OSI Pharmaceuticals, Inc. (NASDAQ: OSIP) announced today its
financial results for the Company�s second quarter ended June 30,
2009. The Company reported total revenues from continuing
operations of $99 million for the second quarter of 2009 compared
to revenues of $96 million for the second quarter of 2008. Total
worldwide net sales of Tarceva for the three and six months ended
June 30, 2009, as reported to the Company by its collaborator
Roche, were approximately $290 million and $569 million,
respectively.
The Company reported net income from continuing operations of
$16.5 million (or $0.28 per share) for the three months ended June
30, 2009, compared to $34.2 million (or $0.59 per share) for the
three months ended June 30, 2008. 2009 is the first year of
financial reporting in which OSI has shown a full tax provision on
its earnings. Adjusting for non-cash tax expense (to reflect OSI�s
actual cash tax rate of approximately 3%), expense related to
equity-based compensation, non-cash interest expense related to the
adoption of FSP APB 14-1 and certain other items detailed in the
attached reconciliation of GAAP to non-GAAP financial measures, the
Company reported non-GAAP earnings per share from continuing
operations of $0.58 and $0.69 for the three months ended June 30,
2009 and 2008, respectively.
Total revenues from continuing operations for the second quarter
of 2009 are comprised of the following key items:
- Tarceva Related Revenues of $85
million for the second quarter of 2009 compared to $88 million in
the second quarter of 2008, based primarily on the following:
- Net revenues from the
unconsolidated joint business for Tarceva of $49 million for the
second quarter of 2009, compared to $52 million in the second
quarter of 2008, arising from the Company's co-promotion
arrangement with Genentech, a wholly-owned member of the Roche
Group. The net revenues are based on total U.S. Tarceva sales of
$113 million for the second quarter of 2009, compared to $119
million in the second quarter of 2008. Sales for the three months
ended June 30, 2009 were negatively impacted by an allowance taken
for rebates related to the U.S. Department of Defense�s TRICARE
Retail Pharmacy Program. These rebates result from the
implementation of a final rule concerning mandatory rebate
obligations for the TRICARE Retail Pharmacy Program. The final rule
is being challenged by a coalition of companies, including
pharmaceutical companies, in a pending litigation. Genentech
recorded an allowance of $7.4 million for such rebates in the three
months ended June 30, 2009, of which $6.3 million represents a
retroactive rebate assessment for sales made during 2008 and the
three months ended March 31, 2009 and the remainder represents
rebates recorded during the second quarter.
- Royalties on product licenses of
$36 million for the second quarter of 2009 compared to $35 million
in the second quarter of 2008 from Roche for sales of Tarceva. The
royalty revenues are based on total rest of world sales of $177
million for the second quarter of 2009 which increased 3%, compared
to the $173 million reported in the second quarter of 2008.
- Other Revenues of $14 million
for the second quarter of 2009 compared to $8 million in the second
quarter of 2008, primarily based upon royalties related to
worldwide non-exclusive licensing agreements under the Company's
DP-IV patent portfolio covering the use of DP-IV inhibitors for
treatment of type 2 diabetes.
Operating
Expenses
Operating expenses from continuing operations for the second
quarter of 2009 were $65 million compared to $56 million for the
same period last year, with the increase primarily driven by an
increase in research and development expenses related to the
advancement of our clinical pipeline. Research and development
expenses for the second quarter of 2009 were $37 million compared
to $30 million for the same period last year. Selling, general and
administrative expenses for the second quarter of 2009 were $25
million compared to $23 million for the same period last year.
Taxes and Interest
Expense
Beginning in 2009, the Company is required to report its tax
provision at its full effective tax rate, which is estimated at
approximately 39%. However, the Company expects to continue paying
taxes at the lower alternative minimum tax rates as it continues to
utilize its net operating loss carryforwards (NOL�s). The results
also reflect the retrospective adoption of FSP APB 14-1,
�Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial Cash Settlement),�
resulting in higher interest expense reported in both 2009 and
2008.
Net Income Including
Discontinued Operations
The Company's net income including results from discontinued
operations was $16.5 million (or $0.28 per share) for the second
quarter of 2009 compared with a net income of $22.2 million (or
$0.39 per share) for the same period last year.
Use of Non-GAAP Financial
Measures
The accompanying tables contain both GAAP and non-GAAP financial
measures for the periods presented. The non-GAAP measures include
adjusted net income from continuing operations and adjusted
earnings per share from continuing operations, each of which has
directly comparable GAAP equivalents. OSI has provided these
non-GAAP financial measures to adjust for the impact of (i) expense
related to equity-based compensation, (ii) imputed interest expense
related to the application of FASB Staff Position APB 14-1
�Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial Cash Settlement),� (iii)
amortization of acquired intangible assets and (iv) non-cash tax
expense to adjust OSI�s effective tax rate of approximately 39% to
reflect its actual cash tax rate of approximately 3%. These items
have been adjusted because they are either non-cash, non-recurring
or not otherwise considered to be core to OSI�s business.
Management uses these non-GAAP financial measures internally to
evaluate the performance of the business, including the allocation
of resources as well as the planning and forecasting of future
periods and believes that these results are useful to others in
analyzing the core operating performance and trends of OSI for the
periods presented. Non-GAAP financial measures are not prepared in
accordance with GAAP and therefore are not necessarily comparable
to the financial results of other companies. These non-GAAP
measures should be considered as a supplement to, not a substitute
for, or superior to, the corresponding financial measures
calculated in accordance with GAAP.
Conference Call
OSI will host a conference call reviewing the Company's
financial results, product portfolio and business developments on
July 22, 2009 at 5:00PM (Eastern Time). To access the live webcast
or the archive via the Internet, log on to www.osip.com. Please
connect to the Company's website at least 15 minutes prior to the
conference call to ensure adequate time for any software download
that may be needed to access the webcast. Alternatively, please
call 1-888-337-8199 (U.S.) or 1-719-325-2297 (international) to
listen to the call. The conference ID number for the live call is
2944263. Telephone replay is available approximately two hours
after the call. To access the replay, please call 1-888-203-1112
(U.S.) or 1-719-457-0820 (international). The conference ID number
is 2944263.
About OSI
Pharmaceuticals
OSI Pharmaceuticals is committed to "shaping medicine and
changing lives" by discovering, developing and commercializing
high-quality, novel and differentiated targeted medicines designed
to extend life and improve the quality of life for patients with
cancer and diabetes/obesity. For additional information about OSI,
please visit http://www.osip.com.
This news release contains forward-looking statements. These
statements are subject to known and unknown risks and uncertainties
that may cause actual future experience and results to differ
materially from the statements made. Factors that might cause such
a difference include, among others, OSI's and its collaborators'
abilities to effectively market and sell Tarceva and to expand the
approved indications for Tarceva, OSI�s ability to protect its
intellectual property rights, safety concerns regarding Tarceva,
competition to Tarceva and OSI�s drug candidates from other
biotechnology and pharmaceutical companies, the completion of
clinical trials, the effects of FDA and other governmental
regulation, including pricing controls, OSI's ability to
successfully develop and commercialize drug candidates, and other
factors described in OSI Pharmaceuticals' filings with the
Securities and Exchange Commission.
� � � � OSI Pharmaceuticals, Inc. and Subsidiaries Selected
Financial Information Consolidated Statements of Operations
Three Months Ended June 30, Six Months Ended June 30,
(In thousands, except per share data)
2009 2008*
2009 2008* Unaudited
Unaudited Unaudited
Unaudited Revenues: Tarceva-related revenues $
85,323 $ 87,940 $ 169,179 $ 170,298 Other revenues � 13,743 � �
7,714 � � 23,564 � � 16,091 � Total revenues � 99,066 � � 95,654 �
� 192,743 � � 186,389 � Operating expenses: Cost of goods sold
2,659 2,061 4,853 4,231 Research and development 37,147 30,406
72,583 60,955 Selling, general and administrative 25,187 23,192
49,388 47,723 Amortization of intangibles � 236 � � 636 � � 464 � �
1,238 � Total operating expenses � 65,229 � � 56,295 � � 127,288 �
� 114,147 � � Income from continuing operations 33,837 39,359
65,455 72,242 � Other income (expense): Investment income - net
1,957 2,960 4,171 6,694 Interest expense (6,392 ) (6,189 ) (12,785
) (12,494 ) Other income (expense) - net � (2,338 ) � (1,006 ) �
(2,722 ) � (1,906 ) � Income from continuing operations before
income taxes 27,064 35,124 54,119 64,536 Income tax provision �
10,556 � � 958 � � 21,107 � � 1,774 � Net income from continuing
operations 16,508 34,166 33,012 62,762 Income (loss) from
discontinued operations � 23 � � (11,919 ) � (81 ) � (14,345 ) Net
income $ 16,531 � $ 22,247 � $ 32,931 � $ 48,417 � � Basic and
diluted income (loss) per common share: Basic income (loss)
Continuing operations $ 0.29 $ 0.60 $ 0.57 $ 1.10 Discontinued
operations 0.00 (0.21 ) (0.00 ) (0.25 ) Net income $ 0.29 $ 0.39 $
0.57 $ 0.85 Diluted income (loss) Continuing operations $ 0.28 $
0.59 $ 0.56 $ 1.08 Discontinued operations 0.00 (0.20 ) (0.00 )
(0.24 ) Net income $ 0.28 $ 0.39 $ 0.56 $ 0.85 � Weighted average
shares of common stock outstanding: Basic shares 57,906 57,083
57,862 57,107 Diluted shares 60,333 59,932 60,481 60,340 �
Computation of diluted income per share from continuing operations:
� Net income from continuing operations $ 16,508 $ 34,166 $ 33,012
$ 62,762 Add: Interest and issuance costs related to dilutive
convertible debt � 495 � � 1,186 � � 991 � � 2,647 � Net income
from continuing operations - diluted $ 17,003 � $ 35,352 � $ 34,003
� $ 65,409 � � Basic shares 57,906 57,083 57,862 57,107 Dilutive
effect of options and restricted stock 429 554 621 618 Dilutive
effect of the 2023 Notes 1,998 2,295 1,998 2,615
Dilutive effect of the 2025
Notes
-
-
-
-
Dilutive effect of the 2038 Notes � - � � - � � - � � - � Diluted
shares � 60,333 � � 59,932 � � 60,481 � � 60,340 � � � �
June
30, December 31, 2009
2008 Unaudited Cash and
investments securities (including restricted investments) $ 556,091
� $ 515,511 � * The three and six months ended June 30, 2008 have
been restated to reflect the adoption of FSP APB 14-1. � � � OSI
Pharmaceuticals, Inc. and Subsidiaries Reconciliation From Reported
Net Income from Continuing Operations to Non-GAAP Net Income from
Continuing Operations and Reported Dilutive Income Per Share to
Non-GAAP Diluted Income Per Share Unaudited (In thousands, except
per share data) � � �
Three Months Ended June
30, Six Months Ended June 30,
2009 �
2008 2009 2008 � Reported
diluted income per common share from continuing operations $ 0.28 $
0.59 $ 0.56 $ 1.08 Adjustments per common share � 0.30 � � 0.10 � �
0.60 � � 0.21 � Non-GAAP diluted income per common share from
continuing operations $ 0.58 � $ 0.69 � $ 1.17 � $ 1.30 � � Net
income from continuing operations $ 16,508 $ 34,166 $ 33,012 $
62,762 Non-GAAP Adjustments: Equity-based compensation 6,296 4,373
12,479 9,845 Imputed interest related to the application of FSP APB
14-1 3,448 3,051 6,896 6,118 Amortization of acquired intangibles
236 636 464 1,238 Non cash tax expense 9,852 - 19,700 - Income tax
effect on adjustments � (259 ) � (223 ) � (516 ) � (476 ) Non-GAAP
net income from continuing operations $ 36,081 � $ 42,003 � $
72,035 � $ 79,487 � � Computation of Non-GAAP diluted income per
common share from continuing operations: Non-GAAP net income from
continuing operations $ 36,081 $ 42,003 $ 72,035 $ 79,487 Add:
Interest and issuance costs related to dilutive convertible debt �
1,490 � � 3,618 � � 2,979 � � 7,319 � Non-GAAP net income from
continuing operations - diluted $ 37,571 � $ 45,621 � $ 75,014 � $
86,806 � � Computation of Non-GAAP diluted shares: Basic shares
57,906 57,083 57,862 57,107 Adjustment to dilutive shares: Dilutive
effect of options and restricted stock 429 554 621 618 Dilutive
effect of the 2023 Notes 1,998 2,295 1,998 2,615 Dilutive effect of
the 2025 Notes 3,908 3,908 3,908 3,908 Dilutive effect of the 2038
Notes � - � � 2,709 � � - � � 2,601 � Non-GAAP dilutive shares �
64,241 � � 66,549 � � 64,389 � � 66,849 �
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