Savient Completes Restatement of 2004 and Prior Period Results; Amended and Initial Quarterly Reports for 2005 Expected to be Fi
January 19 2006 - 4:19PM
Business Wire
Restatement Positively Affects Revenues and Earnings in 2004;
Expected to Positively Affect Revenues and Earnings in First Half
of 2005 Savient Pharmaceuticals, Inc. (NASDAQ: SVNTE), an emerging
specialty pharmaceuticals company focused on developing,
manufacturing and marketing novel therapeutic products for unmet
medical needs, announced today that it has completed and filed with
the U.S. Securities and Exchange Commission an amendment to its
Annual Report on Form 10-K for the year ended December 31, 2004,
including 2003, 2002 and 2001 prior period restatements. As
previously announced, the amended Form 10-K filing restates the
Company's financial statements due primarily to errors made in
recording the Company's reserves for product returns and inventory
related to sales of the Company's products. The amendment also
includes certain restatements and adjustments to rebate allowances
related to contracts with Medicaid and other government agencies
and a correction of the Company's accounting for negative goodwill
in connection with the 2001 acquisition of Myelos Corporation.
Savient expects to file an amendment to its Form 10-Q for the
period ended March 31, 2005, and its initial Forms 10-Q for the
periods ended June 30, 2005 and September 30, 2005 by January 26,
2006. Today's restatements positively affect Savient's revenues and
earnings in 2004 and next week's planned restatement is expected to
positively affect Savient's revenues and earnings for the first
half of 2005. "We are pleased to have filed our Form 10-K amendment
and look forward to announcing our quarterly and year-end results,"
said Christopher Clement, President and Chief Executive Officer of
Savient. "Despite the extraordinary efforts directed toward
completing this restatement of our prior period financial
statements, we continue to successfully drive Savient's business
forward and believe that the fundamentals of the Company remain
strong. We remain focused on advancing our pipeline and expanding
our product portfolio as we continue to provide physicians and
patients with effective and unique therapeutic alternatives."
Effect of Today's Restatement The impact of restatements on revenue
and net income (loss) is summarized as follows: -0- *T Year Ended
December 31,
------------------------------------------------------------ 2002
2002 2003 2003 2004 2004
(Reported)(Restated)(Reported)(Restated)(Reported)(Restated)
------------------------------------------------------------ (in
thousands except per share data) Revenue, net $102,966 $101,752
$132,525 $131,450 $113,275 $123,895 --------- --------- ---------
--------- --------- --------- Net income (loss) $9,717 $8,679
$13,922 $12,454 $(35,272) $(27,515) ========= ========= =========
========= ========= ========= Earnings (loss) per share: Basic: Net
income (loss) $0.17 $0.15 $0.24 $0.21 $(0.59) $(0.46) =========
========= ========= ========= ========= ========= Diluted: Net
income (loss) $0.17 $0.15 $0.23 $0.21 $(0.59) $(0.46) =========
========= ========= ========= ========= ========= *T Nasdaq Update
As announced on January 13, Savient requested that the Nasdaq
Listing Qualifications Panel ("the Panel") extend until today the
date by which the Company must file its amended Form 10-K in order
to continue listing of the Company's securities on The Nasdaq Stock
Market. The Company also requested that the Panel extend until
January 26, 2006 the date by which Savient must file the amendment
to its March 31, 2005 Form 10-Q and its initial Forms 10-Q for the
periods ended June 30, 2005 and September 30, 2005. As of this time
there has been no decision made by the Panel with respect to the
Company's request. Mr. Clement concluded, "With the 2002, 2003 and
2004 restatements completed and the expected filings of our amended
10-Q for the first quarter of 2005 and initial Forms 10-Q for the
second and third quarters of 2005, we hope for a speedy
determination of compliance by the Nasdaq Panel. If the Panel
grants the extension we have requested, Savient's securities will
continue trading on The Nasdaq Stock Market. We appreciate the
support and patience of our shareholders during this difficult time
and as we move forward we continue to improve our financial systems
and personnel to ensure accurate and timely financial reporting."
If the Panel denies Savient's request for an extension, the Company
expects that its securities would be delisted from The Nasdaq Stock
Market. Reasons for the Restatement The restatements are primarily
the result of errors made in connection with estimating product
return and inventory reserves related to sales of the Company's
Oxandrin(R) and Delatestryl(R) products. It was determined that an
error had occurred in the prior financial periods. The Company
conducted an internal review and investigation of the facts and
circumstances that contributed to the errors and determined that
there was no evidence of fraud or internal misconduct on the part
of any Savient employee with respect to these errors. The Company's
Audit Committee also engaged outside consultants to conduct an
independent evaluation which confirmed these findings.
Historically, the Company has had minimal returns related to its
products. During 2004, the Company began receiving actual returns
of Oxandrin that were at or near expiration. At that time, the
Company determined that an adjustment would be required to accrue
for future returns. This return reserve adjustment was based, in
part, on notifications received from customers advising the
Company, through its third-party fulfillment center, of their
intent to return product. The Company subsequently determined that
certain of those reported returns were in error in that actual
units of product returned were significantly less than the amounts
originally expected to be returned. The Company further determined
that in recording its reserves for product returns and inventory,
it had failed to promptly evaluate the data and the resulting
impact on such reserves. In connection with this review and
restatement, Savient identified a number of other restatement
items: -- The Company has restated its rebate allowances related to
contracts with Medicaid and other government agencies. It was
determined that the actual historical rebate activity that was
available during each period of restatement was not being utilized
in an effective manner as a basis for forecasting future rebate
trends. Based upon the historical trends, the Company has
determined that Medicaid rebates were generally under accrued and
rebates related to other government agencies were generally over
accrued. These adjustments are reflected in the restated rebate
allowance accounts. Going forward, the Company will monitor rebate
activity trends including actual rebate vouchers received, timing
of rebate voucher receipt, and corresponding rebate vouchers to
sale origination periods. -- The Company has restated its
accounting for its 2001 acquisition of Myelos Corporation. Savient
had previously recorded negative goodwill in connection with the
acquisition. It has been determined that the negative goodwill
should have been allocated on a pro rata basis to non-current
assets. The primary change in 2001 eliminates all negative goodwill
and reduces Savient's in-process research and development expense.
-- The Company's restated consolidated financial statements include
the tax impact related to all restatement items, the resolution of
an IRS tax audit and an accrual for an ongoing Sales and Use tax
audit with the State of New Jersey. This impact is carried through
2004 which effectively decreased deferred tax assets and the
related valuation allowance. -- The Company has restated
commissions and royalty expense during 2004 to correct an expense
over accrual. -- The Company also restated its presentation of net
assets of the global biologics manufacturing business at December
31, 2004. About Savient Pharmaceuticals, Inc. Based in East
Brunswick, New Jersey, Savient Pharmaceuticals, Inc., is an
emerging specialty pharmaceuticals company, is engaged in
developing, manufacturing, and marketing pharmaceutical products
that address unmet medical needs in both niche and broader markets.
The Company's lead product development candidate, Puricase(R), for
the treatment of refractory gout has reported positive Phase 1 and
2 clinical data. Savient's experienced management team is committed
to advancing its pipeline and expanding its product portfolio by
in-licensing late stage compounds and exploring co-promotion and
co-development opportunities that fit the Company's expertise in
specialty pharmaceuticals and initial focus in rheumatology.
Savient markets its product Oxandrin(R) (oxandrolone, USP) in the
United States. The Company's subsidiary, Rosemont Pharmaceuticals
Limited, develops, manufactures, and markets through its own sales
force oral liquid formulations of prescription products for the UK
pharmaceutical market. Rosemont's product portfolio includes over
90 liquid formulations primarily targeting the geriatric
population. Savient's product Mircette(R), an oral contraceptive,
is marketed by its licensee, Duramed Pharmaceuticals, Inc. Puricase
is a registered trademark of Mountain View Pharmaceuticals, Inc.
Further information on the Company can be accessed by visiting
www.savientpharma.com. Safe Harbor Statement This news release
contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934. All statements, other
than statements of historical facts, included in this report
regarding the Company's strategy, expected future financial
position, discovery and development of products, strategic
alliances, competitive position, plans and objectives of management
are forward-looking statements. Words such as "anticipate,"
"believe," "estimate," "expect," "intend," "plan," "will" and other
similar expressions help identify forward-looking statements,
although not all forward-looking statements contain these
identifying words. In particular, the statements regarding the
possible continued listing of the Company's common stock on The
Nasdaq Stock Market, the timing of the filing of the Company's
amended Quarterly Report on Form 10-Q for the period ended March
31, 2005 and initial Quarterly Reports on Form 10-Q for the periods
ended June 30, 2005 and September 30, 2005 are forward-looking
statements. These forward-looking statements involve substantial
risks and uncertainties and are based on current expectations,
assumptions, estimates and projections about the Company's business
and the biopharmaceutical and specialty pharmaceutical industries
in which the Company operates. Such risks and uncertainties
include, but are not limited to, delay or failure in developing
Prosaptide, Puricase and other product candidates; difficulties of
expanding the Company's product portfolio through in-licensing;
introduction of generic competition for Oxandrin; fluctuations in
buying patterns of wholesalers; potential future returns of
Oxandrin or other products; our continuing to incur substantial net
losses for the foreseeable future; difficulties in obtaining
financing; potential development of alternative technologies or
more effective products by competitors; reliance on third-parties
to manufacture, market and distribute many of the Company's
products; economic, political and other risks associated with
foreign operations; risks of maintaining protection for the
Company's intellectual property; risks of an adverse determination
in on-going or future intellectual property litigation; and risks
associated with stringent government regulation of the
biopharmaceutical and specialty pharmaceutical industries. The
Company may not actually achieve the plans, intentions or
expectations disclosed in its forward-looking statements, and you
should not place undue reliance on the Company's forward-looking
statements. Actual results or events could differ materially from
the plans, intentions and expectations disclosed in the
forward-looking statements that the Company makes. The Company's
forward-looking statements do not reflect the potential impact of
any future acquisitions, mergers, dispositions, joint ventures or
investments that the Company may make. The Company does not assume
any obligation to update any forward-looking statements.
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