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Santarus Inc. Reports Operating Results (10-Q)

August 03, 2010 | About:
10qk

10qk

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Santarus Inc. (SNTS) filed Quarterly Report for the period ended 2010-06-30.

Santarus Inc. has a market cap of $151.2 million; its shares were traded at around $2.59 with a P/E ratio of 4.6 and P/S ratio of 0.9. SNTS is in the portfolios of Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Product Sales, Net. Product sales, net were $32.9 million for the three months ended June 30, 2010 and $28.0 million for the three months ended June 30, 2009 and consisted of sales of Zegerid Capsules and Zegerid Powder for Oral Suspension as well as shipments of the authorized generic version of our Zegerid Capsules under our distribution and supply agreement with Prasco. The $4.9 million increase in product sales, net was comprised of approximately $5.9 million related to an increase in the sales volume of our Zegerid products, including the related authorized generic products, offset in part by approximately $1.0 million related to decreased average selling prices. These increases in volume and decreases in average selling prices related to shipments of the authorized generic version of our Zegerid Capsules to Prasco at the invoice supply price.

Cost of Product Sales. Cost of product sales was $3.8 million for the three months ended June 30, 2010 and $2.1 million for the three months ended June 30, 2009, or approximately 12% and 8% of net product sales, respectively. Cost of product sales consists primarily of raw materials, third-party manufacturing costs, freight and indirect personnel and other overhead costs associated with the sales of our Zegerid prescription products as well as shipments to Prasco of the authorized generic version of Zegerid Capsules. Cost of product sales also includes reserves for excess, dated or obsolete commercial inventories based on an analysis of inventory on hand and on firm purchase commitments compared to forecasts of future sales. The increase in our cost of product sales as a percentage of net product sales was primarily attributable to a reserve of approximately $1.5 million recognized in the three months ended June 30, 2010 against on-hand inventories of our Zegerid products in connection with the launch of generic and authorized generic versions of prescription Zegerid Capsules and our related decision to cease promotion of Zegerid.

License Fees and Royalties. License fees and royalties were $2.3 million for the three months ended June 30, 2010 and $1.9 million for the three months ended June 30, 2009. License fees and royalties consisted of royalties due to the University of Missouri based upon net product sales of our Zegerid prescription products and products sold by GSK under our license and distribution agreements. In the three months ended June 30, 2010, license fees and royalties also consisted of royalties due to the University of Missouri based upon sales of Zegerid OTC by Schering-Plough under our license agreement. License fees and royalties in both periods also included license fee amortization from the $12.0 million upfront fee paid to Depomed under our promotion agreement entered into in July 2008. The $12.0 million upfront fee has been capitalized and is being amortized to license fee expense over the estimated useful life of the asset on a straight-line basis through mid-2016.

Product Sales, Net. Product sales, net were $61.9 million for the six months ended June 30, 2010 and $55.6 million for the six months ended June 30, 2009 and consisted of sales of Zegerid Capsules and Zegerid Powder for Oral Suspension as well as shipments of the authorized generic version of our Zegerid Capsules under our distribution and supply agreement with Prasco. The $6.3 million increase in product sales, net was comprised of approximately $5.5 million related to increased average selling prices and approximately $865,000 related to an increase in sales volume, which volume related to shipments of the authorized generic version of our Zegerid Capsules to Prasco at the invoice supply price.

Other License Revenue. Other license revenue was $245,000 for the six months ended June 30, 2010 and $4.9 million for the six months ended June 30, 2009. For the six months ended June 30, 2010, other license revenue was comprised of the remaining amortization of the $2.5 million upfront payment we received in October 2009 in connection with our license agreement with Norgine. The $2.5 million upfront payment was amortized on a straight-line basis over a three-month period through early January 2010, which represented the period during which we had significant responsibilities under the agreement. For the six months ended June 30, 2009, license revenue was comprised of the amortization of upfront payments we received from GSK in December 2007 and Schering-Plough in November 2006.

License Fees and Royalties. License fees and royalties were $5.3 million for the six months ended June 30, 2010 and $3.7 million for the six months ended June 30, 2009. License fees and royalties consisted of royalties due to the University of Missouri based upon net product sales of our Zegerid prescription products and products sold by GSK under our license and distribution agreements. Beginning in the six months ended June 30, 2010, license fees and royalties also consisted of royalties due to the University of Missouri based upon sales of Zegerid OTC by Schering-Plough under our license agreement. License fees and royalties in both periods also included license fee amortization from the $12.0 million upfront fee paid to Depomed under our promotion agreement entered into in July 2008. The $12.0 million upfront fee has been

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