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Biovail Reports Record Second Quarter 2003 Financial Results TORONTO--(BUSINESS WIRE)--July 29, 2003--Biovail Corporation (NYSE:BVF):
-- Revenues increased 17% for second quarter 2003 and 20% for
first half 2003 --
-- Diluted EPS excluding charges increased 33% to $0.52 for
second quarter 2003 --
-- Operating cash flow increased 67% for second quarter 2003 and
38% for first half 2003 --
-- Biovail reconfirms previously issued EPS guidance --
Biovail Corporation (NYSE:BVF)(TSX:BVF) announced today record financial results for the three month and six month periods ending June 30, 2003. Total revenues for the three months ended June 30, 2003 increased 17% to $217.3 million, compared with $185.1 million for the second quarter 2002. Total revenues for the six months ended June 30, 2003 increased 20% to $408.7 million versus $340.4 million for the first six months of 2002. Contributing to these favorable results was the launch of Cardizem LA in April 2003, contributions from Wellbutrin XL, which received an Approvable Letter in June 2003, growth from Canadian product sales and the benefit from an economic interest in the gross profits from the sales of a generic version of Prilosec. Net income and diluted earnings per share for the three months and six months ended June 30, 2003 in accordance with U.S. generally accepted accounting principles (GAAP) are as follows:
Three Months Six Months
Ended Ended
June 30 June 30
-------------- ---------------
In $millions, except per share data 2003 2002 2003 2002
----------------------------------- ------- ------ ------- -------
Net income (loss) - US GAAP $(1.0) $62.6 $62.0 $115.6
======= ====== ======= =======
Diluted earnings (loss) per share - US
GAAP $(0.01) $0.39 $0.39 $0.70
======= ====== ======= =======
Net income (loss) - US GAAP $(1.0) $62.5 $62.0 $115.6
Add acquired research and development 84.2 - 84.2 -
------- ------ ------- -------
Net income excluding acquired research
and development $83.2 $62.5 $146.2 $115.6
======= ====== ======= =======
Diluted earnings per share excluding
acquired research and development $0.52 $0.39 $0.91 $0.70
======= ====== ======= =======
Second quarter 2003 net loss of $1.0 million and diluted loss per share of $0.01 compared to net income of $62.6 million and diluted earnings per share of $0.39 for second quarter 2002. Excluding acquired research and development, second quarter 2003 net income of $83.2 million and diluted earnings per share of $0.52 both grew 33% versus comparable 2002 results of $62.5 million and $0.39 per share. First half 2003 net income of $62.0 million and diluted earnings per share of $0.39 compared to net income of $115.6 million and diluted earnings per share of $0.70 for the 2002 first half. First half 2003 net income excluding acquired research and development grew 26% to $146.2 million as compared to net income of $115.6 million for first half 2002. Excluding acquired research and development, first half 2003 diluted earnings per share increased 30% to $0.91 versus diluted earnings per share of $0.70 for the first half of 2002. Excluded from the three month and six month periods ended June 30, 2003 net income and diluted earnings per share calculations above was $84.2 million related to the acquisition from Athpharma Limited (Athpharma) of four cardiovascular products under development and the Ativan sublingual development product acquired from Wyeth. "The dramatic increase in market share for Biovail's Cardizem franchise from 7% to over 11% in the 16 weeks since the launch of Cardizem LA has surpassed our expectations," commented Eugene Melnyk, Chairman of the Board and Chief Executive Officer. "The recent confirmation of September 3, 2003 as the Food and Drug Administration's target date for the approval of Wellbutrin XL, the first and only once-daily anti-depressant with a low incidence of sexual dysfunction and weight gain, should contribute to strong organic growth for Biovail in the coming quarters. These two highlights, in combination with other approaching milestones including the release of top line clinical data in the next 90 days for Tramadol XL, our once-daily pain medication currently completing two Phase III clinical trials, confirms the focus and successful execution of our strategic initiatives." Second quarter and first half 2003 U.S. GAAP calculations of net income and fully diluted earnings per share included the write-off of acquired research and development. Management utilizes a measure of net income and earnings per share on a basis that excludes certain items to better assess operating performance. Each of the items excluded is considered to be of a non-operational nature in the applicable period. Management has consistently applied this measure when discussing earnings or earnings guidance and will continue to do so going forward. Management believes that most of the Company's shareholders prefer to analyze the Company's results based on this measure, as it is consistent with industry practice. Earnings excluding acquired research and development are also disclosed to give investors the ability to further analyze the Company's results. Financial results Product sales revenues for second quarter 2003 of $157.7 compared to $157.8 million for second quarter 2002. First half 2003 product sales revenue of $284.6 million compared to first half 2002 product sales revenue of $287.6 million. Product sales were favorably impacted in the second quarter and first half of 2003 by Canadian product sales revenues, the launch of Cardizem LA and by revenues related to the upcoming launch of Wellbutrin XL. Generic product sales to Teva Pharmaceuticals were less than expected during the second quarter and are tracking well below underlying prescription trends for the primary products in this portfolio. Biovail is working with Teva Pharmaceuticals to better understand this inconsistency and resolve the situation expeditiously. Additionally, supply constraints related to branded Cardizem CD, which is manufactured by Aventis Pharmaceuticals, resulted in a backorder situation of approximately $20 million. Biovail is currently working with Aventis to rectify this. Co-promotion, royalty and licensing revenue increased over 150% to $55.9 million and $117.8 million for second quarter and first half 2003 respectively versus $21.5 million and $41.2 million for the second quarter and first half of 2002 respectively. The increase in this revenue line item is due to Biovail's on-going economic interest in the sales of a generic version of Prilosec. Cost of goods sold for the second quarter 2003 was $11.3 million and $48.7 million for the first half of 2003 resulting in gross margins on product sales revenue of 93% for the second quarter 2003 and 83% for the first half of 2003. This compares to 74% and 73% gross margins on product sales for the second quarter and first half 2002 respectively. The favorable increase in gross margins in second quarter 2003 is due to favorable product mix and a change in the supply price for Zovirax. In October 2002, Biovail amended certain terms of the original Zovirax distribution agreement with GlaxoSmithKline. The new terms provided Biovail with a lower supply price for Zovirax contingent upon the approvability of Wellbutrin XL. Since October 2002, the benefit from the lower supply price was capitalized and deferred. The contingency to this benefit was removed upon receipt of the Approvable Letter for Wellbutrin XL in June 2003 and as a result, Biovail has reflected the benefit as a reduction to cost of goods in the quarter the contingency was removed. Research and development expenditures for second quarter 2003 increased 51% to $21.8 million versus $14.5 million for second quarter 2002. Research and development expenditures for the first half 2003 increased 60% to $39.8 million versus $24.9 million for first half 2002. The increase in research and development expenditure for the second quarter and first half of 2003 reflects the considerable increase in the number of products that have been added to Biovail's growing and maturing pipeline. Some of the additional products under development in the first half of 2003 versus 2002 include clinically enhanced versions of venlafaxine, fenofibrate, acyclovir, simvastatin, sumatriptan, Hepacol and lorazepam as well as four chrono-therapeutic cardiovascular products being developed in conjunction with Athpharma. Selling, general and administrative expenses for the second quarter and first half 2003 increased to $56.9 million and $103.1 million respectively versus $39.0 million and $78.3 million for the comparable 2002 periods respectively. The increase in selling, general and administrative expenses is primarily due to the sales force expansion, increased promotional and advertising activities for the growing portfolio of in-market products, co-promote fees paid to Reliant Pharmaceuticals and the significant expenses associated with the launch of Cardizem LA. All previously capitalized advertising costs associated with Cardizem LA were expensed during the 2003 second quarter as the product was launched in April 2003. Amortization expense increased more than 200% for both the second quarter and first half of 2003 to $45.9 million and $86.4 million respectively primarily due to amortization expenses associated with the economic interest in the sales of a generic version of Prilosec. Settlements for second quarter 2003 were $9.3 million and $34.1 million for the first half of 2003. Settlements of $9.3 million for second quarter 2003 related to settlement proceeds derived from the resolution of a 2001 dispute with Pfizer Inc. regarding Biovail's delayed market entry for a generic controlled-release version of Procardia XL 30mg. Settlements for the first half of 2003 also include recovery from product supply agreements that were resolved and recognized during the 2003 first quarter. For the second quarter of 2003, interest expense of $9.5 million was partially offset by interest and other income of $7.8 million. Other income of $6.1 million in the second quarter 2003 related to interest rate swap transactions that previously had been accounted for as effective hedges against the Company's outstanding senior subordinated debt. Under accounting guidelines for derivatives, it was determined during the quarter that these swaps must be accounted for as ineffective hedges. As a result, marked-to-market changes must be included in the calculation of net income. The Company is determining if the hedges are likely to return to effectiveness or if they should be sold. The swaps currently have a marked-to-market value in excess of $20 million. Cash flow from operations increased 69% for second quarter 2003 and 38% for the first half of 2003 to $174.2 million for the six months ended June 30, 2003. Earnings before interest, tax, depreciation and amortization (EBITDA) excluding certain items increased to $146.9 million for the second quarter 2003 and to $265.7 million for the first half of 2003 reflecting increases in excess of 50% for both periods. The Company's conference call to review the second quarter and first half 2003 results will be broadcast live at 8:30 a.m. E.S.T. on the world wide web at www.biovail.com and a reply of the conference call will be available on this website shortly after the call. Biovail Corporation is an international full-service pharmaceutical company, engaged in the formulation, clinical testing, registration, manufacture, sale and promotion of pharmaceutical products utilizing advanced drug delivery technologies. "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995. To the extent any statements made in this release contain information that is not historical, these statements are essentially forward looking and are subject to risks and uncertainties, including the difficulty of predicting FDA approvals, acceptance and demand for new pharmaceutical products, the impact of competitive products and pricing, new product development and launch, reliance on key strategic alliances, availability of raw materials, the regulatory environment, fluctuations in operating results and other risks detailed from time to time in the company's filings with the Securities and Exchange Commission. BIOVAIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(All dollar amounts are expressed in thousands of U.S. dollars, except
per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------- -----------------------
2003 2002 2003 2002
--------- --------- ----------- -----------
REVENUE
Product sales $157,730 $157,788 $284,644 $287,642
Research and development 3,673 5,802 6,273 11,515
Co-promotion, royalty and
licensing 55,880 21,541 117,756 41,227
--------- --------- ----------- -----------
217,283 185,131 408,673 340,384
--------- --------- ----------- -----------
EXPENSES
Cost of goods sold 11,332 41,291 48,744 77,007
Research and development 21,813 14,453 39,819 24,921
Selling, general and
administrative 56,949 38,981 103,106 78,318
Amortization 45,886 14,019 86,407 26,528
Acquired research and
development 84,200 - 84,200 -
Settlements (9,300) - (34,055) -
--------- --------- ----------- -----------
210,880 108,744 328,221 206,774
--------- --------- ----------- -----------
Operating income 6,403 76,387 80,452 133,610
Interest income 1,635 1,047 4,702 2,561
Interest expense (9,507) (10,104) (19,489) (11,797)
Other income (expense) 6,157 (66) 6,664 (66)
--------- --------- ----------- -----------
Income before provision
for income taxes 4,688 67,264 72,329 124,308
Provision for income
taxes 5,700 4,707 10,350 8,700
--------- --------- ----------- -----------
Net income (loss) $(1,012) $62,557 $61,979 $115,608
========= ========= =========== ===========
Diluted earnings (loss)
per share $(0.01) $0.39 $0.39 $0.70
========= ========= =========== ===========
Net income (loss) $(1,012) $62,557 $61,979 $115,608
Add acquired research and
development 84,200 - 84,200 -
--------- --------- ----------- -----------
Net income excluding
acquired research and
development (Note) $83,188 $62,557 $146,179 $115,608
========= ========= =========== ===========
Diluted earnings per share
excluding acquired
research and development
(Note) $0.52 $0.39 $0.91 $0.70
========= ========= =========== ===========
Weighted average number
of common shares
outstanding (000s) 160,428 161,423 159,960 164,885
========= ========= =========== ===========
Note
Management utilizes a measure of net income and diluted earnings per
share that excludes certain items. This measure is a non-GAAP measure
that does not have a standardized meaning and, as such, is not
necessarily comparable to similarly titled measures presented by other
companies. Management has consistently applied this measure when
discussing earnings or earnings guidance and will continue to do so
going forward. This measure is provided to assist our investors in
assessing the Company's operating performance. Management understands
that many of our investors prefer to analyze the Company's results
based on this measure, as it is consistent with industry practice.
Investors should consider this non-GAAP measure in the context of the
Company's U.S. GAAP results.
BIOVAIL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
June 30 December 31
2003 2002
----------- --------------
ASSETS
Cash and cash equivalents $102,592 $56,080
Other current assets 309,540 265,551
Long-term investments 95,754 79,324
Property, plant and equipment, net 157,409 136,784
Goodwill, net 102,450 102,212
Intangible assets, net 1,144,439 1,080,503
Other assets, net 118,259 113,350
----------- --------------
$2,030,443 $1,833,804
=========== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities $321,106 $345,158
Deferred revenue 16,200 18,200
Long-term obligations 749,328 624,760
Shareholders' equity 943,809 845,686
----------- --------------
$2,030,443 $1,833,804
=========== ==============
BIOVAIL CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All dollar amounts are expressed in thousands of U.S. dollars)
(Unaudited)
Six Months Ended
June 30
-----------------------
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $61,979 $115,608
Add (deduct) items not involving cash
Depreciation and amortization 94,355 32,025
Amortization of deferred financing costs 1,369 1,160
Amortization of discounts on long-term
obligations 3,978 2,074
Acquired research and development 84,200 -
Other items not involving cash (6,843) 999
----------- -----------
239,038 151,866
Net change in non-cash operating items (64,847) (25,388)
----------- -----------
Cash provided by operating activities 174,191 126,478
CASH FLOWS FROM INVESTING ACTIVITIES (212,160) (474,432)
CASH FLOWS FROM FINANCING ACTIVITIES 83,946 (51,481)
Effect of exchange rate changes on cash and
cash equivalents 535 49
----------- -----------
Increase (decrease) in cash and cash
equivalents 46,512 (399,386)
Cash and cash equivalents, beginning of
period 56,080 434,891
----------- -----------
Cash and cash equivalents, end of period $102,592 $35,505
=========== ===========
CONTACT: Biovail Corporation
Ken Howling, 905-286-3000
ir@biovail.com
SOURCE: Biovail Corporation
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