ST. LOUIS, Aug. 11 KV Pharmaceutical Company(NYSE: KVa/KVb) today reported results for the first quarter of fiscal 2009ended June 30, 2008.
Marc S. Hermelin, Chairman of the Board and Chief Executive Officer,stated, "During the first quarter, KV delivered sharply improved profits andnearly $16.0 million in cash flow from operating activities. Performance wasled by strong growth at ETHEX Corporation and continued competitiveness of ourcategory-leading branded products at Ther-Rx. Both of these businesses arepoised for further growth over the balance of fiscal 2009 helped by recentintroductions like metoprolol succinate extended-release tablets and ourbranded transdermal spray Evamist(TM). The Company's pipeline remains strongas well, with expectations of receiving one NDA approval and at least six ANDAapprovals during the current fiscal year."
First Quarter Review
Revenues Increased 30% and Gross Profits Rose 39%
Net revenues for the first quarter increased 30.2%, or $34.5 million, to$148.9 million, compared with $114.4 million in the first quarter of fiscal2008. Gross profits increased 38.6%, or $28.9 million, to $103.6 millioncompared to $74.8 million in the first quarter of fiscal 2008. Revenue growthduring the quarter was impacted by:
-- The later-than-expected approval and launch of the 50 mg strength ofgeneric metoprolol succinate extended-release tablets in May 2008; and
-- A net sales gain of 52.6% over the prior year period at the Company'sETHEX generic/non-branded marketing subsidiary, contributed to by sales of 25mg, 50 mg, 100 mg, and 200 mg strengths of metoprolol succinateextended-release tablets.
At the close of the first quarter of fiscal 2009, due tohigher-than-expected demand from our customers for certain of our genericproducts, the Company had an unusually large volume of unshipped open ordersfor generic products, representing approximately $10 million of net revenues.Net revenues were also affected by a $5.9 million reduction related to theexecution of a price increase on our generic potassium chloride capsules andthe impact of the previously disclosed discontinuation of cough/cold productswhich generated revenue of $0.5 million in the current quarter compared with$9.3 million in the first quarter of last year.
Operating expenses were $83.1 million, an increase of $17.0 million overthe prior year period. The increases included $18.6 million of higher sellingand administrative expenses, a $4.2 million increase in R&D spending and a$2.2 million increase in amortization expenses related primarily to theacquisition of Evamist(TM). These increases were partially offset by an $8.0million reduction in purchased in-process R&D charges.
Selling and administrative expenses of $63.8 million were slightly higherthan the $61.2 million spent in the fourth quarter of fiscal 2008. We expecta quarterly run rate of selling and administrative expenses of approximately$61 million during the rest of fiscal 2009, resulting in an approximate 18%increase on an annual basis over the prior fiscal year. The 41.1% increase inselling and administrative expenses for the first quarter compared to the yearago quarter reflected the following:
-- $4.6 million related to one-time launch related marketing expenses forthe initial launch and supply of the 25 mg and 50 mg strength of metoprololsuccinate extended-release tablets;
-- $1.5 million increase in expense associated with foreign currencytransaction losses on investments denominated in the Indian Rupee;
-- $3.8 million of launch-related marketing and promotion expensesrelated to Evamist(TM);
-- $2.6 million increase in personnel costs due to increases inmanagement, sales and other personnel, of which $1.4 million was related tothe expansion for our branded sales force initi