EX-99.1 3 v095216_ex99-1.htm
 
Contact:    
Allison Wey 
Senior Director
Investor Relations and Corporate Affairs
Par Pharmaceutical Companies, Inc.
(201) 802-4000

PAR PHARMACEUTICAL FILES FORM 10-Qs
FOR FIRST AND SECOND QUARTERS OF 2007

Revises 2007 Full-Year Financial Outlook

Woodcliff Lake, N.J., November 21, 2007 - Par Pharmaceutical Companies, Inc. (NYSE:PRX) today filed with the U.S. Securities and Exchange Commission (SEC) its Form 10-Q for the first and second quarters of 2007. The filing of Par’s Form 10-Qs for these periods had been delayed due to the work involved in restating its consolidated financial statements for certain prior periods, which were filed earlier this year.
 
First-Quarter Results
 
For the first quarter ended March 31, 2007, Par reported total revenues of $234.2 million and net income of $41.5 million, or $1.19 per diluted share. This is compared with reported revenues of $172.3 million and net income of $4.5 million, or $0.13 per diluted share, for the same period in 2006.

First quarter 2007 reported, or GAAP, results included a $20.0 million gain on the sale to Optimer Pharmaceutical, Inc. of marketing rights to the investigational drug Difimicin (Par 101), a $1.4 million investment gain on the sale of shares of Optimer common stock, and net settlement gains of $0.6 million related to the discontinuation of certain product-development agreements. Adjusting for these items, net income for the first quarter of 2007 was $28.1 million, or $0.80 per diluted share.
 
First-Quarter Review
 
For the first quarter ended March 31, 2007, total revenues increased 35.9 percent compared with the same period in 2006 due primarily to new product introductions. These products include propranolol HCl extended release (ER) capsules, metoprolol succinate, polyethylene glycol, and ranitidine HCl syrup achieving sales of $31.3 million, $12.3 million, $4.3 million and $4.2 million, respectively. Partially offsetting the increases were lower sales of certain existing products due to competitive pressures, including fluticasone, paroxetine, tramadol HCl and cefprozil. Revenues of branded products for the first quarter of 2007 of $19.5 million, an increase of 137 percent over the prior year period, were driven by increased sales of Megace® ES (megestrol acetate) oral suspension, and fees related to the co-promotion of AndroGel®.

Par’s first-quarter gross margin was 37.4 percent of sales, compared to 28.5 percent in 2006. The increase in the Company’s gross margin resulted primarily from increased sales of higher-margin products, including Megace® ES and propranolol ER, royalties related to the sale of ondansetron orally disintegrating tablets and the co-promotion fee for AndroGel®.

 
 
-2-
 
Research and development (R&D) expenses increased 1.3 percent for the first quarter 2007 compared with the first quarter 2006. The results reflect increased development costs in support of Par’s generic product portfolio tempered by reduced clinical development costs following the termination of the megestrol acetate concentrated suspension oncology study in 2006 and the termination of Par’s participation in the development of Par 101, as well as lower personnel costs following the restructuring of the R&D organization.

Selling, general and administrative (SG&A) expenses for the first quarter 2007 increased 14.9 percent from first quarter 2006. The increase is primarily due to an increase of the field sales force for Strativa, the Company’s branded division, as well as the expansion of the finance and accounting functions and increased professional costs associated with the Company’s restatement.
 
Second-Quarter and Six-Month Results
 
For the second quarter ended June 30, 2007, Par reported total revenues of $167.6 million and net income of $2.8 million, or $0.08 per diluted share. This is compared with reported revenues of $195.2 million and a net loss of $7.2 million, or $0.21 per diluted share, for the same period in 2006. For the six months ended June 30, 2007, Par reported total revenues of $401.9 million and net income of $44.3 million, or $1.27 per diluted share. This is compared with reported revenues of $367.6 million and a net loss of $2.7 million, or $0.08 per diluted share, for 2006.

Second-quarter 2007 reported, or GAAP, results included a $6.0 million investment loss and a $3.0 million license fee paid to Immtech Pharmaceuticals for commercialization rights to the developmental drug pafuramidine maleate, both of which are discussed in more detail below, in addition to $1.6 million of severance costs. Adjusting for these items, net income for the second quarter of 2007 was $9.3 million, or $0.27 per diluted share. By comparison, second-quarter 2006 reported results included a write-off of approximately $10.0 million of accounts receivable relating to invalid customer deductions and $5.2 million of expense relating to the write-down of an equity investment and an arbitration settlement. Adjusting for these items, net income for the second quarter 2006 was $2.1 million, or $0.06 per diluted share.

Net income for the first six months of 2007 was $37.4 million, or $1.07 per diluted share, after adjusting for the aforementioned items. By comparison, reported results for the first six months of 2006 included the 2006 second-quarter items discussed above. Adjusting for these items, net income for the first six months of 2006 was $6.6 million, or $0.19 per diluted share. [See reconciliation between reported (GAAP) and adjusted net income (loss) at the end of this press release.]
 
Second-Quarter Review
 
For the second quarter ended June 30, 2007, total revenues decreased 14.1 percent compared with the same period a year earlier as increased competition resulted in lower sales of generic products. Among these products, sales of fluticasone nasal spray declined by $26.9 million from the second quarter of 2006. Partially offsetting these decreases were sales of recently introduced products. Among the products introduced since the end of the second quarter of 2006, metoprolol extended release (ER) 25 mg tablets achieved sales of $17.3 million and propranolol ER capsules contributed sales of $10.4 million. Par markets fluticasone in the U.S. through a supply and distribution agreement with GlaxoSmithKline. Par markets metoprolol ER in the U.S. through a supply and distribution agreement with AstraZeneca. Sales of Megace® ES (megestrol acetate) oral suspension increased 124 percent to $19.1 million in the second quarter.

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Par’s second-quarter gross margin was 33.7 percent of sales, compared to 28.1 percent in 2006. The increase in the Company’s gross margin resulted primarily from increased sales of higher-margin products, including Megace® ES and propranolol ER, royalties related to the sale of ondansetron orally disintegrating tablets and the co-promotion fee for AndroGel®.

Research and development (R&D) expense decreased 18.7 percent to $14.3 million in the second quarter of 2007, driven by reduced clinical development costs related to Megace® ES, the termination of Par’s participation in the development of Par 101, as well as lower personnel costs. These reductions were partially offset by a $3.0 million license fee paid to Immtech Pharmaceuticals for commercialization rights to their lead oral drug candidate, pafuramidine maleate, which is being developed for the treatment of pneumocystis pneumonia in AIDS patients. In June 2007, Par entered into an exclusive licensing agreement with Immtech for U.S. commercialization rights.

Second-quarter selling, general and administrative (SG&A) expense decreased 20.8 percent to $34.0 million. The decrease in 2007 SG&A expense was primarily due to the second-quarter 2006 write-off of approximately $10.0 million of accounts receivable relating to invalid customer deductions.

In the second quarter of 2007, Par recorded a $6.0 million loss relating to an investment in a fund comprised of various floating-rate structured finance securities that experienced a severe reduction in value.

2007 Financial Outlook
 
Par has revised its previously announced guidance for full-year 2007 earnings per diluted share to $1.35-$1.50 from $0.95-$1.10. This increase is driven by a delay in the anticipated impact of competition on the pricing and volume environment of certain generic products, specifically, propanolol, fluticisone, metroprolol, and cabergoline. However, the Company is experiencing significant competition on price and volume of propranolol, fluticasone, and metroprolol in the fourth quarter.

The Company’s projections are based on its results for the first six months of 2007 and management’s assumption of the impact of product competition on some of Par’s key products and include the impact of certain one-time items and lower SG&A costs.

Total net revenue is expected to be between $760-$780 million. SG&A is expected to be $130-$133 million, including approximately $2 million in severance costs. Research and development cost is projected to be in the range of $75-$80 million, including approximately $19 million in branded milestone payments. Total projected expenses for the full-year include approximately $18-$20 million of share-based compensation and $24-$26 million of depreciation and amortization expenses. Adjusting for one-time items, full year earnings per diluted share is projected to be $1.40-$1.55. [See summary of estimated operating results for full year 2007 at the end of this press release.]
 

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Stock Repurchase Program
 
Since October 1, 2007, Par has repurchased 1,643,094 shares of its common stock at a total cost of $31.5 million. On September 28, 2007, Par announced that its Board of Directors had authorized the repurchase of up to $75 million of the company’s common stock.
 
Conference Call
 
Par has scheduled a conference call for Wednesday, November 21 at 9:00 am EST to discuss results for first and second quarters of 2007. 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 at least 30 days. The dial-in number is 866-770-7120 for domestic callers and 617-213-8065 for international callers. The access number is 88770486. 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 18960113.

For a copy of Par’s Form 10-Qs for the quarterly periods ended March 31, 2007 and June 30, 2007, visit Investors/SEC Filings on the Par web site at www.parpharm.com.

Non-GAAP Measures
 
Par prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP). In an effort to provide investors with additional information regarding the Company’s results and to provide a meaningful year-over-year 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 the attached. 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 results of the Company 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
 
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 www.parpharm.com.
 
Safe Harbor Statement
 
Certain statements in this press 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 risks and uncertainties, including the extent and impact of litigation arising out of the accounting issues described in the Company’s filings with the Securities and Exchange Commission (SEC), the difficulty of predicting FDA filings and approvals, acceptance and demand for new pharmaceutical products, the impact of competitive products and pricing, new product development and launch, reliance on key strategic alliances, uncertainty of patent litigation filed against the Company, availability of raw materials, the regulatory environment, fluctuations in operating results and other risks and uncertainties detailed from time to time in the company's filings with the SEC, such as the Company's reports on Form 10-K, Form 10-Q and Form 8-K, and amendments thereto. Any forward-looking statements included in this press 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.


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PAR PHARMACEUTICAL COMPANIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
 
 
  
June 30,
 
March 31,
 
December 31,
  
ASSETS
  
2007
 
2007
 
2006
  
Current assets:
  
 
  
 
  
 
  
Cash and cash equivalents
  
$
184,238
  
$
141,477
  
$
120,991
  
Available for sale debt and marketable equity securities
    
169,243
    
119,754
    
92,120
  
Accounts receivable, net
    
47,123
    
147,030
    
99,043
  
Inventories
    
83,779
    
87,674
    
106,322
  
Prepaid expenses and other current assets
    
22,225
    
23,215
    
15,833
  
Deferred income tax assets
    
72,104
    
72,104
    
72,105
  
Income taxes receivable
    
6,605
    
6,608
    
12,422
  
Total current assets
    
585,317
    
597,862
    
518,836
  
 
    
   
   
 
Property, plant and equipment, at cost less
accumulated depreciation and amortization
    
85,012
    
86,354
    
89,155
  
Available for sale debt and marketable equity securities
    
4,680
    
4,710
    
7,652
  
Investment in joint venture
    
5,387
    
5,304
    
5,292
  
Other investments
    
-
    
4,588
    
16,588
  
Intangible assets, net
    
41,371
    
44,674
    
47,880
  
Goodwill
    
63,729
    
63,729
    
63,729
  
Deferred charges and other assets
    
3,027
    
6,917
    
16,000
  
Non-current deferred income tax assets, net
    
49,714
    
49,278
    
49,545
  
Total assets
  
$
838,237
  
$
863,416
  
$
814,677
  
 
    
   
   
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
    
   
   
 
Current liabilities:
    
   
   
 
Short-term and current portion of long-term debt
  
$
200,824
  
$
202,632
  
$
204,469
  
Accounts payable
    
32,801
    
33,690
    
48,297
  
Payables due to distribution agreement partners
    
73,754
    
89,635
    
89,585
  
Accrued salaries and employee benefits
    
13,443
    
12,444
    
15,510
  
Accrued expenses and other current liabilities
    
23,112
    
22,154
    
18,833
  
Income taxes payable
    
4,438
    
20,815
    
16,974
  
Total current liabilities
    
348,372
    
381,370
    
393,668
  
 
    
   
   
 
Long-term debt, less current portion
    
-
    
-
    
-
  
Other long-term liabilities
    
13,482
    
13,246
    
-
  
 
    
   
   
 
Commitments and contingencies
    
-
    
-
    
-
  
 
    
   
   
 
Stockholders’ equity:
    
   
   
 
Preferred Stock, par value $0.0001 per share, authorized
6,000,000 shares; none issued and outstanding
    
-
    
-
    
-
  
Common Stock, par value $0.01 per share, authorized
90,000,000 shares, issued 36,345,466 and 36,335,215
and 35,901,276 shares
    
364
    
364
    
359
  
Additional paid-in-capital
    
263,446
    
257,394
    
254,013
  
Retained earnings
   
244,568
    
241,766
    
200,256
  
Accumulated other comprehensive gain (loss)
    
2,526
    
3,209
    
(431
)
Treasury stock, at cost 941,035 and 920,558 and 889,245 shares
    
(34,521
)
  
(33,933
)
  
(33,188
)
Total stockholders’ equity
    
476,383
    
468,800
    
421,009
  
Total liabilities and stockholders’ equity
  
$
838,237
  
$
863,416
  
$
814,677
  


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PAR PHARMACEUTICAL COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)

   
Three months ended
 
 
 
March 31,
 
April 1,
 
 
 
2007
 
2006
  
           
Revenues:
          
Net product sales
  
$
222,589
  
$
169,037
  
Other product related revenues
    
11,621
    
3,281
  
Total revenues
    
234,210
    
172,318
  
Cost of goods sold
    
146,521
    
123,150
  
Gross margin
    
87,689
    
49,168
  
Operating expenses:
              
Research and development
    
14,039
    
13,852
  
Selling, general and administrative
    
32,557
    
28,342
  
Settlements, net
    
(578
)
  
-
  
Total operating expenses
    
46,018
    
42,194
  
Gain on sale of product rights
    
(20,000
)
  
-
  
Operating income
    
61,671
    
6,974
  
Other expense, net
    
(19
)
  
(39
)
Equity in loss of joint venture
    
(148
)
  
(253
)
Realized gain on sale of marketable securities
    
1,397
    
-
  
Interest income
    
2,684
    
1,983
  
Interest expense
    
(1,718
)
  
(1,694
)
Income before provision for income taxes
    
63,867
    
6,971
  
Provision for income taxes
    
22,353
    
2,457
  
Net income
  
$
41,514
  
$
4,514
  
               
Earnings per share of common stock:
              
Basic
  
$
1.20
  
$
0.13
  
Diluted
  
$
1.19
  
$
0.13
  
               
Weighted average number of common shares outstanding:
              
Basic
    
34,618
    
34,259
  
Diluted
    
34,997
    
34,766
  
 

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PAR PHARMACEUTICAL COMPANIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)

   
Three months ended
 
Six months ended
 
 
 
June 30,
 
July 1,
 
June 30,
 
July 1,
 
 
 
2007
 
2006
 
2007
 
2006
  
                   
Revenues:
                  
Net product sales
  
$
160,014
  
$
190,583
  
$
382,603
  
$
359,620
  
Other product related revenues
    
7,626
    
4,655
    
19,247
    
7,937
  
Total revenues
    
167,640
    
195,238
    
401,850
    
367,557
  
Cost of goods sold
    
111,085
    
140,471
    
257,606
    
263,621
  
Gross margin
    
56,555
    
54,767
    
144,244
    
103,936
  
Operating expenses:
                          
Research and development
    
14,277
    
17,557
    
28,316
    
31,409
  
Selling, general and administrative
    
33,999
    
42,941
    
66,556
    
71,283
  
Settlements, net
    
-
    
1,250
    
(578
)
  
1,250
  
Total operating expenses
    
48,276
    
61,748
    
94,294
    
103,942
  
Gain on sale of product rights
    
-
    
-
    
(20,000
)
  
-
  
Operating income (loss)
    
8,279
    
(6,981
)
  
69,950
    
(6
)
Other expense, net
    
(30
)
  
142
    
(49
)
  
104
 
Equity in loss of joint venture
    
(80
)
  
(225
)
  
(228
)
  
(479
)
Loss on marketable securities, net
    
(6,040
)
  
(3,773
)
  
(4,643
)
  
(3,773
)
Interest income
    
3,901
    
1,973
    
6,585
   
3,956
 
Interest expense
    
(1,727
)
  
(1,693
)
  
(3,445
)
  
(3,388
)
Income (loss) before provision (benefit) for income taxes
    
4,303
    
(10,557
)
  
68,170
    
(3,586
)
Provision (benefit) for income taxes
    
1,505
    
(3,352
)
  
23,858
    
(896
)
Net income (loss)
  
$
2,798
  
$
(7,205
)
$
44,312
  
$
(2,690
)
                           
Earnings (loss) per share of common stock:
                          
Basic
  
$
0.08
  
$
(0.21
)
$
1.28
  
$
(0.08
)
Diluted
  
$
0.08
  
$
(0.21
)
$
1.27
  
$
(0.08
)
                           
Weighted average number of common shares outstanding:
                          
Basic
    
34,676
    
34,454
    
34,647
    
34,368
  
Diluted
    
34,943
    
34,454
    
34,970
    
34,368
  
 

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Reconciliation Between Reported (GAAP) and Adjusted Net Income (Loss)
(In thousands, except per share data)
(Unaudited)
 
   
Three Months Ended
 
 
 
March 31,
 
April 1,
 
 
 
2007
 
2006
  
   
 
  
 
  
Reported Net Income
 
$
41,514
  
$
4,514
  
Gain on Sale of Product Rights
    
(20,000
)
  
─
  
Investment Gain
    
(1,397
)
  
─
  
Net Settlements Gain
    
(578
)
  
─
  
Estimated Tax on Adjustments
    
8,570
    
─
  
Adjusted Net Income (non-GAAP measure)
  
$
28,109
  
$
4,514
  
               
Diluted Earnings Per Share:
             
Reported
  
$
1.19
  
$
0.13
  
Adjusted (non-GAAP measure)
  
$
0.80
  
$
0.13
  
 
   
 Three Months Ended
 
 
 
June 30,
 
July 1,
 
 
 
2007
 
2006
  
   
 
  
 
  
Reported Net Income (Loss)
 
$
2,798
  
$
(7,205
)
Net Investment Loss
    
6,040
    
3,773
  
License Fee
   
3,000
    
─
  
Severance Costs
    
1,643
    
─
  
Write-off of Accounts Receivable Relating to Invalid
              
Customer Deductions
    
─
    
9,965
  
Arbitration Settlement
    
─
    
1,502
  
Estimated Tax on Adjustments
    
(4,166
)
  
(5,944
)
Adjusted Net Income (non-GAAP measure)
  
$
9,315
  
$
2,091
  
               
Diluted Earnings (Loss) Per Share:
             
Reported
  
$
0.08
  
$
(0.21
)
Adjusted (non-GAAP measure)
  
$
0.27
  
$
0.06
  


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Reconciliation Between Reported (GAAP) and Adjusted Net Income (Loss)
(In thousands, except per share data)
(Unaudited)
 
   
Six Months Ended
 
 
 
June 30,
 
July 1,
 
 
 
2007
 
2006
  
   
 
  
 
  
Reported Net Income (Loss)
 
$
44,312
  
$
(2,690
)
Gain on Sales of Product Rights
    
(20,000
)
  
─
  
Net Investment Loss
    
4,643
    
3,773
  
License Fee
   
3,000
    
─
  
Severance Costs
    
1,643
    
─
  
Net Settlements Gain
    
(578
)
  
─
  
Write-off of Accounts Receivable Relating to Invalid
              
Customer Deductions
    
─
    
9,965
  
Arbitration Settlement
    
─
    
1,502
  
Estimated Tax on Adjustments
    
4,404
    
(5,944
)
Adjusted Net Income (non-GAAP measure)
  
$
37,424
  
$
6,606
  
               
Diluted Earnings (Loss) Per Share:
             
Reported
  
$
1.27
  
$
(0.08
)
Adjusted (non-GAAP measure)
  
$
1.07
  
$
0.19
  
 
 
 
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Estimated Operating Results for Full Year 2007


Total Revenue
  
$
760 - $780 million
  
SG&A
  
$
130 - $133 million
  
R&D
  
$
75 - $80 million
  
EPS (fully diluted)
  
$
1.35 - $1.50
  
Other supplemental information
      
Depreciation & amortization
  
$
24 - $26 million
  
Share-based compensation
  
$
18 - $20 million
  




 
IMPACT OF ONE-TIME ITEMS
(in millions, except per share amounts)
    
FY 2007
  
Severance
  
$
2
  
Branded Milestone Payments
    
19
  
High Yield Investment Loss
    
6
  
PAR 101
    
(24)
Total One-Time Items
  
$
3
  
EPS Impact (fully diluted)
  
$
0.05
  
EPS (fully diluted)
adjusted for one-time items
  
$
1.40 - $1.55