BRISTOL, Tenn., Feb. 28 /PRNewswire-FirstCall/ -- King Pharmaceuticals, Inc. announced today that total revenues increased 36% to $1.77 billion during the year ended December 31, 2005 compared to $1.30 billion for 2004. Including special items, net income equaled $117.8 million and diluted earnings per share equaled $0.49 during the year ended December 31, 2005, compared to a net loss of $160.3 million and a diluted loss per share of $0.66 during the prior year. Excluding special items, net earnings increased to $400.5 million and diluted earnings per share increased to $1.66 for the twelve months ended December 31, 2005 from net earnings of $157.6 million and diluted earnings per share of $0.65 in 2004.
Brian A. Markison, President and Chief Executive Officer of King, stated, "King achieved many significant milestones in 2005, as we refocused all aspects of our business and made tremendous progress toward resolving our previously existing challenges. Evidencing these achievements is our record high total revenues for the year ended December 31, 2005, totaling approximately $1.8 billion." Mr. Markison continued, "A particularly significant accomplishment during 2005 is our strategic collaboration with Pain Therapeutics, Inc. to develop and commercialize Remoxy(TM) and up to three other abuse-resistant opioid painkillers, which exemplifies the continued successful execution of our growth strategy. With this collaboration, we believe we have significantly strengthened our development pipeline providing greater potential to deliver long-term value for our Company."
Mr. Markison added, "We plan to continue implementing our strategy for long-term growth during 2006, focusing on our key therapeutic areas of cardiovascular/metabolics, neuroscience, and hospital/acute care. Relying on our best in class commercial operations capability, we expect to maximize the potential of our existing portfolio of branded pharmaceutical products. Our research and development team, in collaboration with our partners, will continue to advance a significant number of development projects in our pipeline. This currently includes three products in Phase III and two products in Phase II clinical trials. With a focus on our key therapeutic areas, we also expect to further expand our development pipeline as we continue to implement our disciplined, systematic business development process leveraging our core strengths."
Joseph Squicciarino, King's Chief Financial Officer, stated, "King continued to generate very strong cash flows from operations, totaling $519.5 million during the year ended December 31, 2005. With such strong cash flows, our unrestricted cash and investments in debt securities as of December 31, 2005 totaled approximately $524.7 million. Our cash position and cash flows from operations allow us to invest in products and commit to programs that are consistent with our strategy for long-term growth."
For the fourth quarter ended December 31, 2005, total revenues increased 24% to $423.3 million compared to $342.6 million in the fourth quarter of 2004. Including special items, the Company had a net loss of $94.6 million and diluted loss per share of $0.39 during the fourth quarter of 2005 compared to net earnings of $14.7 million and diluted earnings per share of $0.06 in the same period of the prior year. Excluding special items, net earnings increased to $92.3 million and diluted earnings per share increased to $0.38 during the fourth quarter ended December 31, 2005 from net earnings of $33.8 million and diluted earnings per share of $0.14 in the fourth quarter of 2004.
During the fourth quarter of 2005, net sales of the Company's key branded products were adversely affected by approximately $30 million resulting from changes in wholesaler buying patterns. The data upon which the Company relied and based its original third-quarter 2005 estimates of wholesale inventory levels was incorrect due to reporting errors made by two of the Company's major wholesale customers. Inventory levels of Skelaxin(R) (metaxalone) and Altace(R) (ramipril) were each slightly higher than one month of estimated end-user demand as of the end of the third quarter. King estimates that inventory levels of these products were subsequently reduced during the fourth quarter of 2005. Accordingly, fourth-quarter 2005 net sales of Skelaxin(R) and Altace(R) were adversely affected by $17 million and $13 million, respectively.
King recorded special items during the fourth quarter ended December 31, 2005 that resulted in a net charge of $284.4 million, or $186.9 million net of tax. More specific information regarding special items is provided below.
Net revenue from branded pharmaceuticals totaled $365.5 million for the fourth quarter of 2005, a 27% increase from the fourth quarter of 2004, and equaled $1.5 billion for the year ended December 31, 2005, a 36% increase from $1.1 billion during the prior year. These increases were primarily due to higher unit sales of the Company's branded pharmaceutical products and a lower rate of reserves for returns for some of these products during the fourth quarter and year ended December 31, 2005 as a result of the effect of a higher level of wholesale channel inventory reductions and actual returns of some of these products during 2004.
Altace(R) net sales equaled $150.3 million in the fourth quarter and $554.4 million during the twelve months ended December 31, 2005, increases of 64% and 60%, respectively, from $91.7 million in the fourth quarter and $347.3 million during the twelve months ended December 31, 2004.
Net sales of Skelaxin(R) totaled $70.0 million during the fourth quarter of 2005, a decrease of 14% from $81.1 million in the fourth quarter of 2004. For the twelve months ended December 31, 2005, net sales of Skelaxin(R) increased 44% to $344.6 million compared to $238.6 million during the same period in 2004.
Thrombin-JMI(R) (thrombin, topical, bovine, USP) net sales equaled $50.7 million during the fourth quarter of 2005 compared to $50.5 million during the same period of the prior year. During the twelve months ended December 31, 2005, Thrombin-JMI(R) net sales increased 26% to $220.6 million from $174.6 million during the same period of the prior year.
Net sales of Sonata(R) (zaleplon) equaled $24.8 million in the fourth quarter and $83.1 million during the twelve months ended December 31, 2005, increases of 125% and 38%, respectively, from $11.0 million during the fourth quarter and $60.4 million during the twelve months ended December 31, 2004.
Levoxyl(R) (levothyroxine sodium tablets, USP) net sales totaled $22.1 million during the fourth quarter of 2005 compared to $21.3 million during the fourth quarter of 2004. During the twelve months ended December 31, 2005, net sales of Levoxyl(R) totaled $139.5 million, an increase of 33% from $104.7 million for the same period of the prior year.
Royalty revenues, derived primarily from Adenoscan(R) (adenosine), totaled $18.2 million during the fourth quarter and $78.1 million during the twelve months ended December 31, 2005 compared to $20.3 million during the fourth quarter and $78.5 million during the twelve months ended December 31, 2004.
King's Meridian Medical Technologies business contributed $32.3 million to the Company's net revenue in the fourth quarter of 2005 and $129.3 million during the year ended December 31, 2005, compared to $27.2 million during the fourth quarter and $123.3 million during the twelve months ended December 31, 2004.
During the fourth quarter and year ended December 31, 2005, revenue from contract manufacturing equaled $6.2 million and $22.2 million, respectively, compared to $7.5 million during the fourth quarter and $26.0 million during the twelve months ended December 31, 2004.
The Company reported yesterday in a press release that it has entered into an agreement with Aventis Pharma Deutschland GmbH (now known as Sanofi-Aventis Deutschland GmbH) and Cobalt Pharmaceuticals, Inc. to dismiss the pending litigation relating to the enforcement of patents pertaining to Altace(R).
Conference Call Information
King will conduct a conference call today to discuss the Company's year-end and fourth-quarter 2005 results and other matters pertaining to its business. Interested persons may listen to the conference call on Tuesday, February 28, 2006, at 1:00 p.m., E.S.T. by one of the following means:
Internet Webcast
Click the following link to register and then join the live event with the same URL: http://hpbroadband.com/program.cfm?key=KingPharmaQ4Earnings
Telephone Audio Conference Call in to the telephone conference up to 15 minutes early: Toll free in the United States 800-903-0258 Outside the US 785-832-1508 Passcode: 7HP6312 Can't Make the Live Event? Listen "On-Demand"
If you are unable to participate during the live event, the call will be archived on King's web site http://www.kingpharm.com for not less than 14 days following the call.
About Special Items
Under Generally Accepted Accounting Principles ("GAAP"), "net earnings" and "diluted earnings per share" include special items. In addition to the results determined in accordance with GAAP, King provides its net earnings and diluted earnings per share results for the fourth quarters and years ended December 31, 2005 and 2004, excluding special items. These non-GAAP financial measures exclude special items which are those particular material income or expense items that King considers to be unrelated to the Company's ongoing, underlying business, non-recurring, or not generally predictable. Such items include, but are not limited to, merger and restructuring expenses; non- capitalized expenses associated with acquisitions, such as in-process research and development charges and one-time inventory valuation adjustment charges; charges resulting from the early extinguishment of debt; asset impairment charges; expenses of drug recalls; and gains and losses resulting from the divestiture of assets. King believes the identification of special items enhances the analysis of the Company's ongoing, underlying business and the analysis of the Company's financial results when comparing those results to that of a previous or subsequent like period. However, it should be noted that the determination of whether to classify an item as a special item involves judgments by King's management. A reconciliation of non-GAAP financial measures referenced herein and King's financial results determined in accordance with GAAP is provided below.
About King Pharmaceuticals
King, headquartered in Bristol, Tennessee, is a vertically integrated branded pharmaceutical company. King, an S&P 500 Index company, seeks to capitalize on opportunities in the pharmaceutical industry through the development, including through in-licensing arrangements and acquisitions, of novel branded prescription pharmaceutical products in attractive markets and the strategic acquisition of branded products that can benefit from focused promotion and marketing and product life-cycle management.
Forward-looking Statements
This release contains forward-looking statements which reflect management's current views of future events and operations, including, but not limited to, statements pertaining to the potential of the Company's development pipeline to provide long-term growth; statements pertaining to the implementation of the Company's strategy for growth; statements pertaining to the Company's plan to maximize the potential of its existing portfolio of branded pharmaceutical products; statements pertaining to the Company's continued development of products in its pipeline; statements pertaining to Company's plans to further expand its development pipeline in 2006; and statements pertaining to the Company's planned conference call to discuss its year-end and fourth-quarter 2005 results. These forward-looking statements involve certain significant risks and uncertainties, and actual results may differ materially from the forward-looking statements. Some important factors which may cause actual results to differ materially from the forward-looking statements include: dependence on the future level of demand for and net sales of King's branded pharmaceutical products, in particular, Altace(R), Thrombin- JMI(R), Sonata(R), Skelaxin(R) and Levoxyl(R); dependence on the successful marketing of King's products, including, but not limited to, Altace(R), Thrombin-JMI(R), Sonata(R), Skelaxin(R) and Levoxyl(R); dependence on the future effect of generic substitution for Levoxyl(R); dependence on royalty revenues from Adenoscan(R); dependence on management of King's growth and integration of its acquisitions; dependence on the Company's compliance with the five-year corporate integrity agreement with the Office of the Inspector General ("OIG") of the Department of Health and Human Services; dependence on the final results of any ongoing government investigations of the Company or any related individuals; dependence on whether King is able to prevail in pending private plaintiff securities litigation; dependence on King's ability to continue to acquire branded products, including products in development; dependence on the high cost and uncertainty of research, clinical trials, and other development activities involving pharmaceutical products, including, but not limited to, King Pharmaceuticals Research and Development's pre-clinical and clinical pharmaceutical product development projects, including Remoxy(TM), binodenoson, PT-141 (now known as bremelanotide), and an Altace(R)/diuretic combination product and other potential formulations involving ramipril; dependence on the unpredictability of the duration and results of the U. S. Food and Drug Administration's ("FDA") review of Investigational New Drug applications ("IND"), New Drug Applications ("NDA"), and Abbreviated New Drug Applications ("ANDA") and/or the review of other regulatory agencies worldwide; dependence on King's ability to maintain effective patent protection for AltaceÃ’, Skelaxin(R), Sonata(R) and Adenoscan(R) and successfully defend against any challenge with respect to the enforceability of patents relating to the products; dependence on whether Skelaxin(R) continues as an exclusive product; dependence on whether King's customers order pharmaceutical products in excess of normal quantities during any quarter which could cause the Company's sales of branded pharmaceutical products to be lower in a subsequent quarter than they would otherwise have been; dependence on the accuracy of King's estimate of wholesale inventory levels of its products; dependence on the extent to which Inventory Management Agreements facilitate effective management of wholesale channel inventories of the Company's products and the accuracy of information provided to the Company pursuant to such agreements and by other third parties; dependence on King's ability to continue to successfully execute the Company's strategy and to continue to capitalize on strategic opportunities in the future for sustained long-term growth; dependence on the availability and cost of raw materials; dependence on no material interruptions in supply by contract manufacturers of King's products; dependence on the potential effect on sales of the Company's existing branded pharmaceutical products as a result of the potential development and approval of a generic substitute for any such product or other new competitive products; dependence on the potential effect of future acquisitions and other transactions pursuant to the Company's growth strategy; dependence on King's compliance with FDA and other government regulations that relate to the Company's business; dependence on King's ability to conduct its webcast as currently planned on February 28, 2006; and dependence on changes in general economic and business conditions; changes in current pricing levels; changes in federal and state laws and regulations; changes in competition; unexpected changes in technologies and technological advances; and manufacturing capacity constraints. Other important factors that may cause actual results to differ materially from the forward-looking statements are discussed in the "Risk Factors" section and other sections of King's Form 10-K for the year ended December 31, 2004 and Form 10-Q for the third quarter ended September 30, 2005, which are on file with the U.S. Securities and Exchange Commission ("SEC"). King does not undertake to publicly update or revise any of its forward-looking statements even if experience or future changes show that the indicated results or events will not be realized.
KING PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) December 31, December 31, ASSETS 2005 2004 Current assets: Cash and cash equivalents $30,014 $192,656 Investments in debt securities 494,663 149,430 Restricted cash 130,400 97,730 Marketable securities - 16,498 Accounts receivable, net 223,581 180,963 Inventories 228,063 274,412 Deferred income tax assets 81,777 153,979 Prepaid expenses and other current assets 59,291 61,395 Total current assets 1,247,789 1,127,063 Property, plant and equipment, net 302,474 280,731 Intangible assets, net 967,194 1,285,961 Goodwill 121,152 121,152 Deferred income tax assets 231,032 92,931 Marketable securities 18,502 - Other assets 77,099 16,318 Total assets $2,965,242 $2,924,156 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $84,539 $92,920 Accrued expenses 519,620 596,010 Income taxes payable 22,301 - Current portion of long-term debt 345,000 - Total current liabilities 971,460 688,930 Long-term debt - 345,000 Other liabilities 20,360 41,436 Total liabilities 991,820 1,075,366 Commitments and contingencies Shareholders' equity: Common shares no par value, 300,000,000 shares authorized, 241,802,724 and 241,706,583 shares issued and outstanding, respectively 1,213,482 1,210,647 Retained earnings 754,953 637,120 Accumulated other comprehensive income 4,987 1,023 Total shareholders' equity 1,973,422 1,848,790 Total liabilities and shareholders' equity $2,965,242 $2,924,156 KING PHARMACEUTICALS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data) Three Months Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 REVENUES: Total revenues $423,285 $342,619 $1,772,881 $1,304,364 OPERATING COSTS AND EXPENSES: Cost of revenues, exclusive of depreciation, amortization and impairments shown below 74,305 86,850 331,564 339,450 Excess purchase commitment (4,527) - (6,109) 8,902 Writeoff of acquisition related inventory step- up/recall (2,470) - (2,470) 4,586 Total cost of revenues 67,308 86,850 322,985 352,938 Selling, general and administrative, exclusive of co- promotion fees 97,029 109,629 389,672 385,002 Special legal and professional fees 6,511 5,609 19,779 19,773 Legal settlement - 5,000 - 5,000 Medicaid related charge - - - 65,000 Mylan transaction costs - 3,149 3,898 9,062 Co-promotion fees 60,546 29,357 223,134 111,604 Total selling, general, and administrative expense 164,086 152,744 636,483 595,441 Depreciation and amortization 34,351 45,488 147,049 162,115 Research and development 20,994 18,158 74,015 67,939 Research and development-In- process upon acquisition 188,711 (845) 188,711 16,300 Intangible asset impairment 94,131 17,336 221,054 149,592 Restructuring charges 1,577 - 4,180 10,827 Gain on sale of products (217) - (1,675) (9,524) Total operating costs and expenses 570,941 319,731 1,592,802 1,345,628 OPERATING (LOSS) INCOME (147,656) 22,888 180,079 (41,264) OTHER (EXPENSE) INCOME: Interest expense (3,055) (3,070) (11,931) (12,588) Interest income 6,712 2,715 18,175 5,974 Valuation charge - convertible notes receivable - - - (2,887) Loss on investment - - (6,182) (6,520) Other, net 21 (574) (2,026) (749) Total other income (expense) 3,678 (929) (1,964) (16,770) (LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (143,978) 21,959 178,115 (58,034) Income tax (benefit) expense (49,817) 6,961 61,485 (7,412) (LOSS) INCOME FROM CONTINUING OPERATIONS (94,161) 14,998 116,630 (50,622) DISCONTINUED OPERATIONS (Loss) income from discontinued operations, including loss on impairment (731) (441) 1,876 (172,750) Income tax (benefit) expense (316) (170) 673 (63,084) Total (loss) income from discontinued operations (415) (271) 1,203 (109,666) NET (LOSS) INCOME $(94,576) $14,727 $117,833 $(160,288) Basic net (loss) income per common share $(0.39) $0.06 $0.49 $(0.66) Diluted net (loss) income per common share $(0.39) $0.06 $0.49 $(0.66) Shares used in basic net (loss) income per share 241,794 241,666 241,751 241,475 Shares used in diluted net (loss) income per share 241,794 241,808 241,903 241,475 KING PHARMACEUTICALS, INC. CONSOLIDATED STATEMENT OF OPERATIONS EXCLUDING SPECIAL ITEMS - NON GAAP (in thousands, except per share data) Three Months Ended Twelve Months Ended December 31, December 31, 2005 2004 2005 2004 REVENUES: Total revenues $423,285 $342,619 $1,772,881 $1,304,364 OPERATING COSTS AND EXPENSES: Cost of revenues, exclusive of depreciation, amortization and impairments shown below 74,305 86,850 331,564 339,450 Selling, general and administrative, exclusive of co-promotion fees 97,029 109,629 389,672 385,002 Co-promotion fees 60,546 29,357 223,134 111,604 Total selling, general, and administrative expense 157,575 138,986 612,806 496,606 Depreciation and amortization 34,351 45,488 147,049 162,115 Research and development 20,994 18,158 74,015 67,939 Total operating costs and expenses 287,225 289,482 1,165,434 1,066,110 OPERATING INCOME 136,060 53,137 607,447 238,254 OTHER INCOME (EXPENSE): Interest expense (3,055) (3,070) (11,931) (12,588) Interest income 6,712 2,715 18,175 5,974 Other, net 21 (574) (2,026) (749) Total other income (expense) 3,678 (929) 4,218 (7,363) INCOME BEFORE INCOME TAXES 139,738 52,208 611,665 230,891 Income tax expense 47,419 18,426 211,186 73,323 NET INCOME $92,319 $33,782 $400,479 $157,568 Basic net income per common share $0.38 $0.14 $1.66 $0.65 Diluted net income per common share $0.38 $0.14 $1.66 $0.65 Shares used in basic net income per share 241,794 241,666 241,751 241,475 Shares used in diluted net income per share 242,121 241,808 241,903 241,920 KING PHARMACEUTICALS, INC. RECONCILIATION OF NON-GAAP MEASURES (in thousands, except per share data) The following tables reconcile Non-GAAP measures to amounts reported under GAAP: Three Months Ending Twelve Months Ending December 31, 2005 December 31, 2005 EPS EPS Net income, excluding special items $92,319 $400,479 Diluted income per common share, excluding special items $0.38 $1.66 SPECIAL ITEMS: Excess purchase commitment (cost of goods sold) 4,527 0.02 6,109 0.03 Writeoff of acquisition related inventory step- up/recall (cost of goods sold) 2,470 0.01 2,470 0.01 Special legal and professional fees (selling, general, and administrative) (6,511) (0.03) (19,779) (0.08) Mylan transaction costs (selling, general, and administrative) - - (3,898) (0.02) In-process research and development (other operating costs and expenses) (188,711) (0.78) (188,711) (0.78) Intangible asset impairment (other operating costs and expenses) (94,131) (0.39) (221,054) (0.91) Restructuring charges (other operating costs and expenses) (1,577) 0.00 (4,180) (0.02) Gain on sale of products (other operating costs and expenses) 217 0.00 1,675 0.01 Loss on investment (other income (expense)) - - (6,182) (0.03) (Loss) income from discontinued operations (731) (0.00) 1,876 0.01 Income tax expense 97,552 0.40 149,028 0.61 Net (loss) income $(94,576) $117,833 Diluted (loss) income per common share, as reported under GAAP $(0.39) $0.49 Three Months Ending Twelve Months Ending December 31, 2004 December 31, 2004 EPS EPS Net income, excluding special items $33,782 $157,568 Diluted income per common share, excluding special items $0.14 $0.65 SPECIAL ITEMS: Excess purchase commitment (cost of goods sold) - - (8,902) (0.04) Writeoff of acquisition related inventory step- up/recall (cost of goods sold) - - (4,586) (0.02) Special legal and professional fees (selling, general, and administrative) (5,609) (0.02) (19,773) (0.08) Legal settlement (selling, general, and administrative) (5,000) (0.02) (5,000) (0.02) Medicaid related charge (selling, general, and administrative) - - (65,000) (0.27) Mylan transaction costs (selling, general, and administrative) (3,149) (0.01) (9,062) (0.04) In-process research and development (other operating costs and expenses) 845 0.00 (16,300) (0.07) Intangible asset impairment (other operating costs and expenses) (17,336) (0.07) (149,592) (0.62) Restructuring charges (other operating costs and expenses) - - (10,827) (0.04) Gain on sale of products (other operating costs and expenses) - - 9,524 0.04 Valuation charge - convertible notes receivable (other income (expense)) - - (2,887) (0.01) Loss on investment (other income (expense)) - - (6,520) (0.03) (Loss) income from discontinued operations (441) (0.00) (172,750) (0.72) Income tax expense 11,635 0.04 143,819 0.61 Net income (loss) $14,727 $(160,288) Diluted income (loss) per common share, as reported under GAAP $0.06 $(0.66) KING PHARMACEUTICALS, INC. Summary Reconciliation of Special Items
