DUSA Pharmaceuticals Inc. (DUSA) filed Quarterly Report for the period ended 2009-09-30.
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 $28.5 million; its shares were traded at around $1.18 with and P/S ratio of 1.
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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 changed 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 the License Agreement is terminated 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. We are recording the revenue under the License Amendment on a cash basis. We received the first $200,000 installment payment under the License Amendment during the second quarter of 2009, which is included in Product Revenues in the accompanying Consolidated Statements of Operations, but have not received any further payments. In the event that we terminate the License Agreement, which we have the right to do for non-payment, we will consider introducing a niacinamide product under the Dietary Supplement Health and Education Act, but in that case, the Company would expect volume and revenues to be lower than historical levels of Nicomide. As of November 6, 2009, payments due from River’s Edge are six months, or $1.2 million, in arrears. We are evaluating our options for termination of the License Agreement, the potential to market a niacinamide product under the Dietary Supplement Health and Education Act, and the collection of the amounts due from River’s Edge.
For the three- and nine-month periods ended September 30, 2009, total PDT Drug and Device Products revenues, comprised of revenues from our Kerastick® and BLU-U® products, were $6,700,000 and $19,836,000, respectively. This represents an increase of $1,543,000, or 30%, and $3,420,000, or 21%, over the comparable 2008 totals of $5,157,000 and $16,416,000, respectively. The incremental revenue was driven primarily by increased Kerastick® revenues and BLU-U® revenues in the United States.
For the three- and nine-month periods ended September 30, 2009, Kerastick® revenues were $6,244,000, and $18,259,000, respectively, representing a $1,513,000, or 32%, and $3,091,000, or 20%, increase over the comparable 2008 totals of $4,731,000 and $15,168,000, respectively. Kerastick® unit sales to end-users were 53,622 and 155,384, for the three- and nine-month periods ended September 30, 2009, respectively. Included in revenues for the nine months ended September 30, 2009, are 4,500 units sold in Canada and 6,606 sold in Korea. This represents an increase from 44,668 and 145,256 Levulan® Kerastick® units sold in the three- and nine-month periods ended September 30, 2008, respectively. Included in revenues for the nine months ended September 30, 2008, are 5,700 units sold in Canada and 10,692 sold in Korea. Our overall average net selling price for the Kerastick® increased to $115.87 per unit for the first nine months of 2009 from $102.79 per unit for the first nine months of 2008. Our average net selling price for the Kerastick® in the United States increased to $121.66 per unit in 2009 from $110.15 per unit in 2008. The increase in 2009 Kerastick® revenue was driven by increased sales volumes in the United States along with the increase in our overall average unit selling price.
For the three- and nine-month periods ended September 30, 2009, BLU-U® revenues were $456,000 and $1,577,000, respectively, representing a $30,000, or 7%, and $329,000, or 26%, increase over the comparable 2008 totals of $426,000 and $1,248,000, respectively. The increase in year-to-date 2009 BLU-U® revenues was driven by increased overall sales volumes, partially offset by a decrease in our average selling price. In the three- and nine-month periods ended September 30, 2009, there were 59 and 198 units sold, respectively, versus 57 and 154 units sold, respectively, in the comparable 2008 periods. All of the units sold in 2009 were sold in the United States. For the nine months ended September 30, 2008, 149 of the units were sold in the United States with 5 sold in Korea. For the first nine months of 2009, our average net selling price for the BLU-U® decreased to $7,591 from $7,820 in 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 one year for hospital clinics, before a purchase decision is required. At September 30, 2009, there were approximately 9 units in the field pursuant to this evaluation program, compared to 58 units in the field at December 31, 2008. The units are classified as inventory in the financial statements and are being amortized during the evaluation period to cost of goods sold using an estimated life for the equipment of three years.
Non-PDT Drug Product Revenues reflect the revenues generated by the products acquired as part of our acquisition of Sirius. Total Non-PDT Product revenues for the three- and nine-month periods ended September 30, 2009 were $230,000 and $1,198,000, respectively, compared to $569,000 and $5,352,000, respectively for the comparable 2008 periods. The substantial majority of the Non-PDT product revenues were from Nicomide® related royalties from River’s Edge, as further described below, and sales of ClindaReach®. In April 2008, we were notified by Actavis Totowa, LLC, the manufacturer of Nicomide®, that Actavis would cease manufacturing several prescription vitamins, including Nicomide®, due to continuing discussions with the FDA. In response to this notification and subsequent discussions with the FDA, we stopped the sale and distribution of Nicomide® as a prescription product in June 2008.
COST OF PRODUCT REVENUES — Cost of product revenues for the three- and nine-month periods ended September 30, 2009 were $1,595,000 and $4,974,000 as compared to $1,462,000 and $4,950,000 in the comparable periods in 2008. A summary of the components of cost of product revenues and royalties is provided below:
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