Par Pharmaceutical Companies Reports Adjusted EPS of $0.65 for Fourth Quarter 2009
Achieves Record Annual Gross Margin of $334 Million
WOODCLIFF LAKE, N.J., Feb. 24 /PRNewswire-FirstCall/ -- Par Pharmaceutical Companies, Inc. (NYSE: PRX) today reported results for the fourth quarter and full year ended December 31, 2009.
For the fourth quarter ended December 31, 2009, Par reported total revenues of $290.3 million and net income of $10.7 million, or $0.31 per diluted share, which includes pre-tax adjustments of $10.5 million of milestone payments to development partners, $3.5 million to settle preexisting litigation, and a $5.0 million loss on extinguishment of debt. Adjusting for these items, net income was $22.8 million, or $0.65 per diluted share. This is compared to reported revenues of $161.3 million and a net loss of $35.9 million, or $1.08 per diluted share for the same period in 2008, which included several one-time items. Adjusting for those one-time items, net income was $7.1 million, or $0.21 per diluted share for the fourth quarter 2008.
For the full year ended December 31, 2009, total revenue was $1,193.2 million with net income of $76.9 million, or $2.25 per diluted share. Adjusting for one-time items, net income was $85.9 million, or $2.51 per diluted share. This is compared to total revenues of $578.1 million and adjusted net income of $1.8 million, or $0.05 per diluted share for the full year 2008.
Fourth Quarter Highlights
Key Product Sales (Net sales comparisons at the product level are to third quarter 2009, which had 14 weeks of sales versus 13 weeks of sales in the fourth quarter 2009.)
- Metoprolol: For the quarter ended December 31, 2009, net sales of metoprolol succinate were $163.0 million, a slight increase from the third quarter 2009. Par remained the exclusive supplier of the 100mg and 200mg strengths of metoprolol succinate through the fourth quarter. Par is the authorized generic for all strengths of AstraZeneca's Toprol® XL.
- Sumatriptan: Net sales of sumatriptan succinate were $17.8 million in the fourth quarter compared to $16.7 million in the prior quarter. The increase is due to additional volume driven by customer buying patterns. Par remained the exclusive supplier of generic Imitrex® 4mg and 6mg starter kits and 4mg prefilled cartridges and had one competitor in the 6mg prefilled cartridges throughout the fourth quarter.
- Clonidine: Net sales for the fourth quarter were $13.4 million compared to $20.4 million in the third quarter. The decrease was due to unanticipated demand for the product as a result of being the only generic supplier coupled with a long lead time necessary to produce additional supply.
- Meclizine: Net sales for the three months ended December 31, 2009 were $9.4 million compared to $10.7 million in the previous quarter. The decrease was due primarily to one less week of sales in the quarter. Par was the exclusive supplier of meclizine throughout 2009.
- Dronabinol: Net sales for the fourth quarter 2009 were $5.9 million compared to $6.6 million in the third quarter. The decrease was due primarily to one less week of sales in the quarter.
- Tramadol ER: Net sales for the fourth quarter 2009 were $5.5 million. Par launched tramadol ER in November 2009.
- Other generic products: For the fourth quarter 2009, net sales from all other generic products were $49.5 million compared to $54.0 million in the third quarter. The decrease was due primarily to one less week of sales in the quarter.
- Megace® ES: Net sales were $19.0 million for the three months ended December 31, 2009 compared to $19.1 million in the third quarter due to one less week of sales in the quarter tempered by the full impact of the third quarter price increase.
- Nascobal® B12 Nasal Spray: Net sales were $4.2 million for the three months ended December 31, 2009, compared to $3.8 million in the third quarter. The increase is due to an increase in prescription volume and market share.
Total net revenues for the three months ended December 31, 2009, were $290.3 million, up $129.0 million, or nearly 80%, from the year ago period, principally driven by limited competition in metoprolol succinate, sumatriptan succinate, meclizine, and dronabinol, as well as the launches of nateglinide and clonidine in the third quarter, and tramadol ER in the fourth quarter 2009.
Gross margin for the fourth quarter 2009 was $91.3 million, or 31.5% of total revenue, an increase of $40.9 million from the comparable period in 2008. Total generic gross margin in the fourth quarter 2009 was $72.2 million, or 27.3% of total generic revenue, compared to $33.7 million, or 24.2% of total generic revenue in the fourth quarter 2008. This increase is due primarily to higher sales of metoprolol and sumatriptan (launched November 2008) coupled with the new product launches in 2009, including nateglinide, clonidine and tramadol ER. The top six products, which include metoprolol, clonidine, sumatriptan, meclizine, dronabinol, and tramadol ER contributed $47.1 million of gross margin, or 21.9% of such generic revenue. Gross margin of all other generic products was approximately $25.1 million, or 50.6% of other generic revenue. This compares to $10.4 million, or 19.1% of other generic revenue, in the fourth quarter of 2008. The increase in gross margin percentage was due to new product launches, increased volume of certain existing products, as well as the trimming of the generic product line as part of the resizing of Par's generic division in the fourth quarter of 2008. Strativa's gross margin of $19.2 million, or 74.6% of total Strativa revenue in the fourth quarter 2009, increased compared to the fourth quarter of 2008 due to the acquisition and launch of Nascobal® in the second quarter of 2009.
Research and development (R&D) expenses increased to $19.7 million in the fourth quarter of 2009 compared to the fourth quarter 2008 driven primarily by investments in development projects with third party partners, which totaled $10.5 million.
Selling, general and administrative (SG&A) expenses for the fourth quarter 2009 increased to $42.8 million compared to $39.2 million in the fourth quarter of 2008. This increase primarily reflects on-going expenditures supporting Strativa sales and marketing, driven primarily by an increase in the field force and other activities related to the re-launch of Nascobal B12 Nasal Spray.
Cash and cash equivalents and marketable securities aggregate balance as of December 31, 2009, was $161.2 million and includes significant one-time cash outflows related to the purchase of Nascobal B12 Nasal Spray (approximately $55 million), the repurchase of $94 million face value of Par's convertible debt at a discount and, as previously reported in the first quarter, the settlement of litigation with Pentech (approximately $66 million).
Product and Pipeline Update
In November 2009, Par successfully launched the 100mg and 200mg strengths of tramadol ER. Tramdol ER is the generic version of Ortho-McNeil's Ultram® ER product. Annual U.S. sales of the 100mg and 200mg strengths of Ultram® ER are approximately $150 million, according to IMS Health data.
In February 2010, Strativa Pharmaceuticals announced that due to a FDA foreign travel restriction to India, the FDA has been unable to perform a recent inspection of the clinical and analytical sites for the bioequivalence study related to Zuplenz™. The NDA cannot be approved until the FDA receives a satisfactory inspection report. The FDA restriction on foreign travel in India has been subsequently lifted and the inspection of the clinical and analytical sites for the bioequivalence study related to Zuplenz is in the process of being scheduled. No issues related to the study data or film product were identified.
Par currently has approximately 27 ANDAs pending with the FDA, 12 of which Par believes to be first-to-file opportunities with a brand value of approximately $6.3 billion.
Conference Call
Par has scheduled a conference call for Wednesday, February 24 at 8:30 am EST to discuss results for the fourth quarter and full year 2009. Par invites investors and the general public to listen to a webcast of the conference call. Access to the live webcast can be made via the Company's website at http://www.parpharm.com and will be available for two weeks. The dial-in number is 866-770-7129 for domestic callers and 617-213-8067 for international callers. The access number is 49930027. A replay of the conference call will be available commencing approximately one hour after the call. The replay dial-in number is 888-286-8010 for domestic callers and 617-801-6888 for international callers. The access number is 90488345.
Non-GAAP Measures
Par 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 Par's results and to provide a meaningful period-over-period comparison of Par'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 an attached schedule. In presenting comparable results, the Company discloses non-GAAP financial measures when it believes such measures will be useful to investors in evaluating Par's underlying business performance. Management uses the non-GAAP financial measures to evaluate Par's financial performance against internal budgets and targets. In addition, management internally reviews Par's results excluding the impact of certain items, as it believes that these non-GAAP financial measures are useful for evaluating Par's core operating results and facilitating comparison across reporting periods. Importantly, Par believes non-GAAP financial measures should be considered in addition to, and not in lieu of, U.S. GAAP financial measures. Par's non-GAAP financial measures may be different from non-GAAP financial measures used by other companies.
About Par
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 Annual Report on Form 10-K in other of the Company's filings with the SEC from time to time, including 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 STATEMENT OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2009 2008 2009 2008
Revenues:
Net product
sales $285,094 $156,721 $1,176,427 $561,012
Other
product
related
revenues 5,227 4,562 16,732 17,103
----- ----- ------ ------
Total
revenues 290,321 161,283 1,193,159 578,115
Cost of
goods sold 198,983 110,803 859,206 401,544
------- ------- ------- -------
Gross margin 91,338 50,480 333,953 176,571
Operating expenses:
Research and
development 19,668 12,759 39,235 59,656
Selling,
general and
administrative 42,752 39,165 165,135 137,866
Settlements
and loss
contingencies,
net 3,560 45,245 307 49,837
Restructuring
costs,
(income) (246) 15,397 1,006 15,397
---- ------ ----- ------
Total
operating
expenses 65,734 112,566 205,683 262,756
------ ------- ------- -------
Gain on sale
of product
rights and
other - 5,300 3,200 9,625
--- ----- ----- -----
Operating
income
(loss) 25,604 (56,786) 131,470 (76,560)
Gain on
bargain
purchase - - 3,021 -
(Loss) gain
on
extinguishment
of senior
subordinated
convertible
notes
(4,962) 3,033 (2,598) 3,033
Equity in
loss of
joint
venture - - - (330)
Loss on
marketable
securities
and other
investments,
net - (4,856) (55) (7,796)
Interest
income 330 1,818 2,658 9,246
Interest
expense (1,078) (2,722) (8,013) (13,355)
------ ------ ------ -------
Income
(loss) from
continuing
operations
before
provision
(benefit)
for income
taxes 19,894 (59,513) 126,483 (85,762)
Provision
(benefit)
for income
taxes 9,050 (25,149) 48,883 (32,447)
----- ------- ------ -------
Income
(loss) from
continuing
operations 10,844 (34,364) 77,600 (53,315)
Discontinued
operations:
Gain from
discontinued
operations - - - 505
Provision
for income
taxes 144 1,498 672 2,361
--- ----- --- -----
Loss from
discontinued
operations (144) (1,498) (672) (1,856)
---- ------ ---- ------
Net income
(loss) $10,700 ($35,862) $76,928 ($55,171)
======= ======== ======= ========
Basic earnings
(loss) per share of
common stock:
Income
(loss) from
continuing
operations $0.32 ($1.03) $2.30 ($1.60)
Loss from
discontinued
operations (0.00) (0.05) (0.02) (0.05)
----- ----- ----- -----
Net income
(loss) $0.32 ($1.08) $2.28 ($1.65)
===== ====== ===== ======
Diluted earnings
(loss) per share of
common stock:
Income
(loss) from
continuing
operations $0.31 ($1.03) $2.27 ($1.60)
Loss from
discontinued
operations (0.00) (0.05) (0.02) (0.05)
----- ----- ----- -----
Net income
(loss) $0.31 ($1.08) $2.25 ($1.65)
===== ====== ===== ======
Weighted average
number of common
shares outstanding:
Basic 33,773 33,400 33,679 33,312
====== ====== ====== ======
Diluted 34,964 33,400 34,188 33,312
====== ====== ====== ======
PAR PHARMACEUTICAL COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Per Share Amounts)
(Unaudited)
As of
December 31,
------------
2009 2008
---- ----
ASSETS
------
Current Assets:
Cash and cash equivalents $121,668 $170,629
Available for sale debt and marketable
equity securities 39,525 93,097
Accounts receivable, net 154,837 83,408
Inventories 80,279 42,504
Prepaid expenses and other current assets 14,051 20,040
Deferred income tax assets 26,356 53,060
Income taxes receivable 9,005 35,397
----- ------
Total current assets 446,171 498,135
Property, plant and equipment, at cost less
accumulated
depreciation and amortization 74,696 79,439
Available for sale and marketable equity
securities 475 1,949
Intangible assets ,net 69,272 35,208
Goodwill 63,729 63,729
Deferred financing costs and other assets 989 1,159
Non-current deferred income tax assets,
net 68,495 68,618
------ ------
Total assets $723,827 $748,237
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $46,175 $130,141
Accounts payable 22,662 20,379
Payables due to distribution agreement
partners 58,552 91,451
Accrued salaries and employee benefits 16,072 11,850
Accrued government pricing liabilities 24,713 21,912
Accrued expenses and other current
liabilities 14,903 18,940
------ ------
Total current liabilities 183,077 294,673
Long-term debt, less current portion - -
Other long-term liabilities 42,097 41,581
Commitments and contingencies
Stockholders' equity
Common Stock, par value $0.01 per share,
authorized 90,000,000 shares;
issued 37,662,231 and 37,392,469 shares
377 374
Additional paid-in capital 331,667 319,976
Retained earnings 236,398 159,470
Accumulated other comprehensive gain 357 122
Treasury stock, at cost 2,815,879 and
2,716,010 shares (70,146) (67,959)
------- -------
Total stockholders' equity 498,653 411,983
------- -------
Total liabilities and stockholders' equity $723,827 $748,237
======= =======
Reconciliation Between Reported (GAAP) and Adjusted Net Income (Loss)
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
------------ ------------
2009 2008 2009 2008
---- ---- ---- ----
Reported Net
Income/(Loss) $10,700 ($35,862) $76,928 ($55,171)
Litigation
settlements,
net 3,500 49,178 88 49,178
Restructuring
costs (income) (246) 15,397 1,006 15,397
Other
restructuring
related costs - 3,753 - 9,175
Sale of product
rights - (5,300) (3,200) (9,000)
Milestone
payments for
non-approved
products - - 1,000 7,500
Up-front
development
payments of
non-approved
products 10,500 - 10,500 -
Non-cash
interest
expense 575 1,464 4,399 7,096
Gain on bargain
purchase - - (3,021) -
Write-offs
relating to
2008 trimming
of generic
portfolio - 323 - (302)
Contingent
liabilities - 210 - 4,802
Loss on
marketable
securities and
other
investments - 4,856 - 8,125
(Gain)/loss on
extinguishment
of debt 4,962 (3,033) 2,598 (3,033)
Discontinued
operations 144 1,498 672 1,856
--- ----- --- -----
Sum of
adjustments,
pre-tax $19,435 $68,346 $14,042 $90,794
------- ------- ------- -------
Estimated tax on
adjustments (7,385) (25,402) (5,081) (33,796)
Adjusted Net
Income (non-
GAAP measure) $22,750 $7,082 $85,889 $1,827
======= ====== ======= ======
Diluted earnings per
share
Reported $0.31 ($1.08) $2.25 ($1.65)
Adjusted (non-
GAAP measure) $0.65 $0.21 $2.51 $0.05
Diluted weighted
average shares
outstanding 34,964 33,400 34,188 33,312
SOURCE Par Pharmaceutical Companies, Inc.
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