EX-99.1 2 p76068exv99w1.htm EX-99.1 exv99w1

Exhibit 99.1

MEDICIS REPORTS SECOND QUARTER 2008 FINANCIAL RESULTS

SCOTTSDALE, Ariz.—August 5, 2008—Medicis (NYSE:MRX) today announced revenues for the three months ended June 30, 2008, of approximately $132.5 million, compared to approximately $108.9 million for the three months ended June 30, 2007, representing an increase of approximately 22%. This increase was due primarily to the continued strength of SOLODYN®. Non-generally accepted accounting principles (non-GAAP) earnings per diluted share for the three months ended June 30, 2008, adjusted only for the $25 million payment to Ipsen for the RELOXIN® Biologics License Application (BLA) acceptance by the U.S. Food and Drug Administration (FDA), was approximately $0.40 per diluted share. Comparatively, for the three months ended June 30, 2007, the Company reported non-GAAP earnings per diluted share of $0.28 per diluted share, adjusted only for the write-down of the long-lived asset value associated with OMNICEF®.

GAAP net income for the three months ended June 30, 2008, was approximately $10.0 million, or approximately $0.17 per diluted share, compared to GAAP net income of $15.5 million, or $0.24 per diluted share, for the three months ended June 30, 2007. This decrease is due to the $25 million payment to Ipsen for the RELOXIN® BLA acceptance by FDA.

The Company’s achievement of approximately $132.5 million in revenues is consistent with the Company’s previously published guidance range of approximately $132-$135 million for the three months ended June 30, 2008. Non-GAAP earnings of approximately $0.40 per diluted share compare favorably to the Company’s previously published guidance range of approximately $0.32-$0.35 in earnings per diluted share for the three months ended June 30, 2008.

“We are pleased to announce another solid quarter,” said Jonah Shacknai, Chairman and Chief Executive Officer of Medicis. “We are excited to be broadening our aesthetic research and development pipeline and to be entering the international aesthetic market with the addition of the LipoSonix technology. We continue to actively pursue business development opportunities, looking at technologies with the potential to grow our clients’ businesses with enhanced patient offerings and build long-term stockholder value. As we look to the second half of 2008, we remain focused on furthering the development of products currently in our pipeline and readying for a first quarter introduction of RELOXIN®, pending FDA approval.”

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Acne Products

Medicis recorded revenues of approximately $79.5 million associated with its acne products in the three months ended June 30, 2008, which represents an increase of approximately $24.0 million, or approximately 43%, compared to revenues of approximately $55.5 million for the three months ended June 30, 2007. This increase is due primarily to increased revenues associated with SOLODYN® in the second quarter of 2008. Medicis’ acne products include primarily DYNACIN®, PLEXION®, SOLODYN®, TRIAZ® and ZIANA®.

Non-Acne Products

Medicis recorded revenues of approximately $40.9 million associated with its non-acne products in the three months ended June 30, 2008, which represents a decrease of approximately $5.2 million, or approximately 11%, compared to revenues of approximately $46.1 million for the three months ended June 30, 2007. This decrease is primarily due to the year-over-year change in the economic and competitive environment affecting the non-acne products category. The Company’s recorded revenues associated with its non-acne products for the three months ended June 30, 2008, increased approximately $3.2 million, or approximately 8%, compared to approximately $37.8 million for the three months ended March 31, 2008. This increase is primarily due to the strength of RESTYLANE®. Medicis’ non-acne products include primarily LOPROX®, PERLANE®, RESTYLANE® and VANOS®.

Other Non-Dermatological Products

Medicis recorded revenues of approximately $12.1 million associated with its other non-dermatological products during the three months ended June 30, 2008, which represents an increase of $4.9 million, or approximately 67%, compared to revenues of approximately $7.2 million for the three months ended June 30, 2007, and an increase of $2.3 million, or approximately 23%, compared to revenues of approximately $9.8 million for the three months ended March 31, 2008. This increase is primarily due to the strength of AMMONUL® and BUPHENYL®. Medicis’ other non-dermatological products include primarily AMMONUL®, BUPHENYL® and contract revenue.

Other Income Statement Items

Gross profit margins for the three months ended June 30, 2008, increased approximately 6 percentage points to approximately 93.1%, compared to approximately 87.1% for the three months ended June 30, 2007. The increase in gross profit margins was primarily attributable to the strength of higher margin products, such as SOLODYN®, during the quarter.

GAAP selling, general and administrative (SG&A) expense for the three months ended June 30, 2008, was approximately $71.9 million, or approximately 54% of revenues, compared to approximately $59.9 million, or approximately 55% of revenues, for the three months ended June 30, 2007. The increase in SG&A was primarily due to an increase in personnel costs, professional and legal expenses and costs associated with the implementation of our new enterprise resource planning system. Approximately $4.6 million was recorded in SG&A related to FAS 123R share-based compensation expense for the three months ended June 30, 2008, as compared to $5.5 million for the three months ended June 30, 2007, representing a year-over-year decrease of approximately 17%.

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Non-GAAP research and development (R&D) expense for the three months ended June 30, 2008, adjusted only for the $25 million payment to Ipsen for the RELOXIN® BLA acceptance by FDA, was approximately $8.0 million, or approximately 6% of revenues, compared to approximately $7.1 million, or approximately 7% of revenues, for the same period last year. R&D expense for the three months ended June 30, 2008, consisted of ongoing expenses related to various R&D projects, including RELOXIN® and SOLODYN®. Approximately $0.1 million was recorded in R&D related to FAS 123R share-based compensation expense for the three months ended June 30, 2008, and for the three months ended June 30, 2007.

Cash Flow

Medicis recorded operating cash flow of approximately $15.3 million in the three months ended June 30, 2008, which represents a decrease of approximately $38.0 million, or approximately 71%, compared to operating cash flow of approximately $53.3 million for the three months ended June 30, 2007. This decrease includes the $25 million payment to Ipsen for the RELOXIN® BLA acceptance by FDA during the three months ended June 30, 2008.

2008 Guidance Update

Based upon information available currently to the Company, the Company’s financial guidance is as follows:

                                         
Calendar 2008
(in millions, except per share amounts)
    First   Second   Third   Fourth   Calander
    Quarter   Quarter   Quarter   Quarter   Year End
 
   (3/31/08)   (6/30/08)   (9/30/08)   (12/31/08)   2008
 
   Actual   Actual   Estimated   Estimated   Estimated
 
                                
Revenue
   $ 131     $ 133     $ 132-$135     $ 134-$137     $ 530-$536  
Non-GAAP diluted earnings per share objectives
   $ 0.38 (a)   $ 0.40 (a)   $ 0.24-$0.27 (b)   $ 0.30-$0.33 (b)   $ 1.32-$1.38 (b)

(a)  
A reconciliation of GAAP to non-GAAP is found in the financial tables of this press release.

(b)  
The above guidance includes amortization associated with the amortizable intangible assets related to the LipoSonix acquisition.  Amortization of the intangible assets is expected to begin in the third quarter of 2008.  The above guidance does not include an anticipated approximately $30 million charge to in-process R&D related to the acquisition of LipoSonix during the third quarter of 2008.

The above guidance does not take into account potential special charges associated with R&D milestones or contract payments, the financial impact of changes in accounting or governmental pronouncements, the impact of a potential generic launch to SOLODYN®, revenues associated with a RELOXIN® approval, and charges related to the accounting for our investment in Revance.

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The Company is anticipating a strong third quarter for the acne products category as historically there has been an increase in prescriptions for acne products, such as ZIANA® and SOLODYN®, correlating to the back-to-school season. The third quarter revenue guidance assumes the seasonal increase in the acne products category will offset the economic impact in the non-acne products category. Significant changes in the U.S. economy or the seasonal trajectory of acne prescriptions could have an impact on the revenue projections for the third quarter and beyond.

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.

At the time of this disclosure, Medicis believes these objectives are attainable based upon information currently available to the Company’s management. Medicis disclaims any duty to update these projections, other than as required by law.

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

Medicis has provided in this release non-GAAP financial information which has been adjusted for the charge related to our Revance investment. Adjusted financial information is referred to as “non-GAAP.” 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, facilitates management’s comparisons to competitors’ core operating results and is a basis for financial decision making. Management believes 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 the core results of Medicis’ business. Historically, Medicis has reported similar non-GAAP information to its investors and believes the inclusion of comparative numbers provides consistency in the Company’s financial disclosures. This information is not in accordance with, or an alternative to, information prepared using GAAP. It excludes items, such as special charges for R&D, transaction costs, the impairment of long-lived assets, and litigation reserves that may have a material effect on the Company’s net income and diluted net income 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. A reconciliation of the non-GAAP financial results and Medicis’ GAAP financial results can be found below.

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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 prescription brands RESTYLANE® (hyaluronic acid), PERLANE® (hyaluronic acid), DYNACIN® (minocycline HCl), LOPROX® (ciclopirox), PLEXION® (sodium sulfacetamide 10% and sulfur 5%), SOLODYN® (minocycline HCl, USP) Extended Release Tablets, TRIAZ® (benzoyl peroxide), LIDEX® (fluocinonide) Cream 0.05%, VANOS® (fluocinonide) Cream 0.1%, and ZIANA® (clindamycin phosphate 1.2% and tretinoin 0.025%) Gel, BUPHENYL® (sodium phenylbutyrate) Tablets and Powder and AMMONUL® (sodium phenylacetate and sodium benzoate) Injection 10%/10%, prescription products indicated in the treatment of Urea Cycle Disorder, and the over-the-counter brand ESOTERICA®. For more information about Medicis, please visit the Company’s website at www.medicis.com.

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:

•  
Medicis’ future prospects, including but not limited to the statements above under the heading “2008 Guidance Update”;

•  
Medicis’ ability to attain regulatory approvals of the product both in the United States and worldwide and the expected timing of such approvals;

•  
information regarding business development activities and future regulatory approval of the Company’s products;

•  
the expected costs to be incurred in connection with the research and development, clinical trials, regulatory approvals, commercialization and marketing of new products;

•  
the commercial success of RESTYLANE®, PERLANE®, SOLODYN® and ZIANA®;

•  
the potential for generic competition to LOPROX® Shampoo, SOLODYN® and VANOS®;

•  
the future expansion of the aesthetics market; and

•  
expectations relating to the Company’s product development pipeline, including the timing associated with the submission to, or acceptance by, the FDA and other regulatory agencies of submissions relating to products under development.

These statements are based on certain assumptions made by Medicis 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 Medicis. 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, 2007, Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 and other documents we file with the Securities and Exchange Commission. 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, including the RESTYLANE® franchise. The RESTYLANE® franchise currently includes PERLANE® and RESTYLANE®.

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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 Medicis’ products;

•  
Increases or decreases in the expected costs to be incurred in connection with the research and development, clinical trials, regulatory approvals, commercialization and marketing of the Company’s products;

•  
competitive developments affecting our products, such as the recent FDA approvals of ARTEFILL®, RADIESSE®, ELEVESS™, EVOLENCE®, JUVEDERM™ Ultra, JUVEDERM™ Ultra Plus and PREVELLE® Silk, competitors to RESTYLANE® and PERLANE®, and generic forms of our DYNACIN® Tablets, LOPROX®, PLEXION®, SOLODYN®, VANOS® or TRIAZ® products;

•  
the Company’s ability to successfully integrate the operations of LipoSonix and commercialize the LipoSonix technology;

•  
Medicis’ ability to effectively compete in the marketplace in which we compete today or in the future;

•  
the inability to secure patent protection from filed patent applications, inadequate protection of Medicis’ intellectual property or challenges to the validity or enforceability of the Medicis’ proprietary rights;

•  
the availability of product supply or changes in the costs of raw materials;

•  
the receipt of required regulatory approvals;

•  
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 Medicis’ products;

•  
the failure of prescription levels for our acne products to meet the Company’s quarterly expectations;

•  
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;

•  
the uncertainty of license payments and/or other payments due from third parties;

•  
changes in reimbursement policies of health plans and other health insurers;

•  
the timing and success of new product development by Medicis or third parties;

•  
the risks of pending and future litigation or government investigations; and

•  
other risks described from time to time in Medicis’ filings with the Securities and Exchange Commission.

Forward-looking statements represent the judgment of Medicis’ management as of the date of this release and Medicis 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 Medicis’ prescription products is available by contacting the Company. RESTYLANE® and PERLANE® are trademarks of HA North American Sales AB, a subsidiary of Medicis Pharmaceutical Corporation. All other marks are the property of their respective owners.

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

                                 
    Three months ended   Six months ended
    June 30,   June 30,
    2008     2007     2008     2007  
Product revenues
   $ 128,121     $ 105,902     $ 255,577     $ 198,273  
Contract revenues
     4,410       2,962       8,260       5,705  
 
                        
Total revenues
     132,531       108,864       263,837       203,978  
Cost of revenues
     9,121       14,011       20,223       24,508  
 
                                
 
                        
Gross profit
     123,410       94,853       243,614       179,470  
Operating expenses:
                                
Selling, general and administrative
     71,872       59,894       143,934       122,155  
Impairment of intangible assets
     —       4,067       —       4,067  
Research and development
     33,000       7,148       42,189       15,154  
Depreciation and amortization
     6,780       5,878       13,502       11,332  
 
                        
 
                                
Total operating expenses
     111,652       76,987       199,625       152,708  
Operating income
     11,758       17,866       43,989       26,762  
Other expense
     —       —       2,871       —  
Interest income, net
     (5,301 )     (6,683 )     (12,094 )     (13,032 )
Income tax expense
     7,061       9,026       21,160       14,983  
 
                        
Net income
   $ 9,998     $ 15,523     $ 32,052     $ 24,811  
 
                        
Basic net income per common share
   $ 0.18     $ 0.28     $ 0.57     $ 0.44  
Diluted net income per common share
   $ 0.17     $ 0.24     $ 0.50     $ 0.39  
Shares used in basic net income per common share
     56,493       55,936       56,425       55,782  
Shares used in diluted net income per common share
     68,443       71,318       69,343       71,466  
Cash flow from operations
   $ 15,273     $ 53,325     $ 48,376     $ 79,080  

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Medicis Pharmaceutical Corporation
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands, except per share data)

                                 
    Three months ended   Six months ended
    June 30, 2008   June 30, 2008
         
 
   Dollar
Value		   EPS Impact   Dollar
Value		   EPS Impact
 
                        
GAAP net income
   $ 9,998     $ 0.18     $ 32,052     $ 0.57  
Interest expense and associated bond offering costs (tax-effected)
     1,353 {a}             2,870 {a}        
 
                            
GAAP “if-converted” net income and diluted EPS
   $ 11,351     $ 0.17     $ 34,922     $ 0.50  
Non-GAAP adjustments:
                                
Research and development expense related to milestone payment to Ipsen upon the FDA’s acceptance of RELOXIN® BLA
     25,000       0.36       25,000       0.36  
Charge related to our investment in Revance
     —       —       2,871       0.05  
Income tax effects
     (9,000 )     (0.13 )     (9,000 )     (0.13 )
 
                        
Non-GAAP “if-converted” net income and diluted EPS
   $ 27,351     $ 0.40     $ 53,793     $ 0.78  
 
                        
Shares used in basic net income per common share
             56,493               56,425  
Shares used in diluted net income per common share
             68,443               69,343  

   
{a} In order to determine “if-converted” net income, the tax-effected net interest on the 2.5% and 1.5% contingent convertible notes and the associated bond offering costs of $1.4 million and $2.9 million are added back to GAAP net income for the three months and six months ended June 30, 2008, respectively.

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Medicis Pharmaceutical Corporation
Unaudited Reconciliation of Non-GAAP Adjustments
(in thousands, except per share data)

                                         
            Three months ended   Six months ended
            June 30, 2007   June 30, 2007
                 
 
 Dollar
Value		   EPS Impact   Dollar
Value		   EPS Impact
 
                                
GAAP net income
           $ 15,523     $ 0.28     $ 24,811     $ 0.44  
Interest expense and associated                                
bond offering costs (tax-                                
effected)
             1,618 {a}             3,292 {a}      
 
                                    
GAAP “if-converted” net income and diluted EPS   $ 17,141     $ 0.24     $ 28,103     $ 0.39  
Non-GAAP adjustments:                                
   Impairment of intangible assets     4,067       0.06       4,067       0.06  
   Income tax effects     (1,477 )     (0.02 )     (1,477 )     (0.02 )
 
                                
Non-GAAP “if-converted” net income and diluted EPS   $ 19,731     $ 0.28     $ 30,693     $ 0.43  
 
                                
   Shares used in basic net                                
   income per common share             55,936               55,782  
   Shares used in diluted net                                
   income per common share             71,318               71,466  

   
{a} In order to determine “if-converted” net income, the tax-effected net interest on the 2.5% and 1.5% contingent convertible notes and the associated bond offering costs of $1.6 million and $3.3 million are added back to GAAP net income for the three months and six months ended June 30, 2007, respectively.

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Medicis Pharmaceutical Corporation
Balance Sheets
(in thousands)

                 
    June 30,     December 31,  
    2008     2007  
Assets
                
Cash, cash equivalents & short-term investments
   $ 470,455     $ 794,680  
Accounts receivable, net
     23,422       12,377  
Inventory, net
     23,859       29,973  
Deferred tax asset
     18,731       —  
Other current assets
     17,586       18,049  
 
            
Total current assets
     554,053       855,079  
Property & equipment, net
     24,981       13,850  
Intangible assets, net
     226,278       236,561  
Deferred tax asset
     63,688       59,445  
Long-term investments
     98,200       17,072  
Other assets
     12,706       12,622  
 
            
Total assets
   $ 979,906     $ 1,194,629  
 
            
Liabilities and stockholders’ equity
                
Contingent convertible senior notes 1.5%, due 2033
   $ 181     $ 283,910  
Other current liabilities
     138,290       111,090  
 
            
Total current liabilities
     138,471       395,000  
Contingent convertible senior notes 2.5%, due 2032
     169,145       169,145  
Other liabilities
     12,825       8,529  
Stockholders’ equity
     659,465       621,955  
 
            
Total liabilities and stockholders’ equity
   $ 979,906     $ 1,194,629  
 
            
Working capital
   $ 415,582     $ 460,079  
 
            

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