Par Pharmaceutical Reports First Quarter 2008 Results

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WOODCLIFF LAKE, N.J., May 8 /PRNewswire-FirstCall/ -- ParPharmaceutical ( News ) Companies, Inc. today reported results for the first quarterended March 29, 2008.
Par reported total revenues of $154.9 million and net income of$2.6 million, or $0.08 per diluted share, which included a $5.0million payment to Alfacell Corporation for the exclusive U.S.commercialization rights to ONCONASE(R) (ranpirnase), a novelproduct currently in Phase III clinical development. Adjusting forthis item, earnings per diluted share were $0.17 for the threemonth period ended March 29, 2008. This is compared with reportedrevenues of $234.2 million and net income of $41.5 million, or$1.19 per diluted share, for the same period in 2007, whichincluded a $20.0 million gain on the sale to OptimerPharmaceuticals, Inc. of marketing rights to the investigationaldrug Difimicin (PAR 101). Adjusting for this item, earnings perdiluted share were $0.84 in the first quarter of 2007.
First Quarter Review
For the first quarter ended March 29, 2008, total revenuesdecreased 33.9% compared with the same period in 2007 due primarilyto a greater number of 2007 new product introductions in theCompany's generics business and increased pricing pressures onexisting generic products, partly offset by higher revenues fromPar's branded division, Strativa, which increased 28.6% from thesame period in 2007 driven by increased net sales of Megace(R) ES.
Revenues of the generic division decreased 39.5% in the first threemonths of 2008 compared to the same period in 2007 primarily due tocompetitive pressures in the following products: fluticasone,propranolol, various amoxicillin products, tramadol HCl andacetaminophen tablets, glyburide/metformin, cabergoline, ranitidinesyrup, as well as lower royalties. Partially offsetting thesedecreases were increased sales of metoprolol resulting from thelaunch of additional strengths in the third quarter of 2007.
Par's first quarter gross margin was 32.0% of total revenuescompared to 37.4% in 2007. The decrease in the Company's grossmargin resulted primarily from the non-recurrence of the 2007launch of propranolol and decreased sales of certain existinggeneric products and lower royalty income both resulting fromcompetitive pressure, tempered by higher gross margin contributionfrom Strativa's net sales of Megace(R) ES.
Research and development (R&D) expenses increased 22.2% for thefirst quarter 2008 compared with the first quarter 2007, which wasprimarily attributed to the initial $5.0 million payment toAlfacell Corporation for an exclusive licensing agreement toacquire the commercialization rights to ONCONASE(R).
Selling, general and administrative (SG&A) expenses for the firstquarter 2008 decreased 3.7% from first quarter 2007. The decreaseis due to lower expenses related to the sales and marketing ofMegace(R) ES, lower finance and accounting costs, and lowerstock-based compensation employment costs.
During the first quarter of 2008, the Company recognized a gain onthe sale of product rights of $1.0 million related to the sale oftwo non-core ANDAs. In addition, the Company recognized a gain of$0.6 million related to providing certain information and otherdeliverables related to Megace(R) ES to a third party that isseeking to commercialize Megace(R) ES outside of the U.S..
Year-to-date Accomplishments
Patrick G. LePore, chairman, president and chief executive officer,states, "2008 is the year to execute on our strategy, and I ampleased with our progress thus far. Par should be measured in largepart by the achievement of certain accomplishments and milestonesthat position the Company for growth in 2009 and beyond."
In January, Strativa acquired the U.S. commercialization rights toAlfacell Corporation's Phase III product, ONCONASE, for an initialpayment of $5 million. Results from the Phase IIIb clinical trialwill be reported by mid-year. Subject to a complete review of thestudy results and discussions with the FDA, it is anticipated thatan NDA could be filed as early as year-end 2008.
In March, Par commenced bioequivalence studies for Zensana(TM)(ondansetron) oral spray. Subject to favorable results anddiscussions with the FDA, it is expected that Strativa could filean NDA around the end of 2008.
In April, Strativa announced that its development partner,BioAlliance Pharma, reported positive preliminary, top-line resultsfrom a Phase III study of Loramyc(R) (miconazole Lauriad(R)).Subject to a complete review of the study results and discussionswith the FDA, it is anticipated that an NDA could be filed byyear-end 2008.
On May 7, 2008, Par announced that it amended its agreement withSpectrum Pharmaceuticals and paid $20 million in cash to increaseits share of profits from the generic versions of GlaxoSmithKline'sImitrex(R) Injection, which will be immediately accretive to 2008earnings. As a result of the agreement, Par's profit share shallincrease from 38% to 95% from the commercialization of sumatriptaninjection. Par will be permitted to sell generic versions ofcertain sumatriptan injection products with an expected launch dateno later than November 2008. According to IMS Health, annual U.S.sales of Imitrex(R) are approximately $220 million.
2008 Financial Guidance
The Company's projections are based on its results for the firstthree months of 2008, as well as management's estimates regardingthe impact of product competition on existing products, and themarket opportunity of some of Par's generic pipeline products. Fullyear 2008 earnings per diluted share are projected to be $0.65 to$0.85, excluding anticipated pre-launch spending and milestonepayments in support of Strativa's business strategy and includingthe estimated impact of four new generic product launches (i.e.,sumatriptan vials and kits, clonidine, dronabinol, certainstrengths of risperidone ODT) with an expected fully diluted EPSimpact of $0.25 to $0.47.
2009-2012 Generic Pipeline
The Company's investment in its generic first-to-file developmentstrategy has lead to a growing pipeline and a track record offirst-to-file drugs. The Company anticipates that it will launch asmany as 15 new products during 2009 and 2012 based on theexpiration of 30 month stay periods or prior settlements.
To provide investors with additional information by which toanalyze the Company, Par is providing a range of estimated valuesfor certain key generic pipeline products. These values are basedon projections regarding the first six months of net sales and theanticipated gross margin of each product in the year the productlaunches. Since each full six-month period may not be in thecalendar year the product launches, we anticipate that some of thevalue will be realized in the next calendar year. (Please note thatthese estimates do not include value after the initial six monthsfollowing product launch).
In 2009, Par anticipates six key generic product launches that areexpected to have a range of net sales and gross margin of $95-$135million and $78-$110 million, respectively, to the Company. In2010, Par anticipates five key generic product launches that areexpected to have a range of net sales and gross margin of $60-$80million and $42-$56 million, respectively, to the Company. In 2011,Par anticipates two key generic launches that are expected to havea range of net sales and gross margin of $20-$28 million and $7-$10million, respectively, to the Company. In 2012, Par anticipates twokey generic launches that are expected to have a range of net salesand gross margin of $14-$20 million and $12-$17 million,respectively, to the Company. These estimates are, of course,subject to future developments, not all of which may be anticipatedat this time. See Key Generic Product Pipeline chart at the end ofthis press release.
In addition to these current first-to-file opportunities, Par isdiligently working on other promising development products andbusiness development opportunities that it anticipates willcontinue to enhance the Company's future sales opportunities.
Conference Call
Par has scheduled a conference call for Friday, May 9 at 9:00 amEDT to discuss results for first quarter of 2008. Par invitesinvestors and the general public to listen to a webcast of theconference call. Access to the live webcast can be made via theCompany's website at .
About Par
Par Pharmaceutical Companies, Inc. develops, manufactures andmarkets generic drugs and innovative branded pharmaceuticals forspecialty markets. For press release and other company information,visit http://www.parpharm.com/.
Safe Harbor Statement
Certain statements in this press release constitute"forward-looking statements" within the meaning of the PrivateSecurities Litigation Reform Act of 1995. To the extent anystatements made in this news release contain information that isnot historical, these statements are essentially forward-looking.Such forward-looking statements are those that include estimates,projections, statements regarding the plans and objectives ofmanagement, as well as the assumptions underlying theforward-looking statements, and other statements that cannot beverified without reference to future developments or events. Theforward-looking statements identified in the release include, butare not limited to, the statements that contain the words "expect,""expected," "anticipate," "anticipates," "anticipated,""projections," "projected," "estimate," estimates," "believes,""continue," and growing." The forward-looking statements in therelease are subject to risks and uncertainties, including theCompany's ability to accurately value its key generic pipelineproducts, including, but not limited to the vagaries of litigation,securing regulatory approval and uncertainty of exclusivity, theextent and impact of litigation arising out of the accountingissues described in the Company's filings with the Securities andExchange Commission (SEC), the difficulty of predicting FDA filingsand approvals, acceptance and demand for new pharmaceuticalproducts, the impact of competitive products and pricing, newproduct development and launch, reliance on key strategicalliances, uncertainty of patent litigation filed against theCompany, availability of raw materials, the regulatory environment,fluctuations in operating results and other risks and uncertaintiesdetailed 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 inthis press release are made as of the date hereof only, based oninformation available to the Company as of the date hereof, and,subject to any applicable law to the contrary, the Company assumesno obligation to update any forward-looking statements.
PAR PHARMACEUTICAL COMPANIES, INC. CONDENSED CONSOLIDATED BALANCESHEETS (In Thousands, Except Share Data) (Unaudited) March 29,December 31, ASSETS 2008 2007 Current assets: Cash and cashequivalents $231,193 $200,132 Available for sale debt andmarketable equity securities 67,893 85,375 Accounts receivable, net84,035 64,182 Inventories 65,183 84,887 Prepaid expenses and othercurrent assets 14,023 14,294 Deferred income tax assets 56,92156,921 Income taxes receivable 13,475 17,516 Total current assets532,723 523,307 Property, plant and equipment, at cost lessaccumulated depreciation and amortization 83,316 82,650 Availablefor sale debt and marketable equity securities 5,959 6,690Investment in joint venture 6,433 6,314 Other investments 2,5002,500 Intangible assets, net 33,643 36,059 Goodwill 63,729 63,729Deferred financing costs and other assets 2,314 2,544 Non-currentdeferred income tax assets, net 57,935 57,730 Total assets $788,552$781,523 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:Current portion of long-term debt $200,000 $200,000 Accountspayable 30,513 32,200 Payables due to distribution agreementpartners 45,253 36,479 Accrued salaries and employee benefits 6,71316,596 Accrued expenses and other current liabilities 32,211 27,518Total current liabilities 314,690 312,793 Long-term debt, lesscurrent portion - - Other long-term liabilities 31,448 30,975Commitments and contingencies - - Stockholders' equity: PreferredStock, par value $0.0001 per share, authorized 6,000,000 shares;none issued and outstanding - - Common Stock, par value $0.01 pershare, authorized 90,000,000 shares, issued 37,203,975 and36,460,461 shares 372 364 Additional paid-in-capital 278,411274,963 Retained earnings 232,781 230,195 Accumulated othercomprehensive loss (1,680) (1,362) Treasury stock, at cost,2,658,335 and 2,604,977 shares (67,470) (66,405) Totalstockholders' equity 442,414 437,755 Total liabilities andstockholders' equity $788,552 $781,523 PAR PHARMACEUTICALCOMPANIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (InThousands, Except Per Share Data) (Unaudited) Three Months EndedMarch 29, March 31, 2008 2007 Revenues: Net product sales $151,237$222,589 Other product related revenues 3,691 11,621 Total revenues154,928 234,210 Cost of goods sold 105,407 146,521 Gross margin49,521 87,689 Operating expenses: Research and development 17,15814,039 Selling, general and administrative 31,346 32,557Settlements, net - (578) Total operating expenses 48,504 46,018Gain on sale of product rights and other (1,625) (20,000) Operatingincome 2,642 61,671 Other expense, net - (19) Equity in loss ofjoint venture (20) (148) Realized gain on sale of marketablesecurities - 1,397 Interest income 3,014 2,684 Interest expense(1,667) (1,718) Income from continuing operations before provisionfor income taxes 3,969 63,867 Provision for income taxes 1,44322,353 Income from continuing operations 2,526 41,514 Discontinuedoperations: Gain from discontinued operations 505 - Provision forincome taxes 445 - Gain from discontinued operations 60 - Netincome $2,586 $41,514 Basic earnings per share of common stock:Income from continuing operations $0.08 $1.20 Gain fromdiscontinued operations 0.00 - Net income $0.08 $1.20 Dilutedearnings per share of common stock: Income from continuingoperations $0.08 $1.19 Gain from discontinued operations 0.00 - Netincome $0.08 $1.19 Weighted average number of common sharesoutstanding: Basic 33,220 34,618 Diluted 33,587 34,997 Par's KeyGeneric Products Pipeline 2009-2012 Net Sales Gross Margin RangeRange ($ in ($ in Product Strength Brand millions) millions) 2009Potential Launches Methylphenidate ER 20, 30, and 40 Ritalin(R)Capsules mg LA Alprazolam ODT Tablets 0.25, 0.5, 1, Niravam(R) and2 mg Amlodipine + 5/40 and 10/40 Lotrel(R) Benazepril Capsules mgPropafenone ER 225, 325, and Rythmol(R) Capsules 425 mg SRNateglinide Tablets 60 mg and Starlix(R) 120 mg Tramadol ER Tablets100, 200, and Ultram(R) 300 mg ER $100-$135 $80-$110 2010 PotentialLaunches Dexmethylphenidate HCl 15 mg Focalin(R) XR Caps XROmeprazole Sodium Bicarbonate Oral Suspension 40 mg Zegerid(R) OSOmeprazole Sodium 20 and 40 mg Zegerid(R) Bicarbonate Caps CapsOxaliplatin Injection 50 and 100 mg Eloxatin(R) vials Diazepamrectal gel all strengths Diastat(R) $60-$80 $42-$56 2011 PotentialLaunches Rosuvastatin Tablets 5, 10, 20, Crestor(R) and 40 mgLatanoprost Ophthalmic 0.005% Xalatan(R) Solution $20-$28 $7-$102012 Potential Launches Amlodipine /Valsartan 5/160, 10/160,Exforge(R) and 10/320 Fluvastatin Sodium ER 80 mg Lescol XL(R)tablets $14-$20 $12-$17
These values are based on projections regarding the first sixmonths of net sales and the anticipated gross margin of eachproduct in the year the product launches. Since each full six-monthperiod may not be in the calendar year the product launches, weanticipate that some of the value will be realized in the nextcalendar year. (Please note that these estimates do not includevalue after the initial six months following product launch).Additionally, there are risks relating to litigation outcomes andregulatory approval of such products.
The estimated launch dates are based on one or more of thefollowing: expiry of the 30-month stay period; patent expiry date;expiry of regulatory exclusivity; and date certain due tosettlement agreement. However, such dates may change due to severalcircumstances, such as extended litigation, outstanding citizenspetitions, other regulatory requirements set forth by the FDA, andstays of litigation.




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