WOODCLIFF LAKE, N.J., Dec. 20 /PRNewswire-FirstCall/ -- Par Pharmaceutical Companies, Inc. today filed with the U.S. Securities and Exchange Commission (SEC) its Form 10-Q for the third quarter of 2007. The filing of Par's Form 10-Q for this period had been delayed due to the work involved in restating its consolidated financial statements for certain prior periods, which were filed earlier this year. As a result of today's filing, the Company is now up-to-date on all of its reporting obligations with the SEC.
Third-Quarter and Nine-Month Results
For the third quarter ended September 29, 2007, Par reported total revenues of $212.7 million and net income of $1.3 million, or $0.04 per diluted share. This is compared with reported revenues of $174.0 million and net income of $4.4 million, or $0.13 per diluted share, for the same period in 2006. For the nine months ended September 29, 2007, Par reported total revenues of $614.5 million and net income of $45.6 million, or $1.30 per diluted share. This is compared with reported revenues of $541.5 million and net income $1.7 million, or $0.05 per diluted share, for 2006.
Third-quarter 2007 reported, or GAAP, results include $16.2 million of costs related to business development activities in support of the Company's branded division, Strativa, which are discussed in more detail below. Adjusting for this item, net income for the third quarter 2007 was $11.1 million, or $0.32 per diluted share. By comparison, third-quarter 2006 results included $7.1 million of severance costs and a $1.2 million net gain relating to the sale of certain product rights. Adjusting for these items, the Company posted net income of $8.0 million, or $0.23 per diluted share for the third-quarter of 2006.
In addition, Par's reported, or GAAP, results for the first nine months of 2007, included a $20.0 million gain on the sale to Optimer Pharmaceutical, Inc. of marketing rights to the investigational drug Difimicin, a $1.4 million investment gain on the sale of shares of Optimer common stock, and net settlement gains of $0.6 million, tempered by a $6.0 million loss on investment, a $3.0 million license fee paid to Immtech Pharmaceuticals for commercialization rights to the developmental drug pafuramidine and $1.6 million of severance costs. Adjusting for these items, net income for the nine months ended September 29, 2007 was $48.5 million, or $1.39 per diluted share. By comparison, reported GAAP results for the nine months ended September 30, 2006 also included a write-off of approximately $10.0 million of accounts receivable relating to invalid customer deductions, the collection of which the Company determined that it would no longer pursue, severance costs, and net investment and arbitration settlement losses. Adjusting for these items, net income for the first nine months of 2006 was $14.6 million, or $0.42 per diluted share (see reconciliation between reported (GAAP) and adjusted net income at the end of this press release).
Third-Quarter Review
For the third quarter ended September 29, 2007, total revenues increased 22.2 percent compared with the same period in 2006 due primarily to new product introductions. The third quarter launch of three additional strengths of metoprolol succinate ER (50mg, 100mg, and 200mg), coupled with the fourth quarter 2006 launch of the 25mg strength, drove $71.7 million of sales and corresponding year-over-year gains. Par markets metoprolol in the U.S. through supply and distribution agreements with AstraZeneca Plc. In addition, the first quarter 2007 introductions of propranolol HCl extended release (ER) capsules and ranitidine HCl syrup benefited the third-quarter by $12.1 million and $4.4 million, respectively. Partially offsetting the increases were lower sales of certain existing products due to competitive pressures, including fluticasone, various amoxicillin products, quinapril, megestrol oral suspension, and doxycycline. Revenues of branded products for the third quarter of 2007 of $24.6 million, an increase of 72.5 percent over the prior year period, were driven by increased sales of Megace(R) ES (megestrol acetate) oral suspension, and fees related to the co-promotion of AndroGel(R).
Par's third-quarter gross margin was 31.2 percent of sales, compared to 31.6 percent in 2006. The Company's gross margin reflects the impact of increased metoprolol succinate ER sales, which have significantly lower gross margin percentages than many of the other products sold by the Company. This impact was offset by increased sales of higher margin products such as propranolol ER and Megace ES, lower inventory write-offs and reduced sales on other lower margin products, including fluticasone.
Research and development (R&D) expenses increased 161.0 percent for the third quarter 2007 compared with the third quarter 2006. The increase was due primarily to costs associated with the in-license of two Phase III products in support of the Company's branded division, Strativa. In July, the Company paid $15 million to BioAlliance Pharma for the US commercialization rights to Loramyc. In August, the Company acquired the North American commercial rights from Hana Biosciences, Inc. ("HANA") for Zensana(TM), at which time the Company made a $5.0 million equity investment in Hana at a contractually agreed premium. Of this amount, $1.2 million representing the premium paid was charged to R&D expense in the quarter. In support of the Company's generic business, Par made a $5.0 million equity investment in IntelliPharmaCeutics Ltd. (IPC), a privately held corporation, to develop and market four controlled release generic drug products. Of this amount, approximately $2.5 million, representing the premium paid, was charged to R&D in the third quarter.
Third-quarter selling, general and administrative (SG&A) expense decreased 15.3 percent to $33.9 million. The decrease in 2007 SG&A expense was primarily due to the non-recurrence of severance costs incurred in 2006 for executives of $7.1 million, partially offset by increased costs associated with the expansion of finance and accounting functions and increased professional costs related to the Company's restatement of prior periods.
2007 Financial Outlook
Par has adjusted its previously announced guidance for full-year 2007 earnings per diluted share of $1.45-$1.50 from $1.35-$1.50. 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 non-GAAP items highlighted on the summary of estimated operating results for full year 2007 at the end of this press release, full year earnings per diluted share is projected to be $1.50-$1.55.
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 Thursday, December 20, 2007 at 9:00 am EST to discuss results for the third quarter 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 800-265-0241 for domestic callers and 617-847-8704 for international callers. The access number is 56870475. 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 95070288.
For a copy of Par's Form 10-Qs for the quarterly period ended September 29, 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.
CONTACT: Allison Wey, Senior Director, Investor Relations and Corporate
Affairs, Par Pharmaceutical Companies, Inc., +1-201-802-4000
Web site: http://www.parpharm.com//