04.08.2005 12:00:00

Kos Reports 49% Increase in Revenue to $179.4 Million, Earnings Per Share of $0.61 and Strong Prescription Trends Across the Portfolio

Kos Pharmaceuticals, Inc. (Nasdaq:KOSP):

Financial Highlights

-- Second quarter revenue grew 49% to $179.4 million

-- Second quarter EPS at $0.61 per share

-- Generated over $51 million in cash from operations; cash and marketable securities balance of $247.3 million at quarter-end

-- No debt on balance sheet; final $19 million of debt converted to equity

Other Recent Events

-- Cholesterol franchise achieved 17% total prescription growth

-- Successfully initiated Barr co-promotion in women's healthcare

-- Completed integration of products and sales force acquired from Biovail

-- Announced commencement of NIH-sponsored AIM-HIGH outcomes study

Kos Pharmaceuticals, Inc. (Nasdaq: KOSP) today announced financialresults for the second quarter and six months ended June 30, 2005. Forthe second quarter, revenue increased 49% to a record $179.4 million,up from $120.3 million for the second quarter of 2004. Thissignificant increase reflects strong revenue and prescription growthof Kos' uniquely differentiated cholesterol products, Niaspan(R) andAdvicor(R), which not only lower LDL-C ("bad" cholesterol) but alsoraise HDL-C ("good" cholesterol). Also contributing to the recordrevenue were sales from the Company's asthma product, Azmacort(R) andthe sales from the newly acquired products, Teveten(R), Teveten(R) HCTand Cardizem(R) LA. Revenue for the six months ended June 30, 2005,increased 55% to $332.7 million, from $214.5 million for thecomparable 2004 period.

Pre-tax income, adjusted to exclude the $6 million settlementreceived from Andrx Laboratories, Inc. during the 2004 quarter,increased by 19% to $41.2 million for the second quarter of 2005 overthe comparable 2004 quarter. Kos recorded net income during thecurrent quarter of $28.9 million, or $0.61 per share, a 33% increasecompared with a pro-forma, fully-taxed net income of $21.4 million, or$0.46 per share, during the 2004 period (reflecting a 38% effectivetax rate and the absence of the $6 million settlement). For the firsthalf of 2005, net income was $55.2 million, or $1.19 per share.

During the quarter, the Company generated over $51 million in cashfrom operations and was debt-free at quarter end. As of June 30, 2005,the Company had $247.3 million in cash and marketable securities, evenafter taking into effect the cost of the Barr transaction and therecent product acquisitions from Biovail.

Niaspan revenue grew 41% to $106.0 million in the second quarterof 2005, from $75.2 million in the second quarter of 2004, whileAdvicor accounted for $30.2 million of revenue, a 16% increase fromthe second quarter of 2004. In the second quarter of 2005, totalprescriptions for the Company's cholesterol franchise grew 17%, andKos' market share for total prescriptions reached a new record of3.4%, with noticeable increases in the large and high potentialprimary care physician universe.

Azmacort revenue grew 23% to $23.6 million for the second quarterof 2005, compared with $19.2 million for the comparable 2004 quarter.Since acquiring Azmacort in 2004, the Company has arrested theprevious four-year prescription decline of this asthma product from a29% rate in the second quarter of 2004 to a 4% prescription declineduring the second quarter of 2005, a significant turnaround since there-launch of the product less than a year ago.

In May 2005, the Company acquired from Biovail Corporation'saffiliates an exclusive license to Teveten (eprosartan mesylate) andTeveten HCT (eprosartan mesylate/hydrochlorothiazide) and obtainedexclusive sales and marketing rights to Cardizem LA (diltiazemhydrochloride) in the United States. These cardiovascular products arecomplementary to the Company's existing cholesterol franchise, in thatthey further leverage Kos' sales force by broadening the Company'sfootprint in the large angina and hypertension markets. Kos recordedsecond quarter 2005 revenue for Teveten/ Teveten HCT of $4.8 millionwhile Cardizem LA revenue was $14.8 million. Teveten and Teveten HCT,products that possess an impressive clinical profile, includingsignificant systolic blood pressure reduction, demonstrated 29% totalprescription growth with a total of 147,000 prescriptions writtenduring the second quarter of 2005. Total prescription volume forCardizem LA, a well-established calcium channel blocker that provides24-hour blood pressure control with peak protection during the earlymorning hours when adverse cardiac events are most likely to occur,increased 24% to 433,000 prescriptions written during the quarter.

"We are delighted with the continued strong financial performanceof Kos and the favorable prescription trends being generated acrossour expanded portfolio of products. This is a direct manifestation ofour peak performance culture with a keen focus on measuredinvestments, controlling costs and leveraging of our quality, targetedsales and marketing efforts," said Adrian Adams, President and ChiefExecutive Officer. "The recent announcements with respect to the Barrand Biovail transactions, coupled with the ongoing productivity of ourResearch and Development functions and increased sales force capacity,have put us in an excellent position for long-term growth andcorporate development. We are particularly pleased with theannouncement of the NIH-sponsored AIM-HIGH outcomes trial given theincreasing interest and activity in the HDL market - a market that Koshelped create and pioneer. We have never been in such a strongposition and we very much look forward to maximizing all opportunitiesfor the further growth of our exciting Company."

In addition to the solid financial and operational results, theCompany achieved several other milestones during the second quarter of2005, principally within the R&D area. Specifically, the Companycompleted enrollment of its phase IV comparison study entitled"COMPELL," a 300-patient study that will assess Niaspan in combinationwith statins (Lipitor(R) and Crestor(R)) versus the combination ofezetimibe and simvastatin (now available as Vytorin(R)) and Crestoralone, with study results expected to be submitted for publication bythe end of this year. The Company also continues to make significantprogress in patient enrollment for its two pivotal clinical trials,SEACOAST and OCEANS to support the development of a new fixed dosecombination of Niaspan with simvastatin. As previously mentioned, inconjunction with the National Institutes of Health (NIH), the Companyannounced the commencement of a landmark long-term coronary heartdisease outcomes study, entitled AIM-HIGH, designed to evaluatewhether combination therapy with Kos' Niaspan and simvastatin issuperior to simvastatin alone in preventing cardiovascular events,such as heart attack, stroke and acute coronary syndromes. The NIHwill fund and conduct the AIM-HIGH study with an additional grant fromKos. This study is of high interest to Kos given its ongoingdevelopment of the Niaspan/simvastatin fixed-dose combination, with alaunch currently scheduled for 2007.

As a result of the Company's strong financial performance, Kos isrevising its full year 2005 EPS expectation to the upper end of therange previously provided, of $2.65 to $2.75. Importantly, the revisedguidance includes the impact of one-time charges, which had beenpreviously excluded from the Company's 2005 EPS expectations. As aresult of increased operating expenses attributable principally to theBiovail and Barr transactions, Kos expects to earn about $0.70 perfully diluted share in the third quarter of 2005. For the full year,Kos now expects to grow revenue in excess of 45% from 2004 to about$720 to $730 million.

Following this release, Kos' senior management will host aconference call today at 11:00 a.m. ET to discuss the Company'squarterly results. The conference call will be available live via theInternet by accessing Kos' website at www.kospharm.com. Please go tothe website at least fifteen minutes prior to the call to register,download and install any necessary audio software. For those whocannot access the webcast, you can participate via telephone bycalling 913-981-5546, confirmation code 6640097. A replay will also beavailable on the website at www.kospharm.com or by calling888-203-1112 domestic or international, and entering 6640097 from 2:00PM ET today until 12:00 AM ET on Monday, August 8, 2005. You will findthe financial information to be discussed during the conference callon Kos' website in the Investor Relations section.

Kos Pharmaceuticals, Inc. is a fully integrated specialtypharmaceutical company engaged in developing, commercializing,manufacturing and marketing proprietary prescription products for thetreatment of chronic diseases. The Company's principal productdevelopment strategy is to reformulate existing pharmaceuticalproducts with large market potential to improve safety, efficacy, orpatient compliance. The Company currently markets Niaspan and Advicorfor the treatment of cholesterol disorders, Azmacort for the treatmentof asthma, Cardizem LA for the treatment of hypertension and angina,and Teveten and Teveten HCT for the treatment of hypertension. Kos isdeveloping additional products, has proprietary drug deliverytechnologies in solid-dose and aerosol metered-dose inhalationadministration and is pursuing certain strategic business developmentand licensing opportunities.

Certain statements in this press release, including statementsregarding the Company's ability to generate enhanced revenue andearnings and projected 2005 financial outlook, continue to grow salesof Niaspan, Advicor, Azmacort, Cardizem LA, and Teveten/ Teveten HCT,the Company's ability to remove the uncertainty of a possible genericNiaspan reaching market in the near term, its expectations regardingits effective tax rate, the Company's ability to develop or acquireadditional products, the Company's ability to successfullycommercialize and develop the products acquired through its strategiccommercialization, and the success of the Company's research anddevelopment alliance with Biovail, the Company's ability to establisha footprint and generate sales in the hypertension and angina markets,the Company's ability to receive FDA approval for future products,such as the modified formulation of Niaspan and others, the Company'sability to successfully negotiate additional important strategicbusiness development opportunities, the progress of the Company'sresearch and development pipeline, the Company's ability to protectand enforce its intellectual property and thus protect its products,the Company's increased expectations regarding revenue and earningsper share in future periods, and the Company's ability to continue togenerate cash from operations are forward-looking and are subject torisks and uncertainties which may cause actual results to differmaterially from those projected in a forward-looking statement. Theserisks and uncertainties include, the Company's ability to grow revenueand control expenses, the protection afforded by the Company's patentsand those related to the acquired products, ability to build awarenessfor Niaspan, Advicor, Azmacort and the newly acquired products,Cardizem LA, Teveten and Teveten HCT within the medical community, thecontinued success of the alliances with Takeda, Merck KGaA, Oryx, Barrand Biovail, the continuing growth of the cardiovascular andrespiratory markets, the Company's ability to maintain its compliancewith FDA regulations and standards without adversely affecting theCompany's manufacturing capability or ability to meet its productionrequirements or profit margins, the Company's ability to attract andretain sales professionals and successfully integrate the sales forceobtained from Biovail, ensure compliance with prescription drug salesand marketing laws and regulations, changes in the regulatoryenvironment governing the Company's compliance with the FDA, PTO, taxand competition issues, the impact of a possible generic version ofthe Cardizem LA product or other products sold by the Company, theability of third party suppliers to the Company continuing to be ableto perform their supply obligations, the Company's ability to achieveregulatory approvals for its products under development in a timelymanner, the effect of conditions in the pharmaceutical industry andthe economy in general, as well as certain other risks. A moredetailed discussion of risks attendant to the forward-lookingstatements included in this press release are set forth in the"Forward-Looking Information: Certain Cautionary Statements" sectionof the Company's Annual Report on Form 10-K for the year endedDecember 31, 2004, filed with the Securities and Exchange Commission,and in other reports filed with the SEC.

Kos Pharmaceuticals, Inc. and Subsidiaries

SELECTED FINANCIAL INFORMATION

Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
2005 2004 2005 2004
-------- -------- -------- --------
(unaudited) (unaudited)
Condensed
Consolidated
Statement of
Operations
(in thousands,
except per share
data)
Revenues $179,399 $120,250 $332,689 $214,518
Cost of Sales 19,057 10,187 29,907 16,941
-------- -------- -------- --------

160,342 110,063 302,782 197,577
-------- -------- -------- --------
Operating Expenses:
Research and
development 31,479 19,523 56,775(III) 73,440(IV)
Selling,
general and
administrative 88,681 53,864 166,696 109,040
-------- -------- -------- --------

Total
operating
expenses 120,160 73,387(II) 223,471 182,480(II)
-------- -------- -------- --------

Income from
Operations 40,182 36,676 79,311 15,097

Interest and
Other Income (1,039) (3,900)(II) (2,269) (4,276)(II)

Provision for/
(Benefit from)
Income Taxes 12,308 2,075 26,342 (27,175)(V)
-------- -------- -------- --------

Net Income $ 28,913 $ 38,501 $ 55,238 $ 46,548
======== ======== ======== ========

Net Income per
Share:
Basic 0.70 $ 1.03 $ 1.36 $ 1.25
Diluted 0.61(I) 0.83(I) 1.19(I) 1.00(I)

Shares Used in
Computing Net
Income per Share:
Basic 41,205 37,328 40,733 37,129
Diluted 47,911 46,975 46,964 47,384


June 30, Dec. 31,
2005 2004
-------- --------
(unaudited)
Condensed
Consolidated
Balance Sheet
(in thousands)
Cash and Cash
Equivalents $243,984 $258,703
Marketable
Securities 3,358 -
Accounts
Receivable, net 123,714 74,568
Deferred Tax Asset,
current 43,554 41,186
Inventories, net 15,705 10,649
Other Current
Assets 21,757 11,572
Fixed Assets, net
of depreciation 25,781 23,341
Deferred Tax Asset,
non-current 15,125 13,346
Intangible Assets 244,858 150,079
Other Assets 3,217 3,482
-------- --------

Total assets $741,053 $586,926
======== ========

Current
Liabilities $174,706 $151,575(VI)
Other Long-Term
Liabilities 1,827 209
Shareholders'
Equity 564,520 435,142
-------- --------

Total
liabilities
and
shareholders'
equity $741,053 $586,926
======== ========



-----
Notes:

(I) Calculation of fully diluted EPS reflects net income excluding
$262,000 and $303,000 in interest expense for the quarters
ended June 30, 2005 and 2004, respectively, and $520,000 and
$606,000 for the six months ended June 30, 2005 and 2004,
respectively, associated with the Company's convertible credit
facilities.

(II) Includes the effect of the $6 million settlement received
from Andrx, of which $2 million was recorded as reimbursement
of operating expenses and $4 million as other income.

(III) Includes a $4 million write-off associated with an equity
investment in Triad Pharmaceuticals, Inc.

(IV) Includes the effect of a one-time, $38 million write-off
associated with the acquisition of the Azmacort product.

(V) Includes a one-time, $15.8 million tax benefit
associated with the reversal of the Company's deferred tax
asset valuation allowance, and a one-time, $14.4 million
deferred tax benefit associated with the Azmacort
acquisition.

(VI) Includes $19 million of debt due to Michael Jaharis, Chairman
Emeritus of the Company's Board of Directors, which matured on
June 30, 2005.

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