NGEx Minerals Ltd. press release
Axcan announces third quarter 2005 results
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TSX SYMBOL (Toronto Stock Exchange): AXP NASDAQ SYMBOL (Nasdaq National Market): AXCA
MONT SAINT-HILAIRE, QC, Aug. 11 /CNW Telbec/ - Axcan Pharma Inc. ("Axcan" or the "Company") announced today operating results for the quarter ended June 30, 2005, the Company's third quarter of the fiscal year ending September 30, 2005. Net sales were $59.4 million compared with $62.0 million in the third quarter of 2004. Selling and administrative expenses were $23.0 million for the quarter ended June 30, 2005, up from $19.5 million for the corresponding quarter of the preceding fiscal year. Research and development expenses increased $3.7 million to $8.9 million for the quarter ended June 30, 2005, from $5.2 million for the corresponding quarter of the preceding fiscal year. Net income for the three-month period ended June 30, 2005, was $4.1 million compared with $12.6 million for the same period of fiscal 2004. Diluted earnings per share were $0.09 compared with $0.25 in 2004 (all amounts stated in U.S. dollars). "We observed prescription growth in our key products during the quarter. However net sales for the quarter were below the level that prescriptions would indicate," said LDeon F. Gosselin, Chairman of the Board and outgoing President and CEO of Axcan. "Overall, US wholesaler inventory levels of Axcan products declined during the quarter which resulted in lower sales. Axcan is dependent on wholesaler inventory buying policies. Changes in these policies make it difficult to predict swings of sales between reporting periods. Prescription trends for our major products are healthy, and we remain confident about our core business." "Our top priority is increasing shareholder value, and I am very confident in Axcan's future growth opportunities and position as a leader in the gastrointestinal field," added Dr. Frank Verwiel, who joined Axcan on July 11, as President and CEO. "For the remainder of the year, we will concentrate our efforts on maximizing the in-market potential of our currently promoted products while our research and development team will continue to advance its programs," he concluded. Dr. FranEcois Martin, Senior Vice President, Scientific Affairs of Axcan, reported on Itopride, Axcan's lead product candidate for the treatment of functional dyspepsia. "We are pleased to report that significant progress in the development of Itopride was made during the quarter as Axcan is meeting important development milestones. Enrolment, screening and randomization are on track to be completed by the end of August for the International Phase III clinical trial, and by the end of calendar 2005 for the North American Phase III clinical trial. Results of the Phase III trials will be known in the first half of calendar 2006," said Dr. Martin. "I am also pleased to report that all patients needed for the 6-month and 1-year safety study are currently being treated and results will be available for inclusion in the New Drug Application (NDA). We have completed the clinical work on 5 of 7 Phase I studies. "These data will form the basis of the clinical section of the NDA to be filed with the U.S. Food and Drug Administration in the summer of 2006."
RECENT DEVELOPMENTS
PENDING APPROVALS
HELIZIDE - The Company finalized 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 filing the amendment to the NDA during the second quarter of fiscal 2006.
SALOFALK 750 MG TABLETS - The Company filed a supplemental New Drug Submission ("sNDS") for approval of a new 750-milligram mesalamine (5-ASA) tablet for the oral treatment of ulcerative colitis in Canada in the first quarter of fiscal 2004. Axcan received a non-approvable 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 sNDS submission. Axcan responded to all questions in the non-approvable letter during the third quarter of fiscal 2005 and expects to obtain a final response in the first half of fiscal 2006.
RESEARCH AND DEVELOPMENT UPDATE
OTHER PHASE III STUDIES
CANASA / SALOFALK rectal gel - Axcan recently completed Phase III studies to confirm the efficacy and safety of a new mesalamine rectal gel in the treatment of distal ulcerative colitis. Data are currently being analyzed, and final results are expected to be available by the end of 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 North America in the first half of fiscal 2007.
PHOTOFRIN - This product is approved in a number of countries for the treatment of different forms of cancers. Axcan recently completed the PHOBAR 02 study assessing the efficacy of PHOTOFRIN in the prevention of esophageal cancer. Data are currently being analyzed.
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. Axcan expects to initiate a pilot, therapeutic proof-of-concept, Phase II study at the end of fiscal 2005.
Ursodiol Disulfate - Axcan completed a proof-of-concept study in rats to evaluate the effect of ursodiol disulfate on the development of colonic tumors. The Company initiated animal toxicity studies in the fourth quarter of fiscal 2004, which will be followed by clinical Phase I studies that should be initiated in the first half of fiscal 2006.
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 is under development consideration for the relief of pain in small duct chronic pancreatitis. It is expected that NMK 150 will enter Phase I clinical trials in the first half of fiscal 2006.
INTERIM FINANCIAL REPORT
This release includes, by reference, the third quarter interim financial report incorporating the financial statements in accordance with 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 5:00 P.M. ET, on August 11, 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 (866) 250-4910 (Canada and United States) or (416) 640-4127 (international). A replay of the call will be available until August 18, 2005. The telephone number to access the replay of the call is (416) 640-1917 code: 21133243.
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 Multijurisdictional Disclosure System.
The names Salofalk, Helizide, 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 speciality 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 responded to all questions in the non-approvable letter during the third quarter of fiscal 2005 and expects to obtain a final response in the first half of fiscal 2006. Axcan reported revenue of $59.4 million, operating income of $6.1 million and net income of $4.1 million for the three-month period ended June 30, 2005. For the nine-month period ended June 30, 2005, revenue was $184.4 million, operating income was $26.5 million and net income was $17.3 million. Revenue from sales of Axcan's products in the United States was $115.8 million (62.8% of total revenue) for the nine-month period ended June 30, 2005, compared to $123.8 million (67.7% of total revenue) for the same period of fiscal 2004. In Canada, revenue was $25.4 million (13.8% of total revenue) for the nine-month period ended June 30, 2005, compared to $20.5 million (11.2% of total revenue) for the same period of fiscal 2004. In Europe, revenue was $43.1 million (23.4% of total revenue) for the nine-month period ended June 30, 2005, compared to $38.3 million (21.0% 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. 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 certain of these acquisition transactions acts as selling agent for the management of these products. For the nine-month period ended June 30, 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 nine-month period ended June 30, 2005 were $2,313,204 ($6,928,009 in 2004), the Company only included in its revenue an amount of $707,089 ($4,413,531 in 2004) representing the net sales less cost of goods sold and other seller related expenses.
Results of Operations
The following table sets forth, for the periods indicated, the percentage of revenue represented by items in Axcan's consolidated statements of operations: >
Periods ended June 30, 2005 compared to periods ended June 30, 2004
Revenue
For the three-month period ended June 30, 2005, revenue was $59.4 million compared to $62.0 million for the corresponding quarter of the preceding fiscal year, a decrease of 4.2%. This decrease is revenue primarily resulted from lower sales in the United States following an announced intention from major wholesalers to reduce their inventory level. The end-customer prescription demand continues to show positive growth for most of our products sold in the United States which leads us to believe that this reduction in revenue is only temporary and that sales should increase when our major wholesalers reach their targeted inventory level. For the nine-month period ended June 30, 2005, revenue was $184.4 million compared to $182.8 million for the corresponding quarter of the preceding fiscal year, an increase of 0.9%.