Angiotech reports $61.9 million total revenue for second-quarter 2010

Angiotech Pharmaceuticals, Inc. (NASDAQ: ANPI, TSX: ANP) today announced its financial results for the second quarter ended June 30, 2010.

"We are pleased to report continued quarter over quarter growth in product sales, driven primarily by our most innovative Proprietary Medical Products," said Dr. William Hunter, President and CEO of Angiotech. "In addition, we are encouraged by sales trends for our Base Medical Products, which continued to show steady improvement across all key product groups through the first half of 2010."

Second Quarter Financial Highlights

- Total revenue was $61.9 million. - Net product sales were $53.0 million. Sales of our Proprietary Medical Products were $16.4 million, or 31% of total product sales. Sales of our Base Medical Products were $36.6 million, or 69% of total product sales. - Royalty revenue was $8.9 million. - Research and development expenses were $6.9 million. - Selling, general and administrative expenses were $22.8 million. - Net loss and net loss per share were $14.1 million and $0.17, respectively. - As of June 30, 2010, cash and short-term investments were $35.1 million and net debt was $539.9 million.

Selected Non-GAAP Financial Measures

- Certain financial measures in this press release are prepared in accordance with United States Generally Accepted Accounting Principles ("GAAP"). In addition, certain financial measures presented below and in the appendix to this press release are non-GAAP, or adjusted, financial measures that exclude certain items. Management uses certain non-GAAP, or adjusted, financial measures to establish operational goals, and believes that these measures may assist investors in evaluating the results of our business and analyzing the underlying trends in our business over time. Investors should consider these non-GAAP adjusted financial measures in addition to, and not as a substitute for, or as superior to, financial measures prepared in accordance with GAAP. A reconciliation of the non-GAAP adjusted financial measures to the corresponding GAAP financial measures, and an explanation of our use of these non-GAAP adjusted financial measures and of the excluded items, are included in the appendix to this press release. - Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, adjusted to exclude certain non-cash and non-recurring items) was $6.5 million. - Adjusted revenue was $62.0 million. - Adjusted cost of goods sold was $27.2 million. - Adjusted research and development expenses were $6.7 million. - Adjusted selling, general and administrative expenses were $21.1 million. - Adjusted net loss and adjusted net loss per share for the quarter were $7.6 million and $0.09, respectively.

Correction in non-GAAP measure reported in prior period

A clerical error in the calculation of adjusted net (loss) income for the three months ended March 31, 2010 was made in the quarterly press release issued on May 4, 2010. Adjusted income tax expense of $3.0 million was added to adjusted (loss) income before income taxes for the period end March 31, 2010 when it should have been deducted. As a consequence, the adjusted net income reported of $1.9 million or $0.02 per common share reported for the three months ended March 31, 2010 should have been an adjusted net loss of $4.0 million or $0.05 per common share. There was no impact on the GAAP reported results for the three months ended March 31, 2010.

Second Quarter Highlights

Proprietary Medical Products. Our Proprietary Medical Products include our Quill(TM) SRS wound closure product line, Skater(TM) line of drainage catheters, Option(TM) inferior vena cava ("IVC") filter, HemoStream(TM) chronic dialysis catheter and BioPince(TM) full core biopsy device. Consistent with recent prior quarters, our Proprietary Medical Products continued to demonstrate higher revenue growth as compared to our overall product portfolio. Revenue for these products for the second quarter of 2010 increased by 20% compared to the second quarter of 2009 and 4% compared to the first quarter of 2010.

Base Medical Products. Our Base Medical Products represent more mature finished medical device product lines in the biopsy, ophthalmology and general surgery areas, as well as medical device components manufactured by us and sold to other third-party medical device manufacturers who assemble those components into finished medical devices. Revenue from our Base Medical Products for the second quarter of 2010 increased by 9% compared to the second quarter of 2009.

Royalty Revenue. We derive additional revenue from royalties paid to us by partners that develop, market and sell products incorporating certain of our proprietary technologies. Currently, the majority of our royalty revenues are derived from sales by Boston Scientific Corporation ("BSC") of TAXUS(R) coronary stent systems incorporating the drug paclitaxel.

Royalty revenue derived from sales of TAXUS stent systems by BSC for the second quarter of 2010 declined by 51% compared to the second quarter of 2009. The decline in royalty revenue was due to lower sales of TAXUS stent systems by BSC, as sales of TAXUS continued to be negatively impacted by competitive pressure in the drug-eluting coronary stent market. Royalty revenue for the quarter ended June 30, 2010 was based on BSC's net sales for the period January 1, 2010 to March 31, 2010 of $142 million, of which $71 million was in the U.S., compared to net sales of $252 million, of which $119 million was in the U.S., for the same period in the prior year. The average gross royalty rate earned in the three months ended June 30, 2010 on BSC's net sales was 6.0% for sales in the U.S. and 5.1% for sales in other countries, compared to an average rate of 6.6% for sales in the U.S. and 6.2% for sales in other countries for the same period in the prior year. The average gross royalty rates declined in the current period as a result of our tiered royalty rate structure for sales in the U.S., the E.U. and Japan.

Closing of Acquisition of Certain Product Candidates and Technology Assets of Haemacure Corporation. In April 2010 we announced the closing of the acquisition of certain product candidates and technology assets of Haemacure Corporation ("Haemacure"). Through an asset sale transaction, we acquired all of the relevant research and development activities, manufacturing operations, key personnel, and intellectual property rights necessary to pursue further clinical development of Haemacure's human biomaterial product candidates, specifically fibrin sealant and thrombin hemostat.

Athersys Inc. In July, 2010 we announced that our partner, Athersys, Inc. ("Athersys"), had announced positive results from its phase I clinical trial of MultiStem(R), its allogeneic cell therapy product, administered to individuals following acute myocardial infarction, more commonly referred to as a heart attack. The study results, which representd at least four months of post-treatment patient data, demonstrated that MultiStem was well tolerated at all dose levels and also suggested improvement in heart function in treated patients.

The phase I clinical trial is an open label, multi-center dose escalation trial evaluating the safety and maximum tolerated dose of a single administration of allogeneic MultiStem cells following an acute myocardial infarction. Enrolled patients received MultiStem delivered via a catheter into the damaged region of the heart 2-5 days following percutaneous coronary intervention (PCI), a standard treatment for heart attack. The study includes patients in three treatment cohorts or dose groups (20 million, 50 million and 100 million cells per patient) and a registry group where patients received only standard of care. Nineteen treated and 6 registry subjects have been enrolled in the study. The trial is being conducted at multiple cardiovascular treatment centers in the United States, including the Cleveland Clinic, Columbia University Medical Center and Henry Ford Health System.

Highlights of Study: -------------------- - Administration of MultiStem was found to be well tolerated at all dose levels. - No clinically significant changes in vital signs, allergic reactions, or infusional toxicities associated with MultiStem administration were observed. - Each dose group showed improvement in mean left ventricular ejection fraction ("LVEF"), a measure of heart function, compared to baseline and relative to the registry group. - Patients in the 50 million dose group had a statistically significant absolute improvement in mean 4-month LVEF relative to baseline (9.8 percentage points, representing a 23.4% improvement over baseline, p less than 0.02). - Among patients with more severe heart attacks - as measured by baseline LVEFs less than or equal to 45% - the 50 and 100 million dose groups each demonstrated better than a 25% improvement over baseline in mean LVEF at 4 months.

Cook Medical - Zilver(R) PTX(R). In June 2010 we announced that our partner, Cook Medical, Inc. ("Cook"), had announced that it had submitted its Pre-Market Approval ("PMA") application to the U.S. Food and Drug Administration for the company's Zilver PTX Drug-Eluting Peripheral Stent, intended for use in patients with peripheral arterial disease ("PAD") in the superficial femoral artery ("SFA"). Cook's PMA submission includes data from the randomized portion of the ongoing Zilver PTX clinical trial, the largest study of its kind for the endovascular treatment of PAD in the SFA. In addition, in May 2010, we announced that Cook presented one-year data at Euro PCR that confirmed sustained clinical outcomes with Zilver PTX. According to data presented, 86.2% of all patient subgroups treated with Zilver PTX demonstrated vessel patency at 12 months without the requirement for an additional intervention. The single-arm study also revealed a low stent fracture rate of just 1.5%. Additionally, in April 2010 we announced that Cook had announced that it had enrolled its first patient in its landmark Formula(TM) PTX clinical trial, the first trial of its kind to evaluate the safety and effectiveness of a paclitaxel-eluting stent to treat renal artery disease, the narrowing of the arteries that supply blood to the kidneys. The multi-center, randomized trial plans to enroll 120 patients at sites across Europe.

Boston Scientific - TAXUS. In June 2010 we announced that our partner, BSC, had commercially launched and implanted its first TAXUS Element(TM) Paclitaxel-Eluting Coronary Stent Systems in the European Union and other CE Mark countries. The TAXUS Element Stent System is BSC's third-generation drug-eluting stent technology and incorporates a platinum chromium alloy with an innovative stent design and an advanced catheter delivery system. In May 2010, we had announced that BSC had received CE Mark approval for its TAXUS Element Paclitaxel-Eluting Coronary Stent System. This approval included a specific indication for the treatment of diabetic patients.

Amendment to Credit Agreement. In April 2010 we completed a third amendment to our credit agreement with Wells Fargo Capital Finance, LLC (formerly Wells Fargo Foothill, LLC). The amendment included, among other items, amendments to financial covenants pertaining to minimum Adjusted EBITDA levels, interest coverage ratios and the definition of Adjusted EBITDA. The significant amended items are intended to reflect the continued decline and uncertainty of sales of TAXUS by BSC and the related potential impact on our Adjusted EBITDA. This amendment allows us continued access to funds per the terms of the credit agreement.