Bentley Pharmaceuticals, Inc. (NYSE: BNT), a specialty pharmaceutical
company, today reported financial results for the third quarter and nine
months ended September 30, 2007.
Bentley’s total third quarter 2007 revenues
increased 9% to $27.3 million from $25.2 million in the third quarter of
2006. Bentley reported a net loss of $0.6 million, or $0.03 per share,
for the third quarter of 2007, compared with a net loss of $7.2 million,
or $0.33 per share, for the same period a year earlier. The Company
noted the $0.03 per share loss for the third quarter of 2007 included
$0.8 million, or approximately $0.04 per share, of professional fees
related to the planned spin-off of its drug delivery business. The
Company also noted that the third quarter of 2006 included $8.9 million
of litigation settlement charges and $0.6 million of executive
separation costs, which totaled approximately $0.43 per share.
Bentley’s specialty generics segment’s
revenue for the third quarter 2007 increased 5% to $24.3 million from
$23.0 million in the third quarter of 2006. Reduced selling prices on
the Company’s Spanish pharmaceutical products
following the implementation of price reductions by the Spanish
government on March 1, 2007 continue to affect revenues and gross
margins. Specialty generics revenue outside of Spain as a percentage of
total generics revenue increased to 26% for the third quarter 2007 from
22% reported in the third quarter of 2006. Specialty generics revenue
was approximately 3% lower than the comparable quarter of the prior year
when expressed in constant currency. Gross margins on net product sales
decreased to 40% in the third quarter of 2007 from 49% in the third
quarter of 2006. The decrease in gross margins primarily reflects the
impact of reduced pricing. In addition, the third quarter sales volumes
historically have been the lowest quarterly volumes of the year, and
lower volumes have resulted in relatively lower gross margins when
compared to other quarters of the year. Excluding $8.9 million of
litigation expenses recorded in the third quarter 2006 and the impact of
exchange rates, specialty generics operating expenses increased $0.1
million in the third quarter of 2007, or 1%, compared to third quarter
of 2006 largely due to changes in exchange rates. Net income reported
for specialty generics was $1.9 million for the third quarter 2007
compared to $3.4 million in the comparable quarter of 2006, excluding
$8.9 million of litigation settlement charges in 2006.
Drug delivery revenues in the third quarter of 2007 increased by 45%, or
$1.0 million, to $3.1 million compared to the third quarter of 2006 due
to increased royalties on sales of Testim®.
Research and development expenses increased 32% to $2.7 million in the
third quarter 2007 primarily related to Nasulin™,
Bentley’s intranasal insulin product
candidate. Net loss reported for the third quarter 2007 increased $0.8
million to $2.5 million from the comparable quarter of 2006. Excluding
the $0.6 million of executive severance costs in the third quarter of
2006 and $0.8 million of professional fees incurred in the third quarter
of 2007 related to the planned spin-off, the quarterly net loss
increased $0.5 million from the third quarter of 2006.
Spin-off of CPEX Pharmaceuticals "The Company initiated a strategic review late
last year which has led the Board of Directors to unanimously approve a
plan to separate the drug delivery business from Bentley’s
specialty generics business and to explore strategic alternatives for
the specialty generics business. The Board and management believe that
separating Bentley into two independent and highly focused companies at
this time will substantially enhance opportunities for both businesses
and create greater value than under the current structure,”
commented Bentley President John Sedor.
Bentley plans to spin-off the drug delivery business as an independent,
publicly traded company to be known as CPEX Pharmaceuticals, Inc. (CPEX
Pharmaceuticals). Bentley’s drug delivery
business segment reported revenues of $7.9 million through September 30,
2007. Bentley plans to implement the spin-off through a taxable stock
dividend of all CPEX Pharmaceuticals common stock to Bentley
shareholders. Bentley plans to seek a listing for CPEX Pharmaceuticals
on the
Nasdaq Capital Market under the ticker symbol "CPEX,”
and Bentley will continue to trade on the NYSE under its current ticker
symbol. Upon completion of the plan, Bentley will consist of the
specialty generics business.
Until CPEX Pharmaceuticals can fully establish its own operations,
Bentley will provide transitional services, including managerial,
operational and administrative support, for a period up to 24 months.
The key executive officer positions, as well as the Board of Directors,
of each of the companies will be named prior to the consummation of the
plan.
Bentley intends to pursue all options available for its two businesses
to seek the highest value for shareholders. However, the Company can
give no assurance that either a transaction involving the specialty
generics business or that the spin-off of the drug delivery business
will occur, or that Bentley’s business will
not be affected by the uncertainty arising from any potential
transaction. More information regarding CPEX Pharmaceuticals will be
included in a Form 10 registration statement to be filed with the SEC.
The Company’s current intention is to file
the Form 10 before the end of 2007. The Board does not intend to provide
any update with respect to its review of potential strategic
alternatives until it has approved a definitive course of action.
Comments on the Third Quarter "With the challenges facing the generics
industry, both our drug delivery and specialty generics businesses
performed well this quarter,” said Sedor. "In
drug delivery, we strengthened our IP portfolio and made good progress
in our Nasulin clinical trials. Following the broad U.S. patent
protection we received for our intranasal drug delivery technology in
July, the European Patent Office recently granted Bentley 20-year
protection for the use of testosterone and other androgen gels
incorporating our CPE-215®
drug delivery technology. Our U.S. Phase II Nasulin trials continue to
proceed on schedule, and the Phase II trials we recently commenced in
India are progressing toward an expected completion in early 2008.” "Looking beyond testosterone and insulin, we
continue to believe that our CPE-215 technology can provide therapeutic
and commercial advantages for the delivery of other complex molecules
that address a wide variety of metabolic, neurological and other serious
medical conditions,” Sedor said. "In
particular, intranasal drug delivery with CPE-215 promises to be highly
beneficial to patients who are resistant to treatments with injectable
pharmaceuticals. It also has the potential to create significant
opportunities for life-cycle extension of existing marketed products.” "In our specialty generics business, during
the third quarter we maintained our strong market position in Spain
while significantly increasing our sales in several other European
countries,” said Sedor. "Bentley
has weathered the effects of first quarter pricing reductions in the
Spanish market, posting modest increases in unit volume for the second
consecutive quarter. At the same time, we capitalized on growth in
demand for generic pharmaceuticals elsewhere in Europe, and revenues
outside of Spain increased 25% from the third quarter last year. In
addition, we recently reported that our subsidiaries in Spain had
received five product approvals, our subsidiary in Ireland received two
product approvals, and we obtained our first product approval in France.”
Sedor concluded by saying, "These
accomplishments have positioned us well, both in Spain and other major
European markets, for the fourth quarter and for continued growth in
2008.”
Bentley’s results by operating segment were
as follows:
(in thousands) For the Three Months Ended September 30, 2007
2006 Specialty Generics Drug Delivery
Consoli-dated Specialty Generics Drug Delivery
Consoli-dated Revenues
$
24,279
$
3,069
$
27,348
$
23,043
$
2,113
$
25,156
Cost of net product sales
14,451
-
14,451
11,778
-
11,778
Gross profit
9,828
3,069
12,897
11,265
2,113
13,378
Operating expenses
6,765
5,765
12,530
15,040
4,045
19,085
Income (loss) from operations
3,063
(2,696
)
367
(3,775
)
(1,932
)
(5,707
)
Other income (expenses), net
(205
)
148
(57
)
40
168
208
Income (loss) before income taxes
2,858
(2,548
)
310
(3,735
)
(1,764
)
(5,499
)
Provision for income taxes
911
-
911
1,730
-
1,730
Net income (loss)
$
1,947
$
(2,548
)
$
(601
)
$
(5,465
)
$
(1,764
)
$
(7,229
)
EBITDA
$
4,456
$
(2,538
)
$
1,918
$
(2,536
)
$
(1,763
)
$
(4,299
)
Significant components of Bentley’s revenues
for the three months ended September 30, 2007 are summarized below:
(in thousands) Revenues Within Spain
Revenues Branded Outside of % of Total Product Line Generics
Generics
Other
Spain
Total Revenues Omeprazole $ 406 $ 4,091 $ – $ – $ 4,497 16% Enalapril 1,227 348 – – 1,575 6% Simvastatin 153 1,041 – – 1,194 4% Lansoprazole 805 294 – – 1,099 4% Paroxetine 297 795 – – 1,092 4% All other products 2,624 2,603 105 426 5,758 21% Sales to licensees and others – – 3,075 5,841 8,916 33% Licensing and collaborations
–
–
148
3,069
3,217
12% Total Revenues $ 5,512
$ 9,172
$ 3,328
$ 9,336
$ 27,348
100% % of Q3 2007 Revenues 20% 34% 12% 34% 100%
Significant components of Bentley’s revenues
for the three months ended September 30, 2006 are summarized below:
(in thousands) Revenues Within Spain
Revenues Branded Outside of % of Total Product Line Generics
Generics
Other
Spain
Total Revenues Omeprazole $ 671 $ 3,896 $ – $ – $ 4,567 18% Enalapril 457 1,371 – – 1,828 7% Simvastatin 1,241 347 – – 1,588 6% Lansoprazole 633 219 – – 852 4% Paroxetine 319 774 – – 1,093 4% All other products 2,408 2,580 301 473 5,762 23% Sales to licensees and others – – 2,642 4,541 7,183 29% Licensing and collaborations
–
–
170
2,113
2,283
9% Total Revenues $ 5,729
$ 9,187
$ 3,113
$ 7,127
$ 25,156
100% % of Q3 2006 Revenues 23% 37% 12% 28% 100%
Bentley’s total revenues increased 9% (2% in
constant currency) to $89.9 million in the first nine months of 2007
from $82.4 million in the comparable period of 2006. Bentley’s
licensing and collaboration revenues increased by $1.8 million, or 28%,
compared with the first nine months of 2006, primarily reflecting
increased royalties on sales of Testim. Primarily due to price
reductions in Spain and $0.4 million of inventory reserves and
write-downs on U.S. simvastatin inventories, gross profit decreased to
$43.8 million in the first nine months of 2007 from $45.2 million in the
comparable period of 2006. Gross margins on net product sales decreased
to 43.5% from 51.0% in the first nine months of 2006. Operating expenses
decreased by 13% to $37.2 million from $42.7 million in the same period
of the prior year. Operating expenses for the first nine months of 2006
included $10.3 million in litigation and litigation settlement charges.
Net income for the first nine months of 2007 was $2.5 million, or $0.11
per diluted share, compared with a net loss of $3.4 million, or $0.16
per share, in the same period of the prior year.
Bentley’s results by operating segment were
as follows:
For the Nine Months Ended September 30, 2007
2006 Specialty Generics Drug Delivery
Consoli-dated Specialty Generics Drug Delivery
Consoli-dated Revenues
$
82,031
$
7,887
$
89,918
$
76,309
$
6,108
$
82,417
Cost of net product sales
46,138
-
46,138
37,182
-
37,182
Gross profit
35,893
7,887
43,780
39,127
6,108
45,235
Operating expenses
22,298
14,946
37,244
29,873
12,783
42,656
Income (loss) from operations
13,595
(7,059
)
6,536
9,254
(6,675
)
2,579
Other income (expenses), net
73
369
442
37
551
588
Income (loss) before income taxes
13,668
(6,690
)
6,978
9,291
(6,124
)
3,167
Provision for income taxes
4,509
-
4,509
6,607
-
6,607
Net income (loss)
$
9,159
$
(6,690
)
$
2,469
$
2,684
$
(6,124
)
$
(3,440
)
EBITDA
$
18,065
$
(6,484
)
$
11,581
$
12,834
$
(6,181
)
$
6,653
Significant components of Bentley’s revenues
for the nine months ended September 30, 2007 are summarized below:
(in thousands) Revenues Within Spain
Revenues Branded Outside of % of Total Product Line Generics
Generics
Other
Spain
Total Revenues Omeprazole $ 1,367 $ 11,916 $ – $ – $ 13,283 15% Enalapril 3,778 1,112 – – 4,890 5% Simvastatin 723 3,631 – – 4,354 5% Paroxetine 1,112 2,485 – – 3,597 4% Lansoprazole 2,571 895 – – 3,466 4% All other products 8,964 9,824 472 2,540 21,800 24% Sales to licensees and others – – 10,062 20,146 30,208 34% Licensing and collaborations
–
–
433
7,887
8,320
9% Total Revenues $ 18,515
$ 29,863
$ 10,967
$ 30,573
$ 89,918
100% % of YTD 2007 Revenues 21% 33% 12% 34% 100%
Significant components of Bentley’s revenues
for the nine months ended September 30, 2006 are summarized below:
(in thousands) Revenues Within Spain
Revenues Branded Outside of % of Total Product Line Generics
Generics
Other
Spain
Total Revenues Omeprazole $ 2,012 $ 12,589 $ – $ – $ 14,601 18% Enalapril 3,538 1,477 – – 5,015 6% Simvastatin 1,383 4,334 – – 5,717 7% Paroxetine 1,094 2,389 – – 3,483 4% Lansoprazole 1,958 671 – – 2,629 3% All other products 7,693 8,172 782 1,100 17,747 22% Sales to licensees and others – – 9,553 17,155 26,708 32% Licensing and collaborations
–
–
409
6,108
6,517
8% Total Revenues $ 17,678
$ 29,632
$ 10,744
$ 24,363
$ 82,417
100% % of YTD 2006 Revenues 21% 36% 13% 30% 100%
Bentley uses both GAAP and certain non-GAAP measures to assess
performance. The Company’s management
believes the non-GAAP measure of EBITDA may also provide useful
supplemental information to investors in order that they may evaluate
Bentley’s financial performance using the
same measures as management. The Company’s
management believes that with this supplemental information investors
are afforded greater transparency in assessing the Company’s
financial performance. This non-GAAP financial measure should not be
considered as a substitute for, nor superior to, measures of financial
performance prepared in accordance with GAAP.
Set forth below is a reconciliation of "EBITDA”
to net income, the most directly comparable financial measure calculated
and presented in accordance with GAAP.
(in thousands) For the Three Months Ended September 30, 2007
2006 Specialty Generics
Drug Delivery
Consoli-dated Specialty Generics
Drug Delivery
Consoli-dated Net income (loss)
$
1,947
$
(2,548
)
$
(601
)
$
(5,465
)
$
(1,764
)
$
(7,229
)
Provision for income taxes
911
-
911
1,730
-
1,730
Interest expense (income)
58
(150
)
(92
)
(40
)
(168
)
(208
)
Depreciation & amortization
1,540
160
1,700
1,239
169
1,408
EBITDA
$
4,456
$
(2,538
)
$
1,918
$
(2,536
)
$
(1,763
)
$
(4,299
)
(in thousands) For the Nine Months Ended September 30, 2007
2006 Specialty Generics
Drug Delivery
Consoli-dated Specialty Generics
Drug Delivery
Consoli-dated Net income (loss)
$
9,159
$
(6,690
)
$
2,469
$
2,684
$
(6,124
)
$
(3,440
)
Provision for income taxes
4,509
-
4,509
6,607
-
6,607
Interest expense (income)
16
(372
)
(356
)
(1
)
(551
)
(552
)
Depreciation & amortization
4,381
578
4,959
3,544
494
4,038
EBITDA
$
18,065
$
(6,484
)
$
11,581
$
12,834
$
(6,181
)
$
6,653
EBITDA is calculated as earnings before interest, income taxes,
depreciation and amortization. The Company uses EBITDA as a supplemental
financial measure of its operational performance. Management believes
EBITDA to be an important measure as it excludes the effects of items
which primarily reflect the impact of long-term investment decisions,
rather than the performance of the Company’s
day-to-day operations. The Company believes that this measurement is
useful to measure a company’s ability to
service debt and to meet other payment obligations or as a valuation
measurement. As compared to net income according to GAAP, this measure
is more limited in scope because it does not reflect the periodic costs
of certain capitalized tangible and intangible assets used in generating
revenues in the Company’s business.
Management evaluates those items through other financial measures such
as capital expenditures and cash flow provided by operating activities.
Management will host a conference call at 10:00 a.m. (ET) on November 6,
2007 to discuss the third quarter 2007 results and review the Company’s
plan to separate its drug delivery and generics businesses. To
participate on the live call, please dial (888) 332-7254 from the U.S.
and Canada or, for international callers, please dial (973) 582-2856.
The access code for this call is 9313321. The conference call will also
be webcast live and may be accessed via Bentley’s
website, www.bentleypharm.com.
A telephone replay will be available for 30 days by dialing (877)
519-4471 from the U.S. and Canada or (973) 341-3080 for international
callers. Please reference reservation number 9313321. A replay of the
conference will also be available on Bentley’s
website for 30 days.
Bentley Pharmaceuticals, Inc. is a specialty pharmaceutical company
focused on advanced drug delivery technologies and generic
pharmaceutical products. Bentley’s
proprietary drug delivery technologies enhance the absorption of
pharmaceutical compounds across various membranes. Bentley manufactures
and markets a growing portfolio of generic and branded generic
pharmaceuticals in Europe for the treatment of cardiovascular,
gastrointestinal, infectious and central nervous system diseases through
its subsidiaries -- Laboratorios Belmac, Laboratorios Davur,
Laboratorios Rimafar and Bentley Pharmaceuticals Ireland. Bentley also
manufactures and markets active pharmaceutical ingredients through its
subsidiary, Bentley API.
Additional information regarding Bentley Pharmaceuticals may be obtained
through Bentley’s website at www.bentleypharm.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act
of 1995: This press release contains forward looking statements,
including without limitation statements regarding the Company’s
plans for separating its drug delivery and specialty generics businesses
and exploring strategic alternatives for its specialty generics
business, future prospects for the two businesses as independent
companies, anticipated completion of clinical trials, the application of
the Company’s CPE-215 technology to complex
molecules in addition to testosterone, and growth prospects for the
Company’s drug delivery and specialty
generics businesses. These forward-looking statements are subject to a
number of risks and uncertainties that could cause actual results to
differ materially from future results expressed or implied by such
statements. Factors that may cause such differences include, but are not
limited to, risks associated with the following: the timing and results
of clinical trials, the timing and nature of regulatory approvals,
changes in third-party reimbursement and government mandates that impact
pharmaceutical pricing, development and commercialization of Bentley’s
proprietary products and formulations, competition from other
manufacturers of generic and proprietary pharmaceuticals, intellectual
property litigation, the efficacy and safety of Bentley’s
products, the unpredictability of patent protection, international
operations, and other uncertainties detailed under "Risk
Factors” in Bentley’s
most recent Annual Report on Form 10-K and its other subsequent periodic
reports filed with the Securities and Exchange Commission. Bentley
cautions investors not to place undue reliance on the forward-looking
statements contained in this release. These statements speak only as of
the date of this document, and Bentley undertakes no obligation to
update or revise the statements, except as may be required by law.
Bentley Pharmaceuticals, Inc. and Subsidiaries Consolidated Income Statements (Unaudited)
(in thousands, except per share data) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2007 2006 2007 2006
Revenues:
Net product sales
$
24,131
$
22,873
$
81,598
$
75,900
Licensing and collaboration revenues
3,217
2,283
8,320
6,517
Total revenues
27,348
25,156
89,918
82,417
Cost of net product sales
14,451
11,778
46,138
37,182
Gross profit
12,897
13,378
43,780
45,235
Operating expenses:
Selling and marketing
4,080
3,495
13,338
11,876
General and administrative
4,098
3,751
12,016
11,320
Research and development
3,017
2,447
9,194
7,850
Litigation settlement
—
8,932
—
10,269
Separation costs
846
—
1,153
—
Depreciation and amortization
489
460
1,543
1,341
Total operating expenses
12,530
19,085
37,244
42,656
Income (loss) from operations
367
(5,707
)
6,536
2,579
Other income (expenses):
Interest income
339
223
706
661
Interest expense
(247
)
(15
)
(348
)
(109
)
Other, net
(149
)
—
84
36
Income (loss) before income taxes
310
(5,499
)
6,978
3,167
Provision for income taxes
911
1,730
4,509
6,607
Net (loss) income
$
(601
)
$
(7,229
)
$
2,469
$
(3,440
)
Net (loss) income per common share:
Basic
$
(0.03
)
$
(0.33
)
$
0.11
$
(0.16
)
Diluted
$
(0.03
)
$
(0.33
)
$
0.11
$
(0.16
)
Weighted average common
shares outstanding:
Basic
22,354
22,194
22,322
22,107
Diluted
22,354
22,194
22,829
22,107
Bentley Pharmaceuticals, Inc. and Subsidiaries Consolidated Balance Sheets (Unaudited)
(in thousands, except per share data) September 30, 2007 December 31, 2006 Assets
Current assets:
Cash and cash equivalents
$
38,452
$
12,424
Marketable securities
560
3,177
Receivables, net
31,469
32,963
Inventories, net
15,043
16,279
Deferred taxes
1,579
1,049
Prepaid expenses and other
2,437
1,798
Total current assets
89,540
67,690
Non-current assets:
Fixed assets, net
55,821
48,556
Drug licenses and related costs, net
17,147
16,026
Restricted cash
1,000
1,000
Deferred taxes
195
240
Other
945
844
Total non-current assets
75,108
66,666
$
164,648
$
134,356
Liabilities and Stockholders’
Equity
Current liabilities:
Accounts payable
$
15,582
$
14,566
Accrued expenses
11,276
9,704
Short-term borrowings
—
247
Current portion of long-term debt
—
307
Deferred income
998
1,045
Other current liabilities
1,571
1,518
Total current liabilities
29,427
27,387
Non-current liabilities:
Long-term debt
15,559
—
Deferred income
4,757
3,899
Other
4,055
2,739
Total non-current liabilities
24,371
6,638
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, 22,323 and 22,262 shares
446
445
Additional paid-in capital
142,092
140,030
Accumulated deficit
(46,952
)
(49,016
)
Accumulated other comprehensive income
15,264
8,872
Total stockholders’ equity
110,850
100,331
$
164,648
$
134,356
