King Pharmaceuticals, Inc. Q2 2010 Earnings Call Transcript

King Pharmaceuticals, Inc. Q2 2010 Earnings Call Transcript
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King Pharmaceuticals, Inc. (KG)

Q2 2010 Earnings Call Transcript

August 9, 2010 11:00 am ET

Executives

Jack Howarth – VP, IR

Brian Markison – Chairman, President and CEO

Joe Squicciarino – CFO

Eric Carter – Chief Science Officer

Analysts

Gregg Gilbert – Bank of America/Merrill Lynch

David Buck – Buckingham Research

Louise Chen – Collins Stewart

Ian Sanderson – Cowen & Co.

Marc Goodman – UBS

Elliot Wilbur – Needham & Company

Corey Davis – Jefferies

William Tanner – Lazard Capital Markets

Shibani Malhotra – RBC Capital Markets

Greg Waterman – Goldman Sachs

John Newman – Oppenheimer Funds

Mario Corso – Caris

Presentation

Operator

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Previous Statements by KG
» King Pharmaceuticals, Inc. Q1 2010 Earnings Call Transcript
» King Pharmaceuticals, Inc. Q4 2009 Earnings Call Transcript
» King Pharmaceuticals, Inc. Q2 2009 Earnings Call Transcript

Good morning, ladies and gentlemen and welcome to the King Pharmaceuticals’ second quarter year 2010 financial results conference call. All lines have been placed in a listen-only mode and the floor will be opened for your questions and comments following the presentation.

At this time, it is my pleasure to turn the floor over to your host Jack Howarth. Sir, the floor is yours.

Jack Howarth

Good morning, everyone. Thanks for joining us today to discuss our financial results for the second quarter ended June 30, 2010. Joining me on today’s call are Brian Markison, Chairman, President and Chief Executive Officer; Joe Squicciarino, Chief Financial Officer; and other members of our management team.

Before we begin today’s call, I’d like to remind you that any discussion that takes place during this conference call may contain forward-looking statements that reflect management’s current view of future events and operations, including but not limited to statements pertaining to our expectations regarding our product development pipeline, the commercial potential of our products and our plans to maximize these potentials, our future product sales and financial results and our strategies for long-term growth.

Forward-looking statements involve certain significant risks and uncertainties, and actual results may differ materially. Certain factors that may cause actual results to differ materially from the forward-looking statements are discussed in the company’s press release issued this morning, August 9, 2010, and also in the risk factors section and other sections of the company’s Form 10-K for the year ended December 31, 2009, and the company’s Form 10-Q for the quarter ended March 31, 2010, which are on file with the SEC.

King does not undertake to publicly update or revise any of its forward-looking statements, even if experienced or future changes show that the individual results or events will not be realized.

In addition to our financial results determined in accordance with Generally Accepted Accounting Principles known as GAAP, King also provides adjusted net earnings and adjusted diluted earnings per share of results.

These non-GAAP financial measures exclude the effect of amortization of intangible assets and imputed interest expense associated with the company’s $400 million convertible senior notes. In addition to those special items that do not relate to the company’s ongoing underlying business are nonrecurring or not generally predictable. Examples of these are listed in the ‘about adjusted financial results’ section of our press release issued this morning.

We believe that providing adjusted financial results enhances the analysis of our company’s ongoing underlying business, when comparing results to those of a previous or subsequent like period. However, it should be noted, that the determination of whether to exclude an item from adjusted financial results involves judgments by King’s management.

A reconciliation of King’s adjusted financial results to report financial results determined in accordance with GAAP for the second quarter ended June 30, 2010 and 2009 can be found in this morning’s press release. In order to give everyone an opportunity to ask questions in an orderly fashion, I would like to ask each participant to limit questions to one each and then return to the queue for follow-up questions. Thanks in advance for your co-operation.

Now I will turn the call over to Brian Markison. Brian?

Brian Markison

Thanks, Jack. Good morning everyone. Let me take a moment to analyze today’s call. First, Joe will take you through the financial results for the second quarter; discuss cash flow from operations, the redemption of auction rate securities and the company’s new revolving credit facility. Following Joe’s remarks I’ll report on the state of the business, which will include updates on King’s Pharmaceutical, Meridian and Animal Health businesses. I’ll also discuss the status of our very exciting and promising products in development. We will then open the lines and take your questions.

I’d now like to turn the call over to Joe.

Joe Squicciarino

Thanks, Brian, and good morning, everyone. I’d like to begin by again noting that in the second quarter of 2010, we are reporting GAAP financial results and adjusted financial results.

The adjusted financial results will continue to exclude special items as in the past, as well as the effect of the amortization of intangible assets and imputed interest expense associated with the change in accounting treatment for $400 million convertible senior notes.

Now for a review of our second quarter results; revenues for the second quarter were $371 million. Net sales of branded pharmaceuticals were $162 million, in addition we recorded approximately $26 million of royalties pertaining to CorePharma’s SKELAXIN authorized generic.

Net sales of branded SKELAXIN were $5 million compared to $102 million last year and was a major driver of unfavorability in branded pharmaceutical sales versus the same quarter in 2009.

Net sales of THROMBIN-JMI were $37 million, unchanged from the sales level of the first quarter of this year and were below last year’s second quarter sales of $49 million.

Net sales of AVINZA totaled $25 million in the second quarter, an increase of $2 million versus the first quarter of this year and a decline of $4 million versus the second quarter of 2009.

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