BIOSPECIFICS TECHNOLOGIES CORP. |
(Exact name of registrant as specified in its charter) |
Delaware | 11-3054851 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
35 Wilbur Street, Lynbrook, NY | 11563 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each exchange on which registered |
Common Stock | The Nasdaq Global Market |
Large accelerated filer ☐ | Accelerated filer ☑ |
Non-accelerated filer ☐ (Do not check if a smaller reporting company) | Smaller reporting company ☑ |
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Item 15. | 68 |
· | the opportunity for minimally invasive non-surgical treatment XIAFLEX in several potential pipeline indications; |
· | whether and when the Company will hear from Endo International plc (“Endo”) the results of their full commercial assessment and analysis regarding the XIAFLEX® research and development (“R&D”) pipeline; |
· | the Company’s ability to achieve its future growth initiatives with regard to Dupuytren’s Contracture and Peyronie’s disease; |
· | the expansion of the market for XIAFLEX® through future growth initiatives; |
· | whether treating uterine fibroids with XIAFLEX® will achieve the advantages over major surgery identified by the Company; |
· | Endo’s interest in currently unlicensed indications, including capsular contracture of the breast, Dercum’s disease, knee arthrofibrosis, urethral strictures, hypertrophic scars and keloids; |
· | whether XIAFLEX® will be the only U.S. Food and Drug Administration (“FDA”) approved nonsurgical therapy for frozen shoulder (adhesive capsulitis); |
· | the projected receipt of payments from Endo and sublicense income payments based on Endo’s partnerships; |
· | and the strength of the Company’s IP portfolio. |
· | An agreement with Swedish Orphan Biovitrum AB (“Sobi”), pursuant to which Sobi has marketing rights for Xiapex® for the treatment of DC and PD in Europe and certain Eurasian countries; |
· | An agreement with Asahi Kasei Pharma Corporation (“Asahi”), pursuant to which Asahi has the right to commercialize XIAFLEX® for the treatment of DC and PD in Japan; and |
· | An agreement with Actelion Pharmaceuticals Ltd. (“Actelion”), pursuant to which Actelion obtained marketing and commercial rights for XIAFLEX® in Australia and New Zealand. |
· | Endo is currently distributing XIAFLEX® in Canada through Paladin Labs Inc. |
· | Sobi Partner Products, a business unit within Sobi, is primarily responsible for the applicable regulatory, clinical and commercialization activities for Xiapex® for DC in Europe, Russia and Turkey, and the Middle Eastern and North Africa. In November 2015, the EU Commission approved Sobi’s label expansion for Xiapex®. |
· | In July 2014, Asahi successfully submitted an application to the PMDA for the potential approval of XIAFLEX® for the treatment of DC in Japan. In July 2015, Asahi received approval for its regulatory application to the PMDA for XIAFLEX® for the treatment of patients with DC in Japan. In August 2015, XIAFLEX® was listed on the Japanese National Health Insurance (“NHI”) drug price standard for treatment of patients with DC. The first commercial sale of XIAFLEX® by Asahi for the treatment of DC in Japan occurred in September 2015. |
License Agreement | |||
First Amendment | |||
Second Amendment | |||
Dupuytren’s License Agreement | |||
Gelbard Amendment | |||
Frozen Shoulder License Agreement | |||
Cellulite License Agreement | |||
Gerut License Agreement | |||
· | Phase 1—Studies are initially conducted in healthy human volunteers or subjects with the target disease or condition and test the product candidate for safety, dosage tolerance, structure‑activity relationships, mechanism of action, absorption, metabolism, distribution, and excretion. If possible, Phase 1 trials may also be used to gain an initial indication of product effectiveness. |
· | Phase 2—Controlled studies are conducted in limited subject populations with a specified disease or condition to evaluate preliminary efficacy, identify optimal dosages, dosage tolerance and schedule, possible adverse effects and safety risks, and expanded evidence of safety. |
· | Phase 3—These adequate and well‑controlled clinical trials are undertaken in expanded subject populations, generally at geographically dispersed clinical trial sites, to generate enough data to provide statistically significant evidence of clinical efficacy and safety of the product for approval, to establish the overall risk‑benefit profile of the product, and to provide adequate information for the labeling of the product. Typically, two Phase 3 trials are required by the FDA for product approval. |
Patent No. | Patent Expiration | Relevant Product/Technology | Ownership | Jurisdiction Where Granted | |||||
RE39,941 | August 24, 2019 | XIAFLEX® | Advance Biofactures Corporation | United States | |||||
6,022,539 | June 3, 2019 | XIAFLEX® | Advance Biofactures Corporation | United States | |||||
7,811,560 | July 12, 2028 | XIAFLEX® | AUXILIUM US HOLDINGS, LLC AUXILIUM INTERNATIONAL HOLDINGS, INC. ACTIENT HOLDINGS LLC ACTIENT PHARMACEUTICALS LLC SLATE PHARMACEUTICALS, INC. TIMM MEDICAL HOLDINGS, LLC ACTIENT THERAPEUTICS LLC 70 MAPLE AVENUE, LLC TIMM MEDICAL TECHNOLOGIES, INC. AUXILIUM PHARMACEUTICALS, INC. | United States | |||||
7,854,929 | January 19, 2026 | Method of treating lateral epicondylitis | Research Foundation for the State University of New York | United States | |||||
8,323,643 | November 17, 2027 | Method of treating adhesive capsulitis | Research Foundation for the State University of New York | United States | |||||
9,744,138 | March 14, 2034 | Method of treating uterine fibroids with collagenase and thermally responsive polymer | BSTC, Duke University, North Carolina Central University | United States | |||||
10,071,143 | May 5, 2028 | Method of treating carpal tunnel syndrome | Research Foundation for the State University of New York | United States | |||||
10,119,131 | September 9, 2032 | Method for fermenting clostripain-producing Clostridium histolyticum in peptone medium to produce collagenase | BSTC | United States | |||||
10,123,959 | February 7, 2027 | Method of treating cellulite | Research Foundation for the State University of New York | United States |
· | the imposition of additional U.S. and foreign governmental controls or regulations; |
· | the imposition of costly and lengthy new export or import licensing requirements; |
· | the imposition of U.S. and/or international sanctions against a country, company, person or entity with whom the company does business that would restrict or prohibit continued business with the sanctioned country, company, person or entity; |
· | economic and political instability or disruptions, including local and regional instability, or disruptions due to natural disasters, such as severe weather and geological events, disruptions due to civil unrest and hostilities, rioting, military activity, terror attacks or armed hostilities; |
· | changes in duties and tariffs, license obligations and other non-tariff barriers to trade; |
· | the imposition of new trade restrictions; |
· | imposition of restrictions on the activities of foreign agents, representatives and distributors; |
· | foreign tax authorities imposing significant fines, penalties and additional taxes; |
· | pricing pressure that Endo may experience internationally; |
· | laws and business practices favoring local companies; |
· | difficulties in enforcing or defending intellectual property rights; and |
· | exposure to different legal and political standards due to Endo’s conducting business in several foreign countries. |
· | perceived safety and efficacy; |
· | convenience and ease of administration; |
· | incidence and severity of adverse side effects in both clinical trials and commercial use; |
· | the information in the approval product label, including the indications and any limitations and warnings; |
· | distribution and user restrictions; |
· | current standard of care; |
· | availability of alternative treatments or products, including biosimilars; |
· | cost effectiveness and pricing; |
· | the adequacy and effectiveness of Endo’s sales force and that of any partner’s sales force; |
· | Endo’s ability to establish and maintain agreements with wholesalers, distributors, group purchasing organizations, pharmacy benefit managers, and similar organizations on commercially reasonable terms; |
· | the adequacy and effectiveness of Endo’s production, distribution and marketing capabilities and those of Endo’s international partners; |
· | publicity concerning Endo’s products or competing products; and |
· | existence and level of third-party or government coverage or reimbursement for XIAFLEX® for the treatment of DC and PD and the price concessions required to obtain coverage. |
· | adverse decisions by a third party regarding the amount and timing of resource expenditures for the development and commercialization of XIAFLEX®/Xiapex®; |
· | possible disagreements as to the timing, nature and extent of Endo’s development plans, including clinical trials or regulatory approval strategy; |
· | the right of a third party to terminate its collaboration agreement with Endo on limited notice upon the occurrence of certain defined events; |
· | loss of significant rights if Endo fails to meet Endo’s obligations under the collaboration agreement; |
· | withdrawal of support by a third party following change of that third party’s corporate strategy or due to competing priorities; |
· | changes in key management personnel at a third party that are members of the collaboration’s various operating committees; and |
· | possible disagreements with a third party regarding the collaboration agreement or ownership of proprietary rights, including with respect to inventions discovered under the applicable collaborative agreement. |
· | Endo’s ability to manufacture and commercialize XIAFLEX® for which we would receive milestone, mark-up on cost of goods sold and royalty payments; |
· | The ability of Endo’s sublicensees to commercialize XIAFLEX®/Xiapex® in their respective territories; |
· | the amount actually owed by us to Endo for certain patent costs; |
· | Endo’s ability to successfully develop and receive regulatory approval for indications that it has exercised its opt-in rights for; |
· | the scope, rate of progress, cost and results of our clinical trials on additional indications, including uterine fibroids, for which Endo could exercise its opt-in to acquire its rights; |
· | Endo’s ability to abide by and ensure third party compliance with the many regulatory requirements applicable to pharmaceutical products; |
· | the terms and timing of any future collaborative, licensing, co-promotion and other arrangements that we may establish; |
· | the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights or defending against any other litigation; and |
· | the extent to which Endo may reallocate priority away from XIAFLEX®. |
· | changes to the regulatory approval process for product candidates; |
· | obtaining regulatory approval to commence or continue a clinical trial; |
· | timing of responses required from regulatory authorities; |
· | negotiating acceptable clinical trial agreement terms with prospective contract research organizations, investigators or trial sites; |
· | obtaining institutional review board, or equivalent, approval to conduct or continue a clinical trial at a prospective site; |
· | recruiting subjects to participate in a clinical trial and retaining subjects in the study; |
· | competition in recruiting clinical investigators; |
· | shortage or lack of availability of clinical trial supplies from external and internal sources; |
· | the need to repeat clinical trials as a result of inconclusive results or poorly executed testing, or to conduct additional clinical or preclinical trials or analyses; |
· | Clinical or pre-clinical trials, as well as commercial experience with similar products, may reveal undesirable side effects, which may require that clinical trials be halted or modified; |
· | failure to validate a patient-reported outcome questionnaire; |
· | the placement of a clinical hold on a study by regulatory authorities, the suspension of a study by an institutional review board, or a decision to suspend or terminate a study by us or our partners; |
· | the failure of third parties conducting and overseeing the operations of our clinical trials to perform their contractual or regulatory obligations in a timely fashion; |
· | exposure of clinical trial subjects to unexpected and unacceptable health risks or noncompliance with regulatory requirements, which may result in suspension of the trial; and |
· | manufacturing and/or distribution issues associated with clinical supplies. |
· | clinical trials may show product candidates to be ineffective or not as effective as anticipated or to have harmful side effects or unforeseen results; |
· | experience with marketed versions of product candidates may reveal harmful side effects or other unforeseen results; |
· | regulatory authorities may disagree with study design, conduct, and/or data interpretation from preclinical and clinical trials, or may find that a product candidate’s benefits do not outweigh its risks; |
· | regulatory authorities may take longer than anticipated to make a decision on the product candidates; |
· | regulatory authorities may require that we or our partners perform additional clinical or pre-clinical trials, or gather additional manufacturing information; |
· | our, our partners, or third party contractor failures to abide by the applicable regulatory requirements or study protocol; |
· | regulatory authorities may fail to approve or subsequently find fault with the product candidate manufacturing processes or the contract manufacturer’s manufacturing facility for clinical and future commercial supplies; |
· | regulatory authorities may require that we or our partners undertake post-market testing, surveillance, or implement a REMS to maintain regulatory approval; |
· | product candidates may fail to receive regulatory approvals required to bring the products to market; |
· | manufacturing costs, the inability to scale up to produce supplies for clinical trials meeting the necessary quality standards, or other factors may make our product candidates uneconomical; |
· | changes in approval policies, data standards, statutes, and regulations; and |
· | the proprietary rights of others and their competing products and technologies may prevent product candidates from being effectively commercialized or from obtaining exclusivity. |
· | the nature, timing and estimated costs of the efforts necessary to complete the development of our drug candidate projects and submit marketing applications; |
· | the anticipated completion dates for our drug candidate projects; |
· | the scope, rate of progress and cost of our clinical trials that we are currently running or may commence in the future with respect to our drug candidate projects; |
· | the scope, rate of progress of our preclinical studies and other R&D activities related to our drug candidate projects; |
· | clinical trial results for our drug candidate projects; |
· | the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights relating to our drug candidate projects; |
· | the terms and timing of any strategic alliance, licensing and other arrangements that we have or may establish in the future relating to our drug candidate projects; |
· | the cost and timing of regulatory approvals with respect to our drug candidate projects; and |
· | the cost of establishing clinical supplies for our drug candidate projects. |
· | restrictions on our products or the manufacturing processes of such products; |
· | warning letters, untitled letters and cyber letters; |
· | withdrawal of a product from the market; |
· | voluntary or mandatory recall of a product; |
· | fines; |
· | suspension or withdrawal of regulatory approvals for a product; |
· | refusal to permit the import or export of our products; |
· | refusal to approve pending applications or supplements to approved applications that we submit; |
· | denial of permission to file an application or supplement in a jurisdiction; |
· | debarment, exclusion from participation in federal healthcare programs, exclusion or debarment from government contracting, consent decrees, or corporate integrity agreements; |
· | product seizure; and |
· | injunctions or the imposition of civil or criminal penalties against us. |
· | we may fail to seek patent protection for inventions that are important to our success; |
· | our pending patent applications may not result in issued patents; |
· | we cannot be certain that we were the first to invent the inventions covered by pending pre-America Invents Act patent applications or that we were the first to file such applications and, if we are not, we may be subject to priority disputes; |
· | we may be required to disclaim part or all of the term of certain patents or all of the term of certain patent applications; |
· | we may file patent applications but have claims restricted or we may not be able to supply sufficient data to support our claims and, as a result, may not obtain the original claims desired or we may receive restricted claims. Alternatively, it is possible that we may not receive any patent protection from an application; |
· | we could inadvertently abandon a patent or patent application, resulting in the loss of protection of certain intellectual property rights in a certain country. We, our collaborators or our patent counsel may take action resulting in a patent or patent application becoming abandoned which may not be able to be reinstated or if reinstated, may suffer patent term adjustments; |
· | the claims of our issued patents or patent applications when issued may not cover our products; |
· | no assurance can be given that our patents would be declared by a court to be valid or enforceable or that a competitor’s technology or product would be found by a court to infringe our patents. Our patents or patent applications may be challenged by third parties in patent litigation or in proceedings before the USPTO or its foreign counterparts, and may ultimately be declared invalid or unenforceable, or narrowed in scope; |
· | there may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim; |
· | third parties may develop products which have the same or similar effect as our products without infringing our patents. Such third parties may also intentionally circumvent our patents by means of alternate designs or processes or file applications or be granted patents that would block or hurt our efforts; |
· | there may be dominating patents relevant to our product candidates of which we are not aware; |
· | our patent counsel, lawyers or advisors may have given us, or may in the future give us incorrect advice or counsel. Opinions from such patent counsel or lawyers may not be correct or may be based on incomplete facts; |
· | obtaining regulatory approval for biopharmaceutical products is a lengthy and complex process, and as a result, any patents covering our product candidates may expire before, or shortly after such product candidates are approved and commercialized; |
· | the patent and patent enforcement laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as laws in the U.S., and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions. If we encounter such difficulties or we are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business prospects could be substantially harmed; and |
· | we may not develop additional proprietary technologies that are patentable. |
· | results of our clinical trials; |
· | failure of any product candidates we have licensed to Endo to achieve commercial success; |
· | failure of Endo to exercise any opt in rights to new indications; |
· | regulatory developments in the U.S. and foreign countries; |
· | developments or disputes concerning patents or other proprietary rights; |
· | litigation involving us or our general industry, or both; |
· | future sales of our common stock by the estate of our former Chairman and Chief Executive Officer, directors, officers, or others; |
· | changes in the structure of healthcare payment systems, including developments in price control legislation; |
· | departure of key personnel; |
· | termination of agreements with our licensees or their sublicensees; |
· | announcements of material events by those companies that are our competitors or perceived to be similar to us; |
· | changes in estimates of our financial results; |
· | investors’ general perception of us; |
· | general economic, industry and market conditions; and |
· | the reallocation by Endo of its priorities away from XIAFLEX®. |
· | provide for a classified Board; |
· | give our Board the ability to designate the terms of and issue new series of preferred stock without stockholder approval, commonly referred to as “blank check” preferred stock, with rights senior to those of our common stock; |
· | limit the ability of the stockholders to call special meetings; and |
· | impose advance notice requirements on stockholders concerning the election of directors and other proposals to be presented at stockholder meetings. |
· | In February 2011 to increase the threshold from 15% to 18% and extend the expiration date for an additional two years, to May 31, 2014. |
· | In February 2014, to extend the term for an additional two years, to May 31, 2016. |
· | In May 2016, to extend the term for an additional two years, to May 31, 2018. |
· | In May 2018, to extend the term for an additional two years, to May 31, 2020. |
The table below sets forth the high and low closing sale prices for our common stock as reported by and as quoted by NASDAQ for each of the quarterly periods in 2018 and 2017:
2018 | HIGH | LOW | ||||||
Fourth Quarter | $ | 66.30 | $ | 52.08 | ||||
Third Quarter | $ | 62.50 | $ | 43.06 | ||||
Second Quarter | $ | 45.12 | $ | 40.54 | ||||
First Quarter | $ | 44.98 | $ | 38.05 |
2017 | HIGH | LOW | ||||||
Fourth Quarter | $ | 48.93 | $ | 42.81 | ||||
Third Quarter | $ | 52.05 | $ | 45.00 | ||||
Second Quarter | $ | 58.00 | $ | 48.15 | ||||
First Quarter | $ | 57.19 | $ | 49.35 |
These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
(a) | (b) | (c) | |
Equity compensation plans approved by security holders(1) | 175,500 | $37.73 | 147,598 |
Equity compensation plans not approved by security holders | - | - | - |
Total | 175,500 | $37.73 | 147,598 |
Month | Total Number of Shares Purchased (2) | Average Price Paid Per Share(3) | Total Number of Shares Purchased as Part of Publicly Announced Plan | Maximum Dollar Value of Shares that may yet be Purchased under the Plan | ||||||||||||
$ | 3,000,000 | (1) | ||||||||||||||
September 1, 2018 – September 30, 2018 | 43,705 | $ | 58.55 | 318,719 | 440,950 | |||||||||||
October 1, 2018 – October 31, 2018 | 5,069 | 57.97 | 323,788 | 147,117 | ||||||||||||
November 1, 2018 – November 30, 2018 | 1,350 | 58.52 | 325,138 | 68,121 | ||||||||||||
December 1, 2018 – December 31, 2018 | 1,207 | 56.59 | 326,345 | - |
(1) | On August 9, 2018, we announced that our Board of Directors had authorized the repurchase of up to $3.0 million of our common stock under the stock repurchase program. |
(2) | The purchases were made in open-market transactions in compliance with Rule 10b-18 or under the Company’s 10b-18 plan. |
(3) | Includes commissions paid, if any, related to the stock repurchase transactions. |
12/31/2013 | 12/31/2014 | 12/31/2015 | 12/31/2016 | 12/31/2017 | 12/31/2018 | |||||||||||||||||||
Biospecifics Technologies Corp | $ | 100.00 | $ | 178.22 | $ | 198.29 | $ | 257.04 | $ | 199.95 | $ | 279.65 | ||||||||||||
Nasdaq Biotechnology Index | $ | 100.00 | $ | 134.10 | $ | 149.42 | $ | 117.02 | $ | 141.66 | $ | 128.45 | ||||||||||||
Nasdaq Composite Index | $ | 100.00 | $ | 113.40 | $ | 119.89 | $ | 128.89 | $ | 165.29 | $ | 158.87 |
* | Total return assumes $100 invested on December 31, 2013 in our common stock, the Nasdaq Composite Index, and the Nasdaq Biotechnology Index and reinvestment of dividends through fiscal year ended December 31, 2018. |
Consolidated Statement of Income Data | Years Ended December 31, | |||||||||||||||||||
2018 | 2017 | 2016 | 2015 | 2014 | ||||||||||||||||
Total revenues | $ | 32,961,443 | $ | 27,443,752 | $ | 26,250,955 | $ | 22,750,135 | $ | 14,044,624 | ||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development | 756,776 | 1,223,277 | 1,327,923 | 1,034,288 | 1,263,512 | |||||||||||||||
General and administrative | 8,805,989 | 8,542,324 | 7,896,616 | 7,272,532 | 5,814,185 | |||||||||||||||
Total costs and expenses | 9,562,765 | 9,765,601 | 9,224,539 | 8,306,820 | 7,077,697 | |||||||||||||||
Operating income | 23,398,678 | 17,678,151 | 17,026,416 | 14,443,315 | 6,966,927 | |||||||||||||||
Other income: | ||||||||||||||||||||
Interest income | 1,294,651 | 636,568 | 295,783 | 92,926 | 32,158 | |||||||||||||||
Other | 103,948 | 51,074 | 52,805 | 14,719 | 33,582 | |||||||||||||||
1,398,599 | 687,642 | 348,588 | 107,645 | 65,740 | ||||||||||||||||
Income before income tax | 24,797,277 | 18,365,793 | 17,375,004 | 14,550,960 | 7,032,667 | |||||||||||||||
Provision for income tax expense | (4,744,008 | ) | (7,037,527 | ) | (6,002,765 | ) | (4,933,328 | ) | (2,386,707 | ) | ||||||||||
Net income | $ | 20,053,269 | $ | 11,328,266 | $ | 11,372,239 | $ | 9,617,632 | $ | 4,645,960 | ||||||||||
Earnings per common share: | ||||||||||||||||||||
Basic | $ | 2.77 | $ | 1.58 | $ | 1.61 | $ | 1.41 | $ | 0.72 | ||||||||||
Diluted | $ | 2.73 | $ | 1.55 | $ | 1.56 | $ | 1.32 | $ | 0.66 | ||||||||||
Shares used in calculation of net income per common share: | ||||||||||||||||||||
Basic | 7,242,212 | 7,170,701 | 7,061,404 | 6,827,355 | 6,477,457 | |||||||||||||||
Diluted | 7,333,368 | 7,321,805 | 7,283,262 | 7,272,989 | 7,079,570 |
Years Ended December 31, | ||||||||||||||||||||
Consolidated Balance Sheet Data: | 2018 | 2017 | 2016 | 2015 | 2014 | |||||||||||||||
Cash and cash equivalents | $ | 13,176,452 | $ | 7,333,810 | $ | 4,763,364 | $ | 5,137,875 | $ | 9,810,816 | ||||||||||
Investments | 68,806,977 | 57,719,945 | 48,026,242 | 31,944,083 | 12,150,436 | |||||||||||||||
Total assets | 100,092,042 | 74,996,394 | 64,696,280 | 45,698,113 | 31,026,824 | |||||||||||||||
Total stockholders’ equity | 97,588,519 | 67,516,838 | 56,281,943 | 44,810,209 | 30,256,855 |
Year Ended December 31 | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Royalties | $ | 32,921,764 | $ | 27,426,117 | $ | 25,431,012 | ||||||
Licensing revenue | 39,679 | 17,635 | 819,943 | |||||||||
Total revenues | $ | 32,961,443 | $ | 27,443,752 | $ | 26,250,955 |
Year Ended December 31 | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Licensing fees | $ | - | $ | - | $ | 750,000 | ||||||
Development licensing fees | 39,679 | 17,635 | 41,443 | |||||||||
Milestones | - | - | 28,500 | |||||||||
Total Licensing revenues | $ | 39,679 | $ | 17,635 | $ | 819,943 |
Year Ended December 31, 2018 | Year Ended December 31, 2017 | Year Ended December 31, 2016 | ||||||||||
Program | ||||||||||||
Human Lipoma | $ | - | $ | - | $ | 412,933 | ||||||
Uterine Fibroids | 311,863 | 500,719 | 214,221 | |||||||||
Pre-clinical/other research projects | 444,913 | 722,558 | 700,769 |
· | the nature, timing and estimated costs of the efforts necessary to complete the development of our drug candidate projects; |
· | the anticipated completion dates for our drug candidate projects; |
· | the scope, rate of progress and cost of our clinical trials that we are currently running or may commence in the future with respect to our drug candidate projects; |
· | the scope, rate of progress of our preclinical studies and other R&D activities related to our drug candidate projects; |
· | clinical trial results for our drug candidate projects; |
· | the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights relating to our drug candidate projects; |
· | the terms and timing of any strategic alliance, licensing and other arrangements that we have or may establish in the future relating to our drug candidate projects; |
· | the cost and timing of regulatory approvals with respect to our drug candidate projects; and |
· | the cost of establishing clinical supplies for our drug candidate projects. |
Year ending December 31, | ||||
2019 | $ | 133,000 | ||
2020 | 3,400 | |||
2021 | 2,300 | |||
2022 | 600 |
Item 11. | EXECUTIVE COMPENSATION |
a) | The following documents are filed as part of this Annual Report: |
(1) | Consolidated Financial Statements (See Index to Consolidated Financial Statements on page F-1) |
(2) | Financial Statement Schedules |
(3) | Exhibits |
b) | Exhibits |
Page | |
Reports of Independent Registered Public Accounting Firm | F-2 |
Consolidated Balance Sheets | F-4 |
Consolidated Statements of Income | F-5 |
Consolidated Statements of Stockholders’ Equity | F-6 |
Consolidated Statements of Cash Flows | F-7 |
Notes to Consolidated Financial Statements | F-8 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of BioSpecifics Technologies Corp.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of BioSpecifics Technologies Corp. and subsidiary (the "Company") as of December 31, 2018 and 2017, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2018 and 2017, and the consolidated results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the Company's internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"), and our report dated April 2, 2019 expressed an unqualified opinion.
Change in Accounting Principle
As discussed in Note 2 to the financial statements, the Company has changed its method of accounting for revenue in the year ended December 31, 2018 due to the adoption of Accounting Standards Codification Topic 606, "Revenue from Contracts with Customers".
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ EisnerAmper LLP
We have served as the Company's auditor since 2014
EISNERAMPER LLP
New York, New York
April 2, 2019
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of BioSpecifics Technologies Corp.
Opinion on Internal Control over Financial Reporting
We have audited BioSpecifics Technologies Corp. and subsidiary's (the "Company") internal control over financial reporting as of December 31, 2018, based on criteria established in the Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in the Internal Control - Integrated Framework (2013) issued by COSO.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) ("PCAOB"), the consolidated balance sheets of BioSpecifics Technologies Corp. and subsidiary as of December 31, 2018 and 2017, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2018, and the related notes and our report dated April 2, 2019 expressed an unqualified opinion.
Basis for Opinion
The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
An entity's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. An entity's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the entity; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the entity are being made only in accordance with authorizations of management and directors of the entity; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the entity's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
EISNERAMPER LLP
New York, New York
April 2, 2019
December 31, | ||||||||
2018 | 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 13,176,452 | $ | 7,333,810 | ||||
Short term investments | 67,707,143 | 51,973,971 | ||||||
Accounts receivable | 16,518,687 | 4,655,105 | ||||||
Deferred royalty buy-down | 184,931 | 1,794,126 | ||||||
Prepaid expenses and other current assets | 646,749 | 623,503 | ||||||
Total current assets | 98,233,962 | 66,380,515 | ||||||
Long-term investments | 1,099,834 | 5,745,974 | ||||||
Deferred royalty buy-down – long term, net | - | 732,206 | ||||||
Deferred tax assets, net | 313,768 | 1,739,706 | ||||||
Patent costs, net | 444,478 | 397,993 | ||||||
Total assets | $ | 100,092,042 | $ | 74,996,394 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | 1,798,588 | $ | 933,998 | |||||
Income tax payable | 704,934 | 68,733 | ||||||
Deferred revenue | - | 1,057,979 | ||||||
Accrued liabilities of discontinued operations | - | 78,138 | ||||||
Total current liabilities | 2,503,522 | 2,138,848 | ||||||
Long-term deferred revenue | - | 5,340,708 | ||||||
Commitments and contingencies (Note 10) | ||||||||
Stockholders' equity: | ||||||||
Series A Preferred stock, $.50 par value, 700,000 shares authorized; none outstanding | - | - | ||||||
Common stock, $.001 par value; 10,000,000 shares authorized; 7,738,167 and 7,600,167 shares issued, 7,275,902 and 7,189,233 outstanding at December 31, 2018 and 2017, respectively | 7,738 | 7,600 | ||||||
Additional paid-in capital | 36,302,446 | 33,468,323 | ||||||
Retained earnings | 72,176,719 | 41,939,115 | ||||||
Treasury stock, 462,265 and 410,934 shares at cost as of December 31, 2018 and 2017 | (10,898,383 | ) | (7,898,200 | ) | ||||
Total stockholders' equity | 97,588,520 | 67,516,838 | ||||||
Total liabilities and stockholders’ equity | $ | 100,092,042 | $ | 74,996,394 |
Years Ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Revenues: | ||||||||||||
Royalties | $ | 32,921,764 | $ | 27,426,117 | $ | 25,431,012 | ||||||
Licensing revenue | 39,679 | 17,635 | 819,943 | |||||||||
Total revenues | 32,961,443 | 27,443,752 | 26,250,955 | |||||||||
Costs and expenses: | ||||||||||||
Research and development | 756,776 | 1,223,277 | 1,327,923 | |||||||||
General and administrative | 8,805,989 | 8,542,324 | 7,896,616 | |||||||||
Total costs and expenses | 9,562,765 | 9,765,601 | 9,224,539 | |||||||||
Operating income | 23,398,678 | 17,678,151 | 17,026,416 | |||||||||
Other income: | ||||||||||||
Interest income | 1,294,651 | 636,568 | 295,783 | |||||||||
Other | 103,948 | 51,074 | 52,805 | |||||||||
1,398,599 | 687,642 | 348,588 | ||||||||||
Income before income tax | 24,797,277 | 18,365,793 | 17,375,004 | |||||||||
Income tax provision | (4,744,008 | ) | (7,037,527 | ) | (6,002,765 | ) | ||||||
Net income | $ | 20,053,269 | $ | 11,328,266 | $ | 11,372,239 | ||||||
Earnings per common share: | ||||||||||||
Basic | $ | 2.77 | $ | 1.58 | $ | 1.61 | ||||||
Diluted | $ | 2.73 | $ | 1.55 | $ | 1.56 | ||||||
Shares used in calculation of net income per common share: | ||||||||||||
Basic | 7,242,212 | 7,170,701 | 7,061,404 | |||||||||
Diluted | 7,333,368 | 7,321,805 | 7,283,262 |
Common Stock | ||||||||||||||||||||||||
Shares | Amount | Additional Paid in Capital | Retained Earnings | Treasury Stock | Stockholder Equity Total | |||||||||||||||||||
Balances - December 31, 2015 | 7,290,167 | 7,290 | 31,797,418 | 19,238,610 | (6,233,109 | ) | 44,810,209 | |||||||||||||||||
Issuance of common stock upon stock option exercise | 265,000 | 265 | 711,135 | - | - | 711,400 | ||||||||||||||||||
Stock compensation expense | - | - | 133,904 | - | - | 133,904 | ||||||||||||||||||
Repurchases of common stock | - | - | - | - | (1,048,592 | ) | (1,048,592 | ) | ||||||||||||||||
Excess tax benefits from share-based payment arrangements | - | - | 302,783 | - | - | 302,783 | ||||||||||||||||||
Net income | - | - | - | 11,372,239 | - | 11,372,239 | ||||||||||||||||||
Balances - December 31, 2016 | 7,555,167 | $ | 7,555 | $ | 32,945,240 | $ | 30,610,849 | $ | (7,281,701 | ) | $ | 56,281,943 | ||||||||||||
Issuance of common stock upon stock option exercise | 45,000 | 45 | 395,705 | - | - | 395,750 | ||||||||||||||||||
Stock compensation expense | - | - | 127,378 | - | - | 127,378 | ||||||||||||||||||
Repurchases of common stock | - | - | - | - | (616,499 | ) | (616,499 | ) | ||||||||||||||||
Net income | - | - | - | 11,328,266 | - | 11,328,266 | ||||||||||||||||||
Balances - December 31, 2017 | 7,600,167 | $ | 7,600 | $ | 33,468,323 | $ | 41,939,115 | $ | (7,898,200 | ) | $ | 67,516,838 | ||||||||||||
Adjustments to prior periods from adopting ASC606 | - | - | - | 10,184,335 | - | 10,184,335 | ||||||||||||||||||
Issuance of common stock upon stock option exercise | 138,000 | 138 | 2,570,692 | - | - | 2,570,830 | ||||||||||||||||||
Stock compensation expense | - | - | 263,431 | - | - | 263,431 | ||||||||||||||||||
Repurchases of common stock | - | - | - | - | (3,000,183 | ) | (3,000,183 | ) | ||||||||||||||||
Net income | - | - | - | 20,053,269 | - | 20,053,269 | ||||||||||||||||||
Balances - December 31, 2018 | 7,738,167 | $ | 7,738 | $ | 36,302,446 | $ | 72,176,719 | $ | (10,898,383 | ) | $ | 97,588,520 |
Years Ended December 31, | ||||||||||||
Cash flows from operating activities: | 2018 | 2017 | 2016 | |||||||||
Net income | $ | 20,053,269 | $ | 11,328,266 | $ | 11,372,239 | ||||||
Adjustments to reconcile net income to net cash provided in operating activities: | ||||||||||||
Amortization | 2,432,941 | 2,239,551 | 1,691,539 | |||||||||
Stock-based compensation expense | 263,431 | 127,378 | 133,904 | |||||||||
Deferred tax expense | 90,176 | 1,550,416 | (2,667,150 | ) | ||||||||
Extinguishment of accrued liabilities | (78,138 | ) | - | - | ||||||||
Changes in operating assets and liabilities: | ||||||||||||
Accounts receivable | (4,308,855 | ) | (844,313 | ) | (1,262,872 | ) | ||||||
Income tax receivable / payable | (763,740 | ) | 563,444 | 422,132 | ||||||||
Prepaid expenses and other current assets | (23,246 | ) | 842 | (240,535 | ) | |||||||
Patent costs | (121,199 | ) | (204,416 | ) | (23,341 | ) | ||||||
Accounts payable and accrued expenses | 325,577 | 195,349 | 127,640 | |||||||||
Deferred royalty buy-down | - | (600,000 | ) | (600,000 | ) | |||||||
Deferred revenue | (139,680 | ) | (1,198,863 | ) | 7,398,793 | |||||||
Net cash provided by operating activities from operations | 17,730,536 | 13,157,654 | 16,352,349 | |||||||||
Cash flows from investing activities: | ||||||||||||
Maturities of marketable securities | 75,170,817 | 54,320,741 | 43,242,679 | |||||||||
Purchases of marketable securities | (86,629,358 | ) | (64,687,200 | ) | (59,935,130 | ) | ||||||
Net cash used in investing activities from operations | (11,458,541 | ) | (10,366,459 | ) | (16,692,451 | ) | ||||||
Cash flows from financing activities: | ||||||||||||
Proceeds from stock option exercises | 2,570,830 | 395,750 | 711,400 | |||||||||
Repurchases of common stock | (3,000,183 | ) | (616,499 | ) | (1,048,592 | ) | ||||||
Excess tax benefits from share-based payment arrangements | - | - | 302,783 | |||||||||
Net cash used in financing activities | (429,353 | ) | (220,749 | ) | (34,409 | ) | ||||||
Increase (decrease) in cash and cash equivalents | 5,842,642 | 2,570,446 | (374,511 | ) | ||||||||
Cash and cash equivalents at beginning of year | 7,333,810 | 4,763,364 | 5,137,875 | |||||||||
Cash and cash equivalents at end of year | $ | 13,176,452 | $ | 7,333,810 | $ | 4,763,364 | ||||||
Supplemental disclosures of cash flow information: | ||||||||||||
Cash paid during the year for: | ||||||||||||
Interest | $ | - | $ | - | $ | - | ||||||
Taxes | $ | 5,417,572 | $ | 5,400,000 | $ | 7,945,000 |
1. | ORGANIZATION AND DESCRIPTION OF BUSINESS |
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
Maturities as of December 31, 2018 | Maturities as of December 31, 2017 | |||||||||||||||
1 Year or Less | Greater than 1 Year | 1 Year or Less | Greater than 1 Year | |||||||||||||
Municipal bonds | $ | 1,295,350 | $ | - | $ | 1,002,650 | $ | 100,000 | ||||||||
Corporate Bonds | 61,321,162 | 1,099,834 | 48,143,495 | 3,155,575 | ||||||||||||
Certificates of deposit | 5,090,631 | - | 2,827,826 | 249,019 | ||||||||||||
Total | $ | 67,707,143 | $ | 1,099,834 | $ | 51,973,971 | $ | 5,745,974 |
December 31, | ||||||||
2018 | 2017 | |||||||
Patents | $ | 1,046,216 | $ | 925,016 | ||||
Accumulated Amortization | (601,738 | ) | (527,023 | ) | ||||
Net Patent Costs | $ | 444,478 | $ | 397,993 |
2019 | $ | 75,200 | ||
2020 | 58,300 | |||
2021 | 41,500 | |||
2022 | 41,500 | |||
2023 | 41,500 |
As reported December 31, 2017 | Adjustments | Adjusted January 1, 2018 | ||||||||||
Accounts receivable | $ | 4.7 | $ | 7.6 | (1) | $ | 12.3 | |||||
Deferred revenue | (6.4 | ) | 6.3 | (2) | (0.1 | ) | ||||||
Deferred royalty buy-down | (2.5 | ) | (0.4 | )(3) | (2.9 | ) | ||||||
Accounts payable and accrued expenses -third party royalties | (0.4 | ) | (0.6 | )(3) | (1.0 | ) | ||||||
Deferred tax assets, net | 1.7 | (1.3 | )(4) | 0.4 | ||||||||
Income tax payable | - | (1.4 | )(5) | (1.4 | ) | |||||||
Retained earnings adjustment | $ | (2.9 | ) | $ | 10.2 | $ | 7.3 |
(1) | This adjustment represents the elimination of the one quarter lag by recognizing royalty revenues based on of XIAFLEX® net sales and mark-up on cost of goods sold revenues reported to us by Endo for the fourth quarter of 2017. |
(2) | Represents the remaining deferred revenue balance of the prepaid mark-up on cost of goods sold based on sales by non-affiliated sublicensees of Endo outside of the U.S. |
(3) | Represents the amortization of the royalty buy-down and third party royalties expense associated royalty revenues based on XIAFLEX® net sales reported to us by Endo for the fourth quarter of 2017. |
(4) | To reverse a deferred tax asset associated with the deferred revenue balance of the prepaid mark-up on cost of goods sold by non-affiliated sublicensees of Endo outside of the U.S. |
(5) | To create a tax liability associated the elimination of the one quarter lag by recognizing royalty revenues based on of XIAFLEX® net sales and mark-up on cost of goods sold revenues reported to us by Endo for the fourth quarter of 2017. |
December 31, 2018 | ||||||||||||
As Reported | Balances Without Adoption of New Revenue Standard | Effect of Change Higher / (Lower) | ||||||||||
Assets | ||||||||||||
Accounts receivable | $ | 16.5 | $ | 6.8 | $ | 9.7 | ||||||
Deferred royalty buy-down | 0.2 | 0.2 | - | |||||||||
Deferred tax assets | 0.3 | 1.4 | (1.1 | ) | ||||||||
Liabilities | ||||||||||||
Accounts payable and accrued expenses | 1.8 | 1.0 | 0.8 | |||||||||
Deferred revenue | - | 1.0 | (1.0 | ) | ||||||||
Income tax payable | 0.7 | (1.2 | ) | 1.9 | ||||||||
Deferred revenue, long term | - | 4.3 | (4.3 | ) | ||||||||
Equity | ||||||||||||
Retained earnings | 72.2 | 61.0 | 11.2 |
Three Months Ended December 31, 2018 | ||||||||||||
As Reported | Balances Without Adoption of New Revenue Standard | Effect of Change Higher / (Lower) | ||||||||||
Revenues | ||||||||||||
Royalties | $ | 9.9 | $ | 8.5 | $ | 1.4 | ||||||
Costs and expenses | ||||||||||||
General and administrative | $ | 2.5 | $ | 2.4 | $ | 0.1 | ||||||
Provision for income taxes | 1.5 | 1.0 | 0.5 | |||||||||
Net income | 6.2 | 5.2 | 1.0 |
Twelve Months Ended December 31, 2018 | ||||||||||||
As Reported | Balances Without Adoption of New Revenue Standard | Effect of Change Higher / (Lower) | ||||||||||
Revenues | ||||||||||||
Royalties | $ | 33.0 | $ | 31.7 | $ | 1.3 | ||||||
Costs and expenses | ||||||||||||
General and administrative | $ | 8.8 | $ | 8.7 | $ | 0.1 | ||||||
Provision for income taxes | 4.7 | 4.5 | 0.2 | |||||||||
Net income | 20.1 | 19.1 | 1.0 |
3. | FAIR VALUE MEASUREMENTS |
December 31, 2018 | Type of Instrument | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Cash equivalents | Institutional Money Market | $ | 6,078,025 | $ | 6,078,025 | $ | - | $ | - | ||||||||
Investments | Municipal Bonds | 1,295,350 | - | 1,295,350 | - | ||||||||||||
Investments | Corporate Bonds | 62,420,996 | - | 62,420,996 | - | ||||||||||||
Investments | Certificates of Deposit | 5,090,631 | 5,090,631 | - | - |
December 31, 2017 | Type of Instrument | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Cash equivalents | Institutional Money Market | $ | 3,108,549 | $ | 3,108,549 | $ | - | $ | - | ||||||||
Cash equivalents | Municipal Bonds | 800,000 | - | 800,000 | - | ||||||||||||
Investments | Municipal Bonds | 1,102,650 | - | 1,102,650 | - | ||||||||||||
Investments | Corporate Bonds | 51,299,068 | - | 51,299,068 | - | ||||||||||||
Investments | Certificates of Deposit | 5,318,227 | 5,318,227 | - | - |
4. | EARNINGS PER SHARE |
2018 | 2017 | 2016 | ||||||||||
Net income | $ | 20,053,269 | $ | 11,328,266 | $ | 11,372,239 | ||||||
Weighted average shares: | ||||||||||||
Basic | 7,242,212 | 7,170,701 | 7,061,404 | |||||||||
Effect of dilutive securities: | ||||||||||||
Stock options | 91,156 | 151,104 | 221,858 | |||||||||
Diluted | 7,333,368 | 7,321,805 | 7,283,262 | |||||||||
Net income per share: | ||||||||||||
Basic | $ | 2.77 | $ | 1.58 | $ | 1.61 | ||||||
Diluted | $ | 2.73 | $ | 1.55 | $ | 1.56 |
5. | PROPERTY, PLANT AND EQUIPMENT |
6. | COMPREHENSIVE INCOME |
7. | ACCOUNTS PAYABLE AND ACCRUED LIABILITIES |
December 31, | ||||||||
2018 | 2017 | |||||||
Trade accounts payable and accrued expenses | $ | 122,199 | $ | 481,753 | ||||
Accrued legal and other professional fees | 308,725 | 150,691 | ||||||
Accrued payroll and related costs | 173,123 | 215,322 | ||||||
Third party royalties | 1,168,837 | - | ||||||
Other accruals | 25,704 | 86,232 | ||||||
$ | 1,798,588 | $ | 933,998 |
8. | INCOME TAXES |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Current taxes: | ||||||||||||
Federal | $ | 4,612,874 | $ | 5,513,691 | $ | 8,571,034 | ||||||
State | 40,958 | (26,580 | ) | 98,881 | ||||||||
Total current taxes | 4,653,832 | 5,487,111 | 8,669,915 | |||||||||
Deferred taxes: | ||||||||||||
Federal | 86,634 | 1,548,247 | (2,647,363 | ) | ||||||||
State | 3,542 | 2,169 | (19,787 | ) | ||||||||
Total deferred taxes | 90,176 | 1,550,416 | (2,667,150 | ) | ||||||||
Total provision for income taxes | $ | 4,744,008 | $ | 7,037,527 | $ | 6,002,765 |
Year ended December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
Statutory rate | 21.00 | % | 35.00 | % | 35.00 | % | ||||||
State income taxes, net of federal income tax benefit | 0.13 | % | (0.08 | )% | 0.26 | % | ||||||
Stock-based compensation | (1.64 | )% | (3.33 | )% | (0.50 | )% | ||||||
Deferred rate change | 0.01 | % | 6.21 | % | - | |||||||
Miscellaneous other, net | (0.37 | )% | 0.52 | % | (0.21 | )% | ||||||
Effective tax rate | 19.13 | % | 38.32 | % | 34.55 | % |
December 31, | ||||||||
2018 | 2017 | |||||||
Deferred revenue | $ | - | $ | 1,344,232 | ||||
Stock option based compensation | 239,492 | 322,524 | ||||||
Other | 74,276 | 72,950 | ||||||
Net deferred tax asset | $ | 313,768 | $ | 1,739,706 |
9. | STOCKHOLDERS’ EQUITY |
December 31, | ||||||||||||
2018 | 2017 | 2016 | ||||||||||
General and administrative | $ | 263,431 | $ | 127,378 | $ | 133,904 | ||||||
Total stock-based compensation expense | $ | 263,431 | $ | 127,378 | $ | 133,904 |
2018 | 2017 | 2016 | ||||||||||
Risk-free interest rate | 2.62% - 2.94 | % | - | - | ||||||||
Expected volatility | 39.4% - 39.9 | % | - | - | ||||||||
Expected life (in years) | 6.25 | - | - | |||||||||
Dividend yield | - | - | - |
Shares | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Term | Aggregate Intrinsic Value | |||||||||||||
Outstanding at January 1, 2016 | 297,000 | 20.14 | 3.10 | 10,561,380 | ||||||||||||
Grants | - | - | - | - | ||||||||||||
Exercised | (45,000 | ) | 8.79 | - | 1,554,100 | |||||||||||
Forfeitures or expirations | (20,000 | ) | 29.21 | - | - | |||||||||||
Outstanding at December 31, 2017 | 232,000 | 21.56 | 2.52 | 5,050,990 | ||||||||||||
Grants | 81,500 | 51.42 | - | - | ||||||||||||
Exercised | (138,000 | ) | 18.63 | - | 3,720,149 | |||||||||||
Outstanding at December 31, 2018 | 175,500 | 37.73 | 6.33 | 4,014,235 | ||||||||||||
Vested and expected to vest at December 31, 2018 | 175,500 | $ | 37.73 | 6.33 | 4,014,235 | |||||||||||
Exercisable at December 31, 2018 | 86,500 | $ | 24.84 | 3.22 | $ | 3,093,460 |
Outstanding Shares | Exercisable Shares | |||||||||||||||||||||||||
Option Exercise Price | Number of Shares | Weighted Average Life (years) | Weighted Average Exercise Price | Number of Shares | Weighted Average Option Price | Weighted Average Life (years) | ||||||||||||||||||||
$ | 13.24 - 15.85 | 30,000 | 3.85 | $ | 15.80 | 30,000 | $ | 15.80 | 3.85 | |||||||||||||||||
$ | 17.00 - 29.21 | 34,000 | 0.62 | 24.34 | 34,000 | 24.34 | 0.62 | |||||||||||||||||||
$ | 37.64 - 57.38 | 111,500 | 8.73 | 47.71 | 22,500 | 37.64 | 6.31 | |||||||||||||||||||
175,500 | 6.33 | $ | 37.73 | 86,500 | $ | 24.84 | 3.22 |
10. | COMMITMENTS AND CONTINGENCIES |
Year ending December 31, | ||||
2019 | $ | 133,000 | ||
2020 | 3,400 | |||
2021 | 2,300 | |||
2022 | 600 |
11. | RELATED PARTY TRANSACTIONS |
12. | EMPLOYEE BENEFIT PLANS |
14. | SELECTED QUARTERLY DATA (Unaudited) |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
Year ended December 31, 2018 | ||||||||||||||||
Net revenues | $ | 7,089,409 | $ | 7,850,774 | $ | 8,168,081 | $ | 9,853,179 | ||||||||
Operating profit | 4,824,549 | 5,595,026 | 5,773,379 | 7,205,724 | ||||||||||||
Net income | 3,978,604 | 4,847,931 | 5,043,050 | 6,183,684 | ||||||||||||
Basic earnings per share | $ | 0.55 | $ | 0.67 | $ | 0.69 | $ | 0.85 | ||||||||
Diluted earnings per share | $ | 0.54 | $ | 0.66 | $ | 0.69 | $ | 0.84 |
First Quarter | Second Quarter | Third Quarter | Fourth Quarter | |||||||||||||
Year ended December 31, 2017 | ||||||||||||||||
Net revenues | $ | 7,690,619 | $ | 6,535,516 | $ | 6,516,108 | $ | 6,701,509 | ||||||||
Operating profit | 5,010,121 | 3,882,502 | 3,983,760 | 4,801,768 | ||||||||||||
Net income | 3,344,753 | 2,624,091 | 2,714,832 | 2,644,590 | ||||||||||||
Basic earnings per share | $ | 0.47 | $ | 0.37 | $ | 0.38 | $ | 0.37 | ||||||||
Diluted earnings per share | $ | 0.46 | $ | 0.36 | $ | 0.37 | $ | 0.36 |
Exhibit Number | Description of Exhibit |
Company’s Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 of the Company’s Annual Report on Form 10-KSB filed March 2, 2007 (File No. 000-19879)) | |
Company’s Amended and Restated By-laws, as amended February 25, 2014 (incorporated by reference to Exhibit 3.2 of the Company’s Annual Report on Form 10-K filed March 7, 2014 (File No. 001-34236)) | |
Amendment to Amended and Restated By-laws (incorporated by reference to Exhibit 3.1 of the Company’s Current Report on Form 8-K filed February 26, 2014 (File No. 001-34236)) | |
Rights Agreement, dated May 14, 2002, by and between the Company and OTC Corporate Transfer Service Company (incorporated by reference to Exhibit 1 to the Company’s Form 8-A filed May 30, 2002 (File No. 000-19879)) | |
Amendment No. 1 to Rights Agreement, dated June 19, 2003, by and between the Company and OTC Corporate Transfer Service Company (incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-KSB filed March 2, 2007 (File No. 000-19879)) | |
Amendment No. 2 to Rights Agreement, dated February 3, 2011, by and between the Company and OTC Corporate Transfer Service Company (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed February 4, 2011 (File No. 001-34236)) | |
Amendment No. 3 to Rights Agreement, dated March 5, 2014, by and between the Company and Worldwide Stock Transfer, LLC (as successor in interest to OTC Corporate Transfer Service Company) (incorporated by reference to Exhibit 4.4 of the Company’s Annual Report on Form 10-K filed March 7, 2014 (File No. 001-34236)) | |
Amendment No. 4 to Rights Agreement, dated May 27, 2016, by and between the Company and Worldwide Stock Transfer, LLC (as successor in interest to OTC Corporate Transfer Service Company) | |
Amendment No. 5 to Rights Agreement, dated May 11, 2018, by and between the Company and Worldwide Stock Transfer, LLC (as successor in interest to OTC Corporate Transfer Service Company) | |
BioSpecifics Technologies Corp. 1997 Stock Option Plan (incorporated by reference to Exhibit 4.1 of the Company’s Form S-8 filed September 26, 1997 (File No. 333-160583)) | |
BioSpecifics Technologies Corp. Amended and Restated 2001 Stock Option Plan (incorporated by reference to Appendix D of the Company’s Definitive Proxy Statement on Schedule 14A filed April 30, 2009 (File No. 001-34236)) | |
Agreement of Lease, dated November 21, 2013, by and among the Company, ABC-NY and 35 Wilbur Street Associates, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Annual Report on Form 10-K filed March 7, 2014 (File No. 001-34236)) | |
Lease Renewal Letter Agreement, dated August 14, 2015, by and among the Company, ABC NY and 35 Wilbur Street Associates, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed November 9, 2015 (File No. 001-34236)) | |
Lease Renewal Letter Agreement, dated November 1, 2016, by and among the Company, ABC NY and 35 Wilbur Street Associates, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed November 9, 2016 (File No. 001-34236)) | |
Lease Renewal Letter Agreement, dated November 6, 2017, by and among the Company, ABC NY and 35 Wilbur Street Associates, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed November 9, 2017 (File No. 001-34236)) | |
Lease Renewal Letter Agreement, dated August 14, 2018, by and among the Company, ABC NY and 35 Wilbur Street Associates, LLC (incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q filed November 9, 2017 (File No. 001-34236)) |
Asset Purchase Agreement, dated March 3, 2006, by and among the Company, ABC-NY and DFB Biotech, Inc. (incorporated by reference to Exhibit 2.1 of the Company’s Current Report on Form 8-K filed March 9, 2006 (File No. 000-19879)) | |
Amendment to Asset Purchase Agreement, dated January 8, 2007, by and among the Company, ABC-NY and DFB Biotech, Inc. (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed January 12, 2007 (File No. 000-19879)) | |
Dupuytren’s License Agreement, dated November 21, 2006, by and between the Company and the Research Foundation of the State University of New York for and on behalf of Stony Brook University (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed November 28, 2006 (File No. 000-19879)) | |
Frozen Shoulder License Agreement, dated November 21, 2006, by and between the Company and the Research Foundation of the State University of New York for and on behalf of Stony Brook University (incorporated by reference to Exhibit 10.2 of the Company’s Current Report on Form 8-K filed November 28, 2006 (File No. 000-19879)) | |
Cellulite License Agreement, dated August 23, 2007, by and between the Company and the Research Foundation of the State University of New York for and on behalf of Stony Brook University (incorporated by reference to Exhibit 10.7 of the Company’s Annual Report on Form 10-K filed March 15, 2013 (File No. 001-34236)) | |
License Agreement, dated March 27, 2010, by and between the Company and Zachary Gerut, M.D. (incorporated by reference as Exhibit 10.8 of the Company’s Annual Report on Form 10-K filed March 15, 2013 (File No. 001-34236)) | |
Second Amended and Restated Development and License Agreement, dated August 31, 2011, by and between the Company and Auxilium Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed September 1, 2011 (File No. 001-34236)) | |
First Amendment to Second Amended and Restated Development and License Agreement, dated February 1, 2016, by and between the Company and Endo Global Ventures (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed February 5, 2016 (File No. 001-34236)) | |
Second Amendment to Second Amended and Restated Development and License Agreement, dated February 26, 2019, by and between the Company and Endo Global Ventures (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed February 28, 2019 (File No. 001-34236)) | |
Settlement Agreement, dated August 31, 2011, by and between the Company and Auxilium Pharmaceuticals, Inc. (incorporated by reference to Exhibit 10.2 of the Company's Current Report on Form 8-K filed September 1, 2011 (File No. 001-34236)) | |
Amended and Restated Agreement, dated August 27, 2008, by and between ABC-NY and Dr. Marty Gelbard (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed September 5, 2008 (File No. 001-19879)) | |
Amendment to Amended and Restated Agreement, dated March 31, 2012, by and between ABC-NY and Dr. Marty Gelbard (incorporated by reference to Exhibit 10.1 of the Company’s Amendment to Current Report on Form 8-K/A filed August 13, 2012 (File No. 001-34236)) | |
Non-Employee Director Change of Control Agreement, dated June 18, 2007, by and between the Company and Michael Schamroth (incorporated by reference to Exhibit 10.22 of the Company’s Annual Report on Form 10-KSB filed September 26, 2007 (File No. 000-19879)) | |
Non-Employee Director Change of Control Agreement, dated June 18, 2007, by and between the Company and Dr. Paul Gitman (incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-KSB filed September 26, 2007 (File No. 000-19879)) |
Non-EmployAs required under theee Director Change of Control Agreement, dated April 22, 2015, by and between the Company and Jyrki Mattila (incorporated by reference to Exhibit 10.19 of the Company’s Annual Report on Form 10-K filed March 14, 2016 (File No. 001-34236)) | |
Executive Employment Agreement, dated August 5, 2008, by and between the Company and Thomas L. Wegman (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed August 8, 2008 (File No. 000-19879)) | |
Offer Letter, dated November 15, 2018, by and between and Dr. Ronald E. Law | |
Amendment to Offer Letter, dated March 4, 2019, by and between and Dr. Ronald E. Law | |
Second Amendment to Offer Letter, dated April 1, 2019, by and between and Dr. Ronald E. Law | |
Confidentiality and Inventions Assignment Agreement, dated November 16, 2018, by and between and Dr. Ronald E. Law | |
Consulting Agreement, dated April 1, 2019, by and between the Company and Patrick M. Caldwell | |
Amended and Restated Indemnification Agreement, dated September 12, 2012, by and between the Company and Patrick M. Caldwell | |
Company’s Amended and Restated Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.1 of the Company’s Annual Report on Form 10-K filed March 14, 2018 (File No. 001-34236)) | |
Subsidiaries of the Company | |
Consent of EisnerAmper LLP, Independent Registered Accounting Firm | |
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002 | |
101* | The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Income, (iii) Consolidated Statements of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements |
* | Filed herewith |
** | Furnished herewith |
† | Identifies exhibits that consist of a management contract or compensatory arrangement |
Date: April 2, 2019 | ||
BIOSPECIFICS TECHNOLOGIES CORP. | ||
By: | /s/ Ronald Law | |
Name: | Ronald Law | |
Title: | Principal Executive Officer |
SIGNATURE | TITLE | |
/s/ Ronald Law | Principal Executive Officer | |
Name: Ronald Law | (Principal Executive Officer) | |
Date: April 2, 2019 | ||
/s/ Pat Caldwell | Principal Financial Officer | |
Name: Pat Caldwell | (Principal Financial Officer and Principal | |
Date: April 2, 2019 | Accounting Officer) | |
Director | ||
Name: Dr. Paul Gitman | ||
Date: April 2, 2019 | ||
/s/ Michael Schamroth | Director | |
Name: Michael Schamroth | ||
Date: April 2, 2019 | ||
/s/ Dr. Mark Wegman | Director | |
Name: Dr. Mark Wegman | ||
Date: April 2, 2019 | ||
/s/ Toby Wegman | Director | |
Name: Toby Wegman | ||
Date: April 2, 2019 |
| Director | |
Name: Dr. Jyrki Mattila | ||
Date: April 2, 2019 | ||
/s/ Jennifer Chao | Director | |
Name: Jennifer Chao | ||
Date: April 2, 2019 |