Barr Reports Third Quarter Fiscal 2006 GAAP Earnings of $0.70 Per Share; Adjusted Earnings of $0.75 Per Share

WOODCLIFF LAKE, N.J., May 4 /PRNewswire-FirstCall/ -- Barr Pharmaceuticals, Inc. (NYSE: BRL) today reported net earnings of $76.1 million, or $0.70 per fully diluted share, for the quarter ended March 31, 2006, up 24% from net earnings of $61.3 million, or $0.58 per fully diluted share, for the same period last year. Revenues for the current quarter totaled $327 million, up 23% from $265 million in the same period last year.

The results for the quarter include a non-cash amortization charge of $7.8 million, or $0.05 per fully diluted share, related to the write-up of inventory acquired from FEI Health, LLC in November 2005. Excluding this item, adjusted earnings per fully diluted share for the third quarter of fiscal 2006 would have been $0.75.

For the nine months ended March 31, 2006, net earnings were $254 million, or $2.36 per fully diluted share, up 47% from net earnings of $173 million, or $1.63 per fully diluted share in the prior year period. Revenues for the first nine months totaled $963 million, up 26% from $767 million in the same period last year. Net earnings for the nine-month period include a benefit of $8.4 million, or $0.05 per fully diluted share, primarily related to a partial reimbursement of the $63.2 million charge the Company recorded in the fourth quarter of fiscal 2005 when it announced the agreement to acquire Mircette(R) and settle related litigation. The results also include a non-cash amortization charge of $12.5 million, or $0.07 per fully diluted share, related to the write-up of FEI inventory as described above. Excluding these two items, adjusted earnings per fully diluted share for the nine months ended March 31, 2006 would have been $2.38.

A reconciliation of GAAP earnings to adjusted earnings is presented in the table at the end of this press release.

"Increased proprietary and generic product sales, as well as $34 million of alliance, development and other revenue from our arrangements with Teva and Kos drove our strong financial performance for the quarter," said Bruce L. Downey, Barr's Chairman and CEO. "During the quarter, we continued to commit significant resources to our proprietary program, including completing the integration and training of our 100 person Specialty Sales Force, which began promoting our newly acquired ParaGard(R) T 380A IUD. We also invested in preparing for the launch of our Enjuvia(TM) hormone therapy product line in April and submitted our labeling for our SEASONIQUE(TM) extended-cycle oral contraceptive that we anticipate gaining approval for, and launching, in our September quarter."

  Revenues
  Generic Product Sales

Sales of generic products increased 6% to $200 million for the third quarter of fiscal 2006, compared to $189 million in the prior year period. For the first nine months of fiscal 2006, total generic product sales increased 10% to $617 million, compared to $561 million for the prior year period. A discussion of generic product sales for the third quarter of fiscal 2006 compared to the prior year period is presented below.

  Oral Contraceptives
  Sales of generic oral contraceptives increased 8% to $101 million for the
  third quarter of fiscal 2006, compared to $94 million in the prior year
  period. The increase in sales for the quarter was primarily related to
  increased sales of Tri-Sprintec(TM) resulting from a competitor's
  temporary supply shortage.

  Other Generic Products
  Sales of other generic products totaled $99 million in the third quarter
  of fiscal 2006, compared to $96 million in the prior year period.  This
  slight increase was attributable to increased sales of Desmopressin that
  were somewhat offset by lower sales of certain existing products. The
  Company launched Desmopressin in July 2005.

  Proprietary Product Sales

Sales of proprietary products increased 29% to $93 million in the third quarter of fiscal 2006, compared to $72 million in the prior year period. Sales of SEASONALE(R) during this period were $27 million, up 12% from $24 million for the prior year period. Sales of products acquired during the previous twelve months, including the ParaGard(R) IUD and Mircette(R) oral contraceptive, also contributed to the increase. Sales of the Company's promoted products increased 85% over the prior year period, more than offsetting a 21% decrease in sales of mature, non-promoted products. For the first nine months of fiscal 2006, proprietary product sales increased 17% to $233 million from $199 million in the prior year period.

Alliance, Development and Other Revenue

During the third quarter of fiscal 2006, the Company reported alliance, development and other revenue of $34 million, compared to $4 million in the prior year period. For the first nine months of fiscal 2006, alliance, development and other revenue totaled $113 million, compared to $7 million in the first nine months of fiscal 2005. The substantial increase for both the third quarter and the first nine months of fiscal 2006 reflects the Company's share of the profits earned from its agreement with Teva on fexofenadine hydrochloride tablets, the generic version of Allegra(R) tablets, as well as royalties and fees earned under its April 2005 agreements with Kos relating to the Niaspan(R) and Advicor(R) cholesterol lowering agents.

Stock-Based Compensation

Effective July 1, 2005, the Company began recording stock-based compensation as an expense on its income statement under SFAS 123 (R). Accordingly, results for the third quarter of fiscal 2006 included stock-based compensation expense of $7 million, or $0.04 per fully diluted share, the impact of which is recorded in cost of sales, SG&A and R&D. Results for the first nine months of fiscal 2006 included stock-based compensation expense of $21 million, or $0.12 per fully diluted share. This new accounting guidance did not impact prior year expenses and earnings.

Margins

Margins on product sales for the third quarter of fiscal 2006 were 69%, down slightly from 70% in the prior year period. Margins were negatively impacted by charges related to the inventory write-up associated with the acquisition of the ParaGard(R) inventory from FEI Health and by stock-based compensation expense recorded in cost of sales that was not present in the prior year period.

For the first nine months of each of fiscal 2005 and 2006, margins on product sales were 70%, with margins in the current period being negatively impacted by the inventory write-up and stock-based compensation expense described above.

Update on R&D Activities

Investment in research and development totaled $38 million for the third quarter of fiscal 2006, compared to $35 million in the prior year period. The increase reflects (1) increased clinical study costs; (2) the write-off of acquired in-process research and development related to the purchase of four Abbreviated New Drug Applications from Teva Pharmaceuticals and Ivax Pharmaceuticals; and (3) stock-based compensation expense. These increases were partially offset by lower third party development costs.

For the nine-month periods, investment in R&D increased to $104 million from $95 million for the prior year period for the reasons described above in the quarterly comparison. Partially offsetting the increase in R&D was a $5 million reimbursement of previously incurred costs under a third party development agreement.

Selling, General and Administrative

SG&A expenses were $87 million during the third quarter of fiscal 2006, compared to $59 million in the prior year period. The 47% year-over-year increase is primarily due to (1) higher sales and marketing costs related to the expansion of the Company's sales force and higher marketing investment for SEASONALE(R), Enjuvia(TM) and ParaGard(R); (2) amortization costs associated with the acquisition of Mircette(R) and ParaGard(R); (3) higher IT-related costs; and (4) stock-based compensation expense.

For the nine-month periods, SG&A expenses increased 22% to $222 million from $182 million for the prior year period for the reasons described above in the quarterly comparison. SG&A expenses in the nine months ended March 31, 2006 include a net benefit of $8.4 million relating to the Mircette(R) agreement, as described earlier, and a one-time, non-cash charge of $4.1 million reflecting an estimate of the fair-value of the Company's potential indemnity obligation to Teva under the Company's agreement with Teva on fexofenadine hydrochloride tablets (generic Allegra(R)).

Tax Rate

The Company's effective tax rate for the quarter ended March 31, 2006 was 35.3% compared to 35.5% for the prior year period. For the first nine months of each of fiscal 2005 and 2006, the effective tax rate remained even at 36.0%.

Balance Sheet and Cash Flows

Cash, cash equivalents and marketable securities totaled $613 million at March 31, 2006. Cash flows from operations totaled $155 million for the third quarter of fiscal 2006 and $260 million for the first nine months of fiscal 2006. Capital spending totaled $14 million during the quarter.

Financial Outlook

The Company expects its adjusted earnings per fully diluted share for the fiscal year ending June 30, 2006 to be in the range of approximately $3.08 - $3.13. This estimate excludes the impact of potential patent challenge outcomes or other business development activities that may be completed by June 30, 2006, as well as the potential impact resulting from the Company's share repurchase program, which is authorized through December 31, 2006.

Conference Call/Webcast

Barr will host a conference call at 8:30 AM Eastern time on Thursday, May 4, 2006 to discuss the results for the quarter and nine months ended March 31, 2006. The number to call from within the United States is (800) 288-8975, and participants from outside the United States should call (612) 332-1025. A replay of the conference call will be available from 12:00 Noon Eastern time on May 4th through 11:59 PM Eastern time on May 6th, and can be accessed by dialing (800) 475-6701 in the United States or (320) 365-3844 Internationally and using the access code 825661.

The conference call will also be webcast live on the Internet. Investors and other interested parties may access the live webcast through the Investor Relations section, under Calendar of Events, on Barr's website at http://www.barrlabs.com/ .

Log on at least 15 minutes before the call begins to register and download or install any necessary audio software.

Barr Pharmaceuticals, Inc., a holding company that operates through its principal subsidiaries, Barr Laboratories, Inc. and Duramed Pharmaceuticals, Inc., is engaged in the development, manufacture and marketing of generic and proprietary pharmaceuticals.

Forward-Looking Statements

Except for the historical information contained herein, the statements made in this press release constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements can be identified by their use of words such as "expects," "plans," "projects," "will," "may," "anticipates," "believes," "should," "intends," "estimates" and other words of similar meaning. Because such statements inherently involve risks and uncertainties that cannot be predicted or quantified, actual results may differ materially from those expressed or implied by such forward-looking statements depending upon a number of factors affecting the Company's business. These factors include, among others: the difficulty in predicting the timing and outcome of legal proceedings, including patent-related matters such as patent challenge settlements and patent infringement cases; the outcome of litigation arising from challenging the validity or non- infringement of patents covering our products; the difficulty of predicting the timing of FDA approvals; court and FDA decisions on exclusivity periods; the ability of competitors to extend exclusivity periods for their products; our ability to complete product development activities in the timeframes and for the costs we expect; market and customer acceptance and demand for our pharmaceutical products; our dependence on revenues from significant customers; reimbursement policies of third party payors; our dependence on revenues from significant products; the use of estimates in the preparation of our financial statements; the impact of competitive products and pricing on products, including the launch of authorized generics; the ability to launch new products in the timeframes we expect; the availability of raw materials; the availability of any product we purchase and sell as a distributor; the regulatory environment; our exposure to product liability and other lawsuits and contingencies; the increasing cost of insurance and the availability of product liability insurance coverage; our timely and successful completion of strategic initiatives, including integrating companies and products we acquire and implementing our new enterprise resource planning system; fluctuations in operating results, including the effects on such results from spending for research and development, sales and marketing activities and patent challenge activities; the inherent uncertainty associated with financial projections; changes in generally accepted accounting principles; and other risks detailed from time-to-time in our filings with the Securities and Exchange Commission, including in our Annual Report on Form 10-K for the fiscal year ended June 30, 2005.

The forward-looking statements contained in this press release speak only as of the date the statement was made. The Company undertakes no obligation (nor does it intend) to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except to the extent required under applicable law.

  Barr Pharmaceuticals, Inc. Selected Financial Data
  (in thousands, except per share amounts)
  (unaudited)
                                   Three Months Ended    Nine Months Ended
                                         March 31,            March 31,
                                      2006       2005      2006      2005
  Revenues:
   Product sales                    $293,157   $261,258  $849,336  $760,050
   Alliance, development and other
    revenue                           33,684      3,749   113,461     6,834
  Total revenues                     326,841    265,007   962,797   766,884

  Costs and expenses:
   Cost of sales                      89,642     77,653   253,436   225,350
   Selling, general and
    administrative                    87,079     59,124   221,765   181,839
   Research and development           37,705     35,488   103,711    95,139

  Earnings from operations           112,415     92,742   383,885   264,556

  Interest income                      4,213      2,825    13,117     7,219
  Interest expense                       110        287       257     1,351
  Other income (expense)               1,071       (260)      478      (409)

  Earnings before income taxes       117,589     95,020   397,223   270,015

  Income tax expense                  41,493     33,675   143,000    97,148

  Net earnings                       $76,096    $61,345  $254,223  $172,867

  Earnings per common share -
   diluted:
  Net earnings                         $0.70      $0.58     $2.36     $1.63
  Weighted average shares -
   assuming dilution                 108,547    105,892   107,607   105,962

  Stock-based compensation
   expense:
   Cost of sales                      $2,012         $-    $6,343        $-
   Selling, general and
    administrative                     3,498          -    10,125         -
   Research and development            1,423          -     4,359         -

  Total stock-based compensation
   expense                            $6,933         $-   $20,827        $-


                                      As of      As of
  Select Balance Sheet Data         March 31,   June 30,
                                        2006       2005

  Cash & cash equivalents            $14,726   $115,793
  Marketable securities - Current
   and long-term                     598,084    581,255
  Accounts receivable, net           188,052    152,599
  Other receivables                   36,474     21,411
  Inventories, net                   139,353    137,638
  Accounts payable & accrued
   liabilities                       149,809    194,171
  Working capital                    826,682    780,386
  Total assets                     1,811,640  1,482,846
  Total debt                          16,616     20,939
  Shareholders' equity             1,599,044  1,233,970


                                       Nine Months Ended
                                           March 31,
                                        2006       2005

  Cash flow provided by operations  $259,674   $256,909
  Capital expenditures                49,684     42,863



                         Barr Pharmaceuticals, Inc.
                 Reconciliation of GAAP EPS to Adjusted EPS
         For the three and nine months ended March 31, 2006 and 2005
                                 (unaudited)


                                                      Three Months Ended
                                                            March 31,
                                                    2006              2005

  Earnings per common share - assuming
   dilution, GAAP                                  $0.70             $0.58
  After tax effect of:
  Amortization expense related to
   inventory step-up                                0.05                 -
  Earnings per common share - assuming
   dilution, adjusted                              $0.75             $0.58


                                                       Nine Months Ended
                                                            March 31,
                                                    2006              2005

  Earnings per common share - assuming
   dilution, GAAP                                  $2.36             $1.63
  After tax effect of:
  Reimbursement related to Mircette
   settlement charge                               (0.05)                -
  Amortization expense related to
   inventory step-up                                0.07                 -
  Earnings per common share - assuming
   dilution, adjusted                              $2.38             $1.63

  Reconciliation of Adjusted Earnings to GAAP Earnings

To supplement its consolidated financial statements presented in accordance with accounting principles generally accepted in the United States of America ("GAAP"), the Company is providing this summary to reflect the adjusted earnings per share effect of certain unusual or infrequent charges or benefits that were taken or received in the quarter and nine months ended and March 31, 2006. The Company believes that the adjusted earnings per share information presented above provides useful information to both management and investors concerning the approximate impact of the above items. The Company also believes that including the effect of these items in earnings per share allows management and investors to better compare the Company's financial performance from period-to-period, and to better compare the Company's financial performance with that of its competitors. The presentation of this additional information is not meant to be considered in isolation of, or as a substitute for, results prepared in accordance with GAAP.

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