The Company's Returns and Inventory Optimization Plan Contributes
to Lower Revenues in the Second Quarter FAIRFIELD, N.J., Aug. 9
/PRNewswire-FirstCall/ -- Bradley Pharmaceuticals, Inc. (NYSE:BDY)
announced today that it has filed with the Securities and Exchange
Commission its Quarterly Report on Form 10-Q for the quarter ended
June 30, 2007. Second Quarter 2007 -- Launched ELESTRIN(TM) and
introduced product to the media -- Launched PERANEX(TM) HC Cream, a
new line of anorectal therapy treatment -- Launched ROSULA(R)
CLARIFYING WASH(TM) -- Launched KEROL(TM) TOPICAL SUSPENSION --
Launched authorized generic of ADOXA(R)150 mg tablet -- Hired 15
additional ELESTRIN(TM) sales representatives for Kenwood
Therapeutics division -- At June 30, 2007, reduced inventory in the
channel from December 31, 2006 by an estimated $9.0 million through
our returns and inventory optimization plan -- At June 30, 2007,
increased cash and cash equivalents, short-term investments and
restricted cash position by $7.0 million from December 31, 2006 --
On August 3, 2007, the Company paid the outstanding principal
balance of $62.4 million under its credit facility with its
existing cash and cash equivalents, concurrently with the closing
of a new credit facility. Bradley reported that net sales for the
quarter ended June 30, 2007 were approximately $32.2 million, a
decrease of $4.9 million, or 13%, from net sales of $37.1 million
for the quarter ended June 30, 2006. The Company had a net loss of
$(1.7) million for the 2007 quarter, or $(0.10) per share on a
fully diluted basis, based upon approximately 16.9 million shares
outstanding, compared to net income of $4.6 million, or $0.28 per
share on a fully diluted basis, based upon approximately 16.5
million shares outstanding for the same period last year. In April
2007, the Company implemented a returns and inventory optimization
plan designed to reduce future returns by decreasing customer
inventory in the channel and to ship products with increased
shelf-life to wholesalers by improving product production planning.
The Company believes the implementation of the plan contributed to
lower revenues in the quarter ended June 30, 2007 compared to the
net sales in more recent quarters. As outlined in the table below,
gross prescription demand has outpaced sales in the most recent
quarters, indicating a portion of the demand was satisfied by
inventory in the channel rather than through new sales. Pursuant to
this plan, the Company estimates it has reduced inventory of all
products in the distribution channel from $36.4 million at December
31, 2006, to $33.2 million at March 31, 2007 and to $27.4 million
at June 30, 2007. The following table is a comparison of the gross
prescription demand, gross prescription sales, the returns
provision and net sales for the last six quarters ($ in millions):
Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 Q2 '07 Gross prescription demand
(1) $46.9 $46.7 $47.9 $50.4 $54.8 $53.2 Gross prescription sales
(2) $45.0 $44.0 $45.0 $48.0 $44.8 $36.5 Returns provision (3) $8.6
$8.0 $6.0 $8.7 $6.9 $2.6 Net sales (3) $34.8 $37.2 $35.2 $37.7
$37.8 $32.2 (1) As reported by Wolters Kluwer, a third party
provider of prescription data. Wolters Kluwer's projected gross
prescription demand is calculated based upon estimated retail sales
value. (2) The Company's actual results. Gross prescription sales
are based upon actual gross prescription sales at current gross
selling prices and do not include charges for discounts, returns,
chargebacks and rebates and do not include sales of the Company's
over-the-counter products. (3) The Company's actual results. Net
sales includes sales of both prescription and over-the-counter
products and include charges for discounts, returns, chargebacks
and rebates. Daniel Glassman, the Company's Chief Executive Officer
and President, said "The continued creation of new business via
prescriptions written and filled continues at robust levels. Our
sales decreases and associated loss for the quarter were not
unexpected as we continue to optimize the channel inventory,
including ADOXA(R) 150 mg tablets. The returns and inventory
optimization plan bodes well for the future as lower channel
inventory should provide for lower returns and a potential increase
in net sales." With a balance sheet return reserve of $22.8
million, 83% of the inventory in the distribution channel is
reserved for as of June 30, 2007. Doak Dermatologics, led by its
core branded products of ADOXA(R), KERALAC(R)/ KEROL(TM),
SOLARAZE(R), ZODERM(R), LIDAMANTLE(R), and ROSULA(R), accounted for
76% of our net sales for the quarter ended June 30, 2007, while
Kenwood Therapeutics, and its core branded products of PAMINE(R),
ANAMANTLE HC(R), PERANEX(TM) HC, ELESTRIN(TM) and FLORA-Q(R),
accounted for 20% of our net sales for the quarter ended June 30,
2007 and A. Aarons, our generic subsidiary, accounted for 4% of our
net sales. The decrease in our net sales for the quarter ended June
30, 2007 was primarily led by the acne/rosacea products, due to a
decline in ADOXA(R) product sales. During this quarter, the
ADOXA(R) 150 mg tablets faced generic competition for the first
time. Additionally, the Company experienced sales declines in both
the gastrointestinal products and respiratory products, led by
lower sales of PAMINE(R) and DECONAMINE(R), respectively. Sales of
the latter were affected by an industry wide shortage of raw
materials and it is anticipated that back orders of approximately
$2.4 million will be shipped in the third quarter. Partially
offsetting these sales declines were higher sales of the actinic
keratosis product SOLARAZE(R), A. Aarons revenue and the launch of
new products late in the quarter, including ELESTRIN(TM),
PERANEX(TM) HC CREAM, ROSULA(R) CLARIFYING WASH(TM) and KEROL(TM)
TOPICAL SUSPENSION. A. Aarons shipped approximately $0.3 million
and $5.6 million, respectively, of products during 2006 and for the
first six months of 2007. In the quarter ended June 30, 2007, the
Company recorded revenues of $1.3 million from these sales based on
prescription data and cash collections, while not recording $3.9
million, at gross sales value, for the estimated product remaining
in the channel at June 30, 2007. The Company has recorded deferred
revenue of $0.6 million related to shipments of A. Aaron product,
which represents the payments received from customers through that
date on sales that were not yet recognized. At June 30, 2007, 100%
of the ADOXA(R) 150 mg tablets estimated in the wholesale and
retail channel is reserved. Due to our efforts to reduce inventory
in the channel, the estimated value of ADOXA(R) 150 mg tablets in
the channel of $3.9 million at June 30, 2007 represents a reduction
of $2.2 million from the prior quarter. The following table sets
forth certain net sales data for the quarters ended June 30, 2007
and June 30, 2006 by therapeutic category within Doak
Dermatologics, Kenwood Therapeutics and A. Aarons: June 30, June
30, Increase/ % Therapeutic Category 2007 2006 (Decrease) Change by
Company Doak Dermatologics Dermatology & Podiatry Keratolytic
$5,431,000 $6,041,000 $(610,000) (10)% Acne/Rosacea 8,787,000
12,675,000 (3,888,000) (31)% Actinic Keratoses 7,156,000 5,936,000
1,220,000 21% Anesthetics 1,357,000 1,158,000 199,000 17% Scalp
159,000 396,000 (237,000) (60)% Cosmeceuticals 1,175,000 1,032,000
143,000 14% Authorized Generic 505,000 455,000 50,000 11% Other
24,000 88,000 (64,000) (73)% Total Doak Dermatologics $24,594,000
$27,781,000 $(3,187,000) (11)% Kenwood Therapeutics
Gastrointestinal $4,955,000 $7,840,000 $(2,885,000) (37)%
Respiratory (63,000) 1,035,000 (1,098,000) (106)% Nutritional
859,000 444,000 415,000 93% Other 559,000 50,000 509,000 NA Total
Kenwood Therapeutics $6,310,000 $9,369,000 $(3,059,000) (33)% A.
Aarons $1,255,000 - $1,255,000 NA Total Bradley Pharmaceuticals,
Inc. $32,159,000 $ 37,150,000 $(4,991,000) (13)% Our Kenwood
Therapeutics sales force began promoting ELESTRIN(TM) to physicians
in June 2007. Total ELESTRIN(TM) sales for the quarter were $0.6
million. We expect to launch VEREGEN(TM) at the end of 2007.
VEREGEN(TM) will be promoted to physicians by both our Doak
Dermatologics and Kenwood Therapeutics sales forces. In connection
with the launch of these products, the Company has increased
Kenwood's sales force to 61 representatives at July 30, 2007 and
will incur a corresponding amount of additional sales, marketing
and related expenses in subsequent periods. During the quarter
ended June 30, 2007, cost of sales were $6.7 million, an increase
of $0.9 million from the comparable year-ago period. A recording of
an inventory reserve provision contributed to a decrease in the
gross profit percentage for the three months ended June 30, 2007 to
approximately 79% from 85% in the corresponding period of 2006. The
inventory reserve provision of $1.5 million was primarily related
to our returns and inventory optimization plan and generic
competition on ADOXA(R) 150 mg tablets. The entrance of generic
competition on ADOXA(R) 150 mg tablets led to revised sales
forecasts that did not support current inventory levels. Selling,
general and administrative expenses for the three months ended June
30, 2007 were $23.0 million, representing an increase of $4.0
million, or 21%, compared to $19.0 for the same period in the prior
year. The increase in expenses reflects higher spending on salary
and salary related expenses, primarily in the sales area, higher
professional fees and, to a lesser extent, an increased provision
for bad debt and higher advertising and promotion expenses,
primarily related to the ELESTRIN(TM) launch. During the quarter
ended June 30, 2007, the Company's professional fees included
approximately $1.5 million related to the internal review of
matters set forth in a resignation letter from a former employee,
which was previously disclosed in the quarter ended March 31, 2007
but occurred during the most recent quarter. On August 3, 2007,
concurrently with the closing of a new $15.0 million revolving
credit facility, the Company repaid the outstanding principal
balance of $62.4 million under its previous credit facility, which
was classified as current maturities of long-term debt at June 30,
2007. The Board determined that the repayment was an appropriate
use of the Company's existing cash and cash equivalents based on
the Board's desire, among other things, to reduce the Company's
interest expense. After repaying the debt, the Company had
approximately $10.0 million in cash and cash equivalents on August
3, 2007. Six months ended June 30, 2007 For the six months ended
June 30, 2007, net sales were $70.0 million, a decrease of $1.9
million from $71.9 million for the six months ended June 30, 2006.
The Company had a net income of $0.9 million for the six months
ended June 30, 2007, or $0.05 per share on a fully diluted basis,
based upon approximately 16.9 million shares outstanding, compared
to net income of $4.8 million, or $0.29 per share on a fully
diluted basis, based upon approximately 16.5 million shares
outstanding for the same period last year. Doak Dermatologics,
Kenwood Therapeutics and A. Aarons accounted for 76%, 22% and 2%,
respectively, of our net sales for the six months ended June 30,
2007. The decrease in net sales was led by declines in the
acne/rosacea products, due primarily to generic competition on the
ADOXA(R), keratolytic and gastrointestinal product lines. These
decreases were partially offset by higher sales of SOLARAZE(R),
DECONAMINE(R), new product launches and A. Aaron's revenue.
Although DECONAMINE(R) net sales increased for the six month
period, the Company has, as noted above, not received the product
for shipment since the quarter ended March 31, 2007 due to an
inability to secure active ingredient and currently has the product
on backorder. The following table sets forth certain net sales data
for the six months ended June 30, 2007 and June 30, 2006 by
therapeutic category within Doak Dermatologics, Kenwood
Therapeutics and A. Aarons: June 30, June 30, Increase/ %
Therapeutic Category 2007 2006 (Decrease) Change by Company Doak
Dermatologics Dermatology & Podiatry Keratolytic $10,298,000
$11,977,000 $(1,679,000) (14)% Acne/Rosacea 23,348,000 28,072,000
(4,724,000) (17)% Actinic Keratoses 12,437,000 10,043,000 2,394,000
24% Anesthetics 2,995,000 2,570,000 425,000 17% Scalp 442,000
788,000 (346,000) (44)% Cosmeceuticals 2,586,000 2,170,000 416,000
19% Authorized Generic 775,000 1,421,000 (646,000) (45)% Other
51,000 143,000 (92,000) (64)% Total Doak Dermatologics $52,932,000
$57,184,000 $(4,252,000) (7)% Kenwood Therapeutics Gastrointestinal
$11,508,000 $12,552,000 $(1,044,000) (8)% Respiratory 2,450,000
1,325,000 1,125,000 85% Nutritional 1,203,000 744,000 459,000 62%
Other 614,000 98,000 516,000 526% Total Kenwood Therapeutics
$15,775,000 $14,719,000 $1,056,000 7% A. Aarons $1,255,000 -
$1,255,000 NA Total Bradley Pharmaceuticals, Inc. $69,962,000 $
71,903,000 $(1,941,000) (3)% Cost of sales for the six months ended
June 30, 2007 were $13.4 million, an increase of $2.6 million, or
24% from $10.8 million last year. The gross profit percentage was
81% compared to 85% for the same comparable year-ago period. A
recording of an inventory reserve provision contributed to the
increased costs and lower gross margin percentage. The inventory
reserve provision of $2.4 million was primarily related to the
Company's returns and inventory optimization plan and generic
competition on ADOXA(R) 150 mg tablets. Selling, general and
administrative expenses for the six months ended June 30, 2007 were
$44.3 million, representing an increase of $5.4 million, or 14%,
compared to $38.9 million for the six months ended June 30, 2006.
The increase in selling, general and administrative expenses
reflects higher spending on salary and salary related expenses,
primarily in the sales area, and higher professional fees related
to the Company's ongoing legal matters, a review of matters set
forth in a resignation letter from a former employee of the Company
and independent financial advisors and legal counsel retained by
the special committee to assist it in its work. The increased costs
were partially offset by decreased spending on advertising and
promotion on the existing product lines in response to increased
competition from generic and therapeutically equivalent products.
Other Information: For more detailed information, please see
Bradley's SEC filings, including its recently filed Quarterly
Report on Form 10-Q for the quarter ended June 30, 2007, by
visiting http://www.bradpharm.com/ and clicking on the Investor
Relations link, then on SEC Filings. Bradley Pharmaceuticals Inc.
invites you to participate in the Company's Second Quarter 2007
Results Conference Call on Friday, August 10, 2007 at 8:30 AM ET.
To participate in the conference call, please dial 1-888-573-3046
approximately 10 minutes prior to the start of the call and enter
ID# 11333497. Playback of the conference call will be available
after 1:00 PM ET by calling 1-800-642-1687 and entering reservation
ID# 11333497. The call also will be available on our web page for
30 days. Please visit the Bradley Pharmaceuticals web site at:
http://www.bradpharm.com/. About Bradley Pharmaceuticals, Inc.
Bradley Pharmaceuticals, Inc. was founded in 1985 as a specialty
pharmaceutical company and markets to niche physician specialties
in the U.S. and international markets. Bradley's success is based
upon its core strengths in marketing and sales, which enable the
company to Commercialize brands that fill unmet patient and
physician needs; Develop new products through life cycle
management; and In-License phase II and phase III drugs with
long-term intellectual property protection that upon approval
leverage Bradley's marketing and sales expertise to increase
shareholder value. Bradley Pharmaceuticals is comprised of Doak
Dermatologics, specializing in therapies for dermatology and
podiatry; Kenwood Therapeutics, providing gastroenterology, OB/GYN,
respiratory and other internal medicine brands; and A. Aarons,
which markets authorized generic versions of Doak and Kenwood
therapies. Safe Harbor for Forward-Looking Statements: This release
contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements include statements that address activities, events or
developments that Bradley expects, believes or anticipates will or
may occur in the future, such as Bradley's plans to in-license,
develop and launch new and enhanced products with long-term
intellectual property protection or other significant barriers to
market entry, sales and earnings estimates, other predictions of
financial performance, launches by Bradley of new products, market
acceptance of Bradley's products, and the achievement of
initiatives to enhance corporate governance and long-term
shareholder value. Forward-looking statements are based on
Bradley's experience and perception of current conditions, trends,
expected future developments and other factors it believes are
appropriate under the circumstances and are subject to numerous
risks and uncertainties, many of which are beyond Bradley's
control. These risks and uncertainties include Bradley's ability
to: launch VEREGEN(TM) at the end of 2007; predict the safety and
efficacy of ELESTRIN(TM) and VEREGEN(TM) in a commercial setting;
estimate sales; maintain adequate inventory levels; implement the
returns and inventory optimization plan timely, if at all; reduce
product returns; comply with the restrictive covenants under its
credit facility; access the capital markets on attractive terms or
at all; favorably resolve the pending SEC informal inquiry;
maintain or increase sales of its products; or effectively react to
other risks and uncertainties described from time to time in
Bradley's SEC filings, such as fluctuation of quarterly financial
results, estimation of product returns, chargebacks, rebates and
allowances, concentration of customers, reliance on third party
manufacturers and suppliers, litigation or other proceedings
(including the pending class action and shareholder derivative
lawsuits), government regulation and stock price volatility.
Further, Bradley cannot accurately predict the impact on its
business of the approval, introduction, or expansion by competitors
of generic or therapeutically equivalent or comparable versions of
Bradley's products or of any other competing products. In addition,
the Company cannot provide any assurance with respect to the
previously announced review by the special committee of the board
of directors of the Company's strategic alternatives or whether any
definitive offer to acquire the Company will be made, whether by
Mr. Daniel Glassman's group (as previously disclosed) or another
potential purchaser, that any agreement will be executed or that
Mr. Glassman's proposal or any other transaction will be approved
or consummated. Actual results may differ materially from those
projected. Bradley undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information,
future events or otherwise. Bradley Pharmaceuticals, Inc. and
Subsidiaries CONSOLIDATED STATEMENTS OF INCOME (LOSS)(unaudited)
Three Months Ended Six Months Ended June 30, June 30, 2007 2006
2007 2006 Net sales $32,158,640 $37,149,759 $69,961,597 $71,903,117
Cost of sales (1) 6,675,063 5,760,750 13,357,318 10,766,399
25,483,577 31,389,009 56,604,279 61,136,718 Selling, general and
administrative 22,990,033 19,038,088 44,286,288 38,931,586 Research
and development 949,502 507,617 1,629,946 5,770,341 Depreciation
and amortization 2,929,652 2,529,296 5,857,443 5,079,474 Interest
income (676,004) (633,413) (1,230,358) (1,060,453) Interest expense
2,285,991 2,084,091 4,552,399 4,198,107 28,479,174 23,525,679
55,095,718 52,919,055 Income (loss) before income tax expense
(benefit) (2,995,597) 7,863,330 1,508,561 8,217,663 Income tax
expense (benefit) (1,322,722) 3,302,000 656,884 3,451,000 Net
income (loss) $(1,672,875) $4,561,330 $851,677 $4,766,663 Basic net
income (loss) per common share $(0.10) $0.28 $0.05 $0.29 Diluted
net income (loss) per common share $(0.10) $0.28 $0.05 $0.29 Shares
used in computing basic net income (loss) per common share
16,900,000 16,400,000 16,730,000 16,390,000 Shares used in
computing diluted net income (loss) per common share 16,900,000
16,520,000 16,890,000 16,510,000 (1) Amounts exclude amortization
of intangible assets related to acquired products. Bradley
Pharmaceuticals, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS
June 30, December 31, 2007 2006 (unaudited) (a) Assets Current
assets: Cash and cash equivalents $50,524,567 $39,608,987
Short-term investments 3,142,011 7,083,678 Accounts receivable, net
of allowances 8,804,298 14,489,623 Inventories, net 9,195,634
6,881,218 Deferred tax assets 14,087,150 13,332,666 Prepaid
expenses and other 2,143,705 2,100,487 Prepaid income taxes 668,283
4,934,119 Restricted cash and investments 25,000,000 - Total
current assets 113,565,648 88,430,778 Property and equipment, net
653,222 813,794 Intangible assets, net 160,466,627 165,985,767
Goodwill 27,478,307 27,478,307 Deferred financing costs 3,905,315
4,798,034 Restricted cash and investments - 25,000,000 Other assets
16,229 16,229 Total assets $306,085,348 $312,522,909 (a) Derived
from audited financial statements. Bradley Pharmaceuticals, Inc.
and Subsidiaries CONSOLIDATED BALANCE SHEETS June 30, December 31,
2007 2006 (unaudited) (a) Liabilities Current liabilities: Current
maturities of long-term debt $62,429,965 $15,660,085 Milestone
payable - ELESTRIN(TM) 3,252,145 10,115,083 Accounts payable
9,144,533 4,948,754 Accrued expenses 37,795,301 38,728,413 Total
current liabilities 112,621,944 69,452,335 Long-term liabilities:
Long-term debt, less current maturities - 53,400,000 Deferred tax
liabilities 795,257 2,054,145 Total long-term liabilities 795,257
55,454,145 Stockholders' Equity Preferred stock, $0.01 par value;
shares authorized: 2,000,000; issued - none - - Common stock, $0.01
par value; authorized: 26,400,000 shares; issued 17,392,974 shares
at June 30, 2007 and 16,965,578 shares at December 31, 2006 173,930
169,656 Class B common stock, $0.01 par value; shares authorized:
900,000; issued 429,752 shares at June 30, 2007 and at December 31,
2006 4,298 4,298 Additional paid-in capital 147,451,852 139,754,887
Retained earnings 48,329,193 50,977,625 Accumulated other
comprehensive gain 54 1,143 Treasury stock - common stock - at
cost; 877,058 shares at June 30, 2007 and December 31, 2006
(3,291,180) (3,291,180) Total stockholders' equity 192,668,147
187,616,429 Total liabilities and stockholders' equity $306,085,348
$312,522,909 (a) Derived from audited financial statements.
DATASOURCE: Bradley Pharmaceuticals, Inc. CONTACT: Cecelia C. Heer,
Investor/Public Relations of Bradley Pharmaceuticals, Inc.,
+1-973-882-1505, ext. 252, Web site: http://www.bradpharm.com/
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