If you really like accounting -- and I mean rolling up your sleeves and adding or subtracting back various accounting bric-a-brac -- you might really like Barr Pharmaceuticals' (NYSE: BRL ) quarterly report. If, however, discussions of accounting and one-time items make your eyelids droopy, you may be tempted to just look at the market's positive reaction today and content yourself that the company did well enough.
As it stands, I'd say that the company did better than "well enough," and that's not uncommon for the generic sector -- when times are good (like with Teva's (Nasdaq: TEVA ) recent release), they're really good; when they're not ... well ...
This time around, Barr reported that total revenue was up 25%, with 17% growth in generics sales, 21% growth in proprietary drug sales, and a tripling of "other revenue" from the likes of Teva and Kos Pharmaceuticals (Nasdaq: KOSP ) .
Below the revenue line is where things get "fun." Gross margin looked OK, but not great, until you adjust for an inventory write-up. And operating income was just nutty -- it looks great as is, but you have to adjust for a settlement in this quarter and a settlement last quarter. Do that and operating income was up about 10% -- and that's without adjusting for the impact of stock option expense (should you choose to do that).
Earnings weren't the only news this time around. The company also announced that it had reached a settlement with Shire (Nasdaq: SHPGY ) concerning patent litigation for that company's Adderall drug for ADHD. Under the settlement, Barr can launch a generic version in 2009 -- 10 years earlier than the patent expiry, but later than if Barr had prevailed completely. And while no money is changing hands (something that torpedoed a settlement between Bristol-Myers (NYSE: BMY ) and Apotex recently) there is an additional product licensing agreement between the two companies. Now, I'm not saying the two are necessarily related, but I don't think it's totally unfair to wonder.
There's a lot going in Barr's favor these days, including a potentially significant (and attractively priced) acquisition and the possibility of eventual FDA approval of OTC sales of Plan B emergency contraception. If you haven't checked this one out yet, now may be the time for a little due diligence.
For more non-generic Foolishness:
- Nothing Generic About Teva's Performance
- Barr Labs and Pliva: Round 2
- A More Realistic Bar for Barr Labs
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Fool contributorStephen Simpsonhas no financial interest in any stocks mentioned (that means he's neither long nor short the shares).