(-) pantoprazole is the isomer of Pantozol, another proton pump inhibitor. The drug is also in preclinical trials and has potential for consistent plasma levels that may lead to better efficacy and safety. Sales were $1 billion last year.
Sepracor has good candidates in the field of infectious disease. The antibacterial drug is (R)-lomefloxacin, an isomer of the parent drug Lomebact/Maxaquin. It belongs to the class of drugs known as the fluoroquinolones, a group of broad-spectrum antibiotics. The improvements expected with the single isomer version include improved antimicrobial activity and decreased photosensitivity. The drug is in preclinical trials.
(2R,4S)-itraconazole is an isomer of Sporanox, an oral antifungal. The parent drug had sales of $550 million last year. This is increasing at a rapid pace because of the dearth of treatments for Onychomycosis prior to the introduction of the oral antifungal medications a few years ago. Companies with oral antifungals have also been advertising. The isomer has reduced cardiovascular side effects and is in preclinical trials.
MANAGEMENT
Sepracor has an impressive executive staff and board of directors. The executives include two PhD's and one MD among their ranks. They have made what we think are excellent management decisions in the past and will probably continue to do so. The board of directors includes the former presidents, vice presidents, or CEO's of five well-known pharmaceutical companies. The company also has ownership of BioSepra (BSEP) (64%, makes chromatography equipment and media), HemaSure (HMSR) (37%, makes equipment for blood product purification) and Versicor, Inc. (22%, anti-infective drugs). It is also the majority owner of Sepracor Canada Limited.
President and CEO: Timothy J. Barberich, age 50, $386,250 pay
EVP, CFO, and Secretary: David P. Southwell, age 37, $286,100 pay
EVP; President, Pharmaceuticals: David S. Barlow, age 41, $282,326 pay
SVP Drug Development: Paul D. Rubin, age 44, $361,662 pay
SVP Discovery: James R. Hauske, age 44, $208,057 pay
SVP Finance and Administration and Treasurer: Robert F. Scumaci, age 38
Chief Patent Counsel: Douglas E. Reedich, age 40
Director Corporate Administration: Shizuko Yamaji
COMPETITORS
Sepracor's competition in the field of chiral chemistry includes Chiroscience PLC of Cambridge, England, which also seeks to improve existing dual-isomer drugs. However, both companies in this field need extremely strong expertise in isolating and purifying stereoisomers in order to achieve success, and the two companies seem to be focusing on different products to re-engineer. It's also quite likely that there's room for more than one company in this niche.
INSIDE OWNERSHIP
The following are the recent insider transactions filed with the SEC.
Date Name Transaction Number of Shares Price(s) Value
09/15/98 Southwell, David P Sold 165,000 $49.25 - 50.52 $8 Mil
08/12/98 Scumaci, Robert F Sold 7,000 $58.00 $406,000
08/05/98 Steigrod, Alan A Sold 1,000 $50.00 $50,000
06/02/98 Scumaci, Robert F Purchase 75 $32.51 $2,438
12/30/97 Johnston, Robert F Sold 10,000 $37.37 $373,730
FINANCIALS
SEPRACOR INC.
Condensed Consolidated Statements of Operations
September 30, 1998 and 1997
(Unaudited)
(In thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
1998 1997 1998 1997
Revenues:
Product sales $ 1,178 1,523 4,683 $ 6,517
R & D, license fees, royalties 1,478 1,982 9,090 2,812
Total revenues 2,656 3,505 13,773 9,329
Costs of revenue 962 1,280 3,373 4,206
Gross margin 1,694 2,225 10,400 5,123
Operating expenses:
Research and development 20,416 10,469 44,419 33,472
Sales and marketing 6,995 1,854 13,115 4,331
Administration 2,384 1,950 6,810 7,415
Restructuring costs and
impairment (a) -- -- (351) --
Patent costs 477 548 1,412 1,203
Total operating expenses 30,272 14,821 65,405 46,421
Loss from operations (28,578) (12,596) (55,005) (41,298)
Other income (expense):
Interest income 3,483 1,274 9,459 4,445
Interest expense (4,502) (1,497) (12,132) (4,487)
Other income (expense), net 179 209 56 377
Equity in investee
income (losses) (b) (600) 134 (1,846) (1,937)
Gain on sale of ChiRex, Inc. (c) -- -- -- 30,069
Total other income (expense) (1,440) 120 (4,463) 28,467
Net loss before minority
interests (30,018) (12,476) (59,468) (12,831)
Minority interests in
subsidiaries 390 349 538 744
Net loss $(29,628) $(12,127) (58,930) $(12,087)
Accrued dividends preferred
stock (d) -- (150) (150) (450)
Net loss applicable to
common shares $(29,628) $(12,277) $(59,080) $(12,537)
Net loss per share $(1.05) $(0.44) $(2.10) $(0. 46)
Weighted average common
and common equivalent shares 28,315 27,662 28,092 27,529
(a) Represents restructuring recoveries relating to BioSepra Inc. in
Q1 1998.
(b) Represents Sepracor's portion of Versicor Inc. losses in 1998 and
Sepracor's portion of ChiRex, Inc. and HemaSure Inc. losses in 1997.
(c) Represents gain on sale of 3,489,301 shares of ChiRex, Inc. common
stock held by Sepracor as equity in investee.
(d) Represents the period to date dividends attributable to the Series B
Redeemable Exchangeable Preferred Stock which was repurchased by
Sepracor in March 1998.
SEPRACOR INC.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
Sept. 30, Dec. 31,
1998 1997
ASSETS
Cash and marketable securities $228,754 $92,560
Accounts receivable 3,635 2,415
Inventory 3,623 2,722
Property, plant and equipment, net 16,837 15,126
Excess of investment over net assets acquired, net 4,994 5,288
Investment in subsidiaries 2,131 3,971
Other assets(1) 13,616 6,425
Total assets $273,590 $128,507
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 37,428 $ 21,688
Deferred revenue 87 21
Debt payable 5,347 4,249
Convertible subordinated debentures(2) 270,355 80,880
Convertible redeemable preferred stock(3) 0 6,700
Minority interests in subsidiaries 2,398 2,937
Total stockholders' equity (42,025) 12,032
Total liabilities and stockholders' equity $273,590 $128,507
(1) Includes $7.2M and $1.9M in net unamortized deferred financing costs
relating to the convertible debenture offerings in 1998 and 1997,
respectively.
(2) Consists of $189,475,00 in 6 1/4% convertible debentures due 2005 and
$80,880,000 in 7% convertible debentures due 2002, issued in 1998 and
1997, respectively.
(3) The Series B Redeemable Exchangeable Preferred Stock (including
$1,850,000 in accrued dividends) due to Beckman Instruments Inc.
was repurchased by Sepracor in March 1998.
Sepracor Inc.
