Contact:
Dennis J. O'Connor
Vice President, Chief Financial Officer
Pharmaceutical Resources, Inc.
(201) 802-4000
PHARMACEUTICAL RESOURCES REPORTS
FIRST-QUARTER SALES AND EARNINGS
FIRST-QUARTER TOTAL REVENUES GREW 32 PERCENT TO $106.4 MILLION;
BASE BUSINESS REVENUES ADVANCED 65 PERCENT TO $60.3 MILLION
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DILUTED EPS INCREASED 24 PERCENT TO $.67,
EXCLUDING NET BENEFIT OF PRIOR YEAR SETTLEMENTS
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FIRST-QUARTER INVESTMENT IN R&D MORE THAN DOUBLED TO $6.5 MILLION
SPRING VALLEY, NEW YORK, APRIL 23, 2003 -- Pharmaceutical Resources, Inc.
(NYSE:PRX) reported that total revenues for the first quarter ended March 30,
2003, increased 32 percent to $106.4 million, compared with $80.5 million in
2002. Net income and diluted earnings per share of $22.4 million and $.67 per
share increased from $20.8 million and $.63 per share in the first quarter of
2002. The 2002 quarter includes a net benefit of $2.9 million after-tax, or $.09
per share resulting from a legal settlement with Bristol-Myers Squibb and the
cost of terminating a potential acquisition from International Specialty
Products. Excluding this net benefit diluted earnings per share increased 24
percent in 2003 to $.67 from $.54 and net income increased 26 percent to $22.4
million from $17.8 million.
Scott Tarriff, president and chief executive officer of PRX's Par Pharmaceutical
subsidiary, said, "We are off to a great start in 2003 and we currently believe
this year will be our most successful ever. Our impressive first-quarter
performance reflects the continuing strength of our base business, along with
the success of omeprazole. Importantly, we were able to achieve these
exceptional financial results while continuing to invest heavily in research and
development. Our commitment to investing for future growth is underscored by the
28 Abbreviated New Drug Applications (ANDA) we now have awaiting approval at the
U.S. Food and Drug Administration (FDA)."
In the first quarter, double-digit sales growth was driven by the Company's core
products, or base business, which increased 65 percent to $60.3 million. The
strong performance of the Company's base business resulted, in part, from
several successful product launches in 2002. PRX defines base business as its
marketed product line, excluding those products that have market exclusivity or
co-exclusivity, or a dominant market share position that results in significant
product sales.
1
Also contributing significantly to revenue growth in the first quarter was
omeprazole, the generic version of Prilosec(R). Omeprazole contributed $5.7
million of royalty revenue in the first quarter.
In the fourth quarter of 2002, PRX began receiving royalty payments as a result
of KUDCo's launch of omeprazole. Under terms of its agreement with KUDCo,
Genpharm (PRX's partner) is currently receiving a 15 percent share of the
profits generated by KUDCo's sales of omeprazole. Through its partnership
agreement with Genpharm, PRX is currently receiving 25 percent of Genpharm's net
profit.
In the quarter, megestrol oral suspension, the generic form of Megace(R),
achieved sales of $20.5 million while sales of fluoxetine, the generic version
of Prozac(R), totaled $19.9 million. Although megestrol and fluoxetine continued
to perform well, the sales growth throughout PRX's base business and the launch
of omeprazole effectively reduced the Company's reliance on each of these key
products. For the first quarter, megestrol and fluoxetine represented
approximately 38 percent of PRX's total revenues compared with 55 percent for
the same period a year ago.
"The past two years have seen tremendous growth in PRX; a trend that has
continued in the first quarter," said Kenneth I. Sawyer, chairman, president and
chief executive officer of PRX. "We are very pleased with the consistent
financial performance of our Company over this period and look forward to
continuing this record of achievement. We have the people, the products and the
financial resources in place to both sustain organic growth and take advantage
of those business development opportunities necessary to support our continued
prosperity."
Continued gross margin improvement served to enhance earnings growth in the
first quarter. Driven by the royalty revenue of omeprazole, PRX's gross margin
improved to 52 percent compared to 49 percent in the first quarter of 2002.
Ken Sawyer added, "PRX recognizes that internal development of successful new
products is critical to achieving its goal of sustainable growth over the long
term. The Company's growing investment in research and development (R&D)
reflects its commitment to identify, formulate and develop these promising new
products. Investment in R&D more than doubled from prior year to $6.5 million in
the first quarter of 2003."
Among the 28 drugs currently awaiting approval by the FDA, PRX believes that
several may represent first-to-file opportunities entitling the Company, or its
strategic partner, up to 180 days of marketing exclusivity or co-exclusivity.
These products include: paroxetine capsules (Paxil(R)); olanzapine 20 mg
(Zyprexa(R)); latanoprost (Xalatan(R)); ribavirin (Rebetol(R)); and tramadol
with acetaminophen (Ultracet(R)). It should be noted that it is difficult to
know with certainty that an ANDA filing has exclusivity, or shared exclusivity,
until final approval is received from the FDA.
2
In other developments since the end of the fourth quarter of 2002:
o PRX's partner, Pentech Pharmaceuticals Inc., reached a settlement with
GlaxoSmithKline (GSK) in their patent litigation over Pentech's proposed
generic capsule version of GSK's anti-depressant Paxil(R) (paroxetine
hydrochloride). As a result of the settlement, PRX will be permitted to
distribute in Puerto Rico substitutable generic paroxetine hydrochloride
immediate release tablets supplied and licensed from GSK in return for a
royalty. PRX will also be entitled to distribute the same product in the U.S.
market once another generic version fully substitutable for Paxil(R) becomes
available there;
o PRX licensed marketing rights to the active pharmaceutical ingredient
torsemide, a generic version of Demadex(R), from Roche. PRX developed and
filed an ANDA for torsemide in conjunction with Kali Laboratories and
received a tentative approval from the FDA in November 2002. Marketing of the
drug is expected to begin later this quarter; and
o PRX was included in the Standard & Poor's (S&P) MidCap 400 Index, which
measures the performance of the mid-size company segment of the U.S. equity
market. This Index is used by over 95 percent of U.S. portfolio managers and
pension plan sponsors with more than $25 billion indexed to the S&P MidCap
400.
Pharmaceutical Resources, Inc., a holding company, develops, manufactures, and
distributes generic pharmaceuticals through its wholly owned subsidiary, Par
Pharmaceutical. Through its FineTech unit, PRX also develops and utilizes
synthetic chemical processes to design and develop intermediate ingredients used
in the production of finished products for the pharmaceutical industry. PRX
currently manufactures and distributes over 156 products representing various
dosage strengths of 59 drugs. For press release and other Company information,
visit http://www.parpharm.com.
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Certain statements in this press release constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
including those concerning management's expectations with respect to future
events or future financial performance. Any such statements that refer to PRX's
anticipated future results, product performance, release date of future
products, or other non-historical facts are forward-looking and reflect PRX's
current perspective of existing trends and information. These statements involve
risks and uncertainties that cannot be predicted or quantified and consequently,
actual results may differ materially from those expressed or implied by such
forward-looking statements. Such risks and uncertainties include, among others,
the uncertainty associated with complex litigation, including the eventual
outcome and litigation costs and expenses incurred along the way, the success of
PRX's product development activities, and the timeliness with which regulatory
authorizations and product introductions may be achieved, market acceptance of
PRX's products, the availability of raw materials on commercially reasonable
terms, successful compliance with extensive, costly, complex, and evolving
governmental regulations and restrictions, exposure to product liability, and
other risks and uncertainties detailed in PRX's filings with the Securities and
Exchange Commission, such as the Company's Form 10-K, Form 10-Q, and Form 8-K
reports.
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3
PHARMACEUTICAL RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
THREE MONTHS ENDED
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MARCH 30, MARCH 31,
2003 2002
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Net sales $106,412 $80,508
Cost of goods sold 51,109 41,233
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Gross margin 55,303 39,275
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Operating expenses (income):
Research and development 6,469 2,874
Selling, general and administrative 11,890 7,516
Settlements - (9,051)
Acquisition termination charges - 4,268
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Total operating expenses 18,359 5,607
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Operating income 36,944 33,668
Other (expense) income (34) 111
Interest income, net 169 254
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Income before provision for income taxes 37,079 34,033
Provision for income taxes 14,646 13,273
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Net income $22,433 $20,760
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NET INCOME PER SHARE OF COMMON STOCK:
BASIC $0.68 $0.65
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DILUTED $0.67 $0.63
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WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
BASIC 32,886 32,048
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DILUTED 33,634 32,868
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COMPARATIVE ADJUSTED FOR ONE-TIME ITEMS
Net income as reported above $22,433 $20,760
Settlements, net of tax - (5,521)
Acquisition termination charges, net of tax - 2,603
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NET INCOME $22,433 $17,842
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NET INCOME PER SHARE OF COMMON STOCK:
BASIC $0.68 $0.56
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DILUTED $0.67 $0.54
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BALANCE SHEET HIGHLIGHTS
(Amounts in thousands) March 30, Dec. 31,
2003 2002
----------- ----------
Cash and cash equivalents $85,487 $65,121
Working capital, including cash and cash
equivalents 157,636 136,305
Long-term debt, less current portion 1,534 2,426
Total shareholders' equity 245,467 220,790