First Horizon Announces Results for Fourth Quarter and Year Ended Dece

First Horizon Announces Results for Fourth Quarter and Year Ended December 31, 2004

    Business Editors/Health Editors

    ALPHARETTA, Ga.--(BUSINESS WIRE)--March 2, 2005--First Horizon Pharmaceutical Corporation (NASDAQ:FHRX):

    Highlights for the fourth quarter 2004 include:

--	Net revenues of $42.4 million
--	Net income of $8.6 million, or $0.21 cents per diluted share, including a $0.02 per share dilutive effect of the Company's senior subordinated contingent convertible debt
--	Earnings before interest, taxes, depreciation and amortization (a non-GAAP measure) of $13.6 million

    Year end 2004 results include:

    -- Net revenues of $152.0 million

    -- Net income of $26.6 million, or $0.66 per diluted share,
    including a $0.06 per share dilutive effect of the Company's
    senior subordinated contingent convertible debt

    -- Completed stock repurchases of 2.1 million shares at a cost of
    $42.4 million

    First Horizon Pharmaceutical Corporation (NASDAQ:FHRX), a specialty pharmaceutical company, today announced results for the fourth quarter and year ended December 31, 2004. Net revenues for the fourth quarter were $42.4 million and net income was $8.6 million, or $0.21 per diluted share, including a $0.02 per share dilutive effect of the Company's senior subordinated contingent convertible debt. Cost of revenues for the quarter was $7.8 million, producing a gross margin of 82%. Selling, general and administrative expenses were $20.5 million for the fourth quarter of 2004, which included $2 million in charges related to (a) a reduction in value of samples because of the introduction of the Robinul generic, (b) initial marketing expenses for the SkyePharma fenofibrate product, and (3) discretionary bonuses for employees based on overall 2004 results.
    For the year ended December 31, 2004, net revenues were $152.0 million and net income was $26.6 million, or $0.66 per diluted share, including a $0.06 per share dilutive effect of the Company's senior subordinated contingent convertible debt. Cost of revenues for the full year was $29.1 million, producing a gross margin of 81%. Selling, general and administrative expenses were $66.8 million for the full year. Our effective tax rate for the full year was 31.9%. The decrease in our tax rate from 2003 was due primarily to our implementation of international operations and income generated in countries with lower effective tax rates than the United States.
    First Horizon's President and CEO, Patrick Fourteau, commented, "In 2004, we focused on marketing our existing branded products in our two primary therapeutic categories: Cardiology and Women's Health. We substantially expanded our sales force and developed our pay-for-performance marketing model. The result was solid growth in our leading cardiology product, Sular. We also saw strong growth in Prenate Elite, launched in April 2004, which has been a very successful extension to our Women's Health line of prenatal vitamins. We also expanded our product line with the signing of a licensing agreement with SkyePharma PLC to market and distribute a fenofibrate product that complements our other cardiology products. We have amended that agreement to allow us to launch the new fenofibrate product during the second quarter of 2005, subject to FDA approval."
    Our current operating plan focuses on maximizing the sales of our existing products, enhancing growth by launching line extensions to our current products and acquiring or licensing approved or late stage development products. We intend to focus our acquisitions on products that fit within our Cardiology and Women's Health therapeutic categories.

    Cardiology Products

    Net revenues of the Company's Cardiology products were $17.0 million for the fourth quarter of 2004, representing 40% of total sales. For the full year, Cardiology products generated $75.3 million in revenues and accounted for 50% of total sales. Sular, the Company's largest cardiology product, marketed for patients with moderate to severe hypertension, produced revenues of $13.0 million for the fourth quarter of 2004. Despite a strong performance in retail sales, our overall sales have been affected by a decrease in our non-retail business during the fourth quarter of 2004. New prescriptions of Sular increased 31.8% and total prescriptions of Sular increased 17.8% for the fourth quarter of 2004 compared with the similar period of the prior year. (Source: IMS Health's National Prescription Audit Plus data). Sular's sales growth for 2004 has primarily been the result of total prescription growth, significant hospital growth and the impact of managed care plan additions.
    Nitrolingual produced revenues of $4.0 million for the fourth quarter of 2004. New prescriptions of Nitrolingual increased 6.1% and total prescriptions of Nitrolingual increased 4.5% for the fourth quarter of 2004 compared with the similar period of the prior year. (Source: IMS Health's National Prescription Audit Plus data).

    Women's Health Products

    Net revenues of the Women's Health products, which include Prenate Elite, Ponstel, the Robinul line, and the Tanafed line, were $22.1 million for the fourth quarter of 2004. Prenate Elite, the only prescription prenatal vitamin with Metafolin(R), captured an 11.7% market share of new prescriptions and an 11.1% market share of total prescriptions as of December 2004. Also, as of December 2004, Prenate Elite is the most prescribed prenatal vitamin for both new and total prescriptions (Source: IMS Health's National Prescription Audit Plus data). Net revenues of Prenate Elite were $5.3 million for the fourth quarter of 2004.
    We intend to launch Optinate, our first line extension of Prenate Elite, in March 2005. Optinate will compete in the EFA segment of the prescription prenatal vitamin market. We anticipate an additional line extension of Prenate Elite in 2005.

    Financial Overview

    Selling, general and administrative expenses were $20.5 million for the fourth quarter of 2004. Included in fourth quarter 2004 expenses were $2.0 million in charges related to (a) a reduction in value of samples because of the introduction of the Robinul generic, (b) initial marketing expenses for the SkyePharma fenofibrate product, and (3) discretionary bonuses for employees based on overall 2004 results.
    During the fourth quarter of 2004, First Horizon repurchased a total of 1.1 million shares of its common stock at an average cost of $22.96 per share, or $24.5 million. Year to date through December 31, 2004, the Company has repurchased a total of 2.1 million shares of its common stock at an average cost of $20.62 per share, or $42.4 million.

    Outlook

    Management believes that growth, if any, in the first quarter of 2005 will be driven by the increased size of its sales force and the continuing success of its leading products, principally Sular, Nitrolingual Pumpspray and Prenate Elite. First Horizon expects first quarter 2005 revenues to be in the range of $40 million to $42 million and diluted earnings per share in the range of $0.17 to $0.19, including the dilutive effect of the Company's senior subordinated contingent convertible debt. Management's estimate of first quarter 2005 revenues and earnings take into consideration the introduction of the generic to Robinul but do not include any revenues from the SkyePharma fenofibrate product or the new Andrx products, Fortamet and Altoprev.
    Second quarter 2005 guidance will be provided after the Andrx acquisition closes.

    Conference Call

    First Horizon will host a conference call on March 2, 2005, at 5 p.m. Eastern Time to discuss First Horizon's financial results. Analysts, investors and other interested parties are invited to participate by visiting First Horizon's website, http://www.fhrx.com and entering the Investor Relations page. You may also dial in to the conference call. The dial-in numbers are 1-800-599-9829 for domestic callers and 1-617-847-8703 for international callers. All callers should use the pass code 38451676 to gain access to the conference call. A replay of this conference call will be available by dialing 1-888-286-8010 for domestic callers and 1-617-801-6888 for international callers. All callers should use the pass code 41545554 to gain access to the replay. The replay will be available through March 16, 2005.

    First Horizon Background

    First Horizon Pharmaceutical Corporation is a specialty pharmaceutical company that markets and sells prescription products with a primary focus on cardiology and women's health. First Horizon has a portfolio that includes 12 branded prescription products of which four are actively promoted to high-prescribing physicians through its nationwide marketing and sales force of approximately 360 representatives. First Horizon's web site address is: http://www.fhrx.com. Please visit First Horizon's website for full prescribing information on First Horizon's products.

    Safe Harbor Statement

    This press release contains forward-looking statements (rather than historical facts) that are subject to risks and uncertainties that could cause actual results to materially differ from those described. Although we believe that the expectations expressed in these forward-looking statements are reasonable, we cannot promise that our expectations will turn out to be correct. Our actual results could be materially different from and worse than our expectations. With respect to such forward-looking statements, we seek the protections afforded by the Private Securities Litigation Reform Act of 1995. These risks include, without limitation:

    -- We may not attain expected net revenues and earnings per
    share;

    -- The timing of implementing our plan to increase the number of
    our sales representatives and the size of such increase may
    differ from our current expectations;

    -- The potential growth rate for Sular may be limited by slower
    growth for the class of drugs to which Sular belongs and the
    ability of our sales representatives to influence prescribing
    habits of physicians;

    -- Sales of our Prenate Elite may not be at the levels that we
    anticipate;

    -- We may not be able to protect our competitive position for
    Prenate Elite from patent infringers;

    -- Sales of our Tanafed products have been adversely affected by
    the introduction of competitive products, and an issued FDA
    notice may cause us to incur increased expenses and adversely
    affect our ability to continue to market and sell our Tanafed
    products;

    -- Introductions by us of line extensions of our existing
    products may require that we make unexpected changes in our
    estimates for future product returns and reserves for obsolete
    inventory which would adversely affect our operating results;

    -- Our supplier can terminate our rights to commercialize
    Nitrolingual and the smaller size of this product has not met
    our expectation;

    -- A small number of customers account for a large portion of our
    sales and the loss of one of them, or changes in their
    purchasing patterns, could result in reduced sales;

    -- If third-party payors do not adequately reimburse patients for
    our products, doctors may not prescribe them;

    -- We rely on operational data obtained from IMS, an industry
    accepted data source. IMS data may not accurately reflect
    actual prescriptions (for instance, we believe IMS data does
    not capture all product prescriptions from some non-retail
    channels) or trade levels of inventory;

    -- An adverse judgment in the securities class action litigation
    in which we and certain directors and executive officers are
    defendants could have a material adverse effect on our results
    of operations and liquidity;

    -- An adverse judgment in our infringement action with
    Breckenridge Pharmaceutical, Inc. with respect to our Tanafed
    products, could result in the invalidation of our Tanafed
    patents, cause us to lose market share for Tanafed products
    and result in a loss of earnings and profits from Tanafed
    sales.

    -- If our products under development fail in clinical studies, if
    we fail to obtain, or encounter difficulties in obtaining,
    regulatory approval for new products or new uses of existing
    products, or if our development agreements are terminated, we
    will have expended significant resources for no return;

    -- If the FDA does not approve certain labeling for the
    cardiovascular product we have licensed from SkyePharma, then
    our sales of that product may be restricted;

    -- Our business and products are highly regulated. The regulatory
    status of some of our products makes these products subject to
    increased competition and other risks, and we run the risk
    that we, or third parties on whom we rely, could violate the
    governing regulations;

    -- If generic competitors that compete with any of our products
    are introduced our revenues may be adversely affected; and

    -- Some unforeseen difficulties may occur.

    This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included herein. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements and risk factors included in our other filings with the Securities and Exchange Commission.

FIRST HORIZON PHARMACEUTICAL CORPORATION Consolidated Condensed Statement of Operations (Unaudited, in thousands, except per share amounts)

For the Quarter Ended Year Ended December 31, December 31, --------------------- -------------------- 2004 2003 2004 2003 ---------- ---------- ---------- --------- Net revenues $ 42,400 $ 37,130 $ 151,967 $ 95,305

Operating costs and expenses: Cost of revenues 7,787 4,316 29,082 17,734 Selling, general and administrative 20,486 13,498 66,773 57,822 Depreciation and amortization 4,307 4,120 16,907 16,489 Impairment charge -- -- -- 4,152 Research and development 523 472 1,546 2,085 ---------- ---------- ---------- --------- Total operating costs and expenses 33,103 22,406 114,308 98,282 ---------- ---------- ---------- ---------

Operating income (loss) 9,297 14,724 37,659 (2,977)

Interest expense (761) (43) (2,480) (194) Interest income and other 1,302 76 3,790 390 ---------- ---------- ---------- --------- Total other income 541 33 1,310 196

Income (loss) before provision for income taxes 9,838 14,757 38,969 (2,781) Provision (benefit) for income taxes 1,275 5,152 12,415 (1,043) ---------- ---------- ---------- ---------

Net income (loss) $ 8,563 $ 9,605 $ 26,554 $ (1,738) ========= ========= ========= ========

Net income (loss) per common share: Basic $ 0.24 $ 0.27 $ 0.74 $ (0.05) ========== ========== ========== ========= Diluted $ 0.21 $ 0.27 $ 0.66 $ (0.05) ========== ========== ========== =========

Weighted average common shares outstanding: Basic 35,438 35,266 35,761 35,092 ========== ========== ========== ========= Diluted 43,657 36,170 42,429 35,092 ========== ========== ========== =========

FIRST HORIZON PHARMACEUTICAL CORPORATION Condensed Consolidated Balance Sheets (Unaudited, in thousands)

Dec. 31, Dec. 31, 2004 2003 --------- --------- ASSETS Current assets: Cash and cash equivalents $ 36,586 $ 33,722 Marketable securities 38,271 9,996 Accounts receivable, net 23,833 15,759 Inventories 15,824 11,188 Other current assets 16,438 10,236 --------- --------- Total current assets 130,952 80,901 --------- ---------

Property and equipment, net 5,110 2,830

Other assets: Intangibles, net 229,953 240,356 Marketable securities 122,365 -- Other assets 10,104 1,066 --------- --------- Total other assets 362,422 241,422 --------- ---------

Total assets $498,484 $325,153 ========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 14,569 $ 5,661 Accrued expenses 20,508 13,210 --------- --------- Total current liabilities 35,077 18,871 --------- ---------

Long-term liabilities: Convertible debt 150,000 -- Other long-term liabilities 4,998 505 --------- --------- Total liabilities 190,075 19,376 --------- ---------

Stockholders' equity: Common stock 36 36 Additional paid-in capital 288,335 288,666 Retained earnings 43,315 16,761 Accumulated other comprehensive income (loss) (87) 314 Treasury stock (23,190) -- --------- --------- Total stockholders' equity 308,409 305,777 --------- ---------

Total liabilities and stockholders' equity $498,484 $325,153 ========= =========

FIRST HORIZON PHARMACEUTICAL CORPORATION Reconciliation of EBITDA(a) (Unaudited, in thousands)

For the Three Months For the Year Ended Dec. 31, Ended Dec. 31, 2004 2004 -------------- -------------- Net income as reported (GAAP) $ 8,563 $ 26,554 Less: Interest income and other (1,302) (3,790) Add: Interest expense 761 2,480 Add: Provision for income taxes 1,275 12,415 Add: Depreciation and amortization 4,307 16,907 -------------- -------------- Earnings before interest, taxes, depreciation and amortization $ 13,604 $ 54,566 ============== ==============

(a) The Company believes that EBITDA is a meaningful non-GAAP financial measure as an earnings-derived indicator that approximates cash flow. EBITDA, as defined and presented by the Company, may not be comparable to similar measures reported by other companies.

--30--KT/na*

CONTACT: First Horizon Pharmaceutical Corporation Darrell Borne, 770-442-9707, ext. 6530 ir@fhrx.com

KEYWORD: GEORGIA INDUSTRY KEYWORD: PHARMACEUTICAL EARNINGS CONFERENCE CALLS SOURCE: First Horizon Pharmaceutical Corporation

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