DUSA PHARMACEUTICALS, INC.
NASDAQ : DUSA

DUSA PHARMACEUTICALS, INC.

November 03, 2006 06:30 ET

DUSA Pharmaceuticals Reports Third Quarter 2006 Corporate Highlights and Financial Results

Year to Date Levulan'R' Revenues Up 50% Over Prior Year; Approval in Brazil Presents Important Growth Opportunity for Levulan

WILMINGTON, MASSACHUSETTS--(CCNMatthews - Nov. 3, 2006) - DUSA Pharmaceuticals, Inc. (NASDAQ GM:DUSA), a dermatology company that is developing and marketing Levulan photodynamic therapy ("PDT") and other treatments for common skin conditions, today reported financial results for the third quarter ended September 30, 2006. Revenue for the quarter was $6.1 million, compared to $2.4 million in the third quarter of 2005. The increase in year over year revenue was driven by a 35% increase in PDT revenues ($3.2 million vs $2.4 million) and the addition of $2.8 million in 'non-PDT revenue' associated with the products acquired in the merger with Sirius Laboratories, Inc. ("Sirius") that closed on March 10, 2006. Revenue for the nine-month period was $17.4 million, versus $8.0 million in the comparable 2005 period. The increase in year to date revenue was driven by a 37% increase in PDT revenue ($10.9 million vs $8.0 million) as well as, $6.5 million in non-PDT revenue.

Sales highlights include:

- 27,480 Levulan Kerastick® units were sold during the quarter versus 20,286 units sold during Q3 2005, a 35% increase over the prior year quarter.

- Year-to-date Kerastick sales totaled 95,358 units, a 38% increase compared to 69,162 units sold in the same period in 2005

- Nicomide® prescriptions increased 13% year to date through August, versus comparable 2005 data.

Additional highlights from the quarter include:

- Significant progress was made on protocol development for DUSA's planned Phase IIb clinical trial of Levulan PDT in the treatment of acne, currently scheduled for initiation in Q1 2007.

- The development of two new prescription products for the treatment of acne and rosacea from the former Sirius pipeline also advanced during the quarter. The first of these products is expected to launch during Q1 2007 and the second during late 2007 or early 2008.

With regard to the ongoing litigation against a generic challenger to Nicomide®, the Company was encouraged by the September court action upholding the preliminary injunction originally issued against the defendant in May. The case is currently in the 'discovery' phase.

Also in September, DUSA reported that Actavis Totowa, the company's contract manufacturer of Nicomide, had received a warning letter from the U.S. Food and Drug Administration (FDA) regarding certain regulatory observations. The primary observations were not related to Nicomide. However, with respect to Nicomide and certain other products manufactured by Actavis Totowa, the FDA requested that the manufacturer provide a copy of the labeling and information providing the basis for an exemption from the drug approval requirements. As it related to Nicomide, DUSA assisted the manufacturer with its response to the FDA and has also independently initiated a dialogue with the agency related to confirming the regulatory requirements of the product.

Subsequent to the end of the quarter, Stiefel Laboratories, Inc., DUSA's Latin American marketing partner for Levulan PDT, received regulatory approval for Levulan in Brazil. Pending government pricing approval, Stiefel is actively working toward a Brazilian launch of Levulan scheduled for the first quarter of next year. Additional launches are expected in other Latin American countries pending regulatory approval.

Robert Doman, President and Chief Operating Officer, commented, "we are very pleased to report another strong quarter of revenue growth, led by sales of Levulan, whose revenues are up 50% through September year-to-date, along with the positive impact of revenue from the Sirius product lines. The upcoming quarters represent an exciting time in DUSA's history, with the pending launch of Levulan in Latin America, the scheduled launch of a new product in the US market for the treatment of acne, and the planned initiation of our Phase IIb clinical trial using Levulan PDT for acne."

Financial Summary:

For the three-month period ended September 30, 2006, DUSA's net loss in accordance with generally accepted accounting principles (GAAP) was ($3,787,000), or ($0.19) per common share, compared to a net loss of ($3,608,000), or ($0.21) per share for the comparable 2005 period. The non-GAAP net loss three-month period ended September 30, 2006 was ($2,906,000) or ($0.15) per common share (refer to the "Use of Non-GAAP Financial Measures" section and accompanying financial tables for a reconciliation of GAAP to non-GAAP information).

Revenues for the three and nine-month periods ended September 30, 2006 were $6,063,000 and $17,432,000, respectively, as compared to $2,392,000 and $7,989,000, respectively for the comparable 2005 periods, and were comprised of the following:



Three months ended Nine months ended
September 30, September 30,
2006 2005 2006 2005
------------------------------------------------
PDT Drug & Device
Product Revenues
Kerastick Product
Revenues
United States $ 2,490,000 $ 1,630,000 $ 8,212,000 $ 5,389,000
Canada 176,000 176,000 939,000 693,000
------------------------------------------------
Subtotal Kerastick
Product Revenues 2,666,000 1,806,000 9,151,000 6,082,000

BLU-U Product Revenues

United States 516,000 462,000 1,633,000 1,489,000
Canada 53,000 124,000 145,000 418,000
------------------------------------------------
Subtotal BLU-U Product
Revenues 569,000 586,000 1,778,000 1,907,000
------------------------------------------------
Total PDT Drug & Device
Product Revenues 3,235,000 2,392,000 10,929,000 7,989,000
------------------------------------------------
Total Non-PDT Drug
Product Revenues 2,828,000 - 6,503,000 -
------------------------------------------------
TOTAL PRODUCT REVENUES $ 6,063,000 $ 2,392,000 $ 17,432,000 $ 7,989,000
------------------------------------------------
------------------------------------------------


The increase in 2006 Kerastick revenues for the three-month period ended September 30, 2006 in comparison to the comparable 2005 period was driven by a number of factors, including: increased sales volumes, an increase in our average unit selling price, and increased levels of direct distribution to customers. Effective January 1, 2006, DUSA became the sole U.S. distributor of the Kerastick. DUSA's average net selling price for the Kerastick increased to $95.96 on a year-to-date basis in 2006 from $87.93 for the comparable 2005 period. The decrease in 2006 BLU-U revenue was driven by lower sales volumes which were partially offset by an increase in our average unit selling price. There were 77 units sold during the third quarter of 2006 versus 82 units in the comparable 2005 period. Our average selling price increased to $7,392 on a year-to-date basis in 2006 from $6,390 for the comparable 2005 period. Non-PDT Drug Product revenues represent the revenues generated by the products acquired as part of our merger with Sirius. The substantial majority of this revenue is attributable to sales of Nicomide.

Total product margins for the three-month period ended September 30, 2006 were $3,213,000 or 53% as compared to $1,085,000 or 45% for the comparable 2005 period. For the three-month period ended September 30, 2006, total PDT Drug and Device Product margins were $1,992,000 or 62%, versus $1,085,000, or 45%, for the comparable 2005 period. The incremental margin was driven by positive margin gain on the Kerastick.

Kerastick gross margins for the three-month period ended September 30, 2006 were 73% versus 55% for the comparable 2005 period. Similar to the increase in revenues, the increase in margin is mainly attributable to an increase in our average unit selling prices, increased levels of direct distribution to customers; as well as a reduction in our overall sales volume discount programs. BLU-U margins for the three-month period ended September 30, 2006 were 10%, versus 16% for the comparable 2005 period. BLU-U margins were adversely impacted by lower sales volumes for the quarter.

Non-PDT Drug Product margins reflect the margin generated by the products acquired as part of our March 10, 2006 acquisition of Sirius. Total margin for the three-month period ended September 30, 2006 was $1,221,000 or 43%. It should be noted that Non-PDT Drug Product margins for the three and nine month periods ended September 30, 2006 were negatively impacted by the recording of the inventory acquired in the Sirius merger at its fair value in accordance with purchase accounting rules. The full impact of this adjustment was recognized over the six months following the acquisition which ended in September 2006. Going forward, we expect gross margins on Non-PDT Drug Products to be in the 80% to 90% range, exclusive of amortization expense related to core/developed technologies acquired in the acquisition.

Total operating costs for the three-month period ended September 30, 2006 were $7,194,000 as compared to $5,033,000 in 2005. Research and developments costs decreased to $1,344,000 for the three-month period ended September 30, 2006 from $1,414,000 in the comparable 2005 period due to decreased spending on clinical trials as we completed both our Phase II acne study and our interim analysis study on photo-damaged skin in the first quarter of 2006. Marketing and sales costs increased to $3,247,000 from $1,804,000 in the comparable 2005 period due primarily to increased headcount resulting from the Sirius acquisition. General and administrative costs increased to $2,603,000 from $1,664,000 due principally to increased legal spending, a $194,000 non-cash stock-based compensation charge in accordance with SFAS 123R and incremental costs associated with the acquisition of Sirius. The legal expenses include approximately $800,000 related to matters surrounding the generic challenge to Nicomide.

As of September 30, 2006, total cash, cash equivalents, and United States government securities were $18,554,000, compared to $34,790,000 at December 31, 2005. The decrease is primarily attributable to cash expended on the Sirius acquisition; as well as the funding of operational expenses. Net cash expenditure for the quarter narrowed to $1,600,000 compared to $3,100,000 in Q2 2006. Net intangible assets and goodwill acquired as part of the Sirius merger totaled $16,183,000 and $5,773,000 respectively as of September 30, 2006.



DUSA Pharmaceuticals, Inc.

Condensed Consolidated Balance Sheets (Unaudited)

September 30, December 31,
2006 2005
---------------------------
ASSETS
Current Assets

Cash and cash equivalents $ 5,139,183 $ 4,210,675
Marketable securities 13,414,499 30,579,486
Accounts receivable 1,826,197 373,130
Inventory 2,158,886 1,860,793
Other current assets 1,575,897 1,961,617
Total current assets 24,114,662 38,985,701
Restricted cash 160,836 144,541
Property, plant and equipment 2,691,425 2,971,869
Intangible assets 16,183,342 -
Goodwill 5,772,505 -
Deferred charges and other assets 956,654 228,520
---------------------------
TOTAL ASSETS $ 49,879,424 $ 42,330,631

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
Accounts payable and accrued expenses $ 4,974,541 $ 4,002,050
Deferred revenue 1,066,326 94,283
---------------------------
Total current liabilities 6,040,867 4,096,333

Other liabilities 205,893 205,570
-------------------------
TOTAL LIABILITIES 6,246,760 4,301,903

TOTAL SHAREHOLDERS' EQUITY 43,632,664 38,028,728
---------------------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 49,879,424 $ 42,330,631




DUSA Pharmaceuticals, Inc.
Condensed Consolidated Statement of Operations (Unaudited)


3 months ended September 30, 9 months ended September 30,
----------------------------------------------------------
2006 2005 2006 2005
----------------------------------------------------------
Product
Revenues $ 6,062,720 $ 2,392,244 $ 17,432,350 $ 7,988,974
----------------------------------------------------------
Cost of Product
Revenues and
Royalties 2,849,485 1,307,433 7,635,407 4,781,589
Gross Margin 3,213,235 1,084,811 9,796,943 3,207,385
----------------------------------------------------------

Operating Costs
Research and
Development 1,343,880 1,414,428 4,382,134 4,809,294

In-process
research and
development - - 1,600,000 -

Marketing and
Sales 3,246,886 1,804,439 9,114,093 6,885,755

General and
Administrative 2,603,237 1,663,697 8,427,324 5,187,415

Restructuring - 150,917 - 150,917
----------------------------------------------------------

Total Operating
Costs 7,194,003 5,033,481 23,523,551 17,033,381
----------------------------------------------------------
Loss from
Operations (3,980,768) (3,948,670) (13,726,608) (13,825,996)
----------------------------------------------------------
Other Income
----------------------------------------------------------
Other Income,
net 194,129 340,389 645,707 1,059,982
----------------------------------------------------------
Net Loss $ (3,786,639) $ (3,608,281) $ (13,080,901) $ (12,766,014)
----------------------------------------------------------
----------------------------------------------------------
Basic and
Diluted
Net Loss
per Common
Share $ (0.19) $ (0.21) $ (0.77) $ (0.75)
----------------------------------------------------------
----------------------------------------------------------

Weighted
Average
Number
of Common
Shares 19,449,442 16,930,746 17,041,197 16,920,220
----------------------------------------------------------
----------------------------------------------------------


Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with GAAP, we have provided in the table below non-GAAP financial measures adjusted to exclude share-based compensation expense, amortization of intangible assets and an in-process research and development charge related to our merger with Sirius in the first quarter of 2006. We believe this presentation is useful to help investors better understand our financial performance this quarter, competitive position and prospects for the future. We use the modified prospective method to report compensation charges associated with the expensing of stock options. Results for prior periods have not been adjusted to reflect non-GAAP financial performance. Management believes these non-GAAP financial measures assist in providing a more complete understanding of our underlying operational results and trends and in allowing for a more comparable presentation of results in the reported period to those in prior periods that did not include SFAS 123® stock based compensation. Management uses these measures along with their corresponding GAAP financial measures to help manage our business and to help evaluate our performance compared to the marketplace. However, the presentation of non-GAAP financial measures is not meant to be considered in isolation or as superior to or as a substitute for financial information provided in accordance with GAAP. The non-GAAP financial measures we use may be calculated differently from, and, therefore, may not be comparable to, similarly titled measures used by other companies. Investors are encouraged to review the reconciliations of these non-GAAP financial measures to the comparable GAAP results, contained in the table below.



For the three months ended
September 30, 2006
--------------------------------------------
Non-cash
charges
resulting
SFAS from the
123R purchase
Adjust- of
GAAP ment(a) Sirius Non-GAAP
--------------------------------------------------------
Product Revenues $ 6,062,720 $ 6,062,720

Cost of Product
Revenues
and Royalties 2,849,485 $ (24,153) $ (437,310)(b) 2,388,022
--------------------------------------------------------


Gross Margin 3,213,235 24,153 437,310 3,674,698
--------------------------------------------------------
Operating Costs

Research and
Development 1,343,880 (101,156) 1,242,724

Marketing and
Sales 3,246,886 (123,249) 3,123,637

General and
Administrative 2,603,237 (194,495) 2,408,742
--------------------------------------------------------
Total Operating
Costs 7,194,003 (418,900) 6,775,103
--------------------------------------------------------
Loss from
Operations $ (3,980,768) $ 443,053 $ 437,310 $ (3,100,405)
--------------------------------------------------------
Other Income

Other Income, net 194,129 194,129
--------------------------------------------------------
Net Loss $ (3,786,639) $ 443,053 $ 437,310 $ (2,906,276)
-------------- --------------------
-------------- --------------------

Basic and Diluted
Net Loss
per Common

Share $ (0.19) $ (0.15)
-------------- --------------------
-------------- --------------------
Weighted Average
Number of Common
Shares Outstanding,
Basic and Diluted 19,449,442 19,449,442
-------------- --------------------
-------------- --------------------


(a) Share based compensation expense resulting from the adoption of SFAS 123R on January 1, 2006

(b) Amortization of intangible assets for the three-month period ended September 30, 2006



For the nine months ended September 30, 2006




Non-cash
charges
resulting
SFAS from the
123R purchase
GAAP Adjust- of
ment(a) Sirius Non-GAAP
-------------------------------------------------------------
Product
Revenues $ 17,432,350 $ 17,432,350

Cost of
Product
Revenues and
Royalties 7,635,407 $ (60,602) $ (976,658)(b) 6,598,147
-------------------------------------------------------------


Gross Margin 9,796,943 60,602 976,658 10,834,203

Operating
Costs

Research and
Development 4,382,134 (263,557) 4,118,577

In-process
Research and
Development 1,600,000 (1,600,000)(c) -

Marketing and
Sales 9,114,093 (270,420) 8,843,673

General and
Administrative 8,427,324 (818,537) 7,608,787
-------------------------------------------------------------
Total
Operating
Costs 23,523,551 (1,352,514) (1,600,000) 20,571,037
-------------------------------------------------------------
Loss from
Operations $ (13,726,608) $ 1,413,116 2,576,658 $ (9,736,834)
-------------------------------------------------------------
Other Income

Other Income,
net 645,707 645,707
-------------------------------------------------------------
Net Loss $ (13,080,901) $ 1,413,116 $ 2,576,658 $ (9,091,127)
---------------- ---------------
---------------- ---------------
Basic and
Diluted
Net Loss
per Common

Share $ (0.77) $ (0.53)
---------------- ---------------
---------------- ---------------
Weighted
Average
Number of
Common Shares
Outstanding,
Basic and
Diluted 17,041,197 17,041,197
---------------- ---------------
---------------- ---------------


(a) Share based compensation expense resulting from the adoption of SFAS 123R on January 1, 2006

(b) Amortization of intangible assets from date of acquisition (March 10, 2006) through September 30, 2006

(c) In-process research and development, one-time charge



Conference Call Details and Dial-in Information

DUSA Pharmaceuticals will host a conference call at 8:30 a.m. EST this morning to discuss the Q3 2006 results:



If calling from the US or Canada use the following toll-free number:
800.647.4314
Password - DUSA

For International callers use
641.297.7663
Password - DUSA

A recorded replay of the call will be available after 1:00 p.m.
North American callers 877.863.0350
International callers 858.244.1268


The call will be accessible on our website after 1:00 p.m. ET www.dusapharma.com.

About DUSA Pharmaceuticals

DUSA Pharmaceuticals, Inc. is an integrated dermatology specialty pharmaceutical company focused primarily on the development and marketing of its Levulan® Photodynamic Therapy (PDT) technology platform, and complementary dermatology products. Levulan PDT is currently approved for the treatment of pre-cancerous actinic keratoses, and is being developed for the treatment of acne and photodamage. DUSA's other dermatology products include Nicomide®, and the AVAR® line, resulting from its merger with Sirius. These products target patients with acne and rosacea. DUSA is also developing certain internal indications of Levulan PDT. DUSA is based in Wilmington, MA. Please visit our website at www.dusapharma.com.

Except for historical information, this news release contains certain forward-looking statements that involve known and unknown risk and uncertainties, which may cause actual results to differ materially from any future results, performance or achievements expressed or implied by the statements made. These forward-looking statements relate to intentions, beliefs, and expectations regarding the anticipated launches of Levulan in Brazil and other Latin American countries, the launches of potential Sirius pipeline products, the planned initiation of the clinical trial for acne, expectations regarding affects of purchase accounting adjustments and range of gross margin on Non-PDT Drug Products, and beliefs regarding non-GAAP presentations. Furthermore, the factors that may cause differing results include the regulatory approval process and drug/device development, third-party marketing decisions, sufficient funding, maintenance of DUSA's patent portfolio and other risks identified in DUSA's SEC filings from time to time.


Contact Information

  • DUSA Pharmaceuticals, Inc.
    D. Geoffrey Shulman, MD
    Chairman & CEO
    (416) 363-5059
    or
    DUSA Pharmaceuticals, Inc.
    Robert F. Doman
    President & COO
    (978) 909-2216
    or
    DUSA Pharmaceuticals, Inc.
    Richard Christopher
    VP Finance & CFO
    (978) 909-2211
    or
    DUSA Pharmaceuticals, Inc.
    Shari Lovell
    Director, Shareholder Services
    (416) 363-5059