Santarus fourth quarter total revenues increase 65% to $42.6M

Santarus, Inc.Mar 5 2012

Santarus, Inc. (NASDAQ: SNTS) today reported financial and operating results for the three and 12 month periods ended December 31, 2011.

“We are pleased with the recently announced GLUMETZA settlement, which we believe provides us time to grow the GLUMETZA brand as we advance our development pipeline.”

Key financial results for the fourth quarter of 2011 include:

• Total revenues increased 65% to $42.6 million from $25.9 million for the fourth quarter of 2010
• Net income was $1.9 million, or $0.03 per diluted share, compared with a net loss of $2.1 million, or $0.03 per share, for the fourth quarter of 2010
• Cash, cash equivalents and short-term investments as of December 31, 2011 were $58.6 million

Business Highlights

Recent business highlights include the following:

• Entered into a settlement agreement with Lupin Ltd. and its subsidiary, Lupin Pharmaceuticals, Inc., granting Lupin the right to begin selling a generic version of GLUMETZA^® (metformin hydrochloride extended release tablets) on February 1, 2016, or earlier under certain circumstances. The settlement agreement is subject to review by the U.S. Department of Justice and the Federal Trade Commission, as well as entry by the U.S. District Court for the Northern District of California of an order dismissing the litigation.
• Announced in February the U.S. Food and Drug Administration (FDA) acceptance for review of the company's New Drug Application (NDA) for UCERIS^™ (budesonide) tablets 9 mg for the induction of remission of mild to moderate active ulcerative colitis. Santarus expects the FDA will complete its review or otherwise respond to the UCERIS NDA by October 16, 2012.
• Initiated patient enrollment in a Phase IIIb clinical study with UCERIS to evaluate whether there is an incremental benefit in remission rate when UCERIS 9 mg is added to current oral aminosalicylate (5-ASA) therapy for patients with mild to moderate active ulcerative colitis not adequately controlled on background 5-ASA therapy.
• Presented new safety and efficacy data from an eight-week open-label study with UCERIS 9 mg in patients with mild or moderate active ulcerative colitis at the Crohn's & Colitis Foundation's Clinical & Research Conference 2011 Advances in Inflammatory Bowel Diseases.
• Reported retrospective analyses of integrated efficacy data and immuno-safety data from placebo-controlled and open-label clinical studies of our investigational pipeline drug RHUCIN^® (recombinant human C1 inhibitor, or C1INH) in patients with hereditary angioedema. The data were presented in two oral presentations at the 2011 Biennial Meeting of the World Allergy Congress.
• Completed expansion of sales force to 150 sales representatives, providing for more effective targeted promotion of our marketed products.
• In February, began promotion of FENOGLIDE^® (fenofibrate) tablets 40 mg and 120 mg, an FDA-approved product for the treatment of high cholesterol.
• Increased revolving line of credit with Comerica Bank from $25 million to $35 million with improved terms and extended the maturity to February 2015.

"Our strong fourth quarter financial performance caps a year of significant accomplishments, including a return to profitability while maintaining a solid cash position," said Gerald T. Proehl, president and chief executive officer of Santarus. "Our outlook for 2012 is for revenue of approximately $200 million, which represents an increase of 68% over 2011. We also expect improved profits even with the inclusion of success-based milestone expenses. We believe Santarus is well positioned for future growth with an attractive portfolio of commercial products and a robust pipeline of investigational drugs focused on specialty markets."

He added, "We are pleased with the recently announced GLUMETZA settlement, which we believe provides us time to grow the GLUMETZA brand as we advance our development pipeline."

Fourth Quarter 2011 Financial Results

Total revenues for the fourth quarter of 2011 increased to $42.6 million from $25.9 million for the fourth quarter of 2010 as indicated below (millions of dollars):

Net income for the fourth quarter of 2011 was $1.9 million, or $0.03 per diluted share, compared with a net loss of $2.1 million, or $0.03 per share, for the fourth quarter of 2010.

The cost of product sales was $3.3 million, or approximately 8% of net product sales, for the fourth quarter of 2011, compared with $1.2 million, or approximately 7% of net product sales, for the fourth quarter of 2010.

License fees and royalties of $10.3 million for the fourth quarter of 2011 was primarily comprised of royalties on GLUMETZA net sales under the restructured commercialization agreement signed in August 2011, the gross margin split on CYCLOSET net sales, and royalties on ZEGERID net sales. License fees and royalties of $7.3 million for the fourth quarter of 2010 was primarily comprised of $2.7 million for a UCERIS clinical milestone, $2.7 million related to a GLUMETZA sales milestone and royalties on ZEGERID net sales.

Research and development (R&D) expenses were $7.4 million for the fourth quarter of 2011, compared with $3.4 million for the fourth quarter of 2010. The increase in R&D expenses was primarily attributable to costs associated with the UCERIS NDA submission and start-up costs associated with the UCERIS Phase IIIb clinical study, as well as costs associated with the SAN-300 Phase I program and increased R&D headcount.

Selling, general and administrative (SG&A) expenses were $19.5 million for the fourth quarter of 2011, compared with $16.1 million for the fourth quarter of 2010. The increase in SG&A expenses was primarily due to increases in legal fees, compensation and benefits, offset in part by a reduction in CYCLOSET advertising and promotion costs.

Full Year 2011 Financial Results

Total revenues for 2011 were $118.8 million, compared with $125.4 million for 2010. The decrease in total revenues was primarily due to reduced net sales of ZEGERID products as a result of generic competition, offset in part by increases in sales of GLUMETZA and CYCLOSET.

Net income for 2011 was $4.7 million, or $0.07 per diluted share, compared with a net loss for 2010 of $18.5 million, or $0.31 per share.

As of December 31, 2011, Santarus had cash, cash equivalents and short-term investments of $58.6 million, compared with $60.8 million as of December 31, 2010. The net decrease in cash resulted primarily from an $11 million upfront fee paid in December 2011 under an agreement to commercialize FENOGLIDE in the U.S. and changes in operating assets and liabilities, offset in part by net income for 2011, adjusted for non-cash charges.

Financial Outlook for 2012

Santarus is increasing its adjusted EBITDA guidance and affirming the balance of the financial guidance for 2012 provided in the company's business update conference call on December 22, 2011, as follows:

• Total revenues of approximately $200 million, an increase of approximately 68% over 2011 total revenues.
• License fee expenses will include a $4 million regulatory milestone in the first quarter of 2012 paid upon FDA acceptance of the UCERIS NDA for review. The milestone was paid in Santarus common stock as requested by Cosmo Technologies Limited under the terms of the license agreement for UCERIS. Santarus also assumes that license fee expenses will include a $10 million milestone payable to Pharming Group NV upon successful completion of the ongoing Phase III clinical study for RHUCIN in treating acute attacks of hereditary angioedema.
• R&D expenses of approximately $30 million to $32 million, approximately half of which will be for expenses associated with the UCERIS Phase IIIb clinical study. Completion of enrollment in the UCERIS Phase IIIb clinical study is expected in the first half of 2013.
• Net income of approximately $8 million to $11 million, which includes the impact of $14 million of expenses from the aforementioned success-based milestones.
• The estimate for adjusted earnings before interest, tax, depreciation and amortization (EBITDA) has been increased to approximately $24 million to $29 million based on paying the UCERIS regulatory milestone in Santarus common stock rather than cash.