EXHIBIT 99.1
FOR MORE INFORMATION, CONTACT:
Cygnus, Inc.
Cygnus Corporate Communications
(650) 369-4300
www.cygn.com
FOR IMMEDIATE RELEASE
CYGNUS REPORTS 2004 FINANCIAL RESULTS
REDWOOD CITY, CA, MARCH 16, 2005 -- CYGNUS, INC. (OTC BULLETIN BOARD: CYGN)
today reported total revenues of $556,000 for the year ended December 31, 2004,
compared to $2.9 million for the year ended December 31, 2003. This decrease is
the result of the termination of the Company's Sales, Marketing and Distribution
Agreement with Sankyo Pharma Inc. in December 2003. Cygnus posted a net loss of
$8.1 million, or $0.20 per diluted share, for the year ended December 31, 2004,
compared to net income of $49.4 million, or $1.01 per diluted share, for the
year ended December 31, 2003. The net income for the year ended December 31,
2003 resulted from a gain of $75.8 million in the fourth quarter due to the
Company's settlement with Sankyo Pharma. Total costs and expenses for the year
ended December 31, 2004 were $11.6 million, compared to $27.0 million for the
year ended December 31, 2003. Costs of product revenues were $240,000 for the
year ended December 31, 2004, compared to $15.4 million for the year ended
December 31, 2003. The decrease in costs of product revenues for 2004 was
partially a result of the Company's reduced product revenues and suspension of
its manufacturing efforts. In addition, costs of product revenues for the year
ended December 31, 2003 included $5.3 million of underabsorbed indirect overhead
associated with building up the Company's manufacturing capacity to meet
then-expected future volumes and a write-off of approximately $6.4 million of
inventory. The Company did not have any research and development expenses for
the year ended December 31, 2004, compared to $5.1 million for the year ended
December 31, 2003. Cygnus ceased all research and development activities and
manufacturing in the fourth quarter of 2003. Sales, marketing, general and
administrative expenses for the year ended December 31, 2004 were $11.4 million,
compared to $6.4 million for the year ended December 31, 2003. This increase is
a result of maintaining personnel and capacity to resume manufacturing and
research and development activities if Cygnus were to have entered into a
strategic alliance or found an acquiror for the Company.
On December 16, 2004, Cygnus entered into an Asset Purchase Agreement with
Animas for the sale of substantially all of its assets (other than its cash and
cash equivalents, accounts receivable, and its claims in the arbitration matter
with Ortho-McNeil Pharmaceutical, Inc.), including its intellectual property
rights, product development and production equipment, regulatory package,
inventory and certain assumed contracts, including all supplier, manufacturing
and license agreements related to its products, to Animas for $10.0 million in
cash. Upon the closing of the asset sale to Animas, Cygnus will satisfy its
arbitration obligation to Sanofi-Aventis in order to release the Company's
assets, including its intellectual property, from the security interests that
Sanofi-Aventis has in those assets.
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On February 9, 2005, Cygnus filed its definitive Proxy Statement on Schedule 14A
with the Securities and Exchange Commission (SEC) seeking stockholder approval
for the asset sale and for a Plan of Complete Liquidation and Dissolution. The
Special Meeting of Stockholders will be held on March 23, 2005. The Company
anticipates that the asset sale to Animas, if approved by the Company's
stockholders, will close in the first quarter of 2005. Additionally, Cygnus must
vacate its Redwood City, California, facility on or before March 31, 2005
pursuant to the Lease Termination Agreement with its landlord, executed on
December 16, 2004. Thereafter, it is anticipated that only two employees will
remain. The Company has rented office space in San Francisco, California, and
plans to pursue the Company's arbitration matter against Ortho-McNeil
Pharmaceutical Inc., a Johnson & Johnson company, and to wind down the Company.
As of December 31, 2004, Cygnus' cash and cash equivalents totaled $10.3
million. Also as of December 31, 2004, Cygnus had total liabilities of $12.7
million, of which $5.7 million were current liabilities. These balances included
amounts due to Sanofi-Aventis pursuant to the Company's remaining arbitration
obligation of $11.5 million, of which $4.5 million is due March 31, 2005. Under
the Company's renegotiated arbitration obligation with Sanofi-Aventis entered
into on January 27, 2005, the Company owes Sanofi-Aventis $4.5 million on March
31, 2005, rather than February 28, 2005; and $5.5 million at the time of the
closing of its asset sale to Animas, for a total of $10.0 million. In the event,
however, that the Company has not paid this $5.5 million prior to February 28,
2006, then Cygnus will owe $4.0 million at that time to Sanofi-Aventis and $3.0
million on February 28, 2007, for a total of $11.5 million.
The Company's Form 10-K for the year ended December 31, 2004 was filed with the
SEC on March 16, 2005. The Report of the Independent Registered Public
Accounting Firm, which is part of the Company's Form 10-K, highlights the
Company's condition in a going concern qualification in paragraph four thereof.
STOCKHOLDERS OF CYGNUS ARE URGED TO READ THE PROXY STATEMENT AND ANY OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC BECAUSE THEY CONTAIN IMPORTANT
INFORMATION. Investors and security holders can obtain free copies of the proxy
statement and other relevant documents by contacting Cygnus, Inc., 400 Penobscot
Drive, Redwood City, CA 94063-4719. In addition, documents filed with the SEC by
Cygnus are available free of charge at the SEC's web site at www.sec.gov.
INFORMATION REGARDING THE IDENTITY OF THE PERSONS WHO MAY, UNDER SEC RULES, BE
DEEMED TO BE PARTICIPANTS IN THE SOLICITATION OF STOCKHOLDERS OF CYGNUS IN
CONNECTION WITH THE TRANSACTION, AND THEIR DIRECT AND INDIRECT INTEREST, BY
SECURITY HOLDING OR OTHERWISE, IN THE SOLICITATION, IS SET FORTH IN A PROXY
STATEMENT FILED BY CYGNUS WITH THE SEC.
(C)2005 Cygnus, Inc Page 2 of 5
ABOUT CYGNUS
CYGNUS (WWW.CYGN.COM) HAS DEVELOPED, MANUFACTURED AND COMMERCIALIZED NEW AND
IMPROVED GLUCOSE-MONITORING DEVICES. THE THREE GENERATIONS OF CYGNUS'
GLUCOWATCH(R) BIOGRAPHERS ARE THE ONLY PRODUCTS APPROVED BY THE FDA THAT PROVIDE
FREQUENT, AUTOMATIC AND NON-INVASIVE MEASUREMENT OF GLUCOSE LEVELS. THE
BIOGRAPHER IS NOT INTENDED TO REPLACE THE COMMON "FINGER-STICK" OR ALTERNATIVE
SITE TESTING METHODS, BUT IS INDICATED AS AN ADJUNCTIVE DEVICE TO SUPPLEMENT
BLOOD GLUCOSE TESTING TO PROVIDE MORE COMPLETE, ONGOING INFORMATION ABOUT
GLUCOSE LEVELS.
SOME OF THE STATEMENTS IN THIS NEWS RELEASE ARE FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES. THESE FORWARD-LOOKING STATEMENTS INCLUDE
STATEMENTS ABOUT CYGNUS' PLANS, OBJECTIVES, EXPECTATIONS, INTENTIONS AND
ASSUMPTIONS AND OTHER STATEMENTS CONTAINED IN THIS NEWS RELEASE THAT ARE NOT
STATEMENTS OF HISTORICAL FACT. FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT
LIMITED TO, STATEMENTS CONCERNING THE CLOSING OF THE ASSET SALE TO ANIMAS AND
THE TIMING THEREOF AND THE ARBITRATION MATTER WITH ORTHO-MCNEIL IN SOME CASES,
YOU CAN IDENTIFY THESE STATEMENTS BY WORDS SUCH AS "MAY," "WILL," "SHOULD,"
"ESTIMATES," "PREDICTS," "POTENTIAL," "CONTINUES," "STRATEGY," "BELIEVES,"
"ANTICIPATES," "PLANS," "EXPECTS," "INTENDS" AND SIMILAR EXPRESSIONS. CYGNUS
CANNOT GUARANTEE FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR
ACHIEVEMENTS. THE COMPANY'S ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS MAY
DIFFER SIGNIFICANTLY FROM THE RESULTS AND TIMING DISCUSSED IN THIS NEWS RELEASE.
ALL FORWARD-LOOKING STATEMENTS INCLUDED IN THIS NEWS RELEASE ARE BASED ON
INFORMATION AVAILABLE TO CYGNUS ON THE DATE HEREOF, AND THE COMPANY ASSUMES NO
OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS.
NOTE: "GLUCOWATCH" IS A REGISTERED TRADEMARK OF CYGNUS, INC.
END
(Financial Tables Follow)
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CYGNUS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
---------------------- -----------------------
2004 2003 2004 2003
-------- -------- -------- --------
Revenues:
Net product revenues $ 227 $ 914 $ 556 $ 2,684
Contract revenues -- 17 -- 234
-------- -------- -------- --------
TOTAL REVENUES 227 931 556 2,918
COSTS AND EXPENSES:
Costs of product revenues 27 2,863 240 15,447
Research and development -- 1,003 -- 5,119
Sales, marketing, general and administrative 3,639 1,010 11,369 6,440
-------- -------- -------- --------
TOTAL COSTS AND EXPENSES 3,666 4,876 11,609 27,006
-------- -------- -------- --------
LOSS FROM OPERATIONS (3,439) (3,945) (11,053) (24,088)
Interest income/(expense) and other, net 53 (571) (260) (2,096)
Gain from Sankyo Pharma settlement -- 75,825 132 75,825
Gain on early retirement of convertible debentures -- -- 2,891 --
-------- -------- -------- --------
Income/(loss) before income taxes (3,386) 71,309 (8,290) 49,641
Provision for/(benefit from) income taxes (198) 197 (198) 199
-------- -------- -------- --------
Net income/(loss) $ (3,188) $ 71,112 $ (8,092) $ 49,442
======== ======== ======== ========
Net income/(loss) per share, basic $ (0.08) $ 1.85 $ (0.20) $ 1.28
======== ======== ======== ========
Shares used in computation of amounts per share, basic 41,009 38,480 40,444 38,480
======== ======== ======== ========
Net income/(loss) per share, diluted $ (0.08) $ 1.24 $ (0.20) $ 1.01
======== ======== ======== ========
Shares used in computation of amounts per share, diluted 41,009 57,757 40,444 49,640
======== ======== ======== ========
Note: The condensed consolidated statement of operations at December 31, 2004
and 2003 have been derived from the audited consolidated financial statements at
those dates but do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
(C)2005 Cygnus, Inc Page 4 of 5
CYGNUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
DECEMBER 31,
------------------------
2004 2003
--------- ---------
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $ 10,317 $ 33,483
Inventories -- 62
Accounts receivable 131 31
Current portion of employee notes receivable -- 25
Other current assets 532 719
Equipment held for sale 1,690 --
--------- ---------
TOTAL CURRENT ASSETS 12,670 34,320
EQUIPMENT AND IMPROVEMENTS:
Manufacturing, office and laboratory equipment 830 11,908
Leasehold improvements 197 377
--------- ---------
1,027 12,285
Less accumulated depreciation and amortization (1,027) (9,080)
--------- ---------
NET EQUIPMENT AND IMPROVEMENTS -- 3,205
Long-term portion of employee notes receivable -- 15
Other assets -- 167
--------- ---------
TOTAL ASSETS $ 12,670 $ 37,707
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY/(NET CAPITAL DEFICIENCY):
CURRENT LIABILITIES:
Accounts payable $ 306 $ 814
Accrued compensation 260 381
Other accrued liabilities 611 505
Current portion of arbitration obligation 4,500 --
Current portion of convertible debentures -- 14,281
Current portion of capital lease obligations -- 74
--------- ---------
TOTAL CURRENT LIABILITIES 5,677 16,055
Long-term portion of arbitration obligation 7,000 11,500
Long-term portion of convertible debentures, net of discount of $709 in 2003 -- 3,291
Other long-term liabilities -- 39
Commitments and contingencies
TOTAL STOCKHOLDERS' EQUITY/(NET CAPITAL DEFICIENCY):
Preferred stock, $0.001 par value: 5,000 shares authorized; no shares issued and outstanding -- --
Common stock, $0.001 par value: 95,000 shares authorized; issued and outstanding: 41,009
and 38,480 shares at December 31, 2004 and 2003, respectively 41 38
Additional paid-in capital 255,353 254,093
Accumulated deficit (255,401) (247,309)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY/(NET CAPITAL DEFICIENCY) (7) 6,822
--------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY/(NET CAPITAL DEFICIENCY) $ 12,670 $ 37,707
========= =========
Note: The condensed consolidated balance sheet at December 31, 2004 and 2003
have been derived from the audited consolidated financial statements at those
dates but do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
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