ViroPharma Incorporated Reports Fourth Quarter and Full Year 2007 Financi... ( The Company's effective income tax ra...)

ViroPharma Incorporated Reports Fourth Quarter and Full Year 2007 Financial Results

Date:2/27/2008

The Company's effective income tax rate was 18.0 percent and 39.9 percent for the quarters ended December 31, 2007 and 2006, respectively, and 29.7 percent and 38.6 percent for the twelve months ended December 31, 2007 and 2006, respectively. Income tax expense includes federal, state and foreign income tax at statutory rates and the effects of various permanent differences. The decrease in both the quarter and twelve months ended December 31, 2007 effect income tax rate as compared to the comparative periods in 2006 is primarily due to our current estimate of the impact of orphan drug credit for Camvia as well as a $4.0 million benefit for the valuation allowance reduction primarily related to additionally deferred tax assets that management believes are more likely than not to be utilized. Our income tax expense for the years ended December 31, 2007 and 2006 also includes the impact of finalizing the federal and state tax provisions for 2006 and 2005, respectively. We currently anticipate an effective tax rate in the range of approximately 27 percent to 31 percent for the year ended December 31, 2008, which includes an estimate related to orphan drug credit based upon estimates of qualified expenses and excludes the impact of discreet items and any potential changes in the valuation allowance. We continue to evaluate our qualified expenses and, to the extent that actual qualified expenses vary significantly from our estimates, our effective tax rate will be impacted.

Regarding additional payments due to Lilly in connection with the Vancocin acquisition, net sales as of December 31, 2007 exceeded the maximum milestone threshold of $65.0 million. As a result, the Company recorded additional purchase price of $6.0 million to intangible assets in June 2007, which was paid to Lilly in the third quarter.

Working Capital Highlights

As of December 31, 2007, ViroPharma's working capital was $594.4 million, which represents a $328.0 million increase
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