Par Pharmaceutical reports second quarter total revenues of $224.2 million

Aug 3 2011

Par Pharmaceutical Companies, Inc. (NYSE: PRX) today reported results for the second quarter ended June 30, 2011.

For the second quarter ended June 30, 2011, the Company reported total revenues of $224.2 million, and income from continuing operations of $9.2 million, or $0.25 per diluted share, which included a one-time charge of $27.7 million related to the Company's restructuring of its branded division, Strativa Pharmaceuticals. Excluding this item and a one-time tax charge, adjusted income from continuing operations (non-GAAP measure) was $29.0 million. On an adjusted cash basis (non-GAAP measure), which excludes amortization expenses, income from continuing operations was $30.9 million, or $0.84 per diluted share for the second quarter 2011. (Please see attached reconciliation page.)  This is compared to reported revenues of $255.5 million and adjusted cash basis income from continuing operations of $25.1 million, or $0.71 per diluted share for the same period in 2010.  

For the six months ended June 30, 2011, the Company reported total revenues of $457.1 million and a loss of $99.7 million from continuing operations, or $2.79 per diluted share, as a result of a $190.6 million pre-tax litigation settlement expense in the first quarter and the aforementioned restructuring and tax charges in the second quarter.  On an adjusted cash basis (non-GAAP measure), income from continuing operations was $65.9 million, or $1.80 per diluted share.  This compares to reported revenues of $547.4 million and income from continuing operations of $44.5 million, or $1.26 diluted share, for the same period in 2010.  On an adjusted cash basis, income from continuing operations for the first six months of 2010 was $51.4 million, or $1.46 per diluted share.

The following is a product level discussion of second quarter 2011 results versus the first quarter 2011:

Key Product Sales

• Metoprolol:  For the quarter ended June 30, 2011, net sales of metoprolol succinate were $63.7 million compared to net sales of $63.4 million in the first quarter 2011. Par Pharmaceutical, the Company's generic drug division, is the authorized generic for all strengths of AstraZeneca's Toprol XL®.
• Budesonide EC:  Net sales for budesonide EC in the second quarter were $16.4 million.  Par Pharmaceutical launched the product in the second quarter as the authorized generic for AstraZeneca's Entocort® EC.
• Sumatriptan: Net sales of sumatriptan succinate were $15.3 million in the second quarter 2011 compared to $16.7 million in the first quarter 2011.  Par Pharmaceutical 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 second quarter.
• Propafenone Hydrochloride ER: Net sales for Propafenone Hydrochloride ER in the second quarter were $13.3 million compared to $22.0 million in the first quarter.  The decrease was driven by customers' non-recurrence of first quarter launch quantities.  Par Pharmaceutical remained the exclusive supplier of generic Rythmol SR® throughout the second quarter.
• Amlodipine and Benazepril: Net sales for the second quarter 2011 were $12.5 million compared to $18.2 million in the first quarter.  The decrease was driven by customers' non-recurrence of first quarter launch quantities.
• Meclizine: Net sales for the second quarter were $4.6 million compared to $4.9 million in the previous quarter. The decrease was driven by customer buying patterns.
• Other Generic Products: For the second quarter 2011, net sales from all other generic products were $76.7 million. This compares to net sales of $84.5 million in the first quarter 2011. The decrease is due to primarily to the voluntary withdrawal of clonidine in the second quarter and the seasonality of hydrocodone/chlorpheniramine.
• Megace® ES: Net sales were $14.1 million for the second quarter compared to $14.1 million in the first quarter.
• Nascobal® B12 Nasal Spray: Net sales were $6.3 million for the second quarter compared to $3.9 million in the first quarter.  The increase was due, in part, to a shortage of a competing vitamin B12 intramuscular injection product.

Revenues and gross margin for the second quarter 2011 were $224.2 million and $99.0 million, respectively, compared to $233.0 million in net sales and $109.7 million in gross margin during the prior quarter (Q1 2011). The gross margin rate on the Company's consolidated product portfolio decreased to 44.2% versus 47.1% in the first quarter 2011.  The decrease was due primarily to the non-recurrence of the first quarter launches of propafenone and amlodipine/benazepril and the second quarter launch of lower margin budesonide.  

Operating Expenses

Excluding the one-time restructuring charge of $27.7 million, total operating expenses decreased during the second quarter of 2011 as compared to the prior quarter as follows:

• Research and development expenses were $8.1 million in the second quarter of 2011 compared to $10.7 million in the first quarter.  The decrease was due to lower generic development costs.
• Selling, general and administrative expenses for the second quarter 2011 decreased to $46.2 million compared to $46.9 million in the first quarter of 2011.  The decrease reflects lower employment costs.

Cash and cash equivalents and marketable securities

The aggregate balance as of June 30, 2011 was approximately $346 million.

Product and Pipeline Update

In July, Strativa Pharmaceuticals returned the U.S. commercialization rights of Zuplenz® to its development partner, MonoSol Rx, as part of the branded division's restructuring announced in June.

In July, the Company received a notice letter from a generic pharmaceutical manufacturer, advising that it has filed an Abbreviated New Drug Application with the U.S. FDA containing a Paragraph IV certification referencing Megace® ES.   Megace® ES is protected by Elan Pharma International Limited's U.S. Patents 6,592,903 and 7,101,576.  The Company intends, with Elan, to investigate the Paragraph IV certification and ANDA, and to enforce its patents, which expire in 2020 and 2024, respectively, as appropriate.

Par Pharmaceutical, along with third-party partners, currently has approximately 31 ANDAs pending with the FDA, 13 of which it believes to be first-to-file opportunities.