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Par Pharmaceutical Reports Adjusted EPS of $0.49 for First Quarter 2009

Strong Quarter Driven by Improved Margins and Higher Sales of Select Generic Products

WOODCLIFF LAKE, N.J., May 6 /PRNewswire-FirstCall/ -- Par Pharmaceutical Companies, Inc. (NYSE: PRX) today reported results for the first quarter ended March 28, 2009.

Par reported total revenues of $204.0 million and net income of $16.1 million, or $0.48 per diluted share, which included a change in estimate relating to the final Pentech settlement agreement, restructuring-related costs, a milestone payment to MonoSol Rx, and a required change in accounting principle that results in non-cash interest expense (FSP APB 14-1). Adjusting for these items, earnings per diluted share were $0.49 for the three month period ended March 28, 2009. This is compared to reported revenues of $154.9 million and net income of $1.4 million, or $0.04 per diluted share for the same period in 2008 as adjusted for the adoption of FSP APB 14-1, which became effective January 1, 2009. Adjusting for one-time items, earnings per diluted share were $0.17 in the first quarter of 2008.

First Quarter Highlights

Key Product Sales (Net sales comparisons at the product level are to fourth quarter 2008)

  • Metoprolol: For the quarter ended March 28, 2009, net sales of metoprolol succinate reached $112.2 million, an increase of 127% from the fourth quarter 2008. Commencing in the first quarter of 2009, Par became the exclusive supplier of metoprolol succinate resulting in increased volume and price. Par is the authorized generic for all strengths of AstraZeneca's Toprol(R) XL.

  • Sumatriptan: Net sales of sumatriptan injection were $16.0 million for the quarter ended March 28, 2009 compared to $18.1 million in the fourth quarter when the product launched. Through the first three months of 2009, Par remained the exclusive supplier of generic Imitrex(R) 4mg and 6mg starter kits and 4mg prefilled cartridges and had one competitor in the 6mg prefilled cartridges.

  • Meclizine: Net sales for the three months ended March 28, 2009 were $9.8 million compared to $10.8 million in the fourth quarter of 2008. Par was the exclusive supplier of meclizine in the first quarter of 2009.

  • Dronabinol: Net sales for the first quarter 2009 were $7.0 million. This compares to $6.4 million in the fourth quarter 2008. Through the first quarter of 2009, Par was one of two distributors of generic Marinol(R).

  • Other generic products: For the first quarter 2009, revenues from all other generic products were $43.0 million, a decrease of approximately $11 million from the fourth quarter 2008. The decline reflects a decrease in the number of products sold as a result of Par's discontinuation of less profitable products from its portfolio, a process that was refined in the fourth quarter of 2008.

  • Megace(R) ES: Net sales were $13.5 million for the three months ended March 28, 2009 compared with $19.7 million in the fourth quarter. The decrease in net sales was due primarily to the trade accelerating its Megace ES purchases in the fourth quarter before the holiday to the detriment of the first quarter. However, prescription levels were up slightly compared to the fourth quarter of 2008.

Total net revenues for the three months ended March 28, 2009, were $204.0 million, up $49.1 million, or nearly 32%, from the year ago period, principally driven by gains in metoprolol succinate, sumatriptan injection, dronabinol, and meclizine, tempered by declines in fluticasone and Megace(R) ES.

Gross margin for the first quarter 2009 was $64.1 million, or 31.4% of total revenue, an increase of $14.5 million from the comparable period in 2008. Total generic gross margin in the first quarter 2009 was $52.0 million, or 27.7% of total generic revenue, compared to $30.1 million, or 23.2% of total generic revenue. This increase is due primarily to the launches of sumatriptan and dronabinal and higher sales of metoprolol and meclizine. These four products contributed $29.3 million of gross margin, or 20.2% of such generic revenue. Gross margin of all other generic products was approximately $22.7 million, or 52.9% of other generic revenue. The improvement in total generic gross margin percentage was due primarily to higher sales of sumatriptan, meclizine and dronabinal, and the discontinuation of lower margin generic products as part of the generic division's restructuring announced in the fourth quarter of 2008. Strativa's gross margin of $12.0 million, or 75.4% of total Strativa revenue, decreased compared to the first quarter of 2008 due to lower sales of Megace ES and increased rebates.

Research and Development (R&D) expenses decreased 58.2% to $7.2 million in the first quarter of 2009 compared to the first quarter 2008 due to the resizing of the generic division, which included a headcount reduction and lower development and biostudy costs, as well as decreased expenses related to Strativa milestone payments.

Selling, general and administrative (SG&A) expenses for the first quarter 2009 increased 5.1% to $33.0 million compared to the first quarter 2008. The increase is due to an increase in employment costs and higher legal fees. Branded sales and marketing expenses were essentially flat as increased pre-launch costs behind products currently being developed were tempered by lower Megace(R) ES related spend. SG&A expenses were $39.2 million in the fourth quarter of 2008.

Cash and cash equivalents and marketable securities is currently approximately $175 million and reflect first quarter cash outflows related to the Pentech final settlement (approximately $66 million), the re-purchase of $2.5 million face value of Par's convertible debentures at a discount, and the second quarter purchase of Nascobal B12 Nasal Spray (approximately $55 million).

Product and Pipeline Update

On March 31, 2009, Strativa Pharmaceuticals acquired the worldwide rights to Nascobal(R) B12 Nasal Spray and anticipates re-launching the product with its expanded salesforce in late June. Nascobal is the first and only once-weekly FDA approved prescription vitamin B12 supplement indicated to treat vitamin B12 deficiency. In conjunction with the acquisition of Nascobal, Par acquired certain manufacturing assets from MDRNA and assumed operating leases at the facility where the product is manufactured.

In early April, Strativa filed its NDA for ondansetron orally dissolving film strip with the FDA. If approved, ondansetron ODFS could launch by mid-2010.

BioAlliance Pharma, Strativa's development partner for Loramyc(R), recently held a meeting with the FDA and based on this meeting, will resubmit the NDA in the second quarter. If approved, Strativa could launch Loramyc in the second half of 2010.

Par successfully launched alprazolam ODT, a generic version of Niravam(R), during the first quarter, and was the exclusive supplier of the product during the period. Niravam had $9.2 million in annual sales in 2008 according to IMS Health.

Par recently announced that it settled its patent litigation with Reliant Pharmaceuticals over Rythmol(R) SR. Under terms of the settlement, Par will have the right to introduce a generic version of Rythmol SR no later than January 1, 2011.

Par also settled its patent litigation with Novartis Pharmaceuticals over certain strengths of Lotrel(R). Under terms of the settlement, Par will have the right to introduce a generic version of Lotrel on January 1, 2011.

Par currently has approximately 37 ANDAs pending with the FDA, 14 of which Par believes to be first-to-file and/or first-to-market opportunities with a brand value of approximately $5.8 billion.

Conference Call

Par has scheduled a conference call for Wednesday, May 6 at 9:00 am EDT to discuss results for the first quarter of 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 and will be available for two weeks. The dial-in number is 866-356-4123 for domestic callers and 617-597-5393 for international callers. The access number is 84965329. 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 59953213.

Non-GAAP Measures

Par believes it prepared its 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 applicable to quarterly reports on Form 10-Q. 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. develops, manufactures and markets generic drugs and innovative branded pharmaceuticals for specialty markets. For press release and other company information, visit

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 for the year ended December 31, 2008, 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.
                         (In Thousands, Except Share Data)

                                                    March 28,  December 31,
                                                      2009         2008
    Current assets:
       Cash and cash equivalents                    $133,773     $170,629
       Available for sale debt and marketable
        equity securities                             70,813       93,097
       Accounts receivable, net                      131,658       83,408
       Inventories                                    48,720       42,504
       Prepaid expenses and other current assets      19,064       20,040
       Deferred income tax assets                     35,941       53,060
       Income taxes receivable                        39,856       35,397
       Total current assets                          479,825      498,135

       Property, plant and equipment, at cost
        less accumulated depreciation and
         amortization                                 79,319       79,439
       Available for sale debt and marketable
        equity securities                                375        1,949
       Intangible assets, net                         28,956       35,208
       Goodwill                                       63,729       63,729
       Deferred financing costs and other assets         991        1,159
       Non-current deferred income tax assets, net    68,030       68,618
    Total assets                                    $721,225     $748,237

    Current liabilities:
       Current portion of long-term debt            $129,234     $130,141
       Accounts payable                               29,037       22,879
       Payables due to distribution agreement
        partners                                      43,297       91,451
       Accrued salaries and employee benefits         14,173       11,850
       Accrued expenses and other current
        liabilities                                   36,250       38,352
       Total current liabilities                     251,991      294,673

    Long-term debt, less current portion                   -            -
    Other long-term liabilities                       40,786       41,581
    Commitments and contingencies                          -            -

    Stockholders' equity
       Common Stock, par value $0.01 per share,
        authorized 90,000,000 shares; issued
        37,572,275 and 37,392,469 shares                 375          374
       Additional paid-in capital                    322,047      319,976
       Retained earnings                             175,549      159,470
       Accumulated other comprehensive gain               92          122
       Treasury stock, at cost 2,815,369 and
        2,716,010 shares                             (69,615)     (67,959)
       Total stockholders' equity                    428,448      411,983
    Total liabilities and stockholders' equity      $721,225     $748,237

                        PAR PHARMACEUTICAL COMPANIES, INC.
                      (In Thousands, Except Per Share Data)

                                                     Three Months Ended
                                                   March 28,    March 29,
                                                      2009         2008
       Net product sales                            $200,223     $151,237
       Other product related revenues                  3,812        3,691
    Total revenues                                   204,035      154,928
    Cost of goods sold                               139,966      105,407
       Gross margin                                   64,069       49,521
    Operating expenses:
       Research and development                        7,172       17,158
       Selling, general and administrative            32,960       31,346
       Settlements and loss contingencies, net        (3,376)           -
       Restructuring costs                             1,401            -
    Total operating expenses                          38,157       48,504
    Gain on sale of product rights and other          (1,100)      (1,625)
    Operating income                                  27,012        2,642
    Gain on extinguishment of senior subordinated
     convertible notes                                   245            -
    Equity in loss of joint venture                        -          (20)
    Loss on marketable securities and other
     investments, net                                    (55)           -
    Interest income                                    1,157        3,014
    Interest expense                                  (2,567)      (3,510)
    Income from continuing operations before
     provision for income taxes                       25,792        2,126
    Provision for income taxes                         9,537          743
    Income from continuing operations                 16,255        1,383
    Discontinued operations:
    Gain from discontinued operations                      -          505
    Provision for income taxes                           176          445
    (Loss) gain from discontinued operations            (176)          60
    Net income                                       $16,079       $1,443

    Basic earnings per share of common stock:
    Income from continuing operations                  $0.48        $0.04
    (Loss) gain from discontinued operations            0.00         0.00
    Net income                                         $0.48        $0.04

    Diluted earnings per share of common stock:
    Income from continuing operations                  $0.48        $0.04
    (Loss) gain from discontinued operations            0.00         0.00
    Net income                                         $0.48        $0.04

    Weighted average number of common shares
       Basic                                          33,603       33,220
       Diluted                                        33,772       33,587

      Reconciliation Between Reported (GAAP) and Adjusted Net Income (Loss)
                       (In thousands, except per share data)

                                                     Three Months Ended
                                                    March 28,    March 29,
                                                      2009         2008

    Reported Net Income                              $16,079       $1,443
    Change in Estimate Related to Final Pentech
     Settlement                                       (3,412)           -
    Restructuring Costs                                1,401            -
    Milestone Payments                                 1,000        5,000
    Non-cash Interest Expense (FSP APB 14-1)           1,593        1,843
    Estimated Tax on Adjustments                        (221)      (2,600)
    Adjusted Net Income (non-GAAP measure)           $16,440       $5,686

    Diluted Earnings Per Share:
                Reported                               $0.48        $0.04
                Adjusted (non-GAAP measure)            $0.49        $0.17

SOURCE Par Pharmaceutical Companies, Inc.
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