InKine Reports 2004 Year End Financial Results: Delivering $0.06 Per S

InKine Reports 2004 Year End Financial Results: Delivering $0.06 Per Share and Achieving Full Year Profitability

    Business Editors/Health/Medical Writers

    BLUE BELL, Pa.--(BUSINESS WIRE)--Feb. 23, 2005--InKine Pharmaceutical Company, Inc. (Nasdaq: INKP)

--	Grew annual revenues by 53% to $22.1 million for 2004, compared to $14.4 million for 2003
--	Recognized sequential revenue growth in each quarter during 2004
--	Generated positive cash flow from operations; reporting $13.1 million in cash and investments and zero debt
--	Announced positive results in INKP-102 Phase III colonoscopy study
--	Announced 2005 guidance; growing EPS by at least 33% to between $0.08 and $0.11 per share

    InKine Pharmaceutical Company, Inc. (Nasdaq: INKP) today announced its fourth quarter and year end financial results, reporting revenues for the 2004-year of $22.1 million, compared to $14.4 million for the same period a year ago. The Company recognized revenues of $6.2 million for the fourth quarter ending December 31, 2004, a 47% increase over revenues of $4.2 million for the same period a year ago. The Company generated net income of $3.1 million or $0.06 per share for the year ended December 31, 2004, compared to a net loss of $(1.5) million or $(0.04) per share for the year ended December 31, 2003.
    "We are pleased to report our first year of net income and positive cash flow from operations," said Leonard S. Jacob, M.D., Ph.D., Chairman and Chief Executive Officer of InKine. "Along with our financial accomplishments of 2004, we also had many successes with our research and development endeavors. We completed a Phase IV study of low dose Visicol(R), which demonstrated positive results in treating patients with chronic constipation and completed a Phase II and a Phase III study of INKP-102 for use as a purgative prior to colonoscopy. Yesterday we announced outstanding results from the INKP-102 Phase III study and hopes to submit the NDA for this novel purgative tablet during the first half of 2005," added Dr. Jacob.

    Product Sales:

    -- Product revenues for the fourth quarter of 2004 were $5.8
    million, a 38% increase over product revenues of $4.2 million
    for the same period a year ago. Prescription levels have
    escalated as a result of increased sales and marketing
    efforts, which continue to grow market awareness and
    acceptance of Visicol(R). Approximately 135,000 prescriptions
    were filled for Visicol(R) during the fourth quarter of 2004,
    which represents approximately a 36% increase over
    prescriptions of 99,000 for the fourth quarter of 2003. The
    continued quarter-to-quarter growth in Visicol(R)
    prescriptions occurred during the fourth quarter in spite of
    the flat fourth quarter market. Visicol(R) prescriptions grew
    by over 3,000 prescriptions in the fourth quarter, compared to
    the previous quarter. The total prescription market increased
    by approximately 5,000 prescriptions for the same periods.

    -- In addition to product revenue, the Company realized
    $1,408,000 in other revenue, for the year ended December 31,
    2004, which was mostly attributable to its promotion agreement
    with Sigma-Tau Pharmaceuticals.

    -- Based upon information currently available, 2005 product
    revenues are expected to grow in the range of 35% to 55% to
    $28.0 million to $32.0 million. The revenue trend is expected
    to be consistent with 2004, whereas sequential growth is
    forecasted from first to fourth quarter of 2005. In addition
    to product revenue, approximately $0.5 million to $0.7 million
    in other revenue is expected from promotion and international
    license agreements.

    "Visicol(R) has been prescribed to more than 1.2 million patients since its introduction," said Robert F. Apple, Chief Operating and Financial Officer of InKine. "For 2005, we plan to carefully manage our growth, by making resource investment in key areas that will return shareholder value. Our team is committed to growing our gastrointestinal presence, which will continue to be leveraged as we grow our pipeline through indication expansion, product improvements, and product acquisition," added Mr. Apple.

    Costs and Expenses:

    -- Research and development costs were $1.7 million and $5.0
    million for the quarter and year ending December 31, 2004,
    compared to $0.6 million and $1.8 million for the same periods
    a year ago. The significant increases were the result of
    development costs associated with the clinical studies of the
    Company's next generation MCC-free purgative tablet, INKP-102.
    During 2004, the Company spent approximately $3.0 million and
    $0.4 on INKP-102 and Colirest, compared to $0.4 million and
    $0.2 million during 2003. In addition to these direct project
    related costs, the Company incurred approximately $1.6 million
    and $0.9 million during 2004 and 2003, respectively, related
    to payroll and other indirect costs related to its research
    and development initiatives. Based upon information currently
    available, the Company expects that research and development
    costs will be in the range of $6.5 million to $7.0 million for
    the 2005-year. The focus of 2005 research and development
    efforts will be on the completion of clinical and NDA
    submission of INKP-102, which will occur primarily in the
    first half of 2005, and on a Phase II placebo controlled dose
    ranging study of Visicol(R) for use in treating patients with
    chronic constipation.

    -- Sales and marketing costs were $1.7 million and $7.6 million
    for the quarter and year ending December 31, 2004, compared to
    $1.5 million and $5.9 million for the same periods a year ago.
    During 2004, sales and marketing costs included expenses
    associated with the Company's sales force, which consisted of
    approximately 45 territories with four district managers,
    along with marketing campaigns related to Visicol(R). The
    Company had approximately 36 territories and three district
    managers during 2003. Based upon information currently
    available, sales and marketing costs are expected to be in the
    range of $9.5 million to $10.0 million for the 2005-year. The
    increase in anticipated sales and marketing costs is due to
    projected increased head count for the Company's
    gastrointestinal sales force to 50 sales representatives and
    five district managers, along with increased marketing
    spending in key areas including market research and pre-launch
    activities associated with INKP-102.

    -- General and administrative costs were $1.2 million and $3.3
    million for the quarter and year ending December 31, 2004,
    compared to $0.7 million and $2.6 million for the same periods
    a year ago. The increases were the result of higher personnel,
    patent and insurance costs resulting from increased overhead
    costs associated with supporting a growing sales volume, head
    count and market capitalization, along with increased legal
    and accounting fees associated with maintaining compliance
    with the Sarbanes-Oxley Act of 2002. Based upon information
    currently available, general and administrative costs are
    expected to be in the range of $3.8 million to $4.0 million
    for the 2005-year.

    -- In addition to the above operating expenses and based upon
    information currently available, the Company expects to incur
    $0.7 million to $0.9 million in equity compensation costs
    related to option and restricted stock grants under its equity
    compensation plans. Compensation costs estimated, assume the
    adoption of SFAS No. 123 (revised) for the third and fourth
    quarters of 2005.

    -- Based upon information currently available, 2005 earnings per
    share is expected to grow by at least 33% to between $0.08 to
    $0.11 per share, which includes the effect of the adoption of
    SFAS No. 123 (revised)

    Balance Sheet:

    -- The Company had $13.1 million in cash and investments at
    December 31, 2004.

    The Company will be hosting a conference call today at 11:00 AM EST to further discuss the fourth quarter 2004 financial results. To participate please dial (877) 709-8150 about five to ten minutes prior to the initiation of the teleconference. The conference call will also be available on replay starting at 1:00 PM EST on February 23, 2005, and ending at 5:00 PM EST on March 2, 2005. For the replay, please dial (877) 660-6853 (replay account # 2658, replay conference # 134296). The access number for the replay for international callers is (201) 612-7415 (replay account # 2658, replay conference # 134296).

    About InKine Pharmaceutical

    InKine Pharmaceutical Company, Inc. is a publicly traded specialty pharmaceutical company focused on developing and commercializing pharmaceutical products for the diagnosis and treatment of gastrointestinal disorders. The Company's development strategy is to acquire late-stage drug candidates with short time lines to commercialization. The Company's franchise product, Visicol(R) is the only tablet purgative preparation indicated for bowel cleansing prior to colonoscopy. InKine's second product, IB-Stat(R), is an oral hyoscyamine spray for the treatment of a variety of indications. Additionally, the Company is developing INKP-102, an advanced generation purgative, which recently completed Phase III clinical trials for bowel cleansing prior to colonoscopy and studying Visicol(R) for use as a laxative in treating patients with chronic constipation. For further information, please visit InKine on its web site http://www.inkine.com.

    In addition to historical facts or statement of current condition, this press release and other statements made from time to time by representatives of the Company contain or may contain forward-looking statements. Forward-looking statements provide InKine's current expectations or forecasts of future events. These may include statements regarding anticipated scientific progress on its research programs, development of potential pharmaceutical products, interpretation of clinical results, prospects for regulatory approval, manufacturing development and capabilities, market prospects for its products, sales and earnings projections, and other statements regarding matters that are not historical facts. You may identify some of these forward-looking statements by the use of words in the statements such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe" or other words and terms of similar meaning. InKine's performance and financial results could differ materially from those reflected in these forward-looking statements due to general financial, economic, regulatory and political conditions affecting the biotechnology and pharmaceutical industries as well as more specific risks and uncertainties such as those set forth in its reports on Form 10-Q and 10-K filed with the U.S. Securities and Exchange Commission. Given these risks and uncertainties, any or all of these forward-looking statements may prove to be incorrect. Therefore, you should not rely on any such factors or forward-looking statements. Furthermore, InKine does not intend (and it is not obligated) to update publicly any forward-looking statements. This discussion is permitted by the Private Securities Litigation Reform Act of 1995.

    - Tables to Follow -

InKine Pharmaceutical Company, Inc. UNAUDITED CONDENSED STATEMENTS OF OPERATIONS (amounts in thousands, except per share)

Quarter Ended Year Ended December 31, December 31, -------------- ---------------- 2004 2003 2004 2003 ------ ------- ------- --------

Product revenue $5,778 $4,175 $20,702 $14,383 Other revenue 375 - 1,408 49 ------ ------- ------- -------- Total revenue 6,153 4,175 22,110 14,432 Cost of goods sold (900) (777) (2,935) (2,242) ------ ------- ------- -------- Gross profit 5,253 3,398 19,175 12,190

Research and development 1,688 569 5,011 1,822 Sales and marketing 1,705 1,535 7,599 5,873 General and administrative 1,169 703 3,347 2,585 Withdrawn public offering and litigation - - 200 - ------ ------- ------- -------- Operating expenses 4,562 2,807 16,157 10,280 ------ ------- ------- --------

Operating income 691 591 3,018 1,910

Interest and other expense 43 10 88 (614) Debt Conversion inducement , non-cash accretion and non-cash premium - - - (2,822) ------ ------- ------- --------

Net income (loss) $734 $601 $3,106 $(1,526) ====== ======= ======= ========

Net income (loss) per share: Basic $0.02 $0.01 $0.06 $(0.04) ====== ======= ======= ======== Diluted $0.01 $0.01 $0.06 $(0.04) ====== ======= ======= ======== Weighted average shares outstanding: Basic 48,759 48,454 48,666 42,839 Diluted 53,946 53,722 53,634 42,839

UNAUDITED CONDENSED BALANCE SHEETS (amounts in thousands) December December 31, 31, 2004 2003 -------- ------- ASSETS ------ Cash and investments $13,053 $10,442 Accounts receivable 2,264 1,170 Inventory 1,445 780 Other assets 622 905 -------- ------- Total assets $17,384 $13,297 ======== =======

LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Accounts payable and accrued expenses $3,016 $2,668 Shareholders' equity 14,368 10,629 -------- ------- Total liabilities and shareholders' equity $17,384 $13,297 ======== =======

--30--CD/ny*

CONTACT: InKine Pharmaceutical Company, Inc. Robert Apple, 215-283-6850 or Wolfe Axelrod Weinberger Assoc. LLC Don Weinberger, 212-370-4500 don@wolfeaxelrod.com

KEYWORD: PENNSYLVANIA INDUSTRY KEYWORD: PHARMACEUTICAL BIOTECHNOLOGY EARNINGS CONFERENCE CALLS SOURCE: InKine Pharmaceutical Company, Inc.

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