Investors Boost Barr Pharma

The generic drugmaker's shares climbed Wednesday after it announced earnings that beat analyst expectations

Barr Pharmaceuticals (BRL) shares jolted higher after the generic drug maker reported first-quarter earnings per share that were better than expected and kept its guidance intact for the year.

The Woodcliff Lake (NJ)-based company said first-quarter revenue shot up 83% from a year ago to $599 million for the first quarter, which included its October 2006 acquisition of Pliva, a Croatia-based pharmaceutical company. Net income declined to $11.6 million, or 11 cents a share, from $76.1 million, or 70 cents, in the same quarter a year ago, amid higher costs associated with the Pliva acquisition and developing new products. Adjusted earnings per share came in at 78 cents, vs. 84 cents a year ago. Analysts had been expecting EPS of 61 and revenue of $616.4 million.

For this year, Barr says it still expects adjusted earnings per fully diluted share to be approximately $3.00- $3.30 (excluding options expenses), and revenues of $2.4-$2.5 billion. On the expense side, it expects R&D investment to be approximately $240-$250 million and SG&A expenses to be approximately $740-$760 million.

Shares of the company rose 4% to $52.03 in heavy trading of more than 2.3 million shares on the New York Stock Exchange.

Barr is the world's third largest generic drugmaker. It sells versions of antidepressants Prozac and Remeron, Tamoxifen for breast cancer, anticoagulant Coumadin, and Adderall, a treatment for attention deficit hyperactivity disorder, and pain reliever Actiq. The company is also a leading supplier of oral contraceptives in the U.S., accounting for about 30% of the market, says S&P Equity Research. It sells oral contraceptives under the Seasonale, Tri-Sprintec, Sprintec, Apri, Aviane, Kariva and other names. S&P notes that much of Barr's growth has come from acquisitions such as Duramed, a maker of women's health and hormone replacement products; and Enhance Pharmaceuticals, an R&D company developing vaginal ring drug delivery systems. Pliva was purchased in October 2006 for $2.5 billion in cash.

"The contribution of Pliva's U.S. products, market acceptance of our generic Actiq, and continued growth in the number and sales of our generic oral contraceptives contributed to sound top-line growth in the quarter," said Bruce L. Downey, Barr's Chairman and CEO in a press release. He noted that "while performance in our proprietary business was down, we had anticipated that the generic competition for Seasonale would impact sales, particularly as we ramp up promotion of Seasonique, our second generation extended-cycle oral contraceptive."

S&P analyst Herman Saftlas kept a buy opinion on Barr shares after its earnings release. He noted that March-quarter operating EPS of 73 cents (after 5 cents of options expense) was 4 cents above his estimate, thanks to "tight cost controls and a lower adjusted tax rate." He said revenue was lifted by the company's recent Pliva acquisition, and that factoring in projected synergies, he expects Pliva to be add to earnings in the years ahead.

Saftlas says he also views Barr's pipeline, which includes 60 abbreviated new drug applications (ANDAs), as one of the strongest in the industry. His 12-month target price remains $63, which measures to a peer-level p-e of 17.5 times the $3.60 in EPS he sees in 2008. (S&P, like BusinessWeek.com, is owned by the McGraw-Hill Companies [MHP].)