King Pharmaceuticals to Cut Costs, 20 Percent of Work Force
BRISTOL, Tenn. -- King Pharmaceuticals announced today actions it is taking to accelerate a planned strategic shift, emphasizing its focus in neuroscience and hospital/acute care to maximize its long-term growth. The Company is taking these actions, which include a workforce reduction of approximately 20% and other general and administrative expense decreases, in light of recent challenges to its ALTACEÂ® (ramipril) franchise. King expects to realize the full benefit of these initiatives commencing in 2008. The Company estimates that the 2008 cost savings from these actions will range from $75 million to $90 million.
In September 2007, the U.S. Court of Appeals ruled against the continued validity of the patent covering Kingâ€™s ALTACEÂ® product. The Company has filed a petition with the court seeking reconsideration of the decision, asserting it involves significant errors.
Brian A. Markison, Chairman, President and Chief Executive Officer of King, stated, â€œIn light of last monthâ€™s decision and the uncertainty that it creates with respect to the future of our ALTACEÂ® franchise, we are accelerating our plan to sharpen our focus on neuroscience and hospital/acute care. This strategic shift was initiated several years ago in anticipation of the eventual loss of ALTACEÂ® exclusivity.â€
â€œKingâ€™s existing platforms in neuroscience and hospital/acute care and aggressive business development initiatives position the Company to effectively capitalize on the positive dynamics of both marketplaces. As a result, we are now in the process of realigning our organization and optimizing the Companyâ€™s cost structure, which primarily involves restructuring the size and focus of our sales force to better support the priorities of our strategic plan,â€ explained Mr. Markison.
Mr. Markison added, â€œOur restructuring plan also takes into consideration our cardiovascular/metabolic assets, and we intend to honor our existing commitments with respect to ALTACEÂ® and GLUMETZAâ„¢ (metformin hydrochloride extended-release tablets).â€
In recent years, King has developed a strong pain management franchise, which includes existing products like SKELAXINÂ® (metaxalone) and AVINZAÂ® (morphine sulfate extended release) as well as products in development like REMOXYâ„¢ (long-acting oral oxycodone). In the hospital/acute care area, Kingâ€™s portfolio of products is led by THROMBIN-JMIÂ® (thrombin, topical, bovine, USP) and its recently added line extensions and the Companyâ€™s auto-injector products, which include EPIPENÂ® (epinephrine).
â€œWe believe the expense reduction measures announced today will enable us to continue generating strong cash flow to invest in our pipeline and business development opportunities, further strengthening our neuroscience and hospital/acute care platforms,â€ said Joseph Squicciarino, Chief Financial Officer of King Pharmaceuticals.
Kingâ€™s cash flow from continuing operations for the first six months of 2007 totaled approximately $253 million, with cash, cash equivalents and investments in debt securities equaling $923 million as of June 30, 2007.
â€œWe remain committed to expanding our product portfolio through investing in R&D, acquiring exciting late-stage compounds and continuing as a partner of choice for promising products and technologies,â€ concluded Mr. Markison.
King will incur special charges during 2007 of approximately $150 million to recognize the impaired value of its intangible assets associated with ALTACEÂ® and approximately $90 million primarily related to the impaired value of raw material inventory and related contracts associated with ALTACEÂ®. King estimates that it will also incur a one time charge of approximately $70 million during 2007 related to the restructuring announced today.
The Company plans to provide more details with respect to todayâ€™s announcement during its conference call on November 8, 2007, the date it intends to announce its financial results for the third quarter ended September 30, 2007.
About King PharmaceuticalsÂ®, Inc.
King PharmaceuticalsÂ®, Inc., headquartered in Bristol, Tennessee, is a vertically integrated branded pharmaceutical company. King, an S&P 500 Index company, seeks to capitalize on opportunities in the pharmaceutical industry through the development, including through in-licensing arrangements and acquisitions, of novel branded prescription pharmaceutical products in attractive markets and the strategic acquisition of branded products that can benefit from focused promotion and marketing and product life-cycle management.
About Forward-Looking Statements
This release contains forward-looking statements which reflect managementâ€™s current views of future events and operations, including, but not limited to, statements pertaining to Kingâ€™s expectations regarding the timing of actions it is taking to realign its organization and cost structure and its estimate of related cost savings; statements pertaining to Kingâ€™s expectations regarding future cash flow; statements pertaining to Kingâ€™s plan to continue investing in its pipeline and business development opportunities; statements pertaining to Kingâ€™s plan to further strengthen its neuroscience and hospital/acute care platforms; and statements pertaining to Kingâ€™s plan to provide more details regarding todayâ€™s announcement and release its financial results for the third quarter ended September 30, 2007 on November 8, 2007. These forward-looking statements involve certain significant risks and uncertainties, and actual results may differ materially from the forward-looking statements. Some important factors which may cause results to differ include: dependence on Kingâ€™s ability to fully realize the benefit of actions it is taking to realign its organization and cost structure commencing in 2008; dependence on the actual amount of the cost savings arising from these initiatives; dependence on Kingâ€™s ability to continue to generate strong cash flow; dependence on Kingâ€™s ability to continue to acquire branded products, including products in development; dependence on Kingâ€™s ability to continue to successfully execute the Companyâ€™s strategy and to continue to capitalize on strategic opportunities in the future for sustained long-term growth; dependence on Kingâ€™s ability to successfully integrate its acquisitions; dependence on the Companyâ€™s ability to continue to advance the development of its pipeline products as planned; dependence on the high cost and uncertainty of research, clinical trials, and other development activities involving pharmaceutical products in which King has an interest; dependence on the unpredictability of the duration and results of the U. S. Food and Drug Administrationâ€™s (â€œFDAâ€) review of Investigational New Drug applications (â€œINDâ€), New Drug Applications (â€œNDAâ€), and Abbreviated New Drug Applications (â€œANDAâ€) and/or the review of other regulatory agencies worldwide that relate to products in development; dependence on the availability and cost of raw materials; dependence on no material interruptions in supply by contract manufacturers of Kingâ€™s products; dependence on the potential effect on sales of the Companyâ€™s existing branded pharmaceutical products as a result of the potential development and approval of a generic substitute for any such product or other new competitive products; dependence on the potential effect of future acquisitions and other transactions pursuant to the Companyâ€™s growth strategy; and dependence on Kingâ€™s ability to provide more details regarding todayâ€™s announcement and release its financial results for the third quarter ended September 30, 2007 as planned on November 8, 2007. Other important factors that may cause actual results to differ materially from the forward-looking statements are discussed in the â€œRisk Factorsâ€ section and other sections of Kingâ€™s Form 10-K for the year ended December 31, 2006, and Form 10-Q for the second quarter ended June 30, 2007, which are on file with the U.S. Securities and Exchange Commission. King does not undertake to publicly update or revise any of its forward-looking statements even if experience or future changes show that the indicated results or events will not be realized.