King Pharmaceuticals, Inc. announced that 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 per cent and other general and administrative expense decreases, in light of recent challenges to its Altace (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 US Court of Appeals ruled against the continued validity of the patent covering King's Altace product. The company has filed a petition with the court seeking reconsideration of the decision, asserting it involves significant errors.
"In light of last month's decision and the uncertainty that it creates with respect to the future of our Altace 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 Altace exclusivity," said, Brian A. Markison, chairman, president and chief executive officer, King.
"King'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 company's cost structure, which primarily involves restructuring the size and focus of our sales force to better support the priorities of our strategic plan," explained Markison.
"Our restructuring plan also takes into consideration our cardiovascular/metabolic assets, and we intend to honor our existing commitments with respect to Altace and Glumetza (metformin hydrochloride extended-release tablets)," he added.
In recent years, King has developed a strong pain management franchise, which includes existing products like Skelaxin (metaxalone) and Avinza (morphine sulfate extended release) as well as products in development like Remoxy (long-acting oral oxycodone). In the hospital/acute care area, King's portfolio of products is led by Thrombin-Jmi (thrombin, topical, bovine, USP) and its recently added line extensions and the Company's auto-injector products, which include Epipen (epinephrine).
"We 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," said Joseph Squicciarino, chief financial officer, King Pharmaceuticals.
King's cash flow from continuing operations for the first six months of 2007 totalled approximately $253 million, with cash, cash equivalents and investments in debt securities equalling $923 million as of June 30, 2007.
"We 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," 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 Altace and approximately $90 million primarily related to the impaired value of raw material inventory and related contracts associated with Altace. King estimates that it will also incur a one time charge of approximately $70 million during 2007 related to the restructuring announced today.
King Pharmaceuticals, 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.