King Pharmaceuticals Reports Third-Quarter 2008 Financial Results

BRISTOL, Tenn.--(BUSINESS WIRE)--Nov 6, 2008 - King Pharmaceuticals, Inc. (NYSE:KG) announced today that total revenues were $388 million during the third quarter ended September 30, 2008, compared to $545 million in the third quarter of 2007. This decrease was primarily due to the market entry of generic substitutes for ALTACE(R) (ramipril). Reported net earnings equaled $85 million and diluted earnings per share equaled $0.34 during the third quarter of 2008, compared to a net loss of $41 million and diluted loss per share of $0.17 in the third quarter of the prior year. Excluding special items, net earnings equaled $82 million and diluted earnings per share equaled $0.33 during the third quarter ended September 30, 2008, compared to net earnings of $128 million and diluted earnings per share of $0.52 in the third quarter of 2007.

Brian A. Markison, Chairman, President and Chief Executive Officer of King, stated, "We are pleased to report that during the quarter our promoted branded products and our Meridian Auto-Injector business generated solid revenue and contributed strong cash flow. Additionally, we continued to advance key research and development programs and launched our initiative to acquire Alpharma in order to substantially improve our prospects for long-term growth."

Recent advances in research and development include the acceptance for filing of the New Drug Application (NDA) for REMOXY(R) (long-acting oral oxycodone) by the U.S. Food and Drug Administration (FDA), which has also granted the application priority review. An FDA advisory committee will review the REMOXY(R) NDA on Thursday, November 13, 2008. Also, King and its partner, Acura Pharmaceuticals, Inc., recently reported encouraging data from a Phase II assessment of the abuse potential of ACUROX(R) Tablets (oxycodone HCl/niacin). The NDA for ACUROX(R) Tablets is expected to be submitted to the FDA by the end of the year.

On September 12, 2008, King launched a tender offer for all outstanding shares of Class A Common Stock of Alpharma Inc. "We believe that combining Alpharma with our company would create a strong platform for sustainable long-term growth to better address the changing healthcare industry and provide meaningful, cost-effective medicines that improve the quality of life for patients," explained Mr. Markison. "The transaction would create a diversified specialty pharmaceutical company with greater commercialization capabilities, an expanded portfolio of pain management products and a strengthened pipeline."

As of September 30, 2008, the Company's cash and cash equivalents totaled approximately $1.2 billion. During the third quarter of 2008, the Company generated cash flow from operations of approximately $112 million.

Net revenue from branded pharmaceuticals totaled $302 million for the third quarter of 2008, compared to $472 million during the third quarter of 2007.

Net sales of SKELAXIN(R) (metaxalone) totaled $110 million during the third quarter of 2008, compared to $106 million during the same period of the prior year.

THROMBIN-JMI(R) (thrombin, topical, bovine, USP) net sales totaled $67 million during the third quarter of 2008, compared to $69 million during the third quarter of 2007.

Net sales of AVINZA(R) (morphine sulfate extended release) totaled $36 million during the third quarter of 2008, compared to $32 million during the same period of the prior year. AVINZA(R) total prescriptions increased in excess of 8% during the third quarter of 2008 compared to the third quarter of last year, according to IMS Health monthly prescription data.

LEVOXYL(R) (levothyroxine sodium tablets, USP) net sales totaled $18 million during the third quarter ended September 30, 2008, compared to $21 million during the third quarter of 2007.

ALTACE(R) net sales totaled $30 million during the third quarter of 2008, compared to $169 million during the third quarter of 2007.

King's Meridian Auto-Injector business contributed revenue of $68 million during the third quarter of 2008, compared to $48 million during the third quarter of last year. This increase was primarily due to an increase in prescriptions for EpiPen(R) (epinephrine) and higher unit sales of other products to various government agencies.

Royalty revenues, derived primarily from ADENOSCAN(R) (adenosine), totaled $18 million during the third quarter ended September 30, 2008, compared to $20 million during the third quarter of last year.

About REMOXY(R)

REMOXY(R), an investigational drug, is a unique, abuse-resistant, controlled-release oxycodone for moderate-to-severe chronic pain. REMOXY(R)'s high viscosity, liquid formulation in a hard gelatin capsule is designed to resist common methods of prescription drug misuse and abuse. The NDA for REMOXY(R) is currently undergoing a priority review by the FDA. The FDA is expected to complete its review of the REMOXY(R) NDA in December 2008. If approved, the companies believe REMOXY(R) could be the first oxycodone on the market that is designed to reduce the risk of misuse and abuse. REMOXY(R) is a proposed brand name that is subject to FDA approval.

About ACUROX(R) Tablets

ACUROX(R) Tablets, an investigational drug, is an orally administered immediate-release tablet containing oxycodone HCl as an active analgesic ingredient, niacin as an active ingredient in subtherapeutic amounts, and a proprietary composition of functional inactive ingredients. ACUROX(R) Tablets are intended to relieve moderate to severe pain while resisting or deterring common methods of prescription drug misuse and abuse, including intravenous injection of dissolved tablets, nasal snorting of crushed tablets and intentional swallowing of excessive numbers of tablets. ACUROX(R) is a proposed brand name subject to FDA approval.

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 Thursday, November 6, 2008, at 11:00 a.m., E.S.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 quarters and nine months ended September 30, 2008 and 2007, 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 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, Inc.

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 and technologies that complement the Company's focus in specialty-driven markets, particularly neuroscience, hospital and acute care. King strives to be a leader and partner of choice in bringing innovative, clinically-differentiated medicines and technologies to market.

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 expected timetable for submission of the ACUROX(R) Tablets NDA to the FDA; statements pertaining to the anticipated benefits of King's proposed acquisition of Alpharma; statements pertaining to the FDA advisory committee meeting scheduled for November 13, 2008; and statements pertaining to the Company's planned webcast to discuss its third-quarter 2008 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 complete the proposed transaction with Alpharma; dependence on King's ability to achieve the synergies and value creation contemplated by the proposed transaction; dependence on King's ability to promptly and effectively integrate the businesses of Alpharma and King; dependence on obtaining required regulatory approvals for the proposed transaction; dependence on the future level of demand for and net sales of Alpharma's branded pharmaceutical and animal health products; dependence on King's ability to successfully market its branded pharmaceutical products; dependence on King's ability to increase its presence in its targeted, specialty-driven markets; dependence on the Company's ability to continue to advance the development of 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 whether the NDA for ACUROX(R) Tablets is submitted to the FDA during the planned timeframe; dependence on the unpredictability of the duration and results of the FDA's review of Investigational New Drug applications ("IND"), NDAs, and Abbreviated New Drug Applications ("ANDA") and/or the review of other regulatory agencies worldwide that relate to projects in Alpharma's development pipeline; dependence on the availability and cost of raw materials; dependence on no material interruptions in supply by contract manufacturers of Alpharma's products; dependence on the potential effect on sales of the Company's or Alpharma'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 November 6, 2008; 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, 2007 and Form 10-Q for the quarter ended June 30, 2008, 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)

                                            September 30, December 31,
                                                2008          2007
                                            ------------- ------------

ASSETS
Current assets:
   Cash and cash equivalents                $  1,231,451  $     20,009
   Investments in debt securities                 71,823     1,344,980
   Marketable securities                             795         1,135
   Accounts receivable, net                      168,597       183,664
   Inventories                                    92,391       110,308
   Deferred income tax assets                     79,651       100,138
   Income tax receivable                               -        20,175
   Prepaid expenses and other current
    assets                                        55,396        39,245
                                            ------------- ------------
           Total current assets                1,700,104     1,819,654
                                            ------------- ------------
Property, plant and equipment, net               257,166       257,093
Intangible assets, net                           655,472       780,974
Goodwill                                         129,150       129,150
Deferred income tax assets                       357,418       343,700
Investments in debt securities                   343,912             -
Other assets                                      68,533        96,251
                                            ------------- ------------
           Total assets                     $  3,511,755  $  3,426,822
                                            ============= ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                         $     68,900  $     76,481
   Accrued expenses                              226,508       376,604
   Income taxes payable                           22,674             -
                                            ------------- ------------
           Total current liabilities             318,082       453,085
                                            ------------- ------------

Long-term debt                                   400,000       400,000
Other liabilities                                 60,810        62,980
                                            ------------- ------------
           Total liabilities                     778,892       916,065
                                            ------------- ------------

Commitments and contingencies
Shareholders' equity:
      Common shares no par value,
       600,000,000 shares authorized,
       246,469,339 and 245,937,709 shares
       issued and outstanding, respectively    1,305,057     1,283,440
      Retained earnings                        1,440,764     1,225,360
      Accumulated other comprehensive
       (loss) income                             (12,958)        1,957
                                            ------------- ------------
           Total shareholders' equity          2,732,863     2,510,757
                                            ------------- ------------
           Total liabilities and
            shareholders' equity            $  3,511,755  $  3,426,822
                                            ============= ============

-0-


                      KING PHARMACEUTICALS, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
                (in thousands, except per share data)
                             (Unaudited)

                           Three Months Ended     Nine Months Ended
                              September 30,         September 30,
                           ------------------- -----------------------
                             2008      2007       2008        2007
                           --------- --------- ----------- -----------
REVENUES:
   Total revenues          $388,445  $544,854  $1,217,329  $1,603,610
                           --------- --------- ----------- -----------
OPERATING COSTS AND
 EXPENSES:
   Cost of revenues,
    exclusive of
    depreciation,
    amortization and
    impairments shown
    below                   101,465   115,951     292,482     349,090
   Excess purchase
    commitment                    -    24,632       2,629      24,632
   Contract termination           -         -           -       3,845
   Excess inventory
    reserve                       -    57,178           -      57,178
                           --------- --------- ----------- -----------
           Total cost of
            revenues        101,465   197,761     295,111     434,745
                           --------- --------- ----------- -----------
   Selling, general and
    administrative,
    exclusive of co-
    promotion fees          100,039   135,075     311,815     383,601
   Special legal and
    professional fees        (6,748)    1,211      (4,713)        723
   Co-promotion fees          5,987    48,971      34,007     142,453
                           --------- --------- ----------- -----------
           Total selling,
            general, and
            administrative
            expense          99,278   185,257     341,109     526,777
                           --------- --------- ----------- -----------
   Depreciation and
    amortization             29,034    34,659     119,263     107,749
   Accelerated
    depreciation                661     2,103       1,935       5,103
   Research and
    development              33,855    34,889     111,025     104,515
   Research and
    development-In-process
    upon acquisition              -       200       5,500       3,300
   Asset impairments              -   147,838      39,429     222,648
   Restructuring charges      1,153    20,274       1,670      20,734
                           --------- --------- ----------- -----------
           Total operating
            costs and
            expenses        265,446   622,981     915,042   1,425,571
                           --------- --------- ----------- -----------

OPERATING INCOME (LOSS)     122,999   (78,127)    302,287     178,039
OTHER INCOME (EXPENSE):
   Interest expense          (1,828)   (1,792)     (5,470)     (5,670)
   Interest income            8,110    10,678      31,000      28,461
   Loss on investment             -   (10,453)          -     (10,453)
   Other, net                (1,024)     (416)     (1,851)       (681)
                           --------- --------- ----------- -----------
           Total other
            income
            (expense)         5,258    (1,983)     23,679      11,657
                           --------- --------- ----------- -----------
INCOME (LOSS) FROM
 CONTINUING OPERATIONS
 BEFORE INCOME TAXES        128,257   (80,110)    325,966     189,696
      Income tax expense
       (benefit)             43,507   (39,583)    110,562      49,310
                           --------- --------- ----------- -----------
INCOME (LOSS) FROM
 CONTINUING OPERATIONS       84,750   (40,527)    215,404     140,386
                           --------- --------- ----------- -----------
DISCONTINUED OPERATIONS
   Loss from discontinued
    operations                    -       (16)          -        (351)
   Income tax benefit             -        (5)          -        (125)
                           --------- --------- ----------- -----------
           Total loss from
            discontinued
            operations            -       (11)          -        (226)
                           --------- --------- ----------- -----------
NET INCOME (LOSS)          $ 84,750  $(40,538) $  215,404  $  140,160
                           ========= ========= =========== ===========

Basic net income (loss)
 per common share          $   0.35  $  (0.17) $     0.88  $     0.58
                           ========= ========= =========== ===========

Diluted net income (loss)
 per common share          $   0.34  $  (0.17) $     0.88  $     0.57
                           ========= ========= =========== ===========

Shares used in basic net
 income (loss) per share    243,696   243,119     243,475     242,752
Shares used in diluted net
 income (loss) per share    245,834   243,119     245,184     244,142

-0-


                      KING PHARMACEUTICALS, INC.
                CONSOLIDATED STATEMENTS OF OPERATIONS
                  EXCLUDING SPECIAL ITEMS - NON GAAP
                (in thousands, except per share data)
                             (Unaudited)

                           Three Months Ended     Nine Months Ended
                              September 30,         September 30,
                           ------------------- -----------------------
                             2008      2007       2008        2007
                           --------- --------- ----------- -----------
REVENUES:
   Total revenues          $388,445  $544,854  $1,217,329  $1,603,610
                           --------- --------- ----------- -----------
OPERATING COSTS AND
 EXPENSES:
   Cost of revenues,
    exclusive of
    depreciation and
    amortization shown
    below                   101,465   115,951     292,482     349,090
                           --------- --------- ----------- -----------
   Selling, general and
    administrative,
    exclusive of co-
    promotion fees          100,039   135,075     311,815     383,601
   Co-promotion fees          5,987    48,971      34,007     142,453
                           --------- --------- ----------- -----------
           Total selling,
            general, and
            administrative
            expense         106,026   184,046     345,822     526,054
                           --------- --------- ----------- -----------
   Depreciation and
    amortization             29,034    34,659     119,263     107,749
   Research and
    development              33,855    34,889     111,025     104,515
                           --------- --------- ----------- -----------
           Total operating
            costs and
            expenses        270,380   369,545     868,592   1,087,408
                           --------- --------- ----------- -----------

OPERATING INCOME            118,065   175,309     348,737     516,202
OTHER INCOME:
   Interest expense          (1,828)   (1,792)     (5,470)     (5,670)
   Interest income            8,110    10,678      31,000      28,461
   Other, net                (1,024)     (416)     (1,851)       (681)
                           --------- --------- ----------- -----------
           Total other
            income            5,258     8,470      23,679      22,110
                           --------- --------- ----------- -----------
INCOME BEFORE INCOME TAXES  123,323   183,779     372,416     538,312
      Income tax expense     41,630    55,896     126,867     174,945
                           --------- --------- ----------- -----------
NET INCOME                 $ 81,693  $127,883  $  245,549  $  363,367
                           ========= ========= =========== ===========


Basic net income per
 common share              $   0.34  $   0.53  $     1.01  $     1.50
                           ========= ========= =========== ===========

Diluted net income per
 common share              $   0.33  $   0.52  $     1.00  $     1.49
                           ========= ========= =========== ===========

Shares used in basic net
 income per share           243,696   243,119     243,475     242,752
Shares used in diluted net
 income per share           245,834   244,206     245,184     244,142

-0-


                      KING PHARMACEUTICALS, INC.
                 RECONCILIATION OF NON-GAAP MEASURES
                (in thousands, except per share data)
                             (Unaudited)

The following tables reconcile Non-GAAP measures to amounts reported
 under GAAP:

                                 Three Months Ended Nine Months Ended
                                 September 30, 2008 September 30, 2008
                                 ------------------ ------------------
                                              EPS                EPS
                                            -------            -------

Net income, excluding special
 items                           $  81,693          $ 245,549
Diluted income per common share,
 excluding special items                    $ 0.33             $ 1.00
SPECIAL ITEMS:
   Excess purchase commitment
    (cost of revenues)                   -       -     (2,629)  (0.01)
   Special legal and
    professional fees (selling,
    general, and administrative)     6,748    0.03      4,713    0.02
   Accelerated depreciation
    (other operating costs and
    expenses)                         (661)  (0.00)    (1,935)  (0.01)
   Research and development-In-
    process upon acquisition
    (other operating costs and
    expenses)                            -       -     (5,500)  (0.02)
   Asset impairments (other
    operating costs and
    expenses)                            -       -    (39,429)  (0.16)
   Restructuring charges (other
    operating costs and
    expenses)                       (1,153)  (0.01)    (1,670)  (0.01)
                                 ---------- ------- ---------- -------
Total special items before
 income taxes                        4,934    0.02    (46,450)  (0.19)
Income tax (expense) benefit
 from special items                 (1,877)  (0.01)    16,305    0.07
                                 ----------         ----------
Net income                       $  84,750          $ 215,404
                                 ========== ------- ========== -------
Diluted income per common share,
 as reported under GAAP                     $ 0.34             $ 0.88
                                            =======            =======


                                 Three Months Ended Nine Months Ended
                                 September 30, 2007 September 30, 2007
                                 ------------------ ------------------
                                              EPS                EPS
                                            -------            -------

Net income, excluding special
 items                           $ 127,883          $ 363,367
Diluted income per common share,
 excluding special items                    $ 0.52             $ 1.49
SPECIAL ITEMS:
   Excess purchase commitment
    (cost of revenues)             (24,632)  (0.10)   (24,632)  (0.10)
   Contract termination (cost of
    revenues)                            -       -     (3,845)  (0.02)
   Excess inventory reserve
    (cost of revenues)             (57,178)  (0.23)   (57,178)  (0.23)
   Special legal and
    professional fees (selling,
    general, and administrative)    (1,211)  (0.01)      (723)  (0.00)
   Accelerated depreciation
    (other operating costs and
    expenses)                       (2,103)  (0.01)    (5,103)  (0.02)
   Research and development-In-
    process upon acquisition
    (other operating costs and
    expenses)                         (200)  (0.00)    (3,300)  (0.01)
   Asset impairments (other
    operating costs and
    expenses)                     (147,838)  (0.61)  (222,648)  (0.92)
   Restructuring charges (other
    operating costs and
    expenses)                      (20,274)  (0.08)   (20,734)  (0.09)
   Loss on investment (other
    income (expense))              (10,453)  (0.04)   (10,453)  (0.04)
   Loss from discontinued
    operations                         (16)  (0.00)      (351)  (0.00)
                                 ---------- ------- ---------- -------
Total special items before
 income taxes                     (263,905)  (1.08)  (348,967)  (1.43)
Income tax benefit from special
 items                              95,484    0.39    125,760    0.51
                                 ----------         ----------
Net (loss) income                $ (40,538)         $ 140,160
                                 ========== ------- ========== -------
Diluted (loss) income per common
 share, as reported under GAAP              $(0.17)            $ 0.57
                                            =======            =======

KING PHARMACEUTICALS, INC. SUMMARY RECONCILIATION OF SPECIAL ITEMS FOR THE THIRD QUARTERS ENDED SEPTEMBER 30, 2008 AND 2007

King recorded special items during the third quarter ended September 30, 2008 resulting in a net benefit of $5 million, or $3 million net of tax, primarily due to the insurance recovery of legal fees associated with previously disclosed shareholder litigation.

During the third quarter ended September 30, 2007, King recorded special items resulting in a net charge of $264 million, or $168 million net of tax, primarily due to (i) a charge totaling $146 million related to the impaired value of the intangible assets associated with ALTACE(R), (ii) charges totaling $82 million primarily related to the impaired value of raw material inventory and related contracts associated with ALTACE(R), and (iii) a charge totaling $20 million related to the restructuring of the Company's workforce. KING PHARMACEUTICALS, INC. SUMMARY RECONCILIATION OF SPECIAL ITEMS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2008 AND 2007

King recorded special items during the nine months ended September 30, 2008 resulting in a net charge of $46 million, or $30 million net of tax, primarily due to an intangible asset impairment charge related to Synercid(R) I.V. Injection.

King recorded special items during the nine months ended September 30, 2007 resulting in a net charge of $349 million, or $223 million net of tax, primarily due to (i) a charge totaling $146 million related to the impaired value of the intangible assets associated with ALTACE(R), (ii) charges totaling $82 million primarily related to the impaired value of raw material inventory and related contracts associated with ALTACE(R), (iii) an impairment charge totaling $47 million related to the Company's sale of its Rochester, Michigan sterile manufacturing facility and certain legacy branded products, (iv) 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, and (v) a charge totaling $21 million related to the restructuring of the Company's workforce.

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

Posted: November 2008


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