ViroPharma Incorporated Reports Second Quarter 2010 Financial Results
In the second quarter of 2010 we:
Net sales were $109.0 million and $199.6 million for the three and six months ended June 30, 2010, respectively, as compared to $81.9 million and $142.1 million in the comparative periods of 2009, respectively. This represents 33 percent growth for the three month period and 41 percent growth for the six month period in net product sales.
"The second quarter of 2010 was an outstanding quarter for us, both operationally and financially," stated Vincent Milano, ViroPharma's chief executive officer. "For example, regarding Cinryze we expanded the HAE prophylaxis market in the U.S.; advanced our manufacturing scale-up progress both through the introduction of product manufactured at parallel chromatography process scale and the filing of our PAS with the FDA for our industrial scale manufacturing; and made progress with our clinical initiatives including the initiation of our subcutaneous administration Phase 2 trial and submission of our IND for our forthcoming antibody mediated rejection study. Overall, this was a period of substantial progress and we look forward to continued execution throughout the rest of 2010 and in the years ahead."
Non-GAAP adjusted net income for the three and six months ended June 30, 2010 was $36.1 million and $64.7 million, respectively compared to $26.2 million and $35.5 million for the same periods in 2009, respectively. The increase in adjusted net income is primarily due to the net effect of the Cinryze launch, increased Vancocin® (Vancomycin Hydrochloride, USP) net sales and lower research and development expenses, offset by higher income tax expense.
Our GAAP net income grew to $28.5 million in the second quarter of 2010 as compared to $16.1 million in the comparative period in 2009 due to the same factors influencing our non-GAAP adjusted net income discussed above. The change between our GAAP net income of $49.8 million for the six months ended June 30, 2010 from a GAAP net loss of $43.2 million in the same period of 2009 was primarily due to the impact of our goodwill impairment in 2009 of $65.1 million and the $9.1 million gain on the repurchase of our convertible notes in the first six months of 2009, in addition to the factors influencing our non-GAAP adjusted net income discussed above.
The Company is reporting both GAAP net income (loss) and adjusted results for the three and six months ended June 30, 2010 and 2009. Adjusted net income is GAAP net income (loss) excluding (1) non-cash interest expense, (2) amortization primarily related to the acquisitions of Lev Pharmaceuticals and Vancocin, and step-up in inventory primarily related to purchase accounting arising from the acquisitions of Lev Pharmaceuticals (3) stock compensation expenses, and (4) certain non-recurring events such as the goodwill write off and gain on extinguishment of repurchased bonds. A reconciliation between GAAP and adjusted net income is provided in the Selected Financial Information - Reconciliation of GAAP Net Income (loss) to Adjusted Net Income table included with this release.
The Company believes it is important to share these non-GAAP financial measures with shareholders as they better represent the ongoing economics of the business and reflect how we manage the business. Accordingly, management believes investors' understanding of the Company's financial performance is enhanced as a result of our disclosing these non-GAAP financial measures. Non-GAAP adjusted net income should not be viewed in isolation, or as a substitute for or superior to reported GAAP net (loss) income. ViroPharma's definition of non-GAAP financial measures may differ from others.
Cinryze net sales grew during the three and six months ended June 30, 2010 to $40.3 million and $75.2 million, respectively, as compared to $25.6 million and $32.2 million in the same periods in 2009, respectively due to the increase in the number of patients receiving Cinryze. Vancocin net sales during the three and six months ended June 30, 2010 increased 21 percent to $68.4 million and 13 percent to $124.1 million, respectively, due to realized price growth, offset by lower sales volume. We currently do not believe that the health care reform will have a material impact on Vancocin or Cinryze net sales in the near term.
Cost of sales decreased for the three months ended June 30, 2010 as compared to the prior year by $0.5 million due to the effect of the step up in inventory recorded, partially offset from increased Cinryze volume. Cost of sales increased for the six months ended June 30, 2010 by $9.5 million as compared to the same period in the prior year due to the increase in Cinryze units sold, partially offset by the impact of the step-up on 2009 cost of sales related to the acquisition of Lev ($6.2 million). We have utilized all inventory that was recorded at fair value as part of the Lev purchase during 2009. Additionally, included in the cost of sales for the six months ended June 30, 2009 are expenses of $1.5 million related to non-refundable start up costs paid to our new plasma supplier.
Investments related to our commercialization efforts and selling, general and administrative (SG&A) expenses increased and our costs related to our product pipeline and research and development (R&D) expenses decreased in the second quarter 2010. Combined, these expenses were $34.6 million in the second quarter of 2010 as compared to $36.1 million in the second quarter of 2009. R&D expenses decreased $3.2 million related primarily to discontinuing the maribavir prophylactic program, partially offset by costs associated with our Phase 1 clinical trial for VP20621 and costs related to the Cinryze Phase 4 safety requirement study for the U.S. and the development of our life cycle program. For the second quarter of 2010, SG&A increased $1.8 million over the same period in 2009. The largest contributors to this increase were increases in compensation expense and marketing activities, offset by lower medical education efforts. For the six months ended June 30, 2010, SG&A expenses decreased $1.7 million to $46.3 million mainly due to decreased compensation expense and decreased medical education activities, partially offset by increased marketing expenses. R&D expenses decreased to $19.0 million for the six months ended June 30, 2010 for the reasons discussed above.
The Company's tax expense for the quarters ended June 30, 2010 and 2009 was $18.4 million and $5.6 million, respectively, and $32.3 million and $10.6 million for the six months ended June 30, 2010 and 2009, respectively. The increases in the 2010 expense as compared to 2009 are primarily due to higher taxable income in both 2010 periods.
Working Capital Highlights
As of June 30, 2010, ViroPharma's working capital was $465.4 million, which represents a $59.0 million increase from December 31, 2009. Cash flow provided by operating activities for the six months ended June 30, 2010 was $92.2 million.
Looking ahead in 2010
ViroPharma is increasing the bottom of its Cinryze net sales guidance range and increasing our expense guidance for the year 2010. The following guidance provided by ViroPharma are projections, based upon numerous assumptions, all of which are subject to certain risks and uncertainties. For a discussion of the risks and uncertainties associated with these forward looking statements, please see the Disclosure Notice below.
For the year 2010, ViroPharma expects the following:
Conference Call and Webcast
ViroPharma is hosting a live teleconference and webcast with senior management to discuss the financial announcement, guidance, and other business results on July 28, 2010 at 9:00 a.m. Eastern. To participate in the conference call, please dial (888) 299-4099 (domestic) and (302) 709-8337 (international). After placing the call, please tell the operator you wish to join the ViroPharma investor conference call.
Alternatively, the live webcast of the conference call can be accessed via ViroPharma's website at http://www.viropharma.com. Windows Media or Real Player will be needed to access the webcast. An audio archive will be available at the same address until August 11, 2010.
About ViroPharma Incorporated
ViroPharma Incorporated is an international biopharmaceutical company committed to developing and commercializing innovative products for physician specialists to enable the support of patients with serious diseases for which there is an unmet medical need, and providing rewarding careers to employees. ViroPharma commercializes Cinryze(TM) (C1 esterase inhibitor [human]) for routine prophylaxis against angioedema attacks in adolescent and adult patients with hereditary angioedema (HAE). ViroPharma commercializes Vancocin® (Vancomycin Hydrochloride, USP), approved for oral administration for treatment of antibiotic-associated pseudomembranous colitis caused by Clostridium difficile and enterocolitis caused by Staphylococcus aureus, including methicillin-resistant strains (for prescribing information on ViroPharma's commercial products, please download the package inserts at http://www.viropharma.com/Products.aspx). ViroPharma currently focuses its drug development activities in diseases including C1 esterase inhibitor deficiency and C. difficile infection.
ViroPharma routinely posts information, including press releases, which may be important to investors in the investor relations and media sections of our company's web site, www.viropharma.com. The company encourages investors to consult these sections for more information on ViroPharma and our business.
Certain statements in this press release contain forward-looking statements that involve a number of risks and uncertainties. Forward-looking statements provide our current expectations or forecasts of future events. Forward looking statements in this press release include our financial guidance for 2010, statements regarding the estimated timeline to increase manufacturing capacity for Cinryze and the timing and results thereof as well as our ability to receive necessary regulatory approvals related to manufacturing capacity increases for Cinryze and the timing of our clinical programs.
We have opposed both the substance of the FDA's bioequivalence method and the manner in which it was developed. The FDA convened a meeting of its Advisory Committee for Pharmaceutical Science and Clinical Pharmacology to discuss bioequivalence recommendations for oral vancomycin hydrochloride capsule drug products on August 4, 2009. The Advisory Committee was asked if the proposed guidelines are sufficient for establishing bioequivalence for generic vancomycin oral capsules. The Advisory Committee voted unanimously in favor of the component of the proposed OGD recommendation. In the event the OGD's revised approach regarding the conditions that must be met in order for a generic drug applicant to request a waiver of in-vivo bioequivalence testing for Vancocin remains in effect, the time period in which a generic competitor may enter the market would be reduced. There can be no assurance that the FDA will agree with the positions stated in our Vancocin related submissions or that our efforts to oppose the OGD's March 2006 and December 2008 recommendation to determine bioequivalence to Vancocin through in-vitro dissolution testing will be successful. We cannot predict the timeframe in which the FDA will make a decision regarding either our citizen petition for Vancocin or the approval of generic versions of Vancocin. If we are unable to change the recommendation set forth by the OGD in March 2006 as revised in December 2008 and voted upon by the Advisory Committee for Pharmaceutical Science and Clinical Pharmacology, the threat of generic competition will be high. The entry of competing generic products will significantly affect our sales of Vancocin and our financial performance.
Our actual results may vary depending on a variety of factors, including:
There can be no assurance that we will conduct additional studies or that we will be successful in gaining regulatory approval of Cinryze for additional indications, formulations or in additional territories, including in Europe. In addition, approval of a competing product which has been granted orphan drug designation in Europe could prevent Cinryze from reaching the market for acute treatment of HAE. There can be no assurance that the FDA or EMEA will not require additional or unanticipated studies or clinical trial outcomes before granting regulatory approval of any of our product candidates, or that we will be successful in gaining regulatory approval of any of our product candidates. These factors, and other factors, including, but not limited to those described in ViroPharma's annual report on Form 10-K for the year ended December 31, 2009 and quarterly report on Form 10-Q for the period ended March 31, 2010, could cause future results to differ materially from the expectations expressed in this press release. The forward-looking statements contained in this press release may become outdated over time. ViroPharma does not assume any responsibility for updating any forward-looking statements.
-- Achieved a record $109 million in net product sales; -- Increased Cinryze net sales by 58 percent over prior year's second quarter to $40 million; -- Attained Non-GAAP adjusted net income of $36 million, representing 38 percent growth over the prior year second quarter; GAAP net income reached $29 million; -- Delivered record positive cash flows from operations of $54 million; -- Improved working capital to $465 million as of June 30, 2010, including cash, cash equivalents and short-term investments of $406 million; -- Submitted the Cinryze industrial scale manufacturing Prior Approval Supplement (PAS) to the U.S. Food and Drug Administration (FDA); -- Introduced parallel chromatography-produced Cinryze into the trade for sale; -- Completed Phase 1 study of non-toxigenic C. difficile (VP20621); -- Initiated Phase 2 study of subcutaneous administration of Cinryze.
SOURCE ViroPharma Incorporated
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