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Executives

Carol A. Cox - Sr. VP, Global IR and Corporate Communications

Bruce L. Downey - Chairman and CEO

William T. McKee - EVP and CFO

Christine A. Mundkur - CEO of Barr Laboratories, Inc.

G. Frederick Wilkinson - CEO of Duramed Pharmaceuticals, Inc.

Analysts

Randall Stanicky - Goldman Sachs

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

Ken Cacciatore - Cowen & Company

Corey Davis - Natixis Bleichroeder

Tim Chiang - FTN Midwest

Marc Goodman - Credit Suisse

David Buck - Buckingham Research Group

Michael Tong - Wachovia Securities

Gregg Gilbert - Merrill Lynch

Richard Silver - Barclays Capital

Edmund Kim - J.P. Morgan

Barr Pharmaceuticals, Inc. (BRL) Q3 2008 Earnings Call November 6, 2008 9:00 AM ET

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Barr Pharmaceuticals Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions]. As a reminder this conference is being recorded.

I would now like to turn the conference over to Carol Cox, please go ahead.

Carol A. Cox - Senior Vice President, Global Investor Relations and Corporate Communications

Thank you, Mary. Good morning, everyone, and welcome to Barr's earnings conference call for the company's third quarter and nine months ended September 30, 2008. Early this morning we issued our press release through PR Newswire and have posted a copy on our website at www.barrlabs.com. A copy of the release has also been provided to the Securities and Exchange Commission on Form 8-K.

This morning's conference call is being webcast live and can be accessed through our website. A replay of the conference call will be available from 11:00 AM Eastern Time today November 6th, through 11:59 PM Eastern Time on November 13th.

Joining me on today's call are Bruce Downey, our Chairman and CEO as well as Bill McKee, our Chief Financial Officer. Also available for question and answer portion of the call are Christine Mundkur, the CEO of Barr Laboratories and Fred Wilkinson, CEO of our branded subsidiary Duramed Pharmaceuticals.

Bruce will provide an overview of the financial results for the quarter and the nine months in the September 30, 2008 and provide an overview of the company's updated guidance for 2008. Following Bruce's prepared remarks, Bill McKee will review the financial results for the quarter in greater detail. Following these prepared remarks we will open the call to question and answer.

Before we move on to the prepared remarks I would like to take a moment to remind investors of several matters. First, in order to provide more transparency in to the adjustments included in our adjusted earnings, our release includes a chart showing our consolidated P&L on a U.S. GAAP basis, a column for the adjustments impacting each line item, and their resulting adjusted P&L.

Secondly, our... for our special shareholders meeting to vote on the pending acquisition of Barr by Teva Pharmaceuticals will be held on November 21, 2008 in New Jersey. Finally I would like remind investors that Barr co-operates on this conference call by reference. The risks and uncertainties set forth under the heading forward-looking statements in our earnings release and in our most recent filings with the SEC all of which are available on the Investor Relations section of the company's website.

Should statements made by management contain information that is not historical these statements are essentially forward-looking and are subject to risks and uncertainties and consequently actual results may differ materially from those expressed or implied in today's earnings conference call. I would now like to introduce Bruce Downey.

Bruce L. Downey - Chairman and Chief Executive Officer

Thank you Carol, and good morning everyone. It's a little nostalgic for me. It's my 63rd and probably last quarterly conference call to announce our earnings and I'm pleased to have the final call such a strong quarter both from a financial standpoint and as an operational stand point.

Financially, we have earned $0.83 a share on adjusted basis versus a $0.71 a year ago and that those earnings reflect strong sales on all segments of our business. Our proprietary sales were strong, our U.S. generic sales were very strong, as were our European and rest of world sales. In total of sales for the quarter was $737 million versus $602 million a year ago.

Our margins for the quarter were flat or slightly down and although I didn't perform a detailed analysis, I believe that the slight downward trend in margins principally attributable to the impact of Ocella, our new oral contraceptive generic version of Yasmin, where we have a partner and the consequence of the profit split if it carries a lower gross margin than the other OCs in our portfolio. So, I think the margins were also strong given that reality.

Beyond the financials, we had a very good quarter across the company and achieving a number of milestones. In the R&D area we filed our first BLA for the Adenovirus vaccine. We received approval for low SEASONIQUE in our brand portfolio and anticipate launching that product in the first quarter of 2009. We continue to have strong performance in the generic area and filings both in the U.S. and around the world and continue to have a very robust pipeline and which bodes well for the future of Barr and then Barr as a part of Teva later on.

In the operational area we had continued to show great improvement in our customer service levels in Europe. This was a trouble spot for us following the PLIVA acquisition and we focused a lot of energy in that area and I think the results are paying off. And I think in part are reflected in the higher sales in that area. And we've also significantly improved our time launches so that we're ready to launch the product in those markets as soon as they're approved.

In the patent challenge area, an area where we have been very successful over the years, we concluded two significant settlements in the Aggrenox and Mirapex cases continue to work towards settlements of a number of other products. And I'll point out that we won a very significant victory in the ciprofloxacin challenge to our patent challenge settlement in the ciprofloxacin base where the federal circuit embraced rated principals that we've... that as long as the settlement doesn't expand either the scope or the duration of the exclusivity granted by the patent, generic companies and brand companies are free to settle their differences on reasonable terms. And in fact have over the years resulted in increased profit to us and our shareholders and lower cost product for customers.

So, I can overstate how important I think that decision was and one that its been a long time coming I think. Its been five or six years that we've been defending that patent challenge settlement and finally the courts have recognized what I thought all along was the self-evident principle that these cases can be settled by getting other.

Now looking forward we have narrowed our guidance for the year from $275 million to $305 million down to $285 million to $295 million. There's still a fairly significant range in that quarter. The biggest variable being new product launches. I think all of you who followed the industry realized that the approval times of the FDA are slowing and making accurate projections to launch at times a little more challenging than they have been in the past and that remains true for us and certainly something that could impact our fourth quarter and as a result we have a fairly wide range of projection for that quarter.

As we sit here today we see, continue to see the second half significantly above the first of the year but we do see the third quarter and fourth quarters being pretty much the flat. I wonder where the other is, three months ago we thought that the fourth quarter would be higher than the third. That's in part because the third quarter turns out to be a little better than we originally had forecasted.

Apart from the operational achievements, we've also continued to work with Teva in anticipation of the acquisition going through later this year before the end of the year. We've completed renegotiating our bank loans to allow for Teva to assume those loans after close, that coupled with Teva's bridge financing and cash on hand and our cash on hand I think clears the way from a financial standpoint for our transaction and eliminates that with that risk factor. We continue to work with the FTC here in the United States and with European anti-trust authorities.

Again I see the issues there as routine and no impediment to the close of the transaction. We have worked with Teva management within the limits allowed by the FTC and other legal authorities to prepare for the acquisition, so that the transition will be smooth as possible and as Carol mentioned in her opening remarks we have scheduled our special shareholder meeting for November 21st to consider the move on of the acquisition. Based on our conversations with shareholders, large shareholders we expect, we anticipate that we be received positively by the shareholders and again we see no impediment on the shareholder vote to concluding this transaction.

So for the 63rd and final call I think the shift is righted and going in the right direction. And I look forward to the future. I'll turn it over to Bill to provide a little more detail on the financial thoughts of the quarter and following his remarks.

William T. McKee - Executive Vice President and Chief Financial Officer

Okay thanks Bruce. Let me kick that off with the revenues as Bruce stated in his remarks, the total revenues for the quarter were $737 million which were up 23% compared to last year and also up a strong 19% on a constant currency basis. And the higher total revenues were driven primarily by higher product sales.

Product sales in the quarter were $695 million, up 24% or about a $136 million compared to the same period last year, reflecting higher sales in both our generic and proprietary segments. On a constant currency basis total product sales increased 20% as compared to the prior year.

Looking at the generic segment, the sales of our generic products were $562 million for the September quarter, up a $128 million or 30% as compared to last year and also up strong 24% on a constant exchange basis reflecting higher sales in both our North American and rest of world markets. Of the total $562 million generic product sales, North America accounted for approximately $350 million while the rest of the world accounted for the remaining $212 million.

Our North American sales up $350 million were up $74 million or 27% versus prior year, driven by higher year-over-year sales in both our OC and non-OC product lines. The generic OCs totaled $159 million in the quarter, which represented a $47 million or 42% increase as compared to last year.

The year-over-year increase primarily reflects the over $50 million of sales of Ocella, our generic version of Barr's Yasmin which we launched in June and about $3 million contributions from TriLegest which we launched in October of 2007. The increases from these products were partially offset by lower sales across most of our other generic OCs, primarily due to lower market shares, resulting from a change in the customer mix which we've talked about a couple of times already during the year.

Our non-OC sales in North America totaled a $192 million in the September quarter, an increase of $27 million or 17% driven by higher sales of our Dex family of products and Claravis principally due to higher market shares as a result of competitors leaving the markets or exiting the markets under those products as well as higher sales of Vitamin D due to higher demand. The year-over-year increase was also helped by higher sales of [indiscernible] which we launched in February of 2008 and sales from the August 2008 launch of Galantamine.

As we look forward into the fourth quarter we anticipate that our generic North American sales will be up slightly in Q4 compared to Q3 with OCs down slightly and our non OCs up, which as Bruce mentioned includes contributions from anticipated product launches occurring before the end of the calendar year.

In our rest of world sales, we had sales of $212 million in the quarter, an increase of $54 million, or 34% as compared to last year. On a constant currency basis, our rest of world sales increased $32 million or 20% reflecting strong year-over-year sales across all our major markets and including about $10 million in new product launches. Our rest of world sales benefited from strong unit sales growth in our key markets as well as reduced product shortages as compared to last year, as well as the acquisition of ORCA in our German market in September of 2007.

Within some of our key markets, Poland had a strong quarter and continued to see strong demand from pharmacies that fueled the growth of our top products and as well they benefited from new product launches. In Russia we saw over 20% constant exchange rate growth due to the continued growth of the markets, a strong tender business, improved physicians on products that we had some shortages on last year, as well as the benefits of increased investments in our medical reps in that market where we increased by about 70 reps from about from April of 2007. So all these factors contributed to strong growth in the Russian market.

Looking forward into the fourth quarter, we do anticipate our rest of world sales to be up slightly in the fourth quarter as compared to the third quarter. Turning to the proprietary segment, the sales for the September quarter totaled $133 million, an increase of $8 million or 7% from the same period last year. The year-over-year increase reflected higher sales of SEASONIQUE and Plan B, both due to higher demand and pricing. In addition we had higher sales of Diamox which benefited from higher pricing in that market. These increases combined with the expected sales in our non-promoted line, due at least in part to some customer purchase timing issues more than offset lower sales of SEASONALE and the continued generic erosion of Cenestin.

In the fourth quarter, we do anticipate proprietary sales being down compared to the third quarter and at this point, it looks to us probably in the high single digits, maybe 8% to 10% down in Q4 versus Q3. Alliance and development revenue totaled about $33 million in the September quarter, relatively flat as compared to prior year, with higher revenues earned under our license agreement with Shire, offsetting lower revenues from our profit sharing agreement with Teva on generic Allegra and lower development fees earned from the Department of Defense on Adenovirus project.

In the fourth quarter, we do anticipate our alliance and development revenues to be down compared to Q3 primarily due to lower payments from EBIT on Niaspan Advicor co-promotion agreement as we hit our annual revenue caps in the early part of the fourth quarter. So what we anticipate seeing in this upcoming fourth quarter is consistent with what we've seen in prior years as we hit the caps under that agreement, we see the revenues fall off pretty significantly in Q4 versus Q3 from that revenue source.

On the margin side, as Bruce reported earlier our overall reported margin on product sales for the quarter was about 52% which was down slightly compared to the 53% in the same period last year. Excluding the impact of our adjusted items, our overall adjusted margin was down... was 58% which was down just under 3 percentage points from 61% in the prior year. The decline in the overall margins as compared to last year reflects somewhat lower margins in the generic segment offset somewhat by higher margins in the proprietary segments.

In the generic segment, the reported gross margins for the quarter was about 46% and was down a little less than 1% compared to the prior year. Excluding adjustments, the adjusted margin was approximately 52% as compared to 54% last year. As Bruce mentioned in the current year, both the reported and adjusted margins were negatively impacted by the sales of our generic Ocella, which generated significant sales in the period but carries far lower margin than our overall rates.

We look in to the fourth quarter, our adjusted margins on generic product sales are expected to be slightly higher than they were in the third quarter. Turning to the proprietary segment margins, the reported margins for the quarter were 76% relatively flat as compared to the same period last year and excluding the impact of amortization costs, the adjusted margin came in at about 87%, an increase of 1% as compared to the same period last year.

And for the fourth quarter, the adjusted margins on the proprietary product sales are expected to be in line to slightly lower than the third quarter in part due to the mix of sales between our higher and lower margin product lines.

In the operating expenses, our SG&A expenses were $234 million in the September quarter, up 23% or $44 million compared to last year. Excluding the charges which are detailed in our press release our adjusted SG&A increased $16 million from last year. Of that increase about $10 million reflects the impact of the weakening dollar. The remaining increase versus last year reflects higher costs in Russia, Hungary, and Poland to support expanded sales forces in those countries as well as higher IT and legal costs in the U.S. which more than offset lower proprietary sales and marketing costs due to lower DTC spend in Q3 supporting SEASONIQUE.

As we look forward into the fourth quarter the SG&A costs in total are expected to increase about $15 million to $20 million or so primarily reflecting higher sales and marketing costs offset by somewhat lower G&A expenses. The sales and marketing increases include higher proprietary sales and marketing costs supporting our DTC campaign for Plan B as well as higher sales and marketing costs in our rest of world markets supporting expanded sales force higher to promote activities in key markets.

The R&D expenses for the quarter increased by about $8 million as compared to the prior year and totaled about $70 million. And the $8 million increase included about $3 million related to foreign currency changes. The remaining $5 million increase primarily related to higher proprietary clinical study costs in the U.S. Looking forward the fourth quarter R&D costs are anticipated to be inline with Q3 somewhat higher generic spending offsetting somewhat lower proprietary spending.

Interest income and expense for the quarter was $21 million of net expense as compared to $30 million of net expense in the same quarter last year. The improvement for lower expense this year was primarily due to lower interest expense caused by lower debt balances and lower interest rates on your debt. The lower interest expense was somewhat offset by lower interest income, due to declining interest rates and lower average daily cash balances.

As of September, we had total debt of approximately $1.950 billion, $1.6 billion which remains from the acquisition, while our cash, cash equivalents and short term marketable securities totaled around $600 million. During the third quarter, we made our scheduled principle repayments of just under $60 million on our term loan facilities.

On our other expense and income line, we've reported a loss of $11.4 million in the third quarter which was compared to a $7.6 million gain, last year. This significant shift reflects the losses arising from a sharp reversal in the U.S. dollar values as compared to last year as well as a gain of about $4 million on the sale of a derivative contract which occurred last year, and wasn't repeated in the current year.

The income taxes or reported effective tax rate for the quarter was 43.6% as compared to 24.4% in the third quarter of 2007. The higher reported rate in the current year reflects a change in the mix of income between U.S. and foreign tax jurisdictions, a shift in the company's investment portfolio from tax exempts to taxable securities as well as our inability in the current year to utilize the R&D tax credit which expired at the end of last year and wasn't reenacted until after the close of the current quarter.

In addition, last years rate was positively intact, was lowered by $9. 6 million benefit arising from a adjustment towards a deferred tax liabilities in Germany, that benefit was not repeated in the current year. Our adjusted tax rate in the current quarter was a little over 36% which was up from about 33% in the third quarter last year primarily due to earnings mix, the lower tax exempts income in the current year, and because we were unable to report the benefit from the R&D tax credit that we did take in last years number.

Although our tax rates through the third quarter have been negatively impacted as compared to last year by the absence of the U.S. R&D tax credit, the benefit arising from the reenactment of the credit in October will be calculated as if it was in place all year and that full benefit will be reflected in our fourth quarter and reflected in our full year rates. Accordingly, we expect our adjusted tax rate in Q4 to be several percentage points lower than Q3's rates and will help lower our forecasted adjusted tax rate for the year to around 35% which was in line with the guidance that we have given throughout the year.

Our EBITDA for the quarter was a $170 million which was up about 10% as compared to last year reflecting primarily a 12% increase in our operating earnings. Cash flows for the quarter totaled around $80 million bringing our total operating cash flows for the nine months ended September to just under $250 million, and our investing activities for the quarter included investments in capital spending totaling approximately $26 million.

Throughout my comments, I was sort of sprinkling in some forward-looking statements in some different lined items, but let me just try to quickly summarize some of the key items there. So, our product sales for the fourth quarter we expect to be in line perhaps slightly up versus Q3 with higher generic product sales mostly offsetting some with lower proprietary product sales. Our margins are expected to be flat to up slightly in the fourth quarter, operating expenses are forecasted to be up slightly in Q4 versus Q3. And I would just note that it's often the case in some of the operating expenses, there is certainly discretionary spending included in those programs and it's not uncommon for us to not achieve the spending rates that we forecast on the operating expense line but we are forecasting them to be up at this point in Q4 versus Q3.

We don't anticipate the same level of FX losses in the fourth quarter as we saw in the third quarter and we are anticipating fairly significant drop in the tax rate in the fourth quarter primarily reflecting the inclusion of the benefit from the R&D tax credit. So with that Carol.

Carol A. Cox - Senior Vice President, Global Investor Relations and Corporate Communications

Thanks Bill. Mary if you could please open the floor up to questions and answers and again I will just ask everyone if you could please limit your questions to one so than we can accommodate everyone, we would appreciate it. Thank you.

Question And Answer

Operator

[Operator Instructions]. Our first question comes from the line of Randall Stanicky from Goldman Sachs. Please go ahead.

Randall Stanicky - Goldman Sachs

Hey guys, thanks for the question. And I guess this is congratulation on what could be the last Barr call here. I guess just, could you update us Bruce on some of the near-term opportunities. I know Ortho TRI-CYCLEN LO, NASACORT AQ is still out there and then maybe you remind us how you're thinking about the opportunity on Adderall XR for '09?

Bruce L. Downey - Chairman and Chief Executive Officer

Well we continue to work through the agreements on TRI-CYCLEN LO, you have correctly noted that we have completed a trial of NASACORT and we have had on to acknowledge another forum that we have on going discussions about that case with the patent holder. We are hopeful of bringing those to a successful conclusion, if not it will in the hands of the court.

On the 2009, the Adderall XR we see as a very large opportunity and you know we have guaranteed six months of exclusivity and I think that product is well over billion dollars a year now in sales and I think its going to be an excellent product of 2009.

Randall Stanicky - Goldman Sachs

Any other near-term pipeline opportunities that we should be thinking about here?

William T. McKee - Executive Vice President and Chief Financial Officer

Well, as I alluded to in my prepared remarks... prepared is a strong word, in the remarks that I made, we do expect... had expected some new launches in the third quarter which we pushed off to the fourth quarter because there is some slowdowns at the FDA. We do expect some nice launches in the fourth quarter, but the significance will be lower for the year because of the shorter period of time.

Randall Stanicky - Goldman Sachs

Sure, okay I'll leave it at that. Thanks guys.

Operator

Thank you. Our next question is from the line of Ronny Gal from Bernstein, please go ahead.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

Good morning and thank you Bruce for all those wonderful conference call. We will certainly miss them.

Bruce L. Downey - Chairman and Chief Executive Officer

Well, some of the entertainment value will go down I guess.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

I'm sure it would. About its ACTIQ, where are you guys standing in terms of getting that one product approved and how do you see self implementing the Covers program which I expected to be implemented in the near future or you are working on it or can you just give us an update on that area?

Bruce L. Downey - Chairman and Chief Executive Officer

Well, I continue to believe we will be the first generic approved or simultaneously perhaps with some others first to be approved on ACTIQ and I guess the slowdown at the FDA works two way. It hurts us in terms of products we expect to be out and alone with and it also in some respect has helped us with ACTIQ wherever the slow down is caused, a delay in the approval.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

Is there still a back and forth with the agency or you are just waiting for them to finish their work?

Bruce L. Downey - Chairman and Chief Executive Officer

I will let you address that question to Christine Mundkur, she's more up to date on the back and forth with the agency.

Christine A. Mundkur - Chief Executive Officer of Barr Laboratories, Inc.

Ronny, we are still on discussions in back and forth with the agency on this particular product, mostly on the risk management plan.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

So, you kind of expect that you will be launching the risk management plan when you launch that product?

Christine A. Mundkur - Chief Executive Officer of Barr Laboratories, Inc.

That would be the expectation that there will be some sort of risk management plan, the question is which risk management plan.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

And the... kind like the discussions that there agencies having now with cellphone which appears to be essentially at the conclusion point are those driving your conversation forward essentially the agency make up the their minds what they want?

Christine A. Mundkur - Chief Executive Officer of Barr Laboratories, Inc.

It is all driven by the agency at driven by the agency at this point Ronny.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

Okay, thank you.

Operator

Thank you our next question is from line of Ken Cacciatore from Cowen and Company. Please go ahead.

Ken Cacciatore - Cowen & Company

Hi, thanks guys. Question Bruce for you back on generic Adderall XR, can you give us a little bit of sense of may be the difference in launching a generic one as a schedule 2 substance that maybe the rate of erosion and may be also touch on if pricing is a bit different in this type of environment when you haven't authorized? And then on Evista, could you talk to us and if not specifically to this product maybe hypothetically, if the company you being acquired obviously you have the exclusivity. There is some thought that may be you don't have the right formulation and Teva does. Is it possible to match exclusivity with and acquire this product or does something need to be done with that for FTC reasons? Thanks.

Bruce L. Downey - Chairman and Chief Executive Officer

Well I think that Teva will enjoy the exclusivity on the Evista product post acquisition. And turning to the first question on Adderall, there is in the very early stages of the launch a slower erosion on a Schedule 2 products because of the necessity to have the appropriate DEA forms... hard copy forms in place, but that's really a very short term disruption and after a period of... certainly a couple of weeks if not just a few days that gets worked out. So in the very early stages a little slower but over the six month period it'll have a little impact.

Ken Cacciatore - Cowen & Company

Okay. Is there any reason to believe pricing in a product like this will be different than any other type of product launch?

Bruce L. Downey - Chairman and Chief Executive Officer

I think you were expected to be consistent with what you have as the single generic in the market place and not affected by a status of Schedule 2 products.

Ken Cacciatore - Cowen & Company

Great thank you.

Operator

Thank you. Our next call is from the line of Corey Davis of Natixis. Please go ahead.

Bruce L. Downey - Chairman and Chief Executive Officer

Good morning Corey.

Corey Davis - Natixis Bleichroeder

Good morning. I apologize if I missed this but can you elaborate a little bit more on the $31 million charge for the proposed settlement offer on Allegra with Sanofi?

Bruce L. Downey - Chairman and Chief Executive Officer

Yeah,I was waiting for that question. We have adopted a practice at Barr dating back to the MIRCETTE settlement or the proposed MIRCETTE settlement several years ago. That when we make a settlement offer, firm settlement offer, whether or not it's accepted, we take a charge to earnings that would cover the cost of the offer and we have made that offer in the case Allegra and as a consequence have taken that charge even though the offer has not been accepted.

Corey Davis - Natixis Bleichroeder

Has the offer been rejected?

Bruce L. Downey - Chairman and Chief Executive Officer

It's pending.

Corey Davis - Natixis Bleichroeder

And does the offer also include Allegra D?

Bruce L. Downey - Chairman and Chief Executive Officer

Well, there would be no charge in Allegra D, because there have been no sale of the product.

Corey Davis - Natixis Bleichroeder

So, now.

Bruce L. Downey - Chairman and Chief Executive Officer

Its neither a no or yes. We have made... I think it's fair to say we have made a settlement offer on all three products from Sanofi the NASACORT, Allegra D, and Allegra. And the Allegra alone would carry a charge because of the past sales.

Corey Davis - Natixis Bleichroeder

Okay, great. Thanks Bruce.

Operator

Thank you. Our next call is from the line of Tim Chiang from FTN Midwest. Please go ahead.

Bruce L. Downey - Chairman and Chief Executive Officer

Good morning.

Tim Chiang - FTN Midwest

Morning Bruce. So, now that the action has been decided, I mean is it your expectation that the ODG is going to get additional funding. I mean you have been sort of a leader of GPHA over the years, I mean, what are your thoughts heading into the next couple of years for the generic drug industry?

Bruce L. Downey - Chairman and Chief Executive Officer

The industry and the agency work very hard over the course of 2007, to achieve funding through a user feed program. We're unable to reach agreement with the agency on the parameters of that program and I think it's fair to say that we and the industry would welcome the resumption of those talks and hopefully a successful conclusion that would provide additional funding for the oxygeneric drug. I'll say that its been, I guess complicated by the high visibility of the foreign inspection issue that's been, that is in congress, I think the recognized need to provide additional funds to have those inspections. So its something we've looked forward to achieving but it's somewhat more complicated than it appear to be a year and half ago, because of this foreign inspection issue.

Tim Chiang - FTN Midwest

And any thoughts on the biologic side. I mean certainly you guys have made, some hefty investments over the years in that space, I mean do you --

Bruce L. Downey - Chairman and Chief Executive Officer

Well I think that the election is a positive towards achieving a generic biological legislation but I think, I thought all along it would be accomplished in 2009 or as late as 2010 and I certainly continue to believe that.

Tim Chiang - FTN Midwest

Alright, thanks. Congrats Bruce.

Bruce L. Downey - Chairman and Chief Executive Officer

Thanks.

Operator

Thank you. Our next question is from the line of Marc Goodman from Credit Suisse. Please go ahead

Bruce L. Downey - Chairman and Chief Executive Officer

Hi, Mark. All the usual suspect this morning, right.

Marc Goodman - Credit Suisse

Yeah, I suppose so, Bruce thanks. Can you just give us I guess one last update on what's happening in the woman's health pipeline and bio stimulus pipeline.

Bruce L. Downey - Chairman and Chief Executive Officer

Well we have two products in clinical trials in the biologics area and Fred can give you that more detail on that woman's health. We have at least a half a dozen products either at the agency or in Phase III clinical for the woman healthcare business so that pipeline remains rich and one that I think is self perpetuating and its going be a business that continues to do well and grow.

Marc Goodman - Credit Suisse

So, you had two in the pipeline three months ago, I mean things were just progressing on plan?

Bruce L. Downey - Chairman and Chief Executive Officer

Two in the clinical trials.

Marc Goodman - Credit Suisse

Yeah.

Bruce L. Downey - Chairman and Chief Executive Officer

But we have additional products in what I say in the pipeline and development but not for the stage of clinical trials yet.

Marc Goodman - Credit Suisse

Right. And so those trials are expected to finish when?

Bruce L. Downey - Chairman and Chief Executive Officer

I don't think we said and I don't think I will this morning.

Marc Goodman - Credit Suisse

Okay

Bruce L. Downey - Chairman and Chief Executive Officer

But I had said and I will repeat it, if we need to, we will be prepared to pursue these opportunities as BLA as opposed to some abbreviated BLA.

And then whether the timing of the completion of clinical trials in part depends on generic biological legislation. I mean if there is abbreviated pathway and that results in a abbreviated clinical program or a lower or a smaller clinical program that could be concluded faster than otherwise would be the case.

Marc Goodman - Credit Suisse

Okay. And then on the women's health?

Bruce L. Downey - Chairman and Chief Executive Officer

Well, I have said we have at least a half a dozen products either at the agency or in page 3 clinical trials. We just got LO SEASONIQUE approved. 1we have continued growth into the year.

Marc Goodman - Credit Suisse

Any other approvals coming in the next 6 months or so?

Bruce L. Downey - Chairman and Chief Executive Officer

I'll let Fred answer that question. I think the answer... but I think the answer is yes.

G. Frederick Wilkinson - Chief Executive Officer of Duramed Pharmaceuticals, Inc.

We're anticipating at least one more approval this year. We have three products that are still pending at the agency, and there are at least three products that are reaching near stage completion on Phase III. So again pipeline looks rich to have continued flow of Phase II into Phase III, Phase III into the filing stage. So, we discontinue to build the proprietary business based on the internal growth as well as some of the external activities that were going on and trying to hunt down some additional products.

Marc Goodman - Credit Suisse

Thanks.

Operator

Thank you, our question is from the line of David Buck from the Buckingham Research Group. Please go ahead.

David Buck - Buckingham Research Group

Yes. Thanks for taking the question. Since it's probably the last conference call just, so congratulations for the run over the years. And the question is on the outlook for the proprietary business, particularly ParaGard. Can you talk a talk a little bit about where you see that product and also on the pipeline products for Adenovirus, what do think the market opportunity is there? And, Bruce just looking at the filing for the merger with Teva, you had obviously put out projections from 2008 to 2012 and looking at the numbers for 2010, essentially flattish growth and just wondering if that was just a comparison on Adderall XR launch the generic or some other factors there? Thanks.

Bruce L. Downey - Chairman and Chief Executive Officer

Taking the last one first, the 2010 versus 2009 was in fact the principally, the flatten has been principally driven by decline in Adderall XR following the six months exclusivity. So that was the case. Adeno, we're in discussion with the department on pricing and volumes and we're also exploring ex-U.S. opportunities and I don't think we've quantified them publicly but we've see it as a very nice product and one that provide stable revenue and profits for a very long period of time.

And on the ParaGard, I've always looked at Marina as the leader and ParaGard is catching up to that product and Marina continues to grow and I think well over $150 million a year now and I see no reason why ParaGard can't continue to grow on a same track.

David Buck - Buckingham Research Group

Okay, thank you.

Operator

Thanks our next question is from the line of Michael Tong from Wachovia. Please go ahead.

Michael Tong - Wachovia Securities

Hi, just a quick one actually for Bill. When you say SG&A in Q4 is going to be up $15 million, was that versus Q3 or was it versus Q4 of last year?

William T. McKee - Executive Vice President and Chief Financial Officer

It was sequential, Michael.

Michael Tong - Wachovia Securities

Okay and then quickly as I looked at the narrowing of the guidance range, at least the top end has come down by about $0.10, how much of that is due to Q3 products approval getting pushed into Q4 resulting in less contribution as Bruce has mentioned or how much of that is due to products that you have already... that you originally expected for Q4 now being pushed into 2009?

Bruce L. Downey - Chairman and Chief Executive Officer

I think it's more of those from three to four.

Michael Tong - Wachovia Securities

Fair enough, thanks very much

Operator

Thank you. Our next question is from the line of Gregg Gilbert from Merrill Lynch. Please go ahead.

Gregg Gilbert - Merrill Lynch

Good morning, how are you Bruce?

Bruce L. Downey - Chairman and Chief Executive Officer

Great.

Gregg Gilbert - Merrill Lynch

So what question can I ask you Bruce that will lead to you to this goal something for the first time?

Bruce L. Downey - Chairman and Chief Executive Officer

I hope to conclude my 63rd call without making that mistake. I have made other mistakes but I don't think I have made that one.

Gregg Gilbert - Merrill Lynch

It is not a mistake. Okay, I guess I'll have to ask you about Washington stuff and you talked about biosimilar, sounds like no change there to your outlook. What about patent settlements especially in light of the recent court ruling? That's my first part. The second part is factored by a similar, do you think it is relevant or do you think Waxman replacing Dingle, if that happens is a relevant data point, thanks?

William T. McKee - Executive Vice President and Chief Financial Officer

On the settlement I think you... are those in Congress who believe there should be legislation that would change the law to impair our ability to settle our cases. I think the logic of the opinion of the federal circuit is compelling. I personally see no reason for that legislation.

I think it's ill advised and I am sure our industry will continue to oppose it and I am hopeful that we'll be successful. On biosimilars, I think, clearly Congressman Waxman is a leader and advocating for of bio-generics and as introduced over the last two sessions of Congress, the legislation that would achieve that and I think whether he becomes the Chairman of the Commerce Committee or remains Chairman of the Oversight Committee, he will be active and strong asset for that legislation.

Gregg Gilbert - Merrill Lynch

Thanks and consider my first question.

Bruce L. Downey - Chairman and Chief Executive Officer

Did I or miss did I not tell?

Gregg Gilbert - Merrill Lynch

Yeah, the thing about this calls in something new, that all.

Bruce L. Downey - Chairman and Chief Executive Officer

Give us the next 10 minutes without doing it.

Gregg Gilbert - Merrill Lynch

Alright, thanks Bruce.

Operator

Thank you. Our next question is from the line of Richard Silver from Barclays. Please go ahead.

Richard Silver - Barclays Capital

Good morning and congratulations and thanks for all the good years working together for the whole team. Bruce?

Bruce L. Downey - Chairman and Chief Executive Officer

Yes?

Richard Silver - Barclays Capital

Yes, so question on you're ANDA filings. Can you tell us how many of those are oral contraceptives?

Bruce L. Downey - Chairman and Chief Executive Officer

On the ANDA filings?

Richard Silver - Barclays Capital

Yeah.

Bruce L. Downey - Chairman and Chief Executive Officer

I believe there are a couple, yes. I know it's still out there.

Richard Silver - Barclays Capital

Other than one's that haven't been, any others that have not been disclosed.

Bruce L. Downey - Chairman and Chief Executive Officer

Well if there are we are not going to disclose them now.

Richard Silver - Barclays Capital

No, I meant in terms of the quantity.

Bruce L. Downey - Chairman and Chief Executive Officer

No. As you know we have a very large portfolio and a very few left to generic, so other than the ones that have been disclosed in patent challenges I can't off of top of my head think of any of those serving those significant ones?

Richard Silver - Barclays Capital

Okay. On settlement discussion, is it possible that NASACORT and Allegra D could be sort of bundled together as part of the patent settlement discussions?

Bruce L. Downey - Chairman and Chief Executive Officer

Well because you are talking to the same party; their conversations are often contemporaneous but they aren't tied together.

Richard Silver - Barclays Capital

Okay. And then I don't know if this was mentioned in the prepared remarks but quarter-over-quarter trends looking at proprietary products in the U.S. non-generic OCs, can you fill a little bit more qualitative commentary there?

Bruce L. Downey - Chairman and Chief Executive Officer

I thought Bill covered that up; my recollection is have the projections right in front of me. We see for proprietary down slightly quarter-over-quarter and non-OC generics U.S. up slightly.

Richard Silver - Barclays Capital

I'm sorry I'm talking more about 3Q versus 2Q?

Bruce L. Downey - Chairman and Chief Executive Officer

Well they were both up. I don't have Q2 in front of me but we saw I think in all three areas of our products sales U.S., Europe and brand up certainly up strongly Q3 versus a year ago.

William T. McKee - Executive Vice President and Chief Financial Officer

Yeah, Rich its Bill. Our proprietary was up significantly in Q3 versus Q2, higher Plan B sales, higher ParaGard sales, high SEASONIQUE sales, and higher sales in our non-promoted line of products. I think at least a portion of the increases in the non-promoted category, probably, were just little accelerated from what we saw in the fourth quarter, got accelerated into the third quarter a little bit.

As far as the other U.S. but the generic OC's were up slightly in Q3 versus Q2 and then the other U.S. generics were up and are being about 4%, $185 million to $191 million. And we had some strong growth in some of the products that we had some pickups on Claravis and the Dex family of products because some competitors went out of the markets on those products. So, those are the principle drivers of the sequential increase in the other generic U.S. product line.

Richard Silver - Barclays Capital

Okay. Thanks very much.

Operator

Your next question is from the line of Edmund Kim, from J.P. Morgan, please go ahead.

Edmund Kim - J.P. Morgan

Good morning. Can you just talk about the growth opportunity that you're seeing in Russia and Poland, do you expect the trend to continue at the level concurrently, how much of the growth in those markets require greater sales and marketing resources?

Bruce L. Downey - Chairman and Chief Executive Officer

Well those are both branded generic markets and require promotion. I think Bill mentioned in his remarks that over the last 18 months, we had increased our sales force in Russia and I think the increased sales that we see in that market are partially is not principally due to the increased sales effort and I see both of them as great growth markets going forward so I think growth there can continue, particularly in Russia.

Edmund Kim - J.P. Morgan

And I guess if I could just one more, the 70 ANDAs that you disclosed in the press release how many of those are first to file list?

Bruce L. Downey - Chairman and Chief Executive Officer

I think its 17 or 18 we believe to be first to file of the 31. Carol, you have the score card there, I think its 31... ParaGard is pending 17 or 18 first to file, another four or five or so that are shared exclusivity.

Carol A. Cox - Senior Vice President, Global Investor Relations and Corporate Communications

That's about right. And then there is also additional products, the 31 is included in the 70, so there is probably some in there that maybe first to file but we have not yet announced or been sued on.

Bruce L. Downey - Chairman and Chief Executive Officer

Yeah and I think, of the non- first to file, several of them are injectable products.

Edmund Kim - J.P. Morgan

Okay, thank you.

Operator

Thank you. Our next question is from the line of Corey Davis from Natixis. Please go ahead.

Corey Davis - Natixis Bleichroeder

Just a one quick follow up on Allegra D in your conversations, negotiations whatever they are with the FTC, do you anticipate that Teva would have to give back its rights to impacts on its Allegra D?

Bruce L. Downey - Chairman and Chief Executive Officer

I don't think we've disclosed what the products are of the FTC and I don't think we will do it now.

Corey Davis - Natixis Bleichroeder

Gregg would really like you to? It's all I had, thanks.

Carol A. Cox - Senior Vice President, Global Investor Relations and Corporate Communications

Mary I think we just have one more call, one more person on and we will finish up with that last with Ronny.

Operator

Certainly, the line of Ronny Gal from Bernstein. Please go ahead.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

So Bruce they couldn't let you get away with that comment without at least asking you for little bit more commentary. If I heard correctly with Paxil [ph] you have essentially converted your application from a part four to a part three, essentially allowing other generics to come in if they can and manufacture Paxil, do I have this correctly?

Bruce L. Downey - Chairman and Chief Executive Officer

I don't think you have that, no.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

New application was not compared from paragraph four to paragraph three upon the settlement?

Bruce L. Downey - Chairman and Chief Executive Officer

On which product?

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

Paxil, the decision by the FTC. [Indiscernible] Paxil, right?

Bruce L. Downey - Chairman and Chief Executive Officer

No.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

No, I am referring to the appeal, the appeal that you guys just on your settlement.

Bruce L. Downey - Chairman and Chief Executive Officer

Cipro.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

Ciprofloxacin, sorry. So, with Cipro I believe you converted your paragraph four to paragraph three.

Bruce L. Downey - Chairman and Chief Executive Officer

Correct.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

So, essentially you were no longer blocking other generics who were coming in if they can indeed undo the patent?

Bruce L. Downey - Chairman and Chief Executive Officer

That would have been effective. Yes, others did challenge and lost the case.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

Right. So, essentially I guess my point is that that would not be a problem if the law changes for you to forfeit the exclusivity in cases of settlements?

Bruce L. Downey - Chairman and Chief Executive Officer

Well, all that depends on the what the changes in the law?

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

Okay.

Bruce L. Downey - Chairman and Chief Executive Officer

I think what was challenged there was the part of the settlement that took the form of the contingent supply grid where Bayer had the option of either paying us stated amounts in the settlement agreement or allowing us to sell the product. And it was at their option. And, at the end of the term we had an absolute right to launch six months prior to patent expiry which we did.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

Great. Okay.

Bruce L. Downey - Chairman and Chief Executive Officer

And that was the provision of the settlement that was under the scan.

Aaron (Ronny) Gal - Stanford C. Bernstein & Company

Okay, I understand. Thank you very much.

Bruce L. Downey - Chairman and Chief Executive Officer

Is that the last call Carol?

Carol A. Cox - Senior Vice President, Global Investor Relations and Corporate Communications

I think that's last, Mary, do we have anyone else in queue?

Operator

We don't.

Bruce L. Downey - Chairman and Chief Executive Officer

I want to just give my final remark. Over the years I've heard a lot of my colleagues who are CEOs of public companies sometimes complained about having to do these calls and the various analysts meetings that we attend and the one-on-one sessions and the like and I got to say I've never understood that. I always felt that it was really an obligation of public company's to do that and I would really enjoy the relationships that we have developed over the years between myself and Bill and Carol others at Barr and our shareholders and the analyst that cover us. And I found that very rewarding part of the job and it is a part that I will definitely miss. And comments of all the sell side analysts, as you continue to have these meetings in nice places like to build more and maybe... or other places, if I invited I'll be happy to come. So with that I conclude the call. I will actually miss the conference call and wish you all well.

Carol A. Cox - Senior Vice President, Global Investor Relations and Corporate Communications

Thanks Bruce. Mary if you could just provide them replay information. Thank you everyone.

Operator

Thank you. Ladies and gentlemen this conference will be available for replay after 11:00 AM Eastern Time today through midnight, November 13th. You may access the replay service, by dialing 1-800-475-6701 and entering the access code 961801. International participants may dial 320-365-3844 and use the same access code 961801. It does conclude our conference for today, thank you for using AT&T Executive Teleconference. You may now disconnect. .

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Source: Barr Pharmaceuticals Inc. Q3 2008 Earnings Call Transcript
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