BRISTOL, Tenn., May 9 /PRNewswire-FirstCall/ -- King Pharmaceuticals, Inc.
(NYSE: KG) announced today that total revenues increased 26% to $368.6 million
during the first quarter ending March 31, 2005, compared to $291.5 million in
the first quarter of 2004. Including special items, King reported net income
of $70.1 million and diluted earnings per share of $0.29 during the first
quarter of 2005, compared to a net loss of $104.1 million and a diluted loss
per share of $0.43 in the same period of the prior year. Excluding special
items, net earnings increased 168% to $76.1 million and diluted earnings per
share increased 158% to $0.31 during the first quarter ending March 31, 2005,
compared to net earnings of $28.4 million and diluted earnings per share of
$0.12 in the first quarter of 2004.
Brian A. Markison, President and Chief Executive Officer of King, stated,
"We are very pleased with our financial results for the first quarter of 2005,
which reflect the positive effect of the completion of wholesale inventory
reductions for our key products. Accordingly, we believe our future financial
results should closely reflect demand-based sales for our products." Mr.
Markison continued, "Having achieved this significant accomplishment, we are
now focusing even more intently on implementing our improved business model to
transform our Company to a leading developer and acquirer of novel branded
prescription products and to deliver renewed long-term growth and shareholder
value."
Net revenue from branded pharmaceuticals totaled $321.8 million for the
first quarter of 2005, a 38% increase from $234.0 million during the first
quarter of 2004. This increase was primarily due to decreased wholesale
channel inventory reductions of some of the Company's branded pharmaceutical
products during the three months ending March 31, 2005, as compared to the
same period of the prior year, particularly with respect to Altace(R)
(ramipril) and Skelaxin(R) (metaxalone), and significantly higher net sales of
Thrombin-JMI(R) (thrombin, topical, bovine, USP). Additionally, the
aggressive work-down of wholesale inventories during the first quarter of 2005
resulted in a decrease of approximately $25 million in King's reserve for
returns due to a change in estimate and a corresponding increase in net sales
from branded pharmaceuticals.
Altace(R) net sales equaled $85.7 million during the first quarter of
2005, an increase of 33% from $64.2 million during the first quarter of 2004.
Net sales of Skelaxin(R) totaled $71.9 million during the first quarter of
2005, an increase of 56% compared to $46.2 million during the same period of
the prior year.
Thrombin-JMI(R) net sales totaled $63.3 million during the first quarter
of 2005, a 60% increase from $39.6 million during the first quarter of 2004.
Net sales of Sonata(R) (zaleplon) equaled $19.5 million during the first
quarter of 2005, an increase of 22% compared to $16.0 million during the first
quarter of the prior year.
Levoxyl(R) (levothyroxine sodium tablets, USP) net sales totaled $40.0
million during the first quarter ending March 31, 2005, an increase of 41%
from $28.3 million during the first quarter of 2004. This increase is
attributable to a reduction in the reserve for returns associated with this
product in the amount of $7.8 million and a reduction in the reserve for
rebates in the amount of $8.5 million due to changes in estimates. The rebate
reserve reduction is primarily due to a recent favorable determination
regarding the appropriate Medicaid rebate rate for Levoxyl(R).
Steve Andrzejewski, Corporate Head of Commercial Operations of King,
stated, "Our sales and marketing team continues to make significant progress
with respect to the promotion of our key products. We are particularly
pleased with the initial results achieved by our expanded hospital field sales
force, which began promoting Thrombin-JMI(R) in the fourth quarter of 2004.
Our managed markets group is also contributing significantly, as Levoxyl(R)
has maintained a prescription base that is well ahead of that which most
branded pharmaceutical products typically retain in the face of generic
competition."
King's Meridian Medical Technologies business produced revenue totaling
$23.2 million during the first quarter of 2005, a decrease of 33% from $34.5
million during the same period of the prior year. This decrease was primarily
due to the comparable high level of U.S. and International government sales
during the first quarter of 2004, which reflected increased military and
homeland preparedness in early 2004.
Royalty revenues, derived primarily from Adenoscan(R) (adenosine), totaled
$18.1 million during the first quarter ending March 31, 2005, compared to
$16.8 million during the first quarter of 2004. During the first quarter
ending March 31, 2005, net revenue from contract manufacturing [and other]
equaled $5.6 million.
Conference Call Information
King will conduct a conference call today to discuss the Company's first-
quarter results and other matters pertaining to its business. Interested
persons may listen to the conference call on Monday, May 9, 2005, at 1:00
p.m., E.D.T. at http://www.b2i.us/external.asp?b=1084&id=153&from=wc&L=e or
by dialing 800-374-1498 (US only) or 706-643-0395 (international). If you are
unable to participate during the live webcast, the call will be archived on
King's web site http://www.kingpharm.com for not less than 14 days following
the call. A replay of the conference call will also be available for not less
than 5 days following the call by dialing 800-642-1687 (US only) or 706-645-
9291 (international), passcode 6068126#.
About Special Items
Under Generally Accepted Accounting Principles ("GAAP"), "net earnings"
and "diluted earnings per share" include special items. In addition to the
results determined in accordance with GAAP, King provides its net earnings and
diluted earnings per share results for the first quarter ending March 31,
2005, 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 an analysis of the
Company's ongoing, underlying business and an 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 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 anticipated future financial results and
shareholder value; statements pertaining to the successful implementation of
the Company's business model; and statements pertaining to the Company's
anticipated conference call to discuss its first quarter 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 and Wyeth Pharmaceuticals' ability to successfully market Altace(R)
under the co-promotion agreement between King and Wyeth; dependence on the
future level of demand for and net sales of King's branded pharmaceutical
products, in particular, Altace(R), Thrombin-JMI(R), Sonata(R), Skelaxin(R)
and Levoxyl(R); dependence on the successful marketing of King's products,
including, but not limited to, Altace(R), Thrombin-JMI(R), Sonata(R),
Skelaxin(R) and Levoxyl(R); dependence of the future effect of generic
substitution for Levoxyl(R); dependence on royalty revenues from Adenoscan(R);
dependence on management of King's growth and integration of its acquisitions;
dependence on the extent to which the Office of the Inspector General ("OIG")
of the Department of Health and Human Services and other governmental agencies
concur with King's best estimate of the extent to which it underpaid amounts
due under Medicaid and other governmental pricing programs and King's
determination of the reasons for such underpayments; dependence on the actual
outcome of the ongoing investigations of the Company by the U.S. Securities
and Exchange Commission ("SEC") and OIG; dependence on whether King is able to
prevail in pending private plaintiff securities litigation; dependence on the
extent to which any governmental sanctions are imposed due to King's
underpayment of amounts due under Medicaid and other governmental pricing
programs; dependence on King's ability to continue to acquire branded
products, including products in development; dependence on the Company's
ability to terminate its development contract with Elan and, if so, on what
terms; dependence on the high cost and uncertainty of research, clinical
trials, and other development activities involving pharmaceutical products,
including, but not limited to, King Pharmaceuticals Research and Development's
pre-clinical and clinical pharmaceutical product development projects,
including binodenoson, PT-141, and an Altace(R)/diuretic combination product;
dependence on the unpredictability of the duration and results of the U. S.
Food and Drug Administration's ("FDA") review of Investigation New Drug
applications ("IND"), New Drug Applications ("NDA"), and Abbreviated New Drug
Applications ("ANDA") and/or the review of other regulatory agencies
worldwide; dependence on King's ability to maintain effective patent
protection for Altace(R) through October 2008, and successfully defend against
any attempt to challenge the enforceability of patents relating to the
product; dependence on King's ability to successfully defend against any
potential attempt to challenge the enforceability of patents related to
Skelaxin(R); dependence on whether Skelaxin(R) continues as an exclusive
product; dependence on whether King's customers order pharmaceutical products
in excess of normal quantities during any quarter which could cause the
Company's sales of branded pharmaceutical products to be lower in a subsequent
quarter than they would otherwise have been; dependence of the accuracy of
King's estimate of wholesale inventory levels of its products; dependence on
the extent to which Inventory Management Agreements facilitate effective
management of wholesale channel inventories of the Company's products and the
accuracy of information provided to the Company pursuant to such agreements
and by other third parties; dependence on King's ability to continue to
successfully execute the Company's strategies and to continue to capitalize on
strategic opportunities in the future for sustained long-term growth;
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 on King's financial and
other projections; 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 May 9, 2005 and
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 ending December 31, 2004 which is on file with
the SEC. 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.
KING PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, December 31,
2005 2004
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 348,589 $ 342,086
Restricted cash 65,000 97,730
Marketable securities 8,534 16,498
Accounts receivable, net 206,170 180,963
Inventories 255,408 274,412
Deferred income tax assets 122,857 153,979
Prepaid expenses and other current
assets 63,706 61,395
Total current assets 1,070,264 1,127,063
Property, plant and equipment, net 281,222 280,731
Intangible assets, net 1,251,697 1,285,961
Goodwill 121,152 121,152
Deferred income tax assets 99,429 92,931
Other assets 26,689 16,318
Total assets $2,850,453 $ 2,924,156
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,028 $ 92,920
Accrued expenses 499,752 596,010
Income taxes payable 14,367 --
Total current liabilities 558,147 688,930
Long-term debt:
Long-term debt 345,000 345,000
Other long-term liabilities 29,226 41,436
Total liabilities 932,373 1,075,366
Commitments and contingencies:
Shareholders' equity:
Common shares no par value,
300,000,000 shares authorized,
241,730,668 and 241,706,583
shares issued and outstanding,
respectively 1,210,703 1,210,647
Retained earnings 707,175 637,120
Accumulated and other
comprehensive income 202 1,023
Total shareholders' equity 1,918,080 1,848,790
Total liabilities and
shareholders' equity $2,850,453 $2,924,156
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended
March 31,
2005 2004
(Unaudited) (Restated)
REVENUES:
Total revenues $ 368,625 $ 291,450
OPERATING COSTS AND EXPENSES:
Cost of revenues , exclusive of
depreciation, amortization and
impairments shown below 73,798 83,365
Excess purchase commitment (1,582) 176
Total cost of revenues 72,216 83,541
Selling, general and administrative,
exclusive of co-promotion fees 89,198 81,910
Special legal and professional fees 3,652 5,692
Merger related costs 3,277 --
Co-promotion fees 34,655 23,544
Total selling, general, and
administrative expense 130,782 111,146
Depreciation and amortization 41,426 39,318
Research and development 11,472 16,023
Intangible asset impairment -- 34,936
Restructuring charges 2,023 --
Special gains on disposition of
assets (847) (858)
Total operating costs and
expenses 257,072 284,106
OPERATING INCOME 111,553 7,344
OTHER (EXPENSES) INCOME:
Interest expense (2,701) (3,105)
Interest income 2,277 1,054
Valuation charge -- convertible notes
receivable -- (449)
Loss on Novavax investment (6,853) --
Other, net (249) (703)
Total other expense (7,526) (3,203)
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 104,027 4,141
Income tax expense 36,922 1,839
INCOME FROM CONTINUING OPERATIONS 67,105 2,302
DISCONTINUED OPERATIONS
Income (loss) from discontinued
operations, including expected loss
on disposal 4,682 (167,462)
Income tax expense (benefit) 1,732 (61,084)
Total income (loss) from
discontinued operations 2,950 (106,378)
NET INCOME (LOSS) $ 70,055 $ (104,076)
Basic income (loss) per common share $ 0.29 $ (0.43)
Diluted income (loss) per common share $ 0.29 $ (0.43)
Shares used in basic net income (loss)
per share 241,724 241,300
Shares used in diluted net income
(loss) per share 241,803 241,300
KING PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
EXCLUDING SPECIAL ITEMS -- NON GAAP
(in thousands, except per share data)
Three Months Ended
March 31,
2005 2004
(Unaudited) (Restated)
REVENUES:
Total revenues $ 368,625 $ 291,450
OPERATING COSTS AND EXPENSES:
Cost of revenues, exclusive of
depreciation, amortization and
impairments shown below 73,798 83,365
Selling, general and administrative,
exclusive of co-promotion fees 89,198 81,910
Co-promotion fees 34,655 23,544
Total selling, general, and
administrative expense 123,853 105,454
Depreciation and amortization 41,426 39,318
Research and development 11,472 16,023
Total operating costs and
expenses 250,549 244,160
OPERATING INCOME 118,076 47,290
OTHER (EXPENSES) INCOME:
Interest expense (2,701) (3,105)
Interest income 2,277 1,054
Other, net (249) (703)
Total other expense (673) (2,754)
INCOME BEFORE INCOME TAXES 117,403 44,536
Income tax expense 41,326 16,165
NET INCOME $ 76,077 $ 28,371
Basic income per common share $ 0.31 $ 0.12
Diluted income per common share $ 0.31 $ 0.12
Shares used in basic net income per
share 241,724 241,300
Shares used in diluted net income per
share 241,803 241,745
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 Ending March 31, 2005
(Unaudited) EPS
Net income, excluding special items $ 76,077
Diluted income per common share, $ 0.31
excluding special items
SPECIAL ITEMS:
Excess purchase commitment (cost of
goods sold) 1,582 0.01
Special legal and professional fees
(selling, general, and
administrative) (3,652) (0.01)
Merger related costs (selling,
general, and administrative) (3,277) (0.01)
Restructuring charges (other
operating costs and expenses) (2,023) (0.01)
Special gains on disposition of
assets (other operating costs and
expenses) 847 0.00
Loss on Novavax investment (other
expenses) (6,853) (0.03)
Income from discontinued operations 4,682 0.02
Income tax benefit 2,672 0.01
Net income $ 70,055
Diluted income per common share, as
reported under GAAP $ 0.29
Three Months Ending March 31, 2004
(Restated) EPS
Net income, excluding special items $ 28,371 $ 0.12
Diluted income per common share,
excluding special items
SPECIAL ITEMS:
Excess purchase commitment (cost of
goods sold) (176) (0.00)
Special legal and professional fees
(selling, general, and
administrative) (5,692) (0.02)
Intangible asset impairment (other
operating costs and expenses) (34,936) (0.14)
Special gains on disposition of
assets (other operating costs and
expenses) 858 0.00
Valuation charge -- convertible notes
receivable (other income) (449) (0.00)
Loss from discontinued operations (167,462) (0.70)
Income tax benefit 75,410 0.31
Net loss $(104,076)
Diluted loss per common share, as
reported under GAAP $ (0.43)
KING PHARMACEUTICALS, INC.
Summary Reconciliation of Special Items
for the FIRST quarter ending MARCH 31, 2005
and FIRST quarter ending MARCH 31, 2004
King recorded special items during the first quarter ending March 31, 2005
which resulted in a net charge of $8.7 million, or $6.0 million net of tax.
More specifically, special items during the first quarter of 2005 include the
following:
* a $6.9 million charge to reflect a decline in the fair value, which
King believes is other than temporary, of the Company's equity
investment in Novavax, Inc.;
* a $3.7 million charge due to professional fees associated with the
previously announced ongoing inquiries by the Securities and Exchange
Commission and the office of Inspector General of the Department of
Health and Human Services;
* a $3.3 million charge for professional fees and expenses associated
with the Company's terminated merger agreement with Mylan Laboratories
Inc.;
* a $2.0 million restructuring charge primarily due to the Company's
decision to discontinue some relatively insignificant products
associated with its Meridian business;
* income in the amount of $4.7 million derived from discontinued
operations due to a reduction in reserves for returns and rebates
previously accrued for divested products as a result of changes in
estimates;
* income in the amount of $1.6 million derived from the reversal of
previously accrued excess purchase commitments for certain products as
a result of a change in estimate; and
* income in the amount of $0.8 million primarily from special gains on
disposition of assets.
During the three months ending March 31, 2004, King recorded special items
resulting in a net charge of $207.9 million, or $132.4 million net of tax,
primarily due to i) a loss from discontinued operations as a result of an
anticipated loss on disposal of certain women's healthcare products; and ii)
an intangible asset impairment charge primarily related to Florinef(R)
(fludrocortisone acetate, USP) and Tapazole(R) (methimazole tablets, USP).
SOURCE King Pharmaceuticals, Inc.
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Related links:
http://www.kingpharm.com
CONTACT:
James E. Green, Executive Vice President,
Corporate Affairs, +1-423-989-8125, or David E. Robinson, Senior
Director, Corporate Affairs, +1-423-989-7045, both of King
Pharmaceuticals Inc.
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