ST. LOUIS, Feb. 15 /PRNewswire-FirstCall/ -- KV Pharmaceutical Company , a fully integrated specialty pharmaceutical company that develops, manufactures, acquires and markets technology-differentiated branded and generic/non-branded prescription pharmaceutical products, reported today its consolidated results of operations for the 2007 fiscal year ended March 31, 2007. The results have been delayed primarily due to the previously reported investigation by a Special Committee of independent members of the Board of Directors into the Company’s former stock option grant practices.
KV is nearing completion of work to restate financial results for the periods affected. In addition to the fiscal 2007 results, KV has also included the following items with today’s release:
The Company also announced that NYSE Regulation, Inc. today granted the Company’s request for a trading extension through March 31, 2008, subject to ongoing reassessment. The extension was required under the Exchange’s rules due to the Company’s delayed filing of its fiscal 2007 Annual Report on Form 10-K with the Securities and Exchange Commission. The Company expects to have resolved all outstanding issues needed to make this filing and to complete its fiscal 2007 filings and restatements of previously reported results for the fiscal years 1996-2006 by March 31, 2008.
KV also reported preliminary, unaudited revenue results for its fiscal 2008 third quarter ended December 31, 2007. Net revenues in this period are estimated to be $163.6 million, up 38.7% from fiscal 2007 third quarter net revenues. The Company’s Ther-Rx Corporation branded pharmaceutical business contributed approximately $56.3 million, up 16.6% from the prior fiscal year period and comprising 34.4% of KV’s total revenue for the period. ETHEX Corporation, KV’s generic/non-branded business, contributed approximately $102.1 million of revenue, up 57.7% from the prior-year quarter, primarily due to sales of the 100 mg and 200 mg strengths of metroprolol succinate extended release tablets launched in the second quarter of fiscal 2008. ETHEX Corporation comprises 62.4% of KV’s total revenue for the third quarter period. Complete preliminary results for the fiscal third quarter have not yet been reported due to the Company’s focus on completing the financial statements for fiscal 2007 as well as the restated results for fiscal 1996 through 2006. KV expects to report its full preliminary third quarter and nine-month fiscal 2008 results in approximately 4 weeks.
Fiscal 2007 Year-End Results
All the financial information presented with this release is unaudited, however, the Company believes that, when filed, its audited financial statements will be consistent with the information presented herein. KV’s fiscal 2007 net revenues, for the period ending March 31st, 2007, of $443.6 million represented its 12th consecutive year of record net revenues, led by higher sales from both the Ther-Rx Corporation branded subsidiary, as well as the Company’s generic/non-branded subsidiary, ETHEX Corporation. Net earnings were $58.1 million, or $1.05 per diluted Class A Common share compared to $11.4 million, or $0.23 per diluted Class A Common share for fiscal 2006. Net earnings in fiscal 2006 (for the fiscal year ended March 31st, 2006) were reduced by a $30.4 million charge for in-process research and development associated with the acquisition of a development-stage product. Gross profit for fiscal 2007 totaled $296.4 million, or 66.8% of revenue, compared with $243.7 million, or 66.3% of revenue for the prior fiscal year.
During fiscal 2007, KV continued its previously announced investment in research and development to support the growth of its internal product pipeline. Research and development expenses increased to $31.5 million for fiscal 2007, compared to $28.9 million for fiscal 2006, an 8.9% increase. The Company expects the amount of its research and development expenses will increase between 40% and 50% during fiscal 2008 to support the development of important new products.
Selling, general and administrative expenses for fiscal 2007 increased 21.5% to $174.3 million, compared to $143.4 million for fiscal 2006. This increase was due primarily to additional personnel recruited for various levels within the organization throughout the year, promotional expenses to support the Company’s existing brands, and to support the introduction of new products at both Ther-Rx and ETHEX during fiscal 2007.
The Company expects selling, general and administrative costs for fiscal 2008 to increase up to 25% over selling, general and administrative expenses for fiscal 2007. This income will allow for the continued expansion of existing products, the support of new product introductions, in particular, a branded product, Evamist(TM), as well as anticipated increased head count, legal, facilities and marketing expenses.
The Company reported a decrease in capital expenditures for fiscal 2007 to $25.1 million, compared to $58.3 million for fiscal 2006 and expects that trend from fiscal 2007 will continue during fiscal 2008.
Discussion of Fiscal 2007 Performance - Marketing Subsidiaries
Ther-Rx Corporation - Continued Performance Execution, Generating 42.5% of Consolidated Corporate Revenues with Gross Margins of 89.0%
Ther-Rx Corporation’s net revenues increased $43.2 million, or 29.7% to $188.7 million during fiscal 2007 from the prior year. Ther-Rx net revenues contributed 42.5% of consolidated corporate net revenues and generated gross margins of 89.0% in fiscal 2007.
For fiscal 2007, net sales of the Company’s anti-infective product lines increased 20.0%, or $9.3 million, to $56.5 million reflecting the continuing success of Clindesse(R). Clindesse(R), now holds 27.9% of the intra-vaginal bacterial vaginosis market and the product contributed $31.8 million in net revenues during fiscal 2007. For the fifth consecutive year, the PreCare(R) family of products continued to be the number one branded line of prescription prenatal nutritional supplements in the United States. The PreCare(R) product lines, as of December 2007, command a 42.5% share of the branded prescription prenatal market according to IMS and reported net revenues for fiscal 2007 of $72.5 million, a 44.1% increase over the $50.4 million in net revenues reported for fiscal 2006. Included in the PreCare(R) product lines are the leading prescription prenatals containing essential fatty acids (EFA’s), PrimaCare(R) and PrimaCare(R) ONE. PrimaCare(R) and PrimaCare(R) ONE now hold a 49.5% share of the prescription prenatal marketplace for products containing EFA’s according to IMS NPA(R), the fifth consecutive year these products have held a leadership position in this particular market segment.
Net revenues of Ther-Rx’s hematinic product lines grew 31.0% over fiscal 2006, an increase of $11.4 million, to $48.2 million, compared to $36.8 million for fiscal 2006, due to both volume growth and price increases in existing products. Repliva 21/7(TM) continues to show sales growth and represents both the fastest growing and the number one branded prescription oral iron supplement prescribed in the United States.
Status of Anticipated Branded Product Introductions
Evamist(TM)
At the close of fiscal 2007, the Company announced that it had entered into an agreement with California-based VIVUS, Inc. for the purchase of U.S. marketing rights to Evamist(TM), a novel new estrogen transdermal spray that has been developed to deliver estradiol in a convenient easy-to-use dosage form for the treatment of vasomotor symptoms associated with menopause. Under the terms of the all-cash transaction, KV paid $10 million at closing (and recognized a corresponding in-process R&D charge) and made an additional payment of approximately $140 million at the time of final approval from the FDA, which occurred in July 2007. There are also two, one-time, success milestone payment obligations tied to the net sales of the product. The Company agreed to pay a one-time payment of $10 million to VIVUS, Inc. at the time the product achieves $100 million in net sales within a marketing year and a one-time payment up to $20 million at the time the product achieves $200 million in net sales within a marketing year.
Evamist(TM) targets an annual $1.3 billion estrogen replacement market (Source: IMS NSP Audit, January 2006 - December 2006) where physicians and patients are seeking an effective and safe, low-dose estrogen product. KV believes Evamist(TM), the first transdermal spray to receive FDA approval, will offer therapeutic effectiveness with estradiol dosing that is among the lowest available for this indication in a manner that is also cosmetically appealing for women.
Evamist(TM) will be marketed by Ther-Rx’s current sales force of approximately 300 specialty sales representatives to their already targeted physician specialty base of OB/GYN’s. As previously stated, we expect the launch of Evamist(TM) to occur prior to the end of the Company’s fiscal 2008 ending March 31, 2008. The Company believes that Evamist(TM) could potentially attain peak annual sales of approximately $125 million for this product with gross margins consistent with those currently being achieved by Ther-Rx Corporation. The Company expects Evamist(TM) will significantly add to the women’s health offerings of KV’s branded subsidiary, Ther-Rx Corporation.
Acquisition of Gestiva(TM)
On January 22, 2008, the Company announced that it had entered into a definitive purchase agreement that gives KV full U.S. and worldwide rights to Gestiva(TM) (17-alpha hydroxyprogesterone caproate) upon approval of the pending Gestiva(TM) New Drug Application (“NDA”). The NDA for Gestiva(TM) is currently before the FDA, pending approval for use in the prevention of preterm birth in certain categories of pregnant women. The proposed indication is for women with a history of at least one spontaneous preterm delivery (i.e., less than 37 weeks), who are pregnant with a single fetus. The FDA issued an “approvable” letter for Gestiva(TM) in October 2006 and a final approval is anticipated in late 2008. The FDA has granted Orphan Drug Designation for Gestiva(TM). KV acquired Gestiva(TM) from Massachusetts-based Hologic, Inc. for $82 million in cash, $7.5 million of which was paid at closing. The balance is payable upon final FDA approval and the production of launch quantities. KV expects Gestiva(TM) to be accretive to KV’s earnings in the first 12 months following its launch.
The Company believes that Gestiva(TM) will be an important extension to Ther-Rx’s growing women’s health franchise and believes that this acquisition will further support additional growth and profitability for the Company’s branded business.
ETHEX Corporation - New Product Approvals Supporting Growth, Contributing 53.1% of Consolidated Corporate Revenues with Gross Margins of 58.7%
KV’s specialty generic/non-branded subsidiary ETHEX Corporation, reported fiscal 2007 net revenues of $235.6 million, an increase of $31.8 million, or 15.6% compared to fiscal 2006 net revenues of $203.8 million. Results for fiscal 2007 were attributable to continued growth in ETHEX’s existing product lines, with particular contribution from the cardiovascular, pain management and cough/cold lines, as well as from net revenue contribution from the ANDA approval received for Diltiazem HCl extended release capsules (generic alternative to Tiazac(R), Forest Laboratories) which was launched late in the second quarter. Even though it was not the first generic to market, ETHEX has already captured 17.9% market share by the end of fiscal 2007 with above- average gross margins and has continued market share gains throughout the first half of fiscal 2008. The increase in net revenues at ETHEX Corporation was reported despite the adverse effect of routine volume and price deterioration on certain products.
ETHEX’s operating performance remained strong as measured by gross profit margins. Fiscal 2007 gross margin was 58.7%, up from 54.9% in fiscal 2006. The Company believes its gross margins remain significantly higher than average gross margins in the generic drug industry segment and that trend has continued with the subsequent approval and launch after fiscal 2007 year-end of metoprolol succinate extended release tablets (generic alternative to Toprol-XL(R), AstraZeneca), 100 mg and 200 mg strengths for which the Company was granted a first-to-file approval and a six-months exclusivity period in the marketplace.
The approval of metoprolol succinate extended release tablets was received during the first quarter of fiscal 2008. The 100 mg and 200 mg strengths of metropolol succinate extended release tablets were launched during the second quarter of the Company’s current fiscal year, contributing $50.4 million in net revenues to ETHEX Corporation during the second quarter launch period. The Company has applications pending approval at the FDA for the two additional strengths of metoprolol succinate 25 mg and 50 mg. The approval of these two additional strengths, which could come as early as the Company’s fiscal 2008 year-end, would position KV to eventually offer all four dosage strengths of metoprolol succinate extended release tablets.
During fiscal 2007, ETHEX Corporation received three approvals from the FDA, including: Diltiazem HCL extended release capsules, Nystatin Topical Powder and a new formulation of Prednisolone Sodium Phosphate. The Company remains optimistic about the potential FDA approvals of important new Abbreviated New Drug Applications (ANDA’s) from its robust internal pipeline as it moves through fiscal 2008, which are expected to benefit the overall performance of its generic/non-branded marketing business.
In addition to the large portfolio of products in its own internal development pipeline, the Company also continues to see progress on its products under its co-development agreements. The Company believes that co- development agreements will continue to add incremental revenues to ETHEX’s revenue base from its existing products, resulting from new planned introductions during the remainder of fiscal 2008 and beyond.
Financial Condition:
The financial condition of the Company remains strong. The Company held cash and marketable securities of $240.4 million at fiscal 2007 year-end. The Company is actively evaluating and pursuing acquisition and other commercial opportunities that are consistent with its strategic goals. Subsequent to fiscal year-end the Company has made sizable additional investments in new products, including by acquisition and internal development.
Fiscal 2008 Potential Growth Factors:
KV anticipates its 13th consecutive year of record revenues in fiscal 2008. Factors expected to contribute to continued performance include:
About KV Pharmaceutical Company
KV Pharmaceutical Company is a fully integrated specialty pharmaceutical company that develops, manufactures, markets and acquires technology- distinguished branded and generic/non-branded prescription pharmaceutical products. The Company markets its technology-distinguished products through ETHEX Corporation, a national leader in pharmaceuticals that compete with branded products, and Ther-Rx Corporation, its branded prescription pharmaceutical subsidiary.
For further information about KV Pharmaceutical Company, please visit the Company’s corporate website at www.kvpharmaceutical.com.
Safe Harbor
The information in this release may contain various forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 (“PSLRA”) and which may be based on or include assumptions concerning KV’s operations, future results and prospects. Such statements may be identified by the use of words like “plans”, “expect”, “aim”, “believe”, “projects”, “anticipates”, “commit”, “intend”, “estimate”, “will”, “should”, “could” and other expressions that indicate future events and trends.
All statements that address expectations or projections about the future, including without limitation, statements about the Company’s strategy for growth, product development, product launches, regulatory approvals, market position, market share increases, acquisitions, revenues, expenditures and other financial results, are forward-looking statements.
All forward-looking statements are based on current expectations and are subject to risk and uncertainties. In connection with the “safe harbor” provisions, KV provides the following cautionary statements identifying important economic, political and technology factors, which among others, could cause actual results or events to differ materially from those set forth or implied by the forward-looking statements and related assumptions.
Such factors include (but are not limited to) the following: (1) changes in the current and future business environment, including interest rates and capital and consumer spending; (2) the difficulty of predicting FDA approvals, including timing, and that any period of exclusivity may not be realized; (3) acceptance and demand for new pharmaceutical products; (4) the impact of competitive products and pricing, including as a result of so-called authorized-generic drugs; (5) new product development and launch, including the possibility that any product launch may be delayed or that product acceptance may be less than anticipated; (6) reliance on key strategic alliances; (7) the availability of raw materials and/or products manufactured for the Company under contract manufacturing arrangements with third parties; (8) the regulatory environment, including regulatory agency and judicial actions and changes in applicable law or regulations; (9) fluctuations in revenues; (10) the difficulty of predicting international regulatory approval, including timing; (11) the difficulty of predicting the pattern of inventory movements by the Company’s customers; (12) the impact of competitive response to the Company’s sales, marketing and strategic efforts; (13) risks that the Company may not ultimately prevail in litigation; (14) finalization of the restatement of the Company’s financial statements for fiscal periods from 1996 through 2006 and for the quarter ended June 30, 2006, as well as completion of the Company’s financial statements for the second, third and fourth quarters of fiscal 2007 and for the full fiscal year ended March 31, 2007, and for the first, second and third quarters of fiscal 2008; (15) actions by the Securities and Exchange Commission and the Internal Revenue Service with respect to the Company’s stock option grants and accounting practices; and (16) the risks detailed from time-to-time in the Company’s filings with the Securities and Exchange Commission; and (17) actions by the NYSE Regulation, Inc. with respect to the continued listing of the Company’s stock on the New York Stock Exchange.
CONTACT: Catherine M. Biffignani, Vice President, Investor Relations, of
KV Pharmaceutical Company, +1-314-645-6600
Web site: http://www.kvpharmaceutical.com//
