Segment Information

6 Months Ended

Jun. 30, 2012

Segment Reporting Information, Revenue for Reportable Segment [Abstract]

Segment Information

Note 18-Segment Information:

We operate in two reportable business segments: generic pharmaceuticals (referred to as “Par Pharmaceutical” or “Par”) and branded pharmaceuticals (referred to as “Strativa Pharmaceuticals” or “Strativa”).  Branded products are marketed under brand names through marketing programs that are designed to generate physician and consumer loyalty.  Branded products generally are patent protected, which provides a period of market exclusivity during which they are sold with little or no direct competition.  Generic pharmaceutical products are the chemical and therapeutic equivalents of corresponding brand drugs.  The Drug Price Competition and Patent Term Restoration Act of 1984 provides that generic drugs may enter the market upon the approval of an ANDA and the expiration, invalidation or circumvention of any patents on corresponding brand drugs, or the expiration of any other market exclusivity periods related to the brand drugs. Our chief operating decision maker is our Chief Executive Officer.   

Our business segments were determined based on management’s reporting and decision-making requirements in accordance with FASB ASC 280-10 Segment Reporting.  We believe that our generic products represent a single operating segment because the demand for these products is mainly driven by consumers seeking a lower cost alternative to brand name drugs.  Par’s generic drugs are developed using similar methodologies, for the same purpose (e.g., seeking bioequivalence with a brand name drug nearing the end of its market exclusivity period for any reason discussed above).  Par’s generic products are produced using similar processes and standards mandated by the FDA, and Par’s generic products are sold to similar customers.  Based on the economic characteristics, production processes and customers of Par’s generic products, management has determined that Par’s generic pharmaceuticals are a single reportable business segment.  Our chief operating decision maker does not review the Par (generic) or Strativa (brand) segments in any more granularity, such as at the therapeutic or other classes or categories.  Certain of our expenses, such as the direct sales force and other sales and marketing expenses and specific research and development expenses, are charged directly to either of the two segments.   Other expenses, such as general and administrative expenses and non-specific research and development expenses are allocated between the two segments based on assumptions determined by management.

The financial data for the two business segments are as follows ($ amounts in thousands):

	Three months ended						Six months ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
Revenues:
Par Pharmaceutical	$	273,109		$	202,449		$	524,276		$	412,193
Strativa	21,224			21,739			41,529			44,947
Total revenues	$	294,333		$	224,188		$	565,805		$	457,140
Gross margin:
Par Pharmaceutical	$	127,121		$	83,994		$	209,571		$	176,554
Strativa	16,033			15,032			31,429			32,125
Total gross margin	$	143,154		$	99,026		$	241,000		$	208,679
Operating income (loss):
Par Pharmaceutical	$	81,408		$	51,845		$	105,456		$	(80,901	)
Strativa	1,363			(34,038		)	(43,898		)	(39,854		)
Total operating income (loss)	$	82,771		$	17,807		$	61,558		$	(120,755	)
Interest income	140			382			276			805
Interest expense	(3,069		)	(150		)	(6,163		)	(301		)
Provision (benefit) for income taxes	28,537			8,859			33,062			(20,587		)
Income (loss) from continuing operations	$	51,305		$	9,180		$	22,609		$	(99,664	)

Our chief operating decision maker does not review our assets, depreciation or amortization by business segment at this time as they are not material to Strativa.  Therefore, such allocations by segment are not provided.

Total revenues of our top selling products were as follows ($ amounts in thousands):

Product	Three months ended				Six months ended
	June 30, 2012		June 30, 2011		June 30, 2012		June 30, 2011
Par Pharmaceutical
Modafinil (Provigil®)	$	57,484	$	—	$	57,484	$	—
Metoprolol succinate ER (Toprol-XL®)	48,953		63,706		110,718		127,124
Budesonide (Entocort® EC)	33,513		16,357		71,497		16,357
Propafenone (Rythmol SR®)	17,888		13,311		36,980		35,350
Sumatriptan succinate injection (Imitrex®)	13,945		15,284		30,644		31,983
Bupropion ER (Wellbutrin®)	12,010		—		23,364		—
Chlorpheniramine/Hydrocodone (Tussionex®)	7,984		7,022		21,941		19,701
Zolpidem (Ambien CR®)	5,342		—		12,264		—
Cholestyramine Powder (Questran®)	4,958		4,077		9,878		7,760
Tramadol ER (Ultracet ER®)	4,593		5,873		10,422		11,954
Dronabinol (Marinol®)	4,444		8,118		12,047		14,989
Meclizine Hydrochloride (Antivert®)	3,783		4,562		7,969		9,437
Amlodipine and Benazepril HCl (Lotrel®)	1,729		12,505		4,177		30,675
Nateglinide (Starlix®)	3,518		3,815		7,542		8,120
Other (1)	46,170		38,774		95,160		81,809
Other product related revenues (2)	6,795		9,045		12,189		16,934
Total Par Pharmaceutical Revenues	$	273,109	$	202,449	$	524,276	$	412,193

Product	Three months ended					Six months ended
	June 30, 2012			June 30, 2011		June 30, 2012			June 30, 2011
Strativa
Megace® ES	$	14,212		$	14,050	$	26,390		$	28,135
Nascobal® Nasal Spray	5,380			6,274		11,312			10,152
Oravig®	(3		)	1,027		152			1,776
Zuplenz®	(106		)	263		(21		)	485
Other product related revenues (2)	1,741			125		3,696			4,399
Total Strativa Revenues	$	21,224		$	21,739	$	41,529		$	44,947

(1) No single product in the other category is in excess of 3% of total generic revenues for the six-month period ended June 30, 2012 or for the six-month period ended June 30, 2011.

(2) Other product related revenues represents licensing and royalty related revenues from profit sharing agreements related to products such as diazepam rectal gel, the generic version of Diastat®, and fenofibrate, the generic version of Tricor®.  Other product related revenues included in the Strativa segment relate primarily to Strativa’s share of the proceeds from Optimer Pharmaceuticals’ sale of certain rights in fidaxomicin to a third party.