Orphan Medical Reports Second Quarter Results; Product Revenue Reaches Record Level

Business Wire, July 21, 2004

MINNEAPOLIS -- Orphan Medical, Inc. (Nasdaq:ORPH) today announced that product revenue for the second quarter ended June 30, 2004 was a record $5.0 million, an increase of 75 percent over revenue from the same products in the second quarter of 2003. Total revenue in the second quarter, including licensing revenue, was $5.4 million, a 24 percent increase over total revenue in the second quarter of 2003 which included $1.5 million of revenue from products divested during the quarter.

All products, Xyrem(R) (sodium oxybate) oral solution, Antizol(R) (fomepizole) Injection and Cystadane(R) (betaine anhydrous for oral solution) contributed to the strong growth in revenue for the quarter. Quarterly Xyrem revenue increased to $2.2 million, an approximate 25 percent increase compared to the first quarter of this year and nearly a 190 percent increase over the quarter ended June 30, 2003. Antizol and Cystadane revenue was $2.8 million for the quarter ended June 30, 2004 an increase of approximately 33 percent from $2.1 million for the same period in the prior year. Total revenue for the second quarter of 2004 included $0.4 million of licensing revenue that resulted from the amortization of the upfront payment from the Company's agreement with Celltech Pharmaceuticals for the European marketing rights for Xyrem.

The net loss to common shareholders was $4.9 million or $0.45 per diluted share in the second quarter of 2004, compared to net income of $26.0 million, or $2.06 per diluted share, in the second quarter of 2003. Net income for the quarter ended June 30, 2003 included a gain of $30.3 million from the divestment of three non-core products.

Total expenses for the second quarter were $10.1 million compared to $8.1 in the second quarter of 2003. Product development expenses for the second quarter were $3.0 million, compared to $2.3 million in the prior year, reflecting expenses related to two Xyrem Phase III(b) trials designed to support the indication of excessive daytime sleepiness (EDS) in narcolepsy. Sales and marketing expenses increased to $5.4 million from $3.7 million in the second quarter of 2003 though full year sales and marketing expenses for 2004 are expected to be approximately five percent higher than last year due to medical education and other programs related to EDS in narcolepsy. General and administrative expenses decreased to $1.0 million compared to $1.4 million for the same period in 2003 as a result of staffing reductions related to the products divested in 2003.

Revenue from products marketed during the six months ended June 30, 2004 increased 78 percent compared to the same products in the corresponding 2003 period. Total reported product revenue was $9.4 million, an increase of $0.5 million or 5 percent compared to reported revenue in the first half of 2003. Reported product revenue for the six months ended June 30, 2003 included $3.6 million from products divested in 2003. Licensing revenue for the six months ended June 30, 2004 was $1.4 million which includes a milestone payment related to the European licensing of Xyrem and an amortized portion of the upfront payment for the same agreement. Net loss to common shareholders for the six months ended June 30, 2004, was $9.2 million or $0.85 per diluted share compared to a net income of $21.9 million or $1.75 per diluted share for the first six months of 2003. The net income in the first half of 2003 was a result of the divestment of products mentioned earlier.

For the six months ended June 30, 2004, sales and marketing expenses increased 10 percent to $8.8 million from $8.0 million in the comparable period of 2003 to support expanded marketing programs. During the same period, product development expenses increased 60 percent to $7.2 million from $4.5 million in the prior year due to the two Xyrem Phase III(b) trials. General and administrative expenses decreased 15 percent to $2.2 million for the six months ended June 30, 2004, from $2.6 million in the prior year due to staff reductions related to the product divestments.

As of June 30, 2004, the Company had approximately $15.3 million in cash. The Company used approximately $2.8 million of cash during the quarter, compared to $5.2 million in the first quarter of 2004.

Xyrem Commercial Update

As previously reported, 6,387 prescriptions were filled for Xyrem in the second quarter representing a 25 percent increase over the number of filled prescriptions in the first quarter of 2004. Through the end of the second quarter, over 1,700 physicians had written Xyrem prescriptions. New prescriptions written were 1,845 in the quarter, a 40 percent increase over the first quarter.

Commercial Outlook

"Xyrem prescriptions increased strongly in the second quarter," stated John H. Bullion, Orphan Medical Chief Executive Officer, "and we anticipate that the rate of growth will increase during the second half of this year. We expect Xyrem revenues for the year to be within analyst estimates which range from $11.7 million to $12.7 million. We project that total 2004 revenues will be in the $19 to $20 million range. Our quarterly cash usage was lower in the second quarter than the approximate $3.0 to $3.5 million quarterly burn that we expect in the second half of this year."