King Pharmaceuticals Reports Second-Quarter 2007 Financial Results
Brian A. Markison, Chairman, President and Chief Executive Officer of King, stated, "During the second quarter of 2007, we continued to deliver solid financial results and advance several promising product opportunities in our development pipeline. Importantly, we, together with our partner Pain Therapeutics, Inc. (NASDAQ: PTIE), recently announced the completion of patient enrollment in the pivotal Phase III clinical trial for REMOXY(TM) (long acting oral oxycodone), our lead investigational product for moderate to severe pain. REMOXY(TM)'s sustained release formulation has the potential to reduce the improper and often intentional accelerated release of oxycodone through crushing, heating, or dissolution in alcohol that is reported with respect to other long acting opioids."
Mr. Markison continued, "We also recently announced positive results from our Phase III clinical trial evaluating our ALTACE(R) (ramipril) diuretic combination product, and expect to file a New Drug Application for this product in the second half of this year. Another important R&D accomplishment is the recent initiation of our Phase II clinical trial program evaluating the safety and efficacy of T-62, a potential major advance in the treatment of neuropathic pain."
Mr. Markison concluded, "In addition to the significant advancements we are making with our new product pipeline, we are also continuing to evaluate many business development opportunities and remain committed to executing our strategy to provide long-term growth for our shareholders."
As of June 30, 2007, the Company's cash and cash equivalents and investments in debt securities totaled approximately $923 million. King generated strong cash flow from operations of $145 million during the second quarter of 2007.
Net revenue from branded pharmaceuticals totaled $467 million for the second quarter of 2007, an 11% increase from $419 million during the second quarter of 2006.
ALTACE(R) net sales totaled $163 million during the second quarter of 2007, compared to $154 million during the second quarter of 2006.
Net sales of SKELAXIN(R) (metaxalone) totaled $108 million during the second quarter of 2007, an increase of 11% compared to $97 million during the same period of the prior year.
THROMBIN-JMI(R) (thrombin, topical, bovine, USP) net sales totaled $65 million during the second quarter of 2007, compared to $62 million during the second quarter of 2006.
Net sales of AVINZA(R) (morphine sulfate extended release) totaled $35 million during the second quarter of 2007. The Company acquired AVINZA(R) in February 2007.
Net sales of SONATA(R) (zaleplon) totaled $17 million during the second quarter of 2007, compared to $24 million during the second quarter of the prior year.
LEVOXYL(R) (levothyroxine sodium tablets, USP) net sales decreased to $26 million during the second quarter ended June 30, 2007 from $29 million during the second quarter of 2006.
King's Meridian Medical Technologies business contributed revenue totaling $51 million during the second quarter of 2007, compared to $54 million during the same period of the prior year.
Royalty revenues, derived primarily from ADENOSCAN(R) (adenosine), totaled $20 million during the second quarter ended June 30, 2007. For the second quarter ended June 30, 2007, net revenue from contract manufacturing equaled $3 million.
Webcast Information
King will conduct a webcast today which may include discussion of the Company's marketed products, pipeline, strategy for growth, financial results and expectations, and other matters relating to its business. Interested persons may listen to the webcast on Tuesday, August 7, 2007, at 11:00 a.m., E.D.T., by clicking the following link to register and then joining the live event with the same URL:
http://www.kingpharm.com/web_casts.asp
If you are unable to participate during the live event, the webcast will be archived on King's web site at the same link for not less than 14 days after the webcast.
About Special Items
Under Generally Accepted Accounting Principles ("GAAP"), reported "net earnings" and "diluted earnings per share" include special items. In addition to the reported results determined in accordance with GAAP, King provides its net earnings and diluted earnings per share results for the second quarters and six months ended June 30, 2007 and 2006, 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 reported 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 Company's plan to file a New Drug Application this year with respect to the ALTACE(R) combination product; statements pertaining to the Company's plan to continue evaluating business development opportunities and commitment to executing its long-term growth strategy; and statements pertaining to the Company's planned webcast to discuss its second-quarter 2007 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 King's ability to file the New Drug Application as planned; dependence on King's ability to continue to acquire branded products, including products in development; 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 King's ability to successfully integrate its acquisitions; dependence on the Company's ability to continue to advance the development of its pipeline products as planned; dependence on the high cost and uncertainty of research, clinical trials, and other development activities involving pharmaceutical products in which King has an interest; 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 that relate to those projects; 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 August 7, 2007; 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, 2006 and Form 10-Q for the quarter ended March 31, 2007, which are on file with the U.S. Securities and Exchange Commission. 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. -0-
KING PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
2007 2006
----------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 54,705 $ 113,777
Investments in debt securities 867,998 890,185
Accounts receivable, net 261,057 263,939
Inventories 185,382 202,577
Deferred income tax assets 63,021 81,991
Income tax receivable 2,188 -
Prepaid expenses and other current assets 62,469 106,595
Current assets held for sale 15,602 14,409
----------- ------------
Total current assets 1,512,422 1,673,473
----------- ------------
Property, plant and equipment, net 241,937 244,382
Intangible assets, net 1,002,703 790,313
Goodwill 129,046 121,152
Deferred income tax assets 305,902 271,554
Marketable securities 11,237 11,578
Other assets 102,269 93,347
Assets held for sale 72,829 123,732
----------- ------------
Total assets $3,378,345 $3,329,531
=========== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 70,188 $ 77,158
Accrued expenses 350,925 510,137
Income taxes payable - 30,501
----------- ------------
Total current liabilities 421,113 617,796
----------- ------------
Long-term debt 400,000 400,000
Other liabilities 68,221 23,129
----------- ------------
Total liabilities 889,334 1,040,925
----------- ------------
Commitments and contingencies
Shareholders' equity:
Common shares no par value, 600,000,000
shares authorized,
244,164,006 and 243,151,223 shares issued
and outstanding, respectively 1,265,649 1,244,986
Retained earnings 1,223,077 1,043,902
Accumulated other comprehensive income 285 (282)
----------- ------------
Total shareholders' equity 2,489,011 2,288,606
----------- ------------
Total liabilities and shareholders'
equity $3,378,345 $3,329,531
=========== ============
-0-
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
--------------------- ---------------------
REVENUES:
Total revenues $542,726 $499,645 $1,058,756 $983,880
----------- --------- ----------- ---------
OPERATING COSTS AND
EXPENSES:
Cost of revenues ,
exclusive of
depreciation,
amortization and
impairments shown below 121,685 107,048 233,139 199,452
Contract termination 3,845 - 3,845 -
----------- --------- ----------- ---------
Total cost of
revenues 125,530 107,048 236,984 199,452
----------- --------- ----------- ---------
Selling, general and
administrative,
exclusive of co-
promotion fees 127,316 105,640 248,526 207,715
Special legal and
professional fees (1,632) 1,486 (488) 4,465
Co-promotion fees 47,524 47,032 93,482 112,321
----------- --------- ----------- ---------
Total selling,
general, and
administrative
expense 173,208 154,158 341,520 324,501
----------- --------- ----------- ---------
Depreciation and
amortization 38,912 38,547 73,090 72,912
Accelerated depreciation 1,500 - 3,000 -
Research and development 37,355 34,630 69,626 64,512
Research and
development-In-process
upon acquisition 3,100 - 3,100 85,000
Asset impairments 74,810 279 74,810 279
Restructuring charges - (8) 460 (8)
----------- --------- ----------- ---------
Total operating
costs and expenses 454,415 334,654 802,590 746,648
----------- --------- ----------- ---------
OPERATING INCOME 88,311 164,991 256,166 237,232
OTHER INCOME (EXPENSE):
Interest expense (1,853) (3,047) (3,878) (6,031)
Interest income 8,517 8,393 17,783 14,353
(Loss) gain on early
extinguishment of debt - (313) - 709
Other, net 278 (204) (265) (714)
----------- --------- ----------- ---------
Total other income 6,942 4,829 13,640 8,317
----------- --------- ----------- ---------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 95,253 169,820 269,806 245,549
Income tax expense 30,394 59,017 88,893 83,911
----------- --------- ----------- ---------
INCOME FROM CONTINUING
OPERATIONS 64,859 110,803 180,913 161,638
----------- --------- ----------- ---------
DISCONTINUED OPERATIONS
(Loss)/income from
discontinued operations (115) 157 (335) (90)
Income tax (benefit)
expense (41) 57 (120) (32)
----------- --------- ----------- ---------
Total (loss) income
from discontinued
operations (74) 100 (215) (58)
----------- --------- ----------- ---------
NET INCOME $ 64,785 $110,903 $ 180,698 $161,580
=========== ========= =========== =========
Basic net income per
common share $ 0.27 $ 0.46 $ 0.74 $ 0.67
=========== ========= =========== =========
Diluted net income per
common share $ 0.26 $ 0.46 $ 0.74 $ 0.67
=========== ========= =========== =========
Shares used in basic net
income per share 242,746 242,209 242,568 242,116
Shares used in diluted net
income per share 244,550 242,755 244,110 242,668
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
EXCLUDING SPECIAL ITEMS - NON GAAP
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2007 2006 2007 2006
--------------------- ---------------------
REVENUES:
Total revenues $542,726 $499,645 $1,058,756 $983,880
----------- --------- ----------- ---------
OPERATING COSTS AND
EXPENSES:
Cost of revenues ,
exclusive of
depreciation and
amortization 121,685 107,048 233,139 199,452
----------- --------- ----------- ---------
Selling, general and
administrative,
exclusive of co-
promotion fees 127,316 105,640 248,526 207,715
Co-promotion fees 47,524 47,032 93,482 112,321
----------- --------- ----------- ---------
Total selling,
general, and
administrative
expense 174,840 152,672 342,008 320,036
----------- --------- ----------- ---------
Depreciation and
amortization 38,912 38,547 73,090 72,912
Research and development 37,355 34,630 69,626 64,512
----------- --------- ----------- ---------
Total operating
costs and expenses 372,792 332,897 717,863 656,912
----------- --------- ----------- ---------
OPERATING INCOME 169,934 166,748 340,893 326,968
OTHER INCOME (EXPENSE):
Interest expense (1,853) (3,047) (3,878) (6,031)
Interest income 8,517 8,393 17,783 14,353
Other, net 278 (204) (265) (714)
----------- --------- ----------- ---------
Total other income 6,942 5,142 13,640 7,608
----------- --------- ----------- ---------
INCOME BEFORE INCOME TAXES 176,876 171,890 354,533 334,576
Income tax expense 59,390 59,803 119,049 116,260
----------- --------- ----------- ---------
NET INCOME $117,486 $112,087 $ 235,484 $218,316
=========== ========= =========== =========
Basic net income per
common share $ 0.48 $ 0.46 $ 0.97 $ 0.90
=========== ========= =========== =========
Diluted net income per
common share $ 0.48 $ 0.46 $ 0.96 $ 0.90
=========== ========= =========== =========
Shares used in basic net
income per share 242,746 242,209 242,568 242,116
Shares used in diluted net
income per share 244,550 242,755 244,110 242,668
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 Ended Six Months Ended
June 30, 2007 June 30, 2007
------------------- ---------------------
(Unaudited) EPS EPS
----------- ------- ---------
Net income, excluding
special items $117,486 $ 235,484
Diluted income per common
share, excluding special
items $ 0.48 $ 0.96
SPECIAL ITEMS:
Contract termination
(cost of revenues) (3,845) (0.02) (3,845) (0.02)
Special legal and
professional fees
(selling, general, and
administrative) 1,632 0.01 488 0.00
Accelerated depreciation
(other operating costs
and expenses) (1,500) (0.01) (3,000) (0.01)
Research and development
-in-process upon
acquisition (other
operating costs and
expenses) (3,100) (0.01) (3,100) (0.01)
Asset impairments (other
operating costs and
expenses) (74,810) (0.31) (74,810) (0.31)
Restructuring charges
(other operating costs
and expenses) - - (460) (0.00)
Loss from discontinued
operations (115) (0.00) (335) (0.00)
----------- ------- ----------- ---------
Total special items before
income taxes (81,738) (0.34) (85,062) (0.35)
Income tax benefit from
special items 29,037 0.12 30,276 0.13
----------- -----------
Net income $ 64,785 $ 180,698
=========== ------- =========== ---------
Diluted income per common
share, as reported under
GAAP $ 0.26 $ 0.74
======= =========
Three Months Ended Six Months Ended June
June 30, 2006 30, 2006
------------------- ---------------------
(Unaudited) EPS EPS
----------- ------- ---------
Net income, excluding
special items $112,087 $ 218,316
Diluted income per common
share, excluding special
items $ 0.46 $ 0.90
SPECIAL ITEMS:
Special legal and
professional fees
(selling, general, and
administrative) (1,486) 0.00 (4,465) (0.02)
Research and
developmnet-in-process
upon acquisition (other
operating costs and
expenses) - - (85,000) (0.35)
Intangible asset
impairment (other
operating costs and
expenses) (279) (0.00) (279) (0.00)
Restructuring charges
(other operating costs
and expenses) 8 0.00 8 0.00
(Loss) gain on early
extinguishment of debt
(other income
(expense)) (313) (0.00) 709 0.00
Income (loss) from
discontinued operations 157 0.00 (90) (0.00)
----------- ------- ----------- ---------
Total special items before
income taxes (1,913) 0.00 (89,117) (0.37)
Income tax benefit from
special items 729 0.00 32,381 0.14
----------- -----------
Net income $110,903 $ 161,580
=========== ------- =========== ---------
Diluted income per common
share, as reported under
GAAP $ 0.46 $ 0.67
======= =========
-0-
KING PHARMACEUTICALS, INC.
SUMMARY RECONCILIATION OF SPECIAL ITEMS
FOR THE SECOND QUARTERS ENDED JUNE 30, 2007 AND 2006
King recorded special items during the second quarter ended June 30,
2007, resulting in a net charge of $82 million, or $53 million net of
tax, primarily due to (i) an impairment charge totaling $46 million
related to the Company's classification of its Rochester, Michigan
sterile manufacturing facility and certain legacy branded products as
held for sale and (ii) an impairment charge totaling $29 million
related to Intal(R) and Tilade(R) as a result of the Company's
decision to no longer pursue the development of a new formulation of
Intal(R) utilizing hyrdroflouroalkane (HFA) as a propellant.
During the second quarter ended June 30, 2006, King recorded special
items resulting in a net charge of $2 million, or $1 million net of
tax, primarily due to legal fees related to private plaintiff
securities litigation.
-0-
KING PHARMACEUTICALS, INC.
SUMMARY RECONCILIATION OF SPECIAL ITEMS
FOR THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
King recorded special items during the six months ended June 30, 2007,
resulting in a net charge of $85 million, or $55 million net of tax,
primarily due to (i) an impairment charge totaling $46 million
related to the Company's classification of its Rochester, Michigan
sterile manufacturing facility and certain legacy branded products as
held for sale and (ii) an impairment charge totaling $29 million
related to Intal(R) and Tilade(R) as a result of the Company's
decision to no longer pursue the development of a new formulation of
Intal(R) utilizing HFA as a propellant.
King recorded special items during the six months ended June 30, 2006,
resulting in a net charge of $89 million, or $57 million net of tax,
primarily due to an $85 million charge related to acquired in-process
research and development associated with King's entry into a
strategic collaboration with Arrow and certain of its affiliates to
commercialize novel formulations of Altace(R).
EXECUTIVE OFFICES
KING PHARMACEUTICALS, INC.
501 FIFTH STREET, BRISTOL, TENNESSEE 37620
Contact
King Pharmaceuticals, Inc.
James E. Green, 423-989-8125
Executive Vice President, Corporate Affairs
or
David E. Robinson, 423-989-7045
Senior Director, Corporate Affairs
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