Segment Information

9 Months Ended

Sep. 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						Nine months ended
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Revenues:
Par Pharmaceutical	$	318,784		$	249,818		$	871,425		$	737,733
Strativa	17,333			17,503			49,182			53,453
Total revenues	$	336,117		$	267,321		$	920,607		$	791,186
Gross margin:
Par Pharmaceutical	$	129,845		$	69,506		$	297,374		$	175,502
Strativa	10,980			11,885			31,276			36,233
Total gross margin	$	140,825		$	81,391		$	328,650		$	211,735
Operating loss:
Par Pharmaceutical	$	(29,846	)	$	(18,352	)	$	(61,409	)	$	(19,169	)
Strativa	(3,029		)	(6,373		)	(23,148		)	(4,446		)
Total operating loss	$	(32,875	)	$	(24,725	)	$	(84,557	)	$	(23,615	)
Interest income	2			14			16			70
Interest expense	(27,690		)	(23,385		)	(80,656		)	(71,033		)
Loss on debt extinguishment	—			—			(3,989		)	(7,335		)
Other Income	500			—			500			—
Benefit for income taxes	(22,425		)	(18,797		)	(64,762		)	(36,077		)
Net loss	$	(37,638	)	$	(29,299	)	$	(103,924	)	$	(65,836	)

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

	Three months ended						Nine months ended
	September 30, 2014			September 30, 2013			September 30, 2014			September 30, 2013
Product
Par Pharmaceutical
Budesonide (Entocort® EC)	$	32,065		$	54,952		$	107,680		$	150,382
Propafenone (Rythmol SR®)	18,858			19,423			55,235			53,919
Oxycodone (Oxycontin®)	18,334			—			18,334			—
Omega-3 acid ethyl esters (Lovaza®)	17,716			—			17,716			—
Bupropion ER (Wellbutrin®)	16,581			11,450			51,346			31,268
Divalproex (Depakote®)	10,849			26,343			46,765			20,116
Metoprolol succinate ER (Toprol-XL®)	9,312			12,277			35,525			45,206
Lamotrigine (Lamictal XR®)	8,789			11,079			29,185			41,725
Rizatriptan (Maxalt®)	3,760			5,283			7,555			42,296
Par Sterile Products	46,751			—			96,479			—
Other (1)	126,959			101,788			386,369			330,624
Other product related revenues (2)	8,810			7,223			19,236			22,197
Total Par Pharmaceutical Revenues	$	318,784		$	249,818		$	871,425		$	737,733
Strativa
Megace® ES	$	7,712		$	9,455		$	23,644		$	31,009
Nascobal® Nasal Spray	8,457			7,592			22,953			20,596
Other	(1		)	(398		)	(47		)	(877		)
Other product related revenues (2)	1,165			854			2,632			2,725
Total Strativa Revenues	$	17,333		$	17,503		$	49,182		$	53,453

(1) The further detailing of revenues of the other approximately 85 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 nine-month periods ended September 30, 2014 and 2013.

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