NEWS RELEASE for October 17, 2002 at 7:35 AM EDT
Contact: Allen &
CLOSURE Medical Corp
CLOSURE MEDICAL REPORTS
Increases Guidance for 2002, Expects 25 to 35 Percent Growth in 2003
RALEIGH, NC (October 17, 2002) … CLOSURE Medical Corporation (Nasdaq:CLSR), a leader in tissue adhesives for wound closure and wound care, reported revenue of $5.9 million for the quarter ended September 30, 2002, 21 percent higher than the $4.9 million reported for the third quarter of 2001. The increase was due primarily to increased sales of its flagship DERMABOND wound closure product, and to sales of its liquid bandage product. Both products are marketed worldwide by divisions of Johnson & Johnson.
During the quarter, Daniel A. Pelak joined CLOSURE as its new President & CEO, replacing Robert V. Toni, who retired. In connection with the transition, the Company recorded a one-time general and administrative charge for recruitment and transition services that aggregated $800,000, or $0.06 per share. Excluding the one-time charge, net income for the quarter ended September 30, 2002 was $1.4 million, or $0.10 per share, an increase of 101 percent over the net income of $684,000, or $0.05 per share, reported for the third quarter of 2001. Earnings for the third quarter 2002, including the CEO transition charge, were $580,000, or $0.04 per share. The Company expects full year 2002 revenues to be approximately $23.5 million to $24.0 million, compared to $19.2 million in 2001, and earnings per share (excluding the one-time charge mentioned above) to be $0.33 to $0.34, up from previous guidance of $0.27 to $0.32 per share.
Pelak commented, “Every day thousands of people use CLOSURE’s DERMABOND and liquid bandage products. DERMABOND is gaining new clinical users and uses. Our liquid bandage product has had an effective launch period that surpassed expectations, due to the efforts and resources provided by the Johnson & Johnson Consumer Products team, who market the product as Band-Aid® Brand Liquid Bandage. Furthermore, I believe our technology platforms, with four commercialized products and others in development, are well suited for a variety of medical needs.”
The Company anticipates continued growth in 2003 and provided financial guidance for its expected results. CLOSURE anticipates revenue of approximately $30 million to $32 million, which represents growth of between 25 percent and 35 percent for 2003, due to the continued acceptance of its technology.
Through the current reporting period, the Company has not reported significant tax expense because of the existence of net operating loss carryforwards (NOL). However, during 2003, the Company may begin to recognize additional income tax expense for financial statement purposes due to the Company’s continued profitability and other conditions that may warrant the recognition of a deferred tax asset for the value of the NOL and a one-time corresponding increase to earnings of approximately $6.0 million. Although the Company would report fully-taxed earnings subsequent to the recognition of the deferred tax asset, it would not be required to pay the resulting incremental taxes reported until such time as the NOL benefits were exhausted.
Assuming a 38 percent effective tax rate, the Company expects to report earnings in 2003 of approximately $3.9 million to $4.5 million, or between $0.28 and $0.32 per share. The 2003 estimate represents growth of between approximately 30 percent and 50 percent over anticipated 2002 pre-tax income adjusted to exclude the one-time charge mentioned above and the application of a 38 percent effective tax rate. With its continued earnings growth, the Company expects to generate net cash flows of approximately $3.0 million to $4.5 million during 2003.
Gross margins in 2003 are expected to be in the range of 70 percent to 74 percent; general and administrative expenses are expected to increase slightly, but to decrease as a percentage of revenue versus 2002 (excluding the one-time charge of $800,000 mentioned above). Research and development and regulatory costs, including clinical trials for new products and product line extensions, are expected to be between $8.5 million and $10.0 million for 2003, versus similar costs for 2002 of approximately $6.8 million.
Pelak added, “Our R&D efforts in 2003 will not only be focused on existing development projects but will also include leveraging CLOSURE’s core technologies against other unmet medical needs. We believe that the opportunities for these technologies could be broad and are a key priority in our strategy for future growth.”
At September 30, 2002, the Company had cash and investments of $15.5 million, a current ratio of 3.4:1, and shareholders’ equity of $20.2 million, with total debt of $526,000.
About CLOSURE Medical Corp
CLOSURE Medical Corporation is a global leader in the development, manufacture, and commercialization of medical adhesive brands for wound closure and care based on its proprietary medical grade cyanoacrylate technology. CLOSURE’s proprietary technology has customized the physical and chemical properties of cyanoacrylates to develop medical adhesive formulations to close and seal topical skin wounds and incisions.
For additional information on CLOSURE Medical visit its website at www.closuremed.com or visit the “Clients” section of the Allen & Caron website at www.allencaron.com.
This release contains certain forward-looking statements which involve known and unknown risks, delays, uncertainties or other factors not under the Company's control which may cause actual results, performance or achievements of the Company to be materially different from the results, performance, or other expectations implied by these forward-looking statements. These factors include, but are not limited to the early stage of commercialization of the Company’s products; the progress of its research and development programs for future products; the need for regulatory approval and effects of governmental regulation; technological uncertainties; the satisfactory conclusion of negotiations with, and dependence on marketing partners, and dependence on patents and trade secrets, as well as those detailed in the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Securities and Exchange Commission. Although the Company believes that the expectations in the forward-looking statements are reasonable, the Company cannot guarantee such results. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
CLOSURE Medical Corporation