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Exhibit 99.1
FOR IMMEDIATE RELEASE
NASDAQ: AAII
APPLIED ANALYTICAL INDUSTRIES ANNOUNCES THIRD QUARTER
AND NINE MONTH RESULTS FOR 2000
WILMINGTON, NC, NOVEMBER 1, 2000 - Applied Analytical Industries, Inc.
(NASDAQ: AAII), today reported financial results for the third quarter and nine
months ended September 30, 2000.
Research revenues increased 17% to $21.9 million versus $18.8 million
in last year's third quarter, primarily as a result of increased non-clinical
revenues which grew 29% year over year to $14.7 million. Total revenues for the
third quarter, which include licensing royalties and fees, increased 5% to $23.9
million over the $22.7 million reported in the comparable quarter of 1999. The
Company reported a net loss of $0.7 million, or ($0.04) per diluted share,
compared to a net loss of $1.5 million, or ($0.08) per diluted share, in the
third quarter of last year.
Overall gross margins were slightly lower as a percentage of revenues
from a year ago, due mainly to the impact of lower royalties and fees which have
no associated direct costs. However, gross margins for research revenues were up
by five percentage points, primarily resulting from ongoing cost control
programs initiated late last year and continuing this year. Selling, general and
administrative expenses increased by approximately $0.6 million, reflecting the
strengthening of the management team and the early stages of the Company's
direct pharmaceutical sales effort. The Company also stated that it expects SG&A
costs to remain unchanged as a percentage of revenues over the remainder of
fiscal 2000.
Dr. Fred Sancilio, Chairman and Chief Executive Officer, commented,
"This quarter was particularly challenging since we not only saw the normal
third quarter seasonal dip in signings, we also saw a delay in closing a major
Product Life Cycle Management (PLCM) contract. In our recent press release, we
noted that last minute delays in licensing negotiations for our
fexofenadine/pseudoephedrine 24-hour product might impact our revenues and
earnings for the quarter, and they did. Despite this, we are pleased with the
success of the clinical results obtained in studies of this product and the
strong third quarter revenue growth from our non-clinical fee-for-service
operations. This growth is principally due to an increase in PLCM work which has
now entered a long-term service contract phase."
Dr. Sancilio continued by saying, "We've made a lot of progress toward
our goal of becoming a fully integrated specialty pharmaceutical company during
the quarter. Products being developed in our R&D program are focused in specific
therapeutic areas; primarily immunosuppressive disorders and pain management. We
have development programs on-going in rheumatoid arthritis, lupus, and
inflammatory bowel disease (IBD)/Crohn's Disease. We also have advanced Phase II
clinical studies on-going in pain control specifically using our ProSorb-D
technology. We have already received initial clinical data in the third quarter
which confirms earlier studies that ProSorb-D is an effective acute pain
medication, better than expected. Additionally, we await completion of two more
clinical trials in the fourth quarter; another Phase II pain management
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study using ProSorb-D in migraine patients and another Phase I study using
fexofenadine/pseudoephedrine in a unique 24-hour preparation."
Dr. Sancilio also added, "During the third quarter, we increasingly
focused our R&D efforts on achieving significant progress with our own
proprietary drug products - both those to be sold by AAI and those augmenting
our clients' portfolios - and on the key products in our PLCM licensing program.
We are phasing out our work on generic drug development as we complete current
projects. Generic development has too frequently conflicted with our major
client relationships and has not yielded profits to support the associated risk.
Instead, by concentrating on our own niche products and projects, we are able to
leverage our internal resources to better advantage, increasing speed of
development, and thereby utilizing spending more efficiently."
"Our cash flow from operations was very positive during the quarter,
amounting to over $1.3 million. As a consequence, we continue to strengthen our
balance sheet and reduce our debt", Dr. Sancilio noted.
For the nine months ended September 30, 2000, revenues were $76.6
million compared to $70.5 million in the comparable 1999 period. The 9% overall
increase was primarily due to higher non-clinical research revenues which were
up by almost 15%. Net income for year-to-date 2000 was $1.3 million, or $0.08
per diluted share, compared to a net loss of $8.2 million, or ($0.48) per
diluted share reported in the first nine months of 1999.
Income from operations was $2.2 million for the first nine months of
2000 compared to a loss of $10.1 million during the first nine months of the
prior year. This positive change results primarily from the higher revenues as
well as benefits obtained from improved utilization of systems in which the
Company invested late last year. The 1999 period included a $6.4 million charge
for transaction, integration and restructuring costs related to the MTRA merger.
Third quarter highlights included:
o AAI entered into an agreement with Osmotica Corporation for the
development and commercialization of osmotic drug delivery
technologies, and quickly announced the successful completion of early
phase, in vivo, human studies for the once-a-day combination of
fexofenadine and pseudoephedrine for allergic seasonal rhinitis.
o Backlog remains strong at a level 97% higher than a year ago.
o Dr. George Van Lear was appointed Vice President, Research and
Development, and is responsible for overseeing AAI's internal research
and development program which includes PLCM projects as well as
proprietary drug delivery technology products and internal IND and
NDAprojects.
o Spencer Goldsmith was appointed Vice President, E-Commerce to lead the
Company's newly formed Internet organization. This initiative was
launched to enhance AAI's capabilities in the e-business market and add
to overall productivity and efficiency in the research and development
of internal and external products.
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Looking ahead, Dr. Sancilio said, "We are on track to launch our own
brand of products in the first half of 2001, with a goal of introducing one new
product during each half for the next couple of years. As part of this program,
after years of investment, several new products and systems are advancing nicely
or nearing completion. We have been absorbing significant costs to accomplish
this, but strongly believe that the investments made in our research program
involving immunosuppression and pain management will allow us to capture
profitable shares of these markets over the next several years. We maintain
strong relationships with leading pharmaceutical companies worldwide that we
will continue to leverage in building our product development pipeline and our
proprietary product lines. Our progress in transitioning to a company that
provides both products and services is on track and may provide an exciting
investment opportunity to our long-term shareholders."
About AAI
AAI is a specialty pharmaceutical and product development company with
comprehensive drug development capabilities in the United States, Europe and
Asia. Since 1979, AAI has partnered with pharmaceutical companies on both a
fee-for-service and royalty and milestone payment basis, providing the expertise
and knowledge to create quality health care products. The Company has earned a
reputation for solving complex pharmaceutical challenges utilizing analytical
testing and formulations development techniques, as well as validation and
regulatory affairs support services. Its stock is listed on Nasdaq (AAII). For
more information about AAI, visit the Company's website at www.aaiintl.com.
Forward-Looking Statements
Information in this press release contains certain "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities and Exchange Act of 1934, including the statements made by Dr.
Sancilio in this press release and the foregoing statements pertaining to SG&A
costs; product R&D costs, revenues and growth rates; clinical study results and
implications; products in the Company's development and regulatory approval
pipelines; plans to introduce proprietary products over the next two years on a
profitable basis; the Company's ability to build on its relationships with
leading pharmaceutical companies to build its product development portfolio and
product line; and the Company's future goals. These statements involve risks and
uncertainties that could cause actual results to differ materially, including,
without limitation, risks and uncertainties pertaining to the Company's ability
to successfully enhance its ability to provide strategic product development
solutions to its clients while developing and profitably selling its own
products, apply its technologies to new commercially successful products which
receive timely regulatory approvals, and manage its cost and operational
efficiencies, and to scientific, competitive and other developments in the
Company's chosen fields of direct pharmaceutical sales focus. Additional factors
that may cause the actual results to differ materially are discussed in the
Company's recent filings with the Securities and Exchange Commission, including,
but not limited to, its registration statement, as amended, its Annual Report on
Form 10-K filed with the SEC on March 30, 2000, its Quarterly Reports on Form
10-Q filed with the SEC on May 15, 2000 and August 14, 2000, including the
exhibits thereof, its Form 8-Ks and its other periodic filings.
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-TABLES TO FOLLOW -
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APPLIED ANALYTICAL INDUSTRIES, INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------- -------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Research revenues
Non-clinical $ 14,683 $ 11,383 $ 41,756 $ 36,419
Clinical 7,207 7,380 21,740 21,945
-------- -------- -------- --------
21,890 18,763 63,496 58,364
Product sales 1,491 1,855 6,050 5,542
Product development (royalties & fees) 518 2,097 7,035 6,615
-------- -------- -------- --------
Total revenues 23,899 22,715 76,581 70,521
-------- -------- -------- --------
Operating costs and expenses:
Direct costs 13,678 12,661 40,675 39,519
Selling, general and administrative 9,474 8,824 28,995 25,988
Research and development 1,440 2,776 4,759 8,735
Transaction, integration, and restructuring costs -- -- -- 6,400
-------- -------- -------- --------
24,592 24,261 74,429 80,642
-------- -------- -------- --------
Income (loss) from operations (693) (1,546) 2,152 (10,121)
Other income (expense):
Interest expense (559) (274) (1,599) (708)
Other, net 90 3 344 (46)
-------- -------- -------- --------
(469) (271) (1,255) (754)
-------- -------- -------- --------
Income (loss) before income taxes (1,162) (1,817) 897 (10,875)
Provision for (benefit from) income taxes (441) (359) (441) (2,681)
-------- -------- -------- --------
Net income (loss) $ (721) $ (1,458) $ 1,338 $ (8,194)
======== ======== ======== ========
Basic earnings (loss) per share $ (0.04) $ (0.08) $ 0.08 $ (0.48)
======== ======== ======== ========
Weighted average shares outstanding 17,556 17,205 17,439 17,203
======== ======== ======== ========
Diluted earnings (loss) per share $ (0.04) $ (0.08) $ 0.08 $ (0.48)
======== ======== ======== ========
Weighted average shares outstanding 17,556 17,205 17,756 17,203
======== ======== ======== ========
</TABLE>
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APPLIED ANALYTICAL INDUSTRIES, INC.
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,364 $ 1,988
Accounts receivable 30,089 35,064
Work-in-progress 10,057 12,689
Prepaid and other current assets 12,448 11,426
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Total current assets 53,958 61,167
Property and equipment, net 42,347 45,026
Goodwill and other intangibles, net 10,864 13,040
Other assets 3,755 4,228
----------- -----------
Total assets $ 110,924 $ 123,461
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt
and short-term debt $ 24,517 $ 28,362
Accounts payable 5,547 6,969
Customer advances 5,014 9,146
Accrued wages and benefits 3,400 4,081
Other accrued liabilities 3,725 6,102
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Total current liabilities 42,203 54,660
Long-term debt, less current portion 626 962
Other long-term liabilities 730 1,281
Stockholders' equity:
Common stock 18 17
Paid-in capital 70,300 69,732
Accumulated deficit (922) (2,260)
Accumulated other comprehensive losses (2,009) (906)
Stock subscriptions receivable (22) (25)
----------- -----------
Total stockholders' equity 67,365 66,558
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Total liabilities and stockholders' equity $ 110,924 $ 123,461
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</TABLE>
