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Angiotech Pharmaceuticals, Inc. announces financial results for the second quarter ended June 30, 2010
Date:7/30/2010

VANCOUVER, July 30 /PRNewswire-FirstCall/ - Angiotech Pharmaceuticals, Inc. (NASDAQ: ANPI, TSX: ANP) today announced its financial results for the second quarter ended June 30, 2010.

"We are pleased to report continued quarter over quarter growth in product sales, driven primarily by our most innovative Proprietary Medical Products," said Dr. William Hunter, President and CEO of Angiotech. "In addition, we are encouraged by sales trends for our Base Medical Products, which continued to show steady improvement across all key product groups through the first half of 2010."

Second Quarter Financial Highlights

    -  Total revenue was $61.9 million.

    -  Net product sales were $53.0 million. Sales of our Proprietary Medical
       Products were $16.4 million, or 31% of total product sales. Sales of
       our Base Medical Products were $36.6 million, or 69% of total product
       sales.

    -  Royalty revenue was $8.9 million.

    -  Research and development expenses were $6.9 million.

    -  Selling, general and administrative expenses were $22.8 million.

    -  Net loss and net loss per share were $14.1 million and $0.17,
       respectively.

    -  As of June 30, 2010, cash and short-term investments were
       $35.1 million and net debt was $539.9 million.

Selected Non-GAAP Financial Measures

    -  Certain financial measures in this press release are prepared in
       accordance with United States Generally Accepted Accounting Principles
       ("GAAP"). In addition, certain financial measures presented below and
       in the appendix to this press release are non-GAAP, or adjusted,
       financial measures that exclude certain items. Management uses certain
       non-GAAP, or adjusted, financial measures to establish operational
       goals, and believes that these measures may assist investors in
       evaluating the results of our business and analyzing the underlying
       trends in our business over time. Investors should consider these
       non-GAAP adjusted financial measures in addition to, and not as a
       substitute for, or as superior to, financial measures prepared in
       accordance with GAAP. A reconciliation of the non-GAAP adjusted
       financial measures to the corresponding GAAP financial measures, and
       an explanation of our use of these non-GAAP adjusted financial
       measures and of the excluded items, are included in the appendix to
       this press release.

    -  Adjusted EBITDA (earnings before interest, taxes, depreciation and
       amortization, adjusted to exclude certain non-cash and non-recurring
       items) was $6.5 million.

    -  Adjusted revenue was $62.0 million.

    -  Adjusted cost of goods sold was $27.2 million.

    -  Adjusted research and development expenses were $6.7 million.

    -  Adjusted selling, general and administrative expenses were
       $21.1 million.

    -  Adjusted net loss and adjusted net loss per share for the quarter were
       $7.6 million and $0.09, respectively.

Correction in non-GAAP measure reported in prior period

A clerical error in the calculation of adjusted net (loss) income for the three months ended March 31, 2010 was made in the quarterly press release issued on May 4, 2010. Adjusted income tax expense of $3.0 million was added to adjusted (loss) income before income taxes for the period end March 31, 2010 when it should have been deducted. As a consequence, the adjusted net income reported of $1.9 million or $0.02 per common share reported for the three months ended March 31, 2010 should have been an adjusted net loss of $4.0 million or $0.05 per common share. There was no impact on the GAAP reported results for the three months ended March 31, 2010.

Second Quarter Highlights

Proprietary Medical Products. Our Proprietary Medical Products include our Quill(TM) SRS wound closure product line, Skater(TM) line of drainage catheters, Option(TM) inferior vena cava ("IVC") filter, HemoStream(TM) chronic dialysis catheter and BioPince(TM) full core biopsy device. Consistent with recent prior quarters, our Proprietary Medical Products continued to demonstrate higher revenue growth as compared to our overall product portfolio. Revenue for these products for the second quarter of 2010 increased by 20% compared to the second quarter of 2009 and 4% compared to the first quarter of 2010.

Base Medical Products. Our Base Medical Products represent more mature finished medical device product lines in the biopsy, ophthalmology and general surgery areas, as well as medical device components manufactured by us and sold to other third-party medical device manufacturers who assemble those components into finished medical devices. Revenue from our Base Medical Products for the second quarter of 2010 increased by 9% compared to the second quarter of 2009.

Royalty Revenue. We derive additional revenue from royalties paid to us by partners that develop, market and sell products incorporating certain of our proprietary technologies. Currently, the majority of our royalty revenues are derived from sales by Boston Scientific Corporation ("BSC") of TAXUS(R) coronary stent systems incorporating the drug paclitaxel.

Royalty revenue derived from sales of TAXUS stent systems by BSC for the second quarter of 2010 declined by 51% compared to the second quarter of 2009. The decline in royalty revenue was due to lower sales of TAXUS stent systems by BSC, as sales of TAXUS continued to be negatively impacted by competitive pressure in the drug-eluting coronary stent market. Royalty revenue for the quarter ended June 30, 2010 was based on BSC's net sales for the period January 1, 2010 to March 31, 2010 of $142 million, of which $71 million was in the U.S., compared to net sales of $252 million, of which $119 million was in the U.S., for the same period in the prior year. The average gross royalty rate earned in the three months ended June 30, 2010 on BSC's net sales was 6.0% for sales in the U.S. and 5.1% for sales in other countries, compared to an average rate of 6.6% for sales in the U.S. and 6.2% for sales in other countries for the same period in the prior year. The average gross royalty rates declined in the current period as a result of our tiered royalty rate structure for sales in the U.S., the E.U. and Japan.

Closing of Acquisition of Certain Product Candidates and Technology Assets of Haemacure Corporation. In April 2010 we announced the closing of the acquisition of certain product candidates and technology assets of Haemacure Corporation ("Haemacure"). Through an asset sale transaction, we acquired all of the relevant research and development activities, manufacturing operations, key personnel, and intellectual property rights necessary to pursue further clinical development of Haemacure's human biomaterial product candidates, specifically fibrin sealant and thrombin hemostat.

Athersys Inc. In July, 2010 we announced that our partner, Athersys, Inc. ("Athersys"), had announced positive results from its phase I clinical trial of MultiStem(R), its allogeneic cell therapy product, administered to individuals following acute myocardial infarction, more commonly referred to as a heart attack. The study results, which representd at least four months of post-treatment patient data, demonstrated that MultiStem was well tolerated at all dose levels and also suggested improvement in heart function in treated patients.

The phase I clinical trial is an open label, multi-center dose escalation trial evaluating the safety and maximum tolerated dose of a single administration of allogeneic MultiStem cells following an acute myocardial infarction. Enrolled patients received MultiStem delivered via a catheter into the damaged region of the heart 2-5 days following percutaneous coronary intervention (PCI), a standard treatment for heart attack. The study includes patients in three treatment cohorts or dose groups (20 million, 50 million and 100 million cells per patient) and a registry group where patients received only standard of care. Nineteen treated and 6 registry subjects have been enrolled in the study. The trial is being conducted at multiple cardiovascular treatment centers in the United States, including the Cleveland Clinic, Columbia University Medical Center and Henry Ford Health System.

    Highlights of Study:
    --------------------

    -  Administration of MultiStem was found to be well tolerated at all dose
       levels.

    -  No clinically significant changes in vital signs, allergic reactions,
       or infusional toxicities associated with MultiStem administration were
       observed.

    -  Each dose group showed improvement in mean left ventricular ejection
       fraction ("LVEF"), a measure of heart function, compared to baseline
       and relative to the registry group.

    -  Patients in the 50 million dose group had a statistically significant
       absolute improvement in mean 4-month LVEF relative to baseline
       (9.8 percentage points, representing a 23.4% improvement over
       baseline, p less than 0.02).

    -  Among patients with more severe heart attacks - as measured by
       baseline LVEFs less than or equal to 45% - the 50 and 100 million dose
       groups each demonstrated better than a 25% improvement over baseline
       in mean LVEF at 4 months.

Cook Medical - Zilver(R) PTX(R). In June 2010 we announced that our partner, Cook Medical, Inc. ("Cook"), had announced that it had submitted its Pre-Market Approval ("PMA") application to the U.S. Food and Drug Administration for the company's Zilver PTX Drug-Eluting Peripheral Stent, intended for use in patients with peripheral arterial disease ("PAD") in the superficial femoral artery ("SFA"). Cook's PMA submission includes data from the randomized portion of the ongoing Zilver PTX clinical trial, the largest study of its kind for the endovascular treatment of PAD in the SFA. In addition, in May 2010, we announced that Cook presented one-year data at Euro PCR that confirmed sustained clinical outcomes with Zilver PTX. According to data presented, 86.2% of all patient subgroups treated with Zilver PTX demonstrated vessel patency at 12 months without the requirement for an additional intervention. The single-arm study also revealed a low stent fracture rate of just 1.5%. Additionally, in April 2010 we announced that Cook had announced that it had enrolled its first patient in its landmark Formula(TM) PTX clinical trial, the first trial of its kind to evaluate the safety and effectiveness of a paclitaxel-eluting stent to treat renal artery disease, the narrowing of the arteries that supply blood to the kidneys. The multi-center, randomized trial plans to enroll 120 patients at sites across Europe.

Boston Scientific - TAXUS. In June 2010 we announced that our partner, BSC, had commercially launched and implanted its first TAXUS Element(TM) Paclitaxel-Eluting Coronary Stent Systems in the European Union and other CE Mark countries. The TAXUS Element Stent System is BSC's third-generation drug-eluting stent technology and incorporates a platinum chromium alloy with an innovative stent design and an advanced catheter delivery system. In May 2010, we had announced that BSC had received CE Mark approval for its TAXUS Element Paclitaxel-Eluting Coronary Stent System. This approval included a specific indication for the treatment of diabetic patients.

Amendment to Credit Agreement. In April 2010 we completed a third amendment to our credit agreement with Wells Fargo Capital Finance, LLC (formerly Wells Fargo Foothill, LLC). The amendment included, among other items, amendments to financial covenants pertaining to minimum Adjusted EBITDA levels, interest coverage ratios and the definition of Adjusted EBITDA. The significant amended items are intended to reflect the continued decline and uncertainty of sales of TAXUS by BSC and the related potential impact on our Adjusted EBITDA. This amendment allows us continued access to funds per the terms of the credit agreement.

    Financial Information
    ---------------------

This press release contains financial data derived from the unaudited consolidated financial statements for the quarter ended June 30, 2010 and 2009. Full unaudited consolidated interim financial statements and Management's Discussion and Analysis for the three months ended June 30, 2010 will be filed on Form 10-Q on or before August 9, 2010 with the relevant regulatory agencies, as well as posted on our website at www.angiotech.com.

Amounts, unless specified otherwise, are expressed in U.S. dollars. Financial results are reported in accordance with U.S. GAAP unless otherwise noted. All per share amounts are stated on a fully diluted basis unless otherwise noted.

    Conference Call Information
    ---------------------------

A conference call to discuss these financial results will be held today, Friday July 30, 2010 at 11:00 AM ET (8:00 AM PT).

    Dial-in information:
    --------------------
    North America (toll-free): (866) 277-1182
    International: (617) 597-5359
    Enter Passcode: 18173223

    An archived replay of the call will be available until August 6, 2010.
    North America (toll-free): (888) 286-8010
    International: (617) 801-6888
    Enter Passcode: 33507758

A live webcast will be available to all interested parties through the Investors section of our website: www.angiotech.com/investors

                       ANGIOTECH PHARMACEUTICALS INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (Unaudited)

    (in thousands of U.S. $,     Three months ended        Six months ended
     except per share data)            June 30                 June 30
    -------------------------------------------------------------------------

                                 2010         2009         2010         2009
    -------------------------------------------------------------------------
    REVENUE
    Product sales, net     $   52,948   $   47,179   $  103,928   $   93,316
    Royalty revenue             8,886       16,996       21,194       34,107
    License fees                   52          398          105       25,450
    -------------------------------------------------------------------------
                               61,886       64,573      125,227      152,873
    -------------------------------------------------------------------------

    EXPENSES
    Cost of products sold      27,871       25,682       53,075       49,648
    License and royalty fees    1,477        2,568        3,714        5,474
    Research and development    6,853        6,833       13,660       12,930
    Selling, general and
     administration            22,784       21,606       44,382       41,178
    Depreciation and
     amortization               8,277        8,296       16,651       16,560
    Write-down of assets
     held for sale                  -            -          700            -
    Escrow settlement recovery      -            -       (4,710)           -
    -------------------------------------------------------------------------
                               67,262       64,985      127,472      125,790
    -------------------------------------------------------------------------
    Operating income (loss)    (5,376)        (412)      (2,245)      27,083
    -------------------------------------------------------------------------

    Other income (expenses):
    Foreign exchange gain
     (loss)                       919       (1,441)       1,266         (709)
    Investment and other
     (expense) income            (333)        (600)        (386)        (615)
    Interest expense on
     long-term debt            (9,027)      (9,641)     (17,946)     (19,685)
    Write-down of investments    (216)           -         (216)           -
    Loan settlement gain        1,180            -        1,180            -
    -------------------------------------------------------------------------
    Total other expenses       (7,477)     (11,682)     (16,102)     (21,009)
    -------------------------------------------------------------------------
    (Loss) income before
     income taxes             (12,853)     (12,094)     (18,347)       6,074
    Income tax expense
     (recovery)                 1,221         (217)       2,422        5,507
    -------------------------------------------------------------------------
    Net (loss) income      $  (14,074)  $  (11,877)  $  (20,769)  $      567
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted net
     (loss) income per
     common share          $    (0.17)  $    (0.14)  $    (0.24)  $     0.01
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted
     weighted average number
     of common shares
     outstanding (in
     thousands)                 85,170      85,122       85,164       85,122
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                       ANGIOTECH PHARMACEUTICALS INC.
                         CONSOLIDATED BALANCE SHEETS
                                 (Unaudited)

                                                        June 30, December 31,
    (in thousands of U.S. $, except per share data)        2010         2009
    -------------------------------------------------------------------------
    ASSETS
    Current assets
    Cash and cash equivalents                        $   29,666   $   49,542
    Short-term investments                                5,482        7,780
    Accounts receivable                                  30,536       28,167
    Income tax receivable                                   914        1,090
    Inventories                                          37,859       35,541
    Deferred income taxes, current portion                3,623        4,284
    Prepaid expenses and other current assets             2,529        3,294
    -------------------------------------------------------------------------
    Total current assets                                110,609      129,698
    -------------------------------------------------------------------------

    Assets held for sale                                  3,800        5,300
    Property, plant and equipment                        48,382       46,879
    Intangible assets                                   157,394      173,019
    Deferred financing costs                             10,197       11,409
    Deferred income taxes, current portion                2,074        4,624
    Other assets                                          1,910        3,754
    -------------------------------------------------------------------------
    Total assets                                     $  334,366   $  374,683
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    LIABILITIES AND SHAREHOLDERS' DEFICIT

    Current liabilities
    Accounts payable and accrued liabilities         $   40,639   $   46,324
    Income taxes payable                                  5,163       10,858
    Interest payable on long-term debt                    6,027        6,004
    -------------------------------------------------------------------------
    Total current liabilities                            51,829       63,186
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Deferred leasehold inducement                         4,466        2,888
    Deferred income taxes, non-current portion           38,307       41,402
    Other tax liabilities                                 3,247        3,898
    Long-term debt                                      575,000      575,000
    Other liabilities                                     1,261        1,596
    -------------------------------------------------------------------------
    Total non-current liabilities                       622,281      624,784
    -------------------------------------------------------------------------

    Shareholders' deficit
    Share capital
      Authorized:
      200,000,000 Common shares, without par value
      50,000,000 Class I Preference shares,
       without par value
      Common shares issued and outstanding:
      June 30, 2010 - 85,170,276
      December 31, 2009 - 85,138,081                    472,749      472,742
    Additional paid-in capital                           34,589       33,687
    Accumulated deficit                                (887,310)    (866,541)
    Accumulated other comprehensive income               40,228       46,825
    -------------------------------------------------------------------------
    Total shareholders' deficit                        (339,744)    (313,287)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Total liabilities and shareholders' deficit      $  334,366   $  374,683
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Forward Looking Statements
    --------------------------

Statements contained in this press release that are not based on historical fact, including without limitation statements containing the words "believes," "may," "plans," "will," "estimates," "continues," "anticipates," "intends," "expects" and similar expressions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and constitute "forward-looking information" within the meaning of applicable Canadian securities laws. All such statements are made pursuant to the "safe harbor" provisions of applicable securities legislation. Forward-looking statements may involve, but are not limited to, comments with respect to our objectives and priorities for the remainder of 2010 and beyond, our strategies or future actions, our targets, expectations for our financial condition and the results of, or outlook for, our operations, research and development and product and drug development. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or developments to be materially different from any future results, events or developments expressed or implied by such forward-looking statements. Many such known risks, uncertainties and other factors are taken into account as part of our assumptions underlying these forward-looking statements and include, among others, the following: general economic and business conditions in the United States, Canada and the other regions in which we operate; market demand; technological changes that could impact our existing products or our ability to develop and commercialize future products; competition; existing governmental legislation and regulations and changes in, or the failure to comply with, governmental legislation and regulations; availability of financial reimbursement coverage from governmental and third-party payers for products and related treatments; adverse results or unexpected delays in pre-clinical and clinical product development processes; adverse findings related to the safety and/or efficacy of our products or products sold by our partners; decisions, and the timing of decisions, made by health regulatory agencies regarding approval of our technology and products; the requirement for substantial funding to conduct research and development, to expand manufacturing and commercialization activities; and any other factors that may affect our performance. In addition, our business is subject to certain operating risks that may cause any results expressed or implied by the forward-looking statements in this press release to differ materially from our actual results. These operating risks include: our ability to attract and retain qualified personnel; our ability to successfully complete pre-clinical and clinical development of our products; changes in our business strategy or development plans; our failure to obtain patent protection for discoveries; loss of patent protection resulting from third-party challenges to our patents; commercialization limitations imposed by patents owned or controlled by third parties; our ability to obtain rights to technology from licensors; liability for patent claims and other claims asserted against us; our ability to obtain and enforce timely patent and other intellectual property protection for our technology and products; the ability to enter into, and to maintain, corporate alliances relating to the development and commercialization of our technology and products; market acceptance of our technology and products; our ability to successfully manufacture, market and sell our products; the availability of capital to finance our activities; our ability to restructure and to service our debt obligations; and any other factors referenced in our other filings with the applicable Canadian securities regulatory authorities or the Securities and Exchange Commission ("SEC"). For a more thorough discussion of the risks associated with our business, see the "Risk Factors" section in our annual report for the year ended December 31, 2009 filed with the SEC on Form 10-K, as amended, and our quarterly report for the first quarter of 2010 filed with the SEC on Form 10-Q.

Given these uncertainties, assumptions and risk factors, investors are cautioned not to place undue reliance on such forward-looking statements. Except as required by law, we disclaim any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained in this press release to reflect future results, events or developments.

(C)2010 Angiotech Pharmaceuticals, Inc. All Rights Reserved.

About Angiotech Pharmaceuticals

Angiotech Pharmaceuticals, Inc. is a global specialty pharmaceutical and medical device company. Angiotech discovers, develops and markets innovative treatment solutions for diseases or complications associated with medical device implants, surgical interventions and acute injury. To find out more about Angiotech (NASDAQ: ANPI, TSX: ANP), please visit our website at www.angiotech.com.

    Appendix A: Presentation of Certain Non-GAAP Financial Information and
          Reconciliations to Corresponding GAAP Financial Measures

The financial results presented in this press release may include any or all of the following non-GAAP, or adjusted, financial measures, which we believe provide important supplemental information to management and investors about our financial condition and results of operations: (1) adjusted earnings before interest expense, taxes, depreciation and amortization ("Adjusted EBITDA"), (2) adjusted net income (loss), (3) adjusted net income (loss) per share, (4) adjusted revenue, (5) adjusted costs of goods sold ("adjusted COGS") (6) adjusted research and development expense ("adjusted R&D expense"), and (7) adjusted selling, general and administrative expense ("adjusted SG&A expense").

Economic Substance of Non-GAAP Financial Measures

Our non-GAAP adjusted financial measures exclude certain non-cash, non-recurring and non-operating items, which may be unpredictable, volatile and not directly correlated to our operating performance. We believe exclusion of these items from our GAAP financial measures may provide the following advantages: (i) improved understanding of trends underlying our business and performance; (ii) improved consistency across periods when measuring and assessing our operating performance; (iii) improved understanding of the cash flow and cash earnings generated by our business in a given period and as compared to prior periods; and (iv) improved comparability of our operating results to those of similar companies in our industry.

Examples of these certain non-cash, non-recurring and non-operating items include: financing charges, asset write-downs, impairment charges, foreign exchange fluctuations, stock-based compensation expense, acquisition related amortization charges, integration and restructuring expenses, in-process research and development costs, retrospective adjustments driven by accounting policy changes, and certain extraordinary litigation expenses. A detailed discussion of the excluded items is provided below (see "Description of Adjustments" below).

Investors are cautioned that Adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per share, adjusted revenue, adjusted COGS, adjusted R&D expense and adjusted SG&A expense do not have any standardized meaning prescribed by GAAP and may not be comparable to similar measures presented by other issuers. Our non-GAAP financial measures are supplemental metrics and should not be viewed as a substitute for, or superior to, financial reporting measures prepared in accordance with GAAP. We have prepared a reconciliation of our non-GAAP adjusted financial measures to the comparable GAAP-based financial measures in the tables included in this Appendix. Management compensates for certain material limitations that may be relevant to our use of certain non-GAAP financial measures by reviewing our operating performance in accordance with GAAP concurrent with our review of our operating performance relative to certain adjusted financial measures during each relevant disclosure period.

Use of Non-GAAP Financial Measures

Management uses Adjusted EBITDA, adjusted net income (loss), adjusted net income (loss) per share, adjusted revenue, adjusted COGS, adjusted R&D expense and adjusted SG&A expense when setting corporate and operational goals, and evaluating operating performance in connection with:

    -  Presenting, comparing and assessing the financial results and
       forecasts reported to our Board of Directors.
    -  Evaluating, managing and benchmarking our operating performance
    -  Analyzing underlying trends in our business.
    -  Evaluating market position and performance relative to our
       competitors, many of which use the same or similar performance
       measures.
    -  Establishing internal operating budgets.
    -  Determining compensation under bonus or other incentive programs.
    -  Enhancing comparability from period to period.
    -  Assessing compliance with credit facility covenants.
    -  Providing vital information in assessing cash flows to service our
       significant debt obligations.
    -  Comparing performance with internal forecasts and targeted business
       models.
    -  Evaluating and valuing potential acquisition candidates.

The adjustments used to compute our non-GAAP financial measures are consistent with those excluded from segmented operating results used by our chief operating decision makers to make operating decisions and assess performance. We have provided this information to enable investors to analyze our operating results in the same way that management uses this information to assess our business relative to other periods, our business objectives and similar companies in our industry.

                       ANGIOTECH PHARMACEUTICALS, INC.
                       CALCULATION OF ADJUSTED EBITDA
                                 (Unaudited)

                                Three months ended         Six months ended
                                      June 30                   June 30
    (in thousands U.S. $)        2010         2009         2010         2009
    -------------------------------------------------------------------------

    GAAP net (loss) income $  (14,074)  $  (11,877)  $  (20,769)  $      567
    Interest expense on
     long-term debt             9,027        9,641       17,946       19,685
    Income tax expense
     (recovery)                 1,221         (217)       2,422        5,507
    Depreciation and
     amortization               9,243        9,207       18,578       18,368
    -------------------------------------------------------------------------
    EBITDA                      5,417        6,754       18,177       44,127
    Adjustments:
    Non-recurring revenue,
     net of license fees (a)      (52)        (398)        (105)     (25,450)
    Non-recurring sales
     provision related to
     product recall (m)           193            -          193            -
    Restructuring related
     charges (b)                1,367          332        2,296        1,266
    Technology acquisition
     related charges (c)            -          625            -          937
    Non-recurring transaction
     fees (l)                     752          413        1,002        1,032
    Stock-based compensation
     expense (d)                  481          423          908          807
    Litigation related
     expenses (g)                  76        1,494          145        2,241
    Foreign exchange (gain)
     loss (h)                    (919)       1,441       (1,266)         709
    Investment and other
     income                       (65)         (36)         (52)         (61)
    Losses on asset
     disposals (j)                 21            -           61           40
    Write-downs of investments
     and other long-lived
     assets (i)                   216            -          916            -
    Write-downs and other
     non-cash deferred
     financing costs (f)            -          636            -          636
    Non-recurring manufacturing
     variances and product
     recall charges (m)           156          896          156          896
    Non-recurring escrow
     settlement recovery (k)        -            -       (4,710)           -
    Non-recurring loan
     settlement gain (k)       (1,180)           -       (1,180)           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjusted EBITDA        $    6,463   $   12,580   $   16,541   $   27,180
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    RECONCILIATION OF GAAP NET (LOSS) INCOME TO NON-GAAP ADJUSTED NET LOSS
                                 (Unaudited)

                                Three months ended        Six months ended
                                      June 30                  June 30
    (in thousands U.S. $)        2010         2009         2010         2009
                           -----------  -----------  -----------  -----------

    GAAP - net (loss)
     income               ($   14,074) ($   11,877) ($   20,769)  $      567
      Non recurring
       revenue (a)                (52)        (398)        (105)     (25,450)
      Non-recurring sales
       provision related to
       product recall (m)         193            -          193            -
      Technology acquisition
       related charges (c)          -          625            -          937
      Non-recurring
       restructuring related
       charges (b)              1,367          332        2,296        1,266
      Non-recurring
       transaction fees (l)       752          413        1,002        1,032
      Stock based
       compensation expense (d)   481          423          908          807
      Litigation related
       expenses (g)                76        1,494          145        2,241
      Write-down of
       investments & other
       long-lived assets (i)      216            -          916            -
      Write-down and other
       deferred financing
       charges (f)                737        1,386        1,456        2,004
      Foreign exchange (gain)
       loss (h)                  (919)       1,441       (1,266)         709
      Acquisition related
       intangible asset
       amortization expense (e) 7,514        7,453       15,146       14,834
      Losses on asset
       disposals (j)               21            -           61           40
      Non-recurring
       manufacturing
       variances (m)                -          896            -          896
      Non-recurring charges
       related to product
       recall (m)                 156            -          156            -
      Non-recurring escrow
       settlement recovery (k)      -            -       (4,710)           -
      Non-recurring loan
       settlement gain (k)     (1,180)           -       (1,180)           -
      Estimated tax impact
       of non-GAAP
       adjustments (n)         (2,875)      (3,960)      (5,841)        (765)
                           -----------  -----------  -----------  -----------
    Adjusted net loss      $   (7,587)  $   (1,772)  $  (11,592)  $     (882)
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------



        RECONCILIATION OF GAAP NET (LOSS) INCOME PER SHARE TO NON-GAAP
                          ADJUSTED NET LOSS PER SHARE
                                 (Unaudited)

                                Three months ended        Six months ended
                                      June 30                  June 30
                                 2010         2009         2010         2009
                           -----------  -----------  -----------  -----------
                               Basic and diluted        Basic and diluted

    GAAP - net (loss)
     income per share      $    (0.17)  $    (0.14)  $    (0.24)  $     0.01
      Non recurring
       revenue (a)              (0.00)       (0.00)       (0.00)       (0.30)
      Non-recurring sales
       provision related
       to product recall (m)     0.00            -         0.00            -
      Technology acquisition
       related charges (c)          -         0.01            -         0.01
      Non-recurring
       restructuring related
       charges (b)               0.02         0.00         0.03         0.01
      Non-recurring
       transaction fees (l)      0.01         0.00         0.01         0.01
      Stock based
       compensation
       expense (d)               0.01         0.00         0.01         0.01
      Litigation related
       expenses (g)              0.00         0.02         0.00         0.03
      Write-down of
       investments & other
       long-lived assets (i)     0.00            -         0.01            -
      Write-down and other
       deferred financing
       charges (f)               0.01         0.02         0.02         0.02
      Foreign exchange (gain)
       loss (h)                 (0.01)        0.02        (0.01)        0.01
      Acquisition related
       intangible asset
       amortization
       expense (e)               0.09         0.09         0.18         0.17
      Losses on asset
       disposals (j)             0.00            -         0.00         0.00
      Non-recurring
       manufacturing
       variances (m)                -         0.01            -         0.01
      Non-recurring
       charges related
       to product recall (m)     0.00            -         0.00            -
      Non-recurring escrow
       settlement recovery (k)      -            -        (0.06)           -
      Non-recurring loan
       settlement gain (k)      (0.01)           -        (0.01)           -
      Estimated tax impact
       of non-GAAP
       adjustments (n)          (0.03)       (0.05)       (0.07)       (0.01)
                           -----------  -----------  -----------  -----------
    Adjusted net loss per
     share                 $    (0.09)  $    (0.02)  $    (0.14)  $    (0.01)
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------



         RECONCILIATION OF GAAP REVENUE TO NON-GAAP ADJUSTED REVENUE
                                 (Unaudited)

                                Three months ended        Six months ended
                                      June 30                  June 30
    (in thousands U.S. $)        2010         2009         2010         2009
                           -----------  -----------  -----------  -----------

    GAAP - revenue             61,886       64,573      125,227      152,873
      Non-recurring
       revenue (a)                (52)        (398)        (105)     (25,450)
      Non-recurring sales
       provison related
       to product
       recall (m)                 193            -          193            -
                           -----------  -----------  -----------  -----------
    Adjusted revenue       $   62,027   $   64,175   $  125,315   $  127,423
                           -----------  -----------  -----------  -----------



            RECONCILIATION OF GAAP COGS TO NON-GAAP ADJUSTED COGS
                                 (Unaudited)

                                Three months ended        Six months ended
                                      June 30                  June 30
    (in thousands U.S. $)        2010         2009         2010         2009
                           -----------  -----------  -----------  -----------

    GAAP - COGS            $   27,871   $   25,682   $   53,075   $   49,648
      Non-recurring
       manufacturing
       variances (m)                -         (896)                     (896)
      Non-recurring
       restructuring
       related charges (b)       (550)           -         (987)           -
      Non-recurring charges
       related to product
       recall (m)                (156)           -         (156)           -
                           -----------  -----------  -----------  -----------
    Adjusted COGS          $   27,165   $   24,786   $   51,932   $   48,752
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------



      RECONCILIATION OF GAAP RESEARCH & DEVELOPMENT EXPENSE TO NON-GAAP
                   ADJUSTED RESEARCH & DEVELOPMENT EXPENSE
                                 (Unaudited)

                                Three months ended        Six months ended
                                      June 30                  June 30
    (in thousands U.S. $)        2010         2009         2010         2009
                           -----------  -----------  -----------  -----------

    GAAP - research and
     development expense   $    6,853   $    6,833   $   13,660   $   12,930
      Non-recurring
       restructuring
       related charges (b)          -            -            -            -
      Technology acquisition
       related charges (c)          -         (625)           -         (937)
      Stock based
       compensation
       expense (d)               (120)        (114)        (224)        (215)
                           -----------  -----------  -----------  -----------
    Adjusted research
     and development
     expense               $    6,733   $    6,094   $   13,436   $   11,778
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------



     RECONCILIATION OF GAAP SELLING, GENERAL & ADMINISTRATION EXPENSE TO
         NON-GAAP ADJUSTED SELLING, GENERAL & ADMINISTRATIVE EXPENSE
                                 (Unaudited)

                                Three months ended        Six months ended
                                      June 30                  June 30
    (in thousands U.S. $)        2010         2009         2010         2009
                           -----------  -----------  -----------  -----------

    GAAP - selling,
     general and
     administration
     expense               $   22,784   $   21,606   $   44,382   $   41,178
      Non-recurring
       restructuring
       related charges (b)       (475)        (332)        (967)      (1,266)
      Stock based
       compensation
       expense (d)               (361)        (309)        (684)        (592)
      Litigation related
       charges (g)                (76)      (1,494)        (145)      (2,241)
      Non-recurring
       transaction fees (l)      (752)        (413)      (1,002)      (1,032)
                           -----------  -----------  -----------  -----------
    Adjusted selling,
     general and
     adminstration expense $   21,120   $   19,058   $   41,584   $   36,047
                           -----------  -----------  -----------  -----------
                           -----------  -----------  -----------  -----------

For an explanation of the adjustments used to derive our non-GAAP financial measures, please refer to the corresponding discussion in the "Description of Adjustments" section below.

We also report certain product sales revenue growth rate figures excluding the impact of foreign exchange rate fluctuations on current period revenues. Significant foreign exchange rate fluctuations can distort revenue growth, depending upon the strength of the U.S. dollar relative to the foreign currencies in which we generate revenues. We generate significant revenues in several foreign jurisdictions in multiple foreign currencies including Euros, British pounds, Swiss francs, Danish krone, Norwegian krone and Swedish krone. We believe this measure provides useful information to measure the success of our international sales offices in increasing product sales in their local currencies without regard to exchange rate fluctuations over which we have no control. The tables below provide additional information on the reported product sales figure including a reconciliation of the estimated impact of foreign currency on net sales.

                       ANGIOTECH PHARMACEUTICALS, INC.
                               WORLDWIDE SALES
                                 (Unaudited)

                              Three Months Ended               Change
                           ------------------------ -------------------------
                                                    As Reported     Constant
                            30-Jun-10    31-Mar-10        Basis     Currency
    (in thousands of U.S.$)                                            Basis
    ----------------------------------------------- -------------------------
    Proprietary Medical
     Products               $  16,397    $  15,759           4%           6%
    Base Medical Products      36,551       35,221           4%           5%
                           ------------------------ -------------------------
    Total Medical Products  $  52,948    $  50,980           4%           5%
                           ------------------------ -------------------------
                           ------------------------ -------------------------


                              Three Months Ended               Change
                           ------------------------ -------------------------
                                                    As Reported     Constant
                            30-Jun-10    30-Jun-09        Basis     Currency
    (in thousands of U.S.$)                                            Basis
    ----------------------------------------------- -------------------------
    Proprietary Medical
     Products               $  16,397    $  13,610          20%          21%
    Base Medical Products      36,551       33,569           9%          10%
                           ------------------------ -------------------------
    Total Medical Products  $  52,948    $  47,179          12%          13%
                           ------------------------ -------------------------
                           ------------------------ -------------------------



                       ANGIOTECH PHARMACEUTICALS, INC.
            NON-GAAP CONSTANT CURRENCY NET SALES RECONCILIATIONS
                                 (Unaudited)

                                     Q2 2010 Net Sales as compared to Q1 2010
                                     ----------------------------------------
                                                  Change
                                        ------------------------
                                                                   Estimated
                                       As Reported     Constant    Impact of
                                          Currency     Currency      Foreign
    (in thousands of U.S.$)                  Basis        Basis     Currency
    ------------------------------------------------------------  -----------
    Proprietary Medical Products        $      638   $      897         (259)
    Base Medical Products                    1,330        1,855         (525)
                                        ------------------------  -----------
    Total Medical Products              $    1,968   $    2,752         (784)
                                        ------------------------  -----------
                                        ------------------------  -----------



                                     Q2 2010 Net Sales as compared to Q2 2009
                                     ----------------------------------------
                                                  Change
                                        ------------------------
                                                                   Estimated
                                       As Reported     Constant    Impact of
                                          Currency     Currency      Foreign
    (in thousands of U.S.$)                  Basis        Basis     Currency
    ------------------------------------------------------------  -----------
    Proprietary Medical Products        $    2,787   $    2,919         (132)
    Base Medical Products                    2,982        3,387         (405)
                                        ------------------------  -----------
    Total Medical Products              $    5,769   $    6,306         (537)
                                        ------------------------  -----------
                                        ------------------------  -----------

    For a consolidated reconciliation of all GAAP financial measures
identified above to corresponding non-GAAP financial measures, refer to the
following tables.


                       ANGIOTECH PHARMACEUTICALS, INC.
         RECONCILIATION OF GAAP FINANCIAL MEASURES TO CORRESPONDING
                         NON-GAAP FINANCIAL MEASURES
                                 (Unaudited)

    (in thousands
     of U.S.$,
     except share
     and per             Three months ended           Three months ended
     share data)            June 30, 2010                June 30, 2009
    -------------------------------------------------------------------------
                Reported Adjustments Adjusted  Reported Adjustments Adjusted

    REVENUE
    Product
     sales, net $ 52,948  $   193 m  $ 53,141  $ 47,179  $     -    $ 47,179
    Royalty
     revenue       8,886        -       8,886    16,996        -      16,996
    License fees      52      (52) a        -       398     (398) a        -
    -------------------------------------------------------------------------
                  61,886      141      62,027    64,573     (398)     64,175
    -------------------------------------------------------------------------

    EXPENSES
    Cost of
     products
     sold         27,871     (550) b   27,165    25,682     (896) m   24,786
                             (156) m                           -
    License and
     royalty fees  1,477        -       1,477     2,568        -       2,568
    Research and
     development   6,853     (120) d    6,733     6,833     (114) d    6,094
                                -                           (625) c
    Selling,
     general and
     administra-
     tive         22,784     (475) b   21,120    21,606     (332) b   19,058
                             (361) d                        (309) d
                              (76) g                      (1,494) g
                             (752) l                        (413) l
    Depreciation
     and
     amortization  8,277   (7,514) e      763     8,296   (7,453) e      843
    -------------------------------------------------------------------------
                  67,262  (10,004)     57,258    64,985  (11,636)     53,349
    -------------------------------------------------------------------------
    Operating
     income
     (loss)       (5,376)  10,145       4,769      (412)  11,238      10,826
    -------------------------------------------------------------------------

    Other income
     (expenses):
    Foreign
     exchange
     (loss) gain     919     (919) h        -    (1,441)   1,441  h        -
    Investment and
     other income
     (loss)         (333)      21  j       30      (600)     636  f       36
                              342  b                            -
    Interest
     expense on
     long-term
     debt         (9,027)     737  f   (8,290)   (9,641)     750  f   (8,891)
    Write-down of
     investments    (216)     216  i        -         -        -           -
    Loan
     settlement
     gain          1,180   (1,180) k        -         -        -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                  (7,477)    (783)     (8,260)  (11,682)   2,827      (8,855)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (Loss) income
     before income
     taxes       (12,853)   9,362      (3,491)  (12,094)  14,065       1,971
    Income tax
     expense
     (recovery)    1,221    2,875  n    4,096      (217)   3,960  n    3,743
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net (loss)
     income for
     the period $(14,074) $ 6,487    $ (7,587) $(11,877) $10,105    $ (1,772)
    -------------------------------------------------------------------------


    Basic and
     diluted net
     (loss)
     income per
     common
     share      $  (0.17)            $  (0.09) $  (0.14)            $  (0.02)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted
     average
     shares
     outstanding
     (000's)
     - basic &
     diluted      85,170               85,170    85,122               85,122
    -------------------------------------------------------------------------



                       ANGIOTECH PHARMACEUTICALS, INC.
         RECONCILIATION OF GAAP FINANCIAL MEASURES TO CORRESPONDING
                         NON-GAAP FINANCIAL MEASURES
                                 (Unaudited)

    (in thousands
     of U.S.$,
     except share
     and per              Six months ended             Six months ended
     share data)            June 30, 2010                June 30, 2009
    -------------------------------------------------------------------------
                Reported Adjustments Adjusted  Reported Adjustments Adjusted

    REVENUE
    Product
     sales, net $103,928  $   193 m  $104,121  $ 93,316  $     -    $ 93,316
    Royalty
     revenue      21,194        -      21,194    34,107        -      34,107
    License
     fees            105     (105) a        -    25,450  (25,450) a        -
    -------------------------------------------------------------------------
                 125,227       88     125,315   152,873  (25,450)    127,423
    -------------------------------------------------------------------------
    EXPENSES
    Cost of
     products
     sold         53,075     (987) b   51,932    49,648     (896) m   48,752
                             (156) m                           -
    License and
     royalty
     fees          3,714        -       3,714     5,474        -       5,474
    Research and
     development  13,660     (224) d   13,436    12,930     (215) d   11,778
                                -                           (937) c
    Selling,
     general and
     administra-
     tive         44,382     (967) b   41,584    41,178   (1,266) b   36,047
                             (684) d                        (592) d
                             (145) g                      (2,241) g
                           (1,002) l                      (1,032) l
    Depreciation
     and
     amortization 16,651  (15,146) e    1,505    16,560  (14,834) e    1,726
    Write-down
     of assets
     held for
     sale            700     (700) i        -         -        -           -
    Escrow
     settlement
     recovery     (4,710)   4,710  k        -         -        -           -
    -------------------------------------------------------------------------
                 127,472  (15,301)    112,171   125,790  (22,013)    103,777
    -------------------------------------------------------------------------
    Operating
     income
     (loss)       (2,245)  15,389      13,144    27,083   (3,437)     23,646
    -------------------------------------------------------------------------

    Other
     income
     (expenses):
    Foreign
     exchange
     (loss) gain   1,266   (1,266) h        -      (709)     709  h        -
    Investment
     and other
     income (loss)  (386)      61  j       17      (615)     676  f       61
                              342  b                           -
    Interest
     expense on
     long-term
     debt        (17,946)   1,456  f  (16,490)  (19,685)   1,368  f  (18,317)
    Write-down
     of
     investments    (216)     216  i        -         -        -           -
    Loan
     settlement
     gain          1,180   (1,180) k        -         -        -           -
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
                 (16,102)    (371)    (16,473)  (21,009)   2,753     (18,256)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Income (loss)
     before
     income
     taxes       (18,347)  15,018      (3,329)    6,074     (684)      5,390
    Income tax
     expense
     (recovery)    2,422    5,841  n    8,263     5,507      765  n    6,272
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net (loss)
     income for
     the period $(20,769) $ 9,177    $(11,592) $    567  $(1,449)   $   (882)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and
     diluted
     net loss
     per common
     share      $  (0.24)            $  (0.14) $   0.01             $  (0.01)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Weighted
     average
     shares
     outstanding
     (000's)
     - basic and
     diluted      85,164               85,164    85,122               85,122
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Description of Adjustments
    --------------------------

The following is an explanation of each of the items that management has adjusted to derive its non-GAAP financial measures for the three months ended June 30, 2010.

(a) Non-Recurring Revenue

We report adjusted net income (loss), adjusted net income (loss) per share and adjusted revenue in a given period, which excludes certain items from our reported GAAP revenue that are non-recurring and are unrelated to the day-to-day operating activities of our business.

Our adjusted results for the three and six months ended June 30, 2010 and 2009 excludes certain non-recurring and non-operating licence revenue. Our adjusted results for the six months ended June 30, 2009 also excludes a $25.0 million one-time payment received from Baxter International Inc. The payment was subtracted from our GAAP-based revenue because it was non-recurring and received in lieu of future royalty payments on licensed technology and non-recurring non-operating license revenue.

(b) Restructuring-Related Charges

We report adjusted net income (loss), adjusted net income (loss) per share, adjusted COGS, adjusted R&D and adjusted SG&A metrics in a given period which exclude certain expenses related to restructuring or corporate reorganization activities that we are pursuing, or have completed in prior periods. These amounts, which are added back to our GA
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SOURCE Angiotech Pharmaceuticals, Inc.
Copyright©2010 PR Newswire.
All rights reserved


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