Angiotech announces reorganization and cost reduction initiatives, updates financial outlook



    
    Date to be established for Annual General Meeting

    Shareholder vote to be postponed regarding proposed transaction with Ares
    Management and New Leaf Venture Partners
    

    VANCOUVER, Sept. 22 /CNW/ - Angiotech Pharmaceuticals, Inc. ("Angiotech")
(NASDAQ:   ANPI, TSX: ANP), a global specialty pharmaceutical and medical device
company, today announced that it is pursuing various initiatives to reduce
operating costs and to further focus its business efforts, pending continued
exploration of alternatives to the Company's balance sheet and current capital
structure. Options to be explored, among others, include determining whether
the Company will be able to consummate its previously announced transaction
with Ares Management and New Leaf Venture Partners, or other potential
transaction alternatives with Ares and New Leaf. In addition, Angiotech also
announced plans to withdraw its outstanding tender offers for its Senior
Floating Rate Notes and its Senior Subordinated Notes, pending resolution of
these discussions and actions. Angiotech's management and Board of Directors
continue to believe a transaction alternative of significant size and scope is
necessary to meaningfully address the Company's working capital needs for its
business initiatives, as well as to address potential liquidity issues likely
to arise in the near term relating to the Company's current balance sheet
structure.
    "Our Board of Directors believes that despite the growth and progress
we've seen this year in our medical products businesses it is in the best
interest of Angiotech and its shareholders to take action now to adjust our
business and operating structure in order to achieve cost savings and to
further focus our business initiatives," said Dr. William Hunter, Chief
Executive Officer of Angiotech. "While our extensive discussions since we
announced the transaction with various shareholders and bondholders have been
useful, during this period events have impacted our business and the capital
markets, and we will take every action necessary to prepare our Company for
the future and to provide the best opportunity for our most important near
term initiatives to continue, regardless of the timing of completing any
financing or strategic transaction. We will also pursue discussions with Ares,
New Leaf and our bondholders and shareholders with a view to solving the
issues arising from our current capitalization."
    The announced reorganization and cost reduction initiatives are, in
certain cases, in addition to the selected expense reduction actions announced
in April 2008, and are actions the Company believes are necessary to provide
the opportunity for Angiotech to be able to achieve its previously stated goal
of achieving positive consolidated free cash flow (after the incurrence of net
interest expense) during the fourth quarter of 2008. Angiotech's ability to
achieve this goal in the absence of a financing or strategic transaction has
been, and may be further impacted by, decreasing levels of royalty revenue we
receive from Boston Scientific Corporation, the Company's ability to implement
certain cost reduction initiatives in a timely and efficient manner, capital
markets conditions and interest rates and other factors.
    Specifically, the Company expects to focus remaining investment and
resources on its most promising near term product opportunities, including
Quill(TM) SRS and certain new interventional radiology products, including the
HemoStream(TM) Chronic Dialysis Catheter, the Option(TM) Inferior Vena Cava
Filter and the Bio-Seal(TM) Lung Biopsy System, and therefore to further
reduce spending on certain research and development relating to various
earlier stage new product initiatives.
    In connection with these initiatives and developments, Angiotech expects
to record a significant reduction in the amount of goodwill and intangible
assets held on its balance sheet during the third quarter of 2008.
    Angiotech has advised Ares Management and New Leaf Venture Partners that,
given the length of time that has been required to complete the transaction,
and given various other factors impacting its business and cash position
(including lower expected revenues derived from Boston Scientific
Corporation), it does not believe it will be able to satisfy the condition in
its note purchase agreement with respect to the minimum level of cash and cash
equivalents required to be held at the time of the transaction's close. In
addition, Angiotech has not received the required consent from Ares and New
Leaf regarding the reorganization actions described in more detail below, such
actions which Angiotech has determined are necessary in light of current
circumstances and the uncertainty as to the timing of the transaction's close.
There also can be no assurance that Angiotech can satisfy certain other
conditions to closing set forth in the note purchase agreement. As a result of
these circumstances, Angiotech plans to withdraw its outstanding tender offers
for its Senior Floating Rate Notes and its Senior Subordinated Notes.
Angiotech, Ares and New Leaf are in discussions with respect to the terms on
which the parties would be prepared to proceed with a transaction.
    Since there can be no assurance that a transaction will be completed,
Angiotech has elected to hold its Annual General Meeting of shareholders in
order to allow shareholders to vote on certain other items of business,
including the election of directors. If a determination is made to proceed
with a transaction subject to a shareholder vote, Angiotech will set a
separate meeting date for consideration of such proposal.
    Angiotech's Annual General Meeting is now expected to be held in the last
week of October, 2008 with a record date to be established in the immediate
future. Details regarding the meeting time and place will be posted at
www.angiotech.com as they are finalized.

    Reorganization Initiatives

    Operating cost reductions will be implemented across all functions in the
Company, including in research and development and general and administrative
functions, with more limited reduction initiatives in sales and marketing. The
reorganization efforts are designed to reduce certain expenses while
maintaining support for the sales momentum of Angiotech's Promoted Brand
product portfolio as well as the growth of Angiotech's core medical device
business. The Company's remaining resources subsequent to these changes will
be focused primarily on its existing medical device products business, with
particular emphasis on our portfolio of Promoted Brands, and on selected new
products that have recently launched or are expected to be launched in the
near future, including Quill(TM) SRS, the HemoStream(TM) Chronic Dialysis
Catheter, the Option(TM) Inferior Vena Cava Filter and the Bio-Seal(TM) Lung
Biopsy System. Selected actions to be taken with respect to the reorganization
include:

    
    -   Postponement of the scheduled launch of our 5-flourouracil-eluting
        central venous catheter (5-FU CVC);
    -   Closure of our research and manufacturing facility in Rochester, NY.
        Reductions in certain research and development personnel have been
        made, and closure is expected to be scheduled for December of 2009,
        after which any remaining manufacturing activities are expected to be
        transferred to another of our facilities;
    -   Postponement of certain preclinical-stage research activities,
        pending the completion of partnering or other funding activities that
        would offset direct costs and personnel costs associated with such
        programs;
    -   Reduction of certain financial and personnel contributions relating
        to the Company's joint venture with Genzyme Corporation;
    -   Potential amendment of and reduction in cash outlays related to the
        Company's collaboration with Athersys, Inc.;
    -   Rationalization or elimination of office and laboratory space in
        Vancouver, BC, North Bend, WA and Hearndon, VA;
    -   Rationalization of selected pending and issued intellectual property;
    -   Elimination of certain expenses and reductions in personnel in all
        general and administrative departments;
    -   Selective reduction in certain sales and marketing investments and in
        medical affairs;
    -   Postponement of selected planned capital expenditures.
    

    Outlook Update

    The key elements of our updated 2008 outlook are summarized below. Our
updated 2008 outlook for expenses, as compared to our prior outlook as
provided in April 2008, has been impacted most materially by added expenses
incurred, or expected to be incurred, due to continued requests by regulatory
agencies relating to patients that were enrolled in clinical trials for our
Vascular Wrap(TM) product candidate. In addition, we have incurred certain
extraordinary legal and administrative costs relating to the announced
transaction with Ares and New Leaf to split Angiotech's operating and royalty
businesses, as well as relating to various other items. As a result of these
and certain other factors, we have yet to realize the full amounts of the
expense reductions that were originally targeted and announced in April 2008.
Our updated 2008 outlook includes:

    
    -   Medical products year over year total revenue growth of 15% or
        greater, consistent with our previous outlooks as presented in
        February 2008 and April 2008;
    -   Potential improvements in gross margins relating to our medical
        products sales of 200 - 300 basis points as compared to 2007,
        consistent with our previous outlook. Achievement of such
        improvements will be impacted by product sales mix, particularly the
        mix among Promoted Brands and our Specialties / OEM sales, and the
        timing of completion of our manufacturing consolidation and cost
        reduction initiatives. Based on the current pace of activities and
        certain of the reorganization and cost reduction initiatives
        announced above, the completion of the closure of our manufacturing
        facility in Syracuse, NY may be delayed by one or more months, which
        may impact our ability to achieve these improvements in 2008;
    -   Research and clinical expenses ranging from $45 to $48 million, as
        compared to our previous outlook range of $30 to $38 million. Of the
        additional expected expenses, approximately $8 to $9 million are
        funds allocated to comply with the more extensive than planned
        activities, as requested by the United States Food and Drug
        Administration, relating to the termination and completion of our
        Vascular Wrap clinical trial;
    -   Sales and marketing expenses ranging from $49 to $53 million,
        consistent with our previous outlook;
    -   General and administrative expenses ranging from $42 to $45 million,
        as compared to our previous outlook range of $38 to $43 million;
    -   Capital expenditures ranging from $10 to $12 million, as compared to
        our previous outlook range of $12 to $15 million;
    -   The potential for additional cash generation of between $8 and
        $12 million, relating to the potential sale of certain real estate
        assets in 2008.
    

    Pursuant to the additional reorganization activities and cost reduction
initiatives described above, we have summarized below our preliminary expected
2009 expense levels in the major reported categories. We will provide a more
complete 2009 outlook across all elements of our business upon the approval of
our full year 2009 revenue goals and budget by our Board of Directors later
this year, consistent with past practices. Our preliminary 2009 outlook
includes:

    
    -   Research and clinical expenses ranging from $13 to $16 million.
        Additional expenses ranging from $4 to $5 million may be incurred
        relating to completing follow up of the last patients enrolled in our
        Vascular Wrap clinical trial, and relating to certain preclinical
        research programs. It is anticipated that expenses for certain
        preclinical programs will be incurred only if they are offset by
        revenues derived from partners relating to certain collaborations
        currently under negotiation;
    -   Sales and marketing expenses ranging from $42 to $45 million.
        Importantly, these expenses are expected to be lower than the total
        incurred in 2008, over a higher level of sales expected in 2009 as
        compared to 2008;
    -   General and administrative expenses ranging from $35 to $38 million;
    -   Capital expenditures ranging from $10 to $12 million.
    

    Cautionary Statement Regarding Forward-Looking Statements

    Statements contained in this press release that are not based on
historical fact, including without limitation statements containing the words
"believes," "may," "plans," "will," "estimate," "continue," "anticipates,"
"intends," "expects" and similar expressions, constitute "forward-looking
statements" within the meaning of the U.S. Private Securities Litigation
Reform Act of 1995 and "forward-looking information" within the meaning of
applicable Canadian securities laws. All such statements are made pursuant to
the "safe harbor" provisions of applicable securities legislation.
Forward-looking statements may involve, but are not limited to, comments with
respect to our objectives and priorities for the second half of 2008 and
beyond, our strategies or future actions, our targets, expectations for our
financial condition and the results of, or outlook for, our operations,
research development and product and drug development. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
that may cause the actual results, events or developments to be materially
different from any future results, events or developments expressed or implied
by such forward-looking statements. Many such risks, uncertainties and other
factors are taken into account as part of our assumptions underlying these
forward-looking statements and include, among others, the following: general
economic and business conditions, both nationally and in the regions in which
we operate; market demand; technological changes that could impact our
existing products or our ability to develop and commercialize future products;
competition; existing governmental regulations and changes in, or the failure
to comply with, governmental regulations; adverse results or unexpected delays
in pre-clinical and clinical product development processes; adverse findings
related to the safety and/or efficacy of our products or products sold by our
partners; decisions, and the timing of decisions, made by health regulatory
agencies regarding approval of our technology and products; and the
requirement for substantial funding to conduct research and development and to
expand manufacturing and commercialization activities or consummate
acquisitions. In addition, our business is subject to certain operating risks
that may cause any results expressed or implied by the forward-looking
statements in this press release to differ materially from our actual results.
These operating risks include: our ability to attract and retain qualified
personnel; our ability to successfully complete pre-clinical and clinical
development of our products; changes in business strategy or development
plans; our failure to obtain patent protection for discoveries; loss of patent
protection resulting from third party challenges to our patents;
commercialization limitations imposed by patents owned or controlled by third
parties; our ability to obtain rights to technology from licensors; liability
for patent claims and other claims asserted against us; our ability to obtain
and enforce timely patent and other intellectual property protection for our
technology and products; the ability to enter into, and to maintain, corporate
alliances relating to the development and commercialization of our technology
and products; market acceptance of our technology and products; our ability to
successfully manufacture, market and sell our products; the continued
availability of capital to finance our activities; and any other factors
referenced in our other filings with the Securities and Exchange Commission
(the "SEC"). Given these uncertainties, assumptions and risk factors, readers
are cautioned not to place undue reliance on such forward-looking statements.
Except as required by law, we disclaim any obligation to update any such
factors or to publicly announce the result of any revisions to any of the
forward-looking statements contained in this press release to reflect future
results, events or developments.

    Use of Certain Non-GAAP Financial Measures

    The financial outlook referred to above presents certain forward-looking,
non-GAAP financial information for which at this time there is no calculable
comparable GAAP measure. As a result, such non-GAAP financial information
cannot be quantitatively reconciled to comparable GAAP financial information.
Specifically, the estimates for certain operating expenses referred to above
exclude estimates of certain expenses that are inherently unpredictable of
subject to significant fluctuation for reasons unrelated to our business
performance, including stock-based compensation expenses, certain litigation
expenses and foreign exchange gains or losses.

    About Angiotech

    Angiotech Pharmaceuticals, Inc. is a global specialty pharmaceutical and
medical device company with over 1,500 dedicated employees. Angiotech
discovers, develops and markets innovative treatment solutions for diseases or
complications associated with medical device implants, surgical interventions
and acute injury. To find out more about Angiotech (NASDAQ:   ANPI, TSX: ANP),
please visit our website at www.angiotech.com.





For further information:

For further information: DeDe Sheel, Investor Relations and Corporate
Communications, Angiotech Pharmaceuticals, Inc., (415) 293-4412,
Dede.sheel@fdashtonpartners.com

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Angiotech Pharmaceuticals, Inc.

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