KV takes 2Q loss on sliding sales and higher costs

ST. LOUIS—KV Pharmaceutical Co., which last week delayed its fiscal second-quarter earnings, said Monday it expects to post a loss due to weaker sales of key products and a variety of one-time charges.

For the three months ended Sept. 30, KV said it expects to lose $3 million, or 6 cents per share, compared with a profit of $40.2 million, or 70 cents per share, in the same period last year. Revenue fell 17 percent, to $144.3 million from $172.9 million, after the company lost exclusive marketing rights on the hypertension and angina drug metoprolol, and greater competition and fewer larger orders hurt its Ther-Rx business.

On Tuesday, KV said it will delay filing its second-quarter report because an audit committee is investigating possible misconduct by the company's management. Monday's results are preliminary and KV said they may be changed based on the results of the investigation.

The company also withdrew its fiscal 2009 outlook because of the review.

Metoprolol is a generic version of AstraZeneca's drug Toprol XL. Overall, revenue from KV's Ethex brand products, which include metoprolol, fell 17 percent to $95.6 million. Sales of older cardiovascular drugs also decreased.

A year ago, KV had the exclusive right to market metoprolol in 100 mg and 200 mg doses. Those rights expired in January, leading to greater competition, and the company said that reduced its profit by 30 cents per share in the second quarter.

For KV's women's health business, Ther-Rx, sales fell 18 percent to $43.4 million. That was due to weaker sales of anti-infection drugs, and lower revenue from sales of hematinic products, or drugs that increase the amount of hemoglobin in the blood. The company said it lost 10 cents per share in the quarter after hiring 50 new sales representatives and continued to fund the launch of its hot flash treatment spray Evamist.

Ther-Rx revenue was also hurt by greater generic competition, and KV said several customers made larger-than-normal purchases in the second quarter of fiscal 2008.

Revenue from the specialty ingredients making business, Particle Dynamics, rose 10 percent to $5.3 million.

The company also said it took a charges of 7 cents per share in labor, overhead and inventory write-offs related to manufacturing issues, and 6 cents per share after recalling some production lots of extended-release morphine sulfate tablets.

It lost 5 cents per share after discontinuing some cough and cold products, and research and development costs rose 5 cents per share as the company worked to support new products in development.

KV said interest income fell by 2 cents per share and it paid 2 cents per share to compensate customers for delayed orders, and another 2 cents per share to settle a Medicaid pricing lawsuit in Alabama.

The company took a loss of a penny per share on mark-to-market investments, and recorded a one-time gain of 2 cents per share.

In afternoon trading, KV shares picked up 16 cents, or 2.5 percent, to $6.45.