Contact:
Allison Wey
Senior Director
Investor Relations and Corporate Affairs
Par Pharmaceutical Companies, Inc.
(201) 802-4000
PAR PHARMACEUTICAL COMPANIES REPORTS ADJUSTED EPS OF $0.65
FOR FOURTH QUARTER 2009
Achieves Record Annual Gross Margin of $334 Million
Woodcliff Lake, N.J., February 24, 2010 – Par Pharmaceutical Companies, Inc. (NYSE:PRX) today reported results for the fourth quarter and full year ended December 31, 2009.
For the fourth quarter ended December 31, 2009, Par reported total revenues of $290.3 million and net income of $10.7 million, or $0.31 per diluted share, which includes pre-tax adjustments of $10.5 million of milestone payments to development partners, $3.5 million to settle preexisting litigation, and a $5.0 million loss on extinguishment of debt. Adjusting for these items, net income was $22.8 million, or $0.65 per diluted share. This is compared to reported revenues of $161.3 million and a net loss of $35.9 million, or $1.08 per diluted share for the same period in 2008, which included several one-time items. Adjusting for those one-time items, net income was $7.1 million, or $0.21 per diluted share for the fourth quarter 2008.
For the full year ended December 31, 2009, total revenue was $1,193.2 million with net income of $76.9 million, or $2.25 per diluted share. Adjusting for one-time items, net income was $85.9 million, or $2.51 per diluted share. This is compared to total revenues of $578.1 million and adjusted net income of $1.8 million, or $0.05 per diluted share for the full year 2008.
Fourth Quarter Highlights
Key Product Sales(Net sales comparisons at the product level are to third quarter 2009, which had 14 weeks of sales versus 13 weeks of sales in the fourth quarter 2009.)
·
Metoprolol: For the quarter ended December 31, 2009, net sales of metoprolol succinate were $163.0 million, a slight increase from the third quarter 2009. Par remained the exclusive supplier of the 100mg and 200mg strengths of metoprolol succinate through the fourth quarter. Par is the authorized generic for all strengths of AstraZeneca’s Toprol® XL.
·
Sumatriptan: Net sales of sumatriptan succinate were $17.8 million in the fourth quarter compared to $16.7 million in the prior quarter. The increase is due to additional volume driven by customer buying patterns. 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 fourth quarter.
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·
Clonidine: Net sales for the fourth quarter were $13.4 million compared to $20.4 million in the third quarter. The decrease was due to unanticipated demand for the product as a result of being the only generic supplier coupled with a long lead time necessary to produce additional supply.
·
Meclizine: Net sales for the three months ended December 31, 2009 were $9.4 million compared to $10.7 million in the previous quarter. The decrease wasdue primarily to one less week of sales in the quarter. Par was the exclusive supplier of meclizine throughout 2009.
·
Dronabinol: Net sales for the fourth quarter 2009 were $5.9 million compared to $6.6 million in the third quarter. The decrease wasdue primarily to one less week of sales in the quarter.
·
Tramadol ER: Net sales for the fourth quarter 2009 were $5.5 million. Par launched tramadol ER in November 2009.
·
Other generic products: For the fourth quarter 2009, net sales from all other generic products were $49.5 million compared to $54.0 million in the third quarter. The decrease wasdue primarily to one less week of sales in the quarter.
·
Megace® ES: Net sales were $19.0 million for the three months ended December 31, 2009 compared to $19.1 million in the third quarter due to one less week of sales in the quarter tempered by the full impact of the third quarter price increase.
·
Nascobal® B12 Nasal Spray: Net sales were $4.2 million for the three months ended December 31, 2009, compared to $3.8 million in the third quarter. The increase is due to an increase in prescription volume and market share.
Total net revenuesfor thethree months ended December 31, 2009, were $290.3 million, up $129.0 million, or nearly 80%, 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, and tramadol ER in the fourth quarter 2009.
Gross marginfor the fourth quarter 2009 was $91.3 million, or 31.5% of total revenue, an increase of $40.9 million from the comparable period in 2008. Total generic gross margin in the fourth quarter 2009 was $72.2 million, or 27.3% of total generic revenue, compared to $33.7 million, or 24.2% of total generic revenue in the fourth quarter 2008. This increase is due primarily to higher sales of metoprolol and sumatriptan (launched November 2008) coupled with the new product launches in 2009, including nateglinide, clonidine and tramadol ER. The top six products, which include metoprolol, clonidine, sumatriptan, meclizine, dronabinol, and tramadol ER contributed $47.1 million of gross margin, or 21.9% of such generic revenue. Gross margin of all other generic products was approximately $25.1 million, or 50.6% of other generic revenue. This compares to $10.4 million, or 19.1% of other generic revenue, in the fourth 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
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resizing of Par’s generic division in the fourth quarter of 2008. Strativa’s gross margin of $19.2 million, or 74.6% of total Strativa revenue in the fourth quarter 2009, increased compared to the fourth quarter of 2008 due to the acquisition and launch of Nascobal®in the second quarter of 2009.
Research and development(R&D) expenses increased to $19.7 million in the fourth quarter of 2009 compared to the fourth quarter 2008 driven primarily by investments in development projects with third party partners, which totaled $10.5 million.
Selling, general and administrative (SG&A) expenses for the fourth quarter 2009 increased to $42.8 million compared to $39.2 million in the fourth quarter of 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.
Cash and cash equivalents and marketable securities aggregate balance as of December 31, 2009, was $161.2 million and includes significant one-time cash outflows related to the purchase of Nascobal B12 Nasal Spray (approximately $55 million), the repurchase of $94 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).
Product and Pipeline Update
In November 2009, Par successfully launched the 100mg and 200mg strengths of tramadol ER. Tramdol ER is the generic version of Ortho-McNeil’s Ultram® ER product. Annual U.S. sales of the 100mg and 200mg strengths of Ultram® ER are approximately $150 million, according to IMS Health data.
In February 2010, Strativa Pharmaceuticals announced that due to a FDA foreign travel restriction to India, the FDA has been unable to perform a recent inspection of the clinical and analytical sites for the bioequivalence study related to Zuplenz™. The NDA cannot be approved until the FDA receives a satisfactory inspection report. The FDA restriction on foreign travel in India has been subsequently lifted and the inspection of the clinical and analytical sites for the bioequivalence study related to Zuplenz is in the process of being scheduled. No issues related to the study data or film product were identified.
Par currently has approximately 27 ANDAs pending with the FDA, 12 of which Par believes to be first-to-file opportunities with a brand value of approximately $6.3 billion.
Conference Call
Par has scheduled a conference call for Wednesday, February 24 at 8:30 am EST to discuss results for the fourth quarter and full year 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 athttp://www.parpharm.com and will be available for two weeks. The dial-in number is 866-770-7129 for domestic callers and 617-213-8067 for international callers. The access number is 49930027. A replay of the conference call will be available commencing approximately one hour after the call. The replay dial-in number is 888-286-8010for domestic callers and 617-801-6888 for international callers. The access number is 90488345.
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Non-GAAP Measures
Par believes it prepared its 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. 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. is a US-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, visitwww.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 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.
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PAR PHARMACEUTICAL COMPANIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
| Three Months Ended December 31, |
| Twelve Months Ended December 31, | ||||
| 2009 |
| 2008 |
| 2009 |
| 2008 |
Revenues: |
|
|
|
|
|
|
|
Net product sales | $285,094 |
| $156,721 |
| $1,176,427 |
| $561,012 |
Other product related revenues | 5,227 |
| 4,562 |
| 16,732 |
| 17,103 |
Total revenues | 290,321 |
| 161,283 |
| 1,193,159 |
| 578,115 |
Cost of goods sold | 198,983 |
| 110,803 |
| 859,206 |
| 401,544 |
Gross margin | 91,338 |
| 50,480 |
| 333,953 |
| 176,571 |
Operating expenses: |
|
|
|
|
|
| |
Research and development | 19,668 |
| 12,759 |
| 39,235 |
| 59,656 |
Selling, general and administrative | 42,752 |
| 39,165 |
| 165,135 |
| 137,866 |
Settlements and loss contingencies, net | 3,560 |
| 45,245 |
| 307 |
| 49,837 |
Restructuring costs, (income) | (246) |
| 15,397 |
| 1,006 |
| 15,397 |
Total operating expenses | 65,734 |
| 112,566 |
| 205,683 |
| 262,756 |
Gain on sale of product rights and other | - |
| 5,300 |
| 3,200 |
| 9,625 |
Operating income (loss) | 25,604 |
| (56,786) |
| 131,470 |
| (76,560) |
Gain on bargain purchase | - |
| - |
| 3,021 |
| - |
(Loss) gain on extinguishment of senior subordinated | (4,962) |
| 3,033 |
| (2,598) |
| 3,033 |
Equity in loss of joint venture | - |
| - |
| - |
| (330) |
Loss on marketable securities and other investments, net | - |
| (4,856) |
| (55) |
| (7,796) |
Interest income | 330 |
| 1,818 |
| 2,658 |
| 9,246 |
Interest expense | (1,078) |
| (2,722) |
| (8,013) |
| (13,355) |
Income (loss) from continuing operations before provision (benefit) for income taxes | 19,894 |
| (59,513) |
| 126,483 |
| (85,762) |
Provision (benefit) for income taxes | 9,050 |
| (25,149) |
| 48,883 |
| (32,447) |
Income (loss) from continuing operations | 10,844 |
| (34,364) |
| 77,600 |
| (53,315) |
Discontinued operations: |
|
|
|
|
|
|
|
Gain from discontinued operations | - |
| - |
| - |
| 505 |
Provision for income taxes | 144 |
| 1,498 |
| 672 |
| 2,361 |
Loss from discontinued operations | (144) |
| (1,498) |
| (672) |
| (1,856) |
Net income (loss) | $10,700 |
| ($35,862) |
| $76,928 |
| ($55,171) |
|
|
|
|
|
|
|
|
Basic earnings (loss) per share of common stock: |
|
|
|
|
|
|
|
Income (loss) from continuing operations | $0.32 |
| ($1.03) |
| $2.30 |
| ($1.60) |
Loss from discontinued operations | (0.00) |
| (0.05) |
| (0.02) |
| (0.05) |
Net income (loss) | $0.32 |
| ($1.08) |
| $2.28 |
| ($1.65) |
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share of common stock: |
|
|
|
|
|
|
|
Income (loss) from continuing operations | $0.31 |
| ($1.03) |
| $2.27 |
| ($1.60) |
Loss from discontinued operations | (0.00) |
| (0.05) |
| (0.02) |
| (0.05) |
Net income (loss) | $0.31 |
| ($1.08) |
| $2.25 |
| ($1.65) |
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding: |
|
|
|
|
|
|
|
Basic | 33,773 |
| 33,400 |
| 33,679 |
| 33,312 |
Diluted | 34,964 |
| 33,400 |
| 34,188 |
| 33,312 |
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PAR PHARMACEUTICAL COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(Unaudited)
| As of December 31, | ||
| 2009 |
| 2008 |
ASSETS |
|
|
|
Current Assets: |
|
|
|
Cash and cash equivalents | $121,668 |
| $170,629 |
Available for sale debt and marketable equity securities | 39,525 |
| 93,097 |
Accounts receivable, net | 154,837 |
| 83,408 |
Inventories | 80,279 |
| 42,504 |
Prepaid expenses and other current assets | 14,051 |
| 20,040 |
Deferred income tax assets | 26,356 |
| 53,060 |
Income taxes receivable | 9,005 |
| 35,397 |
Total current assets | 446,171 |
| 498,135 |
|
|
|
|
Property, plant and equipment, at cost less accumulated depreciation and amortization | 74,696 |
| 79,439 |
Available for sale and marketable equity securities | 475 |
| 1,949 |
Intangible assets ,net | 69,272 |
| 35,208 |
Goodwill | 63,729 |
| 63,729 |
Deferred financing costs and other assets | 989 |
| 1,159 |
Non-current deferred income tax assets, net | 68,495 |
| 68,618 |
Total assets | $723,827 |
| $748,237 |
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current portion of long-term debt | $46,175 |
| $130,141 |
Accounts payable | 22,662 |
| 20,379 |
Payables due to distribution agreement partners | 58,552 |
| 91,451 |
Accrued salaries and employee benefits | 16,072 |
| 11,850 |
Accrued government pricing liabilities | 24,713 |
| 21,912 |
Accrued expenses and other current liabilities | 14,903 |
| 18,940 |
Total current liabilities | 183,077 |
| 294,673 |
|
|
|
|
Long-term debt, less current portion | - |
| - |
Other long-term liabilities | 42,097 |
| 41,581 |
Commitments and contingencies |
|
|
|
|
|
|
|
Stockholders’ equity |
|
|
|
Common Stock, par value $0.01 per share, authorized 90,000,000 | 377 |
| 374 |
Additional paid-in capital | 331,667 |
| 319,976 |
Retained earnings | 236,398 |
| 159,470 |
Accumulated other comprehensive gain | 357 |
| 122 |
Treasury stock, at cost 2,815,879 and 2,716,010 shares | (70,146) |
| (67,959) |
Total stockholders’ equity | 498,653 |
| 411,983 |
Total liabilities and stockholders’ equity | $723,827 |
| $748,237 |
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Reconciliation Between Reported (GAAP) and Adjusted Net Income (Loss)
(In Thousands, Except Per Share Data)
(Unaudited)
| Three Months Ended December 31, |
| Twelve Months Ended December 31, | ||||
| 2009 |
| 2008 |
| 2009 |
| 2008 |
Reported Net Income/(Loss) | $10,700 |
| ($35,862) |
| $76,928 |
| ($55,171) |
|
|
|
|
|
|
|
|
Litigation settlements, net | 3,500 |
| 49,178 |
| 88 |
| 49,178 |
Restructuring costs (income) | (246) |
| 15,397 |
| 1,006 |
| 15,397 |
Other restructuring related costs | - |
| 3,753 |
| - |
| 9,175 |
Sale of product rights | - |
| (5,300) |
| (3,200) |
| (9,000) |
Milestone payments for non-approved products | - |
| - |
| 1,000 |
| 7,500 |
Up-front development payments of non-approved products | 10,500 |
| - |
| 10,500 |
| - |
Non-cash interest expense | 575 |
| 1,464 |
| 4,399 |
| 7,096 |
Gain on bargain purchase | - |
| - |
| (3,021) |
| - |
Write-offs relating to 2008 trimming of generic portfolio | - |
| 323 |
| - |
| (302) |
Contingent liabilities | - |
| 210 |
| - |
| 4,802 |
Loss on marketable securities and other investments | - |
| 4,856 |
| - |
| 8,125 |
(Gain)/loss on extinguishment of debt | 4,962 |
| (3,033) |
| 2,598 |
| (3,033) |
Discontinued operations | 144 |
| 1,498 |
| 672 |
| 1,856 |
Sum of adjustments, pre-tax | $19,435 |
| $68,346 |
| $14,042 |
| $90,794 |
Estimated tax on adjustments | (7,385) |
| (25,402) |
| (5,081) |
| (33,796) |
|
|
|
|
|
|
|
|
Adjusted Net Income (non-GAAP measure) | $22,750 |
| $7,082 |
| $85,889 |
| $1,827 |
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
|
|
|
|
|
|
Reported | $0.31 |
| ($1.08) |
| $2.25 |
| ($1.65) |
Adjusted (non-GAAP measure) | $0.65 |
| $0.21 |
| $2.51 |
| $0.05 |
|
|
|
|
|
|
|
|
Diluted weighted average shares outstanding | 34,964 |
| 33,400 |
| 34,188 |
| 33,312 |