DANBURY, Conn., Aug. 16 /PRNewswire-FirstCall/ -- Penwest Pharmaceuticals Co. today said that it intends to initiate the dispute resolution procedures as provided for under its agreement with Endo Pharmaceuticals Inc., its partner in the development and commercialization of Opana(R) ER (oxymorphone HCl) extended-release tablets CII. The dispute is regarding the responsibility of Endo for the losses that both Endo and Penwest expect to occur during the marketing period for Opana ER provided for in the agreement. Opana ER was approved by the U.S. Food and Drug Administration (FDA) on June 22, 2006 for the relief of moderate-to-severe pain in patients requiring continuous, around-the-clock opioid treatment for an extended period of time. It is not intended to be used on an as-needed basis. Endo recently launched Opana ER.
Penwest believes that, under the terms of the agreement, it is not responsible for Opana ER losses that occur during the marketing period for the product, it is not obligated under the agreement to fund any of these losses, and royalties will be due to Penwest beginning with the first quarter during which Opana ER is profitable without any deduction for these losses. Endo has publicly stated that it will recognize 100% of the losses in 2006 attributable to the product during its launch phase. However, Endo has said that it expects to recover dollar for dollar Penwest’s share of these losses from the future profits of Opana ER, and that no royalty would be due Penwest on Opana ER until the product becomes profitable on a cumulative basis from the date of approval.
Penwest acknowledges that it owes Endo between approximately $23 million and $30 million for expenses incurred by Endo in connection with obtaining approval of the product as a result of Penwest’s decision in April 2003 to opt out of funding these costs. Penwest has disclosed that it currently does not intend to reimburse Endo for these costs and that, as a result, Endo will recoup these expenses through a temporary adjustment in the royalty rate payable to Penwest. This rate will return to its pre-adjustment level once Endo has recovered such unfunded expenses. Under the agreement, the rate adjustment is calculated based on the cumulative contribution of each party to Opana ER development costs.
The dispute resolution provision in the companies’ contract provides for disagreements between the parties first to be escalated to the companies’ CEOs, then to mediation, and finally to arbitration. Discussions between the companies’ CEOs have taken place without resolution, and therefore, Penwest hopes to begin the mediation process shortly. Penwest is unable to predict the timing and outcome of the dispute resolution process.
Jennifer L. Good, President and Chief Executive Officer of Penwest, said, “We look forward to resolving this matter as quickly as possible. We continue to be enthusiastic about the prospects for Opana ER and bullish about Endo’s ability to successfully market this important product. Regardless of the outcome of the dispute resolution process, we believe that Opana ER will be a significant asset for Penwest as we continue to develop our product portfolio targeted at disorders of the nervous system.”
Conference Call and Webcast Today
Jennifer Good, President and Chief Executive Officer, and Benjamin Palleiko, Senior Vice President, Corporate Development and Chief Financial Officer, will hold a conference call today at 5:15 pm EDT to discuss this matter. The dial-in numbers for the call are 800-895-3606 (Domestic) and 785-424-1065 (International). The conference ID is “Penwest.” The conference call will also be accessible live and as a replay on the Investor Relations section of the Penwest Web site at http://www.penwest.com.
Penwest Pharmaceuticals
Penwest develops pharmaceutical products based on innovative proprietary drug delivery technologies. We are focusing our development efforts principally on products that address disorders of the nervous system. The foundation of our technology platform is TIMERx (R), an extended release delivery system that is adaptable to soluble and insoluble drugs and that is flexible for a variety of controlled release profiles. We have also developed two additional oral drug delivery systems, Geminex(R) and SyncroDose(TM). Geminex is a dual release rate drug delivery system that is designed to provide independent release of different active ingredients contained in a drug, and SyncroDose is a drug delivery system that is designed to release the active ingredient of a drug at the desired site and time in the digestive tract.
The matters discussed herein contain forward-looking statements that involve risks and uncertainties, which may cause Penwest’s actual results in future periods to be materially different from any future performance suggested herein. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words, “believes,” “anticipates,” “plans,” “expects,” “intends,” “potential,” and similar expressions are intended to identify forward-looking statements. Important factors that could cause results to differ materially include: the risks and uncertainties, including the outcome, of any dispute resolution proceeding with Endo regarding the interpretation of the contract; the risk that Opana ER will not be accepted by the medical community; dependence on collaborators such as Endo to, among other things, sell products for which Penwest receives royalties; regulatory risks relating to drugs in development such as, torsemide ER and nalbuphine ER, including the timing and outcome of regulatory action; uncertainty of success of collaborations; the timing of clinical trials and whether the results of clinical trials will warrant further clinical trials, warrant submission of an application for regulatory approval of, or the regulatory approval of, the product that is the subject of the trial; actual and potential competition; the need for capital; and other risks as set forth under the caption Risk Factors in Penwest’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 9, 2006, which risk factors are incorporated herein by reference. Penwest disclaims any intention or obligation to update any forward-looking statements.
Contacts: Investors: Media: Ben Palleiko Caroline Gentile/Jim Fingeroth Penwest Kekst and Company (203) 796-3750 (212) 521-4800 (877) 736-9378
Penwest Pharmaceuticals Co.
CONTACT: Investors - Ben Palleiko of Penwest, +1-203-796-3750, or+1-877-736-9378; or Media - Caroline Gentile, or Jim Fingeroth, both ofKekst and Company, +1-212-521-4800
Web site: http://www.penwest.com/
