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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

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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

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