OSI Pharmaceuticals, Inc. (NASDAQ: OSIP) announced today its
financial results for the year ended December 31, 2008. The Company
reported net income from continuing operations of $467 million (or
$7.19 per share) in 2008, which includes a $337 million (or $5.05
per share) non-cash gain recorded in the fourth quarter based
primarily on the expected utilization of the Company�s net
operating loss carryforwards (NOL�s). Excluding this gain, net
income from continuing operations was $130 million (or $2.14 per
share) for the year ended December 31, 2008, compared with $103
million (or $1.70 per share) for the same period last year. For the
quarter ended December 31, 2008, net income from continuing
operations was $363 million (or $5.50 per share). Excluding the
non-cash gain recorded in the fourth quarter, net income from
continuing operations was $27 million (or $0.44 per share) for the
three months ended December 31, 2008, compared with $18 million (or
$0.29 per share) for the same period last year.
Total worldwide net sales of Tarceva� (erlotinib) for 2008, as
reported by the Company's collaborators for Tarceva, Genentech,
Inc. and Roche, were approximately $1.12 billion, representing a
27% growth in global sales compared to the same period last year.
For the three months ended December 31, 2008, worldwide Tarceva net
sales were approximately $285 million, representing a 14% increase
over the same period last year.
The Company reported total revenues from continuing operations
of $379 million for 2008 compared with $341 million for 2007, an
increase of 11%. Total revenues from continuing operations for the
three months ended December 31, 2008 were $98 million, compared
with $84 million for the same period last year. Overall, total
revenues were comprised of the following key items:
- Tarceva-related revenues of $335
million in 2008 compared with $268 million in 2007, based primarily
on the following:
- Net revenues from the
unconsolidated joint business for Tarceva of $196 million in 2008,
compared with $169 million in 2007, arising from the Company's
co-promotion arrangement with Genentech. The net revenues were
based on total U.S. Tarceva net sales of $457 million, compared to
$417 million in 2007. Net revenues from the unconsolidated joint
business for Tarceva for the three months ended December 31, 2008
were $49 million, compared to $45 million for the same period last
year, based upon total U.S. Tarceva net sales of $118 million for
the three months ended December 31, 2008 compared with $112 million
for the same period last year;
- Royalties of $135 million in
2008 compared with $95 million in 2007 from Roche, the Company's
international collaborator for Tarceva. The royalty revenues for
2008 were based on total rest-of-world Tarceva sales of
approximately $665 million which increased 42%, compared to $470
million in 2007. Royalties for the three months ended December 31,
2008 were $34 million compared with $28 million for the same period
last year. Royalty revenues for the three months ended December 31,
2008 were based upon rest-of -world Tarceva sales of approximately
$167 million, compared with $138 million for the same period last
year;
- Other Revenues of $45 million in
2008 compared with $73 million in 2007, based primarily on the
following:
- Royalties of $41 million in 2008
compared with $17 million in 2007 related to worldwide
non-exclusive licensing agreements under the Company's DP-IV patent
portfolio covering the use of DP-IV inhibitors for treatment of
type 2 diabetes. Royalties for the three months ended December 31,
2008 were $14 million compared with $7 million for the same period
last year;
- License, milestone and other
revenues in 2008 of $4 million compared with $56 million in 2007.
In 2007, the Company recognized an upfront license fee of $25
million related to a license granted to Eli Lilly and Company for
our glucokinase activator program, license and milestone revenue of
$18 million related to worldwide non-exclusive licensing agreements
under the Company's DP-IV patent portfolio covering the use of
DP-IV inhibitors for treatment of type 2 diabetes, and license
revenue of $7.5 million from Renovo in connection with its
licensing agreement with Shire, plc for its TGF-beta 3 drug
candidate Juvista�. License, milestone and other revenues for the
three months ended December 31, 2008 were $396,000 compared with
$3.0 million in the same period last year.
Operating
Expenses
Operating expenses from continuing operations for the fourth
quarter and year ended December 31, 2008 were $73 million and $246
million, respectively, compared to $67 million and $244 million,
respectively, for the same periods last year. Research and
development expenses for the fourth quarter and year ended December
31, 2008 were $41 million and $135 million, respectively, compared
to $36 million and $124 million, respectively, for the same periods
last year. The Company also recognized a $4 million in-process
research and development charge in the fourth quarter of 2008
related to acquiring certain diabetes and obesity-related assets.
Selling, general and administrative expenses for the fourth quarter
and year ended December 31, 2008 were $25 million and $95 million,
respectively, compared to $25 million and $99 million,
respectively, for the same periods last year.
Income Taxes
In the fourth quarter of 2008, the Company recorded a $337
million non-cash gain, based primarily on its sustained
profitability and its expected utilization of a significant portion
of its deferred tax assets which are primarily related to its
NOL�s. Starting in 2009, the Company will be required to report its
tax provision at its full effective tax rate of 40%. The Company
expects to continue paying taxes at the lower alternative minimum
tax rates as it continues to utilize its NOL�s. The following table
provides a reconciliation between the Company�s income tax
provision and effective cash tax expense.
Tax Provision Reconciliation
for
continuing operations
� Fourth Quarter � Year-to-Date (in millions) 2008 � 2007 2008 �
2007 Income tax (benefit) provision $ (336.2 ) � $ 0.8 $ (333.5 ) �
$ 2.7 Impact of valuation allowance reversal � (336.6 ) � � - �
(336.6 ) � � - Effective cash tax expense $ 0.4 � � $ 0.8 $ 3.1 � �
$ 2.7
Discontinued
Operations
As a result of the Company's decision to divest its eye disease
business held by (OSI) Eyetech, the operating results for (OSI)
Eyetech, for all periods presented, are shown as discontinued
operations in the accompanying consolidated statement of
operations. The Company completed the divestiture in August
2008.
The Company's net income, including results from discontinued
operations, was $362 million (or $5.48 per share) and $471 million
(or $7.26 per share) for the three months and year ended December
31, 2008, respectively, compared with a net income of $10 million
(or $0.18 per share) and $66 million (or $1.11 per share),
respectively, for the same periods last year.
Conference Call
OSI will host a conference call reviewing the Company's
financial results, product portfolio and business developments on
February 19, 2009 at 5:00PM (Eastern Time). To access the live
webcast via the Internet, log on to www.osip.com. Please connect to
the Company's website at least 15 minutes prior to the conference
call to ensure adequate time for any software download that may be
needed to access the webcast. Alternatively, please call
1-877-852-6578 (U.S.) or 1-719-325-4826 (international) to listen
to the call. The conference ID number for the live call is 2105141.
Telephone replay is available approximately two hours after the
call through March 5, 2009. To access the replay, please call
1-888-203-1112 (U.S.) or 1-719-457-0820 (international). The
conference ID number is 2105141. The presentation, including the
financial and statistical information contained therein, will be
available via the investor relations section of the Company�s
website for a 12-month period follow the webcast.
About OSI
Pharmaceuticals
OSI Pharmaceuticals is committed to "shaping medicine and
changing lives" by discovering, developing and commercializing
high-quality and novel pharmaceutical products designed to extend
life and/or improve the quality of life for patients with cancer
and diabetes/obesity. The Company�s oncology programs are focused
on developing molecular targeted therapies designed to change the
paradigm of cancer care. OSI�s diabetes/obesity efforts are
committed to the generation of novel, targeted therapies for the
treatment of type 2 diabetes and obesity. OSI's flagship product,
Tarceva� (erlotinib), is the first drug discovered and developed by
OSI to obtain FDA approval and the only EGFR inhibitor to have
demonstrated the ability to improve survival in both non-small cell
lung cancer and pancreatic cancer patients in certain settings. OSI
markets Tarceva through partnerships with Genentech, Inc. in the
United States and with Roche throughout the rest of the world. For
additional information about OSI, please visit http://www.osip.com.
This news release contains forward-looking statements. These
statements are subject to known and unknown risks and uncertainties
that may cause actual future experience and results to differ
materially from the statements made. Factors that might cause such
a difference include, among others, OSI's and its collaborators'
abilities to effectively market and sell Tarceva and to expand the
approved indications for Tarceva, OSI�s ability to protect its
intellectual property rights, safety concerns regarding Tarceva,
competition to Tarceva and OSI�s drug candidates from other
biotechnology and pharmaceutical companies, the completion of
clinical trials, the effects of FDA and other governmental
regulation, including pricing controls, OSI's ability to
successfully develop and commercialize drug candidates, and other
factors described in OSI Pharmaceuticals' filings with the
Securities and Exchange Commission.
OSI Pharmaceuticals, Inc. and Subsidiaries Selected Financial
Information � Consolidated Statements of Operations �
Three
Months Ended December 31, �
Twelve Months Ended December
31, (In thousands, except per share data)
2008 �
2007 2008 �
2007
Unaudited
Unaudited
Unaudited
Revenues: Tarceva-related revenues $ 83,647 $ 73,846 $ 334,653 $
267,799 Other revenues � 14,780 � � 10,462 � � 44,735 � � 73,231 �
Total revenues � 98,427 � � 84,308 � � 379,388 � � 341,030 � �
Expenses: Cost of goods sold 2,567 3,306 9,315 9,399 Research and
development 41,335 36,147 135,344 123,531 Acquired in-process
research and development 4,000 2,164 4,000 9,664 Selling, general
and administrative 24,945 25,176 94,930 99,159 Amortization of
intangibles � 605 � � 462 � � 2,489 � � 1,840 � Total expenses �
73,452 � � 67,255 � � 246,078 � � 243,593 � � Income from
continuing operations 24,975 17,053 133,310 97,437 � Other income
(expense): Investment income - net 3,291 3,583 12,961 12,830
Interest expense (2,892 ) (1,812 ) (11,932 ) (7,235 ) Other income
(expense) - net � 1,584 � � (275 ) � (1,195 ) � 2,307 � � Income
from continuing operations before income taxes 26,958 18,549
133,144 105,339 Income tax (benefit) provision � (336,218 ) � 817 �
� (333,457 ) � 2,732 � Net income from continuing operations
363,176 17,732 466,601 102,607 Income (loss) from discontinued
operations � (1,052 ) � (7,304 ) � 4,884 � � (36,288 ) Net income $
362,124 � $ 10,428 � $ 471,485 � $ 66,319 � � Basic and diluted
income (loss) per common share: Basic income (loss) Continuing
operations $ 6.30 $ 0.31 $ 8.14 $ 1.78 Discontinued operations $
(0.02 ) $ (0.13 ) $ 0.09 $ (0.63 ) Net income $ 6.29 $ 0.18 $ 8.23
$ 1.15 Diluted income (loss) Continuing operations * $ 5.50 $ 0.29
$ 7.19 $ 1.70 Discontinued operations $ (0.02 ) $ (0.12 ) $ 0.07 $
(0.58 ) Net income $ 5.48 $ 0.18 $ 7.26 $ 1.11 � Weighted average
shares of common stock outstanding: Basic shares 57,610 58,047
57,316 57,665 Diluted shares 66,678 62,839 66,911 62,241 � *
Computation of diluted income per share from continuing operations:
� Net income from continuing operations $ 363,176 $ 17,732 $
466,601 $ 102,607 Add: Interest and issuance costs related to
dilutive convertible debt � 3,344 � � 760 � � 14,351 � � 3,040 �
Net income from continuing operations - diluted $ 366,520 � $
18,492 � $ 480,952 � $ 105,647 � � Basic shares 57,610 58,047
57,316 57,665 Dilutive effect of options and restricted stock 453
884 729 668 Dilutive effect of the 2025 Notes 3,908 3,908 3,908
3,908 Dilutive effect of the 2023 Notes** 1,998 - 2,308 - Dilutive
effect of the 2038 Notes (issued in January 2008) � 2,709 � � - � �
2,650 � � - � Diluted shares � 66,678 � � 62,839 � � 66,911 � �
62,241 � � ** Under the �if-converted� method, common share
equivalents related to our 2023 Notes were not included in diluted
earnings per share for the three and twelve months ended December
31, 2007 because their effect would be anti-dilutive. � �
Reconciliation from reported net income and earnings per share
from continuing operations to adjusted net income and earnings per
share from continuing operations Three Months Ended December
31, Twelve Months Ended December 31,
2008
2007
2008
2007
Net income from continuing operations $ 363,176 $ 17,732 $ 466,601
$ 102,607 Income tax benefit from recognition of deferred tax
assets � 336,629 � � - � � 336,629 � � - � Adjusted net income from
continuing operations $ 26,547 � $ 17,732 � $ 129,972 � $ 102,607 �
� Dilutive earning per share from continuing operations $ 5.50 $
0.29 $ 7.19 $ 1.70 Benefit from recognition of deferred tax assets
per share � 5.06 � � - � � 5.05 � � - � Adjusted dilutive earning
per share from continuing operations $ 0.44 � $ 0.29 � $ 2.14 � $
1.70 � �
December 31, December 31,
2008
2007
Unaudited
Cash and investments securities (including restricted investments)
$ 515,511 � $ 305,098 � � Use of Non-Gaap information
The accompanying tables contain
both GAAP and non-GAAP financial measures for the periods
presented. The non-GAAP measures include adjusted net income from
continuing operations and adjusted earnings per share from
continuing operations, each of which have directly comparable GAAP
equivalents. OSI has provided these non-GAAP financial measures to
adjust for the impact of the $337 million non-cash gain in the
fourth quarter of 2008, based primarily on OSI�s expected
utilization of its net operating loss carryforwards, or NOLs.
Management believes that the included non-GAAP financial measures
can assist in making meaningful period-over-period comparisons and
in identifying operating trends that could otherwise be masked or
distorted by the significant $337 million non-cash gain related to
its NOLs, which will not be repeated in 2009 in this magnitude, if
at all. Management uses these non-GAAP financial measures
internally to evaluate the performance of the business, including
the allocation of resources as well as the planning and forecasting
of future periods and believes that these results are useful to
others in analyzing operating performance and trends of OSI.
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