Adams Respiratory Therapeutics Reports Fiscal 2007 Fourth Quarter and Year-End Financial Results

CHESTER, N.J., Aug. 21 /PRNewswire-FirstCall/ --

  Financial Highlights
  -- Fiscal 2007 fourth quarter net sales of $46.9 million declined 11
     percent from net sales of $52.8 million in the prior year period.
     Despite the lower reported net sales growth, Adams' retail consumption
     increased 44 percent during the fiscal 2007 fourth quarter, according
     to Information Resources Inc. (IRI) data for the 52 weeks ended July 1,
     2007.  Net sales in the fiscal 2006 fourth quarter benefited from $11.0
     million in sales related to the reduction in the product backorder that
     was generated in the first half of fiscal 2006.
  -- Net sales in fiscal 2007 increased 39 percent to $331.6 million, in
     line with Adam's previously disclosed annual net sales guidance range
     of $320 to $335 million.  This growth was driven by Adams' retail
     consumption that grew more than $130 million, an increase of nearly 70
     percent over fiscal 2006, according to IRI data.
  -- Income per diluted share of $0.82 for fiscal 2007 includes pretax
     charges of $14.9 million (or $0.26 per diluted share), comprised of
     $9.7 million related to the repurchase of the Ft. Worth, Texas
     manufacturing operations in July 2006; a $2.7 million non-cash charge
     related to the AlleRx(TM) royalty interest recorded in December 2006;
     and a $2.5 million non-cash charge related to the impairment of the
     Humibid(R) intangible asset in June 2007.

  Other Highlights
  -- The Food and Drug Administration (FDA) announced its intention to take
     enforcement action to remove all unapproved timed-release guaifenesin
     products from the market, including prescription versions of Adams'
     Mucinex DM and Mucinex D. (May)
  -- Adams' dollar share of the total cough/cold/allergy/sinus (CCAS)
     category increased nearly 4 market share points to 10.4 percent, from
     6.6 percent in the prior year period, according to IRI data for the 52
     weeks ended July 1, 2007, compared to the prior year period.
  -- Adams' portfolio expansion is underway with strong initial trade
     shipments of the new Mucinex products, including Maximum-Strength
     Mucinex, Mucinex Nasal Sprays and new items in the Mucinex for Children
     product line. (August)

Adams Respiratory Therapeutics, Inc. (NASDAQ: ARxT) today announced financial results for the fourth quarter and fiscal year ended June 30, 2007.

Commenting on the quarterly results, COO Robert D. Casale, said, "Solid retail consumption and strong market share gains of our key brands during this non-seasonal quarter represent a healthy business."

Casale added, "During the fiscal 2007 fourth quarter we were intently focused on preparations for the market introduction of our new OTC products. Our teams did a great job securing trade distribution and promotional programs. At this time we already have commitments and programs to support a 20 percent display increase over last year. We're expecting another year of strong promotional support across all our major drug customers. It is safe to say, based on initial trade orders and acceptances, that we will have all of our new products and segments in distribution at most outlets in the Food, Drug and Mass channels. By the end of this week, we expect to have shipped all of these products except grape Delsym. The adult and children's versions of grape-flavored Delsym are awaiting final FDA approval. We remain confident about the potential for our new products to further strengthen our OTC business."

Summary of Fiscal 2007 Results

Annual net sales of $331.6 million were in line with the Company's previously disclosed net sales projection of between $320 and $335 million, and represent an increase of $92.5 million or 39 percent over net sales of $239.1 million in fiscal 2006. The solid top-line growth was primarily due to higher sales of new products such as the line of Mucinex for Children products and Delsym, as well as the continued market penetration of Mucinex DM and Mucinex D. The annual sales growth was tempered by a decline in sales of Mucinex SE, primarily due to a greater availability of and patient conversion to Mucinex DM. Overall net sales in fiscal 2007 were tempered by a lower severity of upper respiratory illness during the 2006-2007 cough/cold season.

As a percentage of net sales, Adams produced a gross margin of 71.1 percent for fiscal 2007, compared to 79.4 percent in fiscal 2006. The significant decline in the gross margin was primarily due to $9.2 million of non-recurring expenses relating to the repurchase of the Ft. Worth, Texas, manufacturing operations in July 2006; year-over-year changes in the Company's product sales mix resulting from the integration of new products such as Delsym and the line of Mucinex for Children products and higher sales of Mucinex DM, all of which carry lower margins than single-ingredient Mucinex; and increases in raw material costs. The fiscal 2007 gross margin was lower than the Company's projected 72 percent guidance primarily due to charges associated with the disposal of some inventory.

Selling, marketing and administrative expenses in fiscal 2007 increased 65 percent to $162.9 million from $99.0 million in fiscal 2006. The increase was primarily driven by increased spending on sales, promotional and marketing programs, including spending related to consumer advertising; higher costs related to increased sales force size; and higher distribution and storage fees. In addition, higher legal expenses were incurred related to the patent infringement lawsuit against Mutual Pharmaceutical Co., which the Company settled in March 2007. The fiscal 2007 selling, marketing and administrative expenses were slightly lower than the Company's previous guidance of between $165 and $168 million, due to lower than projected stock compensation expense resulting from the non-achievement of certain financial performance targets in fiscal 2007.

Adams' effective tax rate for fiscal 2007 was 35.8 percent compared to 39.1 percent in fiscal 2006, in line with the Company's projected effective tax rate of 35.5 percent. The year-over-year decline in the effective tax rate was related to a tax deduction provided to U.S. manufacturers for which Adams is now eligible as a result of repurchasing the manufacturing assets in Ft. Worth; a shift in Adams' stock compensation expense from non-deductible incentive stock options to deductible non-qualified stock options; and an adjustment recorded in the fiscal 2007 third quarter to align the Company's tax liability with its 2006 tax returns, as filed during the third quarter of 2007.

Income per diluted share of $0.82 for fiscal 2007 includes pretax charges of $14.9 million (or $0.26 per diluted share), comprised of $9.7 million related to the repurchase of the Ft. Worth, Texas manufacturing operations in July 2006; a $2.7 million non-cash charge related to the AlleRx(TM) royalty interest recorded in December 2006; and a $2.5 million non-cash charge related to the impairment of the Humibid(R) intangible asset in June 2007.

  Fiscal 2007 Earnings Per Share Reconciliation

                                             Net Income       Earnings
                                                              Per Share

  Reported                                     $30,529          $0.82
    Repurchase of manufacturing operations       6,206           0.17
    AlleRx charge                                1,733           0.05
    Humibid impairment char                      1,632           0.04
  Proforma                                     $40,100          $1.08

  Product Sales

Net sales of the adult Mucinex franchise grew 7 percent in fiscal 2007 to $254.7 million, led by growth in Mucinex DM which generated sales of $94.6 million, an increase of 60 percent over the prior year period. Mucinex DM sales were driven by the product's increased market penetration and market share, benefiting from its first-ever dedicated advertising campaign as well as improved depth and quality of distribution. The Company believes that a portion of Mucinex DM sales also resulted from the conversion of some consumers from single-ingredient Mucinex, which recorded net sales of $131.9 million, a decline of 17 percent over the prior year period. Also contributing to the sales of the adult Mucinex franchise were higher sales of Mucinex D, which increased 46 percent in fiscal 2007 to $28.2 million.

The strong in-season performance of the adult Mucinex line coupled with solid post-season retail consumption, further strengthened the brand's market position, resulting in a 9.1 percent share of the adult CCAS category, according to IRI for the 52 weeks ended July 1, 2007. This represents a year- over-year increase of 1.5 market share points. For the second consecutive year, Mucinex was rated the No. 1 adult expectorant, with 62.6 percent of pharmacist recommendations, in the recently published Pharmacy Times 2007 OTC Survey of Pharmacist Recommendations.

The new line of Mucinex for Children products, launched in August 2006, generated sales of $29.2 million in fiscal 2007. These new products have rapidly penetrated the pediatric segment of the Children's CCAS category, gaining nearly 6 market share points in their first year on the market, according to IRI data for the 52 weeks ended July 1, 2007.

The Delsym line of 12-hour OTC cough liquids, which Adams acquired in June 2006, produced revenue of $48.3 million in fiscal 2007. After its first-ever season of consumer advertising, Delsym achieved strong market penetration and grew 2.5 market share points to 12.3 percent in the OTC liquid cough/congestion segment of the CCAS category, according to IRI data for the 52 weeks ended July 1, 2007. In its first year of marketing under Adams' ownership, Delsym ranked No. 1 in both the Children's and Adult Cough categories, in the recently published Pharmacy Times 2007 OTC Survey of Pharmacist Recommendations.

Business Outlook

Michael J. Valentino, president & CEO, said, "Based on our current planning assumptions, we expect to continue to execute effectively in the marketplace and produce top-line growth in excess of 20 percent in fiscal 2008, while experiencing meaningful financial leverage that should produce diluted earnings per share growth in excess of 40 percent."

Valentino added, "In fiscal 2009, our regulatory and marketing strategies should continue to bear fruit. An FDA approval of our Mucinex with Codeine product would allow us to begin bridging to our long-term diversification strategy which includes building a portfolio of prescription respiratory products. We have confidence in our ability to continue to deliver strong growth over the long term, which will be driven by meaningful financial leverage from our existing business. As a result, diluted earnings per share growth should continue to exceed top-line growth for the next several years."

  Revenue
  -- Adams expects fiscal 2008 net sales to be in the range of $400 to $440
     million, reflecting solid growth in the base OTC business and
     incremental revenue from newly launched products.

  Gross Margin
  -- As a ratio to net sales, Adams expects to produce a gross margin in the
     range of 73 to 74 percent for fiscal year 2008, reflecting anticipated
     higher revenue of lower-margin products, including Maximum Strength
     Mucinex, Mucinex D (related to the FDA enforcement action), Mucinex for
     Children and Delsym.

  Operating Expenses
  -- In general, the rate of growth in Adams' fiscal 2008 expenses is
     expected to trail the rate of top-line sales growth, as the Company
     begins to experience meaningful leverage in its business.

  Diluted Earnings Per Share (EPS)
  -- In fiscal 2008, Adams expects diluted EPS to be in the range of $1.55
     to $1.75, reflecting higher revenue and expenses related to the launch
     and promotion of its new OTC products and pre-launch spending for
     Mucinex with Codeine; growth in the base OTC business; and the
     anticipated benefit from the recent FDA enforcement action.  In
     addition, Adams' estimated effective tax rate for fiscal 2008 is
     expected to be approximately 36 percent.

  Fiscal Fourth Quarter 2007 Conference Call and Webcast

Adams Respiratory Therapeutics, Inc. (NASDAQ: ARxT) is scheduled to announce its sales and earnings results for the fiscal 2007 fourth quarter and full year on Tuesday, Aug. 21, 2007, before the market opens. At 9:00 a.m. (EDT) on that day, Adams management will conduct a conference call to review the fiscal fourth quarter and full year results.

To listen live to the call, dial 1-877-669-8882 or 1-706-758-9391. A replay of the call will be available starting at approximately 12 p.m. on Aug. 21 through 5 p.m. on Aug. 28. To listen to the replay, dial 1-800-642-1687 or 1-706-645-9291 and enter the conference ID# 6835936.

A live audio webcast of the conference call also will be available by going to the Investor Relations section of the Adams web site, http://www.adamsrt.com/. A replay of the webcast will be available starting at approximately 11 a.m. on Aug. 21 through 5 p.m. on Sept. 21.

PLEASE NOTE: A slide presentation to accompany the audio webcast of the conference call will be available by going to the Investor Relations/News and Events section of Adams' web site, http://www.adamsrt.com/.

About Adams Respiratory Therapeutics, Inc.

Adams is a specialty pharmaceutical company focused on the late-stage development, commercialization and marketing of over-the-counter and prescription pharmaceuticals for the treatment of respiratory disorders.

Forward-Looking Statements

This press release contains certain "forward-looking" statements, including the FDA's removal from the market of unapproved timed-release guaifenesin products; the FDA's review of the Company's NDA for Mucinex with Codeine; the FDA's approval of grape-flavored Delsym; the expansion and diversification of the Company's product portfolio; and the Company's future financial performance and growth. Such forward-looking statements can be identified by the words "believe," "will," "intend," "expect," "estimate," "anticipate" and similar expressions and are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Factors that could cause actual results to differ materially include, among others, the Company's ability to maintain the success of its existing products and successfully introduce and commercialize new products; the Company's ability to achieve projected growth and sales; competition from other branded and generic products; the FDA's failure to take enforcement action to remove from the market unapproved timed-release guaifenesin products; an FDA decision not to approve grape-flavored Delsym or Mucinex with Codeine; the severity of the cough and cold season; seasonality of product sales and other risk factors set forth Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2006 and under Item 1A. Risk Factors in Adams' Quarterly Report on Form 10-Q for the period ended March 31, 2007. Except to the extent required by applicable securities laws, Adams is not under any obligation to (and expressly disclaims any such obligation to) update its forward-looking statements, whether as a result of new information, future events, or otherwise. All statements contained in this press release are made only as of the date of this release.

                   Adams Respiratory Therapeutics, Inc.
                  Consolidated Statements of Operations
             (Amounts in thousands, except per share amounts)

                                Three Months Ended           Year Ended
                                     June 30,                 June 30,
                                2007         2006         2007        2006
                                   (unaudited)

  Net sales                   $46,861      $52,839     $331,603     239,105
  Cost of goods sold           16,152       10,751       95,799      49,358
  Gross margin                 30,709       42,088      235,804     189,747
  Selling, marketing
   & administrative            24,286       24,996      162,861      98,998
  Product development           5,798        7,545       23,855      18,904
  AlleRx charge                     -            -        2,699           -
  Other, net                    1,680       (1,439)      (1,187)     (4,307)
                               31,764       31,102      188,228     113,595

  (Loss)/income before
    income taxes               (1,055)      10,986       47,576      76,152
  (Benefit)/provision for
    income taxes                  (19)       4,632       17,047      29,801
  Net (loss)/income           $(1,036)      $6,354      $30,529     $46,351

   (Loss)/income per
    common share
      Basic                    $(0.03)       $0.18        $0.86       $1.42
      Diluted                  $(0.03)       $0.17        $0.82       $1.28

  Weighted-average number of
    common shares used in
    (loss)/income per share
    calculation
       Basic                   35,646       34,840       35,340      32,616
       Diluted                 35,646       36,933       37,113      36,349



                   Adams Respiratory Therapeutics, Inc.
                           Net Sales by Product
             (Amounts in thousands, except per share amounts)

                               Three Months Ended           Year Ended
                                     June 30,                 June 30,
                                2007         2006         2007        2006
                                   (unaudited)

  Mucinex SE                  $21,989      $29,205     $131,871    $158,575
  Mucinex DM                   13,140       17,863       94,633      59,235
  Mucinex D                     3,929        4,982       28,204      19,347
    Adult Mucinex Franchise    39,058       52,050      254,708     237,157

  Mucinex products
    for Children                2,601            -       29,190           -
  Humibid                        (281)         137         (639)      1,296
  Delsym                        5,483          652       48,344         652
  Total                       $46,861      $52,839     $331,603    $239,105