Medicis Provides Updates on Its Corporate Initiatives

SCOTTSDALE, Ariz., Dec. 27, 2011 (GLOBE NEWSWIRE) -- Medicis (NYSE:MRX) today announced that it has made substantial progress with its previously announced strategy to significantly reduce the Company's exposure to managed care restrictions for SOLODYN^® (minocycline HCl, USP) Extended Release Tablets and the Company's other therapeutic products. This strategy includes, among other things, negotiating new, multi-year contracts to begin in 2012 with targeted managed care organizations and pharmacy benefit managers to profitably achieve total coverage and access for SOLODYN of at least 75% of the insurable lives in the U.S. Medicis has also begun shipping ZYCLARA^® (imiquimod) Cream 3.75% in the U.S. and a number of its newly acquired products in Canada. Additionally, the Company has purchased approximately 4.4 million shares, or approximately $150 million, of its common stock under the previously announced Stock Repurchase Plan. As a result of successful execution on these initiatives to date, the Company has updated its financial guidance for the remainder of 2011.

"We are pleased with the progress of several corporate initiatives late in the fourth quarter," said Jonah Shacknai, Chairman and Chief Executive Officer of Medicis. "We believe our progress to date in securing multi-year contracts with managed care organizations and pharmacy benefit managers has greatly reduced the coverage risk associated with our therapeutic brands, and will provide SOLODYN total coverage and access to approximately 64% of the insurable lives in the United States. The Company looks forward to further execution of our strategy to profitably expand multi-year contracted access for SOLODYN and our other therapeutic brands."

Updated 2011 Financial Guidance

Medicis had previously announced that, if successful in its negotiations with managed care, the Company anticipated having to accrue additional sales reserves, not contemplated in its previously announced fourth quarter 2011 revenue guidance, totaling approximately $12-$17 million, and a corresponding impact on the quarter's non-generally accepted accounting principles (non-GAAP, defined below) diluted cash earnings per share (EPS, defined below) guidance. The financial guidance update provided below reflects a decrease in revenue of approximately $17 million, and a corresponding decrease in diluted cash EPS of $0.17, for the fourth quarter and calendar year-end.

Based upon information available currently to the Company's management, the Company's financial guidance for the remainder of 2011 is anticipated as follows:

Additional 2011 Guidance Considerations

Revenue and non-GAAP diluted cash EPS objectives include certain assumptions associated with:

• revenue associated with the Company's shipment of ZYCLARA in the U.S. and a number of its newly acquired products in Canada in the fourth quarter of 2011. Impact on non-GAAP diluted cash EPS is expected to be minimal, as any incremental revenue will be offset by associated operating expenses.
   
• the Company's decision, effective July 1, 2011, to stop shipment of the Legacy Strengths¹ of SOLODYN to wholesalers. The Company's guidance issued today in the table above reflects the decrease in sales and profitability associated with the Legacy Strengths. The average selling price (ASP) for the Legacy Strengths is approximately $200 higher than that of the current strengths.
   
• continued acceptance of newer strengths of SOLODYN by physicians;
   
• levels of managed care rebates for SOLODYN and the Company's other therapeutic brands;
   
• the Company's early 2011 discontinuation of TRIAZ^® and decision to no longer promote PLEXION^®;
   
• the exclusion of all revenue and expenses associated with LipoSonix, as the Company began classifying the LipoSonix business as a discontinued operation in the first quarter of 2011;
   
• competition in the dermal filler and botulinum toxin markets;
   
• gross profit margins of approximately 90-91% of revenues;
   
• selling, general and administrative (SG&A) expenses of approximately 47-49% of revenues;
   
• research and development (R&D) expenses of approximately 5-6% of revenues;
   
• effective tax rate of approximately 39-40%; and
   
• fully diluted weighted average shares outstanding of approximately 66-67 million shares. This includes a weighted average reduction of fully diluted shares outstanding of approximately 0.4 million shares associated with the Company's repurchase of shares in the fourth quarter of 2011 under the previously announced Stock Repurchase Plan.

The above guidance does not take into account the following:

• any one-time expenses that may result from the Graceway transaction, such as, but not limited to, acquired in-process R&D;
   
• amortization related to all acquired intangibles;
   
• changes in levels of managed care rebates, and the associated impact on sales, reserves, profitability and the ASP, for SOLODYN and the Company's other therapeutic brands. The Company is actively engaged in a strategy, which management believes will significantly reduce the Company's exposure to managed care restrictions for SOLODYN and the Company's other therapeutic products. This strategy includes, among other things, negotiating new, multi-year contracts to begin in 2012 with targeted managed care organizations and pharmacy benefit managers to profitably achieve total coverage and access for SOLODYN of at least 75% of the insurable lives in the U.S. SOLODYN was the 7^th largest infectious disease prescription product in the U.S. for 2010,² and we believe that our anticipated growth of SOLODYN will increase the risk of managed care restrictions. If we are successful in our continuing negotiations, we would anticipate having to accrue additional sales reserves in the relevant quarter.
   
• proceeds from the disposition of the LipoSonix business;
   
• special charges associated with R&D milestones or contract payments;
   
• the financial impact of fluctuations in the Company's stock price and the resulting effect on its Stock Appreciation Rights (SARs);
   
• the financial impact of potential future share repurchases made under the Company's previously announced Stock Repurchase Plan;
   
• the financial impact of legal settlements;
   
• additional recognized losses on our auction rate securities investments;
   
• recognized losses resulting from impairments on our intangible assets;
   
• the impact of accounting for new collaborative arrangements with Medicis partners;
   
• the financial impact of changes in accounting or governmental pronouncements;
   
• charges related to the accounting for our investment in Revance or Hyperion;
   
• material changes to the demand for ZIANA^® (clindamycin phosphate 1.2% and tretinoin 0.025%) Gel associated with the launch of a competitive product;
   
• material changes to our assumptions regarding sales of SOLODYN to wholesalers and the demand for SOLODYN associated with the November 2011 launch of generic forms of the Legacy Strengths of SOLODYN;
   
• material changes to our assumptions regarding returns, including associated returns reserves, of SOLODYN and the Company's other therapeutic brands;
   
• the timing of additional SOLODYN patent allowances, if any;
   
• uncertainty relating to the reduction of the ASP, including reserves, for covered products as a result of the rise in costs associated with consumer rebate programs, including MediSAVE and other point-of-sale offers;
   
• changes in reimbursement policies of health plans and other health insurers;
   
• the impact of the U.S. economy on the Company's aesthetic and therapeutic franchises; and
   
• significant changes in assumptions and estimates used for calculating various sales reserves.

At the time of this disclosure, Medicis believes these objectives are attainable based upon information currently available to the Company's management.

2012 Financial Guidance

The Company anticipates giving full 2012 guidance in the February 2012 timeframe.

It would be our objective to provide financial guidance at that time which will include, among other things:

• revenue growth in excess of approximately 10% compared to our 2011 guidance provided above;
   
• corporate gross profit margins consistent with the Company's existing margins of approximately 89-90% of revenues;
   
• R&D expenses of approximately 8-10% of revenues; and
   
• non-GAAP diluted cash EPS growth of approximately 10% compared to our 2011 guidance provided above.

Revenue and non-GAAP diluted cash EPS objectives include certain assumptions associated with:

• continued acceptance of newer strengths of SOLODYN by physicians;
   
• levels of managed care rebates for SOLODYN and the Company's other therapeutic brands;
   
• the Company's early 2011 discontinuation of TRIAZ and decision to no longer promote PLEXION;
   
• competition in the dermal filler and botulinum toxin markets; and
   
• successful launch and integration of newly acquired products.

The above guidance does not take into account the following:

• amortization related to all acquired intangibles;
   
• additional material changes in levels of managed care rebates, and the associated impact on sales, reserves, profitability and the ASP, for SOLODYN and the Company's other therapeutic brands. The Company is actively engaged in a strategy, which management believes will significantly reduce the Company's exposure to managed care restrictions for SOLODYN and the Company's other therapeutic products. This strategy includes, among other things, negotiating new, multi-year contracts to begin in 2012 with targeted managed care organizations and pharmacy benefit managers to profitably achieve total coverage and access for SOLODYN of at least 75% of the insurable lives in the U.S. SOLODYN was the 7^th largest infectious disease prescription product in the U.S. for 2010,² and we believe that our anticipated growth of SOLODYN will increase the risk of managed care restrictions. If we are successful in our continuing negotiations, we would anticipate having to accrue additional sales reserves in the relevant quarter.
   
• special charges associated with R&D milestones or contract payments;
   
• the financial impact of fluctuations in the Company's stock price and the resulting effect on its SARs;
   
• the financial impact of legal settlements;
   
• additional recognized losses on our auction rate securities investments;
   
• recognized losses resulting from impairments on our intangible assets;
   
• the impact of accounting for new collaborative arrangements with Medicis partners;
   
• the financial impact of changes in accounting or governmental pronouncements;
   
• charges related to the accounting for our investment in Revance or Hyperion;
   
• material changes to our assumptions regarding sales of SOLODYN to wholesalers and the demand for SOLODYN associated with the November 2011 launch of generic forms of the Legacy Strengths of SOLODYN;
   
• material changes to our assumptions regarding returns, including associated returns reserves, of SOLODYN and the Company's other therapeutic brands;
   
• the timing of additional SOLODYN patent allowances, if any;
   
• uncertainty relating to the reduction of the ASP, including reserves, for covered products as a result of the rise in costs associated with consumer rebate programs, including MediSAVE and other point-of-sale offers;
   
• changes in reimbursement policies of health plans and other health insurers;
   
• the impact of the U.S. economy on the Company's aesthetic and therapeutic franchises; and
   
• significant changes in assumptions and estimates used for calculating various sales reserves.

At the time of this disclosure, Medicis believes these objectives are attainable based upon information currently available to the Company's management.

Diluted Earnings Per Share

Diluted earnings per share amounts are calculated using the "if-converted" method of accounting regardless of whether the Company's outstanding convertible bonds meet the criteria for conversion and regardless of whether the bondholders actually convert their bonds into shares.

Non-GAAP Diluted Cash Earnings Per Share

Historically, the Company's non-GAAP diluted EPS amounts have been calculated excluding certain items, such as R&D charges which result from payments made to Medicis partners, transaction costs, the impairment of long-lived assets, gains resulting from the sale of subsidiaries, charges related to the accounting for our investment in Revance or Hyperion and litigation reserves.

Non-GAAP diluted cash EPS excludes amortization, in addition to all of the items identified in the paragraph above.

Use of Non-GAAP Financial Information

The Company provides non-GAAP financial information in this press release. Management measures the Company's performance using non-GAAP financial measures, such as those that are disclosed in this press release, to provide meaningful supplemental information regarding its operational performance and to enhance its investors' overall understanding of its core financial performance. This information facilitates management's internal comparisons to the Company's historical core operating results and competitors' core operating results, and is a basis for financial decision making. Management believes that Medicis' investors benefit from seeing the Company's results on the same basis as management, in addition to the GAAP presentation, where applicable. In our view, non-GAAP financial measures, such as non-GAAP diluted cash EPS, which are based on non-GAAP net income as defined below, are informative to investors, allowing them to focus on the ongoing operations and core results of Medicis' business. Historically, Medicis has provided similar non-GAAP information to its investors and believes that the use of such numbers provides consistency in the Company's financial disclosures. This information is not in accordance with, or an alternative for, information prepared using GAAP. Non-GAAP net income excludes certain items, such as R&D charges which result from payments made to Medicis partners, transaction costs, amortization (for calculation of diluted cash EPS only), the impairment of long-lived assets, gains resulting from the sale of subsidiaries, charges related to the accounting for our investment in Revance or Hyperion and litigation reserves. These items may have a material effect on the Company's net income and diluted earnings per common share calculated in accordance with GAAP. The Company excludes such charges and the related tax benefits when analyzing its financial results, as the items are distinguishable events or large non-cash expenses related to intangibles. Management believes that, by viewing the Company's results of operations excluding these charges, investors are given an indication of the ongoing results of the Company's operations.

About Medicis

Medicis is the leading independent specialty pharmaceutical company in the United States focusing primarily on the treatment of dermatological and aesthetic conditions. The Company is dedicated to helping patients attain a healthy and youthful appearance and self-image. Medicis has leading branded prescription products in a number of therapeutic and aesthetic categories. The Company's products have earned wide acceptance by both physicians and patients due to their clinical effectiveness, high quality and cosmetic elegance.

For more information about Medicis or the Company's products, please visit the Company's website at www.Medicis.com. Printed copies of the Company's complete audited financial statements are available free of charge upon request.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. All statements included in this press release that address activities, events or developments that Medicis expects, believes or anticipates will or may occur in the future are forward-looking statements, including, but not limited to:

• the Company's future prospects;
   
• the Company's ability to successfully negotiate contracts with managed care organizations and pharmacy benefit managers;
   
• the reduction of the coverage risk associated with the Company's therapeutic brands and the provision of SOLODYN total coverage and access to the insurable lives in the U.S.;
   
• revenues, gross profit margin, expense, tax rate, cash flows and earnings guidance;
   
• the contribution to revenues from sales of ZYCLARA in the U.S. and the Company's newly acquired products in Canada;
   
• information regarding business development activities and future regulatory approval of the Company's products;
   
• the Company's ability to consummate repurchases under its Stock Repurchase Plan due to changes in the Company's stock price, economic or other market conditions or corporate or regulatory requirements;
   
• the commercial success of the Company's products;
   
• the patentability of certain intellectual property;
   
• the potential for generic competition to SOLODYN and other Medicis products;
   
• the future expansion or contraction of the aesthetics market;
   
• the ability of Solta Medical, Inc. to make future contingent payments under the sale agreement for LipoSonix; and
   
• expectations relating to the Company's product development pipeline.

These statements are based on certain assumptions made by Medicis based on its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. No assurances can be given, however, that these activities, events or developments will occur or that such results will be achieved. Such statements are subject to a number of assumptions, risks and uncertainties, many of which are beyond the control of Medicis. The Company's business is subject to all risk factors outlined in the Company's most recent Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, Annual Report on Form 10-K for the year ended December 31, 2010, and other documents we file with the Securities and Exchange Commission (SEC). At the time of this press release, the Company cannot, among other things, assess the likelihood, timing or forthcoming results of R&D projects, the risks associated with the U.S. Food and Drug Administration (FDA) approval process and risks associated with significant competition within the Company's industry, nor can the Company validate its assumptions of the full impact on its business of the approval of competitive generic versions of the Company's primary brands, and any future competitive product approvals that may affect the Company's brands.

Additionally, Medicis may acquire and/or license products or technologies from third parties to enter into new strategic markets. The Company periodically makes up-front, non-refundable payments to third parties for R&D work that has been completed and periodically makes additional non-refundable payments for the achievement of various milestones. There can be no certainty about the periods in which these potential payments could be made, nor if any payments such as these will be made at all. Any estimated future guidance does not include, among other things, the potential payments associated with any such transactions.

There are a number of additional important factors that could cause actual results to differ materially from those projected, including, but not limited to:

• the anticipated size of the markets and demand for the Company's products;
   
• the availability of product supply or changes in the costs of raw materials;
   
• the receipt of required regulatory approvals;
   
• competitive developments affecting our products, including the potential entry of generic competitors;
   
• product liability claims;
   
• the introduction of federal and/or state regulations relating to the Company's business;
   
• dependence on sales of key products;
   
• changes in the treatment practices of physicians that currently prescribe the Company's products, including prescription levels;
   
• the uncertainty of future financial results and fluctuations in operating results, and the factors that may attribute to such fluctuations as set forth in our SEC filings;
   
• dependence on the Company's strategy (including the uncertainty of license payments and/or other payments due from third parties);
   
• changes in reimbursement policies of health plans and other health insurers;
   
• changes in levels of managed care rebates, and the associated impact on sales, reserves, profitability and the ASP, for SOLODYN and the Company's other therapeutic brands. The Company engages in negotiations from time to time, as management believes necessary, to enhance the longer-term sustainability of these brands. Such negotiations may result in increased managed care rebates, which may have a negative impact on sales, reserves, profitability and the ASP for affected products.
   
• decreases in revenues associated with the FDA's requirement, effective March 2011, that prescription benzoyl peroxide products that are not approved through a New Drug Application, such as TRIAZ, not be sold as prescription products;
   
• the timing and success of new product development by the Company or third parties;
   
• the inability to secure patent protection from filed patent applications, inadequate protection of the Company's intellectual property or challenges to the validity or enforceability of the Medicis proprietary rights;
   
• the risks of pending and future litigation or government investigations and enforcement actions; and
   
• other risks described from time to time in the Company's filings with the SEC.

Forward-looking statements represent the judgment of Medicis management as of the date of this release, and Medicis disclaims any intent or obligation to update any forward-looking statements contained herein, which speak as of the date hereof.

NOTE: Full prescribing information for any Medicis prescription product is available by contacting the Company. All trademarks are the property of their respective owners.

¹ The Legacy Strengths of SOLODYN include the 45 mg, 90 mg and 135 mg forms.
² Noah Pines. "Infectious Diseases." Medical Marketing and Media August 2011: 40-41.