition of deferred revenue under the AstraZeneca co-promotion agreement.
Research and Development (R&D) expense totaled $57.3 million for 2006 compared with $49.0 million in 2005. The increase was primarily due to the further development of ABRAXANE and other proprietary products in the pipeline.
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APP Segment
Hospital-based product revenue for the APP segment increased 51 percent to $583.2 million, including $103.7 million from the acquired AstraZeneca products, versus $385.1 million in 2005. Fourth quarter revenue increased 105 percent to $199.7 million versus $97.4 in the fourth quarter of 2005. Sales of the hospital-based business grew 33 percent in the fourth quarter 2006 versus the third quarter of 2006.
Full-year selling and marketing expenses increased to $13.8 million, or 2 percent of revenue, versus $12.0 million, or 3 percent of revenue in 2005. In the fourth quarter of 2006, selling and marketing expenses were $3.9 million versus $3.5 million in the prior-year period.
In the fourth quarter, the company received approval from the U.S. Food and Drug Administration for its Abbreviated New Drug Application (ANDA) for the combination drug Ampicillin and Sulbactam for Injection, 15g, USP, the generic equivalent of Pfizer Inc.’s, Unasyn®. Also in the fourth quarter, Abraxis launched Ondansetron Injection, USP, the generic equivalent of GlaxoSmithKline’s Zofran® Injection.
As announced in February, Abraxis closed on the acquisition of the Puerto Rico manufacturing facility from Pfizer and expects to begin commercial manufacturing from this site in the first half of 2007. The net purchase price for this facility was $32.5 million.
APP remained a market leader with 10 ANDA approvals in 2006. From 2001 to 2006, APP led the market with 55 approvals. Including the 31 ANDAs pending with the FDA, representing over $2.0 billion in annual branded sales, APP currently has over 60 product candidates in various stages of development.
Gross margin for the full year 2006 and fourth quarter was 56 percent and 58 percent, respectively, excluding product rights amortization associated with the AstraZeneca product purchase, reflecting strong margins on sales of new products.
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R&D expenses totaled $28.2 million for 2006 compared with $18.9 million in 2005. The increase was primarily due to expense associated with the transfer of products to the recently acquired Puerto Rico facility.
General and Administrative Expenses
Company-wide, full-year general and administrative (G&A) expenses, excluding selling and marketing expenses, increased to $93.0 million, or 12 percent of revenue, versus $66.4 million, or 13 percent of revenue in 2005. In the fourth quarter of 2006, G&A expenses were $34.6 million versus $21.6 million in the prior-year period. These increases are primarily due to increased compensation expense and professional fees related to the merger.
Clinical Development Update
Investigational New Drug (IND) applications were filed with the FDA fornab-docetaxel (ABI 008) and the mTOR inhibitornab-rapamycin (ABI 009) in the fourth quarter of 2006.
In December 2006, data was presented at the 29th Annual San Antonio Breast Cancer Symposium (SABCS) from an interim analysis of a randomized, head-to-head Phase II trial of ABRAXANE versus Taxotere® (docetaxel) Injection Concentrate, in the first-line treatment of metastatic breast cancer. The interim analysis showed that first-line treatment with weekly ABRAXANE (100 and 150 mg/m2) increased tumor response rate by greater than 60 percent with less toxicity versus Taxotere (100 mg/m2) given every three weeks in patients with metastatic breast cancer. Although the data are not fully mature, the interim analysis showed that the ABRAXANE regimens currently have longer progression-free survivals than Taxotere dosed every three weeks. The company currently plans to present the final analysis of the data to the American Society of Clinical Oncology (ASCO) in 2007.
In January 2007, the Therapeutic Goods Administration (TGA) in Australia accepted for review the company’s marketing application for ABRAXANE for the treatment of metastatic breast cancer. This represented the second global regulatory filing for ABRAXANE to be accepted for review in a four-month period. A marketing authorization application also is currently under review with the European Medicines Agency (EMEA) for use of ABRAXANE in the treatment of breast cancer.
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The company continues to study the use of ABRAXANE in a variety of oncology settings and currently intends to focus its Phase III trials in first-line metastatic breast cancer, first-line non-small cell lung cancer (NSCLC) and melanoma by developing three Phase III superiority trials using weekly dosing schedules of ABRAXANE. Abraxis plans to initiate the worldwide head-to-head Phase III registration trial in the first half of 2007 comparing weekly ABRAXANE to every three week Taxotere for the treatment of first-line metastatic breast cancer. Special Protocol Assessments (SPA) for the design of these Phase III trials were submitted to the FDA in the first quarter of 2007. Initiation of the Phase III trials for NSCLC and melanoma are planned for the second half of 2007.
2007 Financial Guidance
For the full year of 2007, Abraxis is providing the following financial guidance estimates, which excludes effects of stock compensation:
| | • | | APP segment hospital-based product net sales increase mid-teens from prior year with gross margins between 48 percent and 52 percent, excluding product rights amortization associated with the AstraZeneca product purchase; |
| | • | | ABRAXANE net sales between $285 million and $305 million; |
| | • | | Company-wide R& D expenses between $100 million and $110 million; and |
| | • | | Company-wide Selling, General and Administrative expenses, excluding ABRAXANE commissions, between $195 million and $205 million. |
Conference Call Information
On Monday, February 26, 2007, the company will host a conference call with interested parties beginning at 8:30 a.m. PST/11:30 a.m. EST to review its results of operations for the full year and fourth quarter of 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.
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Non-GAAP Financial Measures
Adjusted net income per diluted share is a non-GAAP financial measure comprised of reported diluted earnings per share excluding the impact of merger-related purchase accounting, other direct merger and transaction-related costs, non-cash stock compensation expense, minority interests, non-cash amortization of acquired intangible assets. The company believes that its presentation of non-GAAP financial measures provides useful supplementary information to investors in understanding the underlying operating performance of the company and facilitates additional analysis by investors. The company also uses non-GAAP financial measures internally for operating, budgeting and financial planning purposes. The non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance calculated in accordance with GAAP. A reconciliation of GAAP net income to adjusted net income for each of the three- and twelve-month periods ending December 31, 2006 and December 31, 2005 is included with this press release.
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 visitwww.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 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 Global Market under the symbol ABBI. For more information about the company and its products, please visitwww.abraxisbio.com.
FORWARD-LOOKING STATEMENTS
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 anticipated ABRAXANE revenue and sales, the clinical development plan for ABRAXANE and product candidates, financial guidance for 2007 and the timing of commercial manufacturing at the Puerto Rico facility. 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, decision by regulatory authorities regarding whether and when to approve ABRAXANE or product
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candidates for various indications as well their decisions regarding labeling and other matters that could affect the availability or commercial potential of ABRAXANE and other products and product candidates, unexpected safety, efficacy or manufacturing issues with respect to ABRAXANE, other products or product candidates, the need for additional data or clinical studies for ABRAXANE or product candidates, regulatory developments (domestic or foreign) involving the company’s manufacturing facilities, the market adoption and demand of ABRAXANE and other products, the costs associated with the ongoing launch of ABRAXANE, research and development associated with the nab technology platform, 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 and the impact of patents and other proprietary rights held by competitors and other third parties. Additional relevant information concerning risks can be found in the company’s Annual Report on Form 10-K for the year ended December 31, 2005 and in other documents it has filed with the Securities and Exchange Commission.
The information contained in this press release is as of the date of this release. Abraxis assumes no obligations to update any forward-looking statements contained in this press release as the result of new information or future events or developments.
Taxol® is a registered trademark of Bristol-Myers Squibb Company.
Taxotere® is a registered trademark of Sanofi-Aventis.
Unasyn® is a registered trademark of Pfizer Inc.
Zofran® is a registered trademark of GlaxoSmithKline.
CONTACT (Investor and Media Inquiries):
Christine Cassiano
(310) 405-7417
# # #
Abraxis BioScience, Inc.
Consolidated Statements of Operation
(unaudited, in thousands, except per share amounts)
| | | | | | | | | | | | | | | | |
| | | Three Months Ended
December 31, | | | Year Ended December 31, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Hospital-based products | | | | | | | | | | | | | | | | |
Anti-infective | | $ | 56,199 | | | $ | 40,681 | | | $ | 213,489 | | | $ | 169,818 | |
Critical care | | | 123,859 | | | | 44,481 | | | | 303,485 | | | | 163,581 | |
Oncology | | | 17,051 | | | | 12,212 | | | | 57,983 | | | | 51,084 | |
Contract manufacturing | | | 3,061 | | | | 1 | | | | 9,485 | | | | 599 | |
| | | | | | | | | | | | | | | | |
Total hospital-based products | | | 200,170 | | | | 97,375 | | | | 584,442 | | | | 385,082 | |
Abraxane revenue | | | 56,143 | | | | 47,454 | | | | 174,906 | | | | 133,731 | |
Research revenue and other | | | 764 | | | | 774 | | | | 6,140 | | | | 1,944 | |
| | | | | | | | | | | | | | | | |
Net revenue | | | 257,077 | | | | 145,603 | | | | 765,488 | | | | 520,757 | |
Cost of sales | | | 96,342 | | | | 60,068 | | | | 307,512 | | | | 227,235 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 160,735 | | | | 85,535 | | | | 457,976 | | | | 293,522 | |
| | | | | | | | | | | | | | | | |
Percent to total revenue | | | 62.5 | % | | | 58.7 | % | | | 59.8 | % | | | 56.4 | % |
Operating Expenses | | | | | | | | | | | | | | | | |
Research and development | | | 24,593 | | | | 18,711 | | | | 96,891 | | | | 68,896 | |
Selling, general and administrative | | | 60,044 | | | | 39,440 | | | | 186,789 | | | | 131,237 | |
Amortization of merger related intangibles | | | 13,509 | | | | — | | | | 38,275 | | | | — | |
Merger-related in-process research and development charge | | | — | | | | — | | | | 105,777 | | | | — | |
Other merger related costs | | | 2,960 | | | | 1,919 | | | | 29,335 | | | | 7,863 | |
Equity (income) loss in Drug Source Company | | | (822 | ) | | | 6 | | | | (2,847 | ) | | | (1,802 | ) |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 100,284 | | | | 60,076 | | | | 454,220 | | | | 206,194 | |
| | | | | | | | | | | | | | | | |
Percent to total revenue | | | 39.0 | % | | | 41.3 | % | | | 59.3 | % | | | 39.6 | % |
Income from operations | | | 60,451 | | | | 25,459 | | | | 3,756 | | | | 87,328 | |
Percent to total revenue | | | 23.5 | % | | | 17.5 | % | | | 0.5 | % | | | 16.8 | % |
Interest expense | | | (4,101 | ) | | | (3,218 | ) | | | (13,927 | ) | | | (6,563 | ) |
Interest income and other | | | 484 | | | | 51 | | | | 3,956 | | | | 756 | |
Minority interests | | | — | | | | (7,083 | ) | | | (11,383 | ) | | | (25,875 | ) |
| | | | | | | | | | | | | | | | |
Income (loss) before income taxes | | | 56,834 | | | | 15,209 | | | | (17,598 | ) | | | 55,646 | |
Income tax expense | | | 28,385 | | | | 12,568 | | | | 29,299 | | | | 37,989 | |
| | | | | | | | | | | | | | | | |
Net income (loss) | | $ | 28,449 | | | $ | 2,641 | | | $ | (46,897 | ) | | $ | 17,657 | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net income (loss) per common share: | | | | | | | | | | | | | | | | |
Basic | | $ | 0.18 | | | $ | 0.02 | | | $ | (0.30 | ) | | $ | 0.11 | |
| | | | | | | | | | | | | | | | |
Diluted | | $ | 0.18 | | | $ | 0.02 | | | $ | (0.30 | ) | | $ | 0.11 | |
| | | | | | | | | | | | | | | | |
Weighted - average common shares outstanding: | | | | | | | | | | | | | | | | |
Basic | | | 159,198 | | | | 158,269 | | | | 158,937 | | | | 157,694 | |
| | | | | | | | | | | | | | | | |
Diluted | | | 160,169 | | | | 159,845 | | | | 158,937 | | | | 159,742 | |
| | | | | | | | | | | | | | | | |
The composition of stock-based compensation included above is as follows: | | | | | | | | | | | | | | | | |
Cost of sales | | $ | 168 | | | $ | 1,575 | | | $ | 2,668 | | | $ | 4,376 | |
Research and development | | | 2,438 | | | | 335 | | | | 5,767 | | | | 930 | |
Selling, general and administrative | | | 6,322 | | | | 3,998 | | | | 15,473 | | | | 11,103 | |
Other merger related stock compensation | | | 2,116 | | | | — | | | | 11,115 | | | | — | |
| | | | | | | | | | | | | | | | |
Total stock based compensation | | $ | 11,044 | | | $ | 5,908 | | | $ | 35,023 | | | $ | 16,409 | |
| | | | | | | | | | | | | | | | |
Abraxis BioScience, Inc.
GAAP to Adjusted Net Income Reconciliation
(unaudited, in thousands, except per share amounts)
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, other direct merger and transaction-related costs, non-cash stock compensation expense, minority interests, non-cash amortization of acquired intangible assets and other significant non-operating items. We believe that our presentation of non-GAAP measures provides useful supplementary information to investors in understanding our underlying operating performance and facilitates additional analysis by investors. We also use non-GAAP financial measures internally for operating, budgeting and financial planning purposes. The non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance calculated in accordance with GAAP. A reconciliation of GAAP net income to adjusted net income for each of the three month periods ending December 31, 2006 and 2005 and for the years ended December 31, 2006 and 2005 are as follows:
| | | | | | | | | | | | | |
| | | Three months ended
December 31, | | Year ended
December 31, |
| | | 2006 | | 2005 | | 2006 | | | 2005 |
Reported net income (loss) | | $ | 28,449 | | $ | 2,641 | | $ | (46,897 | ) | | $ | 17,657 |
Merger related items | | | | | | | | | | | | | |
In-process research and development charge | | | — | | | — | | | 105,777 | | | | — |
Sale of inventory written up to fair-market value | | | — | | | — | | | 7,706 | | | | — |
Intangible amortization | | | 8,342 | | | — | | | 23,635 | | | | — |
Stock compensation charge | | | 1,307 | | | — | | | 6,864 | | | | — |
Merger and transaction expense | | | 521 | | | 1,258 | | | 11,251 | | | | 5,156 |
| | | | | | | | | | | | | |
Total merger related costs | | | 10,170 | | | 1,258 | | | 155,233 | | | | 5,156 |
Stock compensation (SFAS 123R) | | | 5,513 | | | 3,841 | | | 14,763 | | | | 10,666 |
Minority interests | | | — | | | 7,083 | | | 11,383 | | | | 25,875 |
Amortization of purchased product rights | | | 2,537 | | | — | | | 5,075 | | | | — |
Merger related income tax benefit | | | — | | | — | | | (17,884 | ) | | | — |
| | | | | | | | | | | | | |
Adjusted net income | | $ | 46,669 | | $ | 14,823 | | $ | 121,672 | | | $ | 59,354 |
| | | | | | | | | | | | | |
Adjusted net income per diluted share | | $ | 0.29 | | $ | 0.09 | | $ | 0.77 | | | $ | 0.37 |
| | | | | | | | | | | | | |
Weighted - average common shares outstanding diluted | | | 160,169 | | | 159,845 | | | 158,937 | | | | 159,742 |
| | | | | | | | | | | | | |
Reported net income (loss) | | $ | 0.18 | | $ | 0.02 | | $ | (0.30 | ) | | $ | 0.11 |
Merger related items | | | | | | | | | | | | | |
In-process research and development charge | | | — | | | — | | | 0.67 | | | | — |
Sale of inventory written up to fair-market value | | | — | | | — | | | 0.05 | | | | — |
Intangible amortization | | | 0.05 | | | — | | | 0.15 | | | | — |
Stock compensation charge | | | 0.01 | | | — | | | 0.04 | | | | — |
Merger and transaction expense | | | 0.00 | | | 0.01 | | | 0.07 | | | | 0.03 |
| | | | | | | | | | | | | |
Total merger related costs | | | 0.06 | | | 0.01 | | | 0.98 | | | | 0.03 |
Stock compensation (SFAS 123R) | | | 0.03 | | | 0.02 | | | 0.09 | | | | 0.07 |
Minority interests | | | — | | | 0.04 | | | 0.07 | | | | 0.16 |
Amortization of purchased product rights | | | 0.02 | | | — | | | 0.03 | | | | — |
Merger related income tax benefit | | | — | | | — | | | (0.11 | ) | | | — |
| | | | | | | | | | | | | |
Adjusted net income | | $ | 0.29 | | $ | 0.09 | | $ | 0.77 | | | $ | 0.37 |
| | | | | | | | | | | | | |
Abraxis BioScience, Inc.
GAAP to Adjusted Pre-tax Income Reconciliation
(unaudited, in thousands, except per share amounts)
| | | | | | | | | | | | | |
| | | Three months ended
December 31, | | Year ended December 31, |
| | | 2006 | | 2005 | | 2006 | | | 2005 |
Reported pretax income (loss) | | $ | 56,834 | | $ | 15,209 | | $ | (17,598 | ) | | $ | 55,646 |
Merger related items — pretax | | | | | | | | | | | | | |
In-process research and development charge | | | — | | | — | | | 105,777 | | | | — |
Sale of inventory written up to fair-market value | | | — | | | — | | | 12,480 | | | | — |
Intangible amortization | | | 13,509 | | | — | | | 38,275 | | | | — |
Stock compensation charge | | | 2,116 | | | — | | | 11,115 | | | | — |
Merger and transaction expense | | | 844 | | | 1,919 | | | 18,220 | | | | 7,863 |
| | | | | | | | | | | | | |
Total merger related costs — pretax | | | 16,469 | | | 1,919 | | | 185,867 | | | | 7,863 |
Stock compensation (SFAS 123R) | | | 8,928 | | | 5,909 | | | 23,908 | | | | 16,409 |
Minority interests | | | — | | | 7,083 | | | 11,383 | | | | 25,875 |
Amortization of purchased product rights | | | 4,109 | | | — | | | 8,218 | | | | — |
| | | | | | | | | | | | | |
Adjusted pretax income | | $ | 86,340 | | $ | 30,120 | | $ | 211,778 | | | $ | 105,793 |
| | | | | | | | | | | | | |
Abraxis BioScience, Inc.
Consolidated Statements of Operating Highlights By Segment
Three months ended December 31, 2006 and 2005
(unaudited, in thousands)
Abraxis BioScience is comprised of Abraxis Pharmaceutical Products, Abraxis Oncology and Abraxis Research. Beginning in the fourth quarter of 2006, the Company re-aligned its segment presentation to better reflect how the business is managed. Abraxis intends to continue to report its business in two segments: Abraxis BioScience (ABI) representing the combined operations of Abraxis Oncology and Abraxis Research; and Abraxis Pharmaceutical Products (APP), representing the hospital-based operations. ABI focuses primarily on the Company's internally developed proprietary products including Abraxane. APP manufactures and markets one of the broadest portfolio of injectable drugs including oncology, critical care, and anti-infectives. Prior year's segment information are recalssified to conform with the current year presentation. Information regarding these two segments is summarized below.
| | | | | | | | | | | | | | | | |
| | | Segment | | | | | | | |
| | | APP | | | ABI | | | Unallocated Costs(1) | | | Total | |
Three months ended December 31, 2006 | | | | | | | | | | | | | | | | |
Hospital-based products | | $ | 199,706 | | | $ | 464 | | | $ | — | | | $ | 200,170 | |
Abraxane revenue | | | — | | | | 56,143 | | | | — | | | | 56,143 | |
Research revenue and other | | | — | | | | 764 | | | | — | | | | 764 | |
| | | | | | | | | | | | | | | | |
Net revenue | | | 199,706 | | | | 57,371 | | | | — | | | | 257,077 | |
Cost of sales | | | 83,973 | | | | 8,091 | | | | 4,278 | | | | 96,342 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 115,733 | | | | 49,280 | | | | (4,278 | ) | | | 160,735 | |
Percent to total revenue | | | 58.0 | % | | | 85.9 | % | | | | | | | 62.5 | % |
Operating Expenses: | | | | | | | | | | | | | | | | |
Research and development | | | 10,075 | | | | 12,080 | | | | 2,438 | | | | 24,593 | |
Selling and marketing(2) | | | 3,895 | | | | 21,524 | | | | — | | | | 25,419 | |
Equity (income) in Drug Source Company | | | — | | | | (822 | ) | | | — | | | | (822 | ) |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 13,970 | | | | 32,782 | | | | 2,438 | | | | 49,190 | |
| | | | | | | | | | | | | | | | |
Pre-tax segment operating income(3) | | $ | 101,763 | | | $ | 16,498 | | | $ | (6,716 | ) | | $ | 111,545 | |
| | | | | | | | | | | | | | | | |
Percent to total revenue | | | 51.0 | % | | | 28.8 | % | | | | | | | 43.4 | % |
Depreciation and amortization | | | 8,267 | | | | 593 | | | | 1,141 | | | | 10,001 | |
Capital expenditures | | | 9,863 | | | | 1,302 | | | | — | | | | 11,165 | |
| | | | |
Three months ended December 31, 2005 | | | | | | | | | | | | | | | | |
Hospital-based products | | $ | 97,375 | | | $ | — | | | $ | — | | | $ | 97,375 | |
Abraxane revenue | | | — | | | | 47,454 | | | | — | | | | 47,454 | |
Research revenue | | | — | | | | 774 | | | | — | | | | 774 | |
| | | | | | | | | | | | | | | | |
Net revenue | | | 97,375 | | | | 48,228 | | | | — | | | | 145,603 | |
Cost of sales | | | 50,832 | | | | 7,661 | | | | 1,575 | | | | 60,068 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 46,543 | | | | 40,567 | | | | (1,575 | ) | | | 85,535 | |
Percent to total revenue | | | 47.8 | % | | | 84.1 | % | | | | | | | 58.7 | % |
Operating Expenses: | | | | | | | | | | | | | | | | |
Research and development | | | 4,901 | | | | 13,475 | | | | 335 | | | | 18,711 | |
Selling and marketing | | | 3,463 | | | | 14,427 | | | | — | | | | 17,890 | |
Equity (income) loss in Drug Source Company | | | — | | | | 6 | | | | — | | | | 6 | |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 8,364 | | | | 27,908 | | | | 335 | | | | 36,607 | |
| | | | | | | | | | | | | | | | |
Pre-tax segment operating income(3) | | $ | 38,179 | | | $ | 12,659 | | | $ | (1,910 | ) | | $ | 48,928 | |
| | | | | | | | | | | | | | | | |
Percent to total revenue | | | 39.2 | % | | | 26.2 | % | | | | | | | 33.6 | % |
| | | | |
Depreciation and amortization | | | 3,336 | | | | 425 | | | | 171 | | | | 3,932 | |
Capital expenditures | | | 9,275 | | | | — | | | | — | | | | 9,275 | |
Abraxis BioScience, Inc.
Consolidated Statements of Operating Highlights By Segment (continued)
Year ended December 31, 2006 and 2005
(unaudited, in thousands)
| | | | | | | | | | | | | | | | |
| | | Segment | | | | | | | |
| | | APP | | | ABI | | | Unallocated Costs(1) | | | Total | |
Year ended December 31, 2006 | | | | | | | | | | | | | | | | |
Hospital-based products | | $ | 583,201 | | | $ | 1,241 | | | $ | — | | | $ | 584,442 | |
Abraxane revenue | | | — | | | | 174,906 | | | | — | | | | 174,906 | |
Research revenue and other | | | — | | | | 6,140 | | | | — | | | | 6,140 | |
| | | | | | | | | | | | | | | | |
Net revenue | | | 583,201 | | | | 182,287 | | | | — | | | | 765,488 | |
Cost of sales | | | 257,159 | | | | 26,984 | | | | 23,369 | | | | 307,512 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 326,042 | | | | 155,303 | | | | (23,369 | ) | | | 457,976 | |
Percent to total revenue | | | 55.9 | % | | | 85.2 | % | | | | | | | 59.8 | % |
Operating Expenses: | | | | | | | | | | | | | | | | |
Research and development | | | 28,233 | | | | 57,316 | | | | 11,342 | | | | 96,891 | |
Selling and marketing(2) | | | 13,769 | | | | 80,015 | | | | — | | | | 93,784 | |
Equity (income) in Drug Source Company | | | — | | | | (2,847 | ) | | | — | | | | (2,847 | ) |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 42,002 | | | | 134,484 | | | | 11,342 | | | | 187,828 | |
| | | | | | | | | | | | | | | | |
Pre-tax segment operating income(3) | | $ | 284,040 | | | $ | 20,819 | | | $ | (34,711 | ) | | $ | 270,148 | |
| | | | | | | | | | | | | | | | |
Percent to total revenue | | | 48.7 | % | | | 11.4 | % | | | | | | | 35.3 | % |
| | | | |
Depreciation and amortization | | | 23,451 | | | | 2,129 | | | | 3,256 | | | | 28,836 | |
Capital expenditures | | | 29,922 | | | | 67,895 | | | | — | | | | 97,817 | |
| | | | |
Year ended December 31, 2005 | | | | | | | | | | | | | | | | |
Hospital-based products | | $ | 385,082 | | | $ | — | | | $ | — | | | $ | 385,082 | |
Abraxane revenue | | | — | | | | 133,731 | | | | — | | | | 133,731 | |
Research revenue and other | | | — | | | | 1,944 | | | | — | | | | 1,944 | |
| | | | | | | | | | | | | | | | |
Net revenue | | | 385,082 | | | | 135,675 | | | | — | | | | 520,757 | |
Cost of sales | | | 201,026 | | | | 21,833 | | | | 4,376 | | | | 227,235 | |
| | | | | | | | | | | | | | | | |
Gross profit | | | 184,056 | | | | 113,842 | | | | (4,376 | ) | | | 293,522 | |
Percent to total revenue | | | 47.8 | % | | | 83.9 | % | | | | | | | 56.4 | % |
Operating Expenses: | | | | | | | | | | | | | | | | |
Research and development | | | 18,925 | | | | 49,041 | | | | 930 | | | | 68,896 | |
Selling and marketing | | | 12,033 | | | | 52,766 | | | | — | | | | 64,799 | |
Equity (income) in Drug Source Company | | | — | | | | (1,802 | ) | | | — | | | | (1,802 | ) |
| | | | | | | | | | | | | | | | |
Total operating expenses | | | 30,958 | | | | 100,005 | | | | 930 | | | | 131,893 | |
| | | | | | | | | | | | | | | | |
Pre-tax segment operating income(3) | | $ | 153,098 | | | $ | 13,837 | | | $ | (5,306 | ) | | $ | 161,629 | |
| | | | | | | | | | | | | | | | |
Percent to total revenue | | | 39.8 | % | | | 10.2 | % | | | | | | | 31.0 | % |
| | | | |
Depreciation and amortization | | | 12,777 | | | | 1,447 | | | | 1,149 | | | | 15,373 | |
Capital expenditures | | | 47,647 | | | | 1,085 | | | | — | | | | 48,732 | |
(1) | Segment costs not allocated for the three months ended December 31, 2006 includes $4.1 million for the amortization of APP AstraZeneca purchase price and $0.2 million stock compensaton, both included in cost of sales and $2.4 million stock compensation included in research and development. For the three months ended December 31, 2005, $1.6 million in stock compensation was not allocated in cost of sales. Segment costs not allocated for the year ended December 31, 2006 includes $12.5 million merger costs, $8.2 million APP AstraZeneca purchase price amortization and $2.7 million stock compensation included in cost of sales and $5.3 million merger costs and $5.8 million stock compensation included in research and development. For the year ended December 31, 2005, $4.4 million stock compensation was not allocated in cost of sales and $0.9 million stock compensation was not allocated to research and development. Additionally, depreciation and amortization expense related to corporate activities are not allocated to the segments. |
(2) | ABI segment selling and marketing expense in the fourth quarter of 2006 benefited from the reversal of accruals established in the second and third quarters for $3.0 million and $0.8 million, respectively. These reversals should have occurred in the third quarter. |
(3) | General and administrative expense, merger related costs and amortization, interest income, interest expense and other, minority interest and income tax expense are not allocated to segments. See “Reconciliation of Operating Income By Segment to Condensed Consolidated Statements of Operation” included herein. |
Abraxis BioScience, Inc.
Reconciliation of Operating Income by Segment to Consolidated Statements of Operations
(unaudited, in thousands)
| | | | | | | | | | | | | | | | |
| | | Three months ended
December 31, | | | Year ended December 31, | |
| | | 2006 | | | 2005 | | | 2006 | | | 2005 | |
Segment operating income from above: | | | | | | | | | | | | | | | | |
APP Segment | | $ | 101,763 | | | $ | 38,179 | | | $ | 284,040 | | | $ | 153,098 | |
ABI Segment | | | 16,498 | | | | 12,659 | | | | 20,819 | | | | 13,837 | |
Segment costs not allocated | | | (6,716 | ) | | | (1,910 | ) | | | (34,711 | ) | | | (5,306 | ) |
| | | | | | | | | | | | | | | | |
| | | 111,545 | | | | 48,928 | | | | 270,148 | | | | 161,629 | |
General and administrative expense | | | (34,625 | ) | | | (21,550 | ) | | | (93,005 | ) | | | (66,438 | ) |
Amortization of merger related intangibles | | | (13,509 | ) | | | — | | | | (38,275 | ) | | | — | |
Merger related in-process research and development charge | | | — | | | | — | | | | (105,777 | ) | | | — | |
Other merger related costs | | | (2,960 | ) | | | (1,919 | ) | | | (29,335 | ) | | | (7,863 | ) |
| | | | | | | | | | | | | | | | |
Income from operations | | | 60,451 | | | | 25,459 | | | | 3,756 | | | | 87,328 | |
Interest expense | | | (4,101 | ) | | | (3,218 | ) | | | (13,927 | ) | | | (6,563 | ) |
Interest income and other | | | 484 | | | | 51 | | | | 3,956 | | | | 756 | |
Minority interests | | | — | | | | (7,083 | ) | | | (11,383 | ) | | | (25,875 | ) |
Income tax expense | | | (28,385 | ) | | | (12,568 | ) | | | (29,299 | ) | | | (37,989 | ) |
| | | | | | | | | | | | | | | | |
Net Income (loss) | | $ | 28,449 | | | $ | 2,641 | | | $ | (46,897 | ) | | $ | 17,657 | |
| | | | | | | | | | | | | | | | |
Abraxis BioScience, Inc.
Consolidated Condensed Balance Sheets
(Unaudited, in thousands)
| | | | | | | | |
| | | December 31, | |
| | | 2006 | | | 2005 | |
Assets | | | | | | | | |
Current assets: | | | | | | | | |
Cash and cash equivalents | | $ | 38,797 | | | $ | 28,818 | |
Short-term investments | | | 500 | | | | 54,455 | |
Accounts receivable, net of allowances for doubtful accounts | | | 84,684 | | | | 61,868 | |
Inventories | | | 218,280 | | | | 175,282 | |
Prepaid expenses and other current assets | | | 15,570 | | | | 13,553 | |
Deferred income taxes | | | 78,955 | | | | 16,936 | |
| | | | | | | | |
Total current assets | | | 436,786 | | | | 350,912 | |
Property, plant and equipment, net | | | 217,819 | | | | 152,630 | |
Investment in Drug Source Company, LLC | | | 5,504 | | | | 2,728 | |
Intangible assets, net of accumulated amortization | | | 738,440 | | | | 892 | |
Goodwill | | | 401,600 | | | | — | |
Deferred income taxes, non-current | | | — | | | | 5,993 | |
Non-current receivables from related parties | | | 39 | | | | 649 | |
Other non-current assets, net of accumulated amortization | | | 25,320 | | | | 10,425 | |
| | | | | | | | |
Total assets | | $ | 1,825,508 | | | $ | 524,229 | |
| | | | | | | | |
Liabilities and stockholders’ equity | | | | | | | | |
Current liabilities: | | | | | | | | |
Accounts payable | | $ | 65,471 | | | $ | 35,593 | |
Accrued liabilities | | | 61,428 | | | | 39,364 | |
Income tax payable | | | 80,054 | | | | 6,992 | |
Deferred revenue | | | 39,225 | | | | 18,404 | |
Minimum royalties payable | | | 1,017 | | | | 1,020 | |
Amounts due to officer/stockholder | | | — | | | | 1,255 | |
Notes payable | | | 72,248 | | | | — | |
| | | | | | | | |
Total current liabilities | | | 319,443 | | | | 102,628 | |
| | | | | | | | |
Deferred income taxes, non-current | | | 142,563 | | | | — | |
Long-term debt | | | 165,000 | | | | 190,000 | |
Long-term portion of deferred revenue | | | 158,135 | | | | — | |
Other non-current liabilities | | | 7,006 | | | | 1,400 | |
| | | | | | | | |
Total liabilities | | | 792,147 | | | | 294,028 | |
| | |
Minority interests | | | — | | | | 162,061 | |
| | |
Stockholders’ equity: | | | | | | | | |
Common stock | | | 166 | | | | 165 | |
Additional paid-in capital | | | 1,085,196 | | | | 71,240 | |
Retained earnings | | | 4,483 | | | | 51,380 | |
Accumulated other comprehensive income | | | 1,257 | | | | 1,629 | |
Less treasury stock | | | (57,741 | ) | | | (56,274 | ) |
| | | | | | | | |
Total stockholders’ equity | | | 1,033,361 | | | | 68,140 | |
| | | | | | | | |
Total liabilities and stockholders’ equity | | $ | 1,825,508 | | | $ | 524,229 | |
| | | | | | | | |
