Par Pharmaceutical Companies Reports Fourth Quarter and Full-Year Results for 2011

Reports Q4 2011 GAAP EPS of $0.85; Adjusted Cash EPS of $0.78

Achieves Record GAAP Annual Gross Margin of $386.7 Million; $405.7 Million Non-GAAP Annual Gross Margin

Feb 28, 2012, 07:30 ET from Par Pharmaceutical Companies, Inc.

WOODCLIFF LAKE, N.J., Feb. 28, 2012 /PRNewswire/ -- Par Pharmaceutical Companies, Inc. (NYSE: PRX) today reported results for the fourth quarter and full year ended December 31, 2011, which includes approximately six weeks of Anchen Pharmaceuticals' operating results following the completion of the acquisition.

For the fourth quarter ended December 31, 2011, the Company reported total revenues of $253.6 million and income from continuing operations of $31.3 million, or $0.85 per diluted share, which includes approximately $14 million of favorable tax benefits. On an adjusted cash basis (non-GAAP measure), which excludes amortization expenses, other transaction-related costs and certain tax items, income from continuing operations was $28.9 million, or $0.78 per diluted share for the fourth quarter 2011.  

For the full year ended December 31, 2011, total revenue was $926.1 million with a loss from continuing operations of $46.3 million, or $1.29 per diluted share, as a result of a first quarter pre-tax litigation charge of $190.6 million as well as a second quarter restructuring charge of $27.0 million. 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 $121.7 million, or $3.32 per diluted share.  On an adjusted cash basis, income from continuing operations for the full year 2010 was $105.0 million, or $2.95 per diluted share.

Fourth Quarter Highlights  

Key Product Sales (Net sales comparisons at the product level are to third quarter 2011)

  • Metoprolol:  For the quarter ended December 31, 2011, net sales of metoprolol succinate were $56.4 million compared to $67.5 million in the third quarter 2011.  The decrease was driven by a decline in volume and price due to competition on all strengths.  Net sales for the full year 2011 were $251.0 million.  Par Pharmaceutical, the Company's generic drug division, is the authorized generic for all strengths of AstraZeneca's Toprol XL®.
  • Budesonide EC:  Net sales for budesonide EC in the fourth quarter were $33.1 million compared to $20.6 million in the third quarter.  The increase was driven by customer buying patterns following the late second quarter launch of the product.  Net sales for 2011 were $70.0 million. Par Pharmaceutical is the authorized generic for AstraZeneca's Entocort® EC.
  • Propafenone Hydrochloride ER: Net sales for propafenone hydrochloride ER in the fourth quarter were $16.4 million compared to $18.1 million in the third quarter.  The decrease was driven by customer buying patterns.  Net sales for the full year 2011 were $69.8 million. Par Pharmaceutical remained the exclusive supplier of generic Rythmol SR® throughout the fourth quarter.
  • Sumatriptan: Net sales of sumatriptan succinate were $15.3 million in the fourth quarter compared to $16.8 million in the prior quarter.  The decrease is driven by a decline in price and volume due to competition. Net sales for the full year 2011 were $64.1 million.
  • Buproprion Hydrochloride ER: Par recorded net sales for buproprion of $6.1 million in the last six weeks of the fourth quarter following the completion of the Anchen acquisition.  
  • Zolpidem Tartrate: Par recorded net sales for zolpidem tartrate of $5.3 million in the last six weeks of the fourth quarter following the completion of the Anchen acquisition.
  • Olanzapine ODT: Net sales for olanzapine orally disintegrating tablets were $3.2 million in the fourth quarter. Par Pharmaceutical launched all strengths of olanzapine orally disintegrating tablets, the generic version of Lilly's Zyprexa Zydis® in October.
  • Fentanyl Citrate Lozenges: Net sales for fentanyl for the fourth quarter were $2.6 million.  Par Pharmaceutical acquired the ANDA from Teva in connection with Teva's acquisition of Cephalon and began shipping all strengths to the trade in October.
  • Other Generic Products:  For the fourth quarter 2011, net sales from all other generic products were $88.5 million. This compares to third quarter net sales of $72.5 million.  The increase is due to the seasonality of chlorpheniramine/hydrocodone, as well as the addition of Anchen products to Other Generic Products.
  • Megace® ES:  Net sales were $15.8 million for the fourth quarter compared to $14.2 million in the third quarter.  The increase was due to customer buying patterns.  Net sales for the full year were $58.2 million.
  • Nascobal® B12 Nasal Spray:  Net sales were $6.6 million for the three months ended December 31, 2011 compared to $4.7 million in the third quarter.  The increase was due to an increase in prescription demand.  Net sales for the full year were $21.4 million.

Revenues and adjusted gross margin for the fourth quarter 2011 were $253.6 million and $103.8 million, respectively, compared to $215.4 million in net sales and $87.2 million in adjusted gross margin during the prior quarter (Q3 2011). The adjusted gross margin rate on the Company's consolidated product portfolio increased slightly to 40.9% versus 40.5% in the third quarter 2011.  (Par is now presenting non-GAAP gross margin on an adjusted basis. See detailed reconciliation table at the end of this press release.)

4Q 2011

3Q 2011

$

%

$

%

Key Par (Generic)

Products (1)

$   38.3

27.7%

$   31.8

25.9%

All Other (Generic)

43.5

49.1%

40.8

56.2%

Total Par Generics

$   81.8

36.0%

$   72.6

37.1%

Strativa (Branded) Products(2)

$   22.0

82.4%

$   14.6

73.4%

Total (All Products)

$ 103.8

40.9%

$   87.2

40.5%

(1) Q4 2011 is comprised of metoprolol, sumatriptan, olanzapine, busdesonide, propafenone, buproprion,

zolpidem, fentanyl lozenges.  Q3 2011 includes propafenone, sumatriptan, metoprolol, budesonide.

(2) Strativa products consist primarily of Megace ES and Nascobal.

Operating Expenses

On a GAAP basis, total operating expenses increased during the fourth quarter of 2011 as compared to the prior quarter as follows:

  • Research and development expenses were $18.1 million in the fourth quarter of 2011 compared to $9.6 million in the third quarter.  The increase was due to higher generic development activity, which also included Anchen's development activities during the post-acquisition period.
  • Selling, general and administrative expenses for the fourth quarter 2011 increased to $44.5 million compared to $35.8 million in the third quarter of 2011.  The increase reflects higher employment costs, as well as Anchen and Edict transaction-related expenses.

Cash and cash equivalents and marketable securities aggregate balance as of December 31, 2011 was $188.2 million and included significant one-time cash outflows from the AWP litigation settlement, as well as the acquisition of Anchen Pharmaceuticals and other business development transactions.

Product and Pipeline Update

In November 2011, Par Pharmaceutical, Inc. completed its acquisition of Anchen Pharmaceuticals, a privately-held specialty pharmaceutical company headquartered in Irvine, California.

In February 2012, Par Pharmaceutical, Inc. completed its acquisition of privately-held Edict Pharmaceuticals Private Limited, an India-based developer and manufacturer of generic pharmaceuticals.

Par Pharmaceutical, along with third-party partners, currently has approximately 71 ANDAs pending with the FDA, 21 of which it believes to be first-to-file opportunities.

Conference Call

Par Pharmaceutical Companies, Inc. will host a conference call and live webcast on Tuesday, February 28, 2012 at 9:00 AM EST to review results for the fourth quarter and full year 2011.  The Company will release its financial results on February 28, 2012 before the market opens.

Access to the live webcast can be made via the Company's website at www.parpharm.com.

Dial-in Information

Domestic:

800-299-0148

International:

617-801-9711

Passcode:

77407762

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:

42749409

Non-GAAP Measures

Par Pharmaceutical Companies, Inc. ("the Company") 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 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 U.S. GAAP and non-GAAP financial measures are reconciled in attached schedules.  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 measures 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.  Importantly, the Company believes non-GAAP financial measures should be considered in addition to, and not in lieu of, U.S. 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 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, 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.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2011 AND 2010

(In Thousands, Except Share Data)

December 31,

December 31,

2011

2010

     ASSETS

Current assets:

   Cash and cash equivalents

$162,516

$218,674

   Available for sale marketable debt securities

25,709

27,866

   Accounts receivable, net  

125,940

95,705

   Inventories

106,250

72,580

   Prepaid expenses and other current assets

20,475

17,660

   Deferred income tax assets

55,966

26,037

   Income taxes receivable

27,049

18,605

   Total current assets

523,905

477,127

Property, plant and equipment, net

97,790

71,980

Intangible assets, net

311,669

95,467

Goodwill

283,432

63,729

Other assets

14,657

5,441

Non-current deferred income tax assets, net

-

69,488

Total assets

$1,231,453

$783,232

     LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Current portion of long-term debt

$21,875

$ -

   Accounts payable

33,000

23,956

   Payables due to distribution agreement partners

69,359

25,310

   Accrued salaries and employee benefits

16,174

16,397

   Accrued government pricing liabilities

39,614

32,169

   Accrued legal fees

4,150

7,084

   Accrued legal settlements

37,800

-

   Payable to former Anchen security holders

20,620

-

   Accrued expenses and other current liabilities

9,604

6,674

   Total current liabilities

252,196

111,590

Long-term liabilities

19,952

43,198

Non-current deferred tax liabilities

25,974

-

Long-term debt, less current portion

323,750

-

Commitments and contingencies

-

-

Stockholders' equity:

   Common stock, par value $0.01 per share, authorized 90,000,000 shares; issued

        39,677,291 and 38,872,663 shares

397

389

   Additional paid-in capital

389,166

373,764

   Retained earnings

302,984

329,129

   Accumulated other comprehensive income

13

137

   Treasury stock, at cost 3,201,858 and 2,970,573 shares

(82,979)

(74,975)

   Total stockholders' equity

609,581

628,444

Total liabilities and stockholders' equity

$1,231,453

$783,232

PAR PHARMACEUTICAL COMPANIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

(In Thousands, Except Per Share Amounts)

2011

2010

2009

Revenues:

   Net product sales

$887,495

$980,631

$1,176,427

   Other product related revenues

38,643

28,243

16,732

Total revenues

926,138

1,008,874

1,193,159

Cost of goods sold, excluding amortization expense

526,288

620,904

838,167

Amortization expense

13,106

14,439

21,039

Total cost of goods sold

539,394

635,343

859,206

   Gross margin

386,744

373,531

333,953

Operating expenses:

   Research and development

46,538

50,369

39,235

   Selling, general and administrative

173,378

192,504

165,135

   Settlements and loss contingencies, net

190,560

3,762

307

   Restructuring costs

26,986

-

1,006

Total operating expenses

437,462

246,635

205,683

Gain on sale of product rights and other

125

6,025

3,200

Operating (loss) income

(50,593)

132,921

131,470

Gain on bargain purchase

-

-

3,021

Loss on extinguishment of senior subordinated convertible notes

-

-

(2,598)

Gain (loss) on marketable securities and other investments, net

237

3,459

(55)

Interest income

736

1,257

2,658

Interest expense

(2,676)

(2,905)

(8,013)

(Loss) income from continuing operations before     provision for income taxes

(52,296)

134,732

126,483

(Benefit) provision for income taxes

(5,996)

41,980

48,883

(Loss) income from continuing operations

(46,300)

92,752

77,600

Discontinued operations:

(Benefit) provision for income taxes

(20,155)

21

672

Income (loss) from discontinued operations

20,155

(21)

(672)

Net (loss) income

($26,145)

$92,731

$76,928

Basic (loss) earnings per share of common stock:

(Loss) income from continuing operations

($1.29)

$2.70

$2.30

Income (loss) from discontinued operations

0.56

(0.00)

(0.02)

Net (loss) income

($0.73)

$2.70

$2.28

Diluted (loss) earnings per share of common stock:

(Loss) income from continuing operations

($1.29)

$2.60

$2.27

Income (loss) from discontinued operations

0.56

(0.00)

(0.02)

Net (loss) income

($0.73)

$2.60

$2.25

Weighted average number of common shares     outstanding:

 Basic

35,950

34,307

33,679

 Diluted

35,950

35,644

34,188

PAR PHARMACEUTICAL COMPANIES, INC.

NON-GAAP P&L (4Q11 vs. 3Q11)

(In Thousands, Except Per Share Amounts)

(Unaudited)

Three Months Ended

December 31,

September 30,

2011

2011

Increase / (Decrease)

Revenues:

   Net product sales

$242,823

$208,865

$33,958

16%

   Other product related revenues

10,818

6,492

4,326

67%

Total revenues

253,641

215,357

38,284

18%

Cost of goods sold, excluding amortization expense

149,863

128,180

21,683

17%

Amortization expense

-

-

-

-

Total cost of goods sold

149,863

128,180

21,683

17%

   Gross margin

103,778

87,177

16,601

19%

   Gross margin %

41%

40%

Operating expenses:

   Research and development

18,141

9,610

8,531

89%

   Selling, general and administrative

37,923

32,435

5,488

17%

Total operating expenses

56,064

42,045

14,019

33%

Gain on sale of product rights and other

125

-

125

100%

Operating income

47,839

45,132

2,707

6%

Gain on marketable securities and other investments, net

237

-

237

100%

Interest income

(229)

160

(389)

(243%)

Interest expense

(2,225)

(150)

(2,075)

1,383%

Income from continuing operations before provision    for income taxes

45,622

45,142

480

1%

Provision for income taxes

16,758

18,079

(1,321)

(7%)

Income from continuing operations

28,864

27,063

1,801

7%

Discontinued operations:

(Benefit) provision for income taxes

-

-

-

-

Income (loss) from discontinued operations

-

-

-

-

Net income

$28,864

$27,063

$1,801

7%

Basic earnings per share of common stock:

Income from continuing operations

$0.80

$0.75

$0.05

7%

Income from discontinued operations

0.00

0.00

0.00

0%

Net income

$0.80

$0.75

$0.05

7%

Diluted earnings per share of common stock:

Income from continuing operations

$0.78

$0.74

$0.04

5%

Income from discontinued operations

0.00

0.00

0.00

0%

Net income

$0.78

$0.74

$0.04

5%

Weighted average number of common shares outstanding:

 Basic

36,173

36,143

30

0%

 Diluted

36,815

36,774

41

0%

Reconciliation Between Reported (GAAP); Adjusted Income (Loss) from Continuing Operations and "Cash EPS"

(In Thousands, Except Per Share Data)

(Unaudited)

Three Months Ended

December 31, 2011

GAAP 10-K P&L CONSOLIDATED

ADJUSTMENTS

NON-GAAP

Revenues:

   Net product sales

$242,823

$242,823

   Other product related revenues

10,818

10,818

Total revenues

253,641

253,641

Cost of goods sold, excluding amortization expense

155,015

(5,152)

a

149,863

Amortization expense

5,665

(5,665)

b

                         -

Total cost of goods sold

160,680

(10,817)

149,863

   Gross margin

92,961

10,817

103,778

   Gross margin %

37%

41%

Operating expenses:

   Research and development

18,141

18,141

   Selling, general and administrative

44,515

(6,592)

c

37,923

Total operating expenses

62,656

(6,592)

56,064

Gain on sale of product rights and other

125

125

Operating income

30,430

17,409

47,839

Gain on marketable securities and other investments, net

237

237

Interest income

(229)

(229)

Interest expense

(2,225)

(2,225)

Income from continuing operations before provision for income taxes

28,213

17,409

45,622

(Benefit) provision for income taxes

(3,096)

19,854

d

16,758

Income (loss) from continuing operations

31,309

(2,445)

28,864

Discontinued operations:

(Benefit) provision for income taxes

(20,535)

20,535

                         -

Income (loss) from discontinued operations

20,535

(20,535)

                         -

Net income (loss)

$51,844

($22,980)

$28,864

Basic earnings per share of common stock:

Income from continuing operations

$0.87

$0.80

Income from discontinued operations

0.57

0.00

Net income

$1.43

$0.80

Diluted earnings per share of common stock:

Income from continuing operations

$0.85

$0.78

Income from discontinued operations

0.56

0.00

Net income

$1.41

$0.78

Weighted average number of common shares outstanding:

 Basic

36,173

36,173

 Diluted

36,815

36,815

a - Amortization of inventory step up established with Anchen purchase accounting

b - Amortization expense (Par $3,657, Anchen $2,008)

c - Transaction costs on 2011 business acquisitions ($6,102) and amortization expense for Megace  ($490)

d - Estimated tax on adjustments

(5,642)

    Adjustment to tax on litigation settlements and contingencies

(12,198)

    Charge related to valuation of deferred income tax assets

2,391

    Reversal of income tax reserves

(4,405)

(19,854)

Reconciliation Between Reported (GAAP); Adjusted Income (Loss) from Continuing Operations and "Cash EPS"

(In Thousands, Except Per Share Data)

(Unaudited)

Twelve Months Ended

December 31, 2011

GAAP 10-K P&L CONSOLIDATED

ADJUSTMENTS

NON-GAAP

Revenues:

   Net product sales

$887,495

$887,495

   Other product related revenues

38,643

38,643

Total revenues

926,138

926,138

Cost of goods sold, excluding amortization expense

526,288

(5,826)

a

520,462

Amortization expense

13,106

(13,106)

b

                       -

Total cost of goods sold

539,394

(18,932)

520,462

   Gross margin

386,744

18,932

405,676

   Gross margin %

42%

44%

Operating expenses:

   Research and development

46,538

46,538

   Selling, general and administrative

173,378

(10,670)

c

162,708

   Settlements and loss contingencies, net

190,560

(190,560)

d

                       -

   Restructuring costs

26,986

(26,986)

e

                       -

Total operating expenses

437,462

(228,216)

209,246

Gain on sale of product rights and other

125

125

Operating (loss) income

(50,593)

247,148

196,555

Gain on marketable securities and other investments, net

237

237

Interest income

736

736

Interest expense

(2,676)

(2,676)

(Loss) income from continuing operations before provision for income taxes

(52,296)

247,148

194,852

(Benefit) provision for income taxes

(5,996)

79,099

f

73,103

(Loss) income from continuing operations

(46,300)

168,049

121,749

Discontinued operations:

(Benefit) provision for income taxes

(20,155)

20,155

                       -

Income (loss) from discontinued operations

20,155

(20,155)

                       -

Net (loss) income

($26,145)

$147,894

$121,749

Basic (loss) earnings per share of common stock:

(Loss) income from continuing operations

($1.29)

$3.39

Income from discontinued operations

0.56

0.00

Net (loss) income

($0.73)

$3.39

Diluted (loss) earnings per share of common stock:

(Loss) income from continuing operations

($1.29)

$3.32

Income from discontinued operations

0.56

0.00

Net (loss) income

($0.73)

$3.32

Weighted average number of common shares outstanding:

 Basic

35,950

35,950

 Diluted

35,950

36,675

a - Amortization of inventory step up established with Anchen purchase accounting ($5,152) and restructuring related inventory write-offs ($674)

b - Amortization expense (Par $11,098, Anchen $2,008)

c - Transaction costs on 2011 business acquisitions ($8,954) and amortization expense for Megace ($1,716)

d - Litigation settlements and contingencies, pre-tax

e - Restructuring costs

f - Estimated tax on adjustments

(79,476)

    Charge related to valuation of deferred income tax assets

4,782

    Reversal of income tax reserves

(4,405)

(79,099)

SOURCE Par Pharmaceutical Companies, Inc.



RELATED LINKS

http://www.parpharm.com