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DUSA Pharmaceuticals Reports Second Quarter 2009 Corporate Highlights and Financial Results

August 11, 2009

WILMINGTON, Mass., Aug. 11 /PRNewswire-FirstCall/ — DUSA Pharmaceuticals, Inc.((R)) (NASDAQ GM: DUSA), a dermatology company that is developing and marketing Levulan((R)) Photodynamic Therapy (PDT) and other products focused on patients with common skin conditions, reported today its corporate highlights and financial results for the second quarter ended June 30, 2009.

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Financial highlights for the second quarter and first half of the year include:

  • Domestic PDT revenues totaled $6.1 million for the second quarter of 2009, representing a $1.2 million, or 24%, improvement as compared to the second quarter of 2008. First half 2009 domestic PDT revenues totaled $12.4 million, representing a $2.3 million, or 22%, improvement year over year.
  • Domestic Kerastick((R)) revenues totaled $5.6 million for the second quarter of 2009, representing a $1.0 million, or 23%, improvement as compared to the second quarter of 2008. First half 2009 domestic Kerastick((R) )revenues totaled $11.3 million, representing a $2.0 million, or 21%, improvement year over year.
  • Domestic BLU-U((R)) revenues totaled $0.5 million for the second quarter of 2009, representing a $0.1 million, or 38%, improvement as compared to the second quarter of 2008. First half 2009 domestic BLU-U((R)) revenues totaled $1.1 million, representing a $0.3 million, or 36%, improvement year over year.
  • Kerastick((R)) gross margins for the second quarter of 2009 reached a record high of 85%.

Management Comments:

“While overall revenues were down for the quarter, due to the loss of Nicomide((R)) sales, continued growth in our core PDT business helped to partially offset the year over year shortfall,” stated Robert Doman, President and CEO. “In the face of a challenging economic environment, our domestic PDT business experienced strong growth in the second quarter. Domestic PDT growth was driven by increased penetration and utilization of our therapy in the medical dermatology and hospital segments of our business.”

“We are pleased to announce another successful BLU-U((R)) sales quarter. Despite a difficult capital equipment market, first half BLU-U((R)) unit sales were up 43% as compared to the prior year,” continued Doman.

“For the second half of the year, we expect to see expanded adoption of our therapy by the marketplace. While we expect that adverse economic conditions will negatively impact the international markets and the non-reimbursed cosmetic/medi spa segment of our business in the U.S., the medical dermatology segment of our business continues to demonstrate robust growth. We also look forward to the further advancement of our solid organ transplant recipients (SOTRs) clinical trial which was initiated in May,” concluded Doman.

Second Quarter 2009 Financial Results:

Total product revenues were $7.0 million in the second quarter of 2009, down 14% from $8.1 million in the second quarter of 2008. PDT revenues totaled $6.4 million, up $1.0 million, or 18%, from $5.4 million for the comparable 2008 period. The increase in PDT revenues was attributable to a 17% increase in Kerastick((R)) revenues and a 38% increase in BLU-U((R)) revenues. The Kerastick((R) )revenue increase was driven by an 11% increase in our domestic Kerastick((R)) volume and an overall 14% increase in our average selling price. Kerastick((R)) sales volumes increased to 49,815 in the second quarter of 2009 from 48,478 units sold in the second quarter of 2008. Domestic Kerastick((R)) sales volumes increased by 4,662 units, or 11%, and were partially offset by a 3,325 unit decrease in our international sales volumes. The BLU-U((R)) revenue increase was driven by a 41% increase in sales volume. There were 58 units sold during the quarter, representing a 17 unit increase over the prior year quarterly total of 41 units. Non-PDT revenues totaled $0.5 million versus $2.7 million for the comparable 2008 period. Non-PDT revenues were adversely impacted by the absence of Nicomide((R) )sales in 2009. In response to discussions with the Food and Drug Administration (FDA) regarding our marketing of certain products considered by the FDA to be marketed unapproved drugs, the Company stopped shipping Nicomide((R) )into the wholesale channel in June of 2008.

DUSA’s net loss on a GAAP basis for the second quarter of 2009 was ($0.9) million, or ($0.04) per common share, compared to a net loss of ($0.1) million, or ($0.01) per common share, in the second quarter of 2008.

DUSA’s non-GAAP net loss for the second quarter of 2009, after adjustments for stock-based compensation expense, consideration provided to the former Sirius shareholders, and the non-cash change in fair value of warrants, was ($0.4) million, or ($0.02) per common share, compared to a net loss of ($0.2) million, or ($0.01) per common share, in the prior year period. The increase in our net loss was primarily the result of the year over year shortfall in our Non-PDT revenues, which was partially offset by incremental PDT revenues, lower operating costs due to the absence of spending on our Phase IIb acne clinical trial which concluded in 2008 and lower promotional expenses associated with the non-PDT product segment.

Please refer to the section entitled “Use of Non-GAAP Financial Measures” and the accompanying financial table included at the end of this release for a reconciliation of GAAP to non-GAAP results for the three and six month periods ending June 30, 2008 and 2009, respectively.

First Half 2009 Financial Results:

Total product revenues for the six month period ended June 30, 2009 were $14.1 million, down 12% from $16.0 million in comparable prior year period. PDT revenues totaled $13.1 million, up $1.9 million, or 17% from $11.3 million for the comparable 2008 period. The increase in PDT revenues was attributable to a 15% increase in Kerastick((R)) revenues and a 36% increase in BLU-U((R)) revenues. The Kerastick((R) )revenue increase was driven by a 9% increase in our domestic Kerastick((R)) volume and an overall 14% increase in our average selling price. Kerastick((R)) sales volumes increased to 101,762 in the first half of 2009 from 100,588 units sold in the first half of 2008. Domestic Kerastick((R)) sales volumes increased by 8,028 units, or 9%, and were partially offset by a 6,854 unit decrease in our international sales volumes. The BLU-U((R)) revenue increase was driven by a 43% increase in sales volume. There were 139 units sold during the first half of 2009, representing a 42 unit increase over the prior year first half total of 97 units. Non-PDT revenues totaled $1.0 million versus $4.8 million for the comparable 2008 period. Non-PDT revenues were adversely impacted by the absence of Nicomide((R) )sales in 2009.

DUSA’s net loss on a GAAP basis for the six months ended June 30, 2009 was ($2.5) million or ($0.10) per common share, compared to a net loss of ($1.4) million or ($0.06) per common share in the first half of 2008.

DUSA’s non-GAAP net loss, after adjustments for stock-based compensation expense, consideration provided to the former Sirius shareholders, and the non-cash change in fair value of warrants, for the six months ending June 30, 2009 was ($1.7) million, or ($0.07) per common share, in 2009, compared to ($0.9) million, or ($0.04) per common share, in 2008. The increase in our net loss was primarily the result of the year over year shortfall in our Non-PDT revenues and the absence of damages payments from River’s Edge, which were partially offset by incremental PDT revenues, lower operating costs due to the absence of spending on our Phase IIb acne clinical trial which concluded in 2008, a Prescription Drug User Fee Act (PDUFA) charge accrued in the prior year period, and lower promotional expenses associated with the non-PDT product segment.

As of June 30, 2009, total cash, cash equivalents, and marketable securities were $16.4 million, compared to $18.9 million at December 31, 2008.

Other Updates:

  • Clinical Development.
    • On May 11, 2009, the Company announced the initiation of its Phase II clinical trial that will examine the safety and efficacy of broad area PDT for the treatment of actinic keratoses and the reduction of new non-melanoma skin cancer (NMSC) in high risk chronically immunosuppressed solid organ transplant recipients (“SOTRs”). In May 2008, we filed an Orphan Drug Designation Application with the FDA with respect to the prevention of cancer occurrence in these patients. We recently received correspondence that the application was not granted on the basis that the agency believes that the prevalence of the target population with the disease state is greater than 200,000, which is the maximum number of patients allowed under the Orphan Drug legislation. The Company has requested a meeting with the FDA to provide further clarification on the application and the related target population.
  • BLU-U((R)) Claims Expansion.
    • In May of 2009, the Company filed a 510(k) application with the FDA to expand the allowed claims on BLU-U((R)) to include severe acne. The filing was based on the results of our Phase IIb clinical trial. We received a response to our application from the FDA in June 2009. The agency has requested additional information in order to complete its review of our application, including supplementary clinical data in support of our claims. The Company has requested a meeting with the FDA to clarify its position and is currently evaluating its next steps as it relates to the application.
  • Nicomide((R)).
    • On April 27, 2009, the Company announced that it had amended its existing non-exclusive license agreement with River’s Edge, granting them an exclusive license to the patent that covers Nicomide(R) (U.S. Patent No. 6,979,468) and associated know-how, as well as a license to use the trademark associated with the licensed products. DUSA received the first $200,000 installment payment under the License Amendment during the three-month period ended June 30, 2009. DUSA has not received payments which were due on June 1, July 1, and August 1, 2009 respectively. We are evaluating our options to collect the amounts due from River’s Edge under the License Agreement.

Revenues Table, Condensed Consolidated Balance Sheets, Condensed Consolidated Statement of Operations and GAAP to Non-GAAP reconciliation follow:

    Revenues for the three month and six month periods were comprised of
    the following:

                                 Three-months ended       Six-months ended
                                    June 30,                  June 30,
                            ------------------------ ------------------------
                                2009        2008        2009         2008
                            (Unaudited)  (Unaudited) (Unaudited)  (Unaudited)
                            ------------------------ ------------------------
    PDT Drug & Device
    Product Revenues

    Kerastick(R)
    Product Revenues:

    United States           $5,621,000   $4,572,000 $11,306,000   $9,346,000
    Canada                     108,000      218,000     243,000      377,000
    Korea                      126,000      159,000     296,000      524,000
    Other                       84,000      133,000     171,000      190,000
                                ------      -------     -------      -------
    Subtotal Kerastick(R)
    Product Revenues         5,939,000    5,082,000  12,016,000   10,437,000

    BLU-U(R) Product Revenues:

    United States              479,000      347,000   1,121,000      822,000
                               -------      -------   ---------      -------
    Subtotal BLU-U(R)
    Product Revenues          479,000       347,000   1,121,000      822,000

    Total PDT Drug & Device
    Product Revenues        6,418,000     5,429,000  13,137,000   11,259,000
    Total Non-PDT
    Product Revenues          548,000     2,683,000     967,000    4,783,000
                              -------     ---------     -------    ---------
    TOTAL PRODUCT REVENUES $6,966,000    $8,112,000 $14,104,000  $16,042,000
                           ==========    ========== ===========  ===========

    DUSA Pharmaceuticals, Inc.
    Condensed Consolidated Balance Sheets

                                          June 30,      December 31,
                                             2009           2008
                                          (Unaudited)
                                          -----------    -----------

    ASSETS
    CURRENT ASSETS
      Cash and cash equivalents            $3,894,037     $3,880,673
      Marketable securities                12,488,406     15,002,830
      Accrued interest receivable             144,523        155,728
      Accounts receivable, net              1,550,149      2,367,803
      Inventory                             2,550,463      2,812,825
      Prepaid and other current assets      1,341,263      1,718,073
                                            ---------      ---------
           TOTAL CURRENT ASSETS            21,968,841     25,937,932
    Restricted cash                           174,080        173,844
    Property, plant and equipment, net      1,773,485      1,937,978
    Deferred charges and other assets          68,099        160,700
                                               ------        -------
         TOTAL ASSETS                     $23,984,505    $28,210,454
                                          ===========    ===========

    LIABILITIES AND SHAREHOLDERS' EQUITY
    CURRENT LIABILITIES
      Accounts payable                       $466,984       $305,734
      Accrued compensation                    497,848      1,515,912
      Other accrued expenses                2,423,767      3,226,571
      Deferred revenue                        717,897        611,602
                                              -------        -------
         TOTAL CURRENT LIABILITIES          4,106,496      5,659,819
    Deferred revenues                       3,633,727      4,157,305
    Warrant liability                         498,188        436,458
    Other liabilities                         144,069        244,673
                                              -------        -------
         TOTAL LIABILITIES                  8,382,480     10,498,255

    SHAREHOLDERS' EQUITY
     Capital stock                        151,683,399    151,663,943
     Authorized: 100,000,000 shares;
     40,000,000 shares designated as
     common stock, no par, and 60,000,000
     shares issuable in series or
     classes; and 40,000 junior Series A
     preferred shares. Issued and
     outstanding: 24,108,908 and 24,089,452
     shares of common  stock, no par,
     at June 30, 2009 and December 31, 2008,
     respectively

    Additional paid-in capital              7,915,624      7,514,900
    Accumulated deficit                  (144,310,565)  (141,850,925)
    Accumulated other comprehensive loss      313,567        384,281
         TOTAL SHAREHOLDERS' EQUITY        15,602,025     17,712,199
                                           ----------     ----------

    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                               $23,984,505    $28,210,454
                                          ===========    ===========

    DUSA Pharmaceuticals, Inc.
    Consolidated Statement of Operations

                             Three-months ended          Six-months ended
                               June 30,                      June 30,
                        --------------------------   ------------------------
                            2009          2008          2009        2008
                        (Unaudited)     (Unaudited) (Unaudited)   (Unaudited)
                        ---------------------------  ------------------------
    Product revenues    $6,965,541      $8,112,239 $14,103,810   $16,041,739
    Cost of product
    revenues and
    royalties            1,440,864       1,787,694   3,379,090     3,488,011
                         ---------       ---------   ---------     ---------
        Gross margin     5,524,677       6,324,545  10,724,720    12,553,728

    Operating costs:
    Research and
     development         1,076,709       1,375,302   2,261,804     3,561,511
    Marketing and sales  3,037,311       3,496,233   6,447,415     6,553,434
    General and
     administrative      2,340,947       2,325,137   4,482,397     4,692,961
    Settlements, net        75,000         (47,825)     75,000      (283,425)
                            ------         -------      ------      --------
    Total operating
    costs                6,529,967       7,148,847  13,266,616    14,524,481
                         ---------       ---------  ----------    ----------
    Loss from
    operations          (1,005,290)       (824,302) (2,541,896)   (1,970,753)
                        -----------      ---------  -----------   -----------
    Other income:

    Gain/(loss) on change
     in fair value
     of warrants            73,183         468,411     (61,730)      123,869
    Other income, net       79,398         217,100     143,986       423,952
                            ------         -------     -------      --------
    Net loss             $(852,709)      $(138,791) $(2,459,640) $(1,422,932)
                         ==========      ========== ============ ============
    Basic and diluted net
     loss per common share  $(0.04)        $(0.01)      $(0.10)       $(0.06)
                            =======        =======      =======       =======
    Weighted average
     number of common
     shares             24,100,874     24,078,610   24,095,149    24,078,514
                        ===========    ==========   ==========    ==========

Use of Non-GAAP Financial Measures

In addition to reporting financial results in accordance with GAAP, DUSA has provided in the table below non-GAAP financial measures adjusted to exclude stock-based compensation expense, consideration provided to the former Sirius shareholders, and the non-cash change in fair value of warrants. The Company believes that this presentation is useful to help investors better understand DUSA’s financial performance, competitive position and prospects for the future. Management believes that these non-GAAP financial measures assist in providing a more complete understanding of the Company’s underlying operational results and trends, and in allowing for a more comparable presentation of results. Management uses these measures along with their corresponding GAAP financial measures to help manage the Company’s business and to help evaluate DUSA’s performance compared to the marketplace. However, the presentation of non-GAAP financial measures is not meant to be considered in isolation or as superior to or as a substitute for financial information provided in accordance with GAAP. The non-GAAP financial measures used by the Company may be calculated differently from, and, therefore, may not be comparable to, similarly titled measures used by other companies.

Investors are encouraged to review the reconciliations of these non-GAAP financial measures to the comparable GAAP results, contained in the table below.

                               Three-months ended      Six-months ended
                                   June 30,                   June 30,
                                2009       2008         2009         2008
                            (Unaudited) (Unaudited)  (Unaudited)  (Unaudited)
                            ----------- -----------  -----------  -----------
    GAAP net loss            $(852,709)  $(138,791) $(2,459,640) $(1,422,932)
    Stock-based
     compensation (a)          225,466     357,912      424,593      689,550
    Consideration to former
     Sirius shareholders (b)   305,000           -      305,000            -
    Change in fair value of
     warrants (c)              (73,183)   (468,411)      61,730     (123,869)
                               --------   ---------      -------    ---------
    Non-GAAP adjusted
     net loss                $(395,426)  $(249,290) $(1,668,317)   $(857,251)
                             ==========  ========== ============   ==========
    Non-GAAP basic and
     diluted net loss
     per common share          $(0.02)      $(0.01)      $(0.07)      $(0.04)
                               =======      =======      =======      =======
    Weighted average number
     of common shares      24,100,874   24,078,610   24,095,149   24,078,514

    ------------------------
       (a) Stock-based compensation expense resulting from the application of
           SFAS 123(R).
       (b) Payment of $100,000 and accrual of $205,000 related to the
           release, consent and the third amendment to the merger agreement
           between DUSA and the former Sirius shareholders.
       (c) Non-cash gain/loss on change in fair value of warrants.

Conference Call Details and Dial-in Information

In conjunction with this announcement, DUSA will host a conference call today:

                    Tuesday, August 11th -- 8:30 a.m. Eastern
             If calling from the U.S. or Canada use the following
                             toll-free number:
                                 800.647.4314
                                Password -- DUSA
                        For international callers use
                                 502.498.8422
                                Password -- DUSA

                A recorded replay of the call will be available
                   approximately 15 minutes following the call
                     U.S. or Canada callers use 877.863.0350
                     International callers use 858.244.1268

The call will be accessible on our Web site approximately four hours following the call at www.dusapharma.com.

About DUSA Pharmaceuticals

DUSA Pharmaceuticals, Inc. is an integrated dermatology pharmaceutical company focused primarily on the development and marketing of its Levulan((R)) photodynamic therapy (PDT) technology platform, and complementary dermatology products. Levulan((R)) PDT is currently approved for the treatment of Grade 1 and 2 actinic keratoses of the face and scalp. DUSA also markets other dermatology products, including ClindaReach((R)). DUSA is researching the use of Levulan((R)) PDT to prevent AKs and squamous cell carcinomas in immunosuppressed solid organ transplant recipients and is supporting research related to oral leukoplakia in collaboration with the National Institutes of Health (NIH). DUSA is based in Wilmington, Mass. Please visit our Web site at www.dusapharma.com.

Except for historical information, this news release contains certain forward-looking statements that represent our current expectations and beliefs concerning future events, and involve certain known and unknown risk and uncertainties. These forward-looking statements relate to expectations for expanded marketplace acceptance of Levulan((R)) PDT, and for the negative impact on certain market segments, as well as the international markets, intentions for the SOTR clinical study, and management’s beliefs concerning non-GAAP financial measures. These forward-looking statements are further qualified by important factors that could cause actual results to differ materially from future results, performance or achievements expressed or implied by those in the forward-looking statements made in this release. These factors include, without limitation, actions by health regulatory authorities, changing economic conditions, launch of competitive products, the status of our patent portfolio, reliance on third parties, sufficient funding, and other risks and uncertainties identified in DUSA’s Form 10-K for the year ended December 31, 2008.

SOURCE DUSA Pharmaceuticals, Inc.


Source: newswire



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