SCHAUMBURG, Ill., July 22 /PRNewswire-FirstCall/ -- American Pharmaceutical Partners, Inc. (Nasdaq: APPX) today reported the highest quarterly revenues in the company's history with net sales of $97.7 million for the second quarter ended June 30, 2004, an increase of 8% over net sales of $90.4 million in the 2003 second quarter. Product launches in the second quarter contributed significantly to the sales increase, with the remaining growth driven primarily by strong sales of oncology and anti-infective products. Second quarter 2004 gross margin was 54.4%, reflecting the launch of new, higher margin products. As anticipated, second quarter ABRAXANE(TM) expenses totaled $23.2 million, or $0.19 per diluted share, consisting of $13.2 million of pre-launch expenses and a $10.0 million milestone payment triggered by the FDA's May 8, 2004 acceptance of the ABRAXANE(TM) NDA filing. Financial results for the 2004 second quarter benefited from a one-time investment tax credit of $1.7 million, or $0.02 per diluted share. After incurring the ABRAXANE(TM) expenses and benefiting from the tax credit, net income was $9.2 million, or $0.13 per fully diluted share, versus net income for the 2003 second quarter of $19.8 million, or $0.27 per diluted share, after incurring $1.6 million, or $0.02 per diluted share, of ABRAXANE(TM) pre-launch expenses. Net income for the core injectable business, which excludes ABRAXANE(TM) related expenses and the benefit of the one-time tax credit, was $0.30 per diluted share for the 2004 second quarter. APP presents this financial metric, which excludes the impact of ABRAXANE and the tax credit, to clarify the operating results of the core injectable business. Refer to the enclosed table for a reconciliation of pro forma net income to GAAP net income. "We are pleased with our accomplishments thus far in 2004, having received eight product approvals including Tobramycin Powder, the company's first New Drug Application, recorded the highest quarterly revenues in the company's history and raised our gross margin percentage in the second quarter to 54% from 50% in the preceding quarter," said Patrick Soon-Shiong, M.D., chairman, president and chief executive officer of American Pharmaceutical Partners. "The tentative approval for carboplatin, 16 ANDAs pending with the FDA and more than 50 products in development bode well for the balance of 2004 and beyond, and further solidify our position as a leader in our industry." Operating expenses totaled $41.5 million for the 2004 second quarter versus $17.8 million in the same period of 2003. Excluding expenses related to ABRAXANE, operating expenses in 2004 were $18.3 million, or 18.8% of sales, compared with $16.2 million, or 17.9% of sales, in the second quarter of 2003. Cash and cash equivalents were $45.2 million at June 30, 2004 compared with $54.3 million at March 31, 2004. The company currently has $77 million in cash on hand, no debt outstanding and $50.0 million available under its credit facility. 2004 Outlook -- Forward Looking Information American Pharmaceutical Partners affirmed its earlier 2004 guidance as follows: * Core injectable business sales are expected to increase in excess of 20% over 2003, with the growth substantially driven by the anticipated fourth quarter launch of new products including Carboplatin, for which the company has obtained tentative FDA approval pending only expiration of the innovator patent; * Core injectable business gross margin is expected to be in the low to mid 50% range; * The FDA accepted the ABRAXANE(TM) NDA filing on May 8, 2004 and APP is preparing for the potential launch of ABRAXANE(TM). Expenses related to ABRAXANE(TM), totaling $20.3 million in the first half of 2004, are expected to approximate $40 million for all of 2004. In addition, APP expensed the $10 million milestone payment in the 2004 second quarter triggered upon the FDA's acceptance of the ABRAXANE(TM) NDA filing, and expects to pay a $15 million milestone payment 30 days following FDA approval of the NDA. The FDA approval milestone would be capitalized and amortized over the estimated life of the product. Conference Call Information and Forward-Looking Statements On Thursday, July 22, 2004, the company will host a conference call with interested parties beginning at 11:30 a.m. (EDT) to review the results of operations for the second quarter ended June 30, 2004. Discussion during the conference call may include forward-looking statements regarding such topics as, but not limited to, the company's revenues, margins, operating expenses, distribution arrangements and clinical or FDA developments, and any comments the company may make about its future in response to questions from participants on the conference call. The conference call may be heard by any interested party through a live audio Internet broadcast at www.appdrugs.com and www.fulldisclosure.com. For those unable to listen to the live broadcast, a playback of the webcast will be available at both websites for one year beginning at approximately 3:00 p.m. (EDT), July 22, 2004. About American Pharmaceutical Partners, Inc. American Pharmaceutical Partners, Inc. is a specialty drug company that develops, manufactures and markets injectable pharmaceutical products, focusing on the oncology, anti-infective and critical care markets. APP has acquired the exclusive North American rights to manufacture and market ABRAXANE(TM), a proprietary nanoparticle injectable oncology product that has completed Phase III clinical trials for metastatic breast cancer. The company believes that it has established the only commercial scale protein-engineered nanoparticle manufacturing capability in the United States. For more information, visit APP's website at www.appdrugs.com. Statements contained in this press release, which are not historical facts, are forward-looking statements, as the term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements, whether expressed or implied, are subject to risks and uncertainties which can cause actual results to differ materially from those currently anticipated, due to a number of factors, which include, but are not limited to, the impact of pharmaceutical industry regulation, the difficulty in predicting the timing or outcome of product development efforts and FDA or other regulatory approvals or actions including the approval of ABRAXANE(TM), the impact of competitive products and pricing, the availability and pricing of ingredients used in the manufacture of pharmaceutical products, the ability to successfully manufacture products in a time-sensitive and cost effective manner, the acceptance and demand of new pharmaceutical products, the impact of patents and other proprietary rights held by competitors and other third parties, actual results achieved in further Phase II and III trials for ABRAXANE(TM) may or may not be consistent with results achieved to date, the timing and completion of the ABRAXANE(TM) filing, the fact that the FDA has not reviewed the Phase III data and may not grant approval on the basis of such data, and other risk factors discussed in the Company's Form 10-K and other documents filed by the Company with the Securities and Exchange Commission from time to time. These forward-looking statements represent the Company's judgment as of the date of this press release. The Company disclaims any intent or obligation to update these forward-looking statements. AMERICAN PHARMACEUTICAL PARTNERS, INC. CONSOLIDATED STATEMENTS OF INCOME (in thousands, except per share amounts) Three months ended Six months ended June 30, June 30, 2004 2003 % Change 2004 2003 % Change Net sales $97,664 $90,416 8% $186,842 $171,761 9% Cost of sales 44,523 39,790 12% 89,314 74,975 19% Gross profit 53,141 50,626 5% 97,528 96,786 1% Percent to sales 54.4% 56.0% 52.2% 56.3% Operating expenses: Research and development 6,889 5,067 13,940 11,143 Selling, general and administrative 25,311 12,813 43,890 24,133 Milestone payment 10,000 -- 10,000 -- Other (694) (83) (763) 235 Total operating expenses 41,506 17,797 133% 67,067 35,511 89% Percent to sales 42.5% 19.7% 35.9% 20.7% Income from operations 11,635 32,829 -65% 30,461 61,275 -50% Percent to sales 11.9% 36.3% 16.3% 35.7% Other income (expense), net 354 761 753 1,221 Income before income taxes 11,989 33,590 -64% 31,214 62,496 -50% Percent to sales 12.3% 37.2% 16.7% 36.4% Income tax expense 2,744 13,772 10,200 25,623 Net income $9,245 $19,818 -53% $21,014 $36,873 -43% Percent to sales 9.5% 21.9% 11.2% 21.5% Net income per share: Basic $0.13 $0.29 $0.30 $0.53 Diluted $0.13 $0.27 $0.29 $0.51 Weighted - average common shares outstanding: Basic 70,268 69,237 70,148 69,698 Diluted 73,202 72,171 73,151 72,552 AMERICAN PHARMACEUTICAL PARTNERS, INC. CONSOLIDATED BALANCE SHEETS (in thousands) June 30, December 31, 2004 2003 (Unaudited) (Audited) ASSETS Current assets: Cash and cash equivalents $45,162 $58,625 Accounts receivable, net 38,143 31,402 Inventory, net 132,453 110,384 Prepaid expenses and other 8,737 7,340 Deferred income taxes 7,948 7,948 Total current assets 232,443 215,699 Property, plant and equipment, net 86,087 77,340 Other assets 11,130 10,746 Total assets $329,660 $303,785 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $30,880 $26,560 Accrued expenses 23,905 29,120 Total current liabilities 54,785 55,680 Long-term deferred income tax liability 2,044 2,044 Total liabilities 56,829 57,724 Stockholders' Equity Common stock 77 77 Additional paid-in capital 207,229 201,009 Amounts due from American BioScience, Inc. (21,930) (21,132) Deferred stock-based compensation (898) (1,309) Retained earnings 144,564 123,550 Accumulated other comprehensive income 63 140 Less treasury stock, at cost (56,274) (56,274) Total stockholders' equity 272,831 246,061 Total liabilities and stockholders' equity $329,660 $303,785 AMERICAN PHARMACEUTICAL PARTNERS, INC. GAAP TO PRO FORMA NET INCOME RECONCILIATION (unaudited, in thousands, except per share amounts) Three months ended June 30, 2004 2003 Reported net income $9,245 $19,818 Abraxane expenses (a) 13,182 1,625 Abraxane milestone payment (b) 10,000 -- Income tax benefit (c) (8,995) (666) Non-recurring investment tax credit (d) (1,700) -- Pro forma net income $21,732 $20,777 Pro forma net income per diluted share $0.30 $0.29 Weighted - average common shares outstanding diluted 73,202 72,171 (a) To eliminate direct ABRAXANE expenses that were not incurred on behalf of the core generic business. (b) To eliminate the ABRAXANE milestone payment. (c) To reverse the tax benefit related to ABRAXANE expenses and the milestone payment at the company's effective tax rate. (d) To eliminate the non-recurring investment tax credit
SOURCE American Pharmaceutical Partners, Inc.