Bentley Pharmaceuticals Reports Second Quarter 2006 Results; Diluted EPS Totaled $0.12; Revenues Grew 17% to a Record $29.0 Million

Bentley Pharmaceuticals, Inc. (NYSE: BNT), a specialtypharmaceutical company, today announced financial results for thesecond quarter and six months ended June 30, 2006. Bentley continuedto experience solid revenue growth fueled by an increase in non-U.S.licensing and manufacturing agreements and increased royalty revenuesfrom sales of Testim(R), the first marketed product containing CPE215(R), Bentley's proprietary drug delivery technology. Bentley alsocontinued its commitment to its drug delivery programs, specificallyits intranasal insulin program, with a 55% increase in investment inits research and development programs when compared to the secondquarter of the prior year. Foreign currency exchange rate fluctuationsdid not have a significant impact on Bentley's financial results inthe second quarter of 2006. Bentley's results by operating segment areas follows:
For the three months ended June 30:

(in thousands) 2006
--------------------------------
Specialty Drug
Generics Delivery Consolidated
--------------------------------
Revenues $26,622 $2,361 $28,983
Cost of net product sales 12,471 - 12,471
--------- --------- ------------
Gross profit 14,151 2,361 16,512
Operating expenses 7,425 4,155 11,580
--------- --------- ------------
Income (loss) from operations 6,726 (1,794) 4,932
Other income (expenses), net 11 176 187
--------- --------- ------------
Income (loss) before income taxes 6,737 (1,618) 5,119
Provision for income taxes 2,484 - 2,484
--------- --------- ------------
Net income (loss) $4,253 $(1,618) $2,635
========= ========= ============


(in thousands) 2005
--------------------------------
Specialty Drug
Generics Delivery Consolidated
--------------------------------
Revenues $23,508 $1,256 $24,764
Cost of net product sales 11,367 - 11,367
--------- --------- ------------
Gross profit 12,141 1,256 13,397
Operating expenses 7,392 2,016 9,408
--------- --------- ------------
Income (loss) from operations 4,749 (760) 3,989
Other income (expenses), net (13) 186 173
--------- --------- ------------
Income (loss) before income taxes 4,736 (574) 4,162
Provision for income taxes 1,554 - 1,554
--------- --------- ------------
Net income (loss) $3,182 $(574) $2,608
========= ========= ============

For the six months ended June 30:

(in thousands) 2006
--------------------------------
Specialty Drug
Generics Delivery Consolidated
--------------------------------
Revenues $53,266 $3,995 $57,261
Cost of net product sales 25,404 - 25,404
--------- --------- ------------
Gross profit 27,862 3,995 31,857
Operating expenses 14,713 8,858 23,571
--------- --------- ------------
Income (loss) from operations 13,149 (4,863) 8,286
Other income (expenses), net (3) 383 380
--------- --------- ------------
Income (loss) before income taxes 13,146 (4,480) 8,666
Provision for income taxes 4,877 - 4,877
--------- --------- ------------
Net income (loss) $8,269 $(4,480) $3,789
========= ========= ============


(in thousands) 2005
--------------------------------
Specialty Drug
Generics Delivery Consolidated
--------------------------------
Revenues $46,882 $2,126 $49,008
Cost of net product sales 22,819 - 22,819
--------- --------- ------------
Gross profit 24,063 2,126 26,189
Operating expenses 14,706 3,847 18,553
--------- --------- ------------
Income (loss) from operations 9,357 (1,721) 7,636
Other income (expenses), net (42) 328 286
--------- --------- ------------
Income (loss) before income taxes 9,315 (1,393) 7,922
Provision for income taxes 3,144 - 3,144
--------- --------- ------------
Net income (loss) $6,171 $(1,393) $4,778
========= ========= ============

Key second quarter results include:

Specialty Generics Business

-- Revenues from Bentley's specialty generics business rose 13% to $26.6 million in the second quarter of 2006 from $23.5 million in the second quarter of 2005, primarily from increased net product sales under licensing and manufacturing agreements;

-- Net product sales to customers under licensing and manufacturing agreements increased 24% to a record $10.1 million compared to $8.1 million in the second quarter of the prior year; and

-- Operating income from sales of specialty generics increased to $6.7 million from $4.7 million as a result of increased net product sales and a non-recurring $460,000 benefit to cost of sales and gross profit as a result of a lower than expected Spanish pharmaceutical tax, combined with an increase in operating expenses of less than 1%.

Drug Delivery Business

-- Licensing and collaboration revenues, driven by increased U.S. royalties on growing sales of Testim, increased 88% to $2.4 million in the second quarter of 2006 compared to $1.3 million in the second quarter of 2005. This increase was driven by increased royalties from the sales of Testim and a one-time benefit of $398,000 from the recognition of previously deferred royalties as a result of a change in the method the Company uses to recognize royalty revenues from sales of Testim. Bentley adopted a methodology in the second quarter of 2006 that provides a reasonable basis for estimating future product returns on Testim sales, enabling it to begin recognizing royalty revenues based on product shipments, rather than on prescriptions dispensed, as was the practice since Testim was launched in 2003; and

-- Although consolidated operating income increased 24% from $4.0 million to $4.9 million, operating losses generated by the drug delivery segment increased to $1.8 million from $760,000, primarily as a result of $1.1 million in increased investment in research and development programs and $1.0 million in increased general and administrative expenses, primarily resulting from higher legal costs, outside services to support the Company's growth, costs of additional employees and the recording of share-based compensation expense from the required adoption of a new accounting principle in January 2006, which was not required to be recorded in previous periods.

Consolidated

-- Consolidated revenues grew to almost $29.0 million in the second quarter of 2006, an increase of 17% compared to the second quarter of 2005;

-- Consolidated operating income increased to $4.9 million, a 24% increase compared to the second quarter of 2005; and

-- Net income of $2.6 million, or $0.12 per diluted share, equaled that of the second quarter of the prior year, while supporting accelerated spending for drug delivery product development.

John Sedor, President of Bentley, commented, "I am extremelypleased with the strength of our continued quarter to quarter growth,both in revenue and to our bottom line. We continue to look atincreasing market share through the expansion of our generics businessboth in and outside of Spain. In addition, our drug deliverydevelopment efforts are intensifying as we make plans to continueglobal Phase II clinical studies for intranasal insulin. We are nowoperating at a brisk but measured pace along the path we have set forthe Company. We are focused on delivering sustained profitability andgrowth in our generics business, building long-term value through thedevelopment of differentiated generics, and expanding the commercialapplications of our proprietary drug delivery technology."

As of June 30, 2006, Bentley's specialty generics segment hasexecuted 157 license agreements for product registrations, of which 19with customers in Spain and 81 with customers outside of Spain coveractively marketed products that are generating revenues. The remaininglicenses (one with a customer in Spain, three with customers inIreland and 53 with customers outside of Spain and Ireland) are forproducts that are awaiting regulatory approvals. Additionally, theCompany has 16 contract manufacturing agreements in effect in Spainand six contract manufacturing agreements in effect for internationalcustomers.

Operating expenses increased 23% in the second quarter to $11.6million, primarily as a result of increases in general andadministrative expenses and the Company's continued focus on theadvancement of its research and development programs. The increase ingeneral and administrative expenses is primarily attributable toincreases in legal costs incurred to defend against legal actionsbrought by Ethypharm, as well as an increase in general businessexpenses required to support the Company's growth and new share-basedcompensation expense related to equity awards which was not requiredto be recorded by the Company in the comparable period of the prioryear. The increase in research and development costs is primarilyattributable to the advancement of the Company's program for theintranasal delivery of insulin and the development of genericpharmaceutical products for the U.S. and other markets.

Consolidated revenues increased by $8.3 million, or 17% (20% inconstant currency), in the first six months of 2006 to $57.3 millionfrom $49.0 million in the first half of 2005. Revenues were driven bya $6.3 million increase in the Company's pharmaceutical product salesand a $1.9 million increase in licensing and collaboration revenues,primarily from increased royalty revenues from sales of Testim.Operating income increased 9% to $8.3 million in the first half of2006 compared to $7.6 million in the first six months of 2005.However, net income for the first half of 2006 decreased 21% to $3.8million, or $0.16 per diluted share, from $4.8 million, or $0.21 perdiluted share, in the first half of the prior year. Increased domesticand Irish losses due to more investment in Bentley's research anddevelopment programs contributed to an increase in the effective taxrate, from 40% in the first half of 2005 to 56% in the first half of2006.

James R. Murphy, Chairman and CEO, remarked, "This year is apivotal one for us as we begin to implement our newly refined businessstrategy, and it is gratifying to see the results thus far. We havecarefully balanced our investment in research and development for thefirst intranasal application of our drug delivery technology withcontinued attention and focus on growth in our specialty generics toprovide a basis for near-term and long-term value for ourshareholders."

Significant components of Bentley's revenues for the secondquarter and first six months of 2006 and 2005 are summarized below:
For the three months ended June 30, 2006:

(in thousands) Revenues Within Spain
--------------------------
Revenues
Outside % of
Branded of Total
Product Line Generics Generics Other Spain Total Revenues
----------------------------------------------------------------------
Omeprazole $712 $4,310 $- $- $5,022 17%
Simvastatin 482 1,492 - - 1,974 7%
Enalapril 1,379 407 - - 1,786 6%
Paroxetine 398 799 - - 1,197 4%
Lansoprazole 665 211 - - 876 3%
All other products 2,478 2,609 171 270 5,528 19%
Sales to licensees and
others - - 4,285 5,789 10,074 35%
Licensing and
collaborations - - 166 2,360 2,526 9%
----------------------------------------------------------------------
Total Revenues $6,114 $9,828 $4,622 $8,419 $28,983 100%
======================================================================
% of Q-2 2006 Revenues 21% 34% 16% 29% 100%



For the three months ended June 30, 2005:

(in thousands) Revenues Within Spain
--------------------------
Revenues
Outside % of
Branded of Total
Product Line Generics Generics Other Spain Total Revenues
----------------------------------------------------------------------
Omeprazole $734 $4,134 $- $- $4,868 19%
Simvastatin 425 1,345 - - 1,770 7%
Enalapril 1,226 447 - - 1,673 7%
Paroxetine 353 812 - - 1,165 5%
Lansoprazole 486 126 - - 612 3%
All other products 2,400 2,294 73 439 5,206 21%
Sales to licensees and
others - - 3,563 4,576 8,139 33%
Licensing and
collaborations - - 75 1,256 1,331 5%
----------------------------------------------------------------------
Total Revenues $5,624 $9,158 $3,711 $6,271 $24,764 100%
======================================================================
% of Q-2 2005 Revenues 23% 37% 15% 25% 100%



For the six months ended June 30, 2006:

(in thousands) Revenues Within Spain
--------------------------
Revenues
Outside % of
Branded of Total
Product Line Generics Generics Other Spain Total Revenues
----------------------------------------------------------------------
Omeprazole $1,341 $8,693 $- $- $10,034 18%
----------------------------------------------------------------------
Simvastatin 926 2,963 - - 3,889 7%
----------------------------------------------------------------------
Enalapril 2,297 1,130 - - 3,427 6%
----------------------------------------------------------------------
Paroxetine 775 1,615 - - 2,390 4%
----------------------------------------------------------------------
Lansoprazole 1,325 452 - - 1,777 3%
----------------------------------------------------------------------
All other products 5,285 5,592 481 627 11,985 21%
----------------------------------------------------------------------
Sales to licensees
and others - - 6,911 12,614 19,525 34%
----------------------------------------------------------------------
Licensing and
collaborations - - 239 3,995 4,234 7%
----------------------------------------------------------------------
Total Revenues $11,949 $20,445 $7,631 $17,236 $57,261 100%
======================================================================
% of YTD 2006
Revenues 21% 36% 13% 30% 100%


For the six months ended June 30, 2005:

(in thousands) Revenues Within Spain
--------------------------
Revenues
Outside % of
Branded of Total
Product Line Generics Generics Other Spain Total Revenues
----------------------------------------------------------------------
Omeprazole $1,450 $8,254 $- $- $9,704 20%
----------------------------------------------------------------------
Simvastatin 873 2,585 - - 3,458 7%
----------------------------------------------------------------------
Enalapril 2,151 912 - - 3,063 6%
----------------------------------------------------------------------
Paroxetine 718 1,647 - - 2,365 5%
----------------------------------------------------------------------
Codeisan 1,997 - - - 1,997 4%
----------------------------------------------------------------------
All other products 4,886 5,059 185 1,015 11,145 23%
----------------------------------------------------------------------
Sales to licensees
and others - - 7,241 7,739 14,980 30%
----------------------------------------------------------------------
Licensing and
collaborations - - 170 2,126 2,296 5%
----------------------------------------------------------------------
Total Revenues $12,075 $18,457 $7,596 $10,880 $49,008 100%
======================================================================
% of YTD 2005
Revenues 25% 38% 15% 22% 100%

Management will host a conference call at 10:00 a.m. Eastern Timeon Thursday, August 3, 2006 to discuss the second quarter results andprovide a business update. To participate on the live call, pleasedial (888) 332-7254 from the U.S. and Canada or, for internationalcallers, please dial (973) 582-2856 (access code 7679196),approximately 10 minutes prior to the scheduled start time. Atelephone replay will be available for 30 days by dialing (877)519-4471 from the U.S. and Canada or (973) 341-3080 for internationalcallers (please reference reservation number 7679196). The conferencecall will also be broadcast live on the Internet and may be accessedvia Bentley's web site, www.bentleypharm.com. Please go to theCompany's web site approximately 10 minutes prior to the scheduledstart time to register. A replay of the conference will also beavailable on Bentley's web site for 30 days.

Bentley Pharmaceuticals, Inc. is a specialty pharmaceuticalcompany focused on advanced drug delivery technologies and genericpharmaceutical products. Bentley's proprietary drug technologiesenhance or facilitate the absorption of pharmaceutical compoundsacross various membranes. Bentley also manufactures a growingportfolio of generic and branded generic pharmaceuticals in Europe forthe treatment of cardiovascular, gastrointestinal, infectious andneurological diseases through its subsidiary, Laboratorios Belmac, andmarkets these pharmaceutical products through its subsidiaries,Laboratorios Belmac, Laboratorios Davur, Laboratorios Rimafar, andBentley Pharmaceuticals Ireland; and manufactures and markets activepharmaceutical ingredients through its subsidiary Bentley API.

Additional information regarding Bentley Pharmaceuticals may beobtained through Bentley's web site at www.bentleypharm.com.

Safe Harbor Statement under the Private Securities LitigationReform Act of 1995: This press release contains forward lookingstatements, including without limitation, statements regarding theprospects for growth of the specialty generics business in and outsideof Spain, Bentley's plans to increase spending on research anddevelopment in 2006, and the prospects for further clinicaldevelopment of Bentley's intranasal insulin program. Theseforward-looking statements are subject to a number of risks anduncertainties that could cause actual results to differ materiallyfrom future results expressed or implied by such statements. Factorsthat may cause such differences include, but are not limited to, risksassociated with the following: clinical trials, the timing and natureof regulatory approvals, changes in third-party reimbursement andgovernment mandates that impact pharmaceutical pricing, developmentand commercialization of Bentley's proprietary products andformulations, competition from other manufacturers of generic andproprietary pharmaceuticals, intellectual property litigation, theefficacy and safety of Bentley's products, the unpredictability ofpatent protection, international operations, and other uncertaintiesdetailed under "Risk Factors" in Bentley's most recent Annual Reporton Form 10-K and its other subsequent periodic reports filed with theSecurities and Exchange Commission. Bentley cautions investors not toplace undue reliance on the forward-looking statements contained inthis release. These statements speak only as of the date of thisdocument, and Bentley undertakes no obligation to update or revise thestatements, except as may be required by law.
Bentley Pharmaceuticals, Inc. and Subsidiaries
Consolidated Income Statements


For the Three For the Six
Months Ended Months Ended
June 30, June 30,
----------------- -----------------
(in thousands, except per share
data) 2006 2005 2006 2005
-------- -------- -------- --------
Revenues:
Net product sales $26,457 $23,433 $53,027 $46,712
Licensing and collaboration
revenues 2,526 1,331 4,234 2,296
-------- -------- -------- --------

Total revenues 28,983 24,764 57,261 49,008

Cost of net product sales 12,471 11,367 25,404 22,819
-------- -------- -------- --------

Gross profit 16,512 13,397 31,857 26,189

Operating expenses:
Selling and marketing 4,242 4,223 8,381 8,615
General and administrative 4,398 3,018 8,906 6,036
Research and development 2,495 1,608 5,403 2,959
Depreciation and amortization 445 559 881 943
-------- -------- -------- --------

Total operating expenses 11,580 9,408 23,571 18,553
-------- -------- -------- --------

Income from operations 4,932 3,989 8,286 7,636
-------- -------- -------- --------

Other income (expenses):
Interest income 185 211 438 372
Interest expense (34) (62) (94) (110)
Other, net 36 24 36 24
-------- -------- -------- --------

Income before income taxes 5,119 4,162 8,666 7,922

Provision for income taxes 2,484 1,554 4,877 3,144
-------- -------- -------- --------

Net income $ 2,635 $ 2,608 $ 3,789 $ 4,778
-======= ======== ======== ========

Net income per common share:
Basic $ 0.12 $ 0.12 $ 0.17 $ 0.22
======== ======== ======== ========
Diluted $ 0.12 $ 0.12 $ 0.16 $ 0.21
======== ======== ======== ========

Weighted average common shares
outstanding:
Basic 22,170 21,395 22,063 21,356
======== ======== ======== ========
Diluted 22,876 22,603 23,380 22,568
======== ======== ======== ========



Bentley Pharmaceuticals, Inc. and Subsidiaries
Consolidated Balance Sheets


(in thousands, except per share data) June 30, December 31,
2006 2005
------------- ------------
Assets
------

Current assets:
Cash and cash equivalents $23,961 $ 32,384
Marketable securities 3,001 462
Receivables, net 32,691 26,916
Inventories, net 15,032 12,147
Deferred taxes 1,280 1,099
Prepaid expenses and other 1,915 2,069
------------- ------------

Total current assets 77,880 75,077
------------- ------------

Non-current assets:
Fixed assets, net 40,673 33,366
Drug licenses and related costs, net 14,529 13,858
Restricted cash 1,000 1,000
Other 1,091 919
------------- ------------

Total non-current assets 57,293 49,143
------------- ------------
$135,173 $124,220
============= ============

Liabilities and Stockholders' Equity
------------------------------------

Current liabilities:
Accounts payable $17,000 $ 15,462
Accrued expenses 12,149 9,428
Short-term borrowings 1,309 2,608
Current portion of long-term debt 375 387
Deferred income 1,044 795
------------- ------------

Total current liabilities 31,877 28,680
------------- ------------

Non-current liabilities:
Deferred taxes 1,760 1,665
Deferred income 3,126 2,286
------------- ------------

Total non-current liabilities 4,886 3,951
------------- ------------

Commitments and contingencies

Stockholders' equity:
Preferred stock, $1.00 par value,
authorized 2,000 shares,
issued and outstanding, none -- --
Common stock, $0.02 par value,
authorized 100,000 shares,
issued and outstanding, 22,173 and
21,923 shares 443 438
Additional paid-in capital 138,737 139,381
Accumulated deficit (46,201 ) (49,990 )
Accumulated other comprehensive income 5,431 1,760
------------- ------------

Total stockholders' equity 98,410 91,589
------------- ------------
$135,173 $124,220
============= ============