Bentley Pharmaceuticals Announces First Quarter Financial Results

Business Wire, May 8, 2008

Reports Revenues of $40.0 Million in the First Quarter;

Revenues Increase 27% over 2007 First Quarter

EXETER, N.H. -- Bentley Pharmaceuticals, Inc. (NYSE: BNT), a specialty pharmaceutical company, today reported financial results for the first quarter and three months ended March 31, 2008.

First quarter 2008 revenues were $40.0 million, a 27% increase (13% in constant currency) from $31.4 million reported in the first quarter 2007. Gross margins on net product sales for the quarters ended March 31, 2008 and 2007 were approximately 45%. Operating income for the first quarter 2008 was $2.9 million compared with $4.2 million reported in the same quarter of the prior year. The Company noted that the first quarter 2008 operating expenses include $3.8 million, or $0.16 per diluted share, of strategic consulting expenses incurred in connection with the Company's plan to spin off its drug delivery business and sell its specialty generics business. Net income for the first quarter 2008 was $1.1 million, or $0.05 per diluted share, compared with $2.4 million, or $0.10 per diluted share, a year ago. Fluctuations in foreign currency provided a benefit of $0.6 million, or $0.02 per diluted share, in the first quarter 2008.

Bentley's specialty generics segment's revenue for the first quarter 2008 increased 25% (9% in constant currency) to $36.6 million from $29.2 million in the first quarter 2007. Specialty generics revenue outside of Spain as a percentage of total generics revenue increased to 32% for the first quarter 2008 from 26% reported in the first quarter 2007. Operating expenses of this segment increased 52% to $11.5 million from $7.5 million for the first quarter 2007 and were significantly increased by the inclusion of $2.0 million in strategic consulting expenses in connection with the Company's plan to sell its specialty generics business. Sales and marketing cost increases were consistent with rising revenues and included normal increases in related compensation. General and administrative expenses included normal compensation and benefit increases. Fluctuations in foreign currency exchange rates increased operating expenses by $1.3 million. Net income reported for specialty generics, including the $2.0 million of strategic consulting expenses, was $3.2 million for the first quarter 2008 compared to $3.8 million in the comparable quarter of 2007. Fluctuations in foreign currency provided a benefit of $0.6 million, or $0.02 per diluted share, in the first quarter 2008.

Drug delivery revenues in the first quarter 2008 increased by 60%, or $1.3 million, to $3.5 million compared to the first quarter 2007 due to royalties on increased sales of Testim([R]). Operating expenses increased $1.9 million from the first quarter 2007, primarily as a result of $1.9 million in strategic consulting expenses in connection with the planned spin-off of the drug delivery business. As a result, net loss reported for the first quarter 2008 attributed to the drug delivery business increased $0.6 million to $2.1 million from $1.5 million in the comparable quarter of 2007.

Cash, cash equivalents and marketable securities were $34.4 million at March 31, 2008 compared to $34.7 million at December 31, 2007. During the first quarter 2008 the Company invested $1.6 million in fixed asset additions and $0.7 million in drug licenses. This compares to additions of $2.0 million in fixed assets and $0.5 million in drug licenses during the first quarter 2007.

Management Comments

"We continue to be pleased with the performance of our generics business given the reimbursement environment and resulting price constraints in Spain," said Bentley President John Sedor. "As discussed in previous quarters, we have continued to expand beyond Spain in order to capitalize on growing demand for generic pharmaceuticals in other European markets. Generics revenues outside of Spain increased 55% compared to the first quarter of 2007 and represented the major factor contributing to the generics revenue growth in the quarter. We are also pleased with the growth in Testim[R] royalties which increased to $3.3 million in the first quarter of 2008, a $1.1 million increase over the first quarter of 2007."

Spin-off and Merger Transactions

"As previously disclosed, we have entered into a definitive agreement for Bentley and its specialty generics business to be acquired by Teva Pharmaceuticals," said Sedor. "The acquisition will take place following the spin-off of our drug delivery business as a new company, CPEX Pharmaceuticals, Inc., which expects to file a second amendment to its Form 10 this week. Completion of the spin-off is subject to various conditions, including, but not limited to, the CPEX Form 10 being declared effective by the Securities and Exchange Commission, approval of the spin-off by Bentley's Board of Directors, and receipt of an opinion to the effect that Bentley and CPEX each will be solvent and adequately capitalized immediately after the distribution, and Bentley has sufficient surplus under Delaware law to declare the dividend of CPEX common stock to Bentley shareholders. Completion of the merger is also subject to a number of conditions, including, but not limited to, completion of the spin-off of CPEX, shareholder approval of the merger and completion of European antitrust review. Although subject to various conditions, we expect the spin-off and merger transactions to be completed by the third quarter of 2008. Additional information regarding the spin-off can be found in the most current CPEX Form 10 which is available on the SEC website, and additional information regarding the proposed merger can be found in Bentley's preliminary proxy statement also located on the SEC website. In addition, shareholders should review updated versions of these documents as they become available."