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20.02.2001 – 14:01

Heska Corporation

Heska Corporation reports 2000 fourth quarter and year-end results
Company delivers record annual revenue, improved margins and reduced operating expenses

    Fort Collins, Colorado (ots-PRNewswire) - Heska Corporation
(Nasdaq: HSKA), a research and development based biotechnology
company focusing on companion animal health care products, today
reported financial results for the fourth quarter and year ended
December 31, 2000.
    
    Photo:  http://www.newscom.com/cgi-bin/prnh/20000622/HESKALOGO
    
    For the year ended December 31, 2000, product revenue from the
Company's continuing core business increased 26%.  This increase was
attributable to strong growth in the Company's veterinary medical
instrument products and to increases in its proprietary
pharmaceuticals, vaccines and diagnostics.  The Company's Diamond
Animal Health subsidiary also posted solid revenue growth during the
year.  Total revenue reported for the year increased by approximately
3% to $52.7 million, as compared to $51.2 million in 1999.  The total
reported revenue included approximately $3.2 million in 2000 and
$13.4 million in 1999 from businesses sold and non-strategic product
lines discontinued during 2000.
    
    The Company's net loss for the year ended December 31, 2000 was
$21.9 million, or a basic net loss of $0.65 per common share,
compared with a net loss of $35.8 million, or a basic net loss of
$1.31 per common share for the year ended December 31, 1999.  The 39%
improvement in the Company's net loss during 2000 was due to a
combination of increased revenue, higher gross profit margins and
reduced operating expenses.  Annual results included non-recurring
costs and expenses of approximately $0.8 million in 2000 and $3.8
million in 1999 related to the Company's restructuring activities and
the write-down of certain assets.
    
    In the fourth quarter of 2000, product revenue from the Company's
continuing core business declined 2%.  This was primarily
attributable to soft fourth quarter sales at the Company's Diamond
Animal Health subsidiary, which were only partially offset by growth
in the Company's proprietary pharmaceuticals, vaccines and diagnostic
products and increases in veterinary medical instrumentation.  Total
revenue reported for the fourth quarter of 2000 declined by
approximately 20% to $11.4 million, as compared to $14.2 million in
1999.  The total reported revenue included approximately $2.6 million
in 1999 from businesses sold and non-strategic product lines
discontinued during 2000.
    
    The net loss for the fourth quarter of 2000 was sharply reduced to
$5.5 million, or a basic net loss of $0.16 per common share, compared
to a net loss of $12.7 million for the comparable quarter of 1999, or
a basic net loss of $0.44 per share.  Fourth quarter results included
non-recurring costs and expenses of approximately $0.4 million in
2000 and $2.6 million in 1999 related to the write-down of certain
assets.
    
    Robert Grieve, Heska's Chairman and Chief Executive Officer, said
"2000 was a year of solid progress for our business.  We achieved
significant improvement in all key financial metrics during the year.
Our revenue from our continuing core business grew at a 26% rate,
our gross profit margins on products sold improved by more than 5
full percentage points, our operating expenses declined by more than
$8.6 million and we generated an improvement in our bottom line of
nearly 40%.
    
    "We have also taken a number of actions to strengthen our
financial position.  First, we reduced the level of debt on our
balance sheet by approximately $7 million during 2000.  This means we
have paid off more than $12 million in debt during the past two
years.  In addition, in February 2001, we sold an additional 4.6
million shares of common stock in a private placement, which raised
an additional $5.7 million in gross proceeds for the Company.  This
further strengthened our balance sheet and increased our liquidity in
the first quarter of 2001.
    
    "We were pleased by the significant improvement in results from
our Diamond Animal Health subsidiary in 2000.  During 1999, we
initiated actions to discontinue contract manufacturing for third
parties of low margin human healthcare products at Diamond, resulting
in the loss of several million dollars of revenue.  During 2000,
Diamond was able to more than replace this lost revenue with vaccines
and biological products with much higher margins. While Diamond had a
soft fourth quarter as a result of orders which were canceled during
the quarter, the business has shown marked improvement during the
past year.  We believe that operating results at Diamond will
continue to improve in the future as they focus on higher margin
products and enhanced operating efficiencies.
    
    "In 2000, the Company also demonstrated significant progress in
research and development.  In clinical studies, our gene medicine for
canine cancer was shown to cause tumor regression.  An important
extension of our heartworm diagnostic line, Solo Step(TM) CH Batch
Test Strips, received regulatory approval and was launched early in
the year.  A clinic-based test for the rapid measurement of IgE
associated with allergy was developed in 2000, and we anticipate the
launch of this product later this year.  Other diagnostic products
for companion animals were developed and are progressing toward
product launches.  The Company's flea genomic sequencing research
yielded potential new molecular targets for insecticide discovery
efforts.  Our collaboration with Ralston Purina led to the launch of
a novel therapeutic diet for diabetic cats.  As another indication of
our progress, 39 new U.S. patents were issued during the year.  At
the end of 2000 our total portfolio contained 105 issued and 127
pending U.S. patents.
    
    "The Company also generated approximately $1.3 million of cash
from the outlicensing of certain technology with potential
applications in human medicine.  This activity is consistent with our
strategy of focusing our efforts on developing products for the
companion animal health market, and outlicensing the Company's
technology which has potential human health applications.  These
arrangements typically generate up-front payments, milestone payments
and future royalty streams to the Company if products are
successfully developed in the future.
    
    "At the beginning of the year, we said that we believed we had
taken the steps necessary to consolidate and streamline our business
in order to generate improved operating results in the future.  Now,
as we review the results achieved in 2000, we feel we have delivered
on that statement.  We finished 2000 with strong momentum in the
sales of several of our key products and look forward to 2001 with a
growing confidence in our future," said Dr. Grieve.
    
    Product Revenue Components
    
    Heska Corporation's total reported product revenues are derived
from the three components of its continuing core business, plus
revenues from sold businesses and discontinued products.  These
revenue components are as follows:
    
    Pharmaceuticals, Vaccines and Diagnostic Products (PVD).  This
group of products includes the Company's heartworm diagnostic
products, equine influenza vaccine, allergy products, feline vaccines
and other such products for the companion animal health market.
During the fourth quarter of 2000, PVD product revenue grew
approximately 12% over the comparable quarter of 1999, to $4.2
million.  For the full year of 2000, PVD product revenue grew by
approximately 10% over 1999 levels, to $14.0 million.
    
    Medical Instrumentation Products.  This group of products includes
all of the Company's veterinary medical instrumentation, as well as
the reagents, consumables, parts and accessories for these
instruments which are for the companion animal health market.  During
the fourth quarter of 2000, medical instrumentation product revenue
grew approximately 14% over the comparable quarter of 1999, to $3.7
million.  For the full year of 2000, medical instrumentation product
revenue grew by approximately 17% over 1999 levels, to $14.2 million.
    
    Diamond Animal Health Products.  Revenue reported from this group
of products is comprised principally of vaccines and other biological
products for cattle and other non-companion animals.  In addition,
Diamond also manufactures some of the PVD products marketed by Heska
and serves as the Company's primary product distribution center.
During the fourth quarter of 2000, Diamond's product revenue declined
by approximately 26% from the comparable quarter of 1999, to $3.2
million.  For the full year of 2000, Diamond's product revenue grew
by approximately 51% over 1999 levels, to $18.2 million.
    
    Sold Businesses and Discontinued Products.  During 1999 and 2000,
the Company engaged in a number of activities to restructure its
business, including the sale of Heska UK, effective January 31, 2000,
the sale of Center Laboratories, effective June 23, 2000, and the
elimination of unprofitable and non-strategic product lines.  The
total product revenue reported by the Company in 1999 and 2000
includes the revenue from these sold businesses prior to the dates of
sale, and from discontinued product lines prior to the date of
discontinuance.  The revenue attributable to these sold businesses
and discontinued products in the fourth quarter of 2000 and 1999 was
zero and approximately $2.6 million, respectively.  For the full year
of 2000 and 1999, revenue from sold businesses and discontinued
products amounted to approximately $3.2 million and $13.4 million,
respectively.
    
    Investor Conference Call
    
    Management will conduct a conference call on Tuesday, February
20th at 9:00 a.m. MST (11:00 a.m. EST) to discuss the fourth quarter
and full year earnings.  To participate you may dial in on the
telephone at (800) 218-9073; the conference call access number is
823927.  The conference call will also be broadcast live over the
Internet at http://www.heska.com.  Simply log on to the web at this
address at least ten minutes prior to the start of the call to
register, download and install any necessary audio software.  Replays
of the conference call will be available for playback until March 6,
2001.  The telephone replay may be accessed by dialing (800)
405-2236.  The webcast replay may be accessed from Heska's home page
at http://www.heska.com.
    
    About Heska
    
    Heska discovers, develops, manufactures and markets companion
animal health products, primarily for dogs, cats and horses.  Heska
has a sophisticated scientific effort devoted to applying
biotechnology to the large and growing companion animal health
market.  Heska's existing state-of-the-art allergy diagnostics and
immunotherapy products are sold to veterinarians for the testing and
treatment of thousands of allergic cats and dogs each year. Heska
also offers diagnostic and patient monitoring instrumentation and
supplies, as well as pharmaceuticals, vaccines and diagnostic
products in the United States and Europe to veterinarians, and
operates a USDA- and FDA- licensed facility, which manufactures
vaccines and pharmaceutical products.  For additional information on
Heska and its products, visit the company's web site at
www.heska.com.
    
    Forward Looking Statements
    
    With the exception of historical matters, this press release
contains express or implied forward-looking information about Heska's
products, markets, and results of operations, including implied
statements concerning the market acceptance of the products described
above, the anticipated growth rate of the business and the ability to
reduce operating losses going forward. Such forward-looking
statements involve known and unknown risks, uncertainties and other
factors which may cause actual results, performance or achievements
of Heska to be materially different from any future results,
performance or achievements expressed or implied by such
forward-looking statements.  Heska's achievement of these results may
be affected by many factors, including among others, the following:
delays in or failure to achieve market acceptance of products; delays
in or failure to achieve future product development; uncertainties
regarding our ability to raise sufficient cash to fund future
operations as needed; uncertainties regarding the outcome of research
and development efforts or the ability to successfully develop or
commercialize products in research and development, uncertainties
regarding the ability to receive required regulatory approvals in a
timely manner, if at all, uncertainties regarding the scope,
enforceability and validity of patents and proprietary rights, which
are subject to complex legal standards that vary from country to
country and are subject to interpretation by administrative agencies
and courts; quality of management; competition; changes in business
strategy or development plans; inability to obtain renewal or
continuation of contracts, or obtain exclusivity, to market, sell or
distribute products described herein; inability to manufacture,
market, sell or distribute products at currently projected costs and
the risks set forth in Heska's filings and future filings with the
Securities and Exchange Commission, including those set forth in
Heska's Annual Report on Form 10-K for the year ended December 31,
1999, its Quarterly Report on Form 10-Q for the quarter ended
September 30, 2000 and in the Form S-3 registration statement filed
on February 14, 2001.
    
    Financial Table Follows:
    
                                 Consolidated Statements of Operations
                                In Thousands, Except per Share Amounts
                                                            (unaudited)
    
                 Three Months Ended December 31, Year Ended December 31,
                                         2000          1999              2000            1999
    Revenues:
    Products, net         $11,016        $13,813         $49,549        $50,291
    Research, development
    and other                      346              367            3,126              885
    Total revenues         11,362         14,180          52,675         51,176
            
    Cost of goods sold    6,961         11,689          33,299         36,386
                                      4,401          2,491          19,376         14,790
    Operating expenses:
    Selling and marketing 3,302         4,526          14,788         15,073
    Research and development      
                                      3,523          4,565          14,929         17,042
    General and administrative  
                                      2,240          2,978            9,457         11,231
    Amortization of intangible  
    assets and deferred  
    compensation                 280              268                903          2,228
    Loss on sale of assets 355          2,592                204          2,593
    Restructuring expenses  --                --                435          1,210
    Total operating expenses  
                                      9,700         14,929          40,716         49,377
    Loss from operations            
                                    (5,299)      (12,438)        (21,340)      (34,587)
            
    Other, net                 (208)         (262)              (530)        (1,249)
    Net loss                $(5,507)  $(12,700)        $(21,870)    $(35,836)
            
    Basic net loss per share      
                                  $(0.16)      $(0.44)          $(0.65)        $(1.31)
            
    Shares used to compute  
    basic net loss per share    
                                      33,924         28,992          33,782         27,290
      
                                                        Balance Sheet Data
                                                            In Thousands
                                                            (unaudited)
                                                                        
                                                                  December 31,
                                                              2000                  1999
            
    Cash and marketable securities        $5,658              $23,981
    Working capital                                13,307                28,234
    Total assets                                    39,160                71,168
    Long-term obligations                        3,043                 5,346
    Stockholders' equity                        25,099                45,439
    
ots Original Text Service: Heska Corporation
Internet: http://recherche.newsaktuell.de

Contact:   Ron Hendrick, Executive Vice President & CFO, ext. 4105, or Robert Grieve, Chairman & CEO, ext. 4155, both of Heska Corporation, +1-970-493-7272; Investor Relations, Miriam Weber, ext. 352, or Media Relations, Matthew Knight, ext. 271, both of Noonan/Russo Communications, Inc., +1 212-696-4455, for Heska Corporation

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Web site:  http://www.heska.com

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