EXHIBIT 99.1
Company Contact: Investor Relations:
John Higgins Ina McGuinness or Bruce Voss
Chief Financial Officer Lippert/Heilshorn & Associates
(650) 843-2800 (310) 691-7100
jhiggins@connetics.com imcguinness@lhai.com
CONNETICS REPORTS FIRST QUARTER EPS OF $0.05,
PRODUCT REVENUES INCREASE 65% TO $23.6 MILLION
Company Raises 2004 Sales Guidance for All Three of its Products and
Introduces Second Quarter Financial Guidance
PALO ALTO, Calif. (May 4, 2004) - Connetics Corporation (Nasdaq: CNCT), a
specialty pharmaceutical company that develops and commercializes dermatology
products, today reported net income for the first quarter ended March 31, 2004
of $1.9 million, or $0.05 per share on a fully diluted basis. This compares with
a net loss for the 2003 first quarter of $5.4 million, or $0.17 per share.
Total revenues for the first quarter of 2004 increased 63% to $25.0 million,
compared with total revenues of $15.3 million for the first quarter of 2003.
Product revenues for the quarter were $23.6 million, including $19.8 million in
sales of OLUX(R) and Luxiq(R), an increase of 39% over sales of $14.3 million
for those two products in the first quarter of 2003. In addition, the Company
booked $3.6 million in sales of Soriatane(R) during the first quarter of 2004.
Connetics acquired exclusive U.S. rights to Soriatane(R)-brand acitretin from
Hoffmann-La Roche, Inc. on March 4, 2004 and therefore there are no comparative
2003 sales figures. Contract and royalty revenues for the first quarter of 2004
were $1.4 million, compared with $1.0 million for the first quarter of 2003.
Selling, general and administrative costs increased to $15.1 million in the
first quarter of 2004, compared with $10.7 million in the first quarter of 2003,
due primarily to costs associated with an expanded sales force and
Soriatane-related costs. Research and development expenses for the first quarter
of 2004 were $4.3 million, down from $8.5 million in the first quarter 2003. The
decrease in R&D expenses is primarily due to lower clinical trial expenses as a
result of the completion of the Extina(R), Actiza(TM) and Velac(R) pivotal
trials in 2003.
Effective with the first quarter of 2004, Connetics is including on the balance
sheet certain manufacturing support and quality assurance costs as capitalized
finished goods inventory and prepaid sample costs. These costs had previously
been classified as R&D expense. These costs will be charged to the income
statement either as cost of goods sold upon the sale of finished goods, or to
SG&A expense upon the distribution of product samples. In the first quarter of
2004, $763,000 in net income, or approximately $0.02 per diluted share, is
attributable to capitalizing these costs in inventory and prepaid samples. The
Company has determined that the effect of accounting for these costs as
inventory and prepaid samples would not have a material impact on its financial
statements in any prior quarterly or annual period.
FIRST QUARTER HIGHLIGHTS
Highlights of the 2004 first quarter and subsequent weeks include:
o Announcing the positive outcome of Phase III clinical trials evaluating
Velac, a first-in-class, once-daily combination treatment for acne;
o Completing the acquisition of exclusive U.S. rights to Soriatane, a
once-daily oral treatment for severe psoriasis in adults;
o Entering a co-promotion agreement with UCB Pharma, Inc. to market OLUX and
Luxiq to a select group of primary care physicians (PCPs). Connetics sales
and marketing activities will continue to focus on dermatologists while UCB
will be educating this group of PCPs on these two Connetics products;
o Presenting 11 scientific posters at the American Academy of Dermatology's
62nd annual meeting;
o Closing a 3.0 million share common stock private placement that generated
gross proceeds of $60.8 million to help fund the acquisition of Soriatane;
o Receiving notice of acceptance by the U.S. Food and Drug Administration
(FDA) of the Company's New Drug Application (NDA) for Actiza, a potential
new topical treatment for acne in the VersaFoam(TM) delivery system. The
FDA set the PDUFA date as October 26, 2004;
o Receiving notice of acceptance by the FDA of the NDA filing for Extina, a
potential new treatment for seborrheic dermatitis in the VersaFoam delivery
system. The FDA set the PDUFA date as September 24, 2004.
"Our business operations so far this year encompass a broad range of
accomplishments that we believe will continue our rapid growth and development,"
said Thomas Wiggans, President and CEO. "Based on our sales and marketing
initiatives, coupled with our important new partnership with UCB, we project
prescriptions for OLUX and Luxiq will continue to grow into 2005. With our
acquisition of Soriatane, we now have a broad range of products for the
treatment of all levels of psoriasis severity. We believe there is a real
opportunity to expand the market for oral treatments for psoriasis by providing
Soriatane information and support to dermatologists and their patients."
"Finally, with two NDAs filed and a projected third quarter NDA filing for
Velac, we are in position to launch three new products within the next 18
months. We remain very optimistic about the prospects for continued growth of
our current brands, and are actively undertaking preparations for the potential
launch of new products," Wiggans continued.
INCREASED 2004 REVENUE AND EARNINGS GUIDANCE; SECOND QUARTER GUIDANCE
Based on Company expectations for continued prescription growth for its core
products OLUX and Luxiq, as well as sales of Soriatane above expectations since
the time of acquisition, Connetics raised 2004 financial guidance. Product
revenues are now expected to be $126 million to $134 million, with sales of OLUX
and Luxiq totaling $87 million to $91 million. This compares with prior guidance
for product revenues of $114 million to $122 million, including $82 million to
$86 million for OLUX and Luxiq. Total revenues (which include royalties and
contract payments) are expected to be $128 million to $137 million.
Connetics projects total operating expenses for 2004 will be $87.5 million to
$89.5 million, reflecting increased expenses associated with the co-promotional
activities of UCB for OLUX and Luxiq, and additional marketing costs to support
pre-launch activities for its products. Based on the successful outcome of Phase
III trials for Velac, Connetics projects it will make a $3.5 million milestone
payment to Yamanouchi in the third quarter (concurrent with the projected
submission of the Velac NDA). Diluted earnings per share for 2004 are projected
to be $0.33 to $0.37, including new guidance of a $0.10 per share charge in the
third quarter for the $3.5 million milestone payment to Yamanouchi.
For the second quarter 2004, the Company projects total revenue of $31.5 million
to $34.0 million, including OLUX and Luxiq product revenues of $21 million to
$22 million. Second quarter operating expenses are projected to be $22.5 million
to $24.0 million. Diluted earnings per share for the second quarter are
projected to be $0.06 to $0.08.
This guidance is based on information currently available to the Company.
CONFERENCE CALL
Connetics will host a conference call to discuss first quarter financial results
and revised financial guidance today, beginning at 4:30 p.m. Eastern Time/1:30
p.m. Pacific Time. To participate in the live call by telephone, domestic
callers should dial (888) 328-2575, and international callers should dial (706)
643-0459. To listen to the conference call live via the Internet, go to the
investor relations section of www.connetics.com. A telephone replay will be
available for 48 hours beginning today at 6:30 p.m. Eastern Time/3:30 p.m.
Pacific Time. To access the replay from the U.S., please dial (800) 642-1687;
and from outside the U.S. please dial (706) 645-9291. Enter the Conference ID#
6756090. The Internet replay of the call will be available for 30 days at
www.connetics.com.
ABOUT CONNETICS
Connetics Corporation is a specialty pharmaceutical company focused on the
development and commercialization of innovative therapeutics for the dermatology
market. The Company's marketed products are OLUX(R) (clobetasol propionate)
Foam, 0.05%, Luxiq(R) (betamethasone valerate) Foam, 0.12%, and Soriatane(R)
(acitretin) capsules, 10 mg and 25 mg. Connetics is developing Extina(R), a foam
formulation of the antifungal drug ketoconazole, Actiza(TM), a foam formulation
of clindamycin for treating acne, and Velac(R), a combination of clindamycin and
tretinoin for treating acne. Connetics has branded its innovative foam drug
delivery vehicle VersaFoam(TM). These formulations aim to improve the management
of dermatological diseases and provide significant product differentiation, and
have earned wide acceptance by both physicians and patients due to their
clinical effectiveness, high quality and cosmetic elegance. For more information
about Connetics and its products, please visit www.connetics.com.
SAFE HARBOR STATEMENT
Except for historical information, this press release includes "forward-looking
statements" within the meaning of the Securities Litigation Reform Act. All
statements included in this press release that address activities, events or
developments that Connetics expects, believes or anticipates will or may occur
in the future are forward-looking statements, including statements about
projected earnings, the revenue and earnings potential for the Company's
products, and the timing of milestone payments and future FDA approvals, if any.
These statements are based on certain assumptions made by Connetics' management
based on experience and perception of historical trends, current conditions,
expected future developments and other factors it believes are
appropriate in the circumstances. Such statements are subject to a number of
assumptions, risks and uncertainties, many of which are beyond Connetics'
control, and which could cause actual results or events to differ materially
from those expressed in such forward-looking statements. Any such projections or
statements include Connetics' current views with respect to future events and
financial performance, and results of operations may fluctuate from period to
period. No assurances can be given, however, that these events will occur or
that such results will be achieved. In particular, Connetics faces risks and
uncertainties that one or more of its product candidates Extina, Actiza and
Velac may not be approved by the FDA in the timeframes projected, if at all;
that Soriatane and the Company's other products may not produce the projected
revenues and earnings; that sales may decline if generic or branded competitors
enter the market; and that initial marketing success for Soriatane may or may
not be achieved or may not be sustainable. Factors that could cause or
contribute to such differences include, but are not limited to, risks and other
factors that are discussed in documents filed by Connetics with the Securities
and Exchange Commission from time to time, including Connetics' Annual Report on
Form 10-K filed on March 15, 2004. Forward-looking statements represent the
judgment of the Company's management as of the date of this release, and
Connetics' disclaims any intent or obligation to update any forward-looking
statements.
NOTE: Full prescribing information for any Connetics prescription product is
available by contacting the Company.
CONNETICS CORPORATION
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)
<Table>
<Caption>
THREE MONTHS ENDED
MARCH 31,
----------------------
2004 2003
-------- --------
Revenues:
Product $ 23,566 $ 14,311
Contract and royalty 1,416 1,000
-------- --------
Total revenues 24,982 15,311
Operating costs and expenses:
Cost of product revenues 1,568 1,072
Selling, general and administrative 15,072 10,682
Research and development 4,286 8,451
Depreciation and amortization 1,648 588
-------- --------
Total operating costs and expenses 22,574 20,793
Net interest and other income/(expense) (292) 178
Income tax benefit (expense) (243) (77)
-------- --------
Net earnings/(loss) $ 1,873 $ (5,381)
-------- --------
BASIC EARNINGS PER SHARE
Net earnings/(loss) per basic share $ 0.06 $ (0.17)
======== ========
Shares used to calculate basic net earnings
(loss) per share 33,587 31,286
DILUTED EARNINGS PER SHARE
Net earnings/(loss) per diluted share $ 0.05 $ (0.17)
======== ========
Shares used to calculate diluted net earnings
(loss) per share 35,887 31,286
</Table>
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(unaudited)
<Table>
<Caption>
ASSETS
Assets:
Cash, cash equivalents and short-term investments $ 44,143 $114,966
Accounts receivables and other current assets 18,453 7,408
Soriatane asset, net 126,559 --
Property and equipment, net 5,608 5,628
Other long-term assets 17,512 17,895
-------- --------
Total assets $212,275 $145,897
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities and stockholders'equity:
Current liabilities $ 16,869 $ 10,127
Other liabilities 90,016 90,016
Stockholders' equity 105,390 45,754
-------- --------
Total liabilities and stockholders' equity $212,275 $145,897
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