Barr Laboratories

(BRL)

on Thursday reported fourth-quarter and year-end earnings that narrowly beat analysts' forecasts, but the company said first-quarter earnings per share will fall below Wall Street consensus estimates.

Barr also said its guidance for the fiscal year that started July 1 will fall at the lower end of analysts' projections.

Barr's shares dropped quickly within the first half hour of trading to as low as $61.44, but fought back as the day went on, closing at $64.45, down 51 cents, or 0.8%.

Bruce L. Downey, Barr's chairman and chief executive, said his company expects earnings per share of $3.14 to $3.27 for the fiscal year that ends June 30, 2004. A consensus of 14 analysts polled by Thomson First Call predicted $3.26.

Downey said key issues for the new fiscal year are the company's ability to launch in the near future generic and branded products, and the expected approval in September by the Food and Drug Administration of the oral contraceptive Seasonale.

Speaking to analysts and investors via telephone conference call, Downey noted that Barr's selling, general and administrative expenses jumped sharply during the fourth quarter -- to $161.1 million from $106.3 million for the same period last year -- due to expanded marketing efforts for Seasonale and the menopause drug Cenestin.

Downey said expenses will be higher than analysts anticipated for the current fiscal year due to the marketing of Seasonale. The exact amount will depend on the scope and timing of a direct-to-consumer advertising campaign for Seasonale, said Downey.

He added that the "substantial" marketing expenses -- more sales representatives, higher promotion costs -- are reflected in a first-quarter EPS prediction of 65 cents to 69 cents. That's below the Thomson First Call consensus of 70 cents. Downey said Barr's second half will be stronger than its first half.

Although Barr's stock has been on a hot streak -- nearly doubling in the last 13 months -- the company suffered a setback in May when the FDA said it would extend the original 10-month review period for Seasonale. The new deadline is Sept. 5.

Downey said in May that Seasonale was "the single most significant advance in oral contraception in the past 40 years." The drug will cut the number of menstrual periods from 13 to 4 a year. A woman would take Seasonale for 84 consecutive days followed by taking placebos for seven days.

The Woodcliff Lake, N.J.-based company's financial report and conference call prompted UBS analyst Steven Valiquette to tell clients Thursday that "everything is on track with Barr fundamentally." Valiquette, who rates the stock as a buy, doesn't own shares, but his company has had an investment banking relationship with Barr.

Valiquette, in a research report, said he is looking for a full-year EPS estimate of $3.20, citing the projected Seasonale launch and the launch of another contraceptive later this year as some reasons for his optimism.

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That other contraceptive, a generic version of

Johnson & Johnson's

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Ortho Tri-Cyclen, will hit the market in late December -- and perhaps as early as late September -- thanks to the July 31 settlement of a patent suit with J&J. As part of the settlement, Barr admitted to infringing on J&J's patent.

Gregory B. Gilbert, of Merrill Lynch, maintained his buy rating on the stock, although he told clients in a research note Thursday that he has "low expectations" for Seasonale. He said Barr's management appears to be taking a conservative approach to guidance, noting that the company isn't including potentially successful patent challenges -- financial oxygen for generic drugmakers -- in its fiscal-year predictions. Gilbert doesn't own shares; his firm is a market maker in Barr's stock.

Barr Chairman Downey said Thursday that his company has 15 or 16 patent challenges in progress.

Downey also expressed exasperation at recent press accounts that it had made a run at Galen Holdings, a Northern Ireland drug company. Galen announced in mid-July that it was talking to an unnamed suitor, which the

Reuters

news service identified as Barr. A week later, Galen said the discussion had been cancelled.

Downey said his company continuously evaluates merger and acquisition activity and will keep looking for "reasonable opportunities." Speculation about a Barr-Galen deal "caused a lot of price volatility," said Downey, who added that speculators should be "more temperate in their response" to what appears in the news media.

For the three months ended June 30, Barr reported that adjusted EPS -- which excludes charges related to an acquisition and the costs of a patent lawsuit -- was 73 cents, 2 cents above the Thomson First Call consensus of 71 cents, and 8 cents above the adjusted EPS of 65 cents for the same period last year.

For the full year, the adjusted EPS was $2.62, 2 cents better than the Thomson First Call consensus.

Net income using generally accepted accounting principles was $37.09 million, or 53 cents a share, for the three months ended June 30, down from the $44.87 million, or 66 cents a share, for the same period last year. Revenue jumped 44% to $301.5 million from $209.4 million.

For the fiscal year ended June 30, using GAAP, the company reported net earnings of $167.6 million, or $2.43 a share, compared to a profit of $212.2 million, or $3.09 a share, for the previous fiscal year. Revenue fell 24% to $894.9 million from $1.17 billion.

All EPS figures cited above reflect a 3-for-2 stock split in the form of a 50% stock dividend distributed in March.