News: Sepracor Inc. Reports 2007 Fourth Quarter and Full-Year …
Sepracor Inc. (Nasdaq: SEPR) today announced its consolidated
financial results for the fourth quarter and full-year ended December
31, 2007.
As announced in Sepracor’s Current Report on Form 8-K, which was
filed with the Securities and Exchange Commission on January 28, 2008,
Sepracor has concluded that certain of its previously filed financial
statements should no longer be relied upon due to matters relating to
the company’s government pricing. As a result, the company’s
management, with the oversight of the Audit Committee, has been
reviewing the company’s government pricing. Based on such review, the
company intends to restate its financial statements for the years
ended December 31, 2006 and 2005 and the quarters ended March 31, June
30 and September 30, 2007 and 2006, to reduce the amount of product
revenues earned during such periods. The company intends to include
the December 31, 2006 and 2005 restatements in its Annual Report on
Form 10-K for the year ended December 31, 2007, which it plans to file
today. The company intends to file amendments to its quarterly reports
on Form 10-Q for the periods ended March 31, June 30 and September 30,
2007, which will include the restated financial statements for such
quarters as well as for the quarters ended March 31, June 30 and
September 30, 2006. The financial information included in this press
release has been adjusted to reflect the restatements. The aggregate
amount by which Sepracor has reduced revenues in prior periods is
approximately $60.2 million. Revenues were reduced by a cumulative
total of $8.2 million for the first three quarters of 2007 and by
$13.4 million, $19.8 million, $7.8 million and $8.0 million for the
years ended December 31, 2006, 2005, 2004 and 2003, respectively.
Included in the accumulated deficit balance at January 1, 2003 is the
cumulative impact of a $3.0 million reduction of revenue for periods
prior to the year ended December 31, 2003. Such amounts are based on
estimates and assumptions made by Sepracor’s management and the
company cannot be certain that it has not overestimated the amount of
additional rebates it may be required to pay, that the amount of any
additional rebate payments or other payments the company may owe will
not exceed its current estimates or that the company will not be
subject to additional penalties.
For the three months ended December 31, 2007, total revenues were
approximately $340.0 million compared to revenues of $353.3 million
during the same quarter in 2006. The reduction of revenues in the
fourth quarter 2007 compared to the fourth quarter 2006 were primarily
attributable to the impact of the decision made by the Centers for
Medicare and Medicaid Services (CMS) during the second quarter 2007 to
institute a new, bundled payment amount for XOPENEX(R) brand
levalbuterol HCl Inhalation Solution and generic albuterol inhalation
solution products. Net loss for the quarter was approximately $5.0
million, or $0.05 per diluted share, compared to net income of $95.2
million, or $0.82 per diluted share, for the fourth quarter of 2006.
Included in the fourth quarter 2007 results is a $75 million, or $0.70
per diluted share, upfront payment that Sepracor made to Bial as part
of the licensing agreement for the development and commercialization
of Bial’s anti-epileptic compound, eslicarbazepine acetate, in the
U.S. and Canada.
Total revenues for the full-year ended December 31, 2007 increased
to $1,225.2 million compared to revenues of $1,183.1 million for the
same period in 2006. Revenues for the full-year 2007 were impacted by
the decision made by the CMS during the second quarter 2007 to
institute a new, bundled payment amount for XOPENEX Inhalation
Solution and generic albuterol inhalation solution products. Excluding
XOPENEX Inhalation Solution revenues, the combined revenue growth for
products/alliance revenue year-over-year was 15.3%. Net income for the
full-year ended December 31, 2007 was approximately $58.3 million, or
$0.50 per diluted share, compared to $171.2 million, or $1.48 per
diluted share, for the full-year ended December 31, 2006. Included in
the results for the full-year ended December 31, 2007 is an after-tax
charge of $32.9 million, or $0.28 per diluted share, that was applied
during the first quarter and relates to the settlement of two class
action lawsuits related to tecastemizole, as well as a $75 million, or
$0.70 per diluted share, upfront payment that Sepracor made to Bial
during the fourth quarter as part of the licensing agreement for the
development and commercialization of eslicarbazepine acetate, in the
U.S. and Canada.
As of December 31, 2007, Sepracor had approximately $1,066 million
in cash and short- and long-term investments.
“This past year was a challenging but transitional year for
Sepracor. We took major steps toward securing the next phase of our
planned growth, as evidenced by our corporate partnerships for the
LUNESTA franchise outside of the U.S., advancements in our clinical
pipeline, and strengthening of our commercial capabilities and
organization,” said Adrian Adams, President and Chief Executive
Officer of Sepracor. “In addition, we are very pleased to have
in-licensed two new products from Nycomed, OMNARIS AQ and ALVESCO HFA,
intended for launch in 2008, and four additional product candidates to
add to our growing pipeline of products, one of which - Bial’s
eslicarbazepine acetate - represents another potential near-term
launch opportunity. 2008 promises to be an exciting year for the
company and we are well-positioned for a period of potential product
launches and continued revenue and earnings opportunities.
LUNESTA brand eszopiclone revenues grew to $149.8 million in the
fourth quarter of 2007 compared to $147.6 million for the same quarter
in 2006. Full-year 2007 revenues for LUNESTA were $600.9 million, an
increase of 6.3%, compared to full-year 2006 revenues of $565.4
million. LUNESTA is indicated for the treatment of insomnia. In 2007,
LUNESTA prescriptions grew 5.9% compared with 2006 to approximately
6.91 million.
XOPENEX Inhalation Solution, which is a short-acting beta-agonist
indicated for the treatment or prevention of bronchospasm in patients
with asthma and chronic obstructive pulmonary disease (COPD),
accounted for $142.4 million of revenues for the fourth quarter 2007,
compared to $176.3 million for the same quarter in 2006. Full-year
2007 revenues for XOPENEX Inhalation Solution were $487.2 million
compared to $542.9 million for the full-year 2006. The reduction of
XOPENEX Inhalation Solution revenues for the full year and fourth
quarter 2007 compared to the full year and fourth quarter 2006, was
primarily attributable to the impact of the decision made by CMS
during the second quarter 2007 to institute a new, bundled payment
amount for XOPENEX Inhalation Solution and generic albuterol
inhalation solution products. The new reimbursement rate, which went
into effect on July 1, 2007, resulted in a significantly lower
per-unit payment for the 1.25 mg dose of XOPENEX Inhalation Solution
(the dose most commonly used by Medicare Part B beneficiaries),
compared to the rate paid in the previous quarters.
XOPENEX HFA(R) brand levalbuterol tartrate Inhalation Aerosol, a
hydrofluoroalkane (HFA) metered-dose inhaler (MDI) formulation of
levalbuterol, accounted for $24.9 million of revenues during the
fourth quarter 2007 compared to $20.9 million for the same period in
2006. Full-year 2007 revenues were $74.9 million, an increase of
82.7%, compared to revenues of $41.0 million for the full-year 2006.
We believe this increase was principally due to the continued
transition of patients previously using chlorofluorocarbon (CFC)
albuterol MDIs. CFC-containing albuterol MDIs are required to be
phased out before the end of 2008. As a result, patients are
increasingly transitioning to HFA MDIs.
BROVANA(R) brand arformoterol tartrate Inhalation Solution, a
long-acting, twice-daily maintenance treatment of bronchoconstriction
in patients with COPD, was commercially introduced in April 2007, and
accounted for $6.3 million of revenues for the fourth quarter. For the
April through December 2007 period, BROVANA revenues were $14.3
million. A significant portion of patients with COPD are Medicare
beneficiaries, and the majority of future BROVANA revenues are
expected to come from non-retail channels such as home health care.
During the fourth quarter of 2007, CMS established a permanent,
product-specific billing code, or J code, for BROVANA under the
Medicare Part B benefit. The permanent J code became effective on
January 1, 2008.
Sepracor continues to earn royalty revenues on sales of
out-licensed antihistamine products, which include Schering-Plough’s
CLARINEX(R) brand desloratadine, sanofi-aventis’ ALLEGRA(R) brand
fexofenadine HCl and UCB’s XYZAL(R)/XUSAL(TM) brand levocetirizine.
These products accounted for combined royalty revenues of $16.4
million in the fourth quarter of 2007 compared to $8.4 million for the
same quarter in 2006. Full-year 2007 royalty revenues were $47.7
million compared to royalty revenues of $33.8 million for the
full-year 2006. In October 2007, UCB and sanofi-aventis launched XYZAL
in the U.S., and Sepracor is entitled to earn royalties on these
product sales.
Sepracor’s pipeline portfolio continues to advance. SEP-225289, a
novel triple reuptake inhibitor for the treatment of depression, began
a Phase II proof-of-concept study during the fourth quarter of 2007.
SEP-225441, a compound for the treatment of generalized anxiety
disorder, also began a Phase II proof-of-concept study during the
fourth quarter of 2007. SEP-227162, a dual reuptake inhibitor for the
treatment of depression, is expected to begin a Phase II
proof-of-concept study during the second quarter of 2008. In addition,
Sepracor submitted three new Investigational New Drug Applications
during the fourth quarter 2007 for product opportunities in
depression, and potentially broader clinical application to conditions
such as pain, bipolar disease, fibromyalgia and panic disorder.
In addition to Sepracor’s pipeline portfolio, the company
established an exclusive licensing arrangement with Bial for
development and commercialization of eslicarbazepine acetate, a new
chemical entity Phase III anti-epileptic compound in the U.S. and
Canada. Sepracor anticipates making a New Drug Application submission
to the U.S. Food and Drug Administration (FDA) in late 2008 or early
2009 with a potential product launch in late 2009 or early 2010,
subject to FDA approval. Also, Sepracor has obtained development
rights to several ciclesonide line extensions through the Nycomed
agreement, which have the potential to broaden the ciclesonide and
current Sepracor respiratory franchises. These programs include
OMNARIS HFA MDI, a Phase II candidate; ALVESCO inhalation solution, a
preclinical candidate; and ALVESCO in combination with a long-acting
beta-agonist, an early clinical candidate.
For the full year 2008, revenues are projected to be in a range of
$1,350- $1,450 million, thus representing approximately a 14.3%
increase in revenues compared with 2007. Fully diluted earnings per
share for the full year 2008 are projected to be in the range of $1.40
- $1.80. We expect that key financial ratios in the organization will
continue to move in a positive direction with approximately 22% of
2008 revenues projected to be spent on research and development. We
anticipate 2008 revenues projected to be spent on sales, marketing and
distribution expenses will decrease by approximately 10% in 2008
compared with 2007. These sales and marketing expenses include plans
to increase our sales force capacity during 2008 by the addition of at
least 200 sales professionals to accommodate the commercialization of
the OMNARIS AQ and ALVESCO HFA products.
About Sepracor
Sepracor Inc. is a research-based pharmaceutical company dedicated
to treating and preventing human disease by discovering, developing
and commercializing innovative pharmaceutical products that are
directed toward serving unmet medical needs. Sepracor’s drug
development program has yielded a portfolio of pharmaceutical products
and candidates with a focus on respiratory and central nervous system
disorders. Sepracor’s corporate headquarters are located in
Marlborough, Massachusetts.
Forward-Looking Statement
This news release contains forward-looking statements that involve
risks and uncertainties, including statements with respect to the
successful development and commercialization of the company’s
pharmaceutical products under development; the safety, efficacy,
potential benefits, possible uses and commercial success of LUNESTA
brand eszopiclone, XOPENEX brand levalbuterol HCl Inhalation Solution,
XOPENEX HFA brand levalbuterol tartrate Inhalation Aerosol, BROVANA
brand arformoterol tartrate Inhalation Solution, and all of the
company’s pharmaceutical candidates; the planned expansion of sales
force capacity; the timing of commercial introduction of OMNARIS AQ
and ALVESCO HFA and the expected value of such products; the value
added by Sepracor’s partnerships for eszopiclone outside the U.S.; the
potential receipt of partnership milestones; the future growth of the
company’s research and development pipeline and its ability to
aggressively pursue synergistic corporate development and licensing
opportunities; the reorganization and restructuring of the company’s
commercial functions and its new focus on enhanced productivity; the
market opportunity for the XOPENEX HFA product and Sepracor’s ability
to capture a portion of the HFA market; Sepracor’s expectation as to
the timing of filing its annual report on Form 10-K and amended
quarterly reports on Form 10-Q; the company’s estimate of additional
rebate amounts, payments and any additional payments or penalties that
may be required, the restatement of the company’s financial statements
for prior periods and the impact thereof; and Sepracor’s expected
future growth, profitability and 2008 revenue and EPS guidance. Among
the factors that could cause actual results to differ materially from
those indicated by such forward-looking statements are: Sepracor’s
ability to fund, and the results of, further clinical trials with
respect to products under development; the timing and success of
submission, acceptance, and approval of regulatory filings; the scope
of Sepracor’s trademarks, patents and the patents of others and the
success of challenges by others of Sepracor’s patents; the clinical
benefits and commercial success of the company’s products; changes in
the use and/or label of LUNESTA or Sepracor’s other products; the
outcome of litigation and regulatory decisions relating to Sepracor’s
patents, products and product candidates; Sepracor’s ability to
realize the benefits of its recent sales force realignment and to
expand its sales force capacity to accommodate the launch of OMNARIS
AQ and ALVESCO HFA; private insurers such as managed care
organizations, adopting their own coverage restrictions or demanding
price concessions in response to state, Federal or administrative
action, such as CMS’s new, bundled payment amount for XOPENEX
Inhalation Solution; the ability of the company to attract and retain
qualified personnel; the ability of the company to successfully
collaborate with third parties; the performance of Sepracor’s
licensees, including Eisai and GlaxoSmithKline, and other
collaboration partners and its ability to enter into new licenses and
collaborations; the ability of Sepracor to develop and successfully
launch its newly acquired products and product candidates; Sepracor’s
ability to file required reports with the SEC; the continued ability
of Sepracor to meet its debt obligations when due; and certain other
factors that may affect future operating results, which are detailed
in the company’s quarterly report on Form 10-Q for the quarter ended
September 30, 2007 filed with the Securities and Exchange Commission
and other reports filed with the SEC.
In addition, the statements in this press release represent
Sepracor’s expectations and beliefs as of the date of this press
release. Sepracor anticipates that subsequent events and developments
may cause these expectations and beliefs to change. However, while
Sepracor may elect to update these forward-looking statements at some
point in the future, it specifically disclaims any obligation to do
so. These forward-looking statements should not be relied upon as
representing Sepracor’s expectations or beliefs as of any date
subsequent to the date of this press release.
Lunesta, Xopenex, Xopenex HFA and Brovana are registered
trademarks of Sepracor Inc. Omnaris is a trademark and Alvesco is a
registered trademark of Nycomed GmbH. Clarinex is a registered
trademark of Schering Corporation. Allegra is a registered trademark
of Merrell Pharmaceuticals. Xusal is a trademark and Xyzal is a
registered trademark of UCB, Societe Anonyme. Ambien CR is a
registered trademark of sanofi-aventis.
In conjunction with this Fourth Quarter and Full-Year 2007
Financial Results press release, Sepracor will host a conference call
and live webcast beginning at 8:30 a.m. ET on Feb. 29, 2008. To
participate via telephone, dial 973-582-2749, referring to access code
31736992. Please call ten minutes prior to the scheduled conference
call time. For live webcasting, go to the Sepracor web site at
www.sepracor.com and access the For Investors section. Click on either
the live webcast link or microphone icon to listen. Please go to the
web site at least 15 minutes prior to the call in order to register,
download, and install any necessary software. A PDF of the slides will
be available in the For Investors section of the web site as well as
in the left-hand navigation menu of the webcast viewer just prior to
the start of the call. A replay of the call will be accessible by
telephone after 11:30 a.m. ET and will be available for approximately
one week. To replay the call, dial 706-645-9291, access code 31736992.
A replay of the web cast will be archived on the Sepracor web site in
the For Investors section.
Condensed, consolidated statements of operations and consolidated
balance sheets follow.
Sepracor Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three months ended Twelve months ended
December 31, December 31,
2007 2006 2007 2006
(as (as
restated) restated)
(1) (1)
——– ———- ———- ———–
Revenues:
Product sales $323,530 $344,866 $1,177,256 $1,149,374
Royalties and other 16,450 8,397 47,974 33,759
——— ———- ———– ———–
Total revenues 339,980 353,263 1,225,230 1,183,133
Cost of revenue 33,587 33,187 117,155 104,736
——— ———- ———– ———–
Gross margin 306,393 320,076 1,108,075 1,078,397
Operating expenses:
Research and
development (2) 128,572 42,340 263,756 163,488
Sales and marketing 161,054 167,899 699,336 691,650
General and
administrative and
patent costs 22,863 20,263 81,529 72,143
Soltara class action
settlement - - 34,000 -
Restructuring
expense 6,921 - 6,921 -
——— ———- ———– ———–
Total operating
expenses 319,410 230,502 1,085,542 927,281
——— ———- ———– ———–
Income (loss)
from operations (13,017) 89,574 22,533 151,116
Other income (expense):
Interest income 11,717 13,486 46,599 46,589
Interest expense (62) (5,534) (3,020) (22,166)
Other income
(expense), net (95) 20 (1,002) (300)
——— ———- ———– ———–
Total other
income 11,560 7,972 42,577 24,123
Equity in investee
gain (loss) (66) 143 (507) (422)
——— ———- ———– ———–
Income (loss) before
income taxes (1,523) 97,689 64,603 174,817
Income taxes 3,478 2,531 6,270 3,656
——— ———- ———– ———–
Net income (loss) $ (5,001) $ 95,158 $ 58,333 $ 171,161
========= ========== =========== ===========
Net income (loss) per
common share - basic $ (0.05) $ 0.90 $ 0.55 $ 1.63
========= ========== =========== ===========
Net income (loss) per
common share - diluted $ (0.05) $ 0.82 $ 0.50 $ 1.48
========= ========== =========== ===========
Weighted average shares
outstanding - basic 107,498 105,340 106,847 104,943
Weighted average shares
outstanding - diluted 107,498 116,023 116,364 115,508
(1)Restatement
Net revenues
As previously
reported $357,155 $1,196,534
As restated $353,263 $1,183,333
Net income per
common share -
diluted
As previously
reported $ 0.85 $ 1.60
As restated $ 0.82 $ 1.48
(2)The three and twelve months ended December 31, 2007 includes the
up-front payment of $75 million related to the Bial licensing
deal. Sepracor Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
December December
31, 31,
ASSETS 2007 2006
(as
restated)
———- ———–
Cash, short and long-term investments $1,065,619 $1,166,324
Accounts receivable, net 159,644 175,103
Inventory, net 53,125 37,087
Property, plant and equipment, net 87,308 72,811
Investment in affiliate 4,313 5,107
Other assets 34,717 37,361
———- ———–
Total assets $1,404,726 $1,493,793
========== ===========
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable and accrued expenses $ 227,426 $ 123,850
Other liabilities 277,462 167,861
Debt payable 2,605 1,078
Convertible subordinated debt 720,820 1,160,820
Total stockholders’ equity 176,413 40,184
———- ———–
Total liabilities and stockholders’
equity $1,404,726 $1,493,793
========== ===========
*T
