SVNTE Savient Pharmaceuticals (MM)

Restatement Positively Affects Revenues and Earnings in 2004; Expected to Positively Affect Revenues and Earnings in First Half of 2005 Savient Pharmaceuticals, Inc. (NASDAQ: SVNTE), an emerging specialty pharmaceuticals company focused on developing, manufacturing and marketing novel therapeutic products for unmet medical needs, announced today that it has completed and filed with the U.S. Securities and Exchange Commission an amendment to its Annual Report on Form 10-K for the year ended December 31, 2004, including 2003, 2002 and 2001 prior period restatements. As previously announced, the amended Form 10-K filing restates the Company's financial statements due primarily to errors made in recording the Company's reserves for product returns and inventory related to sales of the Company's products. The amendment also includes certain restatements and adjustments to rebate allowances related to contracts with Medicaid and other government agencies and a correction of the Company's accounting for negative goodwill in connection with the 2001 acquisition of Myelos Corporation. Savient expects to file an amendment to its Form 10-Q for the period ended March 31, 2005, and its initial Forms 10-Q for the periods ended June 30, 2005 and September 30, 2005 by January 26, 2006. Today's restatements positively affect Savient's revenues and earnings in 2004 and next week's planned restatement is expected to positively affect Savient's revenues and earnings for the first half of 2005. "We are pleased to have filed our Form 10-K amendment and look forward to announcing our quarterly and year-end results," said Christopher Clement, President and Chief Executive Officer of Savient. "Despite the extraordinary efforts directed toward completing this restatement of our prior period financial statements, we continue to successfully drive Savient's business forward and believe that the fundamentals of the Company remain strong. We remain focused on advancing our pipeline and expanding our product portfolio as we continue to provide physicians and patients with effective and unique therapeutic alternatives." Effect of Today's Restatement The impact of restatements on revenue and net income (loss) is summarized as follows: -0- *T Year Ended December 31, ------------------------------------------------------------ 2002 2002 2003 2003 2004 2004 (Reported)(Restated)(Reported)(Restated)(Reported)(Restated) ------------------------------------------------------------ (in thousands except per share data) Revenue, net $102,966 $101,752 $132,525 $131,450 $113,275 $123,895 --------- --------- --------- --------- --------- --------- Net income (loss) $9,717 $8,679 $13,922 $12,454 $(35,272) $(27,515) ========= ========= ========= ========= ========= ========= Earnings (loss) per share: Basic: Net income (loss) $0.17 $0.15 $0.24 $0.21 $(0.59) $(0.46) ========= ========= ========= ========= ========= ========= Diluted: Net income (loss) $0.17 $0.15 $0.23 $0.21 $(0.59) $(0.46) ========= ========= ========= ========= ========= ========= *T Nasdaq Update As announced on January 13, Savient requested that the Nasdaq Listing Qualifications Panel ("the Panel") extend until today the date by which the Company must file its amended Form 10-K in order to continue listing of the Company's securities on The Nasdaq Stock Market. The Company also requested that the Panel extend until January 26, 2006 the date by which Savient must file the amendment to its March 31, 2005 Form 10-Q and its initial Forms 10-Q for the periods ended June 30, 2005 and September 30, 2005. As of this time there has been no decision made by the Panel with respect to the Company's request. Mr. Clement concluded, "With the 2002, 2003 and 2004 restatements completed and the expected filings of our amended 10-Q for the first quarter of 2005 and initial Forms 10-Q for the second and third quarters of 2005, we hope for a speedy determination of compliance by the Nasdaq Panel. If the Panel grants the extension we have requested, Savient's securities will continue trading on The Nasdaq Stock Market. We appreciate the support and patience of our shareholders during this difficult time and as we move forward we continue to improve our financial systems and personnel to ensure accurate and timely financial reporting." If the Panel denies Savient's request for an extension, the Company expects that its securities would be delisted from The Nasdaq Stock Market. Reasons for the Restatement The restatements are primarily the result of errors made in connection with estimating product return and inventory reserves related to sales of the Company's Oxandrin(R) and Delatestryl(R) products. It was determined that an error had occurred in the prior financial periods. The Company conducted an internal review and investigation of the facts and circumstances that contributed to the errors and determined that there was no evidence of fraud or internal misconduct on the part of any Savient employee with respect to these errors. The Company's Audit Committee also engaged outside consultants to conduct an independent evaluation which confirmed these findings. Historically, the Company has had minimal returns related to its products. During 2004, the Company began receiving actual returns of Oxandrin that were at or near expiration. At that time, the Company determined that an adjustment would be required to accrue for future returns. This return reserve adjustment was based, in part, on notifications received from customers advising the Company, through its third-party fulfillment center, of their intent to return product. The Company subsequently determined that certain of those reported returns were in error in that actual units of product returned were significantly less than the amounts originally expected to be returned. The Company further determined that in recording its reserves for product returns and inventory, it had failed to promptly evaluate the data and the resulting impact on such reserves. In connection with this review and restatement, Savient identified a number of other restatement items: -- The Company has restated its rebate allowances related to contracts with Medicaid and other government agencies. It was determined that the actual historical rebate activity that was available during each period of restatement was not being utilized in an effective manner as a basis for forecasting future rebate trends. Based upon the historical trends, the Company has determined that Medicaid rebates were generally under accrued and rebates related to other government agencies were generally over accrued. These adjustments are reflected in the restated rebate allowance accounts. Going forward, the Company will monitor rebate activity trends including actual rebate vouchers received, timing of rebate voucher receipt, and corresponding rebate vouchers to sale origination periods. -- The Company has restated its accounting for its 2001 acquisition of Myelos Corporation. Savient had previously recorded negative goodwill in connection with the acquisition. It has been determined that the negative goodwill should have been allocated on a pro rata basis to non-current assets. The primary change in 2001 eliminates all negative goodwill and reduces Savient's in-process research and development expense. -- The Company's restated consolidated financial statements include the tax impact related to all restatement items, the resolution of an IRS tax audit and an accrual for an ongoing Sales and Use tax audit with the State of New Jersey. This impact is carried through 2004 which effectively decreased deferred tax assets and the related valuation allowance. -- The Company has restated commissions and royalty expense during 2004 to correct an expense over accrual. -- The Company also restated its presentation of net assets of the global biologics manufacturing business at December 31, 2004. About Savient Pharmaceuticals, Inc. Based in East Brunswick, New Jersey, Savient Pharmaceuticals, Inc., is an emerging specialty pharmaceuticals company, is engaged in developing, manufacturing, and marketing pharmaceutical products that address unmet medical needs in both niche and broader markets. The Company's lead product development candidate, Puricase(R), for the treatment of refractory gout has reported positive Phase 1 and 2 clinical data. Savient's experienced management team is committed to advancing its pipeline and expanding its product portfolio by in-licensing late stage compounds and exploring co-promotion and co-development opportunities that fit the Company's expertise in specialty pharmaceuticals and initial focus in rheumatology. Savient markets its product Oxandrin(R) (oxandrolone, USP) in the United States. The Company's subsidiary, Rosemont Pharmaceuticals Limited, develops, manufactures, and markets through its own sales force oral liquid formulations of prescription products for the UK pharmaceutical market. Rosemont's product portfolio includes over 90 liquid formulations primarily targeting the geriatric population. Savient's product Mircette(R), an oral contraceptive, is marketed by its licensee, Duramed Pharmaceuticals, Inc. Puricase is a registered trademark of Mountain View Pharmaceuticals, Inc. Further information on the Company can be accessed by visiting www.savientpharma.com. Safe Harbor Statement This news release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this report regarding the Company's strategy, expected future financial position, discovery and development of products, strategic alliances, competitive position, plans and objectives of management are forward-looking statements. Words such as "anticipate," "believe," "estimate," "expect," "intend," "plan," "will" and other similar expressions help identify forward-looking statements, although not all forward-looking statements contain these identifying words. In particular, the statements regarding the possible continued listing of the Company's common stock on The Nasdaq Stock Market, the timing of the filing of the Company's amended Quarterly Report on Form 10-Q for the period ended March 31, 2005 and initial Quarterly Reports on Form 10-Q for the periods ended June 30, 2005 and September 30, 2005 are forward-looking statements. These forward-looking statements involve substantial risks and uncertainties and are based on current expectations, assumptions, estimates and projections about the Company's business and the biopharmaceutical and specialty pharmaceutical industries in which the Company operates. Such risks and uncertainties include, but are not limited to, delay or failure in developing Prosaptide, Puricase and other product candidates; difficulties of expanding the Company's product portfolio through in-licensing; introduction of generic competition for Oxandrin; fluctuations in buying patterns of wholesalers; potential future returns of Oxandrin or other products; our continuing to incur substantial net losses for the foreseeable future; difficulties in obtaining financing; potential development of alternative technologies or more effective products by competitors; reliance on third-parties to manufacture, market and distribute many of the Company's products; economic, political and other risks associated with foreign operations; risks of maintaining protection for the Company's intellectual property; risks of an adverse determination in on-going or future intellectual property litigation; and risks associated with stringent government regulation of the biopharmaceutical and specialty pharmaceutical industries. The Company may not actually achieve the plans, intentions or expectations disclosed in its forward-looking statements, and you should not place undue reliance on the Company's forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that the Company makes. The Company's forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments that the Company may make. The Company does not assume any obligation to update any forward-looking statements.