Par Pharmaceutical Companies Reports Second Quarter 2010 Results

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%
                                    =====               =====

 

    (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.
 

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