Par Pharmaceutical Reports Third-Quarter Sales and Earnings

SPRING VALLEY, N.Y., Oct. 27 /PRNewswire-FirstCall/ -- Par Pharmaceutical Companies, Inc. today reported total revenues of $118.7 million for the third quarter ended October 2, 2005. For the quarter, reported net income was $25.3 million and diluted earnings per share were $.74. This result includes a $13.3 million after-tax gain on the sale of shares of common stock of New River Pharmaceuticals, Inc., and a $6.4 million tax benefit resulting from the resolution of certain tax contingencies. Third-quarter results also include a non-cash charge of $4.4 million, after tax, for the impairment of assets related to Par's Abbreviated New Drug Application (ANDA) for latanaprost ophthalmic solution. Excluding these items, net income was $10.0 million and diluted earnings per share were $.29. This is compared with reported revenues of $151.6 million and a net loss of $35.1 million, or $1.03 loss per diluted share, in 2004. Excluding a non-cash charge of $51.2 million, after tax, for the write-off of acquired in-process research and development (IPR&D), net income was $16.2 million and diluted earnings per share were $.48 for the same period a year ago.

"The third quarter benefited from the introduction of Megace ES and an improving gross margin," said Scott Tarriff, president and chief executive officer. "Contributing to this improvement were new, internally-developed products such as Megace ES and Par's generic version of Ultracet(R). Par's financial performance, year-to-date, reflects the considerable investment necessary to build a branded pharmaceutical business. However, with the successful launch of Megace ES now underway, Par has passed an important milestone. We believe that the Megace ES launch will ultimately be viewed as the transforming event that established Par as a successful specialty pharmaceutical company."

Third-Quarter Review

The appetite stimulant, Megace ES (megestrol acetate) concentrated oral suspension, was launched in the third quarter. Sales of Megace ES, Par's first branded pharmaceutical product, were $10.2 million. In just 13 weeks since its launch, Megace ES now holds an 8.8 percent share of new prescriptions in the U.S. market for megestrol acetate oral suspension products, according to the IMS Health national prescription audit for the week ending October 14, 2005.

In the third quarter, Par's leading generic product, tramadol hydrochloride (HCl) and acetaminophen tablets, contributed sales of $23.9 million. The product is the generic version of the analgesic Ultracet and was introduced in April 2005. Par was awarded 180 days of marketing exclusivity for being the first to file an ANDA containing a paragraph IV certification for the product.

For the third quarter, sales of paroxetine HCl tablets, the generic version of the antidepressant Paxil(R), megestrol acetate oral suspension, the generic form of Megace, and fluoxetine, the generic equivalent of Prozac(R), totaled $19.2 million. This is compared with total sales of $59.0 million in the same period a year ago. The lower sales of these three products primarily reflect the impact of increased generic competition and its corresponding effect on pricing and market share.

Par's third-quarter gross margin was 45 percent of sales, compared to 39 percent in 2004. The increase in the company's gross margin reflects, in part, the introduction of new, internally-developed products. These higher- value products include Megace ES, and tramadol HCl and acetaminophen tablets.

Third-quarter selling, general and administrative (SG&A) expense increased 42 percent to $22.9 million. SG&A expense included $6.8 million of sales and marketing expenses associated with the introduction of Megace ES. Increased legal fees and additional personnel costs across various administrative functions also contributed to the increase in SG&A expense during the quarter.

Research and development (R&D) expense of $15.0 million declined from $17.1 million in the third quarter of 2004. This decline resulted primarily from reduced spending on biostudies, and lower outside product development costs in the quarter.

In the third quarter, Par recognized an investment gain of $13.3 million, after tax, on the sale of Par's remaining shares of common stock of New River Pharmaceuticals, Inc. Par purchased shares of New River in an initial public offering on August 5, 2004.

The third quarter includes a $6.4 million tax benefit resulting from the resolution of certain tax contingencies. Excluding this benefit, Par's effective tax rate would have been 37 percent in the period.

Nine-Month Review

For the nine months ended October 2, 2005, total revenues were $333.2 million, compared with $575.9 million for the same period in 2004. For the first nine months of the year, Par reported net income of $26.6 million and diluted earnings per share of $.77. Results for the first nine months include a $10.1 million, after tax, net gain related to investments, the $6.4 million tax benefit and the $4.4 million, after tax, asset impairment. Excluding these items, net income was $14.5 million and diluted earnings per share were $.42 for the first nine months of 2005. This is compared with reported net income of $25.0 million and reported diluted earnings per share of $.71 for the same period a year ago. Excluding the $51.2 million after-tax write-off of acquired IPR&D, and an after-tax gain of $1.7 million associated with the sale of a company facility, net income was $74.5 million and diluted earnings per share were $2.13 for the first nine months of 2004.

SG&A expense increased 40 percent to $69.4 million for the first nine months of 2005. SG&A expense included $16.8 million of sales and marketing expenses associated with the introduction of Megace ES.

For the first nine months of 2005, investment in R&D increased 43 percent to $48.4 million. This includes $19.6 million for the development of proprietary pharmaceutical products. The substantial increase in R&D underscores Par's commitment to identify, formulate and develop a continuing stream of new branded and generic pharmaceutical products. Par currently has 54 regulatory filings awaiting approval from the U.S. Food and Drug Administration (FDA). This includes 53 ANDAs targeting branded pharmaceutical products with U.S. sales of approximately $29 billion.

For the first nine months, Par recognized a net investment gain of $10.1 million, after tax. This includes a $15.3 million after-tax gain on the sale of shares of common stock of New River Pharmaceuticals, Inc. and an unrealized loss of $5.2 million, after tax, reflecting the impairment of Par's investment in Advancis Pharmaceutical Corporation.

  Since the end of the second quarter of 2005:

  * Par promoted Michael Graves and John A. MacPhee to the newly created
    positions of president, Generic Products Division, and president,
    Branded Products Division, respectively.  Mr. Graves and Mr. MacPhee
    were also elected corporate officers by Par's board of directors;

  * Par entered into an agreement with MN Pharmaceuticals, based in
    Istanbul, Turkey, to develop and market generic versions of as many as
    10 injectable pharmaceuticals;

  * Par began shipping leflunomide tablets, cholestyramine regular and light
    powder for oral suspension, and clonazepam orally disintegrating tablets
    (ODT);

  * Par announced that its licensing partner, Amide Pharmaceutical, Inc.,
    received final FDA approval and began shipping mirtazapine ODT.  The
    product was developed by Par's wholly-owned subsidiary, Kali
    Laboratories, Inc; and

  * Par terminated its partnership agreement with Advancis Pharmaceutical
    Corporation.  The decision to terminate the partnership followed the
    release of disappointing results from Advancis' Amoxicillin PULSYS Phase
    III clinical trials.

Par Pharmaceutical Companies, Inc. develops, manufactures and markets generic pharmaceuticals through its principal subsidiary, Par Pharmaceutical, Inc. The company is also developing an additional line of branded pharmaceutical products, the first of which is Megace(R) ES, for specialty markets. Par currently manufactures, markets or licenses more than 90 prescription drugs. For press release and other company information, visit http://www.parpharm.com/.

Certain statements in this press release constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. To the extent any statements made in this news release contain information that is not historical, these statements are essentially forward- looking and are subject to risks and uncertainties, including the difficulty of predicting FDA filings and approvals, acceptance and demand for new pharmaceutical products, the impact of competitive products and pricing, new product development and launch, reliance on key strategic alliances, uncertainty of patent litigation filed against us, availability of raw materials, the regulatory environment, fluctuations in operating results and other risks and uncertainties detailed from time to time in the Company's filings with the Securities and Exchange Commission, such as the Company's Form 10-K, Form 10-Q, and Form 8-K reports.

                    PAR PHARMACEUTICAL COMPANIES, INC.
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                 (In Thousands, Except Per Share Amounts)

                               Nine Months Ended        Three Months Ended
                             Oct. 2,       Oct. 3,     Oct. 2,       Oct. 3,
                              2005          2004        2005          2004
  Revenues:
    Net product sales       $326,072      $574,810    $118,257     $151,566
    Other product related
     revenues                  7,143         1,054         417            -
  Total revenues             333,215       575,864     118,674      151,566
  Cost of goods sold         191,362       373,461      64,810       92,832
    Gross margin             141,853       202,403      53,864       58,734

  Operating expenses
   (income):
    Research and development  48,374        33,722      14,987       17,060
    Acquired in-process
     research and development      -        84,000           -       84,000
    Intangible asset
     impairment                6,999             -       6,999            -
    Selling, general and
     administrative           69,442        49,676      22,936       16,128
    Gain on sale of facility       -        (2,812)          -            -
    Settlements, net               -        (2,846)          -            -
      Total operating
       expenses              124,815       161,740      44,922      117,188

      Operating income
       (loss)                 17,038        40,663       8,942      (58,454)

  Other expense, net            (310)         (130)         (5)         (55)
  Net investment gain         16,013             -      21,137            -
  Interest expense, net         (649)         (667)       (135)         (94)

  Income (loss) before
   provision (benefit)
   for income taxes           32,092        39,866      29,939      (58,603)
  Provision (benefit)
   for income taxes            5,456        14,885       4,659      (23,518)
  Net income (loss)          $26,636       $24,981     $25,280     ($35,085)

  Net income (loss) per
   share of common stock:
    Basic                      $0.78         $0.73       $0.74       ($1.03)
    Diluted                    $0.77         $0.71       $0.74       ($1.03)

  Weighted average number of
   common shares outstanding:
    Basic                     34,119        34,225      34,205       33,958
    Diluted                   34,404        35,027      34,391       33,958

  Comparative adjusted for
   asset impairment, net
   investment gain,
   tax benefits, acquired
   in-process research and
   development and gain on
   sale of facility.
  Net income (loss)
   as reported above         $26,636       $24,981     $25,280     ($35,085)
    Asset impairment,
     net of tax                4,409             -       4,409            -
    Net investment gain      (10,088)            -     (13,316)           -
    Resolution of tax
     contingencies            (6,418)            -      (6,418)           -
    Acquired in-process
     research and development,
     net of tax                    -        51,240           -       51,240
    Gain on sale of facility,
     net of tax                    -        (1,715)          -            -
  Net income                 $14,539       $74,506      $9,955      $16,155

  Net income per share of
   common stock:
    Basic                      $0.43         $2.18       $0.29        $0.48
    Diluted                    $0.42         $2.13       $0.29        $0.48


                    PAR PHARMACEUTICAL COMPANIES, INC.
                  CONSOLIDATED CONDENSED BALANCE SHEETS
                              (In Thousands)

                                               Oct. 2,           Dec. 31,
                                                2005              2004
  Assets:
    Current assets:
      Cash and cash equivalents                $59,903           $36,534
      Available for sale securities             95,078           151,854
      Accounts receivable, net                 196,714           149,107
      Inventories, net                          99,812            86,835
      Deferred tax assets, prepaid
       expenses and other current assets        47,016            69,652
    Total current assets                       498,523           493,982

    Property, plant and equipment, net          81,653            66,642
    Investments                                 21,771            25,271
    Goodwill and intangible assets, net        122,888           129,410
    Non-current deferred tax assets, deferred
     charges and other assets                   51,423            53,699

  Total assets                                $776,258          $769,004

  Liabilities and stockholders' equity:
    Current liabilities:
      Short-term and current portion of
       long-term debt                           $1,499            $4,348
      Accounts payable                          71,987            85,981
      Accrued expenses and other
       current liabilities                      35,575            25,299
      Income taxes payable                       5,213            39,116
    Total current liabilities                  114,274           154,744

    Long-term debt, less current portion       200,120           200,275
    Other long-term liabilities                    395               395

    Stockholders' equity                       461,469           413,590

  Total liabilities and stockholders' equity  $776,258          $769,004