Ther-Rx Branded Division 3rd Quarter Revenue Growth of 60% Drives EPS to $0.26
per Diluted Share
Consolidated Net Revenues Increase 21% For Nine Months
Gross Profit Year-To-Date Up 23%
ST. LOUIS, Feb. 7 /PRNewswire-FirstCall/ -- KV Pharmaceutical Company
(NYSE: KVa; KVb) today reported results for the third quarter and nine months
of fiscal 2006 ended December 31, 2005.
Net revenues for the third quarter increased 13% to $98.4 million,
compared to $86.9 million for the third quarter of fiscal 2005. This positive
performance was driven by the Company's branded division, Ther-Rx Corporation,
which reported an increase in net revenues of 60% over the third quarter of
fiscal 2005. Results were partially offset by modest revenue declines at the
Company's generic/non-branded ETHEX Corporation and Particle Dynamics, the
Company's specialty raw materials division.
Net income for the December quarter was up 6% to $14.4 million, or $0.26
per diluted share compared to $13.6 million, or $0.25 per diluted share in the
prior year period. The improvement in net income reflects the 13% increase in
net revenues for the quarter.
Marc S. Hermelin, Vice Chairman of the Board and Chief Executive Officer,
stated, "KV posted solid profits in the quarter, as the investments we have
made, and continue to make, in sales, marketing and promotional activities
related to Ther-Rx are beginning to bear fruit. Ther-Rx posted a 60% increase
in revenue for the quarter year-over-year, which comes on the heels of the 51%
increase we reported for Ther-Rx in the second quarter. Overall at the
Company, we saw good gross profit improvement of 14%.
"Meanwhile, ETHEX revenues are up 4% year-to-date in what is a very
difficult generic environment made more challenging by the timing of new
product approvals. However, this picture has begun to brighten with two ANDA
approvals late in the fiscal third quarter and the recent favorable ruling in
our Toprol-XL(R) Paragraph IV patent case. This ruling positions us for
exclusivity on two key dosage strengths of our generic metoprolol equivalent,
pending FDA approval. We are also currently waiting approvals for Diltiazem
(Tiazac(R) - Biovail/Forest) and Levothyroxine (Levoxyl(R) - King), which we
expect to receive this fiscal year or in the first half of fiscal 2007."
For the nine months ended December 31, 2005, consolidated net revenues
increased 21% to $280.2 million, compared with $232.3 million for the
corresponding year-ago period, as the Ther-Rx branded products division
experienced a 68% growth in revenues in addition to the 4% growth in revenues
reported by the ETHEX generic/non-branded division, compared with the prior
year period.
As a result of the write-off of $30.4 million in-process research and
development costs ($0.61 per diluted share for the nine months ended December
31, 2005) for the previously announced acquisition of the development stage
endometriosis product, year-to-date, net income was down 88% to $4.0 million.
Also contributing to the decline in net income was the Company's investments
in sales, marketing and promotional activities associated with Ther-Rx, which
the Company previously had announced plans to undertake. Earnings per diluted
share were $0.08 for the nine months ended December 31, 2005, compared with
$0.62 per diluted share for the prior year period.
Similarly, due to the endometriosis acquisition and the announced
investments in ramping up Ther-Rx launches, the Company's net income for the
first nine months of fiscal 2006 was $4.0 million, or $0.08 per diluted share.
Excluding the write-off of acquired in-process research and development,
earnings for the first nine months of fiscal 2006 would have been up 2% to
$34.4 million, or $0.63 per diluted share, slightly over the diluted earnings
per share in the first nine months of fiscal 2005. A reconciliation of GAAP
(Generally Accepted Accounting Principles) earnings per diluted share to
adjusted non-GAAP earnings per share is presented in a table attached to this
release.
Gross profit for the third quarter increased to $64.7 million, up $7.7
million, or 14%, over the prior year's quarter. Gross profit for the first
nine months of fiscal 2006 increased 23% to $186.2 million, compared to $151.7
million for the corresponding period of the prior year. Gross profit for both
periods was driven by the exceptional performance of the Company's Ther-Rx
branded division, which accounted for 43% of total quarterly revenues and 39%
of year-to-date revenues.
Pretax income for the third quarter of fiscal 2006 was $20.9 million, an
increase of $0.9 million, or 4%, compared to $20.1 million in the third
quarter of fiscal 2005. Pretax income for the first nine months of fiscal
2006 was $20.6 million, reflecting the $30.4 million write-off of acquired
in-process research and development during the first quarter associated with
the endometriosis product acquisition, compared to $51.2 million for the first
nine months of fiscal 2005. Pretax income was also affected by higher selling
and administrative, and research and development costs for the fiscal third
quarter and nine months. Selling and administrative costs for the quarter
were up 21% to $35.4 million compared to $29.2 million in the third quarter of
fiscal 2005.
Higher selling and administrative costs reflected intensified activities
to support the ongoing promotion of existing and new branded products.
Research and development costs were $6.8 million, an increase of 14% compared
to $6.0 million for the third quarter of the prior year as the Company
continues to increase new drug development efforts.
OPERATING HIGHLIGHTS:
Ther-Rx Corporation Revenues Up 60% -- Clindesse(TM) Continues To Reach
New Highs in New Prescriptions and Contributes $15.1 Million Year-To-Date
Ther-Rx branded marketing division net revenues for the fiscal third
quarter were up 60% to $41.9 million, compared to $26.2 million in the prior
year period. Year-to-date net revenues increased to $108.1 million, up 68%,
compared to $64.5 million in the first nine months of fiscal 2005. The
increases in branded product sales were due primarily to the continued success
of Clindesse(TM), the Company's single-dose bacterial vaginosis product, and
PrimaCare(TM) ONE, the leading product in the essential fatty acid sector of
the prescription prenatal vitamin marketplace.
* Vaginal Anti-Infective Products Contributed 34% of Year-to-Date Ther-Rx
Revenues
The Company's two unique, single-dose treatments for vaginal yeast
infections and bacterial vaginosis (BV); respectively, Gynazole-1(R) and
Clindesse(TM) continue to be important contributors to Ther-Rx sales
growth. For the three months ended December 31, 2005, Gynazole-1(R) net
sales were $9.6 million and Clindesse(TM) net sales were $3.1 million.
Year-to-date, Gynazole-1(R) and Clindesse(TM) contributed $21.6 million
and $15.1 million respectively, or a combined 34% of total revenues for
Ther-Rx. In December 2005, Clindesse(TM) captured 19% of all TRx (total
prescription) volume in the intra-vaginal BV market. Clindesse(TM) now
has greater TRx (total prescription) share than all other Clindamycin-
based intravaginal BV products combined. For Gynazole-1(R), one of
every three prescriptions for an Rx intra-vaginal product is still being
filled with Gynazole-1(R), which currently reports an approximately 30%
market share of the prescription intra-vaginal cream marketplace.
* Hematinic Line Net Sales Up 11%, Contributing 23% of Year-to-Date
Ther-Rx Revenues
For the three-month period of fiscal 2006, the Ther-Rx market leading
oral hematinic product line reported sales of $7.3 million, up 11% over
the third quarter of the prior year. Year-to-date, the hematinic line
reported revenues of $24.5 million, up 34%, compared to the first nine
months of fiscal 2005. Ther-Rx's recently introduced Repliva 21/7(TM)
gained 17,846 TRx (total prescriptions). This growth represents the
largest quarter-over-quarter volume gain among all branded oral
prescription hematinic products in the United States.
* Prenatal Vitamin Share Remains Strong, Now Comprising 43% of All New
Branded Prescription Prenatal Vitamins
Ther-Rx's market leading PreCare(R) prenatal vitamin product line
contributed $19.2 million and $38.7 million of net sales during the
three-month and nine-month periods of fiscal 2006, up 174% and 80%,
respectively, compared to prior period. During the first nine months of
fiscal 2006, continued growth was primarily generated by the Company's
proprietary line of prescription prenatal vitamin products focusing on
essential fatty acids, PrimaCare(R) and PrimaCare(R) ONE.
PrimaCare(R) ONE grew NRx (new prescriptions) share of all branded
prenatal vitamins from 12% in September 2005 to 15% in December 2005.
This growth represented the largest three-month share gain among all
branded prenatal vitamins. PrimaCare(R) ONE grew faster than any other
prescription EFA prenatal vitamins did during their launch phases.
After only 20 months on the market (from May 2004 through December
2005), PrimaCare(R) ONE has generated more than 527,300 total filled
prescriptions. This is 58% more filled prescriptions than the second
ranked EFA prenatal vitamin brand. The PrimaCare(R) franchise has been
the #1 filled Rx EFA prenatal vitamin in the United States for over four
years now.
Ther-Rx's entire line of prenatal vitamins now comprises 43% of all new
branded prenatal vitamin prescriptions, almost double the nearest
competing prenatal vitamin franchise and marks the highest share in the
history of Ther-Rx's prenatal vitamin franchise, based on most recent
market data.
New Product Introductions
During recent months, the Company has had three new product
introductions into its Ther-Rx branded product lines:
* Repliva 21/7: An internally developed once-daily prescription iron
supplement uniquely formulated to promote maximum red blood cell
regeneration while minimizing the uncomfortable side effects that
patients have typically endured with normal iron supplements.
Repliva 21/7 tablets provide a rapid restoration of hemoglobin levels
with less administered iron and half the incidence of side effects
compared to commonly prescribed ferrous sulfate. These benefits of
Repliva 21/7 are driven by a proprietary formulation of two
complementary, balanced irons and an absorption-designed dosing regimen
that maximizes iron absorption, and was designed to be easier to
tolerate than traditional iron supplements. Repliva 21/7 has been
specifically formulated to be better absorbed in the body - this means
less unpleasant side effects and an easier return to good health.
* Encora: There are approximately 78 million women age 35 and over in the
United States - generally past their childbearing years -- who need
improved nutritional and preventive health products specifically
designed to meet their needs. Encora is a unique, twice-daily
prescription nutritional supplement designed to meet the key nutritional
and preventative health needs of women past their childbearing years in
three key areas:
-- Osteoporosis: Encora includes calcium and Vitamin D to help prevent
osteoporosis.
-- Cardiovascular: Encora includes folic acid, essential fatty acids
and selected vitamins and minerals to help protect against
cardiovascular disease.
-- Mood fluctuations: Encora's omega-3 fatty acids help balance mood
and help protect against depression.
Encora was developed internally to meet this set of specific women's
health needs that KV believes are not addressed by any other
pharmaceutical product. Encora builds on Ther-Rx's established
prescription nutritional franchise treated by Ther-Rx's current targeted
specialty physicians. No other single product offers the unique
combination of nutrients as supplied by Encora. Encora delivers the
optimal level of nutrients at the opportune times for maximum benefit.
* Niferex GOLD: A new and advanced once-daily iron formulation for the
latest in convenience and tolerability. Niferex GOLD provides patients
with 200 mg. of elemental iron and the convenience of once-daily dosing
ensuring that they will receive the highest level of elemental iron
available. With the inclusion of an exclusive form of iron, Niferex
GOLD has been formulated to provide increased bioavailability,
tolerability and patient preference and could result in fewer women
suffering from moderate to severe side effects when compared to women
taking other forms of iron.
Ther-Rx Corporation will be promoting these three products throughout the
remainder of fiscal 2006 and into fiscal 2007 as national rollouts are
completed.
ETHEX Corporation Begins to See Progress on Product Approval Front
Specialty generic net revenues for ETHEX Corporation for the third quarter
of fiscal 2006 were $52.7 million, which represented a decrease of 5% compared
to $55.5 million for the third quarter of the prior year. ETHEX net revenues
for the nine-month period were $158.5 million, up 4%, compared to $152.8
million for the first nine months of fiscal 2005.
As previously reported, ETHEX revenue growth has been hampered by both a
competitive generics marketplace and the timing of new product approvals being
pursued by the Company. Late in the third quarter, ETHEX Corporation received
FDA approval to market the following products:
* Oxycodone Hydrochloride 5, 10, 15, 20, and 30 mg. strengths
* Hydromorphone Hydrochloride 2, 4 and 8 mg. tablets - Hydromorphone
Hydrochloride Tablets are indicated for the management of pain in
patients where an opioid analgesic is appropriate. Total branded sales
for the three strengths for the 12 months ended September 2005 were
approximately $38 million.
ETHEX Corporation is optimistic about the possibility of future product
approvals and introductions. On January 18, 2006, the Company received a
favorable court ruling on its motions for summary judgment in a patent
infringement case filed against the Company by AstraZeneca based on the
Company's submission of ANDAs seeking approval to market generic formulations
of Toprol-XL(R) (metoprolol succinate extended-release tablets).
AstraZeneca's patents were held invalid and unenforceable under the ruling.
While KV anticipates an appeal of the ruling, the Company notes that the
ruling sets the stage, pending approval of KV's submission, for a 180-day
exclusive marketing of the two strengths for which KV believes it was first to
file. Separately, KV is also awaiting approvals on both Diltiazem (Tiazac(R)
- Biovail/Forest) and Levothyroxine (Levoxyl(R) - King) as it moves through
the remainder of fiscal 2006 and into the new fiscal year and other pending
products.
Particle Dynamics, Inc. Third Quarter Revenues Down 27%
Net revenues of specialty material products, which contribute on average
less than 7% of total Company revenue, were down 27% to $3.4 million for the
third quarter of fiscal 2006, compared to $4.7 million for the third quarter
of the prior year. Year-to-date net revenues were $12.4 million, compared to
$13.8 million for the corresponding period of the prior year, a decrease of
$1.4 million. The decreases in specialty material product sales for the
three- and nine-month periods were primarily due to reduced sales of a product
to a customer who is in the process of reformulating, coupled with increased
competition on certain products.
About KV Pharmaceutical Company
KV Pharmaceutical Company is a fully integrated specialty pharmaceutical
company that develops, manufactures and 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 competes with
branded products, and Ther-Rx Corporation, its emerging branded drug
subsidiary. KV has consistently ranked as one of America's fastest growing
small companies, most recently by Forbes' in its November 2004 issue.
For further information about KV Pharmaceutical Company, please visit the
Company's corporate website at http://www.kvpharmaceutical.com.
For full prescribing information, please see:
http://www.repliva.com
http://www.encoraefa.com
http://www.gynazole-1.com
http://www.clindesse.com,
http://www.primacareEFA.com
http://www.chromageniron.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," "anticipate," "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, regulatory approvals, market position,
expenditures and 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; (5) new product development and launch
including but not limited to 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; (8) the
regulatory environment; (9) fluctuations in operating results; (10) the
difficulty of predicting international regulatory approvals, 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) inherent uncertainty in
the ultimate outcome of litigation in which the Company is involved; (14) the
Company's increased spending to promote its branded business may not yield
intended results;, and (15) the risks detailed from time to time in the
Company's filings with the Securities and Exchange Commission.
This discussion is by no means exhaustive, but is designed to highlight
important factors that may impact the Company's outlook. We are under no
obligation to update any of the forward-looking statements after the date of
this report.
KV Pharmaceutical Company
Reconciliation of GAAP-Based EPS to Adjusted Non-GAAP EPS
For the nine-months ended December 31, 2005
(unaudited in thousands, except per share data)
Income Effect
Per Share Amount
Net income as reported $0.08 $ 3,985
After tax effect of:
Write-off of acquired in-process research
and development (1) 0.61 30,441
Dilutive securities (2) (0.06) 3,112
Earnings per common share - assuming
dilution, net of acquired in-process
research and development and direct
acquisition related costs $ 0.63 $37,538
(1) Includes transaction costs of $871
(2) Impact of additional shares required on conversion of dilutive
securities.
Reconciliation of GAAP-Based Pretax Income and Net Income to Adjusted Non-
GAAP Pretax Income and Net Income
Pretax income as reported $20,575
Write-off of acquired in-process research and
development (1) 30,441
Pretax income, net of acquired in-process
research and development and direct
acquisition related costs 51,016
Provision for income taxes 16,590
Adjusted net income excluding in-process
research and development and direct
acquisition related costs $34,426
(1) Includes transaction costs of $871
KV PHARMACEUTICAL COMPANY AND SUBSIDIARIES
CONSOLIDATED FINANCIAL RESULTS
(unaudited; in thousands, except per share data)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended
December 31, December 31,
2005 2004 2005 2004
Net revenues:
Branded products $41,942 $26,180 $108,058 $64,477
Specialty generics 52,664 55,508 158,502 152,843
Specialty materials and
other 3,786 5,169 13,628 14,946
Total net revenues 98,392 86,857 280,188 232,266
Cost of sales 33,741 29,935 93,988 80,525
Gross profit 64,651 56,922 186,200 151,741
Operating expenses:
Research and development 6,817 5,988 20,869 16,813
Purchased in-process
research and
development - - 30,441 -
Selling and
administrative 35,447 29,176 109,746 79,009
Amortization of
intangible assets 1,198 1,172 3,589 3,441
Litigation - - - (843)
Total operating
expenses 43,462 36,336 164,645 98,420
Operating income 21,189 20,586 21,555 53,321
Other expense (income):
Interest expense 1,538 1,242 4,382 4,276
Interest and other
income (1,272) (718) (3,402) (2,151)
Total other expense,
net 266 524 980 2,125
Income before income
taxes 20,923 20,062 20,575 51,196
Provision for income
taxes 6,509 6,510 16,590 17,407
Net income $14,414 $13,552 $3,985 $33,789
Net income per Common
share - diluted $0.26 $0.25 $0.08 $0.62
Average shares
outstanding - diluted 59,407 59,477 50,301 59,448
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
2005 2004
Balance Sheet Information (as of December 31)
Cash and cash equivalents $66,839 $159,954
Marketable securities 96,370 45,516
Receivables, net 69,159 78,174
Inventory, net 57,519 49,278
Prepaid and other current assets 6,621 7,317
Deferred tax asset 9,222 -
Total current assets 305,730 340,239
Property and equipment, net 170,398 119,473
Intangible assets and goodwill 73,980 78,319
Other assets 18,731 13,160
$568,839 $551,191
Current liabilities $35,462 $38,178
Long-term debt and other long-term
liabilities 236,327 220,265
Shareholders' equity 297,050 292,748
$568,839 $551,191
Working capital $270,268 $302,061
Working capital ratio 8.6 to 1 8.9 to 1
Debt to equity ratio .71 to 1 .74 to 1
Cash Flow Information (nine months ended
December 31)
Net cash provided by (used in):
Operating activities $42,305 $27,969
Investing activities (134,995) (59,753)
Financing activities (296) 157
Decrease in cash and cash
equivalents (92,986) (31,627)
Cash and cash equivalents,
beginning of year 159,825 191,581
Cash and cash equivalents, end of
period $66,839 $159,954
SOURCE KV Pharmaceutical Company
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Related links:
http://www.kvpharmaceutical.com
http://www.repliva.com http://www.encoraefa.com
http://www.gynazole-1.com http://www.clindesse.com
http://www.primacareEFA.com http://www.chromageniron.com
CONTACT:
Catherine M. Biffignani, Vice President,
Investor Relations, KV Pharmaceutical Company, +1-314-645-6600
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