Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Information

Segment Information:

We operate in two reportable business segments: generic pharmaceuticals (referred to as “Par Pharmaceutical” or “Par”) and branded pharmaceuticals (referred to as “Strativa Pharmaceuticals” or “Strativa”). Branded products are marketed under brand names through marketing programs that are designed to generate physician and consumer loyalty. Branded products generally are patent protected, which provides a period of market exclusivity during which they are sold with little or no direct competition. Generic pharmaceutical products are the chemical and therapeutic equivalents of corresponding brand drugs. The Drug Price Competition and Patent Term Restoration Act of 1984 provides that generic drugs may enter the market upon the approval of an ANDA and the expiration, invalidation or circumvention of any patents on corresponding brand drugs, or the expiration of any other market exclusivity periods related to the brand drugs. Our chief operating decision maker is our Chief Executive Officer.

Our business segments were determined based on management’s reporting and decision-making requirements in accordance with ASC 280-10, "Segment Reporting." We believe that our generic products represent a single operating segment because the demand for these products is mainly driven by consumers seeking a lower cost alternative to brand name drugs. Par’s generic drugs are developed using similar methodologies, for the same purpose (e.g., seeking bioequivalence with a brand name drug nearing the end of its market exclusivity period for any reason discussed above). Par’s generic products are produced using similar processes and standards mandated by the FDA, and Par’s generic products are sold to similar customers. Based on the similar economic characteristics, production processes and customers of Par’s generic products, management has determined that Par’s generic pharmaceuticals are a single reportable business segment. Our chief operating decision maker does not review the Par (generic) or Strativa (brand) segments in any more granularity, such as at the therapeutic or other classes or categories. Certain of our expenses, such as the direct sales force and other sales and marketing expenses and specific research and development expenses, are charged directly to either of the two segments. Other expenses, such as general and administrative expenses and non-specific research and development expenses are allocated between the two segments based on assumptions determined by management.

Our chief operating decision maker does not review our assets or depreciation by business segment at this time as they are not material to Strativa. Therefore, such allocations by segment are not provided.

The financial data for the two business segments are as follows ($ amounts in thousands):

	Three months ended						Six months ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Revenues:
Par Pharmaceutical	$	278,834		$	215,115		$	552,640		$	487,917
Strativa	16,571			18,554			31,849			35,948
Total revenues	$	295,405		$	233,669		$	584,489		$	523,865
Gross margin:
Par Pharmaceutical	$	83,884		$	46,301		$	167,529		$	105,996
Strativa	9,625			12,599			20,295			24,348
Total gross margin	$	93,509		$	58,900		$	187,824		$	130,344
Operating (loss) income:
Par Pharmaceutical	$	(8,560	)	$	(10,341	)	$	(31,571	)	$	(817	)
Strativa	(8,967		)	2,842			(20,111		)	1,927
Total operating (loss) income	$	(17,527	)	$	(7,499	)	$	(51,682	)	$	1,110
Interest income	—			20			14			56
Interest expense	(27,499		)	(23,612		)	(52,966		)	(47,648		)
Loss on debt extinguishment	—			—			(3,989		)	(7,335		)
Benefit for income taxes	(18,106		)	(9,300		)	(42,338		)	(17,280		)
Net loss	$	(26,920	)	$	(21,791	)	$	(66,285	)	$	(36,537	)

Total revenues of our top selling products were as follows ($ amounts in thousands):

	Three months ended						Six months ended
	June 30, 2014			June 30, 2013			June 30, 2014			June 30, 2013
Product
Par Pharmaceutical
Budesonide (Entocort® EC)	$	38,266		$	45,027		$	75,615		$	95,430
Bupropion ER (Wellbutrin XL®)	18,423			11,565			34,765			19,817
Divalproex (Depakote®)	15,511			(7,653		)	35,917			(6,227		)
Propafenone (Rythmol SR®)	15,266			17,337			36,377			34,496
Metoprolol succinate ER (Toprol-XL®)	12,096			13,527			26,213			32,929
Lamotrigine (Lamictal XR®)	10,262			10,535			20,396			30,646
Rizatriptan (Maxalt®)	1,597			3,466			3,795			37,014
Other (1)	$	162,427		$	113,115		309,137			228,838
Other product related revenues (2)	4,986			8,196			10,425			14,974
Total Par Pharmaceutical Revenues	278,834			215,115			$	552,640		$	487,917
Strativa
Megace® ES	$	7,779		$	11,018		$	15,932		$	21,553
Nascobal® Nasal Spray	8,172			6,801			14,496			13,003
Other	$	(35	)	$	(236	)	$	(46	)	$	(479	)
Other product related revenues (2)	655			971			1,467			1,871
Total Strativa Revenues	$	16,571		$	18,554		$	31,849		$	35,948

(1) The further detailing of revenues of the other approximately 80 generic drugs was not considered significant to the overall disclosure due to the lower volume of revenues associated with each of these generic products. No single product in the other category was significant to total generic revenues for the six-month periods ended June 30, 2014 and 2013.

(2) Other product related revenues represents licensing and royalty related revenues from profit sharing agreements.