EXHIBIT 10.1
IVAX Corporation
4400 Biscayne Boulevard
Miami, Florida 33137
Telephone 305-575-6000
FOR IMMEDIATE RELEASE
IVAX CORPORATION PROVIDES OUTLOOK FOR SECOND QUARTER EARNINGS
Miami, Florida, June 27, 1996 -- IVAX Corporation (AMEX: IVX) said
today that the confluence of three factors relating to its U.S. generic drug
business -- significant customer inventories of important generic drugs, price
declines for certain generic drugs, and related credits provided to customers --
will adversely affect its second quarter financial results. As a consequence,
IVAX estimates that earnings before extraordinary items for the quarter ending
June 30, 1996, will be between $.06 to $.08 per share. This estimate includes an
expected contribution of approximately $.05 per share from a one-time tax
benefit, described below. IVAX expects to issue a press release reporting its
definitive second quarter earnings in late July.
"Although our business and strategies remain sound and our industry
holds great promise for continued growth, I regret to report that quarterly
results that will fall significantly short of the record earnings of our recent
quarters," said Phillip Frost, M.D., IVAX' Chairman and Chief Executive Officer.
"Since the beginning of 1995, we have launched a large number of generic drugs
and several of our customers have established significant inventories of many of
these and other IVAX generic products. Prices for certain of these drugs have
declined, however, following launches of generic versions of the same drugs by
competitors who have adopted aggressive pricing strategies."
"As is the practice in the industry, where necessary, we adjust certain
customers' accounts with credits or other allowances to reflect price declines.
We offer these credits to put customers who establish inventories on a level
playing field with customers who wait for lower prices, and to help us earn
shelf space, market share and, above all, customer loyalty. Given the occurrence
of price declines at a time of significant inventory levels, we expect that
these credits will reduce our 1996 second quarter net revenues and operating
income by approximately $18 million. The quarter is additionally challenged,
although to a lesser degree, by the simple fact that price declines have reduced
margins and significant customer inventories have reduced reorders. Although
reorders should improve as inventories are depleted, we expect to be addressing
all of these factors to some extent for the balance of the year."
Included in IVAX' earnings estimate is a one-time tax benefit. As part
of an audit of certain of the tax returns of IVAX' McGaw subsidiary, the
Internal Revenue Service has proposed that McGaw modify the amortization
schedule of some of McGaw's intangible assets. These modifications will decrease
the amortization deductions during the periods prior to McGaw's acquisition by
IVAX, thereby reducing McGaw's net operating loss carryforwards for those
periods and increasing amortization deductions for subsequent periods. The
future benefit to be
IVAX Corporation Press Release
June 27, 1996
Page 2
derived from the amortization deductions will generate a deferred tax asset
which is expected to be recognized by IVAX in the second quarter. The
recognition of this tax asset is subject to execution of an agreement with the
IRS, which is expected to occur in July, although no assurance can be given that
the agreement will be executed or that it will contain the terms described. The
modifications would result in an approximate $6.5 million reduction in the tax
provision for the second quarter, contributing approximately $.05 to quarterly
earnings per share.
As previously announced, in the second quarter IVAX will report an
extraordinary charge of approximately $2.1 million (net of tax) relating to the
redemption of McGaw's 10-3/8% Senior Notes, which will reduce second quarter
earnings per share by approximately $.02.
Dr. Frost offered additional observations: "Despite the anticipated
decrease in second quarter earnings, we remain confident of IVAX' long-term
prospects. As we have all seen, the long-term rewards offered by the generic
drug industry are, from time to time, balanced with short-term earnings
volatility. Nevertheless, we are satisfied that we have built and continue to
advance the most prolific and valuable generic drug development program in the
world. Our program has pioneered many, if not the majority, of the most
technically challenging, commercially significant generic drugs on the market,
and has active development projects for many more. Our program was not developed
for the purpose of delivering specified earnings in a given quarter of a
particular year. We try to deliver an expanding array of valuable generic drugs
that have the potential, year over year, to generate earnings growth, reward
investors and benefit society. Without diminishing the significance of the
pricing and related issues which impacted results in this quarter, we did not
build a program that shies from competition or is reliant for ultimate growth on
the price stability of specific drugs at a point in time. That would be
shortsighted in an industry the societal purpose of which is to foster
competition and reduce health care costs. Rather, we have established a
broad-based, highly ambitious program which has developed, and is capable of
continuing to develop, generic versions of a significant number of important
off-patent brand drugs."
The estimates of second quarter earnings contained in this release are
not actual results and are based on preliminary information as well as certain
assumptions which management believes to be reasonable at this time, including
the assumption that prices for IVAX' important U.S. generic products will remain
at current levels through the end of the quarter. Historically, a material
portion of the revenues from IVAX' U.S. generic drug business has been generated
towards the end of each quarter. Accordingly, actual results for the quarter are
difficult to predict with certainty, and may differ from the estimate set forth
above.
Statements made in this press release, including those relating to
estimated second quarter results, are forward looking and are made pursuant to
the safe harbor provisions of the Securities
IVAX Corporation Press Release
June 27, 1996
Page 3
Litigation Reform Act of 1995. Such statements involve risks and uncertainties
which may cause results to differ materially from those set forth in these
statements. In addition to the factors set forth elsewhere in this release, the
economic, competitive, governmental, technological and other factors identified
in IVAX' filings with the Securities and Exchange Commission could affect such
results.
IVAX Corporation, headquartered in Miami, Florida, is a holding company
with subsidiaries engaged primarily in the research, development, manufacture
and marketing of health care products, including generic and branded
pharmaceuticals, intravenous solutions and related products, and IN VITRO
diagnostics.
CONTACTS:
Joseph C. Jones
Vice President -
Investor Relations
IVAX Corporation
305-575-6042
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