Nov 8 2006, 3:15 PM EST
News source: Business Wire
Connetics Corporation (Nasdaq:CNCT), a specialty pharmaceutical company that develops and commercializes dermatology products, today announced financial results for the three and nine months ended September 30, 2006. All prior-year revenues, net income and per share figures reflect the restated results contained in Connetics' Form 10-K/A for the year ended December 31, 2005, filed with the Securities and Exchange Commission on July 25, 2006.
On October 23, 2006, Connetics announced it had signed a definitive merger agreement with Stiefel Laboratories, Inc. Upon closing of the transaction, holders of Connetics common stock will receive $17.50 per share in cash. The two companies anticipate closing the transaction in late 2006 or early 2007. The closing is subject to approval by holders of a majority of Connetics common stock, antitrust clearance and other customary closing conditions. The transaction was unanimously approved by Connetics' Board of Directors.
Connetics reported a net loss for the third quarter of 2006 of $27.4 million, or $0.81 per share, compared with net income of $11.0 million, or $0.29 per diluted share, for the third quarter of 2005.
Total revenues for the third quarter of 2006 were $19.7 million, reflecting Connetics' previously announced decision to reduce wholesaler inventories by shipping product below estimated unit demand. The Company estimates that unit demand exceeded product shipments by approximately $31.4 million during the third quarter of 2006, and had Connetics shipped to total estimated unit demand, total revenues in the quarter would have been approximately $51.1 million. Third quarter 2006 product revenues include Soriatane(R) sales of $10.4 million, OLUX(R) sales of $4.3 million, Evoclin(R) sales of $2.3 million and Luxiq(R) sales of $1.8 million.
Connetics reported that wholesaler inventories as of September 30, 2006 represented six to seven weeks of sales. Connetics now expects to maintain wholesaler inventory levels of its four current brands at approximately four to six weeks of sales. This level is expected to be achieved during the fourth quarter of 2006. The estimated wholesaler inventory levels for Connetics' products are shown in the table below:
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More News Months of Estimated Wholesaler Inventory as of:
Product June 30, 2006 September 30, 2006
---------------------- ------------------------ ----------------------
Soriatane 3.2 1.5
OLUX Foam 3.6 1.5
Evoclin Foam 3.7 1.3
Luxiq Foam 4.0 1.6
------------------------ ----------------------
Weighted average for
all products 3.6 1.5
Connetics currently anticipates that the reduced wholesaler inventory will correlate to lower product returns in the future. If, as anticipated, Connetics' on-going product returns experience and additional information from wholesalers indicate a significantly lower rate of product returns in the future, the Company will determine a more appropriate accrual for returns, and could potentially release a substantial portion of its product returns reserve.
Selling, general and administrative (SG&A) expenses for the third quarter of 2006 were $31.6 million, including non-cash stock-based compensation expense of $1.0 million. Expenses in the third quarter of 2006 reflected non-recurring expenses for audit, consulting and legal fees of approximately $2.0 million related to the Company's financial restatement and to the ongoing SEC investigation; and payments and fees related to the note holder consent of approximately $3.3 million, of which $1.3 million was included in in
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