EX-99.1 2 g16459exv99w1.htm EX-99.1 Ex-99.1
Exhibit 99.1
Contacts:
James E. Green, Executive Vice President, Corporate Affairs
423-989-8125
David E. Robinson, Senior Director, Corporate Affairs
423-989-7045
FOR IMMEDIATE RELEASE
KING PHARMACEUTICALS REPORTS
THIRD-QUARTER 2008 FINANCIAL RESULTS
Highlighted by Continued Advances in Opportunities for Long-term Growth
BRISTOL, TENNESSEE, November 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® (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® (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® 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® Tablets (oxycodone HCl/niacin). The NDA for ACUROX® 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 SKELAXINâ (metaxalone) totaled $110 million during the third quarter of 2008, compared to $106 million during the same period of the prior year.
THROMBIN-JMIÒ (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 AVINZAâ (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. AVINZAâ 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.
LEVOXYLÒ (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® 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® (epinephrine) and higher unit sales of other products to various government agencies.
Royalty revenues, derived primarily from ADENOSCANÒ (adenosine), totaled $18 million during the third quarter ended September 30, 2008, compared to $20 million during the third quarter of last year.
About REMOXYÒ
REMOXYÒ, an investigational drug, is a unique, abuse-resistant, controlled-release oxycodone for moderate-to-severe chronic pain. REMOXYÒ’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 REMOXYÒ is currently undergoing a priority review by the FDA. The FDA is expected to complete its review of the REMOXYÒ NDA in December 2008. If approved, the companies believe REMOXYÒ could be the first oxycodone on the market that is designed to reduce the risk of misuse and abuse. REMOXYÒ is a proposed brand name that is subject to FDA approval.

 

About ACUROX® Tablets
ACUROX® 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® 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® 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® 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® 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.

 

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  
 
            

 

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  

 

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  

 

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 September 30, 2008     Nine Months Ended 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 September 30, 2007     Nine Months Ended 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®, (ii) charges totaling $82 million primarily related to the impaired value of raw material inventory and related contracts associated with ALTACE®, 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® 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®, (ii) charges totaling $82 million primarily related to the impaired value of raw material inventory and related contracts associated with ALTACE®, (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® and Tilade® as a result of the Company’s decision to no longer pursue the development of a new formulation of Intal® utilizing HFA as a propellant, and (v) a charge totaling $21 million related to the restructuring of the Company’s workforce.
EXECUTIVE OFFICES
KING PHARMACEUTICALS, INC.
501 FIFTH STREET, BRISTOL, TENNESSEE 37620