Santarus, Inc. (NASDAQ: SNTS) today reported financial and operating results for the quarter ended June 30, 2013. Key financial results include:
- Total revenues of $89.4 million grew 89% compared with total revenues of $47.2 million in the second quarter of 2012
- Non-GAAP adjusted earnings were $24.3 million and diluted non-GAAP adjusted earnings per share (EPS) were $0.31 in the second quarter of 2013 compared with non-GAAP adjusted earnings of $7.1 million and diluted non-GAAP adjusted EPS of $0.10 for the second quarter of 2012
- Net income of $73.5 million, or $0.94 diluted EPS, which included a $5.0 million expense for a success-based regulatory milestone, and a one-time income tax benefit of $54.9 million, or $0.70 per share fully diluted, resulting from the release of the company’s valuation allowance for deferred tax assets as further described below. For the second quarter of 2012, net income was $3.4 million, or $0.05 diluted EPS.
- Cash, cash equivalents and short-term investments were $142.7 million as of June 30, 2013, an increase of $48.0 million compared with $94.7 million at December 31, 2012
- In June 2013, the FDA accepted for review the RUCONEST (recombinant human C1 esterase inhibitor) Biologics License Application (BLA) for the treatment of acute angioedema attacks in patients with hereditary angioedema. Pursuant to the Prescription Drug User Fee Act (PDUFA), Santarus expects the FDA will complete its review or otherwise respond to the RUCONEST BLA by April 16, 2014.
- In July 2013, Santarus completed enrollment in the UCERIS (budesonide) CONTRIBUTE clinical study designed to evaluate the incremental benefit of adding UCERIS extended release tablets 9 mg to oral aminosalicylate (5-ASA) therapy for the induction of clinical remission in adult patients with active, mild to moderate ulcerative colitis. The company expects to report top-line data from the study by the end of 2013 or in early 2014.
- UCERIS total prescriptions were approximately 11,528 in the second quarter of 2013. Through the end of June more than 3,500 physicians have prescribed UCERIS at least one time, a number that has doubled since mid-April. The commercial launch for UCERIS began in mid-February 2013.
- ZEGERID (omeprazole/sodium bicarbonate) brand and authorized generic total prescriptions were stable at approximately 93,000 prescriptions in the second quarter of 2013, consistent with prescription levels in the first quarter of 2013. The company resumed promotion of ZEGERID to gastroenterologists and other selected physicians in February 2013, with the initial goal of stopping the decline in total prescriptions for the product franchise.
- GLUMETZA (metformin HCl extended release tablets) total prescriptions increased 13% in the second quarter of 2013 compared with the second quarter of 2012.
- CYCLOSET (bromocriptine mesylate) tablets total prescriptions were up 20% in the second quarter of 2013 compared with the second quarter of 2012.
|Three Months Ended||Increase|
|Product sales, net|
|Total product sales, net||88.5||46.3||42.2|
At June 30, 2013, the company concluded that it was more likely than not that all of its deferred tax assets would be realized through future taxable income and released its valuation allowance. The release of the valuation allowance resulted in an income tax benefit of $54.9 million, which was recorded as a discrete item in the second quarter of 2013.License fees and royalties of $25.0 million for the second quarter of 2013 included royalties on net sales of GLUMETZA, UCERIS, ZEGERID and FENOGLIDE, the gross margin split on CYCLOSET net sales, amortization expense, and $5.0 million expense for a success-based regulatory milestone associated with the FDA acceptance for review of the RUCONEST BLA. License fees and royalties of $12.4 million for the second quarter of 2012 included royalties on GLUMETZA, ZEGERID and FENOGLIDE net sales, the gross margin split on CYCLOSET net sales and amortization of upfront payments. Research and development expenses totaled $6.6 million for the second quarter of 2013, compared with $6.7 million for the second quarter of 2012. Selling, general and administrative (SG&A) expenses were $33.5 million for the second quarter of 2013 and $20.6 million for the second quarter of 2012. The $12.9 million increase in SG&A expenses primarily resulted from the addition of 85 sales representatives in the first quarter of 2013, costs associated with the commercial launch of UCERIS and an increase in recorded stock-based compensation resulting from an increase in the price of the company’s common stock. Six Months Ended June 30, 2013 For the six months ended June 30, 2013, total revenues were $168.8 million compared with $93.1 million for the six months ended June 30, 2012 as indicated below ($ in millions):
|Six Months Ended||Increase|
|Product sales, net|
|Total product sales, net||167.0||91.5||75.5|
As of June 30, 2013, Santarus had cash, cash equivalents and short-term investments of $142.7 million, an increase of approximately $48.0 million in the six months ended June 30, 2013. The June 30, 2013 cash balance reflected the payment of a $7.0 million milestone in April 2013 for first commercial sale of UCERIS. Cash, cash equivalents and short-term investments were $94.7 million as of December 31, 2012.Financial Outlook for 2013 Santarus has increased and narrowed the range of its financial outlook for full year 2013 as follows:
- Total revenues of approximately $355 million to $360 million, compared with its prior estimate of total revenues of approximately $330 million to $340 million.
- Non-GAAP adjusted earnings of approximately $97 million to $101 million and diluted non-GAAP adjusted EPS of $1.21 to $1.26, up from its prior estimates of non-GAAP adjusted earnings of approximately $81 million to $91 million and diluted non-GAAP adjusted EPS of $1.03 to $1.15.
- Net income of approximately $129 million to $132 million and diluted EPS of $1.61 to $1.65, increased from its prior estimates of net income of approximately $57 million to $64 million and diluted EPS of $0.72 to $0.81. The updated 2013 net income and diluted EPS estimates include an income tax benefit of $54.9 million, or $0.69 per share fully diluted, resulting from the release of the company’s valuation allowance for deferred tax assets as previously described.
- Research and development expenses of approximately $34 million.
- SG&A expenses of approximately $138 million.
Set forth below are tables reconciling the company’s non-GAAP adjusted earnings to GAAP net income for the three months and six months ended June 30, 2013 and 2012 and reconciling the company’s non-GAAP adjusted earnings guidance to GAAP net income guidance for the year ending December 31, 2013.
|Santarus, Inc. Reconciliation of GAAP Net Income to Non-GAAP Adjusted Earnings ($ in millions) (unaudited)|
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|GAAP net income||$||73.5||$||3.4||$||92.2||$||4.1|
|Interest (income) expense||0.1||0.1||0.1||0.1|
|Income tax (benefit) expense||(54.9||)||0.3||(53.8||)||0.6|
|Depreciation and amortization||1.7||1.5||3.4||3.0|
|Stock issuance for regulatory milestone||-||-||-||3.7|
|Loss on contingent consideration||0.2||0.1||0.4||0.3|
|Non-GAAP adjusted earnings||$||24.3||$||7.1||$||48.2||$||14.9|
|Non-GAAP adjusted EPS, diluted||$||0.31||$||0.10||$||0.62||$||0.22|
|Shares used in computing non-GAAP adjusted EPS, diluted||78,435,595||68,270,628||77,226,847||66,995,658|
|Santarus, Inc. Reconciliation of GAAP Net Income to Non-GAAP Adjusted Earnings Guidance for the Year Ending December 31, 2013 (in millions, except EPS)|
|GAAP net income||$129 - 132|
|Interest (income) expense||0|
|Income tax (benefit)||(53)|
|Depreciation and amortization||7 - 8|
|Non-GAAP adjusted earnings||$97 - $101|
|Non-GAAP adjusted EPS, diluted||$1.21 - $1.26|
|Shares used in computing non-GAAP adjusted EPS, diluted||80|
|Condensed Consolidated Balance Sheets|
|June 30,||December 31,|
|Cash and cash equivalents and short-term investments||$||142,746||$||94,736|
|Accounts receivable, net||35,037||31,024|
|Deferred tax assets||31,211||-|
|Prepaid expenses and other current assets||6,871||6,678|
|Total current assets||227,679||142,335|
|Long-term restricted cash||750||950|
|Property and equipment, net||1,111||945|
|Intangible assets, net||20,126||16,254|
|Long-term deferred tax assets||23,694||-|
|Liabilities and stockholders' equity|
|Accounts payable and accrued liabilities||$||48,464||$||45,824|
|Allowance for product returns||22,386||20,574|
|Total current liabilities||70,850||66,398|
|Deferred revenue, less current portion||1,262||1,639|
|Other long-term liabilities||4,425||2,884|
|Total stockholders' equity||190,869||82,952|
|Total liabilities and stockholders' equity||$||277,311||$||163,749|
|Condensed Consolidated Statements of Operations|
|(in thousands, except share and per share amounts)|
|Three Months Ended||Six Months Ended|
|June 30,||June 30,|
|Product sales, net||$||88,495||$||46,308||$ 167,013||$||91,437|
|Costs and expenses:|
|Cost of product sales||5,646||3,703||10,113||7,187|
|License fees and royalties||24,988||12,376||42,783||28,695|
|Research and development||6,600||6,738||13,154||11,912|
|Selling, general and administrative||33,451||20,587||64,205||40,434|
|Total costs and expenses||70,685||43,404||130,255||88,228|
|Income from operations||18,677||3,788||38,547||4,844|
|Other income (expense):|
|Total other income (expense)||(66||)||(75||)||(128||)||(176||)|
|Income before income taxes||18,611||3,713||38,419||4,668|
|Income tax (benefit) expense||(54,923||)||265||(53,830||)||593|
|Net income||$||73,534||$||3,448||$ 92,249||$||4,075|
|Net income per share:|
|Weighted average shares outstanding used to|
|calculate net income per share:|