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Par Pharmaceutical Companies Reports Adjusted EPS of $0.65 for Fourth Quarter 2009
Date:2/24/2010

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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