Bentley reports big drop in earnings

Bentley Pharmaceuticals’ quarterly profits dropped sharply as a result of the Spanish government’s policy of cutting the cost of prescription medicine as well as increased operating costs, the company announced Thursday..

The Exeter-based provider of generic drugs and alternative delivery systems posted a net income of $700,000 – 3 cents a diluted share — in the second quarter of 2007, compared to $2.6 million in the same quarter last year, or 12 cents a diluted share.

The company, which has its biggest market in Spain, cut prices even more than required in that country in order to capture market share. While the move increased volume and helped contribute to $31.2 million in revenue – an 8 percent year over year increase – it didn’t increase market share, nor did it make up from the gross profit margin decline.

“Overall our market share is unchanged,” said John Sedor, president of Bentley, who called the quarter “a challenging three months for our generic business.”

Operating expenses increased by $1.9 million. About half of that increase was due to increases in research and development. But the other half was primarily due to “general and administrative” costs. The increase in spending came even though a one-time $733,000 charge from last year for a litigation settlement was no longer on the books.

The company did learn last month that it extended patent rights, which could provide increased protection for the use of the company’s internasal drug delivery system. While drug delivery only accounts for less than a tenth of the company’s revenues, and last quarter was a $2.5 million drag on the bottom line, the hope is that it will help the company grow in the future.

The company also had $36 million in cash as of June 30, more than twice that it had at the end of last year, but that reflects the closing of a $14.8 million loan agreement with a Spanish financial institution in June, a long-term debt that the company didn’t have before.

Bentley stock fell sharply amid heavy trading shortly after the earnings release, dropping from $11.37 to share to a low of 9.05, before recovering to $10.38. – BOB SANDERS