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CONTACT:
Kara Stancell, Investor Relations & Corporate Communications, (602) 808-3854
MEDICIS REPORTS FIRST QUARTER FISCAL 2005 FINANCIAL RESULTS
SCOTTSDALE, Arizona--October 19, 2004--Medicis (NYSE:MRX) today announced first
quarter fiscal 2005 net revenue growth of approximately 40% to $88.8 million
with "if-converted" net income of $21.2 million, or $0.32 per diluted share,
absent a $19.4 million tax-effected special charge associated with the SubQ(TM)
transaction. Including this special charge, the Company reported Generally
Accepted Accounting Principles ("GAAP") net income of $1.0 million, or $0.02 per
diluted share. In the first quarter of fiscal 2004, Medicis reported net
revenues of $63.3 million with net income of $10.3 million, or $0.18 per diluted
share, absent a $37.5 million tax-effected loss associated with the early
extinguishment of debt. Including the loss on early extinguishment of debt, the
Company reported a first quarter fiscal 2004 GAAP net loss of $27.2 million, or
$0.50 per diluted share.
"We are pleased to announce a solid first quarter in line with our expectations
as we begin our fiscal 2005 year," said Jonah Shacknai, Chairman and Chief
Executive Officer of Medicis. "We continue to concentrate on advancing our
research and development pipeline illustrated by our investment in SubQ(TM) and
the significant increase in research and development as a percentage of revenue.
Future commitments will focus on proprietary technologies that we expect will
continue to add shareholder value and enhance our mission in helping patients
attain a healthy and youthful appearance and self-image."
First quarter fiscal 2005 revenues increased primarily due to sales of
RESTYLANE(R) and growth of DYNACIN(R). The Company's core brands include:
RESTYLANE(R), DYNACIN(R), LOPROX(R), OMNICEF(R), PLEXION(R) and TRIAZ(R). The
Company recorded contract revenue of approximately $16 million for the first
quarter fiscal 2005. Contract revenue includes license revenues associated with
the outlicensing of the ORAPRED(R) and LUSTRA(R) brands. Core brand revenues for
first quarter fiscal 2005 represented approximately 75% of total revenue, or
$67.0 million, an increase of approximately 26%, compared to core brand revenues
of $53.0 million for first quarter fiscal 2004. The Company's gross profit
margins were 84.4%.
Selling, general and administrative expenses for the first quarter of fiscal
2005 decreased as a percentage of revenues approximately 11 percentage points to
$32.2 million, or approximately 36% of revenues, from $30.0 million, or
approximately 47% of revenues, in first quarter fiscal 2004. The $2.2 million
increase in selling, general and administrative expenses primarily was due to
incremental expenses associated with the RESTYLANE(R) product. The decrease in
percentage of revenues primarily was due to first quarter fiscal 2005 revenues
outpacing the increase in selling, general and administrative spending. Research
and development expenses for the first quarter of fiscal 2005 increased 63% to
$5.8 million, or approximately 6%
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of revenues, absent special charges, compared to $3.5 million, or approximately
6% of revenues, in first quarter fiscal 2004.
In May 2003, the Company's Board of Directors approved a new stock repurchase
program that authorized the repurchase of up to $75 million of our common stock.
This program provided for the repurchase of Class A common stock at such time as
management determined. As of June 30, 2004, Medicis had not repurchased any
shares of our common stock under this program. In August 2004, the Company's
Board of Directors approved a new program that replaces the May 2003 program and
authorizes the repurchase of up to $150 million of our common stock. As of
September 30, 2004, approximately $66 million of common shares have been
repurchased under this program (1,743,800 common shares at an average market
price of $37.76).
Based upon information available currently to the Company and as result of the
first quarter fiscal 2005 results, the Company's financial guidance is as
follows:
Fiscal Year 2005
ending June 30, 2005
(in millions, except per share amounts)
First Quarter Second Quarter Third Quarter Fourth Quarter Fiscal Year
(9/30/04) (12/31/04) (3/31/05) (6/30/05) 2005
Actual Estimated Estimated Estimated Estimated
------------- -------------- ------------- -------------- -----------
Current revenue
objectives $89 $91 $95 $100 $375
Previous EPS guidance* $0.29 $0.35 $0.36 $0.42 $1.42
Current EPS objectives* $0.32 $0.37 $0.38 $0.44 $1.51
Current EPS objectives,
including EITF Issue
04-8 impact of contingent
convertible securities* $0.30 $0.35 $0.36 $0.41 $1.42
*Excluding tax-effected special charges relating to research and development
collaborations and including the application of the "if-converted" method in
accordance with GAAP
First quarter fiscal 2005 diluted per share amounts are calculated using the
"if-converted" method of accounting in accordance with GAAP due to the
outstanding 2.5% Convertible Senior Notes meeting the criteria for conversion,
regardless of whether the bondholders actually convert their bonds into shares.
For first quarter fiscal 2005, the dilutive shares relative to the convertible
notes do not impact GAAP earnings per share, as they are anti-dilutive. First
quarter fiscal 2004 diluted per share amounts do not reflect the "if-converted"
method, as the criteria for conversion had not been met.
At its June 30-July 1, 2004 meeting, the Emerging Issues Task Force ("EITF")
began discussing Issue 04-8, "Accounting Issues Related to Certain Features of
Contingently Convertible Debt and the Effect on Diluted Earnings per Share," and
the accounting for contingently convertible debt instruments, commonly referred
to as "CoCos." At its subsequent September 29-30, 2004 meeting, the EITF reached
a conclusion that CoCos should be included in diluted earnings per share
computations (if dilutive) regardless of whether the market price trigger has
been met, effective for periods ending after December 15, 2004.
At the time of this disclosure, Medicis believes these objectives are attainable
based upon information currently available to the Company. The Company's
business is subject to all risk factors outlined in the
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Company's most recent annual report on Form 10-K, its Form S-3 registration
statement and other filed documents with the Securities and Exchange Commission.
At the time of this release, the Company cannot, among other things, assess the
forthcoming results of the Company's research and development projects and the
risks associated with the FDA approval process, risks associated with
significant competition within the Company's industry, nor can the Company
validate its assumptions of the full impact on its business of the approval of
competitive generic versions of the Company's core brands, or any future
competitive product approvals that may affect the Company's brands.
Additionally, Medicis may acquire and/or license products or technologies from
third parties to enter into new strategic markets. The Company periodically
makes up-front, non-refundable payments to third parties for research and
development work which has been completed and periodically makes additional
non-refundable payments for the achievement of various milestones. There can be
no certainty which periods these potential payments could be made, nor if any
payments such as these will be made at all. The above estimated future guidance
does not include the potential payments associated with any such transactions.
Medicis is the leading independent specialty pharmaceutical company in the
United States focusing primarily on the treatment of dermatological and
podiatric conditions and aesthetics medicine. The Company is dedicated to
helping patients attain a healthy and youthful appearance and self-image.
Medicis has leading branded prescription products in a number of therapeutic
categories, including acne, eczema, fungal infections, psoriasis, rosacea,
seborrheic dermatitis and skin and skin-structure infections. The Company's
products have earned wide acceptance by both physicians and patients due to
their clinical effectiveness, high quality and cosmetic elegance.
The Company's products include the prescription brands RESTYLANE(R), DYNACIN(R)
(minocycline HCl), LOPROX(R) (ciclopirox), OMNICEF(R) (cefdinir), PLEXION(R)
(sodium sulfacetamide/sulfur), TRIAZ(R) (benzoyl peroxide), LIDEX(R)
(fluocinonide), and SYNALAR(R) (fluocinolone acetonide), the over-the-counter
brand ESOTERICA(R), and BUPHENYL(R) (sodium phenylbutyrate), a prescription
product indicated in the treatment of Urea Cycle Disorder. For more information
about Medicis, please visit the Company's website at www.medicis.com.
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 Medicis expects, believes or anticipates will or may occur in
the future are forward-looking statements. This includes earnings estimates,
future financial performance and other matters. These statements are based on
certain assumptions made by Medicis based on its 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 the control of Medicis. Any such projections or statements include the
current views of Medicis with respect to future events and financial
performance. No assurances can be given, however, that these events will occur
or that such results will be achieved. Medicis cannot validate its assumptions
of the full impact on its business of the approval of competitive generic
versions of its core brands, including DYNACIN(R) Tablets and/or LOPROX(R), or
any future competitive product approvals that may affect its brands. Also, there
are a number of additional important factors that could cause actual results to
differ materially from those projected, including the anticipated size of the
markets, the availability of product supply, the receipt of required regulatory
approvals, the ability to realize anticipated synergies and benefits of the
Q-Med transactions, the risks and uncertainties normally incident to the
pharmaceutical industry, dependence on sales of key products, the uncertainty of
future financial results and fluctuations in operating results, dependence on
Medicis' strategy including the uncertainty of license payments and/or other
payments due from third parties, the timing and success of new product
development by Medicis or third parties, product introductions, the risks of
pending or future litigation, and other risks described from time to time in
Medicis' SEC filings including its Annual Report on Form 10-K for the year ended
June 30, 2004. There can
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be no assurance as to when or if any of the holders of the Notes will have the
right to convert or if the Notes will be converted, and what impact the increase
in the number of shares outstanding will have on its results of operations.
Forward-looking statements represent the judgment of Medicis' management as of
the date of this release, and Medicis disclaims any intent or obligation to
update any forward-looking statements.
NOTE: Full prescribing information for any Medicis prescription product is
available by contacting the Company. OMNICEF(R) is a registered trademark of
Abbott Laboratories, Inc. under a license from Fujisawa Pharmaceutical Co., Ltd.
RESTYLANE(R) is a registered trademark of HA North American Sales AB, a
subsidiary of Medicis Pharmaceutical Corporation. All other marks (or brands)
and names are the property of Medicis or its Affiliates.
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Medicis
(in thousands, except per share data)
SUMMARY STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended
September 30,
---------------------------------------------
2004 2003
---------------------------------------------
Revenues $ 88,818 $ 63,295
Cost of sales 13,833 10,181
-------- --------
Gross profit 74,985 53,114
Operating expenses:
Selling, general and administrative 32,176 30,012
Research and development 36,513(a) 3,539
Depreciation and amortization 5,032 3,425
-------- --------
Total operating expenses 73,721 36,976
Operating income 1,264 16,138
Interest expense, net (146) (278)
Loss on early extinguishment of debt -- (58,660)
Income tax (expense) benefit (95) 15,636
-------- --------
Net income (loss) $ 1,023 $(27,164)
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Basic net income (loss) per common share $0.02 $(0.50)
===== ======
Diluted net income (loss) per common share $0.02 $(0.50)
===== ======
Shares used in basic net income (loss) per common share 57,228 54,595
Shares used in diluted net income (loss) per common share 60,268 54,595
Cash flow from operations $13,906 $33,751
- -------------------------------------------------------------------------------------------------------------
GAAP Net income (loss) $1,023 $(27,164)
Interest expense and associated bond offering costs
(tax-effected) 839(b) --
Special charge for R&D (tax-effected) 19,372(a) --
Loss on early extinguishment of debt (tax-effected) -- 37,474
-------- --------
"If-converted" net income prior to special charge and
loss on early extinguishment of debt $ 21,234 $ 10,310
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Shares used in diluted net income per common share 66,091 57,299
Diluted net income per common share $0.32 $0.18
===== =====
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(a) Reported R&D expenses include a special charge of $30.7 million ($19.4
million tax-effected) relating to a research & development collaboration.
(b) To calculate diluted earnings per share, tax-effected net interest on the
2.5% contingent convertible notes and associated bond offering costs of $839,000
is added back to GAAP net income for the three months ended September 30, 2004,
and divided by shares used in diluted net income per common share. For GAAP
diluted net income per common share for the three months ended September 30,
2004, the dilutive shares relative to the convertible notes are not included as
they are anti-dilutive.
BALANCE SHEETS
At September 30, 2004 At June 30, 2004
--------------------- ----------------
(unaudited)
Assets
Cash, cash equivalents & short-term investments $587,099 $634,040
Accounts receivable, net 45,782 47,858
Inventory, net 19,622 19,540
Other current assets 30,688 32,425
---------- ----------
Total current assets 683,191 733,863
Property and equipment, net 6,248 5,842
Intangible assets, net 327,247 331,144
Deferred tax assets, net 1,913 --
Other assets 6,999 7,535
---------- ----------
Total assets $1,025,598 $1,078,384
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Liabilities and stockholders' equity
Current liabilities $71,617 $67,120
Contingent convertible senior notes 2.5% due 2032 169,155 169,157
Contingent convertible senior notes 1.5% due 2033 283,910 283,910
Deferred tax liabilities -- 2,894
Stockholders' equity 500,916 555,303
---------- ----------
Total liabilities and stockholders' equity $1,025,598 $1,078,384
========== ==========
Working capital $611,574 $666,743
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