Achieves Record Quarterly Gross Margin of $92 Million WOODCLIFF
LAKE, N.J., Nov. 6 /PRNewswire-FirstCall/ -- Par Pharmaceutical
Companies, Inc. (NYSE:PRX) today reported results for the third
quarter ended October 3, 2009. For the third quarter ended October
3, 2009, Par reported total revenues of $294.8 million and net
income of $26.3 million, or $0.76 per diluted share. This is
compared to reported revenues of $149.0 million and net income of
$0.5 million, or $0.01 per diluted share for the same period in
2008, which included several one-time items. For the nine months
ended October 3, 2009, total revenue was $902.8 million with net
income of $66.2 million, or $1.95 per diluted share. This is
compared to total revenues of $416.8 million and a net loss of
$19.3 million, or $0.57 per diluted share in the same period of
2008. Third Quarter Highlights Key Product Sales (Net sales
comparisons at the product level are to second quarter 2009, which
had 13 weeks of sales versus 14 weeks of sales in the third quarter
2009.) -- Metoprolol: For the quarter ended October 3, 2009, net
sales of metoprolol succinate were $161.1 million, a decrease of
47% from the second quarter 2009. The decrease was driven by a
decline in volume and price due to competition on the 25mg and 50mg
strengths, as well as inventory adjustments that benefited the
second quarter. Par remained the exclusive supplier of the 100mg
and 200mg strengths metoprolol succinate through the third quarter.
Par is the authorized generic for all strengths of AstraZeneca's
Toprol® XL. -- Clonidine: Net sales for the third quarter were
$20.4 million. Par launched the generic version of Catapres TTS® in
August and was the only generic supplier of the product during the
quarter. -- Sumatriptan: Net sales of sumatriptan succinate were
$16.7 million in the third quarter, a decrease of 24% from the
prior quarter due to the release of backorders during the second
quarter. Par remained the exclusive supplier of generic Imitrex®
4mg and 6mg starter kits and 4mg prefilled cartridges and had one
competitor in the 6mg prefilled cartridges throughout the third
quarter. -- Meclizine: Net sales for the three months ended October
3, 2009 were $10.7 million compared to $8.9 million in the second
quarter of 2009. The increase was due primarily to the additional
week of sales in the quarter. Par was the exclusive supplier of
meclizine through the first nine months of 2009. -- Dronabinol: Net
sales for the third quarter 2009 were $6.6 million compared to $5.5
million in the second quarter. The increase was due primarily to
the additional week of sales in the quarter. -- Other generic
products: For the third quarter 2009, net sales from all other
generic products were $54.0 million compared to $39.6 million in
the second quarter. The increase primarily reflects an increase in
volume of certain products such as tramadol APAP, risperidone ODT,
calcitonin, and doxycycline, as well as the launch of nateglinide
in September 2009. -- Megace® ES: Net sales were $19.1 million for
the three months ended October 3, 2009 compared to $17.1 million in
the second quarter. The increase in net sales was due to an
increase in price and volume. -- Nascobal® B12 Nasal Spray: Net
sales were $3.8 million for the three months ended October 3, 2009,
compared to $2.2 million in the second quarter. The increase is due
to a full quarter of promotional activity following the re-launch
of the product in June 2009 resulting in an increase in
prescription volume and market share. Total net revenues for the
three months ended October 3, 2009, were $294.8 million, up $145.8
million, or nearly 98%, from the year ago period, principally
driven by limited competition in metoprolol succinate, sumatriptan
succinate, meclizine, and dronabinol, as well as the launches of
nateglinide and clonidine in the third quarter 2009. Gross margin
for the third quarter 2009 was $92.1 million, or 31.3% of total
revenue, an increase of $40.7 million from the comparable period in
2008. Total generic gross margin in the third quarter 2009 was
$72.9 million, or 27.1% of total generic revenue, compared to $35.9
million, or 27.8% of total generic revenue in the third quarter
2008. This increase is due primarily to higher sales of metoprolol
coupled with the launches of sumatriptan, dronabinol, and
clonidine, partially offset by lower sales of fluticasone and
amoxicillin. The top five products, which include metoprolol,
clonidine, sumatriptan, meclizine, and dronabinol, contributed
$46.3 million of gross margin, or 21.5% of such generic revenue.
Gross margin of all other generic products was approximately $26.6
million, or 49.3% of other generic revenue. This compares to $15.2
million, or 23.2% of other generic revenue, in the third quarter of
2008. The increase in gross margin percentage was due to new
product launches, increased volume of certain existing products, as
well as the trimming of the generic product line as part of the
resizing of Par's generic division in the fourth quarter of 2008.
Strativa's gross margin of $19.2 million, or 75.7% of total
Strativa revenue, increased compared to the second quarter of 2008
due to higher sales of Megace® ES and Nascobal®. Research and
development (R&D) expenses decreased 53% to $6.5 million in the
third quarter of 2009 compared to the third quarter 2008 due
primarily to the resizing of the generic division, which included a
headcount reduction and lower development and biostudy costs.
Selling, general and administrative (SG&A) expenses for the
third quarter 2009 increased to $45.3 million compared to $30.7
million in the third quarter 2008. This increase primarily reflects
on-going expenditures supporting Strativa sales and marketing,
driven primarily by an increase in the field force and other
activities related to the re-launch of Nascobal B12 Nasal Spray, as
well as accruals of higher bonus compensation expenses related to
significantly better year-to-date financial performance through the
first nine months of 2009. Cash and cash equivalents and marketable
securities aggregate balance as of October 3, 2009, was $210.5
million and includes significant one-time cash outflows related to
the purchase of Nascobal B12 Nasal Spray (approximately $55
million), the first nine months repurchase of $63.5 million face
value of Par's convertible debt at a discount and, as previously
reported in the first quarter, the settlement of litigation with
Pentech (approximately $66 million). On October 14, 2009 Par
announced a "Modified Dutch Auction" tender offer for up to $65
million of its outstanding 2.875% Senior Subordinated Convertible
Notes due September 30, 2010, at a price not greater than $990.00
nor less than $982.50 per $1,000 principal amount. As of that date,
there was approximately $78.6 million aggregate principal amount of
notes outstanding. The tender offer is scheduled to expire at 12:00
midnight, EST on Wednesday, November 11, 2009, unless the tender
offer is extended. Par expects to fund the purchase of the
convertible notes tendered in the tender offer with available cash
on hand. Product and Pipeline Update Par successfully launched the
60mg and 120mg strengths of nateglinide in the third quarter.
Nateglinide is a generic version of Novartis' Starlix®. Annual U.S.
sales of Starlix® are approximately $124 million, according to IMS
Health data. In August, Par announced that the U.S. District Court
for the District of Delaware ruled in favor of Par in its challenge
of Purdue's patents relating to extended-release tramadol, which
are listed in the Orange Book for Ortho-McNeil's Ultram® ER
product. Par has been awarded 180 days of marketing exclusivity,
commencing at launch, for being the first to file an ANDA
containing a paragraph IV certification for the product. Par
currently has tentative approval on two of the three strengths
(100mg and 200mg) of tramadol ER. Par intends to review its options
with respect to its tramadol ER ANDA. Par currently has
approximately 27 ANDAs pending with the FDA, 13 of which Par
believes to be first-to-file and/or first-to-market opportunities
with a brand value of approximately $6.5 billion. Conference Call
Par has scheduled a conference call for Friday, November 6 at 9:00
am EST to discuss results for the third quarter of 2009. Par
invites investors and the general public to listen to a webcast of
the conference call. Access to the live webcast can be made via the
Company's website at http://www.parpharm.com/ and will be available
for two weeks. The dial-in number is 866-783-2144 for domestic
callers and 857-350-1603 for international callers. The access
number is 72513859. A replay of the conference call will be
available commencing approximately one hour after the call. The
replay dial-in number is 888-286-8010 for domestic callers and
617-801-6888 for international callers. The access number is
97865258. Non-GAAP Measures Par believes it prepared its condensed
consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America (U.S.
GAAP) and pursuant to accounting requirements of the Securities and
Exchange Commission applicable to quarterly reports on Form 10-Q.
In an effort to provide investors with additional information
regarding Par's results and to provide a meaningful
period-over-period comparison of Par's financial performance, the
Company sometimes uses non-GAAP financial measures as defined by
the Securities and Exchange Commission. The differences between the
U.S. GAAP and non-GAAP financial measures are reconciled in an
attached schedule. In presenting comparable results, the Company
discloses non-GAAP financial measures when it believes such
measures will be useful to investors in evaluating Par's underlying
business performance. Management uses the non-GAAP financial
measures to evaluate Par's financial performance against internal
budgets and targets. In addition, management internally reviews
Par's results excluding the impact of certain items, as it believes
that these non-GAAP financial measures are useful for evaluating
Par's core operating results and facilitating comparison across
reporting periods. Importantly, Par believes non-GAAP financial
measures should be considered in addition to, and not in lieu of,
U.S. GAAP financial measures. Par's non-GAAP financial measures may
be different from non-GAAP financial measures used by other
companies. About Par Par Pharmaceutical Companies, Inc. develops,
manufactures and markets generic drugs and innovative branded
pharmaceuticals for specialty markets. For press release and other
company information, visit http://www.parpharm.com/. Safe Harbor
Statement Certain statements in this news release constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. To the extent any
statements made in this news release contain information that is
not historical, these statements are essentially forward-looking
and, as such, are subject to known and unknown risks, uncertainties
and contingencies, many of which are beyond the control of the
Company, which could cause actual results and outcomes to differ
materially from those expressed herein. Risk factors that might
affect such forward-looking statements include those set forth in
Item 1A of the Company's Annual Report on Form 10-K for the year
ended December 31, 2008, in other of the Company's filings with the
SEC from time to time, including Current Reports on Form 8-K, and
on general industry and economic conditions. Any forward-looking
statements included in this news release are made as of the date
hereof only, based on information available to the Company as of
the date hereof, and, subject to any applicable law to the
contrary, the Company assumes no obligation to update any
forward-looking statements. PAR PHARMACEUTICAL COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share
Data) (Unaudited) October 3, December 31, 2009 2008 ---- ----
ASSETS Current assets: Cash and cash equivalents $170,686 $170,629
Available for sale marketable debt and equity securities 39,767
93,097 Accounts receivable, net 104,851 83,408 Inventories 75,361
42,504 Prepaid expenses and other current assets 16,593 20,040
Deferred income tax assets 37,474 53,060 Income taxes receivable
15,311 35,397 ------ ------ Total current assets 460,043 498,135
Property, plant and equipment, at cost less accumulated
depreciation and amortization 75,862 79,439 Available for sale
marketable debt and equity securities 1,600 1,949 Intangible
assets, net 74,108 35,208 Goodwill 63,729 63,729 Deferred financing
costs and other assets 434 1,159 Non-current deferred income tax
assets, net 67,934 68,618 ------ ------ Total assets $743,710
$748,237 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: Current portion of long-term debt $74,373
$130,141 Accounts payable 35,286 22,879 Payables due to
distribution agreement partners 53,980 91,451 Accrued salaries and
employee benefits 16,328 11,850 Accrued expenses and other current
liabilities 37,438 38,352 ------ ------ Total current liabilities
217,405 294,673 Long-term debt, less current portion - - Other
long-term liabilities 42,866 41,581 Commitments and contingencies -
- Stockholders' equity Common Stock, par value $0.01 per share,
authorized 90,000,000 shares; issued 37,620,354 and 37,392,469
shares 375 374 Additional paid-in capital 326,042 319,976 Retained
earnings 225,698 159,470 Accumulated other comprehensive gain 1,132
122 Treasury stock, at cost 2,802,266 and 2,716,010 shares (69,808)
(67,959) ------- ------- Total stockholders' equity 483,439 411,983
------- ------- Total liabilities and stockholders' equity $743,710
$748,237 ======== ======== PAR PHARMACEUTICAL COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands,
Except Per Share Data) (Unaudited) Three Months Ended Nine Months
Ended ------------------ ------------------ October September
October September 3, 27, 3, 27, 2009 2008 2009 2008 ---- ---- ----
---- Revenues: Net product sales $290,961 $144,765 $891,333
$404,291 Other product related revenues 3,841 4,202 11,505 12,541
----- ----- ------ ------ Total revenues 294,802 148,967 902,838
416,832 Cost of goods sold 202,664 97,505 660,223 290,741 -------
------ ------- ------- Gross margin 92,138 51,462 242,615 126,091
Operating expenses: Research and development 6,458 13,784 19,567
46,897 Selling, general and administrative 45,306 30,664 122,383
98,701 Settlements and loss contingencies, net 62 4,592 (3,253)
4,592 Restructuring costs (230) - 1,252 - ---- --- ----- --- Total
operating expenses 51,596 49,040 139,949 150,190 ------ ------
------- ------- Gain on sale of product rights and other 1,835
2,200 3,200 4,325 ----- ----- ----- ----- Operating income (loss)
42,377 4,622 105,866 (19,774) Gain on bargain purchase - - 3,021 -
Gain on extinguishment of senior subordinated convertible notes
1,615 - 2,364 - Equity in loss of joint venture - - - (330) Loss on
marketable securities and other investments, net - (2,507) (55)
(2,940) Interest income 504 2,285 2,328 7,428 Interest expense
(1,773) (3,579) (6,935) (10,633) ------ ------ ------ -------
Income (loss) from continuing operations before provision (benefit)
for income taxes 42,723 821 106,589 (26,249) Provision (benefit)
for income taxes 16,209 196 39,833 (7,298) ------ --- ------ ------
Income (loss) from continuing operations 26,514 625 66,756 (18,951)
Discontinued operations: Gain from discontinued operations - - -
505 Provision for income taxes 176 150 528 863 --- --- --- --- Gain
(loss) from discontinued operations (176) (150) (528) (358) ----
---- ---- ---- Net income (loss) $26,338 $475 $66,228 ($19,309)
======= ==== ======= ======== Basic earnings (loss) per share of
common stock: Income (loss) from continuing operations $0.79 $0.01
$1.98 ($0.56) Gain (loss) from discontinued operations (0.01)
(0.00) (0.02) (0.01) ----- ----- ----- ----- Net income (loss)
$0.78 $0.01 $1.96 ($0.57) ===== ===== ===== ====== Diluted earnings
(loss) per share of common stock: Income (loss) from continuing
operations $0.77 $0.01 $1.97 ($0.56) Gain (loss) from discontinued
operations (0.01) (0.00) (0.02) (0.01) ----- ----- ----- ----- Net
income (loss) $0.76 $0.01 $1.95 ($0.57) ===== ===== ===== ======
Weighted average number of common shares outstanding: Basic 33,710
33,322 33,647 33,282 ====== ====== ====== ====== Diluted 34,245
33,366 33,930 33,282 ====== ====== ====== ====== Reconciliation
Between Reported (GAAP) and Adjusted Net Income (Loss) (In
thousands, except per share data) (Unaudited) Three Months Ended
------------------------- Oct. 3, Sept. 27, 2009 2008 ---- ----
Reported Net Income $26,338 $475 Write-offs relating to 2008
Trimming of Generic Portfolio - 5,422 Contingent Liabilities -
4,592 Loss on Marketable Security - 2,506 Development Milestone
Payments - 1,250 Restructuring Costs (230) - Estimated Tax on
Adjustments 85 (5,233) --- ------ Adjusted Net Income (non-GAAP
measure) $26,193 $9,012 ======= ====== Diluted Earnings Per Share:
Reported $0.76 $0.01 ===== ===== Adjusted (non-GAAP measure) $0.76
$0.27 ===== ===== Nine Months Ended ------------------------- Oct.
3, Sept. 27, 2009 2008 ---- ---- Reported Net Income (Loss) $66,228
($19,309) Change in Estimate Related to Final Pentech Settlement
(3,412) - Gain on Bargain Purchase (3,021) - Development Milestone
Payments 1,000 7,500 Write-offs relating to 2008 Trimming of
Generic Portfolio - 5,422 Contingent Liabilities - 4,592 Net
Investment Loss on Marketable Securities - 2,929 Restructuring
Costs 1,252 - Estimated Tax on Adjustments 1,547 (7,768) -----
------ Adjusted Net Income (Loss) (non-GAAP measure) $63,594
($6,634) ======= ======= Diluted Earnings (Loss) Per Share:
Reported $1.95 ($0.57) ===== ====== Adjusted (non-GAAP measure)
$1.87 ($0.20) ===== ====== DATASOURCE: Par Pharmaceutical Companies
CONTACT: Allison Wey, Senior Director, Investor Relations and
Corporate Affairs, Par Pharmaceutical Companies, Inc.,
+1-201-802-4000 Web Site: http://www.parpharm.com/
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