WOODCLIFF LAKE, N.J., March 2 /PRNewswire-FirstCall/ -- Par Pharmaceutical Companies, Inc. today reported fourth quarter and full year 2008 results ended December 31, 2008.
Fourth Quarter and 2008 Results
For the fourth quarter ended December 31, 2008, Par reported total revenues of $161.3 million and a loss from continuing operations of $30.5 million, or $0.91 per share. This is compared with reported revenues of $155.1 million and income from continuing operations of $5.5 million, or $0.16 per diluted share, for the same period in 2007. For the year ended December 31, 2008, Par reported total revenues of $578.1 million and a loss from continuing operations of $45.9 million, or $1.38 per share. This is compared with reported revenues of $769.7 million and income from continuing operations of $51.1 million, or $1.47 per diluted share, for 2007.
Fourth quarter 2008 reported, or GAAP, loss from continuing operations also included the write-off of a restructuring charge of $15.4 million and other related costs of $3.8 million, $49.2 million in charges due to an unfavorable court decision and related legal fees, $5.3 million gain on non-core ANDA sales and the sale of other product rights, $4.9 million impairment charge related to various investments, and a $7.9 million gain related to early debt extinguishment. Adjusting for these items and other special items, income from continuing operations for the fourth quarter 2008 would have been $7.1 million, or $0.21 per diluted share. By comparison, fourth quarter 2007 results included a pre-tax gain of $3.1 million from Par's sale of its remaining investment in Optimer Pharmaceutical, Inc. common stock and $4.6 million of additional share-based compensation expense related to Par's employee stock option tender offer. Adjusting for these items, income from continuing operations for the fourth quarter of 2007 would have been $6.5 million, or $0.19 per diluted share.
Par's reported, or GAAP, loss from continuing operations for the year ended December 31, 2008, included the write-off of an intangible asset and certain inventories related to the trimming of its generic product portfolio of $5.5 million, a charge related to a government pricing contingency of $4.8 million, a $7.8 million net impairment charge related to various investments, $7.5 million in development milestone payments to MonoSol Rx and Alfacell, and $9.0 million of gains from the sale of non-core ANDAs and other product rights. Adjusting for these items and the fourth quarter special items, income from continuing operations for the full year ended December 31, 2008 would have been $1.8 million, or $0.05 per diluted share. By comparison, and in addition to the fourth quarter 2007 events cited above, reported GAAP income from continuing operations for the full year 2007 included a $20.0 million gain on the sale to Optimer of marketing rights to the investigational drug Difimicin (Par 101), a $4.5 million investment gain on the sale of shares of Optimer common stock, and net settlement gains of $0.6 million. These benefits were tempered by $19.2 million of costs related to business development activities in support of Strativa Pharmaceuticals, Par's branded division, a $6.0 million loss on an investment, $1.6 million of severance costs. Adjusting for these items, income from continuing operations for the full year ended December 31, 2007 would have been $55.1 million, or $1.59 per diluted share.
"Given the challenging environment of 2008, we are pleased with the operating results over the last two quarters," stated Patrick G. LePore, chairman, president and chief executive officer. "This momentum should continue into 2009 as the results of our restructuring takes hold and solid product sales continue."
2008 Restructuring Plan
In October, Par announced its plans to resize its generic division by significantly reducing its research and development expense and trimming its product portfolio resulting in a workforce reduction of approximately 190. The $15.4 million fourth quarter charge related to the restructuring will result in cash expenditures of approximately $6.0 million in 2009. Par anticipates these actions will generate annualized operating expense savings in a range near $45 million.
Revenue
Revenues for the fourth quarter 2008 increased 4.0% compared with the same period in 2007 due primarily to the launch of sumatriptan succinate injection, increased sales of metoprolol and Megace(R) ES. For the year ended December 31, 2008 total revenue decreased 24.9% to $578 million compared with the same period a year earlier as a result of a decrease in the number of new product launches, trimming of Par's generic product portfolio, increased competition in Par's generic products.
Strativa revenues increased 2.7% from the prior year to $87.1 million driven by a mid-year price increase, fees related to the co-promotion of Androgel(R), and timing of trade buying patterns offset by a more challenging reimbursement environment. Revenues from Strativa represented 15.1% of total revenues, as compared to 11.0% in 2007.
Revenues from Par's generic segment declined 28.3% for the full year 2008 to $491.1 million primarily due to competitive pressures that adversely affected the volume and pricing of certain existing products. Products which experienced significant volume and pricing declines included fluticasone, propranolol, cabergoline, various amoxicillin products, ranitidine syrup, tramadol HCl and acetaminophen tablets driven by Par's exit from the market, and lower royalty payments of ondansetron tablets, among others. These decreases were offset by higher sales of meclizine, which re-launched in July, the launch of dronabinol in July, and the launch of sumatriptan succinate in November, and increased sales of metoprolol succinate to new customers.
Gross Margin
Par's 2008 gross margin represented 30.5% of total revenues, a decrease from 34.9% in 2007. Generic product gross margin decreased to 22.2% of generic revenues in 2008 from 29.8% of generic revenues in 2007 driven by increased sales of lower margin metoprolol succinate, lower sales of existing products as mentioned above, and an impairment charge of $4.9 million for nabumetone, and lower inventory write-offs, in addition to the other factors discussed above. Strativa's gross margin increased to 77.7% of branded revenues from 76.0% in 2007 due to revenue growth discussed above.
Research and Development
Research and development (R&D) expenses decreased 23.2% from the year ended December 31, 2007, to $59.7 million, and represented 10.3% of total revenues. The decrease was due primarily to a net reduction of $11.7 million of one-time Strativa milestone payments. On-going R&D expense in support of Par's strategy to expand Strativa increased $1.7 million driven by costs related to the development of Zensana(TM). Generic R&D expense decreased $8.0 million due to lower internal development costs, lower performance incentive compensation of $4 million, and the non-recurrence of one-time costs associated with a third party development agreement.
Selling, General and Administrative
Selling, general and administrative (SG&A) expense of $137.9 million for the year ended December 31, 2008 decreased slightly from $138.2 million in 2007. The decrease in SG&A expense was primarily due to lower employee compensation, the non-recurrence of the 2007 stock option tender offer and the resulting lower stock option costs, and lower expenses relates to sales and marketing of Megace(R) ES, which offset higher legal fees, severance costs and increased outside consulting costs.
Net Income
Par reported a loss for the fourth quarter ended December 31, 2008 of $32.0 million, or $0.96 per share. This is compared with reported net income of $4.3 million, or $0.12 per share, for the same period in 2007. For the full year 2008, Par reported a loss of $47.8 million, or $1.43 per share. This is compared with reported net income of $49.9 million, or $1.43 per share in 2007.
Balance Sheet
As of December 31, 2008, Par had working capital of $193.8 million, which includes $142 million of current liabilities due to mature in September 2010.
Conference Call
Par has scheduled a conference call for Tuesday, March 3 at 9:00 am EST to discuss results for the fourth quarter and full year 2008. 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 Par's website at http://www.parpharm.com/ and will be available for 30 days. The dial-in number is 888-679-8034 for domestic callers and 617-213-4847 for international callers. The access number is 28915622. 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 6087603.
For a copy of Par's 2008 Annual Report on Form 10-K, visit Investors/SEC Filings on the Par web site at http://www.parpharm.com/.
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 http://www.parpharm.com/.
Safe Harbor Statement
Certain statements in this news 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 known and unknown risks, uncertainties and contingencies, many of which are beyond the control of the Company, which could cause actual results and outcomes to differ materially from those expressed herein. Risk factors that might affect such forward-looking statements include those set forth in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2008, in other of the Company's filings with the SEC from time to time, including Current Reports on Form 8-K, and on general industry and economic conditions. Any forward-looking statements included in this news 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.
PAR PHARMACEUTICAL COMPANIES, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2008 AND 2007 (In Thousands, Except Share Data) December 31, December 31, 2008 2007 ASSETS ------ Current assets: Cash and cash equivalents $170,629 $200,132 Available for sale debt and marketable equity securities 93,097 85,375 Accounts receivable, net 83,408 64,182 Inventories 42,504 84,887 Prepaid expenses and other current assets 20,040 14,294 Deferred income tax assets 55,230 56,921 Income taxes receivable 35,397 17,516 Total current assets 500,305 523,307 Property, plant and equipment, at cost less accumulated depreciation and amortization 79,439 82,650 Available for sale debt and marketable equity securities 1,949 6,690 Investment in joint venture - 6,314 Other investments - 2,500 Intangible assets, net 35,208 36,059 Goodwill 63,729 63,729 Deferred financing costs and other assets 1,159 2,544 Non-current deferred income tax assets, net 70,954 57,730 Total assets $752,743 $781,523 LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Current portion of long-term debt $142,000 $200,000 Accounts payable 22,879 32,200 Payables due to distribution agreement partners 91,451 36,479 Accrued salaries and employee benefits 11,850 16,596 Accrued expenses and other current liabilities 38,352 27,518 Total current liabilities 306,532 312,793 Long-term debt, less current portion - - Other long-term liabilities 41,581 30,975 Commitments and contingencies - - Stockholders' equity Preferred Stock, par value $0.0001 per share, authorized 6,000,000 shares; none issued and outstanding - - Common Stock, par value $0.01 per share, authorized 90,000,000 shares; issued 37,400,125 and 36,460,461 shares 374 364 Additional paid-in capital 289,666 274,963 Retained earnings 182,427 230,195 Accumulated other comprehensive gain (loss) 122 (1,362) Treasury stock, at cost 2,686,519 and 2,604,977 shares (67,959) (66,405) Total stockholders' equity 404,630 437,755 Total liabilities and stockholders' equity $752,743 $781,523 The accompanying notes are an integral part of these consolidated financial statements. PAR PHARMACEUTICAL COMPANIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2008, 2007 AND 2006 (In Thousands, Except Per Share Amounts) 2008 2007 2006 Revenues: Net product sales $561,012 $739,020 $705,378 Other product related revenues 17,103 30,646 19,790 Total revenues 578,115 769,666 725,168 Cost of goods sold 401,544 501,147 506,884 Gross margin 176,571 268,519 218,284 Operating expenses: Research and development 59,656 77,659 61,766 Selling, general and administrative 137,866 138,217 148,217 Intangible assets impairment - - 1,100 Settlements and loss contingencies, net 49,837 (945) 1,250 Restructuring costs 15,397 - 1,283 Total operating expenses 262,756 214,931 213,616 Gain on sale of product rights and other 9,625 20,000 3,054 Operating (loss) income (76,560) 73,588 7,722 Other income (expense), net - (56) 126 Gain on extinguishment of senior subordinated convertible notes 7,877 - - Equity in loss of joint venture (330) (387) (663) Loss on marketable securities and other investments, net (7,796) (1,583) (583) Interest income 9,246 13,673 8,974 Interest expense (6,259) (6,803) (6,781) (Loss) income from continuing operations before provision for income taxes (73,822) 78,432 8,795 (Benefit) provision for income taxes (27,910) 27,322 2,054 (Loss) income from continuing operations (45,912) 51,110 6,741 Discontinued operations: Gain from discontinued operations 505 - - Provision for income taxes 2,361 1,212 894 (Loss) from discontinued operations (1,856) (1,212) (894) Net (loss) income ($47,768) $49,898 $5,847 Basic (loss) earnings per share of common stock: (Loss) income from continuing operations ($1.38) $1.48 $0.20 (Loss) from discontinued operations (0.05) (0.04) (0.03) Net (loss) income ($1.43) $1.44 $0.17 Diluted (loss) earnings per share of common stock: (Loss) income from continuing operations ($1.38) $1.47 $0.19 (Loss) from discontinued operations (0.05) (0.04) (0.03) Net (loss) income ($1.43) $1.43 $0.16 Weighted average number of common shares outstanding: Basic 33,312 34,494 34,422 Diluted 33,312 34,718 34,653
