Par Pharmaceutical Companies Reports Second Quarter 2012 Results

Reports Q2 2012 Adjusted Cash EPS of $1.62; GAAP $1.38 per Share

Results Driven by Modafinil Launch

Aug 02, 2012, 07:30 ET from Par Pharmaceutical Companies, Inc.

WOODCLIFF LAKE, N.J., Aug. 2, 2012 /PRNewswire/ -- Par Pharmaceutical Companies, Inc. (NYSE: PRX) today reported results for the second quarter ended June 30, 2012.

For the second quarter ended June 30, 2012, the Company reported total revenues of $294.3 million and income from continuing operations of $51.3 million, or $1.38 per diluted share, which includes amortization expenses and certain transaction costs. On an adjusted cash basis (non-GAAP measure), which excludes amortization and transaction costs, income from continuing operations was $60.3 million, or $1.62 per diluted share for the second quarter 2012.  (Refer to attached reconciliation table between GAAP and adjusted non-GAAP amounts.)

Second Quarter Highlights

Key Product Sales (Net sales comparisons at the product level are to first quarter 2012.)

  • Modafinil:  Net sales for modafinal were $57.5 million in the second quarter.  Par launched the product on April 6, 2012.
  • Metoprolol:  For the quarter ended June 30, 2012, net sales of metoprolol succinate were $49.0 million compared to $61.8 million in the first quarter 2012.  The decrease was driven by non-recurrence of first quarter customer buying patterns.  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 second quarter 2012 were $33.5 million compared to $38.0 million in the first quarter 2012.  The decrease was driven by non-recurrence of first quarter customer buying patterns.  Par Pharmaceutical is the authorized generic for AstraZeneca's Entocort® EC.
  • Propafenone Hydrochloride ER:  Net sales for propafenone hydrochloride ER in the second quarter were $17.9 million compared to $19.1 million in the first quarter 2012. Par Pharmaceutical remained the exclusive supplier of generic Rythmol SR® throughout the second quarter.
  • Sumatriptan:  Net sales of sumatriptan succinate were $13.9 million in the second quarter compared to $16.7 million in the prior quarter.  The decrease was driven by a reduction in customer orders in anticipation of Par's exit from the market in the third quarter.
  • Bupropion Hydrochloride ER:  Net sales of bupropion were $12.0 million in the second quarter 2012.  Par recorded $11.4 million of net sales in the first quarter.
  • Zolpidem Tartrate:  Net sales of zolpidem tartrate of $5.3 million in the second quarter 2012.  Par recorded $6.9 million of net sales in the first quarter. The reduction in sales was the result of a small decline in net pricing resulting from customer mix.
  • Fentanyl Citrate Lozenges:  Net sales for fentanyl for the second quarter were $2.6 million compared to $2.0 million in the first quarter.  The increase is due to customer buying patterns.
  • Other Generic Products:  For the second quarter 2012, net sales from all other generic products were $81.3 million. This compares to first quarter net sales of $95.3 million. The decline was primarily due to the seasonality of the Chlorpheniramine/Hydrocodone product.
  • Megace® ES:  Net sales were $14.2 million for the second quarter compared to $12.2 million in the first quarter.  The increase was due to non-recurrence of unfavorable first quarter customer buying patterns.  
  • Nascobal® B12 Nasal Spray:  Net sales were $5.4 million for the second quarter compared to $5.9 million in the first quarter.  The decrease was due to the timing of customer orders, despite higher prescription volume.

Revenues and adjusted gross margin for the second quarter 2012 were $294.3 million and $156.0 million, respectively, compared to $271.5 million in net sales and $110.7 million in adjusted gross margin during the prior quarter (Q1 2012). The adjusted gross margin rate on the Company's consolidated product portfolio was 53.0% versus 40.8% in the first quarter 2012, with this increase driven by the launch of modafinil.  (Par is now presenting non-GAAP gross margin on an adjusted basis. See detailed reconciliation table at the end of this press release.)

 

2Q 2012

1Q 2012

$

%

$

%

Key Par (Generic)

Products (1)

$   98.6

51.4%

$   46.4

29.8%

All Other (Generic)

40.2

49.4%

47.8

50.1%

Total Par Generics

$  138.8

50.8%

$   94.2

37.5%

Strativa (Branded) Products(2)

$   17.2

80.9%

$   16.5

81.5%

Total (All Products)

$ 156.0

53.0%

$ 110.7

40.8%

(1) Q2 2012 Key Par Products include modafinil, metoprolol, sumatriptan, budesonide, propafenone, bupropion, zolpidem, fentanyl lozenges.  (2) Strativa products consist primarily of Megace ES and Nascobal.

Operating Expenses On a GAAP basis, total operating expenses fell during the second quarter of 2012 as compared to the prior quarter as follows:

  • Research and development expenses were $20.7 million in the second quarter 2012 compared to $29.9 million in the first quarter 2012.  The decrease was due primarily to a one-time upfront development payment in the first quarter.
  • Selling, general and administrative expenses for the second quarter 2012 decreased to $39.7 million compared to $42.2 million in the first quarter.

Cash and cash equivalents and marketable securities aggregate balance as of June 30, 2012 was $261.0 million.

Product and Pipeline Update In July, Par Formulations Private Limited, (formerly Edict Pharmaceuticals Private Limited), received its first USFDA approval for Labetalol HCl Tablets 100 mg, 200 mg & 300 mg, the generic version of Trandate®.  Par anticipates the product to be available in August. Par Pharmaceutical acquired Edict Pharmaceuticals, based in Chennai, India, in February 2012.

Par Pharmaceutical, along with third-party partners, currently has approximately 72 ANDAs pending with the FDA, 23 of which it believes to be first-to-file opportunities.

Subsequent Event On July 14, 2012, we entered into an Agreement and Plan of Merger (the "Agreement") with Sky Growth Holdings Corporation, a Delaware corporation ("Parent"), and Sky Growth Acquisition Corporation, a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub").  The Agreement provides for the merger of Merger Sub with and into the Company, with the Company surviving the Merger as a wholly-owned subsidiary of Parent (the "Merger").

Parent and Merger Sub are beneficially owned by affiliates of TPG Capital, L.P. and were formed solely for the purposes of executing the Agreement and facilitating the Merger.  The Agreement provides for a purchase price of approximately $1.9 billion for our fully diluted equity.  We expect this transaction to close, subject to customary conditions, before the end of 2012.  Some of the customary conditions to closing include obtaining the approval of the holders of a majority of the outstanding shares of our common stock and the expiration or early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Under the Agreement, we may solicit superior proposals from third parties through August 24, 2012.  Parent has certain termination rights that could require us to pay Parent a termination fee of $24 million or $48 million, if and as applicable, based on the circumstances of the termination, plus in each case up to $7 million in Parent's expenses.  We also have certain termination rights in certain circumstances.

On July 14, 2012, in conjunction with our execution of the Agreement, we modified our Rights Agreement dated as of October 27, 2004, with American Stock Transfer & Trust Company (the "Rights Agreement"), to render the Rights Agreement inapplicable to the Agreement and the Merger and to cause the Rights Agreement to terminate immediately prior to the effective time of the Merger.

For more information about the Merger, the Agreement and our modification of the Rights Agreement, please see our Current Report on Form 8-K, filed July 16, 2012.

Conference Call Par Pharmaceutical Companies, Inc. will host a conference call and live webcast on Thursday, August 2, 2012 at 9:00 AM EDT to review results for the second quarter 2012.

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

Dial-in Information

Domestic:    

866-356-3377

International:  

617-597-5392

Passcode:   

39276355

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:    

22276530

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, acquires, 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 and Quarterly Report on 10-Q for the second quarter of 2012 which the Company intends to file today, as well as in other of the Company's filings with the SEC from time to time, including other 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. CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Share and Per Share Data) (Unaudited)

June 30, 2012

December 31, 2011

ASSETS

Current assets:

Cash and cash equivalents

$

241,527

$

162,516

Available for sale marketable debt securities

19,459

25,709

Accounts receivable, net  

156,067

125,940

Inventories

89,247

106,250

Prepaid expenses and other current assets

24,450

20,475

Deferred income tax assets

45,080

55,966

Income taxes receivable

11,358

27,049

Total current assets

587,188

523,905

Property, plant and equipment, net

102,373

97,790

Intangible assets, net

289,037

311,669

Goodwill

309,551

283,432

Other assets

13,567

14,657

Total assets

$

1,301,716

$

1,231,453

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Current portion of long-term debt

$

30,625

$

21,875

Accounts payable

37,203

33,000

Payables due to distribution agreement partners

64,971

69,359

Accrued salaries and employee benefits

13,840

16,174

Accrued government pricing liabilities

28,468

39,614

Accrued legal fees

7,237

4,150

Accrued legal settlements

82,800

37,800

Payable to former Anchen securityholders

12,630

20,620

Accrued expenses and other current liabilities

21,983

9,604

Total current liabilities

299,757

252,196

Long-term liabilities

24,211

19,952

Non-current deferred tax liabilities

26,722

25,974

Long-term debt, less current portion

306,250

323,750

Commitments and contingencies

Stockholders' equity:

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

39,989,734 and 39,677,291 shares

400

397

Additional paid-in capital

403,883

389,166

Retained earnings

325,538

302,984

Accumulated other comprehensive income

37

13

Treasury stock, at cost 3,229,853 and 3,201,858 shares

(85,082)

(82,979)

Total stockholders' equity

644,776

609,581

Total liabilities and stockholders' equity

$

1,301,716

$

1,231,453

 

 

PAR PHARMACEUTICAL COMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Data) (Unaudited)

Three months ended

Six months ended

June 30, 2012

June 30, 2011

June 30, 2012

June 30, 2011

Revenues:

Net product sales

$

285,797

$

215,018

$

549,920

$

435,807

Other product related revenues

8,536

9,170

15,885

21,333

Total revenues

294,333

224,188

565,805

457,140

Cost of goods sold, excluding amortization expense

138,371

122,556

303,175

243,094

Amortization expense

12,808

2,606

21,630

5,367

Total cost of goods sold

151,179

125,162

324,805

248,461

Gross margin

143,154

99,026

241,000

208,679

Operating expenses:

Research and development

20,716

8,077

50,616

18,787

Selling, general and administrative

39,667

46,156

81,826

93,101

Intangible asset impairment

2,000

Settlements and loss contingencies, net

45,000

190,560

Restructuring costs

26,986

26,986

Total operating expenses

60,383

81,219

179,442

329,434

Operating income (loss)

82,771

17,807

61,558

(120,755)

Interest income

140

382

276

805

Interest expense

(3,069)

(150)

(6,163)

(301)

Income (loss) from continuing operations before

    provision (benefit) for income taxes

79,842

18,039

55,671

(120,251)

Provision (benefit) for income taxes

28,537

8,859

33,062

(20,587)

Income (loss) from continuing operations

51,305

9,180

22,609

(99,664)

Discontinued operations:

Provision for income taxes

28

127

55

253

Loss from discontinued operations

(28)

(127)

(55)

(253)

Net income (loss)

$

51,277

$

9,053

$

22,554

$

(99,917)

Basic earnings (loss) per share of common stock:

Income (loss) from continuing operations

$

1.41

$

0.26

$

0.62

$

(2.79)

Loss from discontinued operations

(0.01)

(0.01)

Net income (loss)

$

1.41

$

0.25

$

0.62

$

(2.80)

Diluted earnings (loss) per share of common stock:

Income (loss) from continuing operations

$

1.38

$

0.25

$

0.61

$

(2.79)

Loss from discontinued operations

(0.01)

Net income (loss)

$

1.38

$

0.25

$

0.61

$

(2.80)

Weighted average number of common shares

    outstanding:

Basic

36,478

35,983

36,392

35,742

Diluted

37,194

36,708

37,122

35,742

 

 

Reconciliation Between Reported (GAAP); Adjusted Income (Loss) from Continuing Operations and "Cash EPS" (In Thousands, Except Per Share Data) (Unaudited)

Three Months Ended

June 30, 2012

GAAP 10-Q P&L CONSOLIDATED

ADJUSTMENTS

NON-GAAP

Revenues:

    Net product sales

$285,797

$285,797

    Other product related revenues

8,536

8,536

Total revenues

294,333

294,333

Cost of goods sold, excluding amortization expense

138,371

138,371

Amortization expense

12,808

(12,808)

a

-

Total cost of goods sold

151,179

(12,808)

138,371

    Gross margin

143,154

12,808

155,962

    Gross margin %

49%

53%

Operating expenses:

    Research and development

20,716

20,716

    Selling, general and administrative

39,667

(1,204)

b

38,463

    Intangible assets impairment

-

-

    Settlements and loss contingencies, net

-

-

Total operating expenses

60,383

(1,204)

59,179

Operating income

82,771

14,012

96,783

Interest income

140

140

Interest expense

(3,069)

(3,069)

Income from continuing operations before      provision for income taxes

79,842

14,012

93,854

Provision for income taxes

28,537

5,044

c

33,581

Income from continuing operations

51,305

8,968

60,273

Discontinued operations:

Provision for income taxes

28

(28)

-

Loss from discontinued operations

(28)

28

-

Net income

$51,277

$8,996

$60,273

Basic earnings per share of common stock:

Income from continuing operations

$1.41

$1.65

Loss from discontinued operations

(0.00)

0.00

Net income

$1.41

$1.65

Diluted earnings per share of common stock:

Income from continuing operations

$1.38

$1.62

Loss from discontinued operations

(0.00)

0.00

Net income

$1.38

$1.62

Weighted average number of common shares      outstanding:

  Basic

36,478

36,478

  Diluted

37,194

37,194

a - Amortization expense ($12,808)

b - Transaction costs ($732), amortization expense for Megace  ($472)

c -  Estimated tax on adjustments ($5,044)

 

Reconciliation Between Reported (GAAP); Adjusted Income (Loss) from Continuing Operations and "Cash EPS" (In Thousands, Except Per Share Data) (Unaudited)

Six Months Ended

June 30, 2012

GAAP 10-Q P&L CONSOLIDATED

ADJUSTMENTS

NON-GAAP

Revenues:

    Net product sales

$549,920

$549,920

    Other product related revenues

15,885

15,885

Total revenues

565,805

565,805

Cost of goods sold, excluding amortization expense

303,175

(4,048)

a

299,127

Amortization expense

21,630

(21,630)

b

-

Total cost of goods sold

324,805

(25,678)

299,127

    Gross margin

241,000

25,678

266,678

    Gross margin %

43%

47%

Operating expenses:

    Research and development

50,616

(10,000)

c

40,616

    Selling, general and administrative

81,826

(3,506)

d

78,320

    Intangible assets impairment

2,000

(2,000)

e

-

    Settlements and loss contingencies, net

45,000

(45,000)

f

-

Total operating expenses

179,442

(60,506)

118,936

Operating income

61,558

86,184

147,742

Interest income

276

276

Interest expense

(6,163)

(6,163)

Income from continuing operations before      provision for income taxes

55,671

86,184

141,855

Provision for income taxes

33,062

18,741

g

51,803

Income from continuing operations

22,609

67,443

90,052

Discontinued operations:

Provision for income taxes

55

(55)

-

Loss from discontinued operations

(55)

55

-

Net income

$22,554

$67,498

$90,052

Basic earnings per share of common stock:

Income from continuing operations

$0.62

$2.47

Loss from discontinued operations

(0.00)

0.00

Net income

$0.62

$2.47

Diluted earnings per share of common stock:

Income from continuing operations

$0.61

$2.43

Loss from discontinued operations

(0.00)

0.00

Net income

$0.61

$2.43

Weighted average number of common shares      outstanding:

  Basic

36,392

36,392

  Diluted

37,122

37,122

a - Amortization of inventory step up established with Anchen purchase accounting ($4,048)

b - Amortization expense ($21,630)

c - Upfront and development milestone payments

d - Transaction costs ($2,180), amortization expense for Megace ($852), and Anchen-related severance costs ($474)

e - Impairment of Anchen IPR&D intangible assets

f -  Contingent loss

g -  Estimated tax on adjustments ($18,741)

 

 

SOURCE Par Pharmaceutical Companies, Inc.



RELATED LINKS

http://www.parpharm.com