Hi-Tech Pharmacal Reports a 15% Sales Increase and 33% EPS Increase for Fiscal 2006
Fourth Quarter Results
For the three months ended April 30, 2006, the Company reported net sales of $18.1 million, an increase of 3% from $17.6 million for the same period last year. Net income increased 11% to $2.1 million from $1.9 million, and fully diluted earnings per share were unchanged at $0.15.
During the quarter ended April 30, 2006, net sales of generic pharmaceutical products were $13.8 million, a decrease of 13% compared to $15.8 million for the same fiscal 2005 period. The decrease was primarily due to the weak cough and flu season lowering the demand for related products versus the same period last year when there was unusually high demand for these products. Additionally, the Company experienced pricing decreases on certain products.
Sales for the Health Care Products division ("HCP"), which markets the Company's branded OTC products, increased 53% to $2.5 million for the three months ended April 30, 2006 compared to $1.7 million for the same fiscal period the prior year. The increase was primarily the result of sales of the Zostrix(R) line of products, acquired in July 2005.
Fiscal Year Results
For the year ended April 30, 2006, the Company reported net sales of $78.0 million, an increase of 15% from net sales of $67.7 million for the year ended April 30, 2005. Net income increased 38% to $11.5 million or $0.85 per fully diluted share for the year ended April 30, 2006 compared to $8.3 million, or $0.64 per share, for the same period ended April 30, 2005.
Selling, general and administrative (SG&A) expenses increased to $23.2 million from $19.6 million, primarily due to increased advertising and promotional spending on Zostrix(R), higher legal fees, and increased amortization of intangibles relating to Naprelan(R), Zostrix(R) and Tanafed(R) DMX.
Research & Development expenses decreased to $3.3 million in fiscal 2006, from $4.4 million for fiscal 2005, due to spending in the previous year on the development of fluticasone propionate nasal spray, 0.05% mg/spray, the generic equivalent of GlaxoSmithKline's Flonase(R).
Generic Sales
Generic pharmaceutical product sales were $64.6 million compared to $57.2 million for the year ended April 30, 2006 and 2005, respectively, an increase of 13%. The increase was primarily due to the launch of new products during the year, and was partially offset by pricing decreases on certain in-line products.
Health Care Products Sales
The Health Care Products division had net sales of $9.8 million and $8.3 million for the year ended April 30, 2006 and 2005, respectively, an increase of 17%. The increase is primarily the result of sales of Zostrix(R).
Branded Prescription Products
The Company markets two prescription products, Naprelan(R) acquired in June 2004 and Tanafed DMX acquired in December 2005. Sales of these products totaled $3.7 million in fiscal 2006, up from $2.1 million in fiscal 2005 due to the acquisition of Tanafed(R) DMX and increased royalties from Blansett Pharmacal which markets the 375 mg strength of Naprelan(R).
David Seltzer, President and CEO, commented on the results: "We are pleased with our fiscal 2006 results, as our sales and income reached record highs. We launched five new products, received one final Abbreviated New Drug Application (ANDA) approval and one tentative approval, and strengthened our market share for several key prescription generic products. We submitted five ANDA's, including Paragraph IV submissions for Merck's Trusopt(R) and Cosopt(R), and our pipeline has never been more robust."
David Seltzer continued: "I am also pleased with the record sales for our HCP division which grew by 17%. While sales of Diabetic Tussin(R) were flat with the weak cold and flu season, we successfully integrated Zostrix(R) into the division and has been growing steadily quarter over quarter."
Hi-Tech currently has twelve products awaiting approval at the FDA. These products target brand sales of over $2.0 billion according to 2005 IMS data. Included in these products is fluticasone propionate nasal spray, which the Company submitted to the FDA in February 2005. Additionally, Hi-Tech has two products which received tentative approvals by the FDA - Levofloxacin ophthalmic solution USP, 0.5%, equivalent to Santen's Quixin(R) Ophthalmic Solution, 0.5%, and Ofloxacin otic solution, equivalent to Daiichi's Floxin(R) otic solution, 0.3%.
In addition to these products awaiting approval at the FDA, Hi-Tech has twenty products in active development targeting brand sales of over $1.0 billion, including sterile ophthalmic products, oral solutions and suspensions, and topical products.
The Company's management believes that net sales will grow between 5% and 15% for Fiscal Year 2007. This increase is dependent on new product launches which are expected in the second half of the fiscal year. The Company's ability to meet the forecast depends on such factors as the timing of new product launches, competition, legal proceedings and other market conditions.
Hi-Tech is a specialty pharmaceutical company developing, manufacturing and marketing branded and generic prescription and OTC products. The Company specializes in difficult to manufacture liquid and semi-solid dosage forms and produces a range of sterile ophthalmic, otic and inhalation products. The Company's Health Care Products Division is a leading developer and marketer of branded prescription and OTC products for the diabetes marketplace.
Forward-looking statements (statements which are not historical facts) in this Press Release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward looking statements are not promises or guarantees and investors are cautioned that all forward-looking statements involve risks and uncertainties, including but not limited to the impact of competitive products and pricing, product demand and market acceptance, new product development, the regulatory environment, including without limitation, reliance on key strategic alliances, availability of raw materials, fluctuations in operating results and other results and other risks detailed from time to time in the Company's filings with the Securities and Exchange Commission. These statements are based on management's current expectations and are naturally subject to uncertainty and changes in circumstances. We caution you not to place undue reliance upon any such forward looking statements which speak only as the date made. Hi-Tech is under no obligation to, and expressly disclaims any such obligation to, update or alter its forward-looking statements, whether as a results of new information, future events or otherwise.
Twelve Months Three Months
------------------------- -------------------------
4/30/2006 4/30/2005 4/30/2006 4/30/2005
------------ ------------ ------------ ------------
Net sales $78,020,000 $67,683,000 $18,077,000 $17,640,000
Cost of goods sold 35,833,000 31,360,000 9,245,000 8,567,000
Gross profit 42,187,000 36,323,000 8,832,000 9,073,000
Selling, general,
administrative
expenses 23,210,000 19,574,000 5,858,000 5,826,000
Research & product
development costs 3,334,000 4,373,0000 1,070,000 635,000
Contract research
(income) (27,000) (50,000) - (25,000)
Interest expense 12,000 24,000 2,000 5,000
Interest (income)
and other (1,937,000) (655,000) (826,000) (249,000)
Total 24,592,000 23,266,000 6,104,000 6,192,000
Income before
income taxes 17,595,000 13,057,000 2,728,000 2,881,000
Provision for
income taxes 6,142,000 4,769,000 644,000 1,003,000
Net income $11,453,000 $8,288,000 $2,084,000 $1,878,000
Basic net earnings
per common share .96 .70 .17 .16
Diluted net
earnings per
common share .85 .64 .15 .15
Weighted average
common shares
outstanding-
basic 11,939,000 11,858,000 12,162,000 11,659,000
Effect of
potential common
shares 1,465,000 1,130,000 1,444,000 1,113,000
Weighted average
common shares
outstanding -
diluted 13,404,000 12,988,000 13,606,000 12,772,000
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