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Par Pharma Beats Estimates

Zacks Equity Research

Par Pharmaceutical Companies Inc. (:PRX) posted second quarter 2012 adjusted earnings of $1.62 per share, well above the Zacks Consensus Estimate of $1.08 and the year-ago earnings of 79 cents per share.

On a sequential basis, second quarter earnings climbed 102.5%.

Quarterly revenues of $294.3 million surpassed the Zacks Consensus Estimate of $290 million and the year-ago revenues of $224.2 million. Higher sales from its generic version of Teva Pharmaceutical’s (TEVA) Provigil (modafinil), strong sales of key products along with an increase in the base generic business led to the rise in net revenues in the reported quarter. On a sequential basis, second quarter 2012 revenues climbed 8.4%.

Revenues in Detail

Par Pharma generated sales of $57.5 million from its generic version of Provigil in the reported quarter. The generic version was launched by Par Pharma in April 2012.

Sales of Par Pharma’s generic version of AstraZeneca’s (AZN) hypertension treatment, Toprol XL (metoprolol), decreased 20.7% sequentially to $49.0 million. Revenues were negatively impacted by customer buying patterns.

Sales of some of Par Pharma’s other generic drugs decreased. These include Par Pharma’s generic versions of Astra Zeneca’s Entocort EC (budesonide) (down 11.8% sequentially to $33.5 million), GlaxoSmithKline’s (GSK) Rythmol SR (propafenone hydrochloride) (down 6.3% sequentially to $17.9 million) and Glaxo’s Imitrex (sumatriptan) (down 16.7% sequentially to $13.9 million).

However, sales of some other generic drugs including the company’s generic version of Teva’s Actiq (fentanyl citrate lozenges) (up 30% sequentially to $2.6 million) increased due to customer buying patterns.

Bupropion hydrochloride ER and zolpidem tartrate, both of which were added to Par Pharma’s portfolio following its acquisition of Anchen Pharmaceuticals, posted second quarter sales of $12.0 million and $5.3 million, respectively.

Among Par Pharma’s branded products, sales of Megace ES increased 16.4% while Nascobal B12 Nasal Spray sales decreased 8.5%, both on a sequential basis. While Megace ES revenues of $14.2 million were boosted by customer buying patterns, Nascobal B12 Nasal Spray revenues of $5.4 million were affected by customer order timings in spite of higher prescription volume.

Other Details

Second quarter 2012 gross margin increased to 53% from 40.8% in the first quarter of 2012.

Research and development (R&D) expenses increased to $20.7 million, from $19.9 million in the first quarter of 2012. Second quarter 2012 selling, general and administrative (SG&A) expenses went down to $38.5 million from $39.8 million in the first quarter of 2012.

Par Pharma was in the news recently with the company announcing that it has entered into an agreement with an affiliate of leading global private equity firm TPG Capitals, whereby TPG will acquire Par Pharma for $1.9 billion.

However, the agreement also permits Par Pharma’s Board of Directors to search for alternative superior proposals until August 24, 2012, from other bidders. Prospective suitors could include other generic players or ex-US companies looking to strengthen their presence in the US. If no alternative offer turns up, the TPG deal is expected to go through in 2012.

As of June 30, 2012, Par Pharma had 72 abbreviated new drug applications (ANDAs) filed with the US Food and Drug Administration (:FDA) of which 23 are believed to be first-to-file opportunities.

Neutral on Par Pharma

Currently, we have a Neutral recommendation on Par Pharma, which carries a Zacks #3 Rank (short-term Hold rating).

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