Drug maker King Pharmaceuticals Inc. (KG) announced Thursday morning that third quarter profit rose two-fold from last year on lower impairment charges in the latest quarter, despite a sharp fall in quarterly revenues. It was hurt by steep drop in sales of the blood pressure drug, Altace, due to market entry of generic substitutes. Earning per share, on an adjusted basis, declined but topped analysts' estimate by seven cents.
King Pharmaceuticals, established in 1994, is a vertically integrated branded pharmaceutical company that develops, manufactures and markets therapies and technologies primarily in specialty-driven markets including neuroscience hospital and acute care medicines.
Third Quarter Results
The Bristol, Tennessee-based pharmaceutical company posted net income of $84.75 million or $0.34 per share for the third quarter, compared to a net loss of $40.54 million or $0.17 per share in the prior-year quarter.
Results for the latest quarter include after-tax net benefit of $3 million or $0.01 per share related to the insurance recovery of legal fees, while the year-ago quarter included a total after-tax $168 million or $0.69 per share, including impaired value of the intangible assets as well as raw material inventory and related contracts associated with Altace and a charge related to the restructuring of the company's workforce.
Excluding special items, non-GAAP net income dropped to $81.69 million or $0.33 per share from $127.88 million $0.52 per share in the year-ago quarter, and topped the average estimate of eight analysts polled by First Call/Thomson Financial of $0.26 per share for the third quarter.
Total revenues for the quarter fell to $388.45 million from $ 545.85 million in the same quarter last year, hurt primarily by a plunge in Altace sales due to the market entry of generic substitutes for the blood pressure drug from December 2007. Seven Wall Street analysts had a consensus revenue estimate of $362.14 million for the third quarter.
Segmental Details
Branded pharmaceuticals net revenues for the quarter dropped to $306 million from $472 million in the comparable quarter of 2007. Altace net sales were $30 million, sharply down from $169 million in the third quarter of 2007, while Skelaxin sales were $110 million, marginally up from $106 million in the year-ago quarter. Sales of Thrombin-Jmi edged down to $67 million from $69 million in the prior-year quarter, while Levoxyl sales declined to $18 million from $21 million in the corresponding quarter a year-ago. Sales of Avinza increased to $36 million from the prior-year quarter's $32 million.
The company's Meridian Auto-injector business revenues rose to $68 million from $48 million in the year-ago quarter, while Royalty revenues totaled $18 million, down from $20 million last year, derived primarily from Adenoscan.
Other Metrics
Operating income for the latest quarter fell to $118.07 million from $175.31 million in the prior-year quarter, while total operating costs and expenses was $270.38 million, lower than $369.55 million in the year-ago quarter.
Total expenses included research and development expenses that edged down to $33.86 million from $34.89 million in the corresponding quarter a year ago, while depreciation and amortization expenses declined to $29.03 million from $34.66 million in the comparable quarter of fiscal 2007.
Total selling, general and administrative expenses fell to $106.03 million from $184.05 million in the same quarter last year. The company ended the third quarter with cash and cash equivalents of about $1.2 billion.
Commenting on the results, chairman, president and chief executive officer, Brian Markison said, "We are pleased to report that during the quarter our promoted branded products and our Meridian Auto-Injector business generated solid revenue and contributed strong cash flow. Additionally, we continued to advance key research and development programs and launched our initiative to acquire Alpharma in order to substantially improve our prospects for long-term growth."
Nine-Month Highlights
For the nine-month period, King Pharma posted net income of $215.40 million or $0.88 per share, higher than $140.16 million or $0.57 per share in the prior-year period. Excluding special items, non-GAAP net income dropped to $245.55 million or $1.00 per share from $363.37 million or $1.49 per share in the year-ago period.
Total revenues for the year-to-date period fell to $1.22 billion from $ 1.60 billion in the same period last year.
Other News
Last month, King Pharma extended its previously announced tender offer for all outstanding common shares of Alpharma Inc. (ALO) until end of day on November 21 from the earlier date of October 10, 2008. In September, King Pharma made an unsolicited tender offer to acquire all of the outstanding shares of Alpharma for a 12% sweetened price of $37.00 per share or $1.6 billion, which was also rejected. King Pharma went hostile by taking the offer directly to shareholders of Alpharma.
The proposal was made as generic competition eroded sales of King Pharma's best-selling blood pressure drug Altace. King Pharma is keen to acquire Alpharma as it has a growing branded pharmaceutical franchise in the U.S. pain market with its Kadian Capsules, and the Flector Patch 1.3%. Alpharma is also internationally recognized as a leading provider of pharmaceutical products for poultry and livestock.
Acquiring Alpharma, apart from delivering significant synergies, would also further diversify King Pharma's business with an additional source of steady cash flow from Alpharma's Animal Health division, a leading feed additives business.
It seems the pharmaceutical industry is heading for a consolidation. The threat of generic competition and quest for new drugs to strengthen the drug pipeline is considered as the primary reason for the mergers in pharmaceutical industry.
In February, King Pharma had launched its key blood pressure drug Altace in a new tablet form, while saying that it will continue to make available Altace capsules. Altace, generically known as ramipril, is indicated for the treatment of hypertension.
The company had noted in February that, Altace, which is the company's top selling drug, is expected to face stiff competition from its cheaper generic versions in coming days, as a court in September ruled against the continued validity of King Pharma's patent covering Altace.
Stock Quote
In Thursday's regular trading session, KG is currently trading at $9.45, up $0.39 or 4.30% on a volume of 0.77 million shares. In the past 52-week period, the stock has been trading in a range of $6.98 to $12.60.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.