Angiotech Pharmaceuticals, Inc. announces 2013 financial results and provides
update on recent developments
VANCOUVER, March 21, 2014
VANCOUVER, March 21, 2014 /PRNewswire/ - Angiotech Pharmaceuticals,Inc.
("ANPI") today announced its financial results for the quarter and year ended
December 31, 2013 as well as number of recent developments.
"We are pleased to have concluded 2013 by recording yet another year of
improved business results as compared to the past several years," said Tammy
Neske, Chief Business Officer of Angiotech. "2013 was a year of exceptional
achievement, beginning with the successful sale of our interventional products
business and a significant return of capital to our shareholders, followed by
a new financing and an additional return of capital to our shareholders, the
development of a new sales distribution and product development strategy, and
the re-branding of our operating company to Surgical Specialties Corporation."
Amendment of Senior Secured Credit Facility: To enhance our operational
flexibility and to support future growth, on March 18 2014, we completed an
amendment to the Senior Secured Credit Facility of our subsidiary, Surgical
Specialties Corporation (US), Inc. ("SSC"). The amendment provides for, among
other things: (i) an increase in our incremental borrowing capacity from $25
million to $60 million; (ii) an increase in the amount of restricted payments
that SSC can make to its parent company, Angiotech; (iii) a reduction from 50%
to 25% in the amount of excess cash flow that must be used to repay debt; and
(iv) an increase in call protection from 101 for 12 months to 102 for 6 months
and 101 for 6 months.
New Member of the Board of Directors: Earlier this year, Richard Packer joined
our Board of Directors. Mr. Packer is currently the CEO at Zoll Medical
Corporation, a leader in medical products for defibrillation and monitoring,
circulation and CPR feedback, data management, fluid resuscitation, and
therapeutic temperature management. Mr. Packer joined Zoll in 1992 as the Vice
President of Operations and has since held a number of senior executive
positions at Zoll. Prior to 1992, he was Vice President of various functions
at Whistler Corporation, a consumer electronics company.
Certainty on Cook Royalty Obligation on Sales of the Zilver PTX Drug Eluting
Peripheral Stent: On December 12, 2013 we entered into an agreement with Cook
Incorporated, licensor of certain patents that brings certainty to the term of
Cook's royalty obligation to Angiotech irrespective of patent life. The
agreement obligates Cook to pay 10% on US sales through the end of 2017, 4.5%
on US sales 2018 through 2020, and 8% on EU sales through the end of 2017.
Expansion ofProduct Portfolio: Through the fall of 2013 we completed
significant needle development and suture line extension projects, resulting
in the launch of new SSC Surgical Suture and SSC Animal Health Suture
products, a Quill Animal Health product line, additional new Quill product
codes for human use (making our barbed wound closure device portfolio the most
robust barbed device portfolio on the market), and new "300 series" needles
(demonstrating improved strength, flexibility and tissue penetration
characteristics) for sale to our OEM customers. Testing conducted to date
indicates that the new SSC needles perform comparable to or better than,
competitive needle offerings.
Transfer of US Manufacturing to Low Cost Environment: In February 2014, we
announced our decision to transition manufacturing from our Reading, PA and
Aguadilla, PR manufacturing plants to a new manufacturing facility in Tijuana,
Mexico. The closure of these facilities is estimated to be complete by the end
of 2015. The move to Tijuana is expected to allow us to operate more
efficiently and cost effectively in one consolidated manufacturing site,
position the company more competitively in the markets it serves, and improve
our opportunities to grow and expand.
*Product revenue for the year ended December 31, 2013 was $128.8 million,
an increase of 5% from $123.1 million recorded in 2012. The year-over-year
improvement in sales was primarily driven by strong demand for our core
suture lines and our microsurgical knives in the US and Asia and continued
growth in the overall sales of our various knotless suture product lines.
*Product revenue for Q4 2013 was $30.2 million, down 6% from $32.1 million
in Q4 2012. Quarter-over-quarter results were impacted primarily by buying
patterns of certain of our OEM and private label customers,
includingEthicon, our sole private label customer for our knotless suture
product lines, and competitive pressure in the U.S. for direct sales of
*While our direct sales of Quill in the U.S. declined during the year,
coincident with Ethicon's product launch, they have subsequently
stabilized and have begun to again show growth. In addition, our Quill
sales in Asia continue to grow and almost doubled year-over-year.
*Importantly, even with the lower average selling price we receive on our
private label sales of knotless suture products to our partner Ethicon,
when combined with our own direct sales of Quill, our total revenues from
knotless suture technology continued to exhibit growth consistent with
previous years, up 9% in 2013 as compared to 2012.
*In addition, our sales force reorganization activities began to yield
benefits for our overall wound closure product lines in 2013.
Specifically, our 2013 sales of our non-Quill suture product lines for
both Q4 and the full year grew 6% as compared to the same periods of 2012.
In the hands of our direct sales team, micro suture product revenues grew
13% quarter-over-quarter and 10% year-over-year.
*Royalty revenue for 2013 was $5.5 million, down 64% from $15.1 million
recorded in 2012. Royalty revenue for Q4 2013 was $1.6 million, down 47%
from $3.0 million in Q4 2012. The vast majority of the decline was due to
lower royalties revenues on sales by Boston Scientific Corporation of
TAXUS® drug-eluting stents. Compared to 2013, royalties were also down in
both Q4 and the year in 2013 compared to last year due to a reversal of
royalties earned in prior periods from Cook associated with their
voluntary recall of Zilver PTX drug-eluting stents in April 2013. Since
the recall, royalty revenues from Cook in the most recent quarter were up
*Adjusted EBITDA for the year ended December 31, 2013 was $36.7 million, a
reduction of 19% from $45.1 million (pro forma for the sale of our
interventional products business) recorded in 2012, consisting of an
increase of $2.3 million from Adjusted EBITDA of $31.4 million for SSC in
2012, offset by a decline of $10.7 million from Adjusted EBITDA of $13.7
million for our Royalty business in 2012.
*Adjusted EBITDA for Q4 2013 was $6.9 million, down 41% from $11.7 million
in Q4 2012. Compared to the same quarter last year, Q4 2013 Adjusted
EBITDA for SSC of $7.3 million declined by $1.0 million and Q4 2013
Adjusted EBITDA for our Royalty business of ($0.4) million declined by
*Lower royalty revenues negatively impacted Adjusted EBITDA for both the
full year and Q4 of 2013, and for the year more than offset the strong
performance of our SSC business. The lower margins we receive on private
label sales of knotless suture products to Ethicon also impacted SSC's
2013 annual and Q4 Adjusted EBITDA.
*As of December 31, 2013, ANPI held $17.3 million of unrestricted cash &
cash equivalents, of which $13.4 million was held by SSC, and $107.3
million of its floating rate notes were outstanding.
Certain financial measures in this press release are prepared in accordance
with U.S. Generally Accepted Accounting Principles ("GAAP"). In addition, we
have presented adjusted earnings before interest, taxes, depreciation and
amortization ("Adjusted EBITDA"), which is a non-GAAP financial metric that
excludes certain non-cash and non-recurring items. Management uses Adjusted
EBITDA to establish operational goals, and believes that this metric may
assist investors in evaluating the results of our business and analyzing the
underlying trends over time. In addition, our creditors may monitor this
metric to measure compliance with certain financial covenants in our lending
agreements, or assess the operating and cash flow performance of our business.
Investors should consider our non-GAAP Adjusted EBITDA in addition to, and not
as a substitute for, or as superior to, financial metrics prepared in
accordance with GAAP.
Amounts, unless specified otherwise, are expressed in U.S. dollars. Financial
results are reported in accordance with U.S. GAAP unless otherwise noted.
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 in 2014 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
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; competition; technological changes that could impact our existing
products or our ability to develop and commercialize future products;
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 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 successfully manufacture, market
and sell our products; changes in our business strategy or development plans;
our ability to attract and retain qualified personnel; our ability to
successfully complete pre-clinical and clinical development of our products;
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; the
availability of capital to finance our activities; our ability to service our
debt obligations; and any other factors referenced in our other filings with
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.
^©2013 Angiotech Pharmaceuticals,Inc. All Rights Reserved.
Angiotech is a medical device business operating in the United States, the
United Kingdom and Puerto Rico that develops, manufactures and markets medical
device products and technologies, primarily in the areas of suture, surgical
needle technologies and micro-surgical blades, through its subsidiary,
Surgical Specialties Corporation (US), Inc. Key product lines include wound
closure products such as the Quill™ knotless tissue closure device, Surgical
Specialties Surgical Suture, and Look™ brand sutures, Sharpoint and Surgical
Specialties Microsurgical Knives brand of microsurgical knives. Angiotech also
manufactures components and private label suture and microsurgical knives for
other third party medical device manufacturers. For additional information
about Angiotech, please visit our website at www.surgicalspecialties.com.
SOURCE Angiotech Pharmaceuticals, Inc.
Investor Relations and Corporate Communications contact us at (604) 221-7933
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