Abraxis BioScience reports $96.6 million net revenues for third quarter of 2009

Nov 5 2009

Abraxis BioScience, Inc. (NASDAQ:ABII), a fully integrated biotechnology company, today reported unaudited financial results for the third quarter ending September 30, 2009.

As of January 2, 2009, the company re-acquired the exclusive rights to market ABRAXANE^® for Injectable Suspension (paclitaxel protein-bound particles for injectable suspension) (albumin-bound) in the U.S. As a result, beginning in 2009, the company no longer recognizes deferred revenue related to the original co-promotion agreement.

Net revenue for the third quarter of 2009 was $96.6 million compared with $93.4 million for the third quarter of 2008. ABRAXANE revenue for the third quarter of 2009 was $82.9 million compared with $92.0 million for the same period in 2008, which included recognition of deferred revenue of $9.1 million related to the co-promotion agreement. Excluding the recognition of deferred revenue, total revenue from sales of ABRAXANE remained steady at $82.9 million for both the third quarter of 2009 and 2008. Other revenue for the third quarter of 2009 increased to $13.8 million from $1.3 million in the comparable period last year, primarily due to increased sales of raw material.

Gross profit for the third quarter of 2009 was $76.9 million, or 80 percent of net revenue, compared with $82.3 million, or 88 percent of net revenue, for the third quarter of 2008. Excluding the recognition of deferred revenue, gross margin for the third quarter of 2009 was 80 percent versus 87 percent for the same period in 2008. The decrease in gross margin was primarily due to an increase in the sales volume of lower margin products, a voluntarily initiated recall of certain lots of ABRAXANE and increased sales of ABRAXANE outside of the United States.

“We have ambitious plans for ABRAXANE and the nab^® technology franchise and continue to optimize our global and U.S. commercial resources to support growth in our current markets as well as those we are targeting for 2010,” said Lonnie Moulder, President and Chief Executive Officer of Abraxis BioScience. “Additionally, we are advancing three pivotal Phase III studies for ABRAXANE, in non-small cell lung cancer, pancreatic cancer and melanoma, which could enable us to broaden the utility of this important oncology product. We have an exciting future before us as we continue to bring this important therapy to cancer patients worldwide.”

Research and development expense for the third quarter of 2009 was $51.0 million compared with $21.0 million for the same period in 2008. The majority of the increase was due to additional spending on Phase III clinical trials for non-small cell lung cancer, pancreatic cancer and melanoma. The remainder of the increase was primarily attributable to investments in early stage discovery and other research and development projects.

Selling, general and administrative (SG&A) expenses for the third quarter of 2009 were $58.0 million versus $56.3 million for the same period in 2008. The re-acquisition of ABRAXANE marketing rights in the U.S. yielded savings due to the elimination of commission payments. These savings were primarily offset by increased investment in the global expansion of ABRAXANE primarily in China and the European Union, and increased spending on U.S. sales and marketing.

On a GAAP basis, net loss for common shareholders for the third quarter of 2009 was $37.7 million, or $0.94 per share, compared with net loss for common shareholders of $15.1 million, or $0.38 per share, for the third quarter of 2008.

Adjusted net loss for common shareholders for the third quarter of 2009 was $24.2 million, or $0.60 per share, compared to adjusted net income for common shareholders of $10.5 million, or $0.26 per share, for the third quarter of the prior year. Adjusted net (loss) income for common shareholders excludes amortization of acquired intangible assets, litigation costs, acquired in-process research and development, impairment charge, realized loss on marketable securities and non-cash stock-based compensation expense.

Financial Results: Nine Months Ended September 30, 2009

Net revenue for the first nine months of 2009 was $254.3 million compared with $253.1 million for the same period of 2008. ABRAXANE revenue for the first nine months of 2009 was $228.6 million compared with $245.8 million for the same period in 2008, which included recognition of deferred revenue of $27.3 million related to the co-promotion agreement. Excluding the recognition of deferred revenue, total revenue from the sales of ABRAXANE for the first nine months of 2009 grew $10.1 million, or 5 percent, to $228.6 million compared with $218.5 million for the same period in 2008. Incremental revenue from the continued global expansion into China, Australia, and European markets, as well as a higher average net selling price in the United States, contributed to the increase in revenue compared to the prior year.

Other revenue for the first nine months of 2009 increased to $25.7 million from $7.3 million in the comparable period last year, primarily due to raw materials sales beginning in the second quarter of 2009.

Gross profit for the first nine months of 2009 was $210.9 million, or 83 percent of net revenue, compared with $223.5 million, or 88 percent of net revenue, for the comparable period of 2008. Excluding the recognition of deferred revenue, gross margin for the first nine months of 2009 was 83 percent versus 87 percent for the same period in 2008. The decrease in gross margin was primarily due to an increase in the sales volume of lower margin products, a voluntarily initiated recall of certain lots of ABRAXANE and increased sales of ABRAXANE outside of the United States.

Research and development expense for the first nine months of 2009 was $122.8 million compared with $61.3 million for the same period in 2008. An increase in spending on Phase III clinical trials for non-small cell lung cancer, pancreatic cancer and melanoma accounted for approximately 50% of the increase in R&D expense. The remainder of the increase is primarily attributable to investments in early stage discovery and other research and development projects.

Selling, general and administrative (SG&A) expenses for the first nine months of 2009 were $150.7 million versus $157.3 million for the same period in 2008. The reacquisition of ABRAXANE marketing rights in the U.S. yielded savings due to elimination of commission payments. These savings were primarily offset by increased investment in the global expansion of ABRAXANE primarily in China and the European Union, and increased spending on U.S. sales and marketing.

On a GAAP basis, net loss for common shareholders for the first nine months of 2009 was $84.1 million, or $2.10 per share, compared with net loss for common shareholders of $94.9 million, or $2.37 per share, for the first nine months of 2008. Adjusted net loss for common shareholders for the first nine months of 2009 was $39.9 million, or $1.00 per share, compared to adjusted net income for common shareholders of $28.7 million, or $0.71 per share, for the first nine months of the prior year.

Recent Company Highlights

• According to IntrinsiQ data for September 2009, in all lines of metastatic breast cancer (MBC), ABRAXANE use has increased for two consecutive quarters from 34.8 percent to 36.7 percent of the taxane market. On a rolling 12-month basis, the ABRAXANE share of the total MBC taxane market was 31.7 percent. In second line + MBC, ABRAXANE has increased for two consecutive quarters from 42.6 percent to 46.2 percent. ABRAXANE continues to be a leader in the taxane market in the third line + setting of the MBC market with a 51 percent market share.
• The company has targeted the previously announced spin-off of Abraxis Health to occur during the first quarter of 2010.
• The Independent Data Monitoring Committee for the Phase III clinical trial with ABRAXANE in NSCLC, recently notified the company that it recommends the trial proceed to completion as per the current protocol without changes to the sample size.
• Abraxis BioScience was recently notified that the FDA’s Office of Orphan Products Development (OOPD) has granted ABRAXANE with orphan drug status in the treatment of pancreatic cancer and melanoma stage IIb-IV.

Conference Call Information

On Thursday, November 5, 2009, the company will host a conference call with interested parties beginning at 8:30 a.m. PST/11:30 a.m. EST to review its results of operations for the third quarter of 2009. The conference call may be heard by interested parties through a live audio Internet broadcast at www.abraxisbio.com and www.earnings.com. For those unable to listen to the live broadcast, a playback of the webcast will be available at both Web sites for approximately six months beginning shortly after the conclusion of the call.

Non-GAAP Financial Measures

The company believes that its presentation of non-GAAP financial measures, such as adjusted net (loss) income for common shareholders and adjusted net (loss) income per common share, provide useful supplementary information to investors in understanding the underlying operating performance of the company and facilitates additional analysis by investors. The company also uses non-GAAP financial measures internally for operating, budgeting and financial planning purposes. The non-GAAP financial measures presented by the company may not be comparable to similarly titled measures reported by other companies. The non-GAAP financial measures are in addition to, and not a substitute for or superior to, measures of financial performance calculated in accordance with GAAP. A reconciliation of GAAP net loss to adjusted net (loss) income for common shareholders for the three and nine months ended September 30, 2009 and 2008 is included with this news release.