WASHINGTON, March 1 (UPI) -- Barr's fourth-quarter figures beat Wall Street's expectations, but its 2007 forecast disappointed, and analysts are skeptical about the company's near-term future.
Analysts were primarily concerned about expenses associated with Barr's acquisition of PLIVA because they seem to be running higher than the company anticipated and they may make things difficult for their books for the remainder of the year.
"The fourth quarter was a little bit better than what we were looking for," Robert Uhl, an analyst with Friedman, Billings & Ramsey, told United Press International.
However, he added, "I think people were kind of put off because of the PLIVA acquisition, so the beat might not have really mattered that much."
Although the PLIVA deal will ultimately pay off in the long-run, Uhl said he's hedging on Barr right now.
"I don't feel at this price level you need to step in," he said. "There could be some additional issues down the road that could have negative impact on share price, so I'm waiting for a lower price to tell people to jump in."
Two issues that give Uhl pause are Barr's refusal to provide fourth-quarter sales figures for its specific products or a GAAP number for 2007.
"The lack of disclosure of individual products sales is a step backwards this year, because they used to do that," Uhl said.
"Anytime a company decreases level of communication with investors it's a warning sign and make you ask the question, 'What are they trying to hide?'" he added.
Although these issues suggest a company facing problems, Uhl said he's willing to cut them some slack because they're still trying to figure out how to handle the PLIVA acquisition, which they bought in October.
"Longer term, I do think it's something that's really going to work out for them because it puts them strategically into the biogeneric marketplace several years down the road when that starts to open up," he said.
Additionally, Uhl likes the potential of Barr's pipeline, which includes more than 60 ANDAs pending at the Food and Drug Administration.
Barr said Wednesday its fourth-quarter earnings per share came in at $0.83, beating the Street's estimate of $0.73. Total revenues for the quarter hit $584 million, topping the Street's consensus of $521 million.
Overall, Barr recorded a loss of $390.9 million for the quarter compared to the same period last year. This was primarily due to charges related to the PLIVA acquisition, which Barr said obscured the strong performances of its generic and brand drugs.
"Sales of our U.S. generic portfolio increased during the quarter, driven by higher sales of our oral contraceptive portfolio, the introduction of generic ACTIQ, the cancer pain treatment, and the addition of PLIVA's global product line," said Bruce Downey, Barr's chairman and chief executive officer.
"On the proprietary side, sales increased 22 percent for the quarterly period, driven by higher sales of our ParaGard IUD, the introduction of our dual-label Plan B OTC/Rx product in November, and the launch of our Adderall IR product in October, which we acquired from Shire plc," he added.
Barr guided for 2007 revenues of $2.5 billion to $2.6 billion, including $1.9 billion for generics sales and $400 million for brand sales. The company projected a 2007 EPS of $3.00 to $3.30.
Citigroup analyst Andrew Swanson called Barr's 2007 guidance "disappointing" and thought the company would continue to struggle due to the expenses associated with incorporating PLIVA. He downgraded the stock from "buy" to "hold."
The company's outlook could improve if it's able to capitalize on several pending patent challenges this year, including Sanofi aventis' Allegra-D and Johnson & Johnson's Ortho Tri Cyclen Lo, but Swanson sees that as an unlikely prospect.
"Despite Barr's strong track record in this regard, however, we believe the upside risk is offset by the downside risks from the PLIVA integration," he stated in a research report.
Citigroup did not respond to UPI's request for comment from Swanson.
Not all analysts were down on Barr. J.P. Morgan analyst Adam Greene said the sell-off of Barr shares Wednesday may have been due to the "confusing" 2007 guidance the company provided but added he still likes the stock.
"While the (profit and loss) is now more complex with PLIVA, we believe Barr remains among the best positioned generics in the industry given its diverse base business and proven litigation record," Greene stated in a research report. "Barr remains our top generic pick and we reiterate our Overweight rating."
J.P. Morgan told UPI Greene was unavailable for comment.
