VANCOUVER, March 21, 2014 /PRNewswire/ - Angiotech Pharmaceuticals, Inc. ("ANPI") today announced its financial results for the quarter and year ended December 31, 2013 as well as number of recent developments.
"We are pleased to have concluded 2013 by recording yet another year of improved business results as compared to the past several years," said Tammy Neske, Chief Business Officer of Angiotech. "2013 was a year of exceptional achievement, beginning with the successful sale of our interventional products business and a significant return of capital to our shareholders, followed by a new financing and an additional return of capital to our shareholders, the development of a new sales distribution and product development strategy, and the re-branding of our operating company to Surgical Specialties Corporation."
Amendment of Senior Secured Credit Facility: To enhance our operational flexibility and to support future growth, on March 18 2014, we completed an amendment to the Senior Secured Credit Facility of our subsidiary, Surgical Specialties Corporation (US), Inc. ("SSC"). The amendment provides for, among other things: (i) an increase in our incremental borrowing capacity from $25 million to $60 million; (ii) an increase in the amount of restricted payments that SSC can make to its parent company, Angiotech; (iii) a reduction from 50% to 25% in the amount of excess cash flow that must be used to repay debt; and (iv) an increase in call protection from 101 for 12 months to 102 for 6 months and 101 for 6 months.
New Member of the Board of Directors: Earlier this year, Richard Packer joined our Board of Directors. Mr. Packer is currently the CEO at Zoll Medical Corporation, a leader in medical products for defibrillation and monitoring, circulation and CPR feedback, data management, fluid resuscitation, and therapeutic temperature management. Mr. Packer joined Zoll in 1992 as the Vice President of Operations and has since held a number of senior executive positions at Zoll. Prior to 1992, he was Vice President of various functions at Whistler Corporation, a consumer electronics company.
Certainty on Cook Royalty Obligation on Sales of the Zilver PTX Drug Eluting Peripheral Stent: On December 12, 2013 we entered into an agreement with Cook Incorporated, licensor of certain patents that brings certainty to the term of Cook's royalty obligation to Angiotech irrespective of patent life. The agreement obligates Cook to pay 10% on US sales through the end of 2017, 4.5% on US sales 2018 through 2020, and 8% on EU sales through the end of 2017.
Expansion of Product Portfolio: Through the fall of 2013 we completed significant needle development and suture line extension projects, resulting in the launch of new SSC Surgical Suture and SSC Animal Health Suture products, a Quill Animal Health product line, additional new Quill product codes for human use (making our barbed wound closure device portfolio the most robust barbed device portfolio on the market), and new "300 series" needles (demonstrating improved strength, flexibility and tissue penetration characteristics) for sale to our OEM customers. Testing conducted to date indicates that the new SSC needles perform comparable to or better than, competitive needle offerings.
Transfer of US Manufacturing to Low Cost Environment: In February 2014, we announced our decision to transition manufacturing from our Reading, PA and Aguadilla, PR manufacturing plants to a new manufacturing facility in Tijuana, Mexico. The closure of these facilities is estimated to be complete by the end of 2015. The move to Tijuana is expected to allow us to operate more efficiently and cost effectively in one consolidated manufacturing site, position the company more competitively in the markets it serves, and improve our opportunities to grow and expand.
- Product revenue for the year ended December 31, 2013 was $128.8 million, an increase of 5% from $123.1 million recorded in 2012. The year-over-year improvement in sales was primarily driven by strong demand for our core suture lines and our microsurgical knives in the US and Asia and continued growth in the overall sales of our various knotless suture product lines.
- Product revenue for Q4 2013 was $30.2 million, down 6% from $32.1 million in Q4 2012. Quarter-over-quarter results were impacted primarily by buying patterns of certain of our OEM and private label customers, including Ethicon, our sole private label customer for our knotless suture product lines, and competitive pressure in the U.S. for direct sales of Quill.
- While our direct sales of Quill in the U.S. declined during the year, coincident with Ethicon's product launch, they have subsequently stabilized and have begun to again show growth. In addition, our Quill sales in Asia continue to grow and almost doubled year-over-year.
- Importantly, even with the lower average selling price we receive on our private label sales of knotless suture products to our partner Ethicon, when combined with our own direct sales of Quill, our total revenues from knotless suture technology continued to exhibit growth consistent with previous years, up 9% in 2013 as compared to 2012.
- In addition, our sales force reorganization activities began to yield benefits for our overall wound closure product lines in 2013. Specifically, our 2013 sales of our non-Quill suture product lines for both Q4 and the full year grew 6% as compared to the same periods of 2012. In the hands of our direct sales team, micro suture product revenues grew 13% quarter-over-quarter and 10% year-over-year.
- Royalty revenue for 2013 was $5.5 million, down 64% from $15.1 million recorded in 2012. Royalty revenue for Q4 2013 was $1.6 million, down 47% from $3.0 million in Q4 2012. The vast majority of the decline was due to lower royalties revenues on sales by Boston Scientific Corporation of TAXUS® drug-eluting stents. Compared to 2013, royalties were also down in both Q4 and the year in 2013 compared to last year due to a reversal of royalties earned in prior periods from Cook associated with their voluntary recall of Zilver PTX drug-eluting stents in April 2013. Since the recall, royalty revenues from Cook in the most recent quarter were up 17%.
- Adjusted EBITDA for the year ended December 31, 2013 was $36.7 million, a reduction of 19% from $45.1 million (pro forma for the sale of our interventional products business) recorded in 2012, consisting of an increase of $2.3 million from Adjusted EBITDA of $31.4 million for SSC in 2012, offset by a decline of $10.7 million from Adjusted EBITDA of $13.7 million for our Royalty business in 2012.
- Adjusted EBITDA for Q4 2013 was $6.9 million, down 41% from $11.7 million in Q4 2012. Compared to the same quarter last year, Q4 2013 Adjusted EBITDA for SSC of $7.3 million declined by $1.0 million and Q4 2013 Adjusted EBITDA for our Royalty business of ($0.4) million declined by $3.8 million.
- Lower royalty revenues negatively impacted Adjusted EBITDA for both the full year and Q4 of 2013, and for the year more than offset the strong performance of our SSC business. The lower margins we receive on private label sales of knotless suture products to Ethicon also impacted SSC's 2013 annual and Q4 Adjusted EBITDA.
- As of December 31, 2013, ANPI held $17.3 million of unrestricted cash & cash equivalents, of which $13.4 million was held by SSC, and $107.3 million of its floating rate notes were outstanding.
Certain financial measures in this press release are prepared in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). In addition, we have presented adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), which is a non-GAAP financial metric that excludes certain non-cash and non-recurring items. Management uses Adjusted EBITDA to establish operational goals, and believes that this metric may assist investors in evaluating the results of our business and analyzing the underlying trends over time. In addition, our creditors may monitor this metric to measure compliance with certain financial covenants in our lending agreements, or assess the operating and cash flow performance of our business. Investors should consider our non-GAAP Adjusted EBITDA in addition to, and not as a substitute for, or as superior to, financial metrics prepared in accordance with GAAP.
Amounts, unless specified otherwise, are expressed in U.S. dollars. Financial results are reported in accordance with U.S. GAAP unless otherwise noted.
Forward Looking Statements
Statements contained in this press release that are not based on historical fact, including without limitation statements containing the words "believes," "may," "plans," "will," "estimates," "continues," "anticipates," "intends," "expects" and similar expressions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and constitute "forward-looking information" within the meaning of applicable Canadian securities laws. All such statements are made pursuant to the "safe harbor" provisions of applicable securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives and priorities in 2014 and beyond, our strategies or future actions, our targets, expectations for our financial condition and the results of, or outlook for, our operations, research and development and product development. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Many such known risks, uncertainties and other factors are taken into account as part of our assumptions underlying these forward-looking statements and include, among others, the following: general economic and business conditions in the United States, Canada and the other regions in which we operate; market demand; competition; technological changes that could impact our existing products or our ability to develop and commercialize future products; governmental legislation and regulations and changes in, or the failure to comply with, governmental legislation and regulations; availability of financial reimbursement coverage from governmental and third-party payers for products and related treatments; adverse results or unexpected delays in pre-clinical and clinical product development processes; adverse findings related to the safety and/or efficacy of our products or products sold by our partners; decisions, and the timing of decisions, made by health regulatory agencies regarding approval of our technology and products; the requirement for funding to conduct research and development, to expand manufacturing and commercialization activities; and any other factors that may affect our performance. In addition, our business is subject to certain operating risks that may cause any results expressed or implied by the forward-looking statements in this press release to differ materially from our actual results. These operating risks include: our ability to successfully manufacture, market and sell our products; changes in our business strategy or development plans; our ability to attract and retain qualified personnel; our ability to successfully complete pre-clinical and clinical development of our products; our failure to obtain patent protection for discoveries; loss of patent protection resulting from third-party challenges to our patents; commercialization limitations imposed by patents owned or controlled by third parties; our ability to obtain rights to technology from licensors; liability for patent claims and other claims asserted against us; our ability to obtain and enforce timely patent and other intellectual property protection for our technology and products; the ability to enter into, and to maintain, corporate alliances relating to the development and commercialization of our technology and products; market acceptance of our technology and products; the availability of capital to finance our activities; our ability to service our debt obligations; and any other factors referenced in our other filings with the SEC.
Given these uncertainties, assumptions and risk factors, investors are cautioned not to place undue reliance on such forward-looking statements. Except as required by law, we disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained in this press release to reflect future results, events or developments.
©2013 Angiotech Pharmaceuticals, Inc. All Rights Reserved.
Angiotech is a medical device business operating in the United States, the United Kingdom and Puerto Rico that develops, manufactures and markets medical device products and technologies, primarily in the areas of suture, surgical needle technologies and micro-surgical blades, through its subsidiary, Surgical Specialties Corporation (US), Inc. Key product lines include wound closure products such as the Quill™ knotless tissue closure device, Surgical Specialties Surgical Suture, and Look™ brand sutures, Sharpoint and Surgical Specialties Microsurgical Knives brand of microsurgical knives. Angiotech also manufactures components and private label suture and microsurgical knives for other third party medical device manufacturers. For additional information about Angiotech, please visit our website at www.surgicalspecialties.com.
SOURCE Angiotech Pharmaceuticals, Inc.