Exhibit 99.1
COVALENT REPORTS RESULTS FOR SECOND QUARTER 2005
WAYNE, Pa., Aug. 11 /PRNewswire-FirstCall/ -- Covalent Group, Inc.
(Nasdaq: CVGR) today announced financial results for its second quarter ended
June 30, 2005.
Our financial, business, programmatic and strategic accomplishments for the
second quarter of 2005 included the following:
* Strong operating cash flow with cash and cash equivalents rising to $4.8
million from $3.2 million at December 31, 2004;
* Highly liquid balance sheet with no debt and minimal exposure to capital
lease commitments;
* New business contracts for $9.2 million resulting, in part, from our
recent programmatic successes in high profile clinical trials where we
played a significant role;
* Increase in backlog by 42% since March 31, 2005;
* Major clinical operations and consultant contributor to Merck's landmark
"Shingle Prevention Study" which was published as a lead article in The
New England Journal of Medicine;
* Continued growth in our new business pipeline. This reflects, in part,
new business opportunities that have been enhanced by our recent
accomplishments in the design and management of clinical trials and
patient disease registries; and
* Continued progress on our strategic goal to grow our business through
new strategic alliances including mergers and acquisitions.
Net revenue for the second quarter of 2005, excluding reimbursement revenue,
was $2.3 million as compared with $3.8 million for the comparable prior year
period. The decrease of $1.5 million in net revenue reflects a decrease in the
value and number of clinical studies being managed by the Company during the
second quarter of 2005 compared with the second quarter of 2004. There were no
significant revenues recognized in our second quarter 2005 financial results
from the recently signed $9.2 million clinical study agreement. We expect to
begin generating significant revenues from activities related to the performance
of this clinical study in the third quarter of 2005.
Net expenses for the quarter ended June 30, 2005, excluding the
reimbursement for out-of-pocket expenses, were $2.8 million versus $5.7 million
for the comparable prior year period, a decrease of approximately $2.9 million.
This decrease resulted principally from a $2.3 million reduction in direct
expenses associated with decreased personnel costs related to lower clinical
trial activity and a $600 thousand reduction in selling, general and
administrative ("SG&A") expenses due principally to reduced headcount, decreased
professional fees and a $400 thousand reduction in bad debt expense.
Net revenue for the six months ended June 30, 2005, excluding reimbursement
revenue, was $5.5 million versus $9.1 million for the comparable prior year
period. The decrease of $3.6 million in net revenue reflects a decrease in the
value and number of clinical trial studies being managed by the Company during
the first six months of 2005 compared to the comparable prior year period. Net
expenses for the six months ended June 30, 2005, excluding the reimbursement for
out-of-pocket expenses, was $6.2 million versus $11 million for the comparable
prior year period, a decrease of $4.8 million. This decrease was principally the
result of a $3.9 million reduction in direct expenses due to decreased personnel
costs related to lower clinical trial activity and an $800 thousand reduction in
SG&A due principally to a $400 thousand decrease in bad debt expense combined
with ongoing cost control initiatives and a decline in personnel costs.
Net loss for the second quarter of 2005 was $483 thousand, or ($0.04) per
share, compared to a net loss of $1.4 million, or ($0.11) per share, for the
comparable prior year period.
Net loss for the six months ended June 30, 2005 was $582 thousand, or
($0.04) per share, compared to a net loss of $1.4 million, or ($0.11) per share,
for the comparable prior year period.
Cash and cash equivalents were $4.8 million as of June 30, 2005 compared
with $3.2 million as of December 31, 2004, an increase of $1.6 million. This
increase resulted principally from cash provided from operating activities in
the amount of $1.7 million.
The amount of announced new business contracts in the second quarter was
$9.2 million. This brought our year-to-date new business awards to $10.7
million. Our backlog was approximately $20 million as of June 30, 2005 compared
to approximately $15 million at December 31, 2004, an increase of $5 million.
Sequentially, our backlog grew from approximately $14 million at March 31, 2005,
an increase of $6 million, or 42%.
Kenneth M. Borow, M.D., President and Chief Executive Officer, commented,
"Our second quarter financial results improved significantly compared to the
second quarter of 2004. Despite our operating losses, our business continues to
provide positive cash flow from operations. We had a very successful quarter
relative to new business signings. As a result, our backlog in the second
quarter grew by 42% compared to the value at the end of the first quarter of
2005. In addition, we are competing for multiple new business contracts that we
believe will help us to significantly improve our future operating results. We
are especially pleased that our programmatic successes in 2004 and 2005 have
positioned us to be highly competitive for new business awards that we are
currently seeking. We expect to make additional new business announcements
during the third quarter of this year."
Dr. Borow continued, "As I have previously stated, we remain committed to
growing our revenue base through new business awards and new strategic alliances
including mergers and acquisitions. We continue to actively seek new business
opportunities in order to grow revenues and more fully leverage our in-house
resources thereby facilitating a return to profitability. Our actions in this
respect are ongoing, and our commitment to achieve our strategic objectives for
top and bottom-line growth is well underway. We expect to have more clarity on
the success of our efforts before the end of 2005. We are committed to our
strategic goals as well as increasing shareholder value, and we anticipate and
look forward to continuing improvements in backlog, operating results and
operating cash flows for the remainder of 2005."
Covalent Group will hold a conference call on Friday, August 12 at 9:00 a.m.
ET to discuss second quarter results. To participate in the live call by
telephone, please dial (877) 407-4018 from the U.S., or for international
callers, please dial (201) 689-8471. Those interested in listening to the
conference call live via the Internet may do so by visiting the Company's Web
site at http://www.covalentgroup.com. Please go to the Web site 15 minutes prior
to the scheduled start to register, download, and install any necessary audio
software.
A webcast audio replay will be available on the Company Web site for 31 days
through Monday, September 12, 2005. A telephone audio replay will also be
available for 10 days through Monday, August 22, 2005, by dialing (877) 660-
6853 from the U.S., or (201) 612-7415 for international callers, and entering
account number 3055 and conference ID number 163223 when prompted.
About Covalent Group
Covalent Group is a clinical research organization that is a leader in the
design and management of complex clinical trials for the pharmaceutical,
biotechnology and medical device industries. The Company's mission is to provide
its clients with high quality, full-service support for their clinical trials.
Covalent offers therapeutic expertise, experienced team management and advanced
technologies. The Company has clinical trial experience across a wide variety of
therapeutic areas such as cardiovascular, endocrinology/metabolism, diabetes,
vaccines, biologics, gene therapy, immunology, neurology, infectious diseases,
gastroenterology, dermatology, hepatology, womens' health and respiratory
medicine. Covalent believes that its leadership in the design of complex
clinical trials, its application of innovative technologies, therapeutic
expertise and commitment to quality offer its clients a means to more quickly
and cost-effectively develop products through the clinical trial process. With
its wholly-owned international subsidiary, Covalent Group, Ltd., as well as its
Strategic Partners operating in various regions around the world, Covalent is
able to meet the global drug development needs of its clients.
This press release contains forward-looking statements identified by words
such as "estimate," "project," "expect," "intend," "believe," "anticipate" and
similar expressions. Actual results might differ materially from those projected
in, expressed in or implied by the forward-looking statements. Potential risks
and uncertainties that could affect the Company's future operating results,
financial condition and stock price include, without limitation: (i) our success
in attracting new business and retaining existing clients and projects; (ii) the
size, duration, and timing of clinical trials we are currently managing may
change unexpectedly; (iii) the termination, delay or cancellation of clinical
trials we are currently managing could cause revenues to decline unexpectedly;
(iv) the timing difference between our receipt of contract milestone or
scheduled payments and our incurring costs to manage these trials; (v)
outsourcing trends in the pharmaceutical, biotechnology and medical device
industries; (vi) our ability to maintain profit margins in a very competitive
marketplace; (vii) our ability to attract and retain qualified personnel; (viii)
the sensitivity of our business to general economic conditions; (ix) other
economic, competitive, governmental and technological factors affecting our
operations, markets, products, services and prices; (x) announced awards
received from existing and potential customers are not definitive until fully
negotiated contracts are executed by the parties; and (xi) our backlog may not
be indicative of future results and may not generate the revenues expected. You
should not place undue reliance on these forward looking statements which speak
only as of the date of this press release. Additional information concerning
risk factors that might affect our business or stock price which could cause
actual results to materially differ from those in forward-looking statements is
contained in Covalent Group's SEC filings, including its Annual Report on Form
10-K for the year ended December 31, 2004 and other periodic reports under the
Securities Exchange Act of 1934, as amended, copies of which are available upon
request from Covalent Group's investor relations department.
Covalent Group, Inc.
Consolidated Condensed Balance Sheets
June 30, December 31,
2005 2004
-------------- --------------
Assets
Current Assets
Cash and cash equivalents $ 4,765,827 $ 3,165,986
Restricted cash 142,970 145,612
Accounts receivable, less allowance
of $35,093 and $40,000
at June 30, 2005 and December 31,
2004, respectively 4,019,358 5,209,950
Prepaid expenses and other 294,786 158,287
Prepaid taxes 1,049,076 1,132,315
Costs and estimated earnings in
excess of related billings on
uncompleted contracts 687,915 1,667,947
Total Current Assets 10,959,932 11,480,097
Property and Equipment, Net 1,097,998 1,321,139
Other Assets 21,665 21,665
Total Assets $ 12,079,595 $ 12,822,901
Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable $ 524,345 $ 1,101,788
Accrued expenses 144,229 392,385
Obligations under capital leases 24,977 23,709
Billings in excess of related costs
and estimated earnings on uncompleted
contracts 2,413,861 1,770,275
Customer advances 1,175,692 1,080,469
Total Current Liabilities 4,283,104 4,368,626
Long Term Liabilities
Obligations under capital leases 50,495 63,309
Other liabilities 523,539 581,710
Total Long Term Liabilities 574,034 645,019
Total Liabilities 4,857,138 5,013,645
Stockholders' Equity
Common stock, $.001 par value
25,000,000 shares authorized,
13,501,201 and 13,495,534 shares
issued and outstanding respectively 13,502 13,496
Additional paid-in capital 12,028,496 12,017,822
Accumulated deficit (4,514,922) (3,933,377)
Accumulated other comprehensive income 154,355 170,289
Less: 7,681,431 8,268,230
Treasury stock, at cost,
152,932 shares (458,974) (458,974)
Total Stockholders' Equity 7,222,457 7,809,256
Total Liabilities and Stockholders'
Equity $ 12,079,595 $ 12,822,901
Covalent Group, Inc.
Consolidated Condensed Statements of Operations
Three months ended Six months ended
June 30, June 30,
-------------------------------- --------------------------------
2005 2004 2005 2004
-------------- -------------- -------------- --------------
Net revenue $ 2,328,379 $ 3,778,774 $ 5,541,908 $ 9,061,359
Reimbursement
revenue 328,554 2,618,378 1,002,826 4,258,511
Total Revenue 2,656,933 6,397,152 6,544,734 13,319,870
Operating Expenses
Direct 1,744,915 4,002,847 3,787,683 7,678,427
Reimbursement out-
of-pocket expenses 328,554 2,618,378 1,002,826 4,258,511
Selling, general and
administrative 952,954 1,547,032 2,099,293 2,870,492
Depreciation and
amortization 132,232 180,095 269,757 433,975
Total Operating Expenses 3,158,655 8,348,352 7,159,559 15,241,405
Loss from Operations (501,722) (1,951,200) (614,825) (1,921,535)
Interest Income 21,253 926 38,361 1,683
Interest Expense (2,605) (2,656) (5,082) (5,484)
Net Interest Income
(Expense) 18,648 (1,730) 33,279 (3,801)
Loss before Income Taxes (483,074) (1,952,930) (581,546) (1,925,336)
Income Tax Benefit - (506,200) - (505,711)
Net Loss $ (483,074) $ (1,446,730) $ (581,546) $ (1,419,625)
Net Loss per Common Share
Basic $ (0.04) $ (0.11) $ (0.04) $ (0.11)
Diluted $ (0.04) $ (0.11) $ (0.04) $ (0.11)
Weighted Average Common and
Common Equivalent Shares
Outstanding
Basic 13,348,441 13,213,297 13,345,521 13,147,924
Diluted 13,348,441 13,213,297 13,345,521 13,147,924
Investor Relations Contact: Lawrence R. Hoffman, CPA, Esq.
CFO, Covalent Group, Inc.
(610) 975-9533
Contact us on-line: http://www.covalentgroup.com
CONTACT: Lawrence R. Hoffman, CPA, Esq., CFO, Covalent Group, Inc.,
+1-610-975-9533/
Web site: http://www.covalentgroup.com /