|
BioSpecifics Technologies Corp
CORPORATE PROFILE
BioSpecifics Technologies Corp. is a biopharmaceutical company with a focus on wound healing and tissue remodeling It produces Collagenase ABC, an enzyme that digests collagen in order to remove non-viable tissue from skin ulcers and wounds. Collagenase Santyl® is the leading enzymatic debridement ointment sold in the United States and is sold under other trademarks abroad.
The mission of BioSpecifics is to further our central role in the healing of wounds and to develop drugs to provide healthcare professionals with a precise chemical "tool" that can deliver pinpoint, minimally invasive therapy for conditions that will benefit from the removal of collagen.
LETTER FROM THE PRESIDENT
To Our Stockholders:
Our fiscal year ended on a very favorable note. Smith & Nephew, the number two company in the world for wound healing products became the new distributor of Collagenase Santyl®
Ointment. Based on their significant commitment, we are confident about the long-term prospects for this product. Smith & Nephew, a global medical device company with worldwide revenues of $1.7 billion, aims to achieve worldwide leadership in the advanced wound management market. It develops, manufactures, and markets a wide range of innovative and technologically advanced tissue repair products, and is deeply committed to the wound healing market, an arena in which we have focused our energies.
Smith & Nephew believes the acquisition of the Santyl®
marketing rights gives it the opportunity to promote Santyl®
alongside its existing portfolio of products, thereby providing a complete wound care healing system. Their strategy is to grow the product portfolio at the high end of technology and be seen as a "one-stop shop" in wound care to its hospital and health provider clients.
We look forward to a long period of collaboration. Smith & Nephew plans to invest behind the brand to confirm the clinical benefit of collagenase for new therapeutic indications, which is in line with our strategy to expand its use to a variety of conditions. In the long term, certainly, the prospects for this new relationship are quite promising.
RESEARCH
We're very pleased that the progress of our research on our injectables has been good during this period. It is a testament to the quality of the collagenase injectable rather than just to our stewardship.
A summary of the excellent results at Stonybrook University for the treatment of Dupuytren's disease (Cordase™) ™
has been submitted to the FDA. As many of you know Dupuytren's is a condition of the fingers, which prevents their opening. We anticipate following this up with further results at Stanford University and subsequent findings at Stonybrook within the next few months. We have also begun construction of a first class manufacturing facility for the injectables.
In addition to the fine results with Cordase™,
twenty five patients with Peyronie's disease have been treated at the leading center in the U.S, with our potential product Plaquase™. In
this disease a plaque forms on the side of the penis and may make sexual function problematical. These were open label trials and have been very encouraging for both the investigator and the patients. Currently, the only proven therapy for Dupuytren. s and Peyronie. s diseases is surgery. There is a real need for a non-surgical treatment for these diseases. Of course, we continue our efforts to further develop what we consider the enormous potential of collagenase in wound healing.
We have spent considerable effort this year in upgrading our manufacturing processes and facilities. This grew out of the observations from the FDA, and from the need to prepare, across the board, for future growth. In this connection we are fundamentally upgrading our Curacao facility to state of the art. This will also enable us to produce more of our product, a requirement which we anticipate as a result of the very active sales program planned by Smith & Nephew.
I am grateful to our employees for their hard work over the past year, a most challenging one. I look forward to their continued dedication, and to the continued support of our shareholders.
Sincerely,
Edwin H. Wegman
President and Chairman
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A PRIMER ON WOUND HEALING
NEW STRIDES~OLD CHALLENGES
Ever since the earliest cavemen was mauled by a mammoth, stabbed by a flint-headed spear or burned by a stone age cooking fire, men and women have fought to heal wounds. Down the ages we've learned much about healing. And a good thing, too, since modern medicine has to cope with various sores and ulcers that didn't trouble your typical injured cavemen. They usually died too quickly for such ailments as bedsores or diabetic ulcers to appear.
Today, in the midst of modern medicine's triumphs over so many microbes, and with greater understanding of the importance to clearing wounds the science of wound healing has made great advances. Yet the old challenge remains: Most wounds heal themselves. When they don't, we have a devil of a job helping them do so. Ambrose Pare said in 1585: "I dressed (the wound), but God healed it".
It's been true for centuries. As Dr. I. Kelman Cohen, chairman of the Division of Reconstructive Surgery at Virginia Commonwealth University, writes "Hippocrates practiced good basic wound care in his day." Yet it took 2,500 years for the Pasteur Institute to begin the truly scientific study of how the body heals. And it wasn't until the 20th century that Alexis Carrel launched the first groping efforts to enhance the process.
The last two decades have brought enormous strides as developmental biology and biochemistry probe ever deeper into the makeup and processes of life. Not just of cells, but deep down into the molecular level. And now, at the dawn of the 21st century, new discoveries are leading to a ferment of approaches and products painstakingly studied to test their usefulness in healing wounds.
Conveniently oversimplified, we now know that there are three main stages to the normal healing of a wound. (1) Inflammation as the body's Sanitation Department moves to clean out dead or damaged cells. (2) Then new cells arrive and proliferate through a network of extracellular connective tissue (collagen). And (3) The collagen and cells mature and remodel as the wound heals and closes.
Each of these stages has many overlapping steps going on, with current research trying to understand more of each step's chemistry and progression, and how one step may affect others in the process.
A cursory look at the field shows research under way in all three stages.
In the first stage - inflammation and destruction - researchers zero in on understanding and increasing the role of white blood cells in fighting bacteria and clearing out dead cells. Similarly, they study collagenase, the enzyme that helps remove connective tissue, because you need collagenase to break down dead connective tissue so new tissue can form.
New uses for the crucial application of collagenase to supplement the body. s own natural enzyme are constantly being discovered. At the same time, various new dressings and medicines seek to shield wounds from further contamination.
The second and third stages are where many innovative approaches have begun to bear fruit. Science has learned far more about how cells arrive at the wound along their connective tissue matrix, to then do Mother Nature's healing tricks. Strides in understanding the process let researchers test ways to quicken various steps. Essentially, they use the biological equivalent of reverse engineering to take molecules apart and see how they work.
Living molecules such as collagen aren't static. They're dynamic, constantly changing as they do their jobs in the body. The more we learn, the more we can help them work better.
Various laboratories are collecting or synthesizing many of the growth factors identified in the creation and life of cells. Professor of Physiology Dr. Ira Herman of Tufts University has shown in his laboratory experiments that the presence of collagenase makes wound healing six times faster. Other researchers are developing delivery systems to provide protein molecules in the proper forms to help build cells.
It's a daunting task. While the basic processes of cell creation are known, details and mechanisms vary among different kinds of cells. Lung tissue uses a super-thin membrane to allow the body to transfer oxygen from the air into our blood. Blood vessels have to grow properly in order to feed other cells. Muscle, bone and nerve cells all have their own pathways. Skin - the final protective armor - must grow in all its complexity even as all the rest comes on line. And the various kinds of collagen connective tissue must grow when and where they are needed. At every step of these parallel processes, various kinds of growing cells and connective tissue affect each other.
A particularly fascinating field of research in this area involves neonatal cell constituents and processes, because a fetus exhibits remarkably strong ability to regenerate wounded tissue. Scientists are extremely hopeful about this work because there are only two ways the body heals a wound: either by regenerating tissue, or by knitting wounds together with a scar. Nature often takes the latter approach and thus could do with man made help to encourage regeneration and reduce scarring.
An example is new living skin substitutes which have the ability to "piggy-back" neonatal cell growth factors into a wound while providing a covering shield. According to Rod Skaggs, chief of the wound healing division at Smith & Nephew, marketer of leading items in this field: "Many of us have a leg up, luckily, because collagen and collagenase research has already established so many beachheads."
Just as there are different kinds of cells, there are different kinds of connective tissue bridging them together. But the stem of the tough collagen molecule seems to be the same in all kinds. It's the ends of each microscopic strand that diverge. And the collagenase enzyme seems capable of splitting the ends off almost every kind of collagen so that nature can rebuild them nearer to the specifically required form.
The ferment of research on many fronts bodes well for the field of wound healing. Yet experts in the field sadly remind us that everything in wound healing still hinges on antisepsis and debridement -- on killing germs and cleaning out dead tissue so the various wonderful new stuff can work. Otherwise, says research biologist George Rodeheaver at the University of Virginia, "You're just pouring $500-a-dose gold into a sewer."
So far, we believe that the best biological aid in debridement continues to be synthetically produced collagenase, more useful at this stage of wound healing than has been demonstrated yet in the other two. Unlike many other elements of the process, however, adverse effects from manipulating collagen seems to be minimal.
Getting new discoveries or ways to create and deliver wound healing products to patients is a tortuous, costly path of which the discovery is only the beginning. First it has to be tried out in the laboratory. Then it goes on a long journey of testing to prove (1) that it works and (2) that it doesn't cause harm. Then all the test results are submitted to regulatory bodies such as the U.S. Food and Drug Administration for licensing. Since each new use requires fresh FDA approval, this expensive process takes a long time. We must be sure that each new clinical study is both accurate and unassailable. As Northwestern University's Dr. Monica Marrow, chairman of a key FDA review group, explains, there's always "concern about sample size and statistical issues."
Nevertheless, wound care is a swiftly growing industry already estimated to involve at least $10 billion a year worldwide. That's understandable. Aging populations drive up the number of chronic wounds such as diabetic foot ulcers, pressure ulcers and bedsores. Meanwhile, burns remain one of the leading causes of injury throughout the world. Not to mention the many wounds that result from the activities of daily living.
Right now, by far most of the money spent on wound healing still goes for inert products such as bandages, sutures, dressings, surgical remedies and for clearing adhesions. But inexorable demographics fuel the march to higher and higher medical expenditures. So industry experts like Dr. Alex Arrow of pl-x.com (The Patent & License Exchange, the global market for intellectual property assets), see a swing toward more spending on active therapy products to reduce the overall cost of patent care. "The market could grow to $18-20 billion in the next decade," Arrow says.
Maybe 15% of all diabetes patients in the U.S. develop a foot ulcer, with some 50,000 of them a year leading to amputation. Similarly, almost $2 billion a year is spent on active therapeutic approaches to bedsores. It takes very few hours in bed for a hospital patient to develop a bedsore wherever blood supply is hampered by a body's pressure on a mattress. So it's not surprising that already, another $1 .5 billion a year goes to preventive efforts.
Similarly, treating the average burn patient takes vast sums of money which could be reduced by faster healing. So medical economics is spurring today's far-flung research into new ways to heal all kinds of wounds.
One thing is certain: just like the war against germs -- which has entered entire new theaters of research since bacteria began to mutate their way around antibiotics -- the fight to heal wounds will continue to obsess medical science, finance and the rest of mankind.
Other Wound Healing Companies
|
Name |
Symbol |
Name |
Symbol |
|
Abbott Labs |
ABT |
Gliatech |
GLIA |
|
Advance Tissue Sciences |
ATIS |
Healthpoint |
n.a. |
|
Beiersdorf . Jobst |
n.a. |
Human Genome Sciences |
HGSI |
|
Bertek |
n.a |
Integra Lifesciences Corp. |
IART |
|
Biomet Inc. |
BMET |
Johnson & Johnson |
JNJ |
|
Bio-Technology General Corp. |
BTGC |
LifeCell |
LIFC |
|
Carrington Laboratories |
CARN |
Marel Corp. |
n.a. |
|
Cellegy Pharmaceuticals |
CLGY |
Novartis |
NVS |
|
Chiron Corp. |
CHIR |
Organogenesis |
ORG |
|
Chrysalis Biotechnology, Inc. |
n.a. |
Ortho McNeil Pharmaceuticals |
JNJ |
|
Coloplast |
n.a. |
Ortec International |
ORTC |
|
Convatec (sub.of Bristol Myers Squibb) |
BMS |
Protein Polymer Technologies |
PPTI |
|
Creative BioMolecules |
CBMI |
SangStat Medical |
SANG |
|
CryoLife |
CRY |
Smith & Nephew |
SNN |
|
Derma Sciences, Inc. |
DSCI |
Theratechnologies |
n.a. |
|
Dow Hickham Pharmaceuticals |
n.a. |
3M |
MMM |
|
Dumex Medical |
n.a. |
Westaim Biomedical |
n.a. |
|
Genzyme Tissue Repair |
GZTR |
|
|
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SELECTED FINANCIAL DATA
(in thousands, except per share amounts)
The following table summarizes certain selected financial data. The selected data is derived from, and is qualified by reference to, our financial statements.
|
Year Ended January 31, |
2000 |
1999 |
1998 |
1997 |
1996 |
|
CONSOLIDATED STATEMENTS OF INCOME (LOSS): |
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
Net sales |
$3,544 |
$4,556 |
$3,389 |
$3,786 |
$2,528 |
|
Royalties |
3,077 |
2,506 |
2,436 |
2,089 |
1,920 |
| |
6,621 |
7,062 |
5,825 |
5,875 |
4,448 |
|
Costs and expenses: |
|
|
|
|
|
|
Cost of sales |
2,080 |
2,164 |
1,665 |
1,700 |
1,179 |
|
General and administrative |
2,972 |
1,776 |
1,527 |
1,512 |
1,771 |
|
Research and Development |
1,659 |
2,050 |
1,905 |
1,583 |
1,822 |
|
Other |
200 |
87 |
- |
- |
500 |
| |
6,911 |
6,077 |
5,097 |
4,795 |
5,272 |
|
Income (loss) from operations |
(290) |
985 |
728 |
1,080 |
(824) |
|
Investment income - net |
158 |
435 |
506 |
384 |
515 |
|
Income (loss) before taxes |
(142) |
1,379 |
1,200 |
1,426 |
(308) |
|
Credit (provision) for income taxes |
302 |
(139) |
(364) |
(300) |
(40) |
|
Net income (loss) |
$160 |
$1,240 |
$836 |
$1,126 |
$(348) |
|
Net income (loss) per share - basic and diluted |
$.04 |
$0.26 |
$0.17 |
$0.23 |
$(0.07) |
|
Weighted average shares outstanding |
4,540 |
4,714 |
4,839 |
4,925 |
4,882 |
| |
|
|
|
|
|
|
January 31, |
2000 |
1999 |
1998 |
1997 |
1996 |
|
CONSOLIDATED BALANCE SHEETS: |
|
|
|
|
|
|
Cash and investments |
$5,172 |
$7,189 |
$6,775 |
$5,607 |
$4,684 |
|
Working capital |
7,815 |
8,993 |
8,460 |
7,512 |
6,373 |
|
Total assets |
10,762 |
11,377 |
11,199 |
9,906 |
9,267 |
|
Total liabilities |
1,849 |
1,707 |
1,779 |
924 |
1,422 |
|
Retained earnings |
7,827 |
7,667 |
6,427 |
5,592 |
4,466 |
|
Stockholders' equity |
8,911 |
9,670 |
9,419 |
8,892 |
7,844 |
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Information provided by the Company or statements contained in this report or made by its employees, if not historical, are forward looking information, which involve uncertainties and risk. The Company cautions readers that important factors may affect the Company's actual results and could cause such results to differ materially from forward-looking statements made by or on behalf of the Company. Such factors include, but are not limited to, government regulation, the ability of the Company to complete the renovation of its production facilities and comply with the Form 483 and FDA Letter, the Company's estimate that its inventory of product is sufficient until the renovated facilities can produce again, changing market conditions, the impact of competitive products and pricing, the timely development and approval by the FDA and foreign health authorities of potential products, market acceptance of the Company's potential products, and other risks detailed herein and in other filings the Company makes with the Securities and Exchange Commission. Further, any forward looking statement or statements speak only as of the date on which such statements were made, and the Company undertakes no obligation to update any forward looking statement or statements to reflect events or circumstances after the date on which such statement or statements were made.
GENERAL
BioSpecifics Technologies Corp. is a biopharmaceutical company with a focus on wound healing and tissue remodeling. It has pioneered the application of collagenase for several disease conditions, notably dermal ulcers, pressure sores (bedsores), and second and third degree burns. BioSpecifics produces Collagenase ABC, the essential ingredient in the prescription drug Collagenase Santyl® Ointment sold in North America, and under other trademarks abroad.
BioSpecifics has two injectable Collagenase ABC derived product candidates in clinical trials. The first product is for Dupuytren's disease, a deformity of the hand where fingers contract toward the palm, often resulting in functional disability. The other product is for Peyronie's disease, a deformity of the penis. Currently, the only proven therapy for these diseases is surgery. Both product candidates have "Orphan Drug" designation from the FDA.
RESULTS OF OPERATIONS
REVENUES
Net product sales were $3,543,563 and $4,556,033 for the fiscal years ended January 31, 2000 and 1999, respectively, a decrease in fiscal 2000 of $1,012,470 or 22%. Sales of the product, Collagenase ABC, to KPC decreased by 22% and sales to the Company's customer in Brazil decreased by 30%, due to timing of deliveries. At January 31, 2000 the Company had approximately $380,000 of deliveries in arrears due to the product not being ready for delivery. The remaining decrease represents reduction in the volume of sales orders, which the Company views as temporary.
Royalties earned on Collagenase Santyl® ointment sales by KPC were $2,947,302 and $2,505,851 for the fiscal years ended January 31, 2000 and 1999, respectively, representing an increase in fiscal 2000 of $441,451 or 18%. During the fourth quarter of fiscal 2000, KPC initiated a sales promotion for Santyl®
. Wholesalers responded by buying at record levels, as reported to the Company by KPC.
The Company recorded a $130,000 license fee in the fiscal year ended January 31, 2000 as a result of the reversal of revenue that was deferred in prior years, under a license agreement that was terminated. In fiscal 1999, there was no licensing activity. See "Collagenase ABC - Agreements for the Distribution of Collagenase ABC".
COST OF SALES
Cost of sales was $2,080,000 and $2,163,695 respectively, in fiscal 2000 and 1999, a decrease in fiscal 2000 of $83,695 or 4%. The gross profit percentage decreased by 10 percentage points in fiscal 2000 (42%) versus fiscal 1999 (52%) because certain of the Company. s fixed production costs were absorbed into a lower number of units sold in fiscal 2000 as compared to fiscal 1999.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses ("SG&A") were $2,971,635 and $1,776,293 respectively, in fiscal 2000 and 1999, an increase in fiscal 2000 of $1,195,342, or 67%. Since May 1999, the Company engaged consultants to assist in responding to FDA observations from FDA inspectors made on FDA. s Form 483 ("483. s), the cost of which is included in SG&A. Additionally, production laboratory personnel were highly involved in the response effort as well, resulting in some level of production inactivity. Therefore, some of their employment costs are included in SG&A in fiscal 2000. The Company anticipates that it will continue to incur considerable consultation costs and the involvement of its laboratory personnel in responding to the 483s through the foreseeable future, although such involvement could decrease in future periods. See "Liquidity, Capital Resources, and Changes in Financial Condition".
RESEARCH AND DEVELOPMENT
Research and development expenses ("R&D") were $1,659,087 and $2,050,049 respectively, in fiscal 2000 and 1999, a decrease in fiscal 2000 of $390,962 or 19%. The Company is currently sponsoring Phase 2 clinical trials of injectable collagenase for Dupuytren's disease and a Phase 1 trial for Peyronie's disease, both of which have been granted Orphan Drug status by the FDA. Internal R&D costs have declined as development moves to clinics. Also, as described above, laboratory personnel have been involved in the response effort to the 483s, including R&D personnel, whose costs have been partially allocated to SG&A. The Company anticipates that there will be continued involvement of its R&D personnel in responding to the 483s, although such involvement should decrease in future periods.
OTHER EXPENSES
Capital asset abandonment charges were $200,000 and $87,250 respectively, in fiscal 2000 and 1999. In fiscal 2000, the Company wrote off certain production assets as a result of the renovation at the Curacao facility that began March 1, 2000. In fiscal 1999, the Company also wrote off certain production assets.
OTHER INCOME, NET
Other income, net was $158,128 and $434,911 respectively, in fiscal 2000 and 1999, a decrease in fiscal 2000 of $276,783. The decrease was due to the decrease in market value of the Company. s investments in equity securities held as trading securities.
INCOME TAXES
The Company's benefit (provision) for income taxes was $302,000 and $(139,300) respectively in fiscal 2000 and 1999. The fiscal 2000 benefit represents an increase in deferred tax assets, principally relating to orphan drug tax credits, offset by current tax liabilities of $36,000 for federal, state and foreign income taxes. The fiscal 1999 provision represents current taxes of $309,100 on taxable earnings, offset by a $109,800 increase in deferred tax assets, principally related to orphan drug tax credits and other credits. The principal reason for the difference between the United States Federal statutory tax rate of 34% and the Company's effective tax rate is due to recognition of orphan drug and other tax credits available to the Company as a result of its qualified research and development expenditures, and a 2% tax rate applicable to pre-tax earnings from operations of the Company's subsidiary in Curacao, state income tax benefit, and non-deductible items. The 2% tax rate granted to the Company. s subsidiary by the Curacao government (the "tax holiday") expired December 31, 1999. The Company has requested an extension of the tax holiday but has not yet been informed of the Curacao government. s decision. If the tax holiday is not extended, the tax rate applicable to pre-tax earnings from operations could go up to 30%. There can be no assurance the Curacao government will extend the tax holiday.
LIQUIDITY, CAPITAL RESOURCES AND FINANCIAL CONDITION
The Company's primary source of working capital is from operations, which includes sales of product, royalties, and periodic license fees. At January 31, 2000, the Company had working capital of approximately $7.8 million which includes cash and cash equivalents, and marketable securities of approximately $5.2 million. The principal source of cash in fiscal 2000 was approximately $909,000 from operating activities. This was offset by approximately $897,000 million used to purchase plant, property and equipment and approximately $700,000 for investing activities.
The Company's manufacturing facilities in New York and Curacao are registered with, and licensed by, the FDA. In January and March of 1999, ABC was issued a List of Inspectional Observations on FDA Form 483 (the "Form 483") from FDA inspectors, citing numerous inspectional observations relating to deficiencies in the Company's compliance with FDA regulations at its Lynbrook, New York and Curacao, Netherlands Antilles facilities. In addition, on May 10, 1999, ABC received a letter from the FDA (the "FDA Letter") citing certain inspectional observations relating to deficiencies at its Lynbrook, New York facility, Curacao, Netherlands Antilles facility, and contract manufacturing facility at KPC. The FDA Letter advised ABC that the FDA will institute formal proceedings to revoke the ABC's Establishment License to manufacture Collagenase Santyl® Ointment unless ABC provided satisfactory assurances to the FDA, including submitting to the FDA a comprehensive plan of corrective action to address the observations listed in the Form 483 and the FDA Letter, and otherwise demonstrate compliance with applicable regulatory requirements. The Company has provided the FDA with a plan of corrective action and has had a number of meetings with the FDA to discuss the plan of corrective action and the renovation of the Curacao production facility. ABC has submitted a number of periodic updates to the FDA on progress under the plan. ABC hired outside consultants and employed additional staff for its reorganized Quality Unit. The Company has retained an outside consulting firm with expertise in FDA regulatory compliance matters to assist in developing and implementing the corrective action plan.
The Company has produced the enzyme Collagenase ABC (the "enzyme"), the active ingredient in Collagenase Santyl® Ointment, at its Lynbrook and Curacao facilities. The Company started extensive renovations at the Curacao facility in March 2000, which resulted in the suspension of enzyme production there. The Company voluntarily suspended the production of the enzyme at the Lynbrook facility and is in the process of planning renovations for that facility, although final stage production and testing continues there. As a result of the renovation at the Curacao facility that began March 1, 2000, the Company wrote off production assets with a carrying value of approximately $200,000 for the year ended January 31, 2000.
The Company invested approximately $1.1 in new equipment through April 2000 and will invest at least an additional $2.2 million to $2.6 million in new equipment and renovations at its Curacao, Netherlands Antilles and Lynbrook, New York facilities over the next twelve months. This investment is intended to address matters described in the Form 483 and the FDA Letter, as well as to modernize and ensure the efficiency of the Company. s production process. Through January 31, 2000 the Company had spent approximately $1,000,000 for professional fees and other expenses in connection with the remediation of the FDA's deficiency observations, and estimates it could spend an additional $600,000 in fees in connection with the remediation of the FDA's deficiency observations.
A supplement (the "supplement. ) to ABC. s Establishment License will have to be approved by the FDA after renovation before any additional enzyme produced at the Curacao facility can be used by KPC. As part of the approval process for the supplement, the FDA may conduct an inspection of the Curacao facility. The Company estimates that in the best-case scenario, either one or both the Curacao and Lynbrook facilities could be back in production by the fourth quarter of calendar 2000 and have enzyme available for KPC during the third quarter of calendar 2001. Due to the uncertainty of the FDA approval process however, there can be no assurances that target dates will be met. In anticipation of the renovation and suspension of manufacturing operations, the Company accumulated an inventory of the product which it estimates KPC can use to contract manufacture Collagenase Santyl® Ointment into the second quarter of calendar 2001. In the opinion of the Company, this would permit KPC to supply S&N with the ointment through the second quarter of calendar 2002.
Although the Company believes that it has made considerable progress in addressing the FDA concerns addressed in the Form 483 and the FDA Letter, if the Company is unable to further address these matters in a timely manner, there may be delays in the delivery of the product produced in the renovated facilities to KPC for use to contract manufacture Collagenase Santyl® Ointment.
Such delays could have a material adverse effect on the Company. s future operating results.
With approximately $7.8 million of working capital, including approximately $5.2 million in cash and marketable securities at January 31, 2000, the Company believes it has adequate financial resources needed to take corrective action and continue its operations.
Year 2000
The Company experienced no difficulties related to preparing its computer systems and hardware to contend with the issues related to the year 2000 ("Year 2000"). The Company continues to monitor its computer systems and hardware.
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PRICE RANGE OF COMMON STOCK
The common stock of BioSpecifics trades on the Nasdaq National Market tier of the Nasdaq Stock Market under the Symbol BSTC. As of January 31, 2000, BioSpecifics had 4,529,766 shares of common stock outstanding. The quarterly range of high and low closing sales prices of BioSpecifics common stock, as reported on the Nasdaq National Market, are shown below.
| Year ended January 31, 2000 |
High |
Low |
| 1st Quarter |
$4.00 |
$3.31 |
| 2nd Quarter |
$3.75 |
$2.94 |
| 3rd Quarter |
$2.94 |
$1.88 |
| 4th Quarter |
$2.50 |
$1.63 |
| |
| Year ended January 31, 1999 |
High |
Low |
| 1st Quarter |
$8.25 |
$4.50 |
| 2nd Quarter |
$6.13 |
$4.50 |
| 3rd Quarter |
$6.25 |
$4.13 |
| 4th Quarter |
$5.00 |
$3.25 |
Dividend Policy
It is BioSpecifics' current policy to retain earnings to finance the growth and development of its business. Any payment of cash dividends in the future will depend upon the financial condition, capital requirements and earnings of BioSpecifics as well as such other factors as the Board of Directors may deem relevant. BioSpecifics' Board of Directors has authorized two buyback programs for the repurchase of a total of 600,000 shares of common stock. Through January 31, 2000, a total of 361,380 shares have been repurchased at an average price of $5.29 per share.
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CONSOLIDATED BALANCE SHEET
January 31, 2000
Assets
| Current assets: |
|
| Cash and cash equivalents |
$4,221,447 |
| Marketable securities |
951,398 |
| Accounts receivable |
1,484,326 |
| Inventories |
1,779,531 |
| Deferred tax assets, net |
686,206 |
| Prepaid expenses and other current assets |
268,942 |
| Total current assets |
9,391,850 |
| |
| Property, plant and equipment, net |
1,221,337 |
| Due from related party |
119,780 |
| Other assets |
28,812 |
| |
|
| |
$10,761,779 |
| |
|
|
Liabilities and Stockholders' Equity |
| Current liabilities: |
|
| Accounts payable and accrued expenses |
$ 1,516,915 |
| Notes payable to related parties |
13,010 |
| Income taxes payable |
2,342 |
| Deferred revenue |
45,000 |
| Total current liabilities |
1,577,267 |
| |
|
| Commitments and contingencies |
|
| |
|
| Minority interest in subsidiaries |
271,448 |
| |
|
| Stockholders' equity: |
|
| Series A Preferred stock, $.50 par value, 700,000 shares authorized; none outstanding |
- |
| Common stock, $.001 par value; 10,000,000 shares authorized; 4,891,146 shares issued |
4,891 |
| Additional paid-in capital |
3,734,375 |
| Retained earnings |
7,826,810 |
| Accumulated other comprehensive loss |
7,412 |
| |
11,573,488 |
| Less: Treasury stock, 361,380 shares at cost |
(1,911,237) |
| Notes receivable from chairman |
(750,815) |
| Total stockholders' equity |
8,911,436 |
| |
$10,761,779 |
| See accompanying notes to consolidated financial statements. |
|
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CONSOLIDATED STATEMENTS OF INCOME
Years ended January 31, 2000 and 1999
|
2000 |
1999 |
| Revenues: |
|
|
| Net sales |
$ 3,543,563 |
4,556,033 |
| Royalties |
2,947,302 |
2,505,851 |
| License fees |
130,000 |
- |
|
6,620,865 |
7,061,884 |
| Costs and expenses: |
|
|
| Cost of sales |
2,080,000 |
2,163,695 |
| Selling, general and administrative |
2,971,635 |
1,776,293 |
| Research and development |
1,659,087 |
2,050,049 |
| Capital asset abandonment charge |
200,000 |
87,250 |
| |
6,910,722 |
6,077,287 |
| |
|
|
| Income (loss) from operations |
(289,857) |
984,597 |
| |
|
|
| Other income (expense): |
|
|
| Investment and other income |
163,049 |
441,894 |
| Interest expense |
(4,921) |
(6,983) |
| |
158,128 |
434,911 |
| |
|
|
Income (loss) before provision for
income taxes and minority interest |
(131,729) |
1,419,508 |
| Benefit (provision) for income taxes |
302,000 |
(139,300) |
| Income before minority interest |
170,271 |
1,280,208 |
| Minority interest in net income of subsidiaries |
10,600 |
40,500 |
| Net income |
$159,671 |
1,239,708 |
| |
|
|
| Basic net income per share |
$.04 |
$.26 |
| |
|
|
| Weighted-average common shares outstanding |
4,540,341 |
4,713,690 |
| |
|
|
| Diluted net income per common share |
$.04 |
$.26 |
| |
|
|
Weighted-average common and dilutive
potential common shares outstanding |
4,542,028 |
4,800,406 |
| See accompanying notes to consolidated financial statements. |
|
|
|
