Pain Therapeutics Declares Special One-Time Cash Distribution To Shareholders
- $2.00 Cash Per Share -
- Distribution Treated As Return of Capital -
- Payment To Shareholders Expected December 2010 -SAN MATEO, Calif., Oct. 27, 2010 (GLOBE NEWSWIRE) -- Pain Therapeutics, Inc. (Nasdaq:PTIE) announced today that a committee of its Board of Directors has declared a special one-time cash distribution of $2.00 per share to shareholders, or an aggregate of about $85 million. This nondividend distribution will be paid to shareholders of record as of the close of business on December 1, 2010. We expect to pay shareholders on or around December 10, 2010. The nondividend distribution will be paid entirely from cash reserves. At September 30, 2010, Pain Therapeutics had cash and total investments of about $180 million, no debt and an expected net burn rate of under $5 million for 2010, before giving effect to the nondividend distribution. "This marks another milestone in our plan to deliver value to shareholders," said Remi Barbier, Chairman, President and CEO of Pain Therapeutics. "Today's action reflects our confidence in REMOXY and its potential to generate meaningful cash flow over the long-term." Pain Therapeutics, Inc. is committed to maintaining a strong balance sheet, tight fiscal discipline and investing in core scientific strategies. We believe these operating guidelines have allowed us to return surplus cash to shareholders. In 2007, we announced a return of $20 million to shareholders in the form of share repurchases. In 2008, we announced an additional return of $10 million to shareholders in the form of share repurchases. Both share repurchases were completed in their entirety. Federal Tax Treatment of Nondividend Distribution According to the Internal Revenue Service, a 'Nondividend Distribution' is a cash distribution that is not paid out of the earnings and profits of a corporation. Because of Pain Therapeutics' cumulative tax loss and our expectation to incur a tax loss for CY2010, we believe this cash distribution will be treated for tax purposes as a nondividend distribution, i.e. a return of capital. A nondividend distribution reduces the cost basis of your investment. It is not taxed until the cost basis of your investment is fully recovered. You are urged to consult a tax advisor or the Internal Revenue Service ( www.irs.gov ) as to the particular tax consequences to you of today's announcement. REMOXY Our lead drug candidate, REMOXY, is a strong painkiller with a unique abuse-resistant formulation designed to reduce potential risks of intentional abuse or accidental misuse. REMOXY and three other abuse-resistant pain medications are being developed pursuant to our strategic alliance with King Pharmaceuticals Inc (NYSE:KG). King has sole responsibility for the commercialization of REMOXY worldwide, except for Australia and New Zealand.
- King plans to resubmit an NDA for REMOXY in Q4 2010. Upon FDA approval of REMOXY, we will receive a $15.0 million cash milestone payment and a running royalty equal to 20% of net sales in the U.S. of all drugs developed under this strategic alliance, except as to the first $1.0 billion in cumulative net sales, which royalty is set at 15%. Outside the United States, the royalty rate is set at 10%.
- To date, we have received from King total cash payments of $180.0 million in various program fees and milestone payments in connection with our strategic alliance. We could receive from King up to $125.0 million in additional milestone payments over the course of the clinical and regulatory development of REMOXY and three other abuse-resistant pain medications.
- On October 12, 2010, Pfizer Inc. (NYSE:PFE) and King announced that they had entered into a definitive merger agreement. Pfizer is the world's largest research-based pharmaceutical company. We believe Pfizer's acquisition of King, if consummated, may facilitate REMOXY's commercial success if this drug is approved.
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