MedImmune Reports Financial Results for First Quarter 2006
Recent highlights
- Phase 3 study to begin in 2006 with Abegrin(TM) in metastatic melanoma
patients
- Preclinical and clinical data with Abegrin presented at the annual
meeting of the American Association for Cancer Research and the
Canadian Melanoma Conference
- Dosing initiated in Phase 1 study with MEDI-545 in lupus patients
- Human papillomavirus vaccine licensed to GlaxoSmithKline (Cervarix(R))
submitted for marketing approval to European regulatory agency
GAITHERSBURG, Md., April 20 /PRNewswire-FirstCall/ -- MedImmune, Inc.
(Nasdaq: MEDI) announced today that total revenues for the 2006 first quarter
were $498 million compared to $510 million in the 2005 first quarter.
"While we continue to make excellent progress toward achieving our
long-term objectives of $2 billion in revenues and $2.00 in earnings per share
in 2009, before share-based compensation expense, our recent sales results
have been disappointing," stated David M. Mott, president and chief executive
officer. "As described on our year-end earnings call in February, several
factors impacted U.S. sales of Synagis(R) (palivizumab) at the outset of the
2005-2006 respiratory syncytial virus (RSV) season from which we had hoped to
be able to recover as the season progressed. Unfortunately, the effect of
these factors -- including changes in payer guidelines, disruptions in our
distribution network, and the one-time effects of Hurricanes Rita and Katrina
-- have taken a more significant toll on seasonal sales of Synagis than
previously expected. We have made a number of changes to our marketing and
sales organization and our Synagis distribution network and are in the process
of completing a significant expansion of our sales team in connection with the
previously announced buyout of Abbott's U.S. co-promotion rights for Synagis
following the 2005-2006 RSV season. Following a difficult 2005-2006 RSV
season, we expect worldwide reported Synagis sales to resume a pattern of high
single-digit growth rates in the second half of this year."
The company's net earnings for the 2006 first quarter were $47 million, or
$0.18 per diluted share, including share-based compensation expense and as
calculated in accordance with generally accepted accounting principles (GAAP).
Excluding share-based compensation expense, net earnings were $59 million, or
$0.23 per diluted share, compared to $114 million, or $0.45 per diluted share,
reported in the 2005 first quarter. The 2006 first quarter results reflect the
impact of the company's increased investment in its long-term business plan.
Mott continued, "With just under a third of product sales being reinvested
in research and development, we are making tremendous progress toward building
the long-term value of our business. In 2006, we expect to have two product
candidates in registration, approximately 15 additional product candidates in
clinical testing, including two in Phase 3 trials and at least three
Investigational New Drug applications. We have one of the most robust
pipelines in the biotechnology industry. We expect this pipeline will deliver
meaningful returns on our current investment in the 2007-to-2009 timeframe."
Product Sales
Total product sales for the 2006 first quarter were $492 million compared
to $509 million in the 2005 first quarter. Worldwide sales of Synagis were
$463 million in the 2006 first quarter compared to $472 million in the first
quarter last year. Sales of Synagis to our international distributor, Abbott
International (AI), were $29 million in the 2006 first quarter compared to $32
million in the 2005 first quarter, reflecting the timing of orders from AI. In
the U.S., sales of Synagis were $434 million in the 2006 quarter, compared to
$440 million in the first quarter of 2005. The factors that contributed to a
slower than expected start to the 2005-2006 RSV season in the U.S., as stated
above, continued to affect U.S. sales in the 2006 first quarter.
Worldwide sales of Ethyol(R) (amifostine) were $20 million in the 2006
first quarter compared to $23 million in the first quarter last year. The
company believes that the decrease in sales is primarily due to the continued
challenge presented by alternative therapies in the marketplace.
Margin and Operating Expense Analysis
On January 1, 2006, MedImmune adopted the new accounting standard
(Statement of Financial Accounting Standards No. 123R) that requires the
company to recognize expense associated with share-based compensation
arrangements, including stock options. This expense is reflected in inventory,
cost of goods sold, research and development (R&D) and selling, general and
administrative expenses (SG&A). To aid investors in understanding the
underlying components of our business, MedImmune has separately identified the
share-based compensation expense in the following discussion.
Gross margins on product sales were 75 percent in the 2006 first quarter
and 76 percent in the 2005 first quarter. The impact of seasonally low sales
volumes for FluMist continues to exert downward pressure on overall gross
margins. Excluding the impact of FluMist, first-quarter gross margins were 77
percent in both the 2006 and 2005 periods. Share-based compensation expense
did not significantly impact gross margins in the 2006 first quarter.
Research and development expenses were $88 million in the 2006 first
quarter. Excluding the impact of share-based compensation expense, R&D
expenses were $84 million in the 2006 first quarter compared to $69 million in
the 2005 first quarter. This increase in R&D expenses is primarily due to a
higher level of activity from new and ongoing collaboration agreements,
preclinical research and process development activities, and clinical trials
for product candidates, including Numax(TM).
Selling, general and administrative expenses were $212 million in the 2006
first quarter. Excluding the impact of share-based compensation expense, SG&A
expenses were $206 million, or 42 percent of product sales, in the 2006 first
quarter, up from $158 million, or 31 percent of product sales, in the 2005
first quarter. SG&A expense in the first quarter of 2006 included amortization
expense of $43 million, or 9 percent of product sales, related to the
reacquisition of domestic promotion rights to Synagis, and $90 million, or 18
percent of product sales, of co-promotion expense. Recurring SG&A expenses of
$73 million or 15 percent of product sales, included in the annualized impact
of 2005 additions to the pediatric sales organization.
The effective tax rate for the 2006 first quarter was 44 percent.
Excluding the impact of share-based compensation expense, the effective tax
rate was 37 percent compared to 35 percent reported in the 2005 first quarter,
reflecting the current absence of certain federal tax credits associated with
research and development activities and increased state taxes.
Share-based compensation expense before taxes approximated $10 million in
the 2006 first quarter, and was allocated to inventory, cost of goods sold,
R&D expense and SG&A expense. The after-tax impact of share-based compensation
expense was approximately $12 million. The total number of stock options
granted in the 2006 first quarter was 3.4 million, compared to 4.0 million in
the 2005 first quarter.
Other Results
Cash and marketable securities at March 31, 2006 were $1.6 billion as
compared to $1.5 billion at December 31, 2005. The increase is primarily due
to cash generated by operations during the quarter offset by continued
investment in property, plant and equipment.
2006 Guidance
As a convenience to investors, MedImmune is providing an update to its
previously issued guidance for 2006. MedImmune now expects that total revenues
for 2006 will grow about 4 percent to approximately $1.3 billion. Following
lower than expected sales of Synagis in the first half of 2006, MedImmune
believes that worldwide sales of Synagis will resume their pattern of growth
in the second half of the year such that worldwide sales of Synagis for the
full calendar year will be about even with 2005.
In the aggregate, MedImmune now expects the 2006 impact of share-based
compensation expense to be approximately $37 million, or $0.11 per diluted
share, and to be allocated in roughly the same proportion as in the first
quarter. The following guidance is provided excluding the impact of
share-based compensation expense.
- Gross margins are expected to be about 73 percent of product sales for
the full-year 2006.
- R&D expense in 2006 is expected to be approximately $375 million, or
about 31 percent of product sales.
- SG&A as a percentage of product sales is expected to be about 40
percent. SG&A is expected to include approximately seven percentage
points attributable to amortization of the repurchase of Synagis co-
promotion rights from Abbott and approximately eight percentage points
attributable to co-promotion expense. Co-promotion expenses are
expected to cease mid-year 2006, and will be only partially offset by
approximately $25 million in annualized selling expense due to the
addition of 125 new sales representatives.
- The company's effective tax rate is expected to be approximately 37
percent.
MedImmune expects 2006 earnings per diluted share will range from $0.30 to
$0.35 before share-based compensation expense, and $0.19 to $0.24, including
share-based compensation.
DISCLOSURE NOTICE AND FORWARD LOOKING STATEMENTS
This announcement contains historical financial information as of and for
the three-month periods ended March 31, 2006 and March 31, 2005 that is
unaudited (except for the balance sheet information as of December 31, 2005),
and MedImmune assumes no obligation to update this information based on new
information or future performance except as may be specifically required by
applicable law or regulation.
This announcement also contains forward-looking statements regarding
MedImmune's future financial performance and business prospects. Those
statements involve substantial risks and uncertainties and are present in the
section captioned "2006 Guidance," as well as other sections containing
statements with words such as "anticipate," "believe," "estimate," "expect,"
"intend," "project" or other terms of similar meaning. Those statements
reflect management's current beliefs and are based on numerous assumptions,
which MedImmune cannot control and which may not develop as MedImmune expects
for reasons set forth in MedImmune's Annual Report on Form 10-K for the year
ended December 31, 2005, its subsequent quarterly reports on Form 10-Q, its
current reports on Form 8-K filed for events occurring in 2006 and other
public disclosures and filings with the U.S. Securities and Exchange
Commission. Consequently, actual results may differ materially from those
projected in the forward-looking statements.
MedImmune is also developing several products for potential future
marketing and the overall success of these development efforts is important
for the company's long-term prospects. There can be no assurance that such
development efforts will succeed, that such products will receive required
regulatory clearance or that, even if such regulatory clearance is received,
such products will ultimately achieve commercial success.
This press release, including the reconciliation of certain historical
data presented in this release to their most comparable GAAP measures, can be
found on MedImmune's website at http://www.medimmune.com in the box marked
"News" or with the archived press releases on the Investor Summary page.
Conference Call & Webcast
MedImmune is offering a live webcast of a discussion by MedImmune
management of its earnings and other business results on Thursday, April 20,
2006 at 8:00 a.m. eastern time. The live webcast may be accessed in the
investor section of MedImmune's website, http://www.medimmune.com. A replay of
the webcast will also be available via the MedImmune website until April 27,
2006. An audio replay of the webcast will be available beginning at 10:00 a.m.
eastern time on April 20, 2006 and ending at midnight April 27, 2006 by
calling (888) 286-8010. The passcode for the audio replay is 84848704.
About MedImmune, Inc.
MedImmune strives to provide better medicines to patients, new medical
options for physicians, rewarding careers to employees, and increased value to
shareholders. Dedicated to advancing science and medicine to help people live
better lives, the company is focused on the areas of infectious disease,
cancer and inflammatory diseases. With more than 2,200 employees worldwide,
MedImmune is headquartered in Maryland. For more information, visit the
company's website at http://www.medimmune.com.
Cervarix(R) is a registered trademark of GlaxoSmithKline.
MedImmune, Inc.
Consolidated Statements of Operations
(in millions, except per share data)
(unaudited)
Three Months Ended
March 31,
2006 2005
Revenues:
Product sales $491.6 $508.7
Other revenue 6.4 1.1
Total revenues 498.0 509.8
Costs and expenses:
Cost of sales 123.1 119.8
Research and development 87.9 69.3
Selling, general and
administrative (1) 211.9 157.5
Other operating expenses 2.7 2.6
Total expenses 425.6 349.2
Operating income 72.4 160.6
Interest income, net 13.0 14.7
Gain (loss) on investment activities (0.8) 0.3
Earnings before income taxes 84.6 175.6
Provision for income taxes 37.6 61.5
Net earnings $ 47.0 $114.1
Basic earnings per share $ 0.19 $ 0.46
Shares used in computing basic
earnings per share 247.9 248.1
Diluted earnings per share (2) $ 0.18 $ 0.45
Shares used in computing diluted
earnings per share (2) 260.0 257.2
(1) In August 2005, the company acquired full promotion rights in the
U.S. for Synagis, effective July 1, 2006. In connection with this
transaction, the company recorded an intangible asset of $360.4
million which represents the fair value of the exclusive promotion
rights, determined as the aggregate value of the probable additional
payments to be made as a result of the amended terms of the agreement
in excess of the value of the co-promotion services to be rendered,
as determined under the previous agreement. Amortization expense of
$43.1 million was recognized during the first quarter of 2006, and is
included in selling, general & administrative expense in the
consolidated statements of operations.
(2) In accordance with EITF No. 04-8, "The Effect of Contingently
Convertible Debt on Diluted Earnings per Share," which became
effective during 2004, the company's 1% Convertible Senior Notes,
which represent 7.3 million potential shares of common stock, are now
included in diluted earnings per share using the if-converted method,
regardless of whether the market price trigger has been met, unless
the effect is anti-dilutive. Earnings used in computing diluted
earnings per share, after assumed conversion of convertible notes,
was $47.5 million and $114.7 million for the three months ended March
31, 2006 and 2005, respectively.
MedImmune, Inc.
Reconciliation of GAAP Results to Adjusted Results
(in millions, except per share data)
Presented in the following table is a reconciliation of reported net
earnings under accounting principles generally accepted in the U.S. (GAAP) to
net earnings excluding the impact of employee stock-based compensation
expense.
Three Months Ended
March 31,
2006 2005
(Unaudited)
Item:
Net earnings, as reported (1) $ 47.0 $114.1
Share-based compensation expense (2)
Cost of sales 0.4 -
Research and development 3.7 -
Selling, general and
administrative 5.6 -
9.7 -
Income taxes - deductible portion (3) (1.7) -
8.0 -
Income taxes - nondeductible
portion (3) 4.1 -
Net earnings, as adjusted $ 59.1 $114.1
Basic earnings per share,
as reported 0.19 0.46
Diluted earnings per share,
as reported 0.18 0.45
Basic earnings per share,
as adjusted 0.24 0.46
Diluted earnings per share,
as adjusted 0.23 0.45
Shares used to compute earnings per share:
Basic, as reported 247.9 248.1
Diluted, as reported 260.0 257.2
Basic, as adjusted 247.9 248.1
Diluted, as adjusted 259.7 257.2
(1) Prepared in accordance with accounting principles generally accepted
in the United States (GAAP).
(2) Represents the addback of the noncash employee share-based
compensation expense.
(3) Share-based compensation expense is comprised of incentive stock
options, non-qualified stock options and the discount on stock
purchased by employees. If incentive stock options are exercised and
sold or stock purchased by employees through the employee stock
purchase plan is sold within one year, becoming non-qualifying
dispositions, the company will be allowed to recognize tax deductions
at that time. Until that time, the company must assume that no tax
deduction is allowed. Separately identified in this table for the
quarter is the tax deduction allowed for non-qualified stock option
expense and the nondeductible portion attributable to incentive stock
options and the discounted employee stock purchase plan.
MedImmune, Inc.
Condensed Consolidated Balance Sheets (1)
(in millions)
March 31, December 31,
2006 2005
(unaudited) (audited)
Assets:
Cash and marketable securities $1,637.7 $1,471.9
Trade and contract receivables, net 283.9 284.3
Inventory, net 70.5 69.4
Deferred taxes, net 162.1 186.6
Property and equipment, net 399.4 381.4
Intangible assets, net (2) 278.2 323.5
Other assets 59.1 62.9
$2,890.9 $2,780.0
Liabilities and shareholders' equity:
Accounts payable $ 36.8 $ 37.0
Accrued expenses 403.9 335.1
Other liabilities (2) 276.2 331.2
Debt 505.9 506.2
Shareholders' equity 1,668.1 1,570.5
$2,890.9 $2,780.0
Common shares outstanding 248.7 247.0
(1) Certain prior period amounts have been reclassified to conform to
current presentation.
(2) In August 2005, the company acquired full promotion rights in the
U.S. for Synagis(R), effective July 1, 2006. In connection with
this transaction, the company recorded an intangible asset of $360.4
million which represents the fair value of the exclusive promotion
rights, determined as the aggregate value of the probable additional
payments to be made as a result of the amended terms of the
agreement in excess of the value of the co-promotion services to be
rendered, as determined under the previous agreement. In addition,
certain of the additional payments under the agreement totaling
$252.5 million that the company deems probable have been aggregated
and recorded as liabilities in the consolidated balance sheet.
SOURCE MedImmune, Inc.
CONTACT: Investors - Peter Vozzo, +1-301-398-4358, or Media - Jamie
Lacey, +1-301-398-4035, both of MedImmune, Inc.