Par Pharmaceutical Companies Reports Third Quarter 2010 Results

WOODCLIFF LAKE, N.J., Nov. 3, 2010 /PRNewswire-FirstCall/ -- Par Pharmaceutical Companies, Inc. (NYSE: PRX) today reported results for the third quarter ended September 30, 2010.

For the third quarter ended September 30, 2010, the Company reported total revenues of $234.4 million and income from continuing operations of $30.7 million, or $0.86 per diluted share.  These results included a $2.0 milestone payment to Tris Pharma, Inc., a $2.3 million payment for litigation settlement, a $3.6 million gain on marketable securities, and a $2.0 million manufacturing tax benefit.  After these items, adjusted income from continuing operations (non-GAAP measure) was $29.4 million.  On an adjusted cash basis (non-GAAP measure), which excludes amortization expenses, income from continuing operations was $31.3 million, or $0.88 per diluted share for the third quarter 2010.  This is compared to reported revenues of $294.8 million and income from continuing operations of $26.5 million, or $0.76 per diluted share, for the same period in 2009.  On an adjusted cash basis, income from continuing operations for the third quarter 2009 was $30.2 million, or $0.88 per diluted share.

For the nine months ended September 30, 2010, the Company reported total revenues of $781.8 million and income from continuing operations of $75.1 million, or $2.12 per diluted share. 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 $82.7 million, or $2.34 per diluted share.  This compares to reported revenues of $902.8 million and income from continuing operations of $66.8 million, or $1.97 per diluted share, for the same period in 2009.  On an adjusted cash basis, income from continuing operations for the first nine months of 2009 was $77.8 million, or $2.29 per diluted share.

Third Quarter Highlights

Key Product Sales

• Metoprolol:  For the third quarter 2010, net sales of metoprolol succinate were $97.4 million, compared to $119.6 in the second quarter 2010.  The decrease was driven by a decline in volume and price due to competition on all strengths.  Par Pharmaceutical, the Company's generic drug division, is the authorized generic for all strengths of AstraZeneca's Toprol® XL.
• Sumatriptan: Net sales of sumatriptan succinate were $18.3 million for the third quarter 2010, compared to $17.5 million for the second quarter 2010.  Par Pharmaceutical 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 third quarter 2010.
• Omeprazole sodium bicarbonate capsules: Net sales were $13.5 million for the third quarter 2010.  Par launched omeprazole sodium bicarbonate capsules on June 27, 2010.   Net sales of $0.6 million were recognized in the second quarter.
• Clonidine:  Net sales for the third quarter 2010 were $7.8 million, compared to $26.3 million for the second quarter.  The decrease was due to a decline in volume and price due to competition and the release of backorders in the second quarter.  
• Meclizine: Net sales for the third quarter 2010 were $6.2 million, compared to $9.4 million for the second quarter 2010.  The decrease was driven by a decline in volume and price due to competition that began in the second quarter.
• Tramadol ER:  Net sales for the third quarter 2010 were $5.5 million, compared to $5.7 million for the second quarter.  Par Pharmaceutical remains one of only two suppliers of tramadol ER since its launch in November 2009.
• Other generic products:  For the third quarter 2010, net sales from all other generic products were $61.0 million, compared to $52.9 million for the second quarter.  The increase was driven by additional volume in certain products and increased royalties, principally related to the September launch of diazepam.
• Megace® ES:  Net sales were $16.8 million for the third quarter 2010, compared to $15.5 million for the second quarter.  The increase was primarily driven by wholesaler buying patterns.
• Nascobal®:  Net sales were $4.9 million for the third quarter 2010, compared to $4.4 million for the second quarter.  The increase was due primarily to an increase in prescription volume.

Total net revenues for the third quarter 2010 were $234.4 million compared to $294.8 million for the third quarter 2009.  The decline was principally driven by additional competition in metoprolol, clonidine, and meclizine, which was partially offset by the 2009 product launches of tramadol ER and Nascobal and the 2010 launch of omeprazole sodium bicarbonate capsules.

Gross margin for the third quarter 2010 increased due primarily to the launch of omeprazole, as well as increases in other generic products.  These gains were partially offset by lower metoprolol, clonidine and meclizine sales and the impact on price resulting from the recently enacted U.S. healthcare reform.

Research and development (R&D) expenses in the third quarter 2010 were $10.1 million, compared to $6.5 million in the third quarter 2009.  The increase was driven by a $2 million milestone payment, and higher biostudy and material costs.

Selling, general and administrative (SG&A) expenses for the third quarter 2010 increased to $50.3 million, compared to $45.3 million in the third quarter 2009.  This increase reflects expenses associated with pre-commercialization marketing activities related to the third quarter launch of Oravig™ and fourth quarter launch of Zuplenz™, and increased legal costs.

Provision for income taxes for the third quarter 2010 reflected the benefit from higher than previously estimated tax deductions specific to U.S. domestic manufacturing companies.

Cash and cash equivalents and marketable securities aggregate balance as of September 30, 2010, was $219.8 million, which included the repayment of the outstanding balance of the Company's Senior Subordinated Convertible Notes in the amount of $47.7 million.    

In October 2010, the Company secured a revolving credit facility in an aggregate principal amount of up to $75 million with an expansion option of up to an additional $25 million.

Product and Pipeline Update

In August 2010, Strativa Pharmaceuticals launched Oravig™, an anti-fungal therapy to be used for the treatment of oropharyngeal candidiasis. During the initial launch phase of the product, Strativa will recognize revenue and all associated costs of sales as it is prescribed to patients based upon an assessment of multiple inputs, including third party prescription data.  Due to the timing of the launch, net sales recognized in the third quarter of 2010 were negligible.        

In October 2010, Strativa Pharmaceuticals launched Zuplenz™ (ondansetron) oral soluble film for the prevention of postoperative, highly and moderately emetogenic cancer chemotherapy-induced nausea and vomiting.  Strativa received FDA approval for Zuplenz in the third quarter of 2010.  Similar to our recognition of Oravig revenues, initial Zuplenz revenues will be recorded on an as-prescribed basis beginning in the fourth quarter of 2010.

In October 2010, Par Pharmaceutical successfully launched a limited supply of hydrocodone polistirex and chlorpheniramine polistirex (CIII) extended-release (ER) oral suspension, a generic version of UCB's Tussionex®.  Annual U.S. sales of Tussionex® are approximately $226 million, according to IMS Health data.  

In October 2010, Strativa Pharmaceuticals signed an amended and restated license and supply agreement with Swedish Orphan Biovitrum (Sobi) covering the European development and commercialization rights of Nascobal®.  Under the terms of the amended agreement, Sobi will conduct and pay for all development activities to obtain European regulatory approval of Nascobal.  Strativa and Sobi will share in the expense of upgrading Strativa's manufacturing facility to comply with European regulations.  Subject to regulatory approval, Strativa will supply European-ready product to Sobi, and Sobi will be responsible for commercializing the product in Europe, including all sales and marketing activities.  Strativa will receive double-digit royalty payments based on Sobi's net sales of Nascobal in Europe.

Par Pharmaceutical currently has approximately 27 ANDAs pending with the FDA, 11 of which Par believes to be first-to-file opportunities with a brand value of approximately $7.3 billion.

Conference Call

The Company has scheduled a conference call for Wednesday, November 3rd at 8:30am EDT to discuss results for the third quarter 2010.  The Company 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.

A replay of the conference call will be available approximately one hour after the call for two weeks.  

Non-GAAP Measures

The Company believes it prepared its condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (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 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 the Company's underlying

business performance.  Management uses the non-GAAP financial measure "Adjusted Income from Continuing Operations" 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. In addition, the accompanying press release presents "Adjusted Cash EPS", which is a non-GAAP financial measure.  Adjusted Cash EPS represents net income adjusted for amortization expense related to intangible assets, in addition to the item adjusted for in Adjusted Income from Continuing Operations.  The Company believes that this measure is utilized by industry analysts in comparing the Company's results to that of similar companies within our industry.  Importantly, the Company believes non-GAAP financial measures should be considered in addition to, and not in lieu of, 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 U.S.-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.

SOURCE Par Pharmaceutical Companies, Inc.