DUSA Pharmaceuticals Inc. (DUSA) filed Quarterly Report for the period ended 2009-03-31.
DUSA Pharmaceuticals Inc. is a pharmaceutical company developing drugs in combination with light devices to treat or detect a variety of conditions in processes known as photodynamic therapy or photodetection. They are engaged primarily in the research and development of our first drug the Levulan brand of aminolevulinic acid HCl with light for use in a broad range of medical conditions. DUSA Pharmaceuticals Inc. has a market cap of $34.4 million; its shares were traded at around $1.43 with and P/S ratio of 1.2.
Highlight of Business Operations:
On August 12, 2008, we entered into a worldwide non-exclusive patent License Agreement to our patent covering Nicomide®, or License Agreement, with River’s Edge Pharmaceuticals, LLC, or River’s Edge, and an amendment to our Settlement Agreement with River’s Edge regarding earlier litigation. See Note 15 of the Notes to the Condensed Consolidated Financial Statements. The amendment to the Settlement Agreement allowed River’s Edge to manufacture and market a prescription product that could be substitutable for Nicomide® pursuant to the terms of the License Agreement and changes certain payment obligations of River’s Edge for sales of its substitutable product. In consideration for granting the license, we were paid a share of the net revenues, as defined in the License Agreement, of River’s Edge’s licensed product sales.® In April 2009, we and River’s Edge entered into an Amendment to the License Agreement, or License Amendment. The License Amendment grants River’s Edge an exclusive license to U.S. Patent, No. 6,979,468, and a license to use all know-how and the trademark associated with the Licensed Products worldwide. Under the License Amendment, we are required to transfer all of our rights, title and interest in and to DUSA’s patent, know-how and trademark relating to the Licensed Products (but not the copyright registration relating to product labeling) to River’s Edge upon our receipt of $5,000,000. Of the $5,000,000, River’s Edge is required to make a minimum guaranteed payment to us of $2,600,000, in thirteen monthly installments of $200,000, subject to reduction under certain conditions, and pay additional consideration of $2,400,000 payable over time based on a share of River’s Edge’s net revenues as defined in the License Amendment. The License Agreement, as amended, has a term of 30 months, subject to a further extension under certain circumstances to 48 months, and may be terminated early by River’s Edge on 30 days’ prior written notice. Under the License Agreement, River’s Edge has assumed all regulatory responsibilities for the Licensed Products. If River’s Edge terminates the License Agreement prior to the payment of the $5,000,000, all of the rights and licenses granted by us to River’s Edge will revert to us.
For the three-month period ended March 31, 2009, Kerastick® revenues were $6,077,000, representing an increase of $723,000 or 13%, over the comparable 2008 total of $5,354,000. Kerastick® unit sales to end-users for the three-month period ended March 31, 2009 were 51,947, including 46,662 sold in the United States, 1,500 sold in Canada and 2,274 sold in Korea. Kerastick® units sold in the three-month period ended March 31, 2008 were 52,110, including 43,296 sold in the United States, 2,100 sold in Canada and 6,036 sold in Korea. Our average net selling price for the Kerastick® increased to $115.36 per unit for the three-month period ended March 31, 2009 from $101.33 per unit in 2008. Our average net selling price for the Kerastick® in the US increased from $110.26 per unit in 2008 to $121.83 per unit in 2009. The increase in 2009 Kerastick® revenues was driven mainly by an increase in both sales volumes and average net selling price in the United States, partially offset by a decrease in international Kerastick® revenues. The decrease in Korea is attributable to the purchase of launch quantities in the 2008 period.
For the three-month period ended March 31, 2009, BLU-U® revenues were $642,000, representing a $166,000 or a 35% increase, over the comparable 2008 total of $476,000. The increase in 2009 BLU-U® revenues was driven by increased overall sales volumes, offset in part by a decrease in our average selling price. In the three-month period ended March 31, 2009, there were 81 units sold, versus 56 units in 2008. All of the units sold in both years were sold in the United States. Our average net selling price for the BLU-U® decreased to $7,589 for the three-month period ended March 31, 2009 from $8,245 for 2008. Our BLU-U® evaluation program allows customers to take delivery for a limited number of BLU-U® units for a period of up to four months for private practitioners and up to
MARKETING AND SALES COSTS — Marketing and sales costs for the three-month period ended March 31, 2009 were $3,410,000 as compared to $3,057,000 for the comparable 2008 period. These costs consisted primarily of expenses such as salaries and benefits for the marketing and sales staff, commissions, and related support expenses such as travel, and telephone, totaling $2,309,000 for the three-month period ended March 31, 2009, compared to $2,057,000 in the comparable 2008 period. The increase in this category is
NET GAIN FROM SETTLEMENT OF LITIGATION — During the fourth quarter of 2007, we entered into a Settlement Agreement and Mutual Release with River’s Edge Pharmaceuticals, LLC. Under the terms of the Settlement Agreement, River’s Edge made a lump-sum settlement payment to us in the amount of $425,000 for damages and paid to DUSA $25.00 for every prescription of NIC 750 above 5,000 prescriptions that were substituted for Nicomide® from September 30, 2007 through June 30, 2008. During the three-month periods ended March 31, 2009 and 2008 the net gain from settlement of litigation was $0 and $236,000, respectively. These payments under the Settlement Agreement ceased due to an amendment effective as of July 3, 2008. See Note 15 to the Condensed Consolidated Financial Statements.
At March 31, 2009, we had approximately $17,911,000 of total liquid assets, comprised of $3,671,000 of cash and cash equivalents and marketable securities available-for-sale totaling $14,240,000. We believe that our liquidity will be sufficient to meet our cash requirements for at least the next twelve months based on our projections of revenues and spending over that timeframe. We have invested our funds in liquid investments, so that we will have ready access to these cash reserves, as needed, for the funding of development plans on a short-term and long-term basis. As of March 31, 2009, these securities had a weighted average yield of 2.98% and maturity dates ranging from May 2009 to January 2013. Our net cash used in operations for the three-month period ended March 31, 2009 was $841,000, versus $5,000 provided by operations in the comparable prior year period. The year over year decrease in cash from operations is primarily attributable to an increase in our net loss as well as a decrease in payments received from our international distributor partners primarily from a one-time milestone payment and purchase of launch quantities and the absence of a bonus payout in 2008. As of March 31, 2009 working capital (total current assets minus total current liabilities) was $18,464,000, as compared to $20,278,000 as of December 31, 2008. Total current assets decreased by $1,984,000 during the three-month period ended March 31, 2009, due primarily to decreases in our marketable securities, accounts receivable, inventory and prepaid and other current asset balances. Total current liabilities decreased by $170,000 during the same period due primarily to a decrease in accrued compensation, partially offset by an increase in other accrued expenses and the current portion of deferred revenues associated with our international distributions agreements. In response to the instability in the global financial markets, we regularly review our marketable securities holdings, and have reduced or avoided investing in securities deemed to have increased risk. We do not hold any asset-backed or auction rate securities.
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