Barr's Forecast a Bit Weak

The company's fourth-quarter and full-year profits will probably miss estimates.
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Barr Pharmaceuticals

(BRL)

issued a third-quarter financial report in which earnings and sales narrowly beat Wall Street's estimates.

However, the company's fourth-quarter and fiscal-year earnings forecasts were slightly below the consensus targets, and the news sent the stock down $2.30, or 3.8%, to $58.11.

Barr's third-quarter featured greater sales growth among its brand-name products than its bread-and-butter generic drugs. Excluding one-time items, Barr reported earnings of 75 cents a share for the three months ended March 31, a penny better than the average analyst estimate compiled by Thomson First Call. Sales of $326.8 million topped the consensus of $320 million.

Once all items were accounted for, the Woodcliff Lake, N.J., company earned $76.1 million, or 70 cents a share. For the same period last year, Barr earned $61.3 million, or 58 cents a share, on sales of $265 million.

The company predicted fourth-quarter profits of 70 cents to 75 cents. The analyst consensus is 76 cents. For the fiscal year ending June 30, Barr said EPS will be in the range of $3.08 to $3.13, a bit shy of the $3.15 expected by analysts. Although Barr's fourth-quarter and fiscal year predictions exclude one-time items, they include accounting for stock-based compensation.

Most of Barr's revenue comes from generic drugs, whose sales of $200 million in the third quarter represented a 6% gain from the year-ago period. Sales of generic oral contraceptives rose 8% to $101 million.

Revenue from alliances with other companies jumped to $34 million from $4 million, thanks to a marketing agreement with

Teva Pharmaceutical Industries

(TEVA) - Get Report

for generic versions of the allergy drug Allegra.

Alliance revenue also was aided by a royalty and fee deal with

Kos Pharmaceuticals

(KOSP)

regarding

two cholesterol drugs made by Kos. The agreement settled patent litigation between the companies.

Barr's brand-name products contributed $93 million in sales, up 29% from the year-ago quarter. Sales of the oral contraceptive Seasonale rose 12% to $27 million.

Bruce L. Downey, the chairman and CEO, said he expects the Food and Drug Administration to approve Seasonique, a successor to Seasonale, during the quarter. He says

Seasonique should be launched in the summer.

Downey added that Barr expects to begin selling a generic version of Actiq, a cancer-pain drug from

Cephalon

(CEPH)

, in December, thanks to a patent-challenge settlement signed earlier this year. Cephalon has granted Barr exclusive rights to market and sell a generic version of Actiq in the U.S. in return for receiving royalties on profits of the generic product for three months.

Downey said he hasn't received any inquiries from the Federal Trade Commission concerning Barr's recent settlement of a patent dispute over Cephalon's sleep-disorders drug Provigil.

Downey declined to comment on discussions with

Shire

(SHPGY)

about settling a patent challenge against Adderall XR, a treatment for attention deficit hyperactivity disorder. The dispute is scheduled for trial in October. Shire settled a similar disagreement in January with

Impax Laboratories

(IPXL)

.