Sagent Pharmaceuticals Inc (fka SGNT)

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Sagent Pharmaceuticals Reports Fourth-Quarter and Full-Year 2014 Results

Last update: 19/02/2015 7:00:06 am

Sagent Pharmaceuticals Reports Fourth Quarter and Full Year 2014 Results

Record quarterly revenue primarily driven by new product launches and Oct. 1 addition of Omega Laboratories

Full year results exceed updated Fiscal Year 2014 earnings guidance

SCHAUMBURG, Ill., Feb. 19, 2015 (GLOBE NEWSWIRE) -- Sagent Pharmaceuticals, Inc. (Nasdaq:SGNT), a leader of specialty pharmaceutical products with a specific emphasis on the injectable market, today announced financial results for the fourth quarter and fiscal year ended December 31, 2014.

Fourth Quarter 2014 Highlights
-- Revenue increased 32% to $84.4 million driven by products launched in the
last twelve months and the October 1, 2014 acquisition of Omega
Laboratories Limited ("Omega");

-- Reported gross profit increased 41% to $24.4 million, or 28.9% of net
revenue, inclusive of $2.1 million of incremental expense due to purchase
accounting revaluation of Omega inventory;

-- Adjusted Gross Profit1 increased 50% to $27.2 million, or 32.2% of net
revenue;

-- Net tax benefit of $25.4 million from the release of domestic deferred
tax valuation allowance based upon strength of current and anticipated
future financial performance;

-- Net income of $30.0 million, or diluted earnings per share of $0.91;

-- Acquired Omega, a market leading specialty pharmaceutical company based
in Montreal, Canada for approximately $83 million on October 1, 2014; and

-- Entered into an $80.0 million asset based revolving loan facility with
JPMorgan Chase on October 31, 2014.

"We are pleased to report another quarter of record revenue and strong earnings results, which contributed to 2014 full year financial performance that exceeded our expectations," said Jeffrey M. Yordon, chief executive officer and chairman of the board of Sagent. "2014 was a year of significant progress for Sagent. We have leveraged our strong financial performance to invest in our market leading product pipeline and geographic expansion through the acquisition of Omega and continued investment in Sagent (China) Pharmaceuticals ("SCP"). The strong year over year growth is a direct result of our commitment to execute against our key strategic initiatives to build a long-term, profitable business through a combination of organic development and strategic acquisition activity."

Financial Results for the Quarter Ended December 31, 2014

Net revenue for the fourth quarter of 2014 was $84.4 million, an increase of $20.3 million, or 32%, compared to $64.1 million in the fourth quarter of 2013. The increase was primarily driven by $10.0 million in revenue from the launch of 17 new codes or presentations of seven new products since December 2013 and the annualization of propofol, which launched in November 2013, and $8.6 million from the addition of Omega on October 1, 2014. Gross profit for the fourth quarter of 2014 was $24.4 million, or 28.9% of net revenue, inclusive of $2.1 million of incremental expense due to the purchase accounting revaluation of Omega inventory, compared to $17.3 million, or 26.9% of net revenue, in the fourth quarter of 2013. Adjusted gross profit for the fourth quarter of 2014 was $27.2 million, or 32.2% of net revenue, compared to $18.1 million, or 28.2% of net revenue in the fourth quarter of 2013.

Total operating expenses for the fourth quarter of 2014 were $19.4 million, an increase of $7.1 million, compared to $12.3 million for the same period in 2013. Included in the fourth quarter of 2014 were $2.4 million of operating expenses for Omega. Product development expense totaled $9.1 million, an increase of $4.4 million, or 95% compared to $4.6 million in the fourth quarter of 2013. Selling, general and administrative ("SG&A") expenses for the fourth quarter of 2014 totaled $11.6 million compared to $10.2 million in the fourth quarter of 2013, with the increase due primarily to $1.5 million of costs associated with Omega. The equity in net income of joint ventures for the fourth quarter of 2014 totaled $1.5 million compared to $2.5 million in the fourth quarter of 2013. The decline is due predominantly to lower non-cash accounting gains on our acquisition of certain products from our Sagent Agila joint venture in 2014 than 2013.

Adjusted EBITDA for the fourth quarter of 2014 was $8.7 million, an increase of $1.6 million, or 22% compared to $7.1 million in the fourth quarter of 2013.(2)

Income taxes were a $26.4 million benefit in the fourth quarter of 2014 compared to $0.9 million of expense in the fourth quarter of 2013. During the fourth quarter of 2014 we concluded that the valuation allowance previously recorded against our net domestic deferred tax assets was no longer required, based on our recent income and projections of sustained profitability. As a result, we recorded a non-recurring net income tax benefit of approximately $25.4 million during the fourth quarter. In addition, in the fourth quarter of 2014 Omega had a $0.7 million income tax benefit.

Net income for the fourth quarter of 2014 was $30.0 million, or $0.91 per diluted share, compared to net income for the fourth quarter of 2013 of $3.6 million, or $0.11 per diluted share. Included in the fourth quarter of 2014 is a $2.1 million loss associated with Omega, inclusive of a $2.5 million net impact of purchase accounting.

Financial Results for the Fiscal Year Ended December 31, 2014

Net revenue for the fiscal year ended December 31, 2014 was $289.8 million, an increase of $45.0 million, or 18%, compared to $244.8 million in fiscal 2013. Gross profit for fiscal 2014 was $86.2 million, or 29.7% of net revenue, compared to $77.5 million, or 31.7% of net revenue, in fiscal 2013. Adjusted gross profit in fiscal 2014 was $91.4 million, or 31.5% of net revenue, compared to $80.2 million, or 32.8% of net revenue in 2013.

Total operating expenses for the fiscal year ended December 31, 2014 were $67.1 million, an increase of $13.0 million, compared with $54.1 million for the same period in 2013. Product development expense for fiscal 2014 totaled $26.8 million compared to $20.3 million in 2013. SG&A expenses for fiscal 2014 totaled $43.2 million compared to $36.2 million in the prior year. Acquisition related costs for the year ended December 31, 2014 totaled $1.1 million. The equity in net income of joint ventures for fiscal 2014 totaled $4.0 million compared to $2.4 million for 2013.

Other operating activity for 2013 included the receipt of a $5.0 million one-time termination fee related to the amendment of the company's Manufacturing and Supply Agreement with Actavis. In addition, in conjunction with the completion of the acquisition of our joint venture partner's 50% interest in SCP, our previously held equity interest was remeasured to fair value, resulting in a gain of $2.9 million reported as gain on previously held equity interest.

Adjusted EBITDA for the fiscal year ended December 31, 2014 was $32.6 million, a decline of $8.1 million, or 20% compared to $40.8 million in 2013. The decline is primarily driven by the non-recurring $5.0 million termination fee recognized in 2013.

Income taxes were a $23.6 million benefit for the fiscal year ended December 31, 2014 compared to $0.9 million of expense in 2013.

Net income for the fiscal year ended December 31, 2014 was $40.1 million, or $1.22 per diluted share compared to a net income of $29.6 million, or $0.99 per diluted share for 2013.

Liquidity

Our cash and cash equivalents and short term investments at December 31, 2014 were $74.1 million, our working capital totaled $112.9 million and outstanding borrowings were $8.0 million.

Fiscal 2015 Guidance

Yordon concluded, "Consistent with our recent guidance disclosures, our growth outlook is influenced by GPO contract renewals, product pricing, the pace of FDA approvals and associated product launches and to a lesser degree, market shortages. We see continued opportunity with private label programs in which we obtain slightly favorable pricing for a guarantee of supply and government contracting opportunities. We continue to supplement our current pipeline with product sourcing initiatives, investment in SCP and an increased focus on business development activities."

Sagent's business plan for fiscal 2015 currently anticipates:
-- Net revenue for the year to be in the range of $325 to $375 million;

-- Adjusted Gross Profit as a percentage of net revenue in the range of 27%
to 31%; and

-- Operating expenses in the range of $80 to $90 million.

Based upon the above assumptions, the Company anticipates Adjusted EBITDA in the range of $20 to $50 million.

(1) Adjusted Gross Profit is a non-GAAP measure. Please see discussion of Non-GAAP Financial Measures at the end of this press release.

(2) Adjusted EBITDA is a non-GAAP measure. Please see discussion of Non-GAAP Financial Measures at the end of this press release.

Conference Call Information

Sagent will host its 2014 fourth quarter and fiscal year end conference call today beginning at 9:00 a.m. Eastern Standard Time. Please call 877-293-5456 from the United States or [phone] internationally. In addition, the live conference call is being webcast and can be accessed on the "Events and Presentations" page of the "Investor Relations" section f the Company's website, www.sagentpharma.com. A replay also will be available for 14 days following the live call, and may be accessed via the Company's website or by calling 855-859-2056, passcode 85446416.

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February 19, 2015 07:00 ET (12:00 GMT)