Par Pharmaceutical Companies Reports Second Quarter 2010 Results
- Reports GAAP EPS of $0.51; Adjusted Cash EPS of $0.71 -
- Achieves Near-record Quarterly Gross Margin of $91.5 Million -
- Makes Significant Investments in Generic Development Opportunities -
- Prepares to Launch Two Branded Products -WOODCLIFF LAKE, N.J., Aug 04, 2010 /PRNewswire via COMTEX/ --
Par Pharmaceutical Companies, Inc. (NYSE: PRX) today reported results for the second quarter ended June 30, 2010.
For the second quarter ended June 30, 2010, the Company reported total revenues of $255.5 million and income from continuing operations of $18.0 million, or $0.51 per diluted share. These results included payments to new development partners of $17 million, income from a litigation settlement of $4.1 million, the resolution of tax contingencies of $3.7 million, and non-cash interest expense of $0.5 million. After these items, adjusted income from continuing operations (non-GAAP measure) was $22.7 million. On an adjusted cash basis (non-GAAP measure), which excludes amortization expenses, income from continuing operations was $25.1 million, or $0.71 per diluted share for the second quarter 2010. This is compared to reported revenues of $404.0 million and income from continuing operations of $24.0 million, or $0.71 per diluted share, for the same period in 2009, which included a one-time item. On an adjusted cash basis, income from continuing operations for the second quarter 2009 was $27.2 million, or $0.80 per diluted share.
For the six months ended June 30, 2010, the Company reported total revenues of $547.4 million and income from continuing operations of $44.5 million, or $1.26 per diluted share. On an adjusted cash basis (non-GAAP measure), which excludes amortization expenses and certain items as detailed in the attached reconciliation, income from continuing operations was $51.4 million, or $1.46 per diluted share. This compares to reported revenues of $608.0 million and income from continuing operations of $40.2 million, or $1.19 per diluted share, for the same period in 2009. On an adjusted cash basis, income from continuing operations for the first six months of 2009 was $47.0 million, or $1.39 per diluted share.
Second Quarter Highlights
Key Product Sales
Metoprolol: For the second quarter 2010, net sales of metoprolol succinate were $119.6 million, a decrease of 35% from the first quarter 2010. The decrease was driven by a decline in volume and price due to competition on the 100mg and 200mg strengths. Par Pharmaceutical, the Company's generic drug division, is the authorized generic for all strengths of AstraZeneca's Toprol(R) XL.
Clonidine: Net sales for the second quarter 2010 were $26.3 million, compared to $18.5 million for the first quarter. The increase was due to the availability of additional supply.
Sumatriptan: Net sales of sumatriptan succinate were $17.5 million for the second quarter 2010, compared to $17.3 million for the first quarter 2010. Par Pharmaceutical remained the exclusive supplier of generic Imitrex(R) 4mg and 6mg starter kits and 4mg prefilled cartridges and had one competitor in the 6mg prefilled cartridges throughout the second quarter 2010.
Meclizine: Net sales for the second quarter 2010 were $9.4 million, compared to $10.2 million for the first quarter 2010. The decrease wasdriven by a decline in volume and price due to competition in the second quarter. Tramadol ER: Net sales for the second quarter 2010 were $5.7 million, compared to $5.3 million for the first quarter. Par Pharmaceutical launched tramadol ER in November 2009.
Other generic products: For the second quarter 2010, net sales from all other generic products were $53.5 million, compared to $37.6 million for the first quarter. The increase was due primarily to the impact of quarter over quarter in-transit revenue recognition, as well as the release of backlogs on certain products. (The first quarter other generic products revenue was negatively impacted due primarily to the deferral of revenue related to shipments at quarter-end without the recognition of revenues related to shipments from the fourth quarter due to the Company's annual year-end shut down.)
Megace(R) ES: Net sales were $15.5 million for the second quarter 2010, compared to $13.8 million for the first quarter. The increase was due to the return to normal buying patterns of the wholesalers.
Nascobal(R) B12 Nasal Spray: Net sales were $4.4 million for the second quarter 2010, compared to $3.6 million for the first quarter. The increase was due primarily to an increase in prescription volume.
Total net revenues for thesecond quarter 2010 were $255.5 million, down $148.5 million, or 37%, from the second quarter 2009. The decline was principally driven by additional competition in metoprolol, which was partially offset by 2009 product launches such as clonidine, tramadol ER, and Nascobal.
Gross margin for the second quarter 2010 increased due primarily to the launches of clonidine, tramadol ER, and nateglinide in second half of 2009, and increases in other generic products. These gains were partially offset by lower metroprolol sales and the impact on price resulting from the recently enacted U.S. healthcare reform.
2Q 2010 2Q 2009
$ % $ %
--- --- --- ---
Key Par (Generic)
Products (1) $46.7 26.2% $50.7 15.0%
All other Par (Generic) 27.0 50.4% 20.0 44.4%
---- ----
Total Par (Generic) $73.7 31.7% $70.7 18.5%
Strativa (Branded)
Products $17.8 75.8% $15.7 71.9%
----- -----
Total (All Products) $91.5 35.8% $86.4 21.4%
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(1) 2010 is comprised of metoprolol, clonidine, sumatriptan,
meclizine and tramadol ER. 2009 does not include clonidine or
tramadol ER as these products were launched subsequent to 2Q 2009.
Research and development(R&D) expenses in the second quarter 2010 were $22.7 million, compared to $5.9 million in the second quarter 2009. The increase was due to two third-party generic product agreements entered into during the second quarter 2010, totaling $17 million.
Selling, general and administrative (SG&A) expenses for the second quarter 2010 increased to $48.9 million, compared to $44.1 million in the second quarter 2009. This increase reflects expenses associated with pre-commercialization marketing activities related to the anticipated third quarter 2010 launches of Oravig(TM) and Zuplenz(R), as well as one-time severance charges.
Cash and cash equivalents and marketable securities aggregate balance as of June 30, 2010, was $226 million.
Product and Pipeline Update
In April 2010, Par Pharmaceutical and its development partner MN Pharmaceuticals of Turkey announced that they had entered into a settlement agreement with sanofi-aventis that resolves patent litigation related to their generic version Eloxatin(R) (oxaliplatin injection) product. Under the terms of the settlement, Par would begin selling the generic version of Eloxatin in August 2012, or earlier under certain circumstances. Eloxatin had combined U.S. sales of approximately $636 million for the twelve months ended March 31, 2010, according to IMS Health.
In April 2010, Strativa Pharmaceuticals, the Company's branded drugs division, announced that it received FDA approval for Oravig(TM) (miconazole) buccal tablets for the treatment of oropharyngeal candidiasis (OPC). Strativa intends to launch Oravig in the third quarter of 2010.
In May 2010, Par Pharmaceutical announced that its partner Glenmark Generics entered into a settlement agreement with an affiliate of Merck & Co. that resolves patent litigation related to Glenmark's submission of an abbreviated new drug application for a generic version of Zetia(R). Under the terms of the settlement agreement, Par will be able to launch the product on December 12, 2016, or earlier under certain circumstances, ahead of the April 25, 2017 expiration of Merck's patent exclusivity for Zetia.
In July 2010, Par Pharmaceutical successfully launched omeprazole and sodium bicarbonate capsules, which are a generic form of Santarus' Zegerid(R). Annual U.S. sales of Zegerid capsules are approximately $195 million, according to IMS Health.
In July 2010, Strativa Pharmaceuticals received FDA approval for Zuplenz(R) (ondansetron) oral soluble film. Strativa intends to launch Zuplenz in the fourth quarter of 2010.
Par Pharmaceutical currently has approximately 28 ANDAs pending with the FDA, 12 of which Par believes to be first-to-file opportunities with a brand value of approximately $7.6 billion.
Conference Call
The Company has scheduled a conference call for Wednesday, August 4th at 9:00am EDT to discuss results for the second quarter 2010. The Company 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.
Dial-in Information
-------------------
Domestic: 800-659-2056
International: 617-614-2714
Passcode: 71836499
A replay of the conference call will be available for two weeks approximately one hour after the call.
Replay Information
------------------
Domestic: 888-286-8010
International: 617-801-6888
Passcode: 84280770
Non-GAAP Measures
The Company believes it prepared its condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) and pursuant to accounting requirements of the Securities and Exchange Commission. In an effort to provide investors with additional information regarding the Company's results and to provide a meaningful period-over-period comparison of the Company's financial performance, the Company sometimes uses non-GAAP financial measures as defined by the Securities and Exchange Commission. The differences between the 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 the Company's underlying business performance. Management uses the non-GAAP financial measure "Adjusted Income from Continuing Operations" to evaluate the Company's financial performance against internal budgets and targets. In addition, management internally reviews the Company's results excluding the impact of certain items, as it believes that these non-GAAP financial measures are useful for evaluating the Company's core operating results and facilitating comparison across reporting periods. In addition, the accompanying press release presents "Adjusted Cash EPS", which is a non-GAAP financial measure. Adjusted Cash EPS represents net income adjusted for amortization expense related to intangible assets, in addition to the item adjusted for in Adjusted Income from Continuing Operations. The Company believes that this measure is utilized by industry analysts in comparing the Company's results to that of similar companies within our industry. Importantly, the Company believes non-GAAP financial measures should be considered in addition to, and not in lieu of, GAAP financial measures. The Company's non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.
About Par Pharmaceutical Companies, Inc.
Par Pharmaceutical Companies, Inc. is a U.S.-based specialty pharmaceutical company. Through its wholly-owned subsidiary's two operating divisions, Par Pharmaceutical and Strativa Pharmaceuticals, it develops, manufactures and markets higher-barrier-to-entry generic drugs and niche, innovative proprietary pharmaceuticals. For press release and other company information, visit 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 most recent Annual Report on Form 10-K in other of the Company's filings with the SEC from time to time, including Quarterly Reports on Form 10-Q and 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)
June 30, December 31,
2010 2009
---- ----
ASSETS
------
Current assets:
Cash and cash equivalents $175,249 $121,668
Available for sale marketable debt
securities 50,793 39,525
Accounts receivable, net 132,177 154,837
Inventories 68,822 80,729
Prepaid expenses and other current assets 17,992 14,051
Deferred income tax assets 26,356 26,356
Income taxes receivable 3,820 9,005
----- -----
Total current assets 475,209 446,171
Property, plant and equipment, net 73,675 74,696
Available for sale marketable debt and
equity securities 425 475
Intangible assets, net 96,618 69,272
Goodwill 63,729 63,729
Other assets 1,465 989
Non-current deferred income tax assets, net 72,512 68,495
------ ------
Total assets $783,633 $723,827
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $47,213 $46,175
Accounts payable 32,554 22,662
Payables due to distribution agreement
partners 44,444 58,552
Accrued salaries and employee benefits 11,936 16,072
Accrued government pricing liabilities 36,664 24,713
Accrued expenses and other current
liabilities 17,015 14,903
------ ------
Total current liabilities 189,826 183,077
Long-term debt, less current portion - -
Other long-term liabilities 40,166 42,097
Commitments and contingencies - -
Stockholders' equity:
Common Stock, par value $0.01 per share,
authorized 90,000,000 shares; issued
37,944,451 and 37,662,231 shares 379 377
Additional paid-in capital 344,010 331,667
Retained earnings 281,091 236,398
Accumulated other comprehensive gain 119 357
Treasury stock, at cost 2,886,503 and
2,815,879 shares (71,958) (70,146)
------- -------
Total stockholders' equity 553,641 498,653
Total liabilities and stockholders' equity $783,633 $723,827
======== ========
PAR PHARMACEUTICAL COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Six Months Ended
------------------ ----------------
June 30, June 27, June 30, June 27,
2010 2009 2010 2009
---- ---- ---- ----
Revenues:
Net product sales $248,739 $400,149 $537,017 $600,372
Other product related
revenues 6,735 3,852 10,389 7,664
----- ----- ------ -----
Total revenues 255,474 404,001 547,406 608,036
Cost of goods sold 164,015 317,593 372,437 457,559
------- ------- ------- -------
Gross margin 91,459 86,408 174,969 150,477
Operating expenses:
Research and development 22,660 5,937 27,312 13,109
Selling, general and
administrative 48,865 44,117 90,100 77,077
Settlements and loss
contingencies, net (4,068) 61 (4,006) (3,315)
Restructuring costs - 81 - 1,482
--- --- --- -----
Total operating expenses 67,457 50,196 113,406 88,353
------ ------ ------- ------
Gain on sale of product
rights and other 146 265 5,921 1,365
--- --- ----- -----
Operating income 24,148 36,477 67,484 63,489
Gain on bargain purchase - 3,021 - 3,021
Gain on extinguishment of
senior subordinated
convertible notes - 504 - 749
Loss on marketable
securities and other
investments, net - - - (55)
Interest income 273 667 601 1,824
Interest expense (918) (2,595) (1,826) (5,162)
---- ------ ------ ------
Income from continuing
operations before
provision 23,503 38,074 66,259 63,866
for income taxes
Provision for income taxes 5,468 14,087 21,798 23,624
----- ------ ------ ------
Income from continuing
operations 18,035 23,987 44,461 40,242
Discontinued operations:
(Benefit) provision for
income taxes (360) 176 (232) 352
---- --- ---- ---
Gain (loss) from
discontinued operations 360 (176) 232 (352)
--- ---- --- ----
Net income $18,395 $23,811 $44,693 $39,890
======= ======= ======= =======
Basic earnings (loss) per
share of common stock:
Income from continuing
operations $0.53 $0.71 $1.31 $1.20
Gain (loss) from
discontinued operations 0.01 0.00 0.01 (0.01)
---- ---- ---- -----
Net income $0.54 $0.71 $1.32 $1.19
===== ===== ===== =====
Diluted earnings (loss)
per share of common
stock:
Income from continuing
operations $0.51 $0.71 $1.26 $1.19
Gain (loss) from
discontinued operations 0.01 0.00 0.01 (0.01)
---- ---- ---- -----
Net income $0.52 $0.71 $1.27 $1.18
===== ===== ===== =====
Weighted average number of
common shares
outstanding:
Basic 34,112 33,630 34,021 33,616
====== ====== ====== ======
Diluted 35,475 33,771 35,273 33,772
====== ====== ====== ======
Reconciliation Between Reported (GAAP); Adjusted Income from
Continuing Operations and "Adjusted Cash EPS"
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
June 30, June 27,
2010 2009
Income from Continuing Operations $18,035 $23,987
Upfront and development milestone
payments 17,000 -
Litigation settlement (4,130) -
Non-cash interest expense 524 1,249
Gain on bargain purchase - (3,021)
Restructuring costs - 81
Sum of adjustments, pre-tax $13,394 ($1,691)
Estimated tax on adjustments (5,090) 643
Resolution of tax contingencies (3,657) -
Adjusted Income from Continuing
Operations (non-GAAP measure) $22,682 $22,939
Amortization Expense 3,904 6,825
Estimated tax impact (1,484) (2,594)
Amortization Expense, net of tax 2,420 4,232
Adjusted Cash basis from Continuing
Operations (non-GAAP measure) 25,103 27,170
"Adjusted Cash EPS" from Continuing
Operations (non-GAAP measure) $0.71 $0.80
Diluted weighted average shares
outstanding 35,475 33,771
Six Months Ended
June 30, June 27,
2010 2009
Income from Continuing Operations $44,461 $40,242
Upfront and development milestone
payments 17,000 1,000
Sale of product rights (5,000) (1,100)
Litigation settlement (4,130) -
Non-cash interest expense 1,038 2,842
Change in estimate related to final
Pentech settlement - (3,412)
Gain on bargain purchase - (3,021)
Restructuring costs - 1,482
Sum of adjustments, pre-tax $8,908 ($2,209)
Estimated tax on adjustments (3,385) 839
Resolution of tax contingencies (3,657) -
Adjusted Income from Continuing
Operations (non-GAAP measure) $46,327 $38,872
Amortization Expense 8,154 13,077
Estimated tax impact (3,099) (4,969)
Amortization Expense, net of tax 5,055 8,108
Adjusted Cash basis from Continuing
Operations (non-GAAP measure) 51,382 46,980
"Adjusted Cash EPS" from Continuing
Operations (non-GAAP measure) $1.46 $1.39
Diluted weighted average shares
outstanding 35,273 33,772
SOURCE Par Pharmaceutical Companies, Inc.