EXHIBIT 99.1
[CONNETICS LOGO]
CONNETICS REPORTS FOURTH QUARTER EPS OF $0.17
AND PRODUCT REVENUES UP 128% TO $43.5 MILLION
CONCLUDES FIRST YEAR OF PROFITABILITY WITH $0.52 EPS
PROVIDES FULL YEAR AND FIRST QUARTER 2005 FINANCIAL GUIDANCE
PALO ALTO, CALIF. (JANUARY 25, 2005) - Connetics Corporation (Nasdaq: CNCT), a
specialty pharmaceutical company that develops and commercializes dermatology
products, today reported record net income for the 2004 fourth quarter of $6.4
million, or $0.17 per diluted share, compared with $1.5 million, or $0.05 per
diluted share, for the comparable quarter last year.
Total revenues for the fourth quarter of 2004 rose 115% to $43.8 million,
compared with $20.3 million for the fourth quarter of 2003. Product revenues
rose 128% to $43.5 million, reflecting $22.6 million in sales of OLUX(R) and
Luxiq(R), $18.0 million in sales of Soriatane(R) and $2.9 million in sales of
Evoclin(TM), which was launched in December 2004. Combined OLUX and Luxiq
revenues increased 19% compared with the fourth quarter of 2003.
Selling, general and administrative (SG&A) expenses increased to $22.8 million
in the fourth quarter of 2004 from $10.1 million in the fourth quarter of 2003,
primarily due to payments made to UCB Pharma (UCB) for promotional activities on
behalf of OLUX and Luxiq, launch-related costs for Evoclin, increased
promotional activities for all products and increased headcount primarily
related to Connetics' salesforce expansion. Research and development (R&D)
expenses were $5.7 million, down from $6.5 million in the fourth quarter of
2003.
"Strong product revenue growth during 2004 contributed to our first full year of
profitability and the fifth consecutive year of growth in our core brands OLUX
and Luxiq," said Thomas G. Wiggans, President and Chief Executive Officer of
Connetics. "Our first product in the acne market, Evoclin, was approved and
launched during the fourth quarter. While early in the launch phase, the
prescription data has been strong and the feedback from physicians has been
encouraging, which we believe bodes well for a dynamic and expanding presence
for Connetics in the acne market. We also marked the success of 2004 with the
acquisition of Soriatane. Through our promotional efforts Soriatane was a
significant financial contributor in 2004 and also was an important product for
patients. With four marketed brands, a substantially expanded commercial team
and a robust product pipeline, we believe Connetics is poised for another
exciting and highly productive year."
Significant activities in the fourth quarter of 2004 and subsequent weeks
included:
o Receiving U.S. Food and Drug Administration (FDA) approval of Evoclin
(clindamycin Foam, 1%) for the topical treatment of mild-to-moderate
acne vulgaris, and the commencement of shipments to pharmaceutical
wholesalers, retail pharmacies, hospitals and other institutional
customers nationwide.
o Launching a comprehensive sales and marketing program for Evoclin that
is expected to include a strong presence at relevant medical
conferences, particularly in the first quarter of 2005, by way of
poster and symposia presentations, as well as journal advertising,
direct promotion, media relations and internet marketing campaigns.
o Hiring 66 sales professionals, which more than doubled the salesforce
to 124 professionals and positions Connetics as a strong commercial
force in the dermatology market.
o Receiving an FDA non-approvable letter for the Company's product
candidate Extina(R). The Company plans to meet with the FDA early in
2005 to discuss the actions required to obtain approval for Extina.
2004 FULL YEAR FINANCIAL RESULTS
Net income for 2004 was $19.4 million, or $0.52 per diluted share, which
includes a third quarter $3.5 million milestone payment to Yamanouchi associated
with the filing of the Velac(R) New Drug Application. This compares with a net
loss of $4.1 million, or $0.13 per share, for 2003.
Total revenues for 2004 rose 92% to $144.4 million, and product revenues
increased 113% to $142.1 million, reflecting growth in OLUX and Luxiq, the
addition of Soriatane in March and the launch of Evoclin in December.
SG&A expenses increased to $71.9 million for 2004, compared with $40.9 million
for 2003, primarily due to payments made to UCB for promotional activities
related to OLUX and Luxiq, increased promotional activities for all products and
increased headcount. R&D expenses for 2004 were $21.0 million, down from $29.6
million during 2003 primarily due to the completion of pivotal trials with
Extina, Evoclin and Velac.
Cash and investments, including restricted cash, totaled $76.3 million on
December 31, 2004.
2005 FULL YEAR AND FIRST QUARTER FINANCIAL GUIDANCE
Connetics expects 2005 total revenues to be between $190 million and $200
million, representing an increase of 32% to 39% compared with 2004. Combined
SG&A and R&D expenses are projected to be between $116 million and $123 million.
Diluted EPS for 2005 is projected to grow by approximately 70% and to be in the
range of $0.88 to $0.92, based on an estimated 42.3 million shares outstanding
and an estimated effective tax rate of 10%. Assuming FDA approval of Velac
during 2005, the Company anticipates making a milestone payment of $5 million to
Yamanouchi. This payment will be capitalized and amortized over the life of the
patent, which expires in 2014.
The Company expects first quarter 2005 total revenues to be between $42 million
and $44 million. Consistent with prior years of heavier expenditures in the
first quarter compared with the immediately preceding quarter, Connetics
projects combined SG&A and R&D expenses for the first quarter to range from
$33.5 million to $35.5 million, reflecting a significant presence at dermatology
conferences during the quarter, an increase in product promotion costs,
particularly the Evoclin launch, and higher costs associated with a
significantly expanded salesforce. Connetics projects net income per share for
the first quarter of 2005 of $0.01 or $0.02.
In assessing the Company's financial guidance, Connetics' management considered
many factors and assumptions including, but not limited to, current and
projected prescription information; sales trend data; the potential generic
availability of, and competitive threats to, the Company's products; size, reach
and call frequency of the Company's selling organization; status, timing and
progression of the Company's development projects; current and projected
spending levels to support sales, marketing, development and administrative
activities; and other risk factors discussed in Connetics' publicly filed
documents. The above guidance does not take into account the effect of expensing
stock options.
CONFERENCE CALL
Connetics management will host a conference call to discuss the Company's
financial performance today at 4:30 p.m. Eastern Time/1:30 p.m. Pacific Time. To
participate in the live call, domestic callers should dial (888) 328-2575,
international callers should dial (706) 643-0459 or the web cast can be accessed
from the investor relations section of the Company's website at
www.connetics.com. A telephone replay can be accessed for 48 hours beginning
today at 6:30 p.m. Eastern Time/3:30 p.m. Pacific Time from the U.S., by
dialing (800) 642-1687, or (706) 645-9291 from outside the U.S. The Conference
ID# is 3252801. 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. Connetics has branded its proprietary foam drug delivery vehicle
VersaFoam(R). The Company's marketed products are OLUX(R) (clobetasol
propionate) Foam, 0.05%, Luxiq(R) (betamethasone valerate) Foam, 0.12%,
Soriatane(R) (acitretin) capsules and Evoclin(TM) (clindamycin) Foam, 1%.
Connetics is developing Velac(R) (a combination of 1% clindamycin and 0.025%
tretinoin) Gel, for treating acne, and Desilux(TM) (desonide) VersaFoam-EF,
0.05% a low-potency topical steroid formulated to treat atopic dermatitis.
Connetics' product formulations aim to improve the management of dermatological
diseases and provide significant product differentiation. In the Company's
marketed products, these formulations 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.
FORWARD LOOKING STATEMENTS
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, including particularly statements about earnings estimates,
future financial performance and financial guidance, are forward-looking
statements. Statements pertaining to revenue expectations, revenue growth, the
timing and success of the launch of Evoclin and performance of other of
Connetics' products or product candidates are also forward-looking statements.
These forward-looking 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. No assurances can be
given that these events will occur or that such results will be achieved.
Factors that could cause or contribute to differences in actual results or
events 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
for the year ended December 31, 2003 and Form 10-Q for the quarter ended
September 30, 2004. Connetics disclaims any intent or obligation to update any
forward-looking statements, which represent the judgment of the Company's
management as of the date of this release.
CONTACTS:
Patrick O'Brien Ina McGuinness or Bruce Voss
Director, Investor Relations Lippert/Heilshorn & Associates
(650) 739-2950 (310) 691-7100
pobrien@connetics.com imcguinness@lhai.com
Press Release Code: CNCT-F
CONNETICS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------ ------------------------
2004 2003 2004 2003
--------- --------- --------- ---------
Revenues:
Product $ 43,495 $ 19,115 $ 142,059 $ 66,606
Royalty and contract 281 1,223 2,296 8,725
--------- --------- --------- ---------
Total revenues $ 43,776 20,338 144,355 75,331
Operating costs and expenses:
Cost of product revenues 4,443 1,484 12,656 5,129
Research and development 5,687 6,518 20,968 29,561
Selling, general and administrative 22,849 10,111 71,949 40,908
Depreciation and amortization 3,750 574 12,903 2,240
Acquired in-process research and development and
milestone payments -- -- 3,500 --
--------- --------- --------- ---------
Total operating costs and expenses 36,729 18,687 121,976 77,838
Income (loss) from operations 7,047 1,651 22,379 (2,507)
Interest and other income (expense), net (202) (254) (1,475) (426)
--------- --------- --------- ---------
Income (loss) before income taxes 6,845 1,397 20,904 (2,933)
Provision for (benefit from) income taxes 459 (124) 1,493 1,167
--------- --------- --------- ---------
Net income (loss) $ 6,386 $ 1,521 $ 19,411 $ (4,100)
========= ========= ========= =========
Net income (loss) per share:
Basic $ 0.18 $ 0.05 $ 0.55 $ (0.13)
========= ========= ========= =========
Diluted $ 0.17 $ 0.05 $ 0.52 $ (0.13)
========= ========= ========= =========
Shares used to calculate net income (loss) per share:
Basic 35,695 31,781 35,036 31,559
========= ========= ========= =========
Diluted 38,172 33,759 37,443 31,559
========= ========= ========= =========
CONNETICS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
(UNAUDITED)
DECEMBER 31, DECEMBER 31,
2004 2003
-------- --------
ASSETS
Assets:
Cash, cash equivalents and short-term investments $ 72,382 $114,662
Restricted cash 3,963 304
Accounts receivable and other current assets 25,100 7,408
Soriatane asset, net 120,249 --
Property and equipment, net 11,830 5,628
Other long-term assets 12,204 17,895
-------- --------
Total assets $245,728 $145,897
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities and stockholders' equity:
Current liabilities $ 27,388 $ 10,127
Other liabilities 90,024 90,016
Stockholders' equity 128,316 45,754
Total liabilities and stockholders' equity $245,728 $145,897
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