Par Pharmaceutical Companies Reports Third Quarter 2011 Results

WOODCLIFF LAKE, N.J., Nov. 2, 2011 /PRNewswire/ -- Par Pharmaceutical Companies, Inc. (NYSE: PRX) today reported results for the third quarter ended September 30, 2011.

For the third quarter ended September 30, 2011, the Company reported total revenues of $215.4 million, and income from continuing operations of $22.1 million, or $0.60 per diluted share, which includes $2.9 million of acquisition-related expenses.  Excluding this item and associated tax impacts, adjusted income from continuing operations (non-GAAP measure) was $25.5 million. On an adjusted cash basis (non-GAAP measure), which excludes amortization expenses, income from continuing operations was $27.1 million, or $0.74 per diluted share for the third quarter 2011. (Please see attached reconciliation page.)  This is compared to reported revenues of $234.4 million and adjusted cash basis income from continuing operations of $31.3 million, or $0.88 per diluted share for the same period in 2010.

For the nine months ended September 30, 2011, the Company reported total revenues of $672.5 million and a loss of $77.6 million from continuing operations, or $2.17 per diluted share, as a result of a $190.6 million pre-tax litigation settlement expense in the first quarter, second quarter restructuring charges of $27.7 million, and the aforementioned transaction costs.  On an adjusted cash basis (non-GAAP measure), income from continuing operations was $92.9 million, or $2.54 per diluted share.  This compares to reported revenues of $781.8 million and income from continuing operations of $75.1 million, or $2.12 diluted share, for the same period in 2010.  On an adjusted cash basis, income from continuing operations for the first nine months of 2010 was $82.7 million, or $2.34 per diluted share.

The following is a product level discussion of third quarter 2011 results versus the second quarter 2011:

Key Product Sales

• Metoprolol:  For the quarter ended September 30, 2011, net sales of metoprolol succinate were $67.5 million compared to net sales of $63.7 million in the second quarter 2011.  The increase was due to 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 third quarter were $20.6 million compared to $16.4 million in the second quarter, when the product was launched.  Par Pharmaceutical is the authorized generic for AstraZeneca's Entocort® EC.

• Sumatriptan: Net sales of sumatriptan succinate were $16.8 million in the third quarter 2011 compared to $15.3 million in the second quarter 2011.  The increase was due to customer buying patterns.

• Propafenone Hydrochloride ER: Net sales for Propafenone Hydrochloride ER in the third quarter were $18.1 million compared to $13.3 million in the second quarter.  The increase was driven by customer buying patterns following the first quarter 2011 launch of the product.  Par Pharmaceutical remained the exclusive supplier of generic Rythmol SR® throughout the third quarter.

• Amlodipine and Benazepril: Net sales for the third quarter 2011 were $4.5 million compared to $12.5 million in the second quarter.  The decrease was driven by price and volume declines due to additional competition in the third quarter.

• Meclizine: Net sales for the third quarter were $3.9 million compared to $4.6 million in the previous quarter. The decrease was driven by price and volume declines due to additional competition in the third quarter.

• Other Generic Products: For the third quarter 2011, net sales from all other generic products were $64.2 million. This compares to net sales of $76.7 million in the second quarter 2011. The decrease is due to customer buying patterns and a decrease in royalty income.

• Megace® ES: Net sales were $14.2 million for the third quarter compared to $14.1 million in the second quarter.

• Nascobal® B12 Nasal Spray: Net sales were $4.7 million for the third quarter compared to $6.3 million in the second quarter.  The decrease was due to primarily to increases in Medicaid rebates.

Revenues and gross margin for the third quarter 2011 were $215.4 million and $85.1 million, respectively, compared to $224.2 million in net sales and $99 million in gross margin during the prior quarter (Q2 2011). The gross margin rate on the Company's consolidated product portfolio decreased to 39.5% versus 44.2% in the second quarter 2011.  The decrease was due primarily to lower royalty income, a decrease in price and volume of amlodipine/benazepril, and an increase in sales of lower-margin budesonide EC.

Operating Expenses

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

• Research and development expenses were $9.6 million in the third quarter of 2011 compared to $8.1 million in the second quarter.  The increase was due to higher generic development activity.

• Selling, general and administrative expenses for the third quarter 2011 decreased to $35.8 million compared to $46.2 million in the second quarter of 2011.  The decrease reflects lower costs as a result of the second quarter branded division restructuring, as well as lower legal and share-based compensation expenses.

Cash and cash equivalents and marketable securities

The aggregate balance as of September 30, 2011 was approximately $256.8 million, after $157.6 million in payments during the quarter for previously announced AWP litigation settlements.

Product and Pipeline Update

In August, Par Pharmaceutical Companies entered into a definitive agreement to acquire Anchen Pharmaceuticals, a privately-held specialty pharmaceutical company focused on developing and commercializing extended release and niche generic products, for $410 million in cash.  The transaction is expected to close by year-end.

In October, Par Pharmaceutical acquired rights to three products from Teva Pharmaceuticals in connection with Teva's acquisition of Cephalon.  Par now owns the ANDAs of fentanyl citrate lozenges, a generic version of Actiq®, and cyclobenzaprine ER capsules, the generic version of Amrix®, as well as the U.S. rights to market modafinil tablets, the generic version of Provigil®.  Par is currently shipping to the trade all strengths of fentanyl citrate lozenges that were previously available from Teva.

In October, Par Pharmaceutical began shipping all strengths of olanzapine orally disintegrating tablets, the generic version of Lilly's Zyprexa Zydis®.  According to IMS Health data, annual sales in the U.S. of Zyprexa Zydis are approximately $360 million.

Par Pharmaceutical, along with third-party partners, currently has approximately 32 ANDAs pending with the FDA, 13 of which it believes to be first-to-file opportunities.

Conference Call

The Company will host a conference call and live webcast today, Wednesday, November 2, 2011 at 9:00 AM EDT to review results for the third quarter 2011.  Access to the live webcast can be made via the Company's website at www.parpharm.com.

Non-GAAP Measures

Par Pharmaceutical Companies, Inc. ("the Company") believes it prepared its unaudited condensed 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 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 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.

SOURCE Par Pharmaceutical Companies, Inc.