updated 5/5/2011 4:16:48 PM ET 2011-05-05T20:16:48

SCOTTSDALE, Ariz., May 5, 2011 (GLOBE NEWSWIRE) -- Medicis (NYSE:MRX) today announced revenues of approximately $164.9 million for the three months ended March 31, 2011, compared to revenues of approximately $165.5 million for the three months ended March 31, 2010, which represents a decrease of approximately $0.6 million, or approximately 0.4%. In April 2011, the Company received notice from its contract manufacturer that one lot of ZIANA® Gel went out of specifications. As a result, the Company booked a $3.9 million reserve against sales in the three months ended March 31, 2011, related to a targeted recall of product from this lot.

Non-generally accepted accounting principles (non-GAAP, defined below) diluted earnings per share (EPS, defined below) for the three months ended March 31, 2011, was $0.50, compared to non-GAAP diluted EPS of $0.61 for the three months ended March 31, 2010, which represents a decrease of $0.11 per diluted share, or approximately 18.8% (see "Unaudited Reconciliation of Non-GAAP Adjustments" in the financial tables of this press release). GAAP diluted EPS for the three months ended March 31, 2011, was $0.30, compared to GAAP diluted EPS of $0.54 for the three months ended March 31, 2010, which represents a decrease of $0.24 per diluted share, or approximately 45.2%.

The Company's achievement of approximately $164.9 million in revenues and non-GAAP diluted EPS of $0.50 is consistent with the Company's published guidance of $160-$170 million in revenues and $0.45-$0.50 in non-GAAP diluted EPS for the three months ended March 31, 2011.

"We are pleased to announce a solid first quarter," said Jonah Shacknai, Chairman and Chief Executive Officer. "With the announcement of our recent settlement with Teva, issuance of the 7,919,483 patent and approximately 95% of new prescriptions for SOLODYN® being written in the latest five strengths, we remain confident in the SOLODYN franchise for the foreseeable future. Additionally, we eagerly await FDA's decision on an expanded label for RESTYLANE®, following the recent FDA advisory panel recommendation to approve an indication for lip augmentation. We entered the second quarter with a significant focus on business development opportunities within our core heritage of medical dermatology and facial aesthetics, and look forward to the potential value these opportunities may yield."

Non-GAAP net income for the three months ended March 31, 2011, was approximately $32.9 million, compared to non-GAAP net income of approximately $40.0 million for the three months ended March 31, 2010, which represents a decrease of approximately $7.1 million, or approximately 17.8%. Non-GAAP net income for the three months ended March 31, 2011, excludes charges totaling approximately $20.5 million (pre-tax), consisting of a $7.0 million research and development (R&D) milestone payment to a Medicis partner, a loss from discontinued operations of approximately $11.4 million associated with the LipoSonix™ business and $2.1 million related to additional expenses from fluctuations in the Company's stock price and the resulting effect on the Company's Stock Appreciation Rights (SARs). Non-GAAP net income for the three months ended March 31, 2010, excluded a loss from discontinued operations of approximately $7.3 million (pre-tax) associated with the LipoSonix business.

GAAP net income for the three months ended March 31, 2011, was approximately $19.4 million, compared to GAAP net income of approximately $35.4 million for the three months ended March 31, 2010, which represents a decrease of approximately $16.0 million, or approximately 45.3%.

Acne Products

Medicis recorded revenues of approximately $103.5 million from sales of its acne products for the three months ended March 31, 2011, compared to revenues of approximately $120.2 million for the three months ended March 31, 2010, which represents a decrease of approximately $16.7 million, or approximately 13.9%. This decrease is due primarily to returns reserves associated with the 45 mg, 90 mg and 135 mg strengths of SOLODYN, reserves related to ZIANA and the impact from the early 2011 discontinuation of TRIAZ® and the Company's decision to no longer promote PLEXION®. The Medicis Acne Products category includes primarily SOLODYN and ZIANA.

Non-Acne Products

Medicis recorded revenues of approximately $52.2 million associated with its non-acne products for the three months ended March 31, 2011, compared to revenues of approximately $34.3 million for the three months ended March 31, 2010, which represents an increase of approximately $17.9 million, or approximately 52.5%. This increase is due primarily to increased sales of DYSPORT®, the RESTYLANE franchise and VANOS®, offset by decreased sales of LOPROX® due to generic competition. The Medicis Non-Acne Products category includes primarily DYSPORT, PERLANE®, RESTYLANE and VANOS.

Other Non-Dermatological Products

Medicis recorded revenues of approximately $9.2 million associated with its other non-dermatological products for the three months ended March 31, 2011, compared to revenues of approximately $11.1 million for the three months ended March 31, 2010, which represents a decrease of approximately $1.9 million, or approximately 16.7%. The Medicis Other Non-Dermatological Products category includes primarily AMMONUL®, BUPHENYL® and contract revenue.

Other Income Statement Items

Gross profit margin for the three months ended March 31, 2011, was approximately 91.3%.

Selling, general and administrative (SG&A) expense for the three months ended March 31, 2011, was approximately $84.6 million, or approximately 51.3% of revenues, compared to approximately $72.3 million, or approximately 43.7% of revenues, for the three months ended March 31, 2010. SG&A expense for the three months ended March 31, 2011, includes a $1.9 million charge related to additional expenses from fluctuations in the Company's stock price and the resulting effect on the Company's SARs.

R&D expense for the three months ended March 31, 2011, was approximately $14.3 million, compared to approximately $6.6 million for the three months ended March 31, 2010. R&D expense for the three months ended March 31, 2011, includes a $7.0 million purchased R&D charge associated with a milestone payment to a Medicis partner and a $0.2 million charge related to additional expenses from fluctuations in the Company's stock price and the resulting effect on the Company's SARs. The Company recorded no special R&D charges for the three months ended March 31, 2010.

Cash Flow

The Company's cash flow from operations for the three months ended March 31, 2011, was approximately $91.2 million, consisting of approximately $96.7 million from continued operations, partially offset by cash used of approximately $5.5 million from discontinued operations.

2011 Guidance

Based upon information available currently to the Company's management, the Company's financial guidance for the remainder of 2011 is anticipated as follows:

Calendar 2011 
(in millions, except per share amounts) 
           
  First  Second  Third  Fourth  Calendar 
  Quarter  Quarter  Quarter  Quarter  Year-End 
  (3/31/11)  (6/30/11)  (9/30/11)  (12/31/11)  2011
  Actual  Estimated  Estimated  Estimated  Estimated 
           
Revenue $165 $185-$197  $190-$202  $195-$206  $735-$770 
           
Non-GAAP diluted EPS objectives  $0.50 $0.61-$0.66  $0.63-$0.68  $0.71-$0.76  $2.45-$2.60 

Additional 2011 Guidance Considerations

  • Revenue and non-GAAP diluted EPS objectives include certain assumptions associated with:
  • continued acceptance of newer strengths of SOLODYN by physicians;
  • the Company's early 2011 discontinuation of TRIAZ and decision to no longer promote PLEXION;
  • the exclusion of all revenue and expenses associated with LipoSonix as the Company is classifying the LipoSonix business as a discontinued operation beginning in the first quarter of 2011;  
  • competition in the dermal filler and botulinum toxin markets;
     
  • gross profit margins of approximately 90-92% of revenues;
     
  • SG&A expenses of approximately 45-47% of revenues;
     
  • R&D expenses of approximately 6-7% of revenues;
     
  • depreciation and amortization of approximately $30-$32 million for the year;
     
  • effective tax rate of approximately 38-39%; and
     
  • fully diluted weighted average shares outstanding of approximately 65-66 million shares.

The above guidance does not take into account the following:

  • disposition of the LipoSonix business;
      
  • special charges associated with R&D milestones or contract payments;  
     
  • the financial impact of fluctuations in the Company's stock price and the resulting effect on the Company's SARs; 
     
  • additional recognized losses on our auction rate securities investments;  
     
  • recognized losses resulting from impairments on our intangible assets;  
     
  • the impact of accounting for new collaborative arrangements with Medicis partners;  
     
  • the financial impact of changes in accounting or governmental pronouncements;  
     
  • charges related to the accounting for our investment in Revance or Hyperion;  
     
  • material changes to the demand for ZIANA associated with the launch of a competitive product;
     
  • material changes to our assumptions regarding sales of SOLODYN to wholesalers and the demand for SOLODYN associated with the anticipated November 2011 launch of generic versions of SOLODYN in 45 mg, 90 mg and 135 mg strengths;
     
  • material changes to our assumptions regarding prescription trends toward the newer strengths of SOLODYN;
     
  • the timing of additional SOLODYN patent allowances, if any;  
     
  • uncertainty relating to the reduction of the average selling price, including reserves, for covered products as a result of the rise in costs associated with consumer rebate programs, including MediSAVE, RESTYLANE Rewards® and other point-of-sale offers;  
     
  • changes in reimbursement policies of health plans and other health insurers;
     
  • the impact of the U.S. economy on the Company's aesthetic and therapeutic franchises; and  
     
  • significant changes in assumptions and estimates used for calculating various sales reserves.

At the time of this disclosure, Medicis believes these objectives are attainable based upon information currently available to the Company's management.

Diluted Earnings Per Share

Diluted earnings per share amounts are calculated using the "if-converted" method of accounting regardless of whether the Company's outstanding convertible bonds meet the criteria for conversion and regardless of whether the bondholders actually convert their bonds into shares.

Use of Non-GAAP Financial Information

The Company has disclosed non-GAAP financial information in this press release to provide meaningful supplemental information regarding its operational performance and to enhance its investors' overall understanding of its core financial performance. Management measures the Company's performance using non-GAAP financial measures, such as those that are disclosed in this press release. This information facilitates management's internal comparisons to the Company's historical core operating results and competitors' core operating results, and is a basis for financial decision making. Management believes that Medicis' investors benefit from seeing the Company's results on the same basis as management, in addition to the GAAP presentation. In our view, the non-GAAP financial measures are informative to investors, allowing them to focus on the ongoing operations and core results of Medicis' business. Historically, Medicis has reported similar non-GAAP information to its investors and believes that the inclusion of comparative numbers provides consistency in the Company's financial disclosures. This information is not in accordance with, or an alternative for, information prepared using GAAP. Non-GAAP net income excludes certain items, such as R&D charges which result from payments made to Medicis partners, transaction costs, the impairment of long-lived assets, gains resulting from the sale of subsidiaries, charges related to the accounting for our investment in Revance or Hyperion and litigation reserves. These items may have a material effect on the Company's net income and diluted earnings per common share calculated in accordance with GAAP. The Company excludes such charges and the related tax benefits when analyzing its financial results as the items are distinguishable events. Management believes that, by viewing the Company's results of operations excluding these charges, investors are given an indication of the ongoing results of the Company's operations.

About Medicis

Medicis is the leading independent specialty pharmaceutical company in the United States focusing primarily on the treatment of dermatological and aesthetic conditions. The Company is dedicated to helping patients attain a healthy and youthful appearance and self-image. Medicis has leading branded prescription products in a number of therapeutic and aesthetic categories. The Company's products have earned wide acceptance by both physicians and patients due to their clinical effectiveness, high quality and cosmetic elegance.

The Company's products include the brands DYSPORT® (abobotulinumtoxinA) 300 Units for Injection, PERLANE® Injectable Gel, PERLANE-L® Injectable Gel with 0.3% Lidocaine, RESTYLANE® Injectable Gel, RESTYLANE-L® Injectable Gel with 0.3% Lidocaine, DYNACIN® (minocycline HCl Tablets, USP), LOPROX® (ciclopirox) Gel 0.77% and Shampoo 1%, SOLODYN® (minocycline HCl, USP) Extended Release Tablets, VANOS® (fluocinonide) Cream 0.1%, ZIANA® (clindamycin phosphate 1.2% and tretinoin 0.025%) Gel, AMMONUL® (sodium phenylacetate and sodium benzoate) Injection 10%/10%, BUPHENYL® (sodium phenylbutyrate) Tablets and Powder and the over-the-counter brand ESOTERICA®.

For more information about Medicis, please visit the Company's website at www.Medicis.com.  Printed copies of the Company's complete audited financial statements are available free of charge upon request.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. All statements included in this press release that address activities, events or developments that Medicis expects, believes or anticipates will or may occur in the future are forward-looking statements, including:

  • the Company's future prospects;
     
  • revenues, gross profit margin, expense, tax rate and earnings guidance;
     
  • information regarding business development activities and future regulatory approval of the Company's products;
     
  • timing of FDA approval of the LipoSonix system1, if at all;
     
  • the commercial success of the Company's products;
     
  • the patentability of certain intellectual property;
     
  • the potential for generic competition to SOLODYN and other Medicis products;
     
  • the future expansion of the aesthetics market;
     
  • the occurrence, timing and financial terms or effect of the Company's proposed disposition of LipoSonix and other potential business development transactions; and
     
  • expectations relating to the Company's product development pipeline.

These statements are based on certain assumptions made by the Company based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. No assurances can be given, however, that these activities, events or developments will occur or that such results will be achieved. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of the Company. The Company's business is subject to all risk factors outlined in the Company's most recent annual report on Form 10-K for the year ended December 31, 2010, and other documents we file with the Securities and Exchange Commission (SEC). At the time of this press release, the Company cannot, among other things, assess the likelihood, timing or forthcoming results of R&D projects, the risks associated with the FDA approval process and risks associated with significant competition within the Company's industry, nor can the Company validate its assumptions of the full impact on its business of the approval of competitive generic versions of the Company's primary brands, and any future competitive product approvals that may affect the Company's brands.

Additionally, Medicis may acquire and/or license products or technologies from third parties to enter into new strategic markets. The Company periodically makes up-front, non-refundable payments to third parties for R&D work that has been completed and periodically makes additional non-refundable payments for the achievement of various milestones. There can be no certainty about the periods in which these potential payments could be made, nor if any payments such as these will be made at all. Any estimated future guidance does not include, among other things, the potential payments associated with any such transactions.

There are a number of additional important factors that could cause actual results to differ materially from those projected, including:

  • the anticipated size of the markets and demand for the Company's products;
     
  • the availability of product supply or changes in the costs of raw materials;
     
  • the receipt of required regulatory approvals;
     
  • competitive developments affecting our products;
     
  • product liability claims;
     
  • the introduction of federal and/or state regulations relating to the Company's business;
     
  • dependence on sales of key products;
     
  • changes in the treatment practices of physicians that currently prescribe the Company's products, including prescription levels;
     
  • the uncertainty of future financial results and fluctuations in operating results, and the factors that may attribute to such fluctuations as set forth in our SEC filings;
     
  • dependence on the Company's strategy (including the uncertainty of license payments and/or other payments due from third parties);
     
  • changes in reimbursement policies of health plans and other health insurers;
     
  • decreases in revenues associated with the FDA's requirement, effective March 2011, that prescription benzoyl peroxide products that are not approved through a New Drug Application, such as TRIAZ, not be sold as prescription products;
     
  • the timing and success of new product development by the Company or third parties;
     
  • the inability to secure patent protection from filed patent applications, inadequate protection of the Company's intellectual property or challenges to the validity or enforceability of the Medicis proprietary rights;
     
  • the risks of pending and future litigation or government investigations; and
     
  • other risks described from time to time in the Company's filings with the SEC.

Forward-looking statements represent the judgment of the Company's management as of the date of this release and the Company disclaims any intent or obligation to update any forward-looking statements contained herein, which speak as of the date hereof.

NOTE: Full prescribing information for any of the Company's prescription products is available by contacting the Company. All trademarks are the property of their respective owners.

1 The LipoSonix system is not approved or cleared for sale in the U.S.

 
Medicis Pharmaceutical Corporation
Summary Statements of Operations (Unaudited)
(in thousands, except per share data)
     
  Three months ended

March 31,
  2011 2010
     
Product revenues $163,896 $163,592
Contract revenues  1,017 1,950
     
 Total revenues 164,913 165,542
     
Cost of revenues 14,331 15,106
     
 Gross profit 150,582 150,436
     
Operating expenses:    
 Selling, general and administrative 84,630 72,284
 Research and development 14,273 6,558
 Depreciation and amortization 7,324 6,733
     
 Total operating expenses 106,227 85,575
     
Operating income  44,355 64,861
     
Interest (income) expense, net (216) (102)
Other expense, net -- 258
     
Income from continuing operations before income tax expense 44,571 64,705
     
Income tax expense  17,886 24,683
     
Net income from continuing operations 26,685 40,022
     
Loss from discontinued operations, net of income tax benefit 7,325 4,650
     
Net income $19,360 $35,372
     
Basic net income per common share $0.32 $0.59
     
Diluted net income per common share $0.30 $0.54
     
Shares used in basic net income per common share 59,124 58,049
     
Shares used in diluted net income per common share 65,381 64,192
     
Cash flow from operations $91,232 $38,217
 
 
Medicis Pharmaceutical Corporation
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands, except per share data)
         
  Three months ended

March 31, 2011
Three months ended

March 31, 2010
  Dollar Value EPS Impact Dollar Value EPS Impact
GAAP net income  $19,360   $35,372  
         
Less: income allocated to participating securities (562)   (1,163)  
         
GAAP net income attributable to common shareholders 18,798 $0.32 34,209 $0.59
         
Less: net undistributed earnings allocated to unvested shareholders (3)   (6)  
         
Interest expense and associated bond offering costs (tax-effected)  666 {a}    666 {a}  
         
GAAP "if-converted" net income and diluted EPS 19,461 $0.30 34,869 $0.54
         
Non-GAAP adjustments:        
         
Research and development expenses related to our collaborations 7,000 $0.11  --  --
         
Loss from discontinued operations 11,428 $0.17 7,291 $0.11
         
Impact of stock price fluctuation on SARs 2,078 $0.03    
         
Income tax effects related to the above transactions (6,986) ($0.11) (2,641) ($0.04)
         
Less: income allocated to participating securities and net undistributed earnings allocated to unvested shareholders related to the above transactions (435)  -- (156)  -- 
         
Non-GAAP "if-converted" net income and diluted EPS $32,546 $0.50 $39,363 $0.61
         
Shares used in basic net income per common share   59,124   58,049
         
Shares used in diluted net income per common share   65,381   64,192
 
{a}  In order to determine "if-converted" net income, the tax-effected net interest on the 2.5% and 1.5% contingent convertible notes of $0.7 million are added back to GAAP net income for the three months ended March 31, 2011 and March 31, 2010.
 
 
Medicis Pharmaceutical Corporation
Balance Sheets
(in thousands)
     
  March 31,

2011
December 31,

2010
Assets (unaudited)  
Cash, cash equivalents & short-term investments $775,534 $703,554
Accounts receivable, net 99,584 130,622
Inventory, net 34,404 35,282
Deferred tax assets 79,351 70,461
Other current assets 18,150 15,268
Assets held for sale from discontinued operations 10,054 13,127
     
Total current assets 1,017,077 968,314
Property & equipment, net 24,077 24,435
Intangible assets, net 294,891 287,706
Deferred tax assets 33,103 36,898
Long-term investments 32,193 21,480
Other assets 2,991 2,991
     
Total assets $1,404,332 $1,341,824
     
Liabilities and stockholders' equity    
Current liabilities of continuing operations $372,602 $332,616
Liabilities held for sale from discontinued operations 5,936 7,276
Total current liabilities 378,538 339,892
Contingent convertible senior notes 2.5%, due 2032 169,145 169,145
Contingent convertible senior notes 1.5%, due 2033 181 181
Other liabilities 4,960 5,084
Stockholders' equity 851,508 827,522
     
Total liabilities and stockholders' equity $1,404,332 $1,341,824
     
Working capital $638,539 $628,422
CONTACT: Medicis
         Kara Stancell (media) 
         (480) 291-5454 
         Sean Andrews (investors) 
         (480) 291-5854

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