MONT-SAINT-HILAIRE, QUEBEC -- 11/29/07 --
Axcan Pharma Inc. (TSX: AXP)(NASDAQ: AXCA) today announced fourth quarter and year-end financial results. Axcan's fiscal year 2007 was very successful with strong operating results and cash flows. All amounts are in U.S. dollars.
"In line with our accomplishments since the beginning of the year, our fourth quarter performance was exceptionally strong, as we realized significant increases in revenue across all product groups, mainly driven by high prescription growth. In addition, we are very pleased to have delivered on the financial and operating commitments that we established at the start of the year. Not only did we significantly increase revenue and income, thus strengthening our base business, but we successfully launched PYLERA in the United States, submitted our complete NDA for ULTRASE, in-licensed Cx401, a new product to extend the depth of our research and development portfolio, and expanded revenue from our international operations," stated Frank Verwiel, M.D., President and Chief Executive Officer of Axcan.
"We are truly excited about the prospects and growth opportunities across the Company in 2008 and, based on our current outlook, fiscal 2008 should be an exciting time for Axcan, both from a customer and shareholder perspective," he added.
Total revenue for the three months ended September 30, 2007, was $92.5 million, compared with $72.3 million for the fourth quarter of fiscal 2006, an increase of 27.9%. Total revenues for the 12-month period ended September 30, 2007, were $348.9 million, exceeding the top end of the Company's previously issued guidance of $335-343 million. This compares with $292.3 million for 2006, and represents an increase of 19.4%.
Based on its best estimate derived from information obtained from a number of its wholesalers in the United States, the Company believes that changes in wholesaler inventory levels favourably impacted revenue by approximately $7.0 million for the fourth quarter of fiscal 2007. The Company believes that increases in wholesaler inventory levels did not have a material impact on revenues for the 12-month period ended September 30, 2007. The Company estimates that at the end of its fourth quarter, overall wholesaler inventory levels of key products sold in the United States were at the higher end of the four- to six-week range.
Net income for the fourth quarter of fiscal 2007 was $16.8 million or $0.30 of diluted income per share, compared with net income of $8.3 million or $0.17 of diluted income per share for the corresponding period in fiscal 2006. Net income for the fourth quarter included a $10.0 million-provision ($7.6 million post-tax) for the upfront payment related to the in-licensing of Cx401. This charge had a negative impact on post-tax income per share of $0.14 for this quarter. The Company's research and development and selling and administrative expenses were within the range given in previously issued guidance.
Diluted income per share for fiscal 2007 was $1.33, compared with diluted income per share of $0.79 the prior year.
PRODUCT DEVELOPMENT PIPELINE UPDATE
An update on Axcan's major projects follows:
ULTRASE-VIOKASE
In April 2004, the United States Food and Drug Administration ("FDA") formally notified manufacturers of pancreatic insufficiency products that these drugs, which include ULTRASE and VIOKASE, must receive approval before April 2008, in order to remain on the market. This deadline was recently extended to April 2010. The FDA has published final guidelines aimed at assisting manufacturers of exocrine pancreatic insufficiency drug products in preparing and submitting these New Drug Applications ("Guidance for Industry - Exocrine Pancreatic Insufficiency Drug Products - Submitting NDAs"; April 2006). Axcan completed the clinical trial program and produced the CMC (Chemistry, Manufacturing and Control) Data required for its NDA for ULTRASE and submitted the NDA in the fourth quarter of fiscal 2007. The clinical work required for Axcan to submit an NDA for VIOKASE is currently ongoing. For both products the Company expects to be compliant with the FDA-defined timelines.
CANASA MAX-002
Axcan has initiated the CANASA MAX-002 program, a Phase III clinical trial to evaluate the efficacy and safety of a novel, high-concentration, 1-gram mesalamine suppository for the treatment of ulcerative proctitis. Ulcerative proctitis is a subgroup of ulcerative colitis, one of the most common inflammatory bowel diseases. For approximately 30% of patients with ulcerative colitis, the illness begins as ulcerative proctitis where bowel inflammation is limited to the rectum. Currently, it is estimated that there are 1 million cases of inflammatory bowel disease in the U.S. with approximately 400,000 new cases every year.
In June 2007, the FDA issued draft guidance on the type of clinical program required for the approval of mesalamine suppositories. Based on this guidance, Axcan temporarily suspended the recruitment of this trial and expects to resume it in the first half of calendar 2008, upon completion of ongoing discussions with the FDA.
PYLERA
Axcan intends to initiate a Phase III clinical program with PYLERA in Europe to obtain approval to market this therapy for the eradication of Helicobacter pylori. This Phase III clinical trial will be conducted in approximately 400 patients and will compare Axcan's PYLERA regimen given in combination with omeprazole, to the widely used OAC triple therapy (20 mg of omeprazole, 1 g of amoxicillin and 500 mg of clarithromycin). The trial is expected to be completed in the second half of calendar 2009. PYLERA was successfully launched in the United States in fiscal 2007.
AGI-010
Axcan and AGI Therapeutics, plc. ("AGI") are co-developing AGI-010, a delayed/controlled release formulation of the Proton Pump Inhibitor ("PPI") drug omeprazole, which is being developed for the treatment of gastro-oesophageal reflux disease ("GERD"), and in particular to address the control of night-time gastric acidity, known as Nocturnal Acid Breakthrough ("NAB"). NAB remains a significant unmet medical need, and is estimated to occur in more than 50% of GERD patients on a PPI therapy.
Development of the final formulation for this compound showed encouraging results that the Company has decided to investigate further. An additional formulation study has been initiated and is expected to be completed in the first half of calendar 2008. Once this process is finalized, Axcan and AGI intend to make a decision on the most appropriate development and filing strategy for this product.
CX401
On September 30, 2007, Axcan entered into an exclusive license and development agreement with Cellerix SL of Spain, for the North American (United States, Canada and Mexico) rights to Cx401, an innovative biological product in development for the treatment of perianal fistulas.
A Phase II trial conducted in 50 patients in Europe demonstrated the efficacy and safety of Cx401. This randomized, open-label, parallel assignment study evaluated the safety and efficacy of Cx401 in the treatment of perianal fistulas in Crohn's and non-Crohn's Disease patients. The primary endpoint for this study was photographically assessed complete closure and healing, and showed a 71% response rate in the acute phase, both in Crohn's and non-Crohn's Disease patients. Results of this study were presented at Digestive Disease Week (DDW) in May 2007 (Garci-Olmo D. et al., "Expanded Adipose-Derived Stem Cells (Cx401) for the Treatment of Complex Perianal Fistula. A Phase II Clinical Trial" (DDW 2007; Abstract: 492)) and are pending publication.
Axcan will be responsible for the development of this product in North America, and expects to initiate a Phase IIb study in North America in fiscal 2008. Details of this study will be communicated upon its initiation.
NMK 150
Axcan is developing NMK 150, a new high protease pancrelipase preparation developed for the relief of pain in small duct chronic pancreatitis, which represents an unmet medical need. A dose-ranging, animal study assessing the toxicity of NMK 150, which paid special attention to duodenal irritation, confirmed the safety profile of this compound. A Phase I, ascending, multiple-dose clinical study was also completed and confirmed the safety and tolerability of this compound alone and in combination with a PPI. The final Phase I study report should be available at the beginning of calendar 2008.
SUDCA (Ursodiol disulfate)
Axcan is currently studying the use of SUDCA, a new ursodiol derivative, in the prevention of the recurrence of colorectal adenomateous polyps, considered to be a pre-cancerous stage of colorectal cancer.
Preliminary results of studies conducted with SUDCA showed that ursodiol disulfate reduces the number of aberrant crypts in a rat model of colon cancer. Aberrant crypts are considered to be early abnormal changes in the intestinal lining that are precursors to colon cancer.
In addition to these animal studies, a single, ascending-dose Phase I clinical study was completed in early 2006, and a multiple, ascending-dose Phase I study was completed in September 2006, to evaluate the safety, tolerability and preliminary pharmacokinetics of SUDCA. Both studies confirmed the safety and tolerability of this compound. The final Phase I study report should be available at the beginning of calendar 2008.
INTERIM FINANCIAL REPORT
This release includes, by reference, the unaudited fourth quarter and fiscal year financial reports incorporating the financial statements in accordance with U.S. GAAP, as well as the Management Discussion & Analysis.
ABOUT AXCAN PHARMA
Axcan is a leading multinational specialty pharmaceutical company focused on gastroenterology. The Company develops and markets a broad line of prescription products to treat a range of gastrointestinal diseases and disorders such as inflammatory bowel disease, irritable bowel syndrome, cholestatic liver diseases and complications related to pancreatic insufficiency. Axcan's products are marketed by its own specialized sales forces in North America and Europe and through commercial collaborations in many markets around the world. Its common shares are listed on the NASDAQ Global Market under the symbol "AXCA" and on the Toronto Stock Exchange under the symbol "AXP".
"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 and the CanadianSecurities regulators. The Company cautions that the foregoing list of factors that may affect future results is not exhaustive. Axcan undertakes no obligation to update or revise any forward-looking statement, unless obligated to do so pursuant to applicable securities laws and regulations.
The names AXCAN, AXCAN PHARMA, CANASA, CARAFATE, DELURSAN, LACTEOL, PANZYTRAT, PYLERA, SALOFALK, ULTRASE, URSO, URSO DS, URSO 250, URSO FORTE and VIOKASE appearing in this press release are trademarks or registered trademarks of Axcan Pharma Inc. and its subsidiaries.
CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share related data)
September 30, September 30,
2007 2006
------------------------------------------------------------------------
(unaudited)
$ $
Assets
Current assets
Cash and cash equivalents 179,672 55,830
Short-term investments, available for sale 129,958 117,151
Accounts receivable, net 36,674 30,939
Income taxes receivable 10,092 8,987
Inventories 26,706 37,349
Prepaid expenses and deposits 3,070 3,699
Deferred income taxes 15,955 8,423
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Total current assets 402,127 262,378
Property, plant and equipment, net 31,197 28,817
Intangible assets, net 367,217 375,680
Goodwill, net 27,467 27,467
Deferred debt issue expenses, net - 1,475
Deferred income taxes 4,603 -
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Total assets 832,611 695,817
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Liabilities
Current liabilities
Accounts payable and accrued liabilities 83,196 60,733
Income taxes payable 18,938 2,099
Instalments on long-term debt 527 681
Deferred income taxes 2,076 1,104
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Total current liabilities 104,737 64,617
Long-term debt 122 125,565
Deferred income taxes 37,555 38,211
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Total liabilities 142,414 228,393
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Shareholders' Equity
Capital stock
Preferred shares, without par value;
unlimited shares authorized: no shares
issued - -
Series A preferred shares, without
par value; shares authorized: 14,175,000;
no shares issued - -
Series B preferred shares, without par
value; shares authorized: 12,000,000;
no shares issued - -
Common shares, without par value;
unlimited shares authorized:
55,359,652 issued and outstanding as
at September 30, 2007 and 45,800,581
as at September 30, 2006 395,888 262,786
Retained earnings 249,371 177,906
Additional paid-in capital 9,089 4,967
Accumulated other comprehensive income 35,849 21,765
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Total shareholders' equity 690,197 467,424
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Total liabilities and shareholders' equity 832,611 695,817
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CONSOLIDATED OPERATIONS
(in thousands of U.S. dollars, except share related data - Unaudited)
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For the For the
three-month three-month For the For the
period ended period ended year ended year ended
September 30, September 30, September 30, September 30,
2007 2006 2007 2006
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$ $ $ $
Revenue 92,472 72,251 348,947 292,317
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Cost of goods
sold (a) 22,562 18,261 83,683 72,772
Selling and
administrative
expenses (a) 27,714 21,548 101,273 93,338
Research and
development
expenses (a) 7,247 15,347 28,655 39,789
Depreciation and
amortization 5,839 5,922 22,494 22,823
Acquired in-process
research 10,000 - 10,000 -
Partial write-down
of intangible assets - - - 5,800
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73,362 61,078 246,105 234,522
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Operating income 19,110 11,173 102,842 57,795
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Financial expenses 123 1,729 4,825 6,988
Interest income (3,844) (2,131) (11,367) (5,468)
Loss (gain) on
foreign currency 1,314 (447) 2,352 (1,110)
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(2,407) (849) (4,190) 410
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Income before
income taxes 21,517 12,022 107,032 57,385
Income taxes 4,729 3,750 35,567 18,266
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Net income 16,788 8,272 71,465 39,119
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Income per common
share
Basic 0.30 0.18 1.47 0.86
Diluted 0.30 0.17 1.33 0.79
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Weighted average
number of common
shares
Basic 55,320,766 45,790,628 48,466,980 45,741,419
Diluted 56,122,330 55,031,340 55,724,405 55,064,496
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(a) Exclusive of depreciation and amortization
KEY PRODUCT INFORMATION
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Prescriptions
Q4 2007 Fiscal 2007 Increase(1), (2)
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Sales Sales Sales Sales Fiscal
(US$ M) increase (US$ M) increase Q4 2007 2007
(%) (%) (%) (%)
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NORTH AMERICA
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CANASA 16.5 4.5 65.1 22.6 2.5 3.9
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SALOFALK 4.9 19.1 19.3 16.7 4.7 7.2
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ULTRASE 15.3 92.4 47.9 22.6 10.4 7.4
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URSO 250 / FORTE / DS 21.1 37.3 77.0 25.1 0 1.9
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CARAFATE 14.6 57.0 50.2 21.7 3.2 6.3
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EUROPE
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LACTEOL 3.0 (24.2) 16.3 (10.0) n/a n/a
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PANZYTRAT 2.4 (35.6) 14.8 22.6 n/a n/a
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DELURSAN 4.3 22.0 16.7 20.0 n/a n/a
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(1) Compared with the same period a year earlier
(2) Based on IMS Prescription Data for products sold in the United States,
except for SALOFALK sold in Canada
PRODUCTS IN NORTH AMERICA
CANASA
U.S. prescriptions for the fourth quarter and fiscal 2007 increased 2.5% and 3.9%, respectively, compared to the same periods in fiscal 2006. In 2006, although CANASA 500 mg had already been removed from the market, this dosage form was still minimally prescribed. An analysis of trends for CANASA 1000 mg alone shows that total prescriptions were up 5.7% for the quarter and 12.9% for the year, compared to the same periods in the prior year. Considering that the prescription size in units dispensed of CANASA 1000 mg suppositories is similar to CANASA 500 mg, and taking into consideration the price differential between the 1000 mg and a 500 mg dosage forms, the Company believes that it is experiencing significantly higher dollar growth than prescription growth.
U.S. sales for the fourth quarter and fiscal 2007 increased 4.5% and 22.6%, respectively, compared to the same periods in fiscal 2006. For the year, the dollar growth for this product does not reflect prescription growth, due to wholesaler ordering patterns experienced during both periods presented. Furthermore, as Axcan transitioned to new eligibility rules in its patient assistance programs, the Company continues to realize revenues from prescriptions that were provided free of charge or at a reduced cost in prior periods.
ULTRASE
U.S. prescriptions increased 10.4% and 7.4% for the fourth quarter and fiscal 2007, respectively, compared to the same periods in fiscal 2006. Axcan is beginning to realize sales from the steatorrhea market, within the general gastrointestinal market outside of Cystic Fibrosis.
U.S. sales for the fourth quarter and fiscal 2007 increased 92.4% and 22.6%, respectively, compared to the same periods in fiscal 2006, based on prescription growth as well as wholesaler ordering patterns experienced during the fourth quarter of fiscal 2007 and the comparable quarter for fiscal 2006. The Company continues to leverage its Care First and Comprehensive Care for CF Patients programs.
URSO 250/URSO FORTE/URSO DS
U.S. prescriptions for the fourth quarter and fiscal 2007 were almost flat compared with the same periods in fiscal 2007. Total dollarized unit growth, when adjusted for the dosage strength differential between 250-mg dosage, and 500-mg dosage prescriptions, showed a 2.9% increase during the fourth quarter and 4.8% for the year. Furthermore, as Axcan transitions to new eligibility rules in its patient assistance programs, the Company is realizing revenues from prescriptions that were provided free of charge, or at a reduced cost in prior periods. The Company has also seen an increase in the prescription size that contributed to dollar sales during the fourth quarter of fiscal 2007 and fiscal 2007.
Total sales for URSO products in North America for the fourth quarter and fiscal 2007 increased 37.3% and 25.1%, respectively, compared to the same periods in fiscal 2006. However, the dollar growth does not reflect the prescription growth for this product, due to wholesaler ordering patterns experienced during the fourth quarter of fiscal 2007 and the comparable quarter for fiscal 2006. As expected, Canadian URSO sales were impacted by generic erosion during the quarter, but the Company believes that sales are beginning to stabilize.
CARAFATE
U.S. prescriptions for the fourth quarter and fiscal 2007 increased 3.2% and 6.3%, respectively, compared to the same periods in fiscal 2006, as the Company continues to benefit from the promotional efforts in fiscal 2007 on CARAFATE oral suspension, which created prescription growth and increased the size of the prescription dispensed.
U.S. sales for the fourth quarter and fiscal 2007 increased 57.0% and 21.7%, respectively. The instability of wholesaler inventory levels in 2006 is the main reason for the difference seen between prescriptions and sales results.
PRODUCTS IN EUROPE
LACTEOL
For the fourth quarter, sales of LACTEOL in Europe and elsewhere in the world decreased 24.2% as compared to the same period last year and declined 10.0% for fiscal 2007, as compared to fiscal 2006. In local currency, LACTEOL sales decreased 28.7% for the quarter and decreased 17.0% for the year. Although sales in France bottomed out following the French government's decision in March 2006 to discontinue reimbursement for this product, an additional decline was experienced this quarter as the incidence of this condition is lowest during the summer period. In Germany the product grew 10% in local currency.
PANZYTRAT
For the fourth quarter, sales of PANZYTRAT expressed in U.S. dollars decreased 35.6% and decreased 39.6% in local currency, compared to the same period in 2006. For fiscal 2007, PANZYTRAT sales expressed in U.S. dollars increased 22.6% and increased 13.8% in local currency, compared to the same period in fiscal 2006. The increase over the fiscal year is largely due to a strong sales performance of this product in Germany, and also to the positive impact of distribution agreements with new partners that have been signed for the export markets over the last few months.
DELURSAN
For the fourth quarter and fiscal 2007, sales of DELURSAN expressed in U.S. dollars increased 22.0% and 20.0%, respectively, compared to the same periods in 2006. In local currency, DELURSAN sales increased 14.4% and 11.1% respectively, compared to the same periods in fiscal 2006. This is mainly due to the Company's ongoing efforts in focusing its commercial activities on gastroenterologists in France.
Contacts:
Axcan Pharma Inc.
Isabelle Adjahi
Senior Director, Investor Relations and Communications
450-467-2600 ext. 2000
www.axcan.com
