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PAR
Pharmaceutical
Contact:
Stephen J. Mock
Vice President, Corporate Affairs
Par Pharmaceutical Companies, Inc.
(201) 802-4000
PAR PHARMACEUTICAL REPORTS SECOND-QUARTER
SALES AND EARNINGS
Second-Quarter Total Revenues Increase 83 Percent to $212.5 Million;
Base Business Grows 56 Percent to $95.5 Million
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Reported Net Income Rose 29 Percent to $29.9 Million, and
Reported Diluted EPS Increased 25 Percent to $.85
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Par Closes Kali Acquisition in Second Quarter
SPRING VALLEY, NEW YORK, JULY 28, 2004 -- Par Pharmaceutical Companies, Inc.
(NYSE:PRX) today reported that total revenues grew 83 percent to $212.5 million
for the second quarter ended July 4, 2004. For the second quarter, reported net
income rose 29 percent to $29.9 million and reported diluted earnings per share
increased 25 percent to $.85. This is compared with reported revenues of $115.9
million, net income of $23.1 million, and diluted earnings per share of $.68 for
the same period a year ago. Excluding a charge associated with a retirement
agreement, net income was $25.3 million and diluted earnings per share were $.74
in the second quarter of 2003.
Included in second-quarter results is $6.2 million pre tax, which reflects a
change in accounting estimate used in accruing for payables due to distribution
partners. The change in accounting estimate has effectively reduced payables due
under Par's agreement with Pentech Pharmaceuticals, Inc. relating to the supply
and marketing of paroxetine. The change in accounting estimate follows Pentech's
filing of an action against Par during the second quarter. Par believes that it
is in compliance with its agreement with Pentech and intends to vigorously
defend this action.
Also included in second-quarter results is net settlement income of $2.8 million
pre tax. This results primarily from the settlement of claims against Akzo Nobel
NV and Organon USA Inc. relating to anticompetitive practices that delayed the
availability of a generic version of Remeron(R) (mirtazapine).
"Par's second quarter benefited from the strong performance of our base business
and new product introductions," said Scott Tarriff, president and chief
executive officer. "Importantly, sales of megestrol acetate oral suspension
stabilized in the quarter and we expect megestrol to continue to be a
significant contributor to our future performance. As we look forward to
building a new Megace(R) franchise in 2005, it is encouraging to see that new
prescriptions for the category reached a two-year high in July. In addition to
the recently submitted NDA for our advanced formulation of megestrol, Par has 38
regulatory filings currently awaiting FDA approval. This represents a record
total for Par and includes 14 ANDAs and 1 NDA already submitted this year by
Par, its partners, and Kali. With the acquisition of Kali complete, our company
has simply never been stronger."
Par completed its acquisition of Kali Laboratories, Inc. on June 9, 2004. The
estimated fair value of the assets acquired was not readily determinable at July
4, 2004. Therefore, the net purchase price of Kali is currently being reflected
on Par's balance sheet as unallocated purchase price of $133.0 million. A
valuation is being performed by independent specialists to determine the fair
value of Kali's research and development (R&D) organization as of the date of
acquisition. Par believes that a substantial portion of the unallocated purchase
price will be valued as in-process R&D and will be written off in 2004 in
accordance with purchase accounting for acquisitions.
SECOND-QUARTER REVIEW
Paroxetine hydrochloride (HCl) immediate release tablets, the generic version of
the antidepressant Paxil(R), contributed significantly to sales growth in the
second quarter. In the quarter, paroxetine achieved sales of $77.3 million,
compared to $.9 million in the same period a year ago. Par's paroxetine
hydrochloride tablets are substitutable for Paxil(R) and are licensed from
GlaxoSmithKline. In the second quarter, Par introduced ribavirin capsules, the
generic equivalent of the antiviral Rebetol(R). Sales of ribavirin totaled $12.6
million in the quarter.
Also contributing to sales growth in the second quarter were Par's core
products, or base business, which increased 56 percent to $95.5 million. The
strong performance of the base business resulted, in part, from the
second-quarter introduction of glyburide and metformin HCl tablets, the generic
version of Glucovance(R); the first-quarter introduction of mercaptopurine, the
generic form of Purinethol(R); and the fourth-quarter 2003 introduction of
metformin HCl extended-release tablets, the generic version of Glucophage XR(R).
The performance of the base business also benefited from increased sales of
lovastatin, the generic form of Mevacor(R).
Second-quarter sales of megestrol acetate oral suspension, the generic form of
Megace(R), were $18.3 million, compared with sales of $22 million in the same
period a year ago. Sales of fluoxetine, the generic version of Prozac(R),
totaled $8.4 million in the quarter. This is compared with sales of $24.6
million in 2003. Second-quarter sales of fluoxetine reflect the impact of
increased generic competition and its corresponding effect on pricing and market
share.
more...
Par's second-quarter gross margin was 34 percent, compared to 53 percent in
2003. The lower gross margin primarily reflects the effect of paroxetine, which,
after profit splits with GlaxoSmithKline and Pentech Pharmaceuticals, has a
lower gross margin than Par's other significant products. Par's gross margin was
also impacted by the decline in royalty revenue from omeprazole, the generic
version of Prilosec(R). Also contributing to the lower gross margin, were
glyburide and metformin HCl tablets and metformin HCl extended-release tablets.
After profit splits with Genpharm Inc. of Toronto, Canada and Bristol-Myers
Squibb Company, these products also have a significantly lower gross margin than
most of Par's other products. The second quarter also includes a $1.0 million
write off of clonidine transdermal patch inventory.
Investment in R&D more than doubled from the same period a year ago to $10.2
million in the second quarter of 2004. The substantial increase in R&D reflects
a steadily increasing number of products in development and regulatory filings.
Second-quarter selling, general and administrative (SG&A) expense increased 13
percent to $16.5 million, after adjusting prior year SG&A expense to exclude a
charge associated with a retirement agreement. The increase in SG&A expense
reflects a megestrol acetate oral suspension product sampling program, and other
marketing and promotional activities. Increased legal fees associated with
ongoing patent litigation; the implementation of new information management
systems; and additional personnel costs across various administrative functions
also contributed to the increase in SG&A expense.
For the six months ended July 4, 2004, total revenues increased 91 percent to
$424.3 million, compared with $222.3 million for the same period in 2003.
Reported net income rose 32 percent to $60.1 million and reported diluted
earnings per share increased 27 percent to $1.70. Excluding a first-quarter,
after-tax gain of $1.7 million, or $.05 per diluted share, associated with the
sale of a company facility, net income was $58.4 million and diluted earnings
per share were $1.66 for the first six months of 2004. This is compared with
reported net income of $45.6 million and reported diluted earnings per share of
$1.34 for the same period a year ago. Excluding a charge associated with a
retirement agreement, net income was $47.8 million and diluted earnings per
share were $1.41 for the first six months of 2003.
Key contributors to Par's sales growth for the first six months of 2004 were
paroxetine and the company's base business. For the first six months, paroxetine
achieved sales of $181.9 million, and base business sales grew 39 percent to
$168.5 million.
For the first six months of 2004, investment in R&D increased 50 percent to
$16.7 million. The substantial increase in R&D underscores Par's commitment to
identify, formulate and develop a continuing stream of new products.
more...
Year-to-date, Par has repurchased 683,700 shares of its common stock at a total
cost of $26.2 million. On April 29, 2004, Par announced that its Board of
Directors had authorized the purchase of up to $50 million worth of the
company's common stock.
SINCE THE END OF THE FIRST QUARTER OF 2004:
o In July, Par and Teva Pharmaceuticals USA entered into a settlement
regarding megestrol acetate oral suspension. As part of that settlement,
Par will grant a license to Teva for a limited number of units, and Par
will, in return, receive a royalty on Teva's sales;
o Par entered into agreements to market certain significant products
representing aggregate annual U.S. branded sales of more than $1 billion.
Assuming timely FDA approvals, Par expects to introduce the products in
2004 and 2005;
o Par announced that it believes it is the first-to-file an ANDA with a
paragraph IV certification for diazepam rectal gel, the generic version of
Diastat(R), and may be entitled to up to 180 days of marketing exclusivity
for the product;
o Par's partner, Genpharm, received tentative approval from the FDA for its
ANDA for sertraline HCl tablets, the generic version of the antidepressant
Zoloft(R);
o Par named Shankar Hariharan, Ph.D. the company's first chief scientific
officer;
o Par announced the election of Joseph E. Smith to its board of directors;
o Par finalized its agreement with Advancis Pharmaceutical Corporation to
develop and market a novel formulation of the antibiotic amoxicillin;
o Par commenced shipment of nystatin topical powder (Mycostatin(R)),
ciprofloxacin tablets (Cipro(R)), fluoxetine oral solution (Prozac(R)
solution), and chlordiazepoxide HCl capsules (Librium(R));
o Kali's partners commenced shipment of quinapril HCl/hydrochlorothiazide
tablets (Accuretic(TM)) and metronidazole capsules (Flagyl(R)). Par
receives royalty income from the sale of these products; and
o Par entered into an agreement with Orchid Chemicals & Pharmaceuticals,
Ltd., based in Chennai, India to develop and market generic drugs,
initially focusing on as many as seven cephalosporin antibiotics.
PAR PHARMACEUTICAL COMPANIES, INC. develops, manufactures and markets generic
pharmaceuticals through its principal subsidiary, Par Pharmaceutical, Inc., and
its recently acquired subsidiary, Kali Laboratories, Inc. The company is also
developing an additional line of branded pharmaceutical products for specialty
markets and expects to introduce the first of these in 2005. Through its
FineTech subsidiary, Par also develops and utilizes synthetic chemical processes
to design and develop intermediate ingredients used in the production of
finished products for the pharmaceutical industry. Par currently manufactures,
markets or licenses 80 prescription drugs. For press release and other company
information, visit http://www.parpharm.com.
more...
Certain statements in this press 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 are subject
to risks and uncertainties, including the difficulty of predicting FDA filings
and approvals, acceptance and demand for new pharmaceutical products, the impact
of competitive products and pricing, new product development and launch,
reliance on key strategic alliances, uncertainty of patent litigation filed
against us, availability of raw materials, the regulatory environment,
fluctuations in operating results and other risks and uncertainties detailed
from time to time in the Company'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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more...
PAR PHARMACEUTICAL COMPANIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
SIX MONTHS ENDED THREE MONTHS ENDED
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JULY 4, JUNE 29, JULY 4, JUNE 29,
2004 2003 2004 2003
---------------- ------------------ ---------------- ----------------
Revenues:
Net product sales $422,099 $209,485 $211,060 $108,801
Other product related revenues 2,199 12,788 1,471 7,060
Total revenues 424,298 222,273 212,531 115,861
Cost of goods sold 280,629 106,000 139,414 54,891
---------------- ------------------ ---------------- ----------------
Gross margin 143,669 116,273 73,117 60,970
---------------- ------------------ ---------------- ----------------
Operating expenses (income):
Research and development 16,662 11,120 10,184 4,651
Selling, general and administrative 30,736 (1) 30,105 16,481 18,215
Settlements, net (2,846) - (2,846) -
---------------- ------------------ ---------------- ----------------
Total operating expenses 44,552 41,225 23,819 22,866
---------------- ------------------ ---------------- ----------------
Operating income 99,117 75,048 49,298 38,104
Other expense, net (75) (44) (53) (10)
Interest (expense) income, net (573) 333 (294) 164
---------------- ------------------ ---------------- ----------------
Income before provision for income taxes 98,469 75,337 48,951 38,258
Provision for income taxes 38,403 29,758 19,091 15,112
---------------- ------------------ ---------------- ----------------
Net income $60,066 $45,579 $29,860 $23,146
================ ================== ================ ================
NET INCOME PER SHARE OF COMMON STOCK:
BASIC $1.75 $1.38 $0.87 $0.70
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DILUTED $1.70 $1.34 $0.85 $0.68
================ ================== ================ ================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING:
BASIC 34,359 33,021 34,267 33,153
================ ================== ================ ================
DILUTED 35,247 33,953 34,930 34,197
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COMPARATIVE ADJUSTED FOR GAIN ON SALE OF FACILITY AND RETIREMENT CHARGES
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Net income as reported above $60,066 $45,579 $29,860 $23,146
Gain of sale of facility, net of tax (1,715) - - -
Retirement charges, net of tax - 2,199 0 2,199
---------------- ------------------ ---------------- ----------------
NET INCOME $58,351 $47,778 $29,860 $25,345
================ ================== ================ ================
NET INCOME PER SHARE OF COMMON STOCK:
BASIC $1.70 $1.45 $0.87 $0.76
================ ================== ================ ================
DILUTED $1.66 $1.41 $0.85 $0.74
================ ================== ================ ================
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(1) Excluding a gain on the sale of a facility of $2,812, selling, general and administrative
expenses totaled $33,548.