At the Company
Robert V. Toni, President & CEO
Benny Ward, CFO
(919) 876-7800

At FRB | Weber Shandwick
Alison Zeigler - General Info
Julie Tu - Analyst Info
Judith Sylk-Siegel- Media Info
(212) 445-8000

For Immediate Release
October 23, 2001

 

CLOSURE MEDICAL CORPORATION REPORTS RECORD REVENUE AND EARNINGS FOR THE THIRD QUARTER AND FIRST NINE MONTHS OF 2001; EXPECTS 30-35% REVENUE GROWTH FOR 2002

Quarterly Highlights

  • Record revenue growth of 31% over comparable 2000 quarter
  • Net income of $684,000 and EPS of $0.05, also records
  • On target to meet year-end revenue and EPS projections of approximately $19 million and $0.18, respectively

Raleigh, NC, October 23, 2001 -- CLOSURE Medical Corporation (Nasdaq: CLSR), a medical tissue adhesive products company, today reported record revenue and earnings for the third quarter and nine months ended September 30, 2001. In addition, the Company updated financial forecasts for the full year 2001 and fiscal 2002.

Revenues for the three months ended September 30, 2001 were $4,873,000, up 31% from $3,721,000 in the corresponding period of 2000, and up 11% from $4,408,000 in the second quarter of 2001. Net income for the third quarter of 2001 was $684,000, or $0.05 per common share, compared to a net loss of $87,000, or ($0.01) per common share, in the corresponding 2000 period. Net income was $441,000, or $0.03 per common share, in the second quarter of 2001.

Revenues for the nine months ended September 30, 2001 grew to $13,198,000, an increase of 35% from $9,771,000 in the corresponding period in 2000. For the nine months ended September 30, 2001, net income was $1,394,000, or $0.10 per common share, compared to a net loss of $3,693,000, or ($0.28) per common share, for the same period of 2000.

As of September 30, 2001, cash, cash equivalents and investments totaled $10,454,000 compared to $11,711,000 at June 30, 2001 and $11,832,000 at December 31, 2000. The lower
cash and investments balance at September 30, 2001 was primarily related to the timing of shipments towards the latter part of the quarter. All related accounts receivable will be collected within normal terms.

Commenting on today's news, Robert V. Toni, President and Chief Executive Officer of CLOSURE Medical, stated, "Through the first three quarters of 2001, our business has steadily grown, primarily driven by increased acceptance of Dermabond. This has resulted in impressive revenue and earnings growth. In fact, our 2001 year-to-date revenues are almost equivalent to revenues for the entire year of 2000 and earnings have grown at a rate of 50% or better for the past two quarters."

2001 Forecast
Revenues for 2001 are expected to be approximately $19.0 million, resulting in earnings per common share of approximately $0.18 for the full year.

Robert V. Toni said, "Given our visibility for the remainder of the year, particularly advanced Dermabond orders and initial shipments of Liquiderm™ liquid adhesive bandage, we expect to have an excellent fourth quarter. This would allow us to meet our full year financial expectations that we communicated to the financial community at the beginning of this fiscal year."

2002 Expectations
The Company expects full year 2002 revenue growth of approximately 30% - 35% over 2001 and earnings per common share of $0.27 to $0.32. This represents approximately 50% - 75% growth over projected 2001 full year earnings. Additionally, gross margin percentages are expected to range from 68% - 70%.

Mr. Toni continued, "We believe the accomplishments of 2001 have positioned CLOSURE for continued growth and another year of solid performance in 2002. We will continue to benefit from the broad distribution channels of our marketing partners, three of which signed new agreements over the last ten months. Additionally, we continue to broaden our revenue base as evidenced by the 2001 introduction of five new stock keeping units."

The Company plans significant investment in research and development of approximately $7.5 to $8 million in 2002, representing a 30% - 40% increase over 2001 spending and providing the foundation for revenue growth beyond 2002. This will include spending on clinical activities targeting several new product indications as well as line extensions for existing products. Mr. Toni added, "In support of our long-term strategy, a considerable portion of our R&D commitment for 2002 will be dedicated to the preparation of our internal adhesive clinical trial."

General and administrative expenses are expected to remain flat year-over-year at approximately $5.5 to $6 million. For accounting purposes and consistent with 2001, the Company expects to be subject to alternative minimum taxes of 1% - 2% for 2002.

About CLOSURE Medical

CLOSURE Medical Corporation, headquartered in Raleigh, North Carolina, develops, manufactures, and commercializes medical tissue adhesive products based on its proprietary 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, as well as formulations to close or seal internal wounds. In addition to its products discussed herein, CLOSURE is also developing internal adhesives for wound closure and the possible treatment of emphysema, as well as developing liquid occlusive dressings for the treatment of a variety of partial thickness wounds, including pressure ulcers and skin tears.

DERMABOND Topical Skin Adhesive is a topical tissue adhesive used to close wounds from skin lacerations and incisions, minimally invasive surgery and plastic surgery. DERMABOND adhesive can be used as a replacement for topical sutures or staples and is marketed and distributed by Ethicon, Inc., a division of Johnson & Johnson, the world leader in wound closure products.

LIQUIDERM™ adhesive is the first and only cyanoacrylate medical device approved by the FDA for the over-the-counter ("OTC") adhesive bandage market. LIQUIDERM™ adhesive is painted on the wound, sealing it from dirt and germs, and creating a healing environment which allows natural healing to take place quickly. As the wound heals, the adhesive sloughs off naturally. CLOSURE recently signed a worldwide supply, distribution and development rights agreement with Johnson & Johnson Consumer Products Company which includes rights to its LIQUIDERM™ adhesive and its overall OTC wound care platform, including distribution rights to all present and future OTC products, except for SOOTHE-N-SEAL™ adhesive. Distribution of LIQUIDERM™ adhesive by Johnson & Johnson Consumer Products Company is expected to begin in early 2002.

SOOTHE-N-SEAL™ adhesive is indicated for the treatment of oral ulcers and mouth sores. It forms a protective barrier that shields oral ulcers from irritation due to eating and drinking while providing immediate and long-term pain relief. SOOTHE-N-SEAL™ adhesive is in the early stages of the product launch to the professional and consumer markets by Colgate Oral Pharmaceuticals, Inc.

The NEXABAND® liquid adhesive line consists of two products used in veterinary wound closure and wound care. The adhesives are used in cat declaw procedures as well as spay and neuter procedures. In July 2001, the Company entered into an agreement providing Abbott Laboratories ("Abbott") with worldwide supply, distribution and development rights to the NEXABAND® product line. In accordance with the agreement, Abbott has been granted immediate worldwide distribution rights to NEXABAND® adhesives excluding the United States and Canada. Upon the expiration of the Company's prior distribution arrangement in the second quarter of 2002, Abbott can begin the distribution of NEXABAND® products in the United States and Canada.

DERMABOND adhesive is a registered trademark of Ethicon, Inc.; SOOTHE-N-SEAL™ is a licensed trademark of Colgate Oral Pharmaceuticals, Inc.; LIQUIDERM™ is a trademark of CLOSURE Medical Corporation; and NEXABAND® is a registered trademark of CLOSURE Medical Corporation.

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 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, 2000 filed with the Securities and Exchange Commission.

                          CLOSURE Medical Corporation
                           Statements of Operations
                     (In thousands, except per share data)
                                  (Unaudited)
 
                                       THREE MONTHS ENDED NINE MONTHS ENDED
                                           SEPTEMBER 30,     SEPTEMBER 30,
 
                                            2001    2000*    2001     2000*
 
    Product sales                         $4,687  $3,565  $12,652   $9,303
    License and product development
     revenue                                 186     156      546      468
         Total revenues                    4,873   3,721   13,198    9,771
    Cost of products sold                  1,466     950    3,799    2,747
          Gross profit                     3,407   2,771    9,399    7,024
    Research, development and regulatory
     affairs expenses                      1,443   1,439    4,178    4,505
    General and administrative expenses    1,383   1,544    4,157    3,925
          Total operating expenses         2,826   2,983    8,335    8,430
    Income (loss) from operations            581    (212)   1,064   (1,406)
    Interest income, net                     114     125      351      369
    Income (loss) before taxes               695     (87)   1,415   (1,037)
    Provision for income taxes                11       -       21        -
    Income (loss) before cumulative
     effect of accounting change             684     (87)   1,394   (1,037)
    Cumulative effect of accounting
     change*                                   -       -        -   (2,656)
    Net income (loss)                       $684    $(87)  $1,394  $(3,693)
 
    Shares used in computation of net
     income (loss) per common share:
           Basic                          13,484  13,407   13,459   13,380
           Diluted                        13,814  13,407   13,767   13,380
 
    Net income (loss) per common share:
           Basic and diluted               $0.05  $(0.01)   $0.10   $(0.28)
 
    * See the Company's Annual Report on Form 10-K for the year ended
    December 31, 2000.
 
 
                           CLOSURE Medical Corporation
                               Balance Sheet Data
                                 (In thousands)
 
                                                SEPTEMBER 30,     DECEMBER 31,
                                                     2001             2000
                                                 (Unaudited)
 
    Cash, cash equivalents and
     investments                                   $10,454           $11,832
    Working capital                                 $9,495            $8,462
    Total assets                                   $23,413           $22,139
    Current portion of long-term debt               $1,086            $1,487
    Total stockholders' equity                     $15,974           $13,907
 
    Total shares outstanding                        13,491            13,428