GoGold Resources Inc. press release
Axcan reports second quarter 2005 results
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TSX SYMBOL (Toronto Stock Exchange): AXP NASDAQ SYMBOL (NASDAQ National Market): AXCA
MONT-SAINT-HILAIRE, QC May 4 /CNW Telbec/ - Axcan Pharma Inc. ("Axcan" or the "Company") announced today operating results for the quarter ended March 31, 2005, the Company's second quarter of the fiscal year ending September 30, 2005. Net sales were $63.4 million compared with $63.2 million in the second quarter of 2004. Research and development expenses increased $4.3 million to $8.3 million for the quarter ended March 31, 2005 from $4.0 million for the corresponding quarter of the preceding fiscal year. Net income for the three- month period ended March 31, 2005 was $5.4 million compared with $12.4 million for the same period of fiscal 2004. Diluted earnings per share were $0.12 compared with $0.24 in 2004 (all amounts stated in U.S. dollars). "To assure Axcan's long-term growth, we are totally committed to meeting our milestones for the development of ITAX," stated LDeon F. Gosselin, President and Chief Executive Officer. "These milestones include completing patient enrolment in our two Phase III clinical trials for this product candidate in June 2005 and completing the clinical trials themselves by September of this year. As a result, our R&D expenses rose to 13% of revenues in the second quarter compared to 10% in the first quarter and to an average of 6%-8% in previous years. This, coupled with an inventory write-down, has had a negative impact on net income and earnings per share for the quarter. We are, however, very pleased with the progress we are making on advancing ITAX to a filing for regulatory approval that should take place by year-end."
RECENT DEVELOPMENTS
PRODUCT LAUNCHES
1000 MG MESALAMINE SUPPOSITORY
In November 2004, Axcan received approval from the U.S. Food and Drug Administration ("FDA") for the use of a new, 1000-milligram mesalamine suppository dosage form, to be administered once-per-day, for the treatment of ulcerative proctitis. Axcan received three-year marketing exclusivity for the new dosage form under the non-patent exclusivity provisions of the Federal Food, Drug and Cosmetic Act. The product was launched in February in the United States under the brand name Canasa 1000mg.
URSO FORTE
In July 2004, Axcan received approval from the FDA for the use of a new, double-strength tablet formulation of URSO (ursodiol, URSO 500mg tablets). This new formulation simplifies the dosing regimen used in the treatment of Primary Biliary Cirrhosis. The product was launched in November 2004 in the United States under the brand name URSO Forte.
PENDING APPROVALS
HELIZIDE
The Company is finalizing the qualification of a manufacturer of biskalcitrate potassium (bismuth salt) a component of the Helizide combination therapy for the eradication of Helicobacter Pylori bacterium. Axcan anticipates FDA re-submission during the 2005 fiscal year. Assuming approval, the Company expects to launch the product in the United States, Canada and Europe during the second half of fiscal 2006.
SALOFALK 750 MG TABLETS
Axcan completed a Phase III trial, for the Canadian market, on the efficacy and safety of a new 750-milligram mesalamine (5-ASA) tablet for the oral treatment of ulcerative colitis. The Company filed a supplemental New Drug Submission ("sNDS") for approval in Canada in the first quarter of fiscal 2004. Recently, Axcan received a non-approval letter from the Therapeutic Products Directorate ("TPD") of Health Canada containing a list of questions and comments for both the clinical and Chemistry, Manufacturing and Controls ("CMC") aspects of the original sNDS submission. Axcan intends to respond to all questions in the non-approvable letter as well as request a meeting with TPD of Health Canada to discuss their decision.
RESEARCH AND DEVELOPMENT UPDATE
PHASE III STUDIES
ITAX
In May 2004, Axcan obtained the approval of the TPD of Health Canada and Investigational New Drug clearance from the Gastro-intestinal division of the FDA, required to initiate Phase III clinical trials to demonstrate the safety and efficacy of ITAX (itopride hydrochloride) in the treatment of functional dyspepsia. Enrollment for the two Phase III studies, which are being conducted in North America and Europe, is well underway and should be completed in the third fiscal quarter of 2005. More recently, Axcan announced positive cardiac safety results of a high dose (supratherapeutic) study. In this study, ITAX was shown to have no clinically relevant effects on heart rate, cardiac conduction and cardiac repolarization. Axcan expects to file a New Drug Application during the first quarter of fiscal 2006 Axcan also plans to study ITAX in the treatment of diabetic gastropathy. As previously announced, Axcan believes that, if approved by the FDA, ITAX has the potential to become its largest selling product, and expects to launch this product in the United States, Canada, Germany, U.K. and France in fiscal 2007.
CANASA / SALOFALK rectal gel
Axcan completed Phase III studies to confirm the efficacy and safety of a new mesalamine rectal gel in the treatment of distal ulcerative colitis. Final results are expected to be available during the second half of fiscal 2005. Assuming the results of the Phase III studies are positive, the Company plans to submit regulatory filings for approvals in the United States and Canada and expects to launch the rectal gel in the United States and Canada in the second half of fiscal 2006.
HEPENAX
L-Ornithine L-Aspartate salt , which is known as HEPENAX, was developed by Merz Pharmaceuticals GmbH in Germany and is licensed to Axcan. The Company intends to further develop HEPENAX in North America and Europe for patients suffering from Porto-Systemic Encephalopathy ("PSE"), a condition used to describe the deleterious effects of liver failure on the central nervous system. The Company plans to conduct a Phase II/III clinical development program for HEPENAX and plans to seek approval of the intravenous formulation to treat the acute symptoms of PSE. The Company initiated its clinical research program in the third quarter of fiscal 2004 and expects to complete such studies in the second half of fiscal 2007.
PHOTOFRIN
PHOTOFRIN is approved in a number of countries for the treatment of different forms of cancers. Axcan is currently investigating the use of PHOTOFRIN for the treatment of cholangiocarcinoma, a serious bile duct (liver) cancer with a high mortality rate. The treatment under investigation combines PHOTOFRIN with PDT and the stenting of the bile ducts. It is anticipated that the proposed Phase III study will start in the third quarter of fiscal 2005.
PRE-CLINICAL, PHASE I AND PHASE II
NCX-1000
The FDA has accepted an Investigational New Drug Application for NCX- 1000, a patented, nitric oxide donating derivative of ursodiol, for the treatment of portal hypertension, a late-stage complication of chronic, advanced liver disease. The Phase I clinical development program, which is designed to demonstrate the tolerability and safety of NCX-1000, has been completed. Phase II studies are planned to begin during fiscal 2005.
Ursodiol Disulfate
Axcan recently completed a proof of concept study in rats to evaluate the effect of ursodiol disulfate on the development of colonic tumors. Axcan initiated animal toxicity studies in the fourth quarter of fiscal 2004, which will be followed by clinical Phase I studies. Also, Axcan intends to pursue the development of an intravenous ursodiol disulfate to be used in the domain of organ preservation in liver transplants.
NMK 150
Axcan and Nordmark GmbH, a German pharmaceutical firm, have set up a joint-venture, Norax, in order to develop NMK 150, a new high protease pancrelipase preparation. This product will be developed for the relief of pain in small duct chronic pancreatitis. It is expected that NMK 150 will enter clinical development in the fiscal year 2005.
NMK 250
Norax is also developing NMK 250, a bacterial lipase intended to correct steatorrhea in patients suffering from diverse causes of pancreatic insufficiency (e.g., following surgery for cancer or due to cystic fibrosis). Norax expects to complete the formulation work during the second half of fiscal 2005.
INTERIM FINANCIAL REPORT
This release includes, by reference, the second quarter interim financial report incorporating the financial statements in accordance with both U.S. and Canadian GAAP as well as the full Management Discussion & Analysis ("MD&A") including the reconciliation to Canadian GAAP of the U.S. GAAP presentation. The interim report, including the MD&A and financial statements, is filed with applicable U.S. and Canadian regulatory authorities.
CONFERENCE CALL
Axcan will host a conference call at 4:30 P.M. ET, on May 4, 2005. Interested parties may also access the conference call by way of web cast at www.axcan.com . The telephone numbers to access the conference call are (800) 814-4890 (Canada and United States) or (416) 640-4127 (international). A replay of the call will be available until May 11, 2005. The telephone number to access the replay of the call is (416) 640-1917 code: 21122352.
ABOUT AXCAN PHARMA
Axcan is a leading specialty pharmaceutical company involved in the field of gastroenterology. Axcan markets a broad line of prescription products sold for the treatment of symptoms in a number of gastrointestinal diseases and disorders such as inflammatory bowel disease, irritable bowel syndrome, cholestatic liver diseases and complications related to cystic fibrosis. Axcan's products are marketed by its own sales force in North America and Europe. Its common shares are listed on the Toronto Stock Exchange under the symbol "AXP" and on the NASDAQ National Market under the symbol "AXCA".
"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995.
This release contains forward-looking statements, which reflect the Company's current expectations regarding future events. To the extent any statements made in this release contain information that is not historical, these statements are essentially forward looking and are often identified by words such as "anticipate," "expect," "estimate," "intend," "project," "plan" and "believe." Forward-looking statements are subject to risks and uncertainties, including the difficulty of predicting FDA and other regulatory approvals, acceptance and demand for new pharmaceutical products, the impact of competitive products and pricing, new product development and launch, reliance on key strategic alliances, availability of raw materials, the regulatory environment, fluctuations in operating results, the protection of our intellectual property and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission and the Canadian securities regulatory authorities.
The names ITAX, , Salofalk, Hepenax, Helizide, Urso, Urso Forte, Photofrin and Canasa appearing in this press release are trademarks of Axcan Pharma Inc. and its subsidiaries.
Management Discussion and Analysis (MD&A), Financial Statements and Notes Attached
Management's discussion and analysis of financial condition and results of operations
This discussion should be read in conjunction with the information contained in Axcan's consolidated financial statements and the related notes thereto. All amounts are in U.S. dollars.
Overview
Axcan is a leading specialty pharmaceutical company concentrating in the field of gastroenterology, with operations in North America and Europe. Axcan markets and sells pharmaceutical products used in the treatment of a variety of gastrointestinal diseases and disorders. The Company seeks to expand its gastrointestinal franchise by in-licensing products and acquiring products or companies, as well as developing additional products and expanding indications for existing products. Axcan's current products include ULTRASE, PANZYTRAT and VIOKASE for the treatment of certain gastrointestinal symptoms, related to cystic fibrosis in the case of ULTRASE and PANZYTRAT; URSO 250, URSO FORTE and DELURSAN for the treatment of certain cholestatic liver diseases; SALOFALK and CANASA for the treatment of certain inflammatory bowel diseases; and PHOTOFRIN for the treatment of certain types of gastrointestinal cancers and other conditions. Axcan has a number of pharmaceutical projects in all phases of development including ITAX for the treatment of functional dyspepsia. In the first quarter of fiscal 2004, Axcan filed a supplemental New Drug Submission for a new 750-milligram Mesalamine (5-ASA) tablet for the oral treatment of ulcerative colitis. On March 24, 2005, Axcan received a non-approval letter from the Therapeutic Products Directorate of Health Canada containing a list of questions and comments for both the clinical and Chemistry, Manufacturing and Controls aspects of the original New Drug Submission. Axcan intends to respond to all questions in the non-approvable letter as well as request a meeting with Therapeutic Products Directorate of Health Canada. Axcan reported revenue of $63.4 million, operating income of $8.3 million and net income of $5.4 million for the three-month period ended March 31, 2005. For the six-month period ended March 31,2005, revenue was $124.9 million, operating income was $20.4 million and net income was $13.2 million. Revenue from sales of Axcan's products in the United States was $78.5 million (62.8% of total revenue) for the six-month period ended March 31, 2005, compared to $81.1 million (67.2% of total revenue) for the same period of fiscal 2004. In Canada, revenue was $16.9 million (13.5% of total revenue) for the six-month period ended March 31, 2005, compared to $13.4 million (11.1% of total revenue) for the same period of fiscal 2004. In Europe, revenue was $29.5 million (23.6% of total revenue) for the six-month period ended March 31, 2005, compared to $26.1 million (21.6% of total revenue) for the same period of fiscal 2004. Axcan's revenue historically has been and continues to be principally derived from sales of pharmaceutical products to large pharmaceutical wholesalers and large chain pharmacies. Axcan utilizes a "pull-through" marketing approach that is typical of pharmaceutical companies. Under this approach, Axcan's sales representatives demonstrate the features and benefits of its products to gastroenterologists who may write their patients prescriptions for Axcan's products. The patients, in turn, take the prescriptions to pharmacies to be filled. The pharmacies then place orders with the wholesalers or, in the case of large chain pharmacies, their distribution centres, to whom Axcan sells its products. Axcan's expenses are comprised primarily of selling and administrative expenses (including marketing expenses), cost of goods sold (including royalty payments to those companies from whom Axcan licenses some of its products), research and development expenses as well as depreciation and amortization. Axcan's annual and quarterly operating results are primarily affected by three factors: wholesaler buying patterns; the level of acceptance of Axcan's products by gastroenterologists and their patients; and the extent of Axcan's control over the marketing of its products. Wholesaler buying patterns, including a tendency to increase inventory levels prior to an anticipated or announced price increase, affect Axcan's operating results by shifting revenue between quarters. To maintain good relations with wholesalers, Axcan typically gives prior notice of price increases. The level of patient and physician acceptance of Axcan's products, as well as the availability of similar therapies, which may be less effective but also less expensive than some of Axcan's products, impact Axcan's revenues by driving the level and timing of prescriptions for its products.
Critical Accounting Policies
Axcan's consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"), applied on a consistent basis. Axcan's critical accounting policies include the use of estimates, revenue recognition, the recording of research and development expenses and the determination of the useful lives or fair value of goodwill and intangible assets. Some of our critical accounting policies require the use of judgment in their application or require estimates of inherently uncertain matters. Although our accounting policies are in compliance with U.S. GAAP, a change in the facts and circumstances of an underlying transaction could significantly change the application of our accounting policies to that transaction, which could have an effect on our financial statements. Discussed below are those policies that we believe are critical and require the use of complex judgment in their application.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the recorded amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the date of the financial statements and the disclosure of recognized amounts of revenues and expenses during the year. Significant estimates and assumptions made by management include the allowance for accounts receivable and inventories, reserves for product returns, rebates and chargebacks, the classification of intangible assets between finite and indefinite life, useful lives of long-lived assets, the expected cash flows used in evaluating long-lived assets, goodwill and investments for impairment, contingency provisions and other accrued charges. These estimates were made using the historical information available to management. The Company reviews all significant estimates affecting the financial statements on a recurring basis and records the effect of any adjustment when necessary. Actual results could differ from those estimates.
Revenue Recognition
Revenue is recognized when the product is shipped to the Company's customer, provided the Company has not retained any significant risks of ownership or future obligations with respect to the product shipped. Revenue from product sales is recognized net of sales discounts, allowances, returns, rebates and chargebacks. In certain circumstances, returns or exchanges of products are allowed under the Company's policy, and provisions are maintained accordingly. Amounts received from customers as prepayments for products to be shipped in the future are reported as deferred revenue.
Goodwill and Intangible Assets
Axcan's goodwill and intangible assets are stated at cost, less accumulated amortization. Since October 1, 2001, the Company does not amortize goodwill and intangible assets with an indefinite life. However, management evaluates the value of the unamortized portion of goodwill and intangible assets annually, by comparing the carrying value to the future benefits of the Company's activities or the expected sale of pharmaceutical products. Should there be a permanent impairment in value or if the unamortized balance exceeds recoverable amounts, a write-down will be recognized for the current year. To date, Axcan has not recognized any significant permanent impairment in value except for an amount of $83,000 of goodwill for the year ended September 30, 2004. Intangible assets with finite life are amortized over their estimated useful lives.
Research and Development Expenses
Research and development expenses are charged to operations in the year they are incurred. Acquired in-process research and development having no alternative future use is written off at the time of acquisition. The cost of intangibles that are acquired from others for a particular research and development project, with no alternative use, are written off at the time of acquisition.
Acquisition of Products
On November 18, 2003, the Company acquired the rights to a group of products from Aventis Pharma S.A. ("Aventis"). The $145.0 million purchase price was paid out of Axcan's cash on hand. These products are CARAFATE and BENTYL for the U.S. market and SULCRATE, BENTYLOL and PROCTOSEDYL for the Canadian market (collectively, "AVAX" product line). On August 29, 2003, the Company acquired an exclusive license for North America, the European Union and Latin America, from Abbott Laboratories ("Abbott") to develop, manufacture and market ITAX, a patented gastroprokinetic drug. Under the terms of this license agreement, the Company paid $10.0 million in cash and assumed $2.0 million in research contract liability. This product is in development, has not reached technological feasibility and has no known alternative uses; therefore, its acquisition was deemed to be acquired in-process research and was expensed in the period of acquisition. On December 10, 2002, the Company acquired the rights to the Ursodiol 250 mg tablets DELURSAN for the French market from Aventis, for a cash purchase price of $22.8 million. On December 3, 2002, the Company acquired the worldwide rights to the PANZYTRAT enzyme product line from Abbott for a cash purchase price of $45.0 million. During a transition period, the seller in some of these acquisition transactions acts as selling agent for the management of these products. For the six-month period ended March 31, 2005, sales of some of these products were still managed in part by the sellers. Axcan includes in its revenue the net sales from such products less corresponding cost of goods sold and other seller related expenses. Consequently, although net sales of such products for the six-month period ended March 31, 2005 were $1,194,522 ($5,315,913 in 2004), the Company only included in its revenue an amount of $467,078 ($3,440,421 in 2004) representing the net sales less cost of goods sold and other seller related expenses. << Results of Operations