<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File NO. 0-15242
DURAMED PHARMACEUTICALS, INC.
State of Incorporation - Delaware
IRS Employer I.D. No. 11-2590026
7155 East Kemper Road
Cincinnati, Ohio 45249
(513) 731-9900
Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ________
Common Stock, $.01 par value per share:
Shares Outstanding as of March 31, 1995 7,991,818
Page 1 of 18 pages
<PAGE> 2
DURAMED PHARMACEUTICALS, INC.
INDEX
PART I. Financial Information Page
---------------------------------
ITEM 1. Financial Statements (Unaudited)
Consolidated Balance Sheets . . . . . . . . . . 3-4
Consolidated Statements of Operations . . . . 5
Consolidated Statements of Cash Flows . . . . . 6
Consolidated Statements of Capital
Deficiency . . . . . . . . . . . . . . . . . . 7
Notes to Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . 8-10
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations . . . . . . . . . . . . . . . . . 11-15
PART II. Other Information
----------------------------
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . 16
SIGNATURES . . . . . . . . . . . . . . . . . . 17
- 2 -
<PAGE> 3
DURAMED PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- -----------
Unaudited (Note)
ASSETS
------
<S> <C> <C>
Current Assets:
Cash $ 2,600 $ 2,900
Trade accounts receivable,
less allowance for doubtful
accounts: 1995 - $468,007
1994 - $504,850 6,294,575 5,249,101
Inventories 10,298,114 8,423,687
Prepaid expenses and other assets 892,228 1,318,573
Deferred taxes 2,463,000 2,463,000
----------- -----------
Total current assets 19,950,517 17,457,261
----------- -----------
Property, Plant and Equipment:
Land 1,000,000 1,000,000
Building and improvements 7,113,576 6,587,005
Equipment, furniture and
fixtures 13,063,218 12,177,615
Construction in progress 7,674,990 6,394,406
----------- -----------
Total 28,851,784 26,159,026
Less accumulated depreciation
and amortization 10,354,392 9,972,348
----------- -----------
Property, plant and
equipment - net 18,497,392 16,186,678
----------- -----------
Other Assets:
Deposits and other assets 517,524 764,300
Product agreement
marketing rights 997,200 997,200
Goodwill 145,228 158,401
Deferred taxes 1,438,000 1,438,000
----------- -----------
Total other assets 3,097,952 3,357,901
----------- -----------
Total Assets $41,545,861 $37,001,840
=========== ===========
</TABLE>
- 3 -
<PAGE> 4
DURAMED PHARMACEUTICALS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- -----------
Unaudited (Note)
<S> <C> <C>
LIABILITIES AND CAPITAL DEFICIENCY
----------------------------------
Current Liabilities:
Accounts payable $ 4,881,966 $ 3,840,069
Accrued liabilities 5,288,807 5,209,179
Current portion of long-term debt and
other liabilities 10,730,895 10,916,074
------------ -----------
Total current liabilities $ 20,901,668 $ 19,965,322
Long-term debt, less current portion 18,995,384 16,188,411
Other long-term liabilities 1,782,726 2,079,007
------------ ------------
Total liabilities 41,679,778 38,232,740
------------ ------------
Commitments and contingent liabilities --- ---
Capital Deficiency:
Preferred stock Series B - authorized
500,000 shares, par value $.001;
74,659 shares issued and outstanding; 75 75
Common stock - authorized 20,000,000
shares, par value $.01; issued and
outstanding 7,991,818 and 7,968,108
shares in 1995 and 1994 respectively 79,918 79,680
Additional paid-in capital 25,656,163 25,567,765
Accumulated deficit (25,870,073) (26,878,420)
------------ ------------
Net Capital Deficiency (133,917) (1,230,900)
------------ ------------
Total Liabilities and
Net Capital Deficiency $ 41,545,861 $ 37,001,840
------------ ------------
</TABLE>
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date but does not include all
information and footnotes required by generally accepted accounting
principles for complete financial statements.
The accompanying notes are an integral part of these consolidated financial
statements.
- 4 -
<PAGE> 5
DURAMED PHARAMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
--------------------------------------------
<S> <C> <C>
Net sales $ 12,581,621 $ 11,140,772
Cost of goods sold 7,324,227 6,553,337
------------- --------------
Gross profit 5,257,394 4,587,435
------------- --------------
Operating expenses:
Product development 799,960 355,231
Selling 888,803 711,647
General and administrative 2,031,647 1,687,576
------------- --------------
Total operating expenses 3,720,410 2,754,454
------------- --------------
Operating income 1,536,984 1,832,981
Interest expense 499,887 561,944
------------- --------------
Income before income taxes 1,037,097 1,271,037
Provision for income taxes 28,750 30,000
------------- --------------
Net income $ 1,008,347 $ 1,241,037
============= ==============
Earnings per average
common and common
equivalent share outstanding:
Primary $ .09 $ .13
============= ==============
Fully Diluted $ .09 $ .12
============= ==============
Weighted average number
of common and common
equivalent shares outstanding:
Primary 10,711,046 9,907,517
============= ==============
Fully Diluted 10,713,950 9,942,352
============= ==============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 5 -
<PAGE> 6
DURAMED PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
1995 1994
------------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,008,347 $ 1,241,037
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 395,217 469,721
Recognition of deferred revenue (250,000) ---
Provision for bad debts --- 39,647
Common stock contributed to employee benefits plan 42,554 33,995
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivable (1,008,631) 168,123
(Increase) decrease in inventories (1,874,427) (580,606)
(Increase) decrease in prepaid expenses 426,345 340,067
Increase (decrease) in accounts payable 1,041,897 (1,115,587)
Increase (decrease) in accrued liabilities (157,434) (707,082)
Other, net (70,458) (7,458)
------------- ------------
Net cash (used by) provided by operating activities (446,590) (118,143)
Cash flows from investing activities:
Capital expenditures (1,496,791) (365,687)
Deposits on capital equipment (23,032) (17,137)
------------- ------------
Net cash (used for) investing activities (1,519,823) (382,824)
Cash flows from financing activities:
Net borrowings under revolving line-of-credit agreement 2,737,026 333,533
Payments of long-term debt, including current
maturities (2,263,866) (115,864)
Proceeds from long-term borrowings 1,446,871 212,122
Issuance of common stock 46,082 71,076
------------- ------------
Net cash provided by financing activities 1,966,113 500,867
Net increase (decrease) in cash and cash equivalents (300) (100)
Cash and cash equivalents at beginning of period 2,900 1,800
------------- ------------
Cash and cash equivalents at end of period $ 2,600 $ 1,700
============= ============
Supplemental cash flow disclosures:
Interest paid $ 593,379 $ 297,435
Income taxes paid $ 70,000 $ 18,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 6 -
<PAGE> 7
DURAMED PHARMACEUTICALS, INC.
CONSOLIDATED STATEMENT OF CAPITAL DEFICIENCY
(UNAUDITED)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
------------------ ----------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital Deficit Total
------------------ ----------------------- --------------------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 74,659 $75 7,968,108 $79,680 $25,567,765 $(26,878,420) $ (1,230,900)
Issuance of stock in connection
with the Company's 401(k)
Plan --- --- 2,326 24 42,530 --- 42,554
Stock options exercised net of
shares surrendered --- --- 21,384 214 45,868 --- 46,082
Net income for 1995 --- --- --- --- --- 1,008,347 1,008,347
------ --- --------- ------- ----------- ------------ -----------
Balance at March 31, 1995 74,659 $75 7,991,818 $79,918 $25,656,163 $(25,870,073) $ (133,917)
====== === ========= ======= =========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
- 7 -
<PAGE> 8
DURAMED PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Interim Financial Data
-------------------------------
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three month period
ended March 31, 1995 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1995. For further information, refer
to the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994.
Note 2: Earnings Per Share
---------------------------
The fully diluted and primary earnings per share calculations are computed
using weighted average common shares outstanding and common equivalent shares,
which include dilutive options, warrants and convertible preferred stock.
Note 3: Inventories
--------------------
Components of inventories include:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- -----------
<S> <C> <C>
Raw Materials $2,633,128 $1,939,890
Work-in-process 220,032 498,975
Finished goods 7,444,954 5,984,822
---------- ----------
Total $10,298,114 $8,423,687
=========== ==========
</TABLE>
- 8 -
<PAGE> 9
DURAMED PHARMACEUTICALS, INC.
Note 4: Debt and Other Long-Term Liabilities
---------------------------------------------
<TABLE>
<CAPTION>
March 31, December 31,
Debt 1995 1994
---- --------- ------------
<S> <C> <C>
Revolving credit facility $10,202,195 $ 7,465,169
Term note 7,500,000 9,500,000
Note payable to State of Ohio 1,192,644 1,230,985
Industrial Revenue Bond 191,780 221,605
Construction loan 5,500,000 4,504,671
Equipment loan 1,270,775 685,061
Installment notes payable 1,976,065 1,554,174
---------- ----------
27,833,459 25,161,665
Less amounts classified as current 8,838,075 8,973,254
----------- ------------
$18,995,384 $ 16,188,411
=========== ============
Other Long-Term Liabilities
---------------------------
Abandoned facility obligation - net $ 1,925,546 $ 2,021,827
Deferred revenue 1,750,000 2,000,000
----------- ----------
3,675,546 4,021,827
Less amount classified as current 1,892,820 1,942,820
----------- -----------
$ 1,782,726 $ 2,079,007
=========== ===========
</TABLE>
Debt
During 1995 the funds used by the Company in its operation have been primarily
provided through borrowings against its revolving credit facility. Under the
terms of the amended and restated bank agreement dated December 31, 1994 two
facilities were established, a term note in the amount of $9,500,000 and a
revolving credit facility. These facilities are collateralized by substantially
all assets of the Company including inventory, receivables and a mortgage
interest on the manufacturing facility. The term note requires quarterly
principal payments in the amount of $2,000,000 payable on the first day of
March, June, September and December of 1995 with the remaining balance due on
March 31, 1996. The first payment of $2,000,000 was made on March 1, 1995. The
terms of the revolving credit facility permit the Company to borrow up to
$10,500,000 based upon eligible collateral ($10,474,749 as of March 31, 1995).
The expressed intention of the Company and its bank is to review quarterly the
Company's financial condition and, if appropriate, extend the due date of its
revolving credit facility in order to maintain a fifteen month term. In
accordance with this, the bank has extended the term of the revolving credit
facility from March 31, 1996 to June 30, 1996. Both facilities provide for
monthly interest payments at a rate of prime plus 1% (10% at March 31, 1995).
- 9 -
<PAGE> 10
DURAMED PHARMACEUTICALS, INC.
The note payable to the State of Ohio is secured by the Company's manufacturing
facility. The loan bears interest at 7.5% and requires minimum monthly payments
of $20,394 and certain other payments as defined by the agreement. The final
payment of approximately $1,067,000, is due November 1, 1996. The State has
agreed to waive, through April 1, 1996, certain financial covenants which
require minimum levels of working capital and stockholders' equity. This debt
is personally guaranteed by a former officer and by a director.
During 1985, Hamilton County, Ohio issued Industrial Revenue Bonds in the
amount of $995,000, the proceeds of which were used by the Company to purchase
new machinery and equipment. The agreement is secured by the machinery and
equipment purchased, which was fully depreciated at March 31, 1995. Monthly
principal and interest payments are required during the term of the loan, due
in April 1998.
The construction loan is a ten year $5.5 million facility which is a portion of
the financing for the expansion of the Company's manufacturing facility and is
supported by a loan guaranty from Johnson & Johnson. As of March 31, 1995, the
$5.5 million balance includes actual draws on the facility of $4.6 million and
an accrual of $.9 million based upon an estimate of the project's stage of
completion. Under the terms of the construction loan, principal payments do
not commence until the occurrence of certain defined events or January 1, 1997,
whichever occurs first. Interest is payable monthly based upon the prime rate.
The equipment line of credit is a $1.5 million facility provided by the
Company's bank for financing equipment which is collateralized by the assets
financed. The term of the facility is five years at an interest rate of prime
plus 1%.
Other long-term debt includes facilities of varying amounts and terms which are
generally collateralized by the assets financed.
Other Long-Term Liabilities
The abandoned facility obligation represents the amounts due, net of sublease
income, under terms of a lease which extends through September 30, 1998. Due
to the Company's financial conditions at the time, the Company was unable to
meet its commitments under the lease and vacated the facility in 1991. The
facility was sublet for a period of five years in 1992.
The $1,750,000 in deferred revenue represents the unamoritized balance from the
$2 million cash received from Ortho-McNeil Pharmaceuticals Corporation
("Ortho-McNeil") pursuant to the terms of distribution and marketing agreements
entered into in 1994. This amount will be amortized over a period which
matches the performance of certain activities pursuant to the terms of the
agreements. As of March 31, 1995, $1.0 million of the deferred revenue is
classified as current.
- 10 -
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Result of Operations
--------------------
Net sales increased $1,440,849 (13%) for the three month period ended March 31,
1995 as compared to the same period in 1994. The increase in net sales was due
primarily to increased sales volume for certain of the Company's products and a
full quarter sales of the Ortho-McNeil products which the Company commenced
marketing late in the fourth quarter of 1994.
Gross margin and the corresponding percentage of net sales was $5,257,394 (42%)
of net sales for the first quarter of 1995 compared to $4,587,435 (41%) for the
first quarter of 1994. There can be no assurance that, with the Company's
current product line, the present gross margin levels can be maintained if the
Company's products, particularly Methylprednisolone, should experience
increased competition.
The marketing agreement under which the Company distributed products
manufactured by Invamed Inc. ("Invamed") expired on December 31, 1994. In May
1995 Invamed notified the Company that it was assuming responsibility for
marketing its product line and would no longer make available its products for
distribution under the Duramed label effective June 10, 1995. In the first
quarter of 1995 the affected Invamed products represented approximately $1.7
million of net sales and generated a gross profit margin of approximately
$474,000. The Company expects to offset the impact of this development by
obtaining most of the products which had been supplied by Invamed from
alternative sources, and enhancing revenues through certain pending business
development pursuits. Accordingly, the Company does not believe that this
development will have a materially adverse impact on its operations. The
Company's right to market the Invamed product Cyclobenzaprine is subject to a
separate agreement under which the Company's exclusive distribution rights will
continue. For additional information on Invamed, see the Company's Form 10-K
for the year ended December 31, 1994 (the "1994 10-K") under "Item 1. Business
- Recent Developments: Strategic Alliances/Product Development Status."
Product development expenditures increased $444,729 (125%) over the first
quarter of 1994. These expenditures are net of reimbursements received from
Schein Pharmaceutical, Inc. ("Schein") pursuant to the terms of a contractual
agreement in connection with the development of a new formulation of conjugated
estrogens tablets, the generic equivalent of the name brand product
Premarin(R). The increased product development expenditures reflect the
Company's expansion of its research and development activities to pursue
additional products. The Company plans to continue to expand product
development activities as its resources permit. Additionally, product
development expenditures in the first quarter of 1995 include pre-launch start
up costs associated with the Company's pending Abbreviated New Drug Application
("ANDA") for conjugated estrogens. The Company continues to prepare for the
launch of conjugated estrogens; accordingly, as deemed appropriate, the Company
will increase spending levels throughout 1995.
- 11 -
<PAGE> 12
DURAMED PHARMACEUTICALS, INC.
The Company's selling expense was primarily comprised of expenses of the sales
and marketing staff and related activities. The increase in 1995 compared to
1994 is a result of expanded sales and marketing activities.
The increase in general and administrative expenses in 1995, compared to the
same quarter of 1994, was due primarily to increased compensation expense as a
result of additional staff positions, and increased expense levels necessary to
provide the administrative support required to execute the Company's business
plan and support the increased business level. Additionally, in the first
quarter of 1995 the Company incurred costs associated with responding to
various issues in connection with its pending ANDA for conjugated estrogens.
Interest expense during 1995 decreased as compared to the same quarter of 1994
as a result of decreased average borrowings to finance operations, offset to an
extent by higher interest rates. The Company capitalized interest in the
amount of $93,792 in the first quarter of 1995 associated with the expansion of
its manufacturing facilities. The facility expansion is scheduled to be
complete during the second quarter of 1995; therefore, interest relative to the
facility will be expensed in future periods.
The $28,750 tax provision in 1995 represents alternative minimum tax; no
regular income tax provision is required due to the offset of taxable income by
the carryforward of net operating losses.
The Company expects that its product development and operating expenses during
the remainder of 1995 will increase over 1994 levels. To the extent that these
increases are not offset by revenue increases, operating results will be
adversely affected. The Company is discussing several potential business
development opportunities which could provide additional product revenues.
However, it is not certain when these revenues would be available.
Accordingly, the Company's reported income for the remaining quarters of 1995
may be less than for the comparable quarters of 1994.
Liquidity and Capital Resources
-------------------------------
As explained in the 1994 10-K under "Item 1. Business - Business and
Regulatory Environment Background," audits of the Company's ANDAs in 1990 and
1991 resulted in the withdrawal of all of the Company's ANDAs except those for
Methylprednisolone and Isoniazid. As a result of the substantially reduced
revenue levels and charges incurred due to product recalls and related
inventory write-offs, the Company's financial base was nearly exhausted.
From that time through much of 1993, the Company's efforts were focused on
three primary pursuits: (1) continued execution of a plan to, at a minimum,
generate sufficient cash flows to meet current obligations exclusive of bank
debt and related interest, (2) seeking other sources of revenue and (3)
continuing discussions with potential sources of capital in an effort to secure
the resources needed to fund the Company's recovery.
- 12 -
<PAGE> 13
DURAMED PHARMACEUTICALS, INC.
Additionally, the Company's product development efforts were focused primarily
on development of a new formulation for conjugated estrogens products under the
agreement with Schein.
With improving sales and operating results commencing in 1993, the Company's
operating plan was modified to address the needs of the expanded product
development, sales and marketing, and general corporate activities required for
long-term success.
On December 31, 1994 the Company entered into an amended and restated agreement
with its bank. The new agreement provides for two new facilities, a term loan
in the amount of $9,500,000 and a revolving credit facility. The term note
requires quarterly principal payments in the amount of $2,000,000 payable on
the first day of March, June, September and December of 1995 with the remaining
balance due on March 31, 1996. The first payment of $2,000,000 was made on
March 1, 1995. The terms of the revolving credit facility permit the Company
to borrow up to $10,500,000 based upon eligible collateral ($10,474,749 as of
March 31, 1995). The expressed intention of the Company and its bank is to
review quarterly the Company's financial condition and, if appropriate, extend
the due date of the revolving credit facility in order to maintain a fifteen
month term and the long-term status of this facility. In accordance with this,
the bank has extended the term of the revolving credit facility from March 31,
1996 to June 30, 1996. See Note F of Notes to Consolidated Financial
Statements in the 1994 10-K for additional information related to the Company's
obligations.
An additional important element of the Company's plan has been the continued
support of its unsecured creditors. At March 31, 1995, the Company owed
approximately $2,441,000 to certain unsecured creditors relating to outstanding
balances prior to 1992. The Company has been making progress payments toward
the outstanding obligations to these unsecured creditors and intends to
continue periodic payments as the Company's resource level permits. At
present, this program is progressing successfully but there can be no assurance
that creditor support will continue.
The increase in inventory and trade payables as of March 31, 1995 results from
product purchases from Ortho-McNeil, and procurement of raw materials for the
Company's conjugated estrogens products.
As discussed in Note B of Notes to Consolidated Financial Statements in the
1994 10-K, the Company's agreement with Schein for the development, manufacture
and marketing of a new formulation of conjugated estrogens tablets provides for
project financing by Schein and, if the project is successful, participation by
both firms in the marketing and distribution of the products. The conjugated
estrogens products have been formulated and are designed to meet bioequivalence
guidance established by the FDA in 1991. On September 27, 1994 the Company
filed an ANDA for the .625 mg strength of conjugated estrogens with the FDA.
- 13 -
<PAGE> 14
DURAMED PHARMACEUTICALS, INC.
In order to market the .625 mg strength product, as well as other dosage
strengths, FDA approval is required. Since 1991, Wyeth-Ayerst, the
manufacturer of the name brand product Premarin(R), has made several
submissions to the FDA which, if adopted, would change the FDA's 1991
conjugated estrogens bioequivalency guidance. In response to each submission,
the FDA has determined that the information submitted by Wyeth- Ayerst is
insufficient to justify changes in the guidance. The FDA has indicated it will
require additional scientific data in order to reconsider its decision. In its
responses, the FDA has cited both the scientific and regulatory basis for its
position. If, however, the requested changes were accepted by the FDA and
retroactively applied, it could significantly delay introduction of the
Company's conjugated estrogens products.
The latest challenge from Wyeth-Ayerst is a Citizens Petition filed on November
30, 1994 with the FDA which reiterates some of its earlier arguments and
requests that the FDA change the USP standards for conjugated estrogens, by
requiring the generic version to include a specific equine estrogenic
substance, Delta 8,9 DHES. During the last week of March 1995 the Company
learned that the question as to whether Delta 8,9 DHES should be required in a
generic version of Premarin(R) was being referred to one of the FDA's standing
Scientific Advisory Committees. The Committee is tentatively scheduled to meet
on July 27-28, 1995 to address this issue.
If successful, Wyeth-Ayerst's petition would change the USP monograph which
Duramed's conjugated estrogens product must meet. In accordance with the FDA's
1991 conjugated estrogens bioequivalency guidance, the Duramed product does not
have Delta 8,9 DHES and may have to be reformulated. In addition, Duramed
could be required to repeat its bioequivalency studies. Because Delta 8,9
DHES is not currently commercially available in large quantities, a new USP
standard would prevent Duramed or any other company from introducing a generic
product in the near future. Even if commercial quantities could be obtained,
any new USP standard would impose substantial development costs on Duramed.
Duramed believes that the petition does not present any new scientific or
regulatory issues that have not already been addressed by the FDA. Duramed
further believes that its conjugated estrogens product as filed meets the
current bioequivalency guidance established by the FDA in 1991. At this time,
the Company is unable to determine when or if it will obtain FDA approval to
market the .625 mg strength product. If approval is obtained and the product
is successfully manufactured and marketed, the Company believes the product
will have a substantial positive effect on the Company's operating results and
financial condition. Work on other conjugated estrogens strengths is
continuing and results to date are encouraging.
In 1994 the Company commenced a project to expand its manufacturing facility by
approximately 38,000 square feet in order to meet the projected manufacturing
requirements of hormonal replacement therapy ("HRT") products under
development, primarily its anticipated conjugated estrogens products.
- 14 -
<PAGE> 15
DURAMED PHARMACEUTICALS, INC.
The facility expansion and related facility testing is scheduled to be
completed in the second quarter of 1995. Investment in facility and equipment
with respect to the HRT facility is approximately $11 million, approximately
$9.5 million of which has been satisfied under the Company's agreement with
Ortho-McNeil (see Note B of Notes to Consolidated Financial Statements in the
1994 10-K).
In addition to the capital resource requirements of the HRT facility expansion,
the Company has identified additional significant capital requirements for
equipment and facility which will be required if it is to carry out the planned
substantial expansion of its research and development capabilities and to
pursue other planned corporate projects designed to foster long-term growth.
The Company's current product line is limited and the Company's current
operating results are heavily dependent on the performance of its
Methylprednisolone product. If the Company receives approval from the FDA of
its ANDA filing for the .625 mg strength of conjugated estrogens, and
successfully manufacturers and markets the product, the resulting favorable
financial impact is expected to be significant; however, approval is not
assured. Additionally, the Company has an agreement with Invamed for the
marketing rights to Verapamil S.R.(R) which has been formulated and will be
manufactured by Invamed, if an ANDA is filed and FDA approval is obtained. The
availability of this product could also significantly improve the Company's
operating results. Again, success is not assured. Therefore, while the
Company's capital needs could be met from new product revenues, this is not
certain.
In the absence of resources provided by new product sales, the additional
capital which will be required in order to execute the Company's expanded
business plan, which includes significantly expanded product development and
business development activities to broaden the Company's current product lines,
will have to be acquired from other sources or the business plan will have to
be scaled back. The Company is currently exploring financing alternatives with
respect to its capital requirements. At this time, the Company cannot
determine if any capital raising efforts will be successful or whether any
capital infusion will result in a substantial dilution of the ownership
interest of the Company's current stockholders. As a result, the Company's
expanded future plans must remain uncertain.
On September 16, 1994 the Company's common stock was approved for re-listing on
The Nasdaq Stock Market ("Nasdaq"). Although the Company does not currently
meet the tangible net assets requirement for Nasdaq listing, an exception was
granted contingent upon the Company meeting the listing requirements as of
March 31, 1995. The Company did not meet the tangible net asset requirement
for Nasdaq listing as of March 31, 1995 and intends to petition Nasdaq for an
extension to its listing exception. While the Company believes it will be
successful with its petition, there is no assurance that Nasdaq will grant the
exception. If the Company's securities should cease to be quoted on the Nasdaq
they should continue to be quoted in the over-the-counter market.
- 15 -
<PAGE> 16
DURAMED PHARMACEUTICALS, INC.
PART II - OTHER INFORMATION
Item 6. Exhibit and Reports on Form 8-K
-------------------------------
(a) Exhibit:
(11) Statement re: Computation of Earnings Per Share
(27) Financial Data Schedule*
(b) Reports on Form 8-K:
On April 6, 1995 the Company filed a Current Report on Form
8-K (date of report: March 31, 1995) relating to
recent developments in connection with its conjugated
estrogens product.
__________________
*Contained only in electronic filing with Securities and Exchange Commission.
- 16 -
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DURAMED PHARMACEUTICALS, INC.
Dated: May 22, 1995 by: /s/ E. Thomas Arington
------------ -----------------------
E. Thomas Arington
President, Chairman of the
Board Chief Executive Officer
Dated: May 22, 1995 by: /s/ Timothy J. Holt
------------ -------------------
Timothy J. Holt
Senior Vice President-Finance,
Treasurer, Chief Financial
Officer
- 17 -
<PAGE> 1
EXHIBIT (11)
STATEMENT REGARDING COMPUTATION OF EARNINGS PER SHARE
DURAMED PHARMACEUTICALS, INC.
<TABLE>
<CAPTION>
Three months ended March 31,
1995 1994
------------- ------------
<S> <C> <C>
Primary:
Weighted average common shares
outstanding 7,984,078 7,723,452
Net effect of preferred shares
converted to common shares -
based on the treasury stock
method using the average
market price 746,590 676,109
Net effect of dilutive stock
options and warrants - based
on the treasury stock method
using the average market price 1,980,378 1,507,956
----------- -----------
Totals 10,711,046 9,907,517
=========== ===========
Net income $ 1,008,347 $ 1,241,037
=========== ===========
Per share amount $ .09 $ .13
=========== ===========
Fully diluted:
Weighted average common
shares outstanding 7,984,078 7,723,452
Net effect of preferred shares
converted to common shares -
based on the treasury stock
method using the quarter-end
market price 746,590 680,568
Net effect of dilutive stock
options and warrants - based
on the treasury stock method
using the quarter-end market 1,983,282 1,538,332
----------- -----------
Totals 10,713,950 9,942,352
=========== ===========
Net income $ 1,008,347 $ 1,241,037
=========== ===========
Per share amount $ .09 $ .12
=========== ===========
</TABLE>
- 18 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements for the quarterly period ended March 31, 1995 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 2,600
<SECURITIES> 0
<RECEIVABLES> 6,762,582
<ALLOWANCES> 468,007
<INVENTORY> 10,298,114
<CURRENT-ASSETS> 19,950,517
<PP&E> 28,851,784
<DEPRECIATION> 10,354,392
<TOTAL-ASSETS> 41,545,861
<CURRENT-LIABILITIES> 20,901,668
<BONDS> 27,833,459
<COMMON> 79,918
0
75
<OTHER-SE> (213,910)
<TOTAL-LIABILITY-AND-EQUITY> 41,545,861
<SALES> 12,581,621
<TOTAL-REVENUES> 12,581,621
<CGS> 7,324,227
<TOTAL-COSTS> 8,213,030
<OTHER-EXPENSES> 2,831,607
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 499,887
<INCOME-PRETAX> 1,037,097
<INCOME-TAX> 28,750
<INCOME-CONTINUING> 1,008,347
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,008,347
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
