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`Table of Contents
`
`($ in thousands)
`Revenues:
`Par Pharmaceutical
`Par Specialty
`Total revenues
`
`2014
`(Successor)
`
`2013
`(Successor)
`
`$ Change % Change
`
`For the years ended December 31,
`Percentage of total revenues
`2014 (cid:9)
`2013
`
`$ (cid:9) 1,241,131
`67,490
`$ (cid:9) 1,308,621
`
`$ (cid:9) 1,028,418
`69,049
`$ (cid:9) 1,097,467
`
`$ 212,713
`(1,559)
`$ 211,154
`
`20.7%
`(2.3)%
`19.2%
`
`94.8% (cid:9)
`5.2% (cid:9)
`100.0% (cid:9)
`
`93.7%
`6.3%
`100.0%
`
`Par Pharmaceutical
`The increase in generic segment revenues in the year ended December 31, 2014 was primarily due to the launches of
`several products in 2014, coupled with products that benefited from competitor supply issues, including the following:
`
`• The launch of amlodipine/valsartan in September 2014;
`
`• increase in bupropion ER, which benefited from competitors that were not able to supply product to the market;
`
`• the acquisition of Aplisol®, which was acquired with Par Sterile in February 2014;
`
`• the launch of clonidine HCI ER in the fourth quarter of 2013;
`
`• divalproex, which benefited from a competitor exiting the market in June 2013 as the result of FDA compliance issues
`and the non-recurrence of a large contractual gross-to-net price adjustment to a major customer that occurred in the prior
`year; and
`
`• the net increase in "Other", which is mainly driven by Par Sterile products, which were acquired in the February 20, 2014
`Par Sterile acquisition; the launch of omega-3-acid ethyl esters oral capsules in July 2014; the September 2014 launch of
`entecavir; and oxycodone, which we sold beginning in September 2014 pursuant to a settlement agreement under which
`we receive a limited quantity of supply to sell once annually over a four year period ending in 2017.
`
`The increases noted above in 2014 were tempered by:
`
`• revenue decline for modafinil as the result of competition, which had a negative impact on both price and volume;
`
`• revenue decline for budesonide principally due to price decline resulting from competition;
`
`• revenue decline for rizatriptan, as a result of several competitors entering the market in July 2013 after we launched in
`January 2013 as the authorized generic; and
`
`• revenue decline for lamotrigine, which experienced a higher level of competition in 2014 as compared to 2013 when it
`launched.
`Net product sales of contract-manufactured products (which are manufactured for us by third parties under contract) and
`licensed products (which are licensed to us from third-party development partners and also are generally manufactured by
`third parties) comprised a significant percentage of our total net product revenues for 2014 and for 2013. The significance of
`the percentage of our net product revenues is primarily driven by the launches/acquisitions of products like entecavir,
`budesonide, divalproex, metoprolol succinate ER, clonidine HCI ER, and digoxin. We are substantially dependent upon
`contract-manufactured and licensed products for our overall sales, and any inability by our suppliers to meet demand could
`adversely affect our future sales.
`
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`JAZZ EXHIBIT 2015
`Amneal Pharms. et al. (Petitioners) v. Jazz Pharms., Inc. (Patent Owner)
`Case IPR2015-00554
`Part 2 of 4
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`Par Specialty
`The decrease in the Par Specialty segment revenues in the year ended December 31, 2014 as compared to the same
`period of 2013 was primarily due to a net product sales decline of Megace® ES primarily as a result of decreased volume.
`These decreases were tempered by revenue growth of Nascobal® primarily due to increased volume.
`
`Revenues (2013 compared to 2012)
`Total net revenues of our top selling products were as follows ($ in thousands):
`
`For the year (cid:9)
`ended (cid:9)
`
`December 31,
`2013 (cid:9)
`
`July 12, 2012 (cid:9)
`to (cid:9)
`December 31, (cid:9)
`2012 (cid:9)
`
`For the year
`ended
`
`For the period (cid:9)
`January 1,
`(non-GAAP)
`2012 to (cid:9)
`September 28, December 31,
`2012 (cid:9)
`2012
`
`$ Change
`
`Product
`Par Pharmaceutical
`Budesonide (Entocort® EC) (cid:9)
`Propafenone (Rythmol SR®)
`Metoprolol succinate ER
`(Toprol-XL®)
`Lamotrigine (Lamictal XR®)
`Divalproex (Depakote®)
`Rizatriptan (Maxalt®)
`Bupropion ER (Wellbutrin®)
`Chlorpheniramine/Hydrocodone
`(Tussionex®)
`Modafinil (Provigil®)
`Diltiazem (Cardizem®CD)
`Other
`Other product related revenues
`Total Par Pharmaceutical
`Revenues (cid:9)
`Par Specialty
`Megace® ES
`Nascobal® Nasal Spray
`Other
`Other product related revenues
`Total Par Specialty Revenues (cid:9)
`
`$
`
`198,834 (cid:9)
`70,508
`
`$
`
`56,670
`54,577
`46,635
`45,598
`45,403
`
`33,518
`27,688
`27,212
`390,346
`31,429
`
`36,710
`19,623
`
`31,287
`-
`2,436
`-
`11,255
`
`17,403
`16,956
`3,702
`79,789
`8,151
`
`$ (cid:9)
`
`103,762 (cid:9)
`53,825
`
`$
`
`140,472
`73,448
`
`$ (cid:9) 58,362
`(2,940)
`
`154,216
`-
`9,099
`-
`34,952
`
`30,706
`88,831
`-
`249,383
`18,586
`
`185,503
`-
`11,535
`-
`46,207
`
`48,109
`105,787
`3,702
`329,172
`26,737
`
`(128,833)
`54,577
`35,100
`45,598
`(804)
`
`(14,591)
`(78,099)
`23,510
`61,174
`4,692
`
`$
`
`1,028,418 (cid:9)
`
`$
`
`227,312
`
`$ (cid:9)
`
`743,360 (cid:9)
`
`$
`
`970,672
`
`$ (cid:9) 57,746
`
`39,510
`26,864
`(910)
`3,585
`69,049 (cid:9)
`
`$
`
`$
`
`10,910
`7,138
`130
`649
`18,827
`
`M
`
`38,322
`17,571
`130
`4,485
`60,508 (cid:9)
`
`$
`
`49,232
`24,709
`260
`5,134
`79,335
`
`(9,722)
`2,155
`(1,170)
`(1,549)
`$ (10,286)
`
`$ (cid:9)
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`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
`

`
`Form S-1 (cid:9)
`
`Table of Contents
`
`($ in thousands)
`Revenues:
`Par Pharmaceutical
`Par Specialty
`Total revenues
`
`($ in thousands)
`Revenues:
`Par Pharmaceutical
`Par Specialty
`Total revenues (cid:9)
`
`Page 73 of 270
`
`2013
`
`(Successor)
`
`2012
`(Total)
`(non-GAAP)
`
`For the years ended December 31,
`Percentage of total revenues
`2012
`(non-GAAP)
`
`2013 (cid:9)
`
`$ Change % Change
`
`$ (cid:9) 1,028,418
`69,049
`$ (cid:9) 1,097,467
`
`$ (cid:9)
`
`970,672
`79,335
`$ (cid:9) 1,050,007
`
`$ (cid:9) 57,746
`(10,286)
`$ (cid:9) 47,460
`
`5.9%
`(13.0)%
`4.5%
`
`93.7% (cid:9)
`6.3% (cid:9)
`100.0% (cid:9)
`
`92.4%
`7.6%
`100.0%
`
`July 12, 2012 to
`December 31, 2012
`(Successor)
`
`$ (cid:9)
`
`$ (cid:9)
`
`227,312
`18,827
`246,139
`
`For the period
`January 1, 2012 to
`September 28, 2012
`(Predecessor)
`
`For the year
`ended
`December 31,
`2012
`Total (non-GAAP)
`
`$ (cid:9)
`
`$ (cid:9)
`
`743,360
`60,508
`803,868
`
`$ (cid:9)
`
`$ (cid:9)
`
`970,672
`79,335
`1,050,007
`
`Par Pharmaceutical
`The increase in generic segment revenues in the year ended December 31, 2013 was primarily due to the products that
`benefited from competitor supply issues coupled with launches of several products in 2013, including:
`
`• the increase in budesonide revenues, which benefited from a competitor's supply issues;
`
`• the launch of lamotrigine in January 2013 coupled with a competitor exiting the market in the second quarter of 2013 due
`to FDA compliance issues;
`
`• the launch of rizatriptan in January 2013;
`
`• the increase in divalproex revenues, which benefited from a competitor exiting the market in June 2013 as the result of
`FDA compliance issues;
`
`• a full year of revenues from products acquired from the merger of Watson and Actavis Group in November 2012,
`primarily diltiazem, fentanyl patch (included in "Other"), and morphine (included in "Other"); and
`
`• the net increase in "Other" is mainly driven by the launches of fluvoxamine maleate ER in first quarter of 2013, fenofibric
`acid in the third quarter of 2013, and the fourth quarter launches of clonidine HCI ER and dexmethylphenidate.
`
`The increases noted above in 2013 were tempered by:
`
`• the decrease in sale volume for modafinil, which launched in April 2012 and experienced high sale volume upon launch
`and subsequently experienced significant competition at the end of its exclusivity period, which had a negative impact on
`both price and volume; and
`
`• on-going competition on all SKUs (packaging sizes) of metoprolol succinate ER, which had a negative impact on both
`price and volume.
`Net product sales of contract-manufactured products (which are manufactured for us by third parties under contract) and
`licensed products (which are licensed to us from third-party development partners and also are generally manufactured by
`third parties) comprised a significant percentage of our total net product revenues
`
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`for 2013 and for 2012. The significance of the percentage of our net product revenues is primarily driven by the launches of
`products like rizatriptan, modafinil, budesonide and metoprolol succinate ER. We are substantially dependent upon
`contract-manufactured and licensed products for our overall sales, and any inability by our suppliers to meet demand could
`adversely affect our future sales.
`
`Par Specialty
`The decrease in the Par Specialty segment revenues in the year ended December 31, 2013 as compared to the same
`period of 2012 was primarily due to a net product sales decline of Megace® ES primarily as a result of decreased volume
`and a decrease in royalties earned from milestone payments pertaining to an agreement with Optimer Pharmaceuticals
`related to fidaxomicin. The decreases were partially offset by the continued growth of Nascobal® due to better pricing.
`
`Gross revenues to total revenues
`Generic drug pricing at the wholesale level can create significant differences between our invoice price and net selling price.
`Wholesale customers purchase product from us at invoice price, then resell the product to specific healthcare providers on
`the basis of prices negotiated between us and the providers. The difference between the wholesalers' purchase price and
`the typically lower healthcare providers' purchase price is refunded to the wholesalers through a chargeback credit. We
`record estimates for these chargebacks as well as sales returns, rebates and incentive programs, and the sales allowances
`for all our customers at the time of sale as deductions from gross revenues, with corresponding adjustments to our
`accounts receivable reserves and allowances.
`
`We have the experience and the access to relevant information that we believe necessary to reasonably estimate the
`amounts of such deductions from gross revenues. Some of the assumptions we use for certain of our estimates are based
`on information received from third parties, such as wholesale customer inventory data and market data, or other market
`factors beyond our control. The estimates that are most critical to the establishment of these reserves, and therefore would
`have the largest impact if these estimates were not accurate, are estimates related to expected contract sales volumes,
`average contract pricing, customer inventories and return levels. We regularly review the information related to these
`estimates and adjust our reserves accordingly if and when actual experience differs from previous estimates. With the
`exception of the product returns allowance, the ending balances of account receivable reserves and allowances generally
`are eliminated during a two-month to four-month period, on average.
`
`We recognize revenue for product sales when title and risk of loss have transferred to our customers and when collectability
`is reasonably assured. This is generally at the time that products are received by the customers. Upon recognizing revenue
`from a sale, we record estimates for chargebacks, rebates and incentives, returns, cash discounts and other sales reserves
`that reduce accounts receivable.
`
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`Our gross revenues for the year ended December 31, 2014 (Successor), the year ended December 31, 2013 (Successor),
`and the periods from July 12, 2012 (inception) to December 31, 2012 (Successor) and January 1, 2012 to September 28,
`2012 (Predecessor), with the percentage of gross revenues on a combined basis (labeled "Total") for purposes of
`comparison with 2014 and 2013, before deductions for chargebacks, rebates and incentive programs (including rebates
`paid under federal and state government Medicaid drug reimbursement programs), sales returns and other sales
`allowances were as follows:
`
`For the year ended (cid:9)
`
`For the year ended (cid:9)
`
`December 31,
`2014
`
`Percentage
`of gross December 31,
`2013
`revenues
`
`July 12,
`2012 to
`Percentage
`of gross December 31,
`2012
`revenues
`
`(Successor)
`
`(Successor)
`
`$ (cid:9)
`
`3,064,079
`(868,511)
`
`$ (cid:9)
`
`28.3%
`
`2,327,023
`(630,097)
`
`(480,949)
`(31,361)
`
`(292,602)
`
`15.7%
`1.0%
`
`9.5%
`
`(290,275)
`(37,956)
`
`(194,068)
`
`27.1%
`
`12.5%
`1.6%
`
`8.3%
`
`(Successor)
`527,734
`(132,834)
`
`$ (cid:9)
`
`For the period
`January 1,
`2012 to Percentage
`September 28,
`of gross
`2012
`revenues
`(Total)
`(Predecessor) (non-GAAP)
`1,436,704
`$ (cid:9)
`(309,411)
`
`22.5%
`
`(69,749)
`(8,522)
`
`(46,053)
`
`(147,171)
`(23,191)
`
`(103,527)
`
`11.0%
`1.6%
`
`7.6%
`
`($ thousands)
`Gross revenues
`Chargebacks
`Rebates and
`incentive
`programs
`Returns
`Cash discounts
`and other
`Medicaid rebates
`and rebates
`due under other
`us
`Government
`pricing
`programs
`Total deductions
`Total revenues
`
`(82,035)
`1,755,458
`1,308,621
`
`$ (cid:9)
`
`2.7%
`57.3%
`42.7% $ (cid:9)
`
`(77,160)
`(1,229,556)
`1,097,467
`
`3.3%
`52.8%
`47.2% $ (cid:9)
`
`(24,437)
`(281,595)
`246,139
`
`$ (cid:9)
`
`(49,536)
`(632,836)
`803,868
`
`3.8%
`46.5%
`53.5%
`
`Gross revenues to total revenues (2014 compared to 2013)
`The total gross-to-net deductions as a percentage of gross revenues increased for the year ended December 31, 2014
`compared to the year ended December 31, 2013 primarily due to:
`
`• Chargebacks: the increase was primarily driven by customer mix as a result of the shift in business from non-wholesalers
`to wholesalers in addition to a decrease in price for modafinil (higher volume and rate), tempered by impact of higher
`sales of products with lower discount rates, including amlodipine/valsartan and entecavir and favorable impact of
`divalproex and bupropion ER price increases.
`
`• Rebates and incentive programs: the increase was primarily driven by higher divalproex (volume and rate), bupropion ER
`(volume and rate), lamotrigine (rate) and budesonide (rate), coupled with the impact of various wholesaler and retailer
`alliances.
`
`• Returns: the decrease in the rate was primarily driven by the non-recurrence of an increase to the rizatriptan returns
`reserve in the prior year following additional competition, coupled with lower than expected returns for other products,
`primarily dronabinol, fluvoxamine and Megace® ES.
`
`• Cash discounts and other: the increase in rate was primarily due to customer mix, including the impact of various
`wholesaler and retailer alliances coupled with pricing adjustments for products that had competitive
`
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`changes in their respective markets, primarily bupropion (price protection as result of price increase effective in June
`2014), lamotrigine, metoprolol, and amlodipine/valsartan, partially offset by the impact of prior year price protection
`related to a divalproex and cholestyramine price increase.
`
`• Medicaid rebates and rebates due under other U.S. Government pricing programs: the decrease as a percentage of
`gross revenues was primarily due to a reduction in the Medicaid accrual based upon additional available information
`related to Managed Medicaid utilization in California, coupled with lower amounts due under certain U.S. Government
`and state pricing programs (e.g., TriCare and Medicaid) due to lower utilization of our subject drugs (e.g., modafinil,
`Megace® ES, Nascobal®, and rizatriptan).
`
`Gross revenues to total revenues (2013 compared to 2012)
`The total gross-to-net deductions as a percentage of gross revenues increased for the year ended December 31, 2013
`compared to the year ended December 31, 2012 (Total) primarily due to:
`
`• Chargebacks: the increase was primarily driven by the impact of higher sales of products with higher discount rates,
`including buproprion ER and diltiazem coupled with higher chargeback rates for modafinil and other products due to
`competitive factors in each of the related markets and a higher percentage of our sales were to wholesalers in 2013
`which resulted in more chargebacks, tempered by the favorable impact of the divalproex discount rate in 2013.
`
`• Rebates and incentive programs: the increase was primarily driven by higher rebatable sales, primarily divalproex and
`modafinil, partially offset by lower sales of metoprolol succinate ER.
`
`• Returns: the rate was flat with 2012.
`
`Cash discounts and other: the increase in cash discounts and other was driven by price adjustments as a result of
`customer mix, including the higher percentage of our sales to wholesalers in 2013.
`
`• Medicaid rebates and rebates due under other U.S. Government pricing programs: decrease was primarily due to lower
`Medicaid from the non-recurrence of accruals for certain fees and managed care rebates due to lower sales of Megaces
`ES, tempered by higher expense related to Medicare Part-D "donut hole" rebates (a 50% discount on cost for certain
`Medicare Part D beneficiaries for certain drugs (e.g., budesonide and modafinil) purchased during the Part D Medicare
`coverage gap) in the 2013 as compared to the prior year.
`Gross-to-net deductions are discussed in the "Critical Accounting Policies and Use of Estimates" section below.
`
`Gross margin (2014 compared to 2013)
`
`($ in thousands)
`Gross margin:
`Par Pharmaceutical
`Par Specialty
`Total gross margin
`
`2014 (cid:9)
`(Successor)
`
`2013 (cid:9)
`(Successor)
`
`For the years ended December 31,
`Percentage of total
`revenues
`2013
`
`$ Change
`
`2014
`
`$ (cid:9)
`
`$ (cid:9)
`
`436,078
`43,037
`479,115
`
`$ (cid:9)
`
`271,396
`46,647
`318,043
`
`$ 164,682
`(3,610)
`$ 161,072
`
`35.1%
`63.8%
`36.6%
`
`26.4%
`67.6%
`29.0%
`
`The increase in Par Pharmaceutical gross margin dollars for the year ended December 31, 2014 as compared to the prior
`year period was primarily due to gross margin dollars from Par Sterile products, which were acquired in February 2014,
`coupled with the September 2014 launch of amlodipine/valsartan; bupropion ER, which
`
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`benefited from competitors that were not able to supply product to the market; and the full year impact of the fourth quarter
`of 2013 launch of clonidine HCI ER. These increases were tempered by the revenue and associated gross margin dollar
`decline of modafinil.
`Par Specialty gross margin dollars decreased for the year ended December 31, 2014, primarily due to the revenue decline
`of Megace® ES.
`
`Gross margin (2013 compared to 2012)
`
`($ in thousands)
`Gross margin:
`Par Pharmaceutical
`Par Specialty
`Total gross margin
`
`($ in thousands)
`Gross margin:
`Par Pharmaceutical
`Par Specialty
`Total gross margin
`
`2013 (cid:9)
`
`(Successor)
`
`2012 (cid:9)
`(Total)
`(non-GAAP)
`
`For the years ended December 31,
`Percentage of total
`revenues
`2012
`(non-GAAP)
`
`$ Change
`
`2013
`
`$ (cid:9)
`
`$ (cid:9)
`
`271,396
`46,647
`318,043
`
`330,114
`57,681
`387,795
`
`$ (58,718)
`(11,034)
`$ (69,752)
`
`26.4%
`67.6%
`29.0%
`
`$ (cid:9)
`
`34.0%
`72.7%
`36.9%
`
`July 12, 2012
`to December 31,
`2012
`(Successor)
`
`$ (cid:9)
`
`$ (cid:9)
`
`33,776
`11,669
`45,445
`
`For the period
`January 1,
`2012 to
`September 28,
`2012
`(Predecessor)
`
`For the year
`ended
`
`December 31,
`2012
`
`Total
`(non-GAAP)
`
`$ (cid:9)
`
`$ (cid:9)
`
`296,338
`46,012
`342,350
`
`$ (cid:9)
`
`$ (cid:9)
`
`330,114
`57,681
`387,795
`
`The decrease in Par Pharmaceutical gross margin dollars for the year ended December 31, 2013 as compared to the prior
`year period was primarily due to increased amortization of intangible assets associated with the Merger (an increase of
`approximately $116.0 million for the Company) coupled with the revenue declines of modafinil and metoprolol succinate ER
`tempered by the launches of lamotrigine and fluvoxamine maleate ER in the first quarter of 2013 and the increase in
`divalproex gross margin dollars, which benefited from a competitor exiting the market in June 2013.
`
`Par Specialty gross margin dollars decreased for the year ended December 31, 2013, primarily due to increased
`amortization of intangible assets associated with the Merger coupled with the revenue decline of Megace® ES.
`
`Research and development (2014 compared to 2013)
`
`($ in thousands)
`Research and development:
`Par Pharmaceutical
`Par Specialty
`Total research and development
`
`2014 (cid:9)
`(Successor)
`
`2013 (cid:9)
`(Successor)
`
`For the years ended December 31,
`Percentage of
`total
`revenues
`2014
`2013
`
`$ Change % Change
`
`$ (cid:9)
`
`$ (cid:9)
`
`118,205
`890
`119,095
`
`$ (cid:9)
`
`$ (cid:9)
`
`99,177
`1,586
`100,763
`
`$ (cid:9) 19,028
`(696)
`$ (cid:9) 18,332
`
`19.2%
`(43.9)%
`18.2%
`
`9.5%
`1.3%
`9.1%
`
`9.6%
`2.3%
`9.2%
`
`73
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`Par Pharmaceutical:
`The net increase in Par Pharmaceutical research and development expense for the year ended December 31, 2014 was
`driven by:
`
`• $8.9 million of higher employment related and other costs due to the acquisition of Par Sterile;
`
`• $5.6 million increase in outside development costs primarily driven by payment related to one new agreement partially
`offset by lower payments for existing development agreements;
`
`• $2.5 million of higher expense for consulting and advisory services related to the acquisition of Par Sterile; and
`
`• $2.3 million in incremental user fees due to 30 ANDA filings.
`
`These increases were tempered by a $2.6 million decrease in biostudy, clinical trial and material costs related to ongoing
`internal development of generic products.
`
`Par Specialty:
`Par Specialty research and development principally reflects FDA filing fees for the years ended December 31, 2014 and
`December 31, 2013.
`
`Research and development (2013 compared to 2012)
`
`($ in thousands)
`Research and development:
`Par Pharmaceutical
`Par Specialty
`Total research and development
`
`in thousands
`Research and development:
`Par Pharmaceutical
`Par Specialty
`Total research and developr
`
`2013 (cid:9)
`
`(Successor)
`
`2012 (cid:9)
`(Total)
`(non-GAAP)
`
`For the years ended December 31,
`Percentage of
`total revenues
`2012
`(non-GAAP)
`
`2013
`
`$ Change % Change
`
`$ (cid:9)
`
`$ (cid:9)
`
`99,177
`1,586
`100,763
`
`$ (cid:9)
`
`$ (cid:9)
`
`84,353
`1,636
`85,989
`
`$ (cid:9) 14,824
`(50)
`$ (cid:9) 14,774
`
`17.6%
`(3.1)%
`17.2%
`
`9.6%
`2.3%
`9.2%
`
`8.7%
`2.1%
`8.2%
`
`July 12,
`2012 to
`December 31,
`2012
`
`19,242
`141
`19,383
`
`For the period
`January 1,
`2012 to
`September 28,
`2012
`
`(Predecessor)
`
`$ (cid:9)
`
`$ (cid:9)
`
`65,111
`1,495
`66,606
`
`For the year ended
`
`December 31, 2012
`Total
`(non-GAAP)
`
`84,353
`1,636
`85,989
`
`Par Pharmaceutical:
`The increase in Par Pharmaceutical research and development expense for the year ended December 31, 2013 was driven
`by a $15.4 million increase in biostudy, clinical trial and material costs related to ongoing internal development of generic
`products.
`
`74
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`Par Specialty:
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`Par Specialty research and development principally reflects FDA filing fees for the years ended December 31, 2013 and
`December 31, 2012.
`
`Selling, general and administrative (2014 compared to 2013)
`
`($ in thousands)
`Selling, general and administrative:
`Par Pharmaceutical
`Par Specialty
`Total selling, general and administrative
`
`2014
`(Successor)
`
`2013
`(Successor)
`
`For the years ended December 31,
`Percentage of
`total revenues
`2014 (cid:9)
`2013
`
`$ Change (cid:9) % Change
`
`$ (cid:9)
`
`$ (cid:9)
`
`134,393
`46,743
`181,136
`
`$ (cid:9)
`
`$ (cid:9)
`
`114,383
`40,781
`155,164
`
`$ (cid:9) 20,010 (cid:9)
`5,962 (cid:9)
`$ (cid:9) 25,972 (cid:9)
`
`17.5%
`14.6%
`16.7%
`
`10.8% (cid:9)
`69.3% (cid:9)
`13.8% (cid:9)
`
`11.1%
`59.1%
`14.1%
`
`The net increase in selling, general and administrative expenditures for the year ended December 31, 2014 principally
`reflects:
`
`• $12.0 million of higher employment related costs due to the acquisition of Par Sterile, combined with higher accrued
`bonus;
`
`• $8.0 million of higher expense for consulting and advisory services related to acquisitions and other business
`development activities;
`
`• $6.6 million of expense related to additional borrowings and repricing of our term loan plus associated transaction fees of
`$0.5 million; and
`
`• $4.0 million increase in direct Par Specialty selling and marketing costs driven by Nascobal.
`These increases were tempered by a $5.1 million of lower legal expenses primarily due to decreased corporate related
`activities.
`
`Selling, general and administrative (2013 compared to 2012)
`
`($ in thousands)
`Selling, general and administrative:
`Par Pharmaceutical
`Par Specialty
`Total selling, general and administrative $ (cid:9)
`
`$ (cid:9)
`
`2013
`
`(Successor)
`
`2012
`(Total)
`(non-GAAP)
`
`For the years ended December 31,
`Percentage of total
`revenues
`2012
`(non-GAAP)
`
`2013 (cid:9)
`
`$ Change % Change
`
`114,383
`40,781
`155,164
`
`$ (cid:9)
`
`$ (cid:9)
`
`162,801
`$ (48,418)
`(35,782)
`76,563
`239,364 $ (84,200)
`
`(29.7)%
`(46.7)%
`(35.2)%
`
`11.1% (cid:9)
`59.1% (cid:9)
`14.1% (cid:9)
`
`16.8%
`45.2%
`20.1%
`
`$ in thousands
`Selling, general and administrative:
`Par Pharmaceutical
`Par Specialty
`Total selling, general and administrative (cid:9)
`
`$ (cid:9)
`
`$ (cid:9)
`
`July 12, 2012 to
`December 31,
`2012
`
`For the period
`January 1, 2012 to
`September 28,
`2012
`
`(Successor)
`
`(Predecessor)
`
`For the year ended
`
`December 31,
`2012
`Total
`(non-GAAP)
`
`53,867
`19,893
`73,760
`
`75
`
`$ (cid:9)
`
`$ (cid:9)
`
`108,934
`56,670
`165,604
`
`$ (cid:9)
`
`$ (cid:9)
`
`162,801
`76,563
`239,364
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`The net decrease in selling, general and administrative expenditures for the year ended December 31, 2013 principally
`reflects:
`
`• $70.4 million of expenses incurred in 2012 non-recurring in 2013 for the transaction fees and other costs related to the
`Merger;
`
`• a $13.0 million reduction in direct Par Specialty selling and marketing costs driven by a 70 person reduction of
`headcount; and
`
`• $2.7 million of incremental employment and related costs associated with certain executive severance amounts.
`
`Intangible asset impairment (2014 compared to 2013 and 2013 compared to 2012)
`
`For the (cid:9)
`year ended (cid:9)
`
`For the
`year ended (cid:9)
`
`December 31,
`2014
`(Successor)
`146,934
`
`$ (cid:9)
`
`December 31,
`2013
`(Successor)
`100,093
`
`$ (cid:9)
`
`July 12, 2012 to
`December 31,
`2012
`(Successor)
`—
`
`$ (cid:9)
`
`For the period
`January 1, 2012 to
`September 28,
`2012
`(Predecessor)
`5,700
`
`$ (cid:9)
`
`$ in thousands (cid:9)
`Intangible asset impairment (cid:9)
`
`During the year ended December 31, 2014, we recorded intangible asset impairments totaling $146.9 million related to an
`adjustment to the forecasted operating results for two IPR&D intangible asset groups and eight Par Pharmaceutical
`segment products compared to their originally forecasted operating results at the date of acquisition, inclusive of one
`discontinued product, one partially impaired product primarily due to the contract ending with the partner and a partially
`impaired IPR&D project from the Par Sterile acquisition due to an adverse court ruling pertaining to related patent litigation.
`The estimated fair values of the assets were determined by completing updated discounted cash flow models.
`
`During the year ended December 31, 2013, we recorded intangible asset impairments totaling approximately $100.1 million
`for IPR&D classes of products and projects that were evaluated as part of the annual evaluation of indefinite lived intangible
`assets, as well as five products not expected to achieve their originally forecasted operating results and we ceased selling a
`product that had been acquired with the divested products from the merger of Watson and Actavis Group. During the period
`from January 1, 2012 to September 28, 2012 (Predecessor), we abandoned an in-process research and development
`project that was acquired in the Anchen acquisition and recorded a corresponding intangible asset impairment of $2.0
`million, and we exited the market of a commercial product that was acquired in the Anchen acquisition and recorded a
`corresponding intangible asset impairment of $3.7 million.
`
`Settlements and loss contingencies, net (2014 compared to 2013 and 2013 compared to 2012)
`
`$inthousands (cid:9)
`Settlements and loss
`contingencies. net (cid:9)
`
`For the (cid:9)
`year ended (cid:9)
`
`For the
`year ended
`
`December 31, (cid:9)
`2014 (cid:9)
`(Successor) (cid:9)
`
`December 31, (cid:9)
`2013 (cid:9)
`(Successor) (cid:9)
`
`July 12, 2012 to
`December 31,
`2012
`(Successor) (cid:9)
`
`For the
`January 1, 2012 to
`September 28,
`2012
`(Predecessor)
`
`$ (cid:9)
`
`90.107 (cid:9)
`
`$ (cid:9)
`
`25.650 (cid:9)
`
`$ (cid:9)
`
`10.059 (cid:9)
`
`$ (cid:9)
`
`45.000
`
`76
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`(cid:9)
`(cid:9)
`(cid:9)
`(cid:9)
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`In 2014, we recorded an incremental provision of $91.0 million related to the settlement of omeprazole/sodium bicarbonate
`patent litigation for $100.0 million. During the 2014, we also received an arbitration award of approximately $0.9 million from
`a former partner related to a discontinued project.
`
`In 2013, we recorded an incremental provision of $25.7 million related to AWP litigation claims (Illinois $19.8 million,
`Louisiana $3.3 million, Utah $1.7 million and Kansas $0.9 million).
`During the period from January 1, 2012 to September 28, 2012 (Predecessor), we recorded an accrual of $45.0 million as
`management's best estimate of a potential loss related to a potential global settlement with respect to an inquiry by the DOJ
`into Par Specialty's promotional practices in the sales and marketing of Megace® ES. In the period from July 12, 2012
`(inception) to December 31, 2012 (Successor), we recorded additional estimated amounts for accrued interest and legal
`expenses that we are liable for paying in the final settlement and we also accrued for a contingent liability of $9.0 million
`related to omeprazole/sodium bicarbonate patent litigation.
`
`Restructuring costs (2014 compared to 2013 and 2013 compared to 2012)
`
`For the (cid:9)
`year ended (cid:9)
`
`For the
`year ended (cid:9)
`
`December 31, (cid:9)
`2014 (cid:9)
`(Successor) (cid:9)
`5,413 (cid:9)
`
`$ (cid:9)
`
`December 31, (cid:9)
`2013 (cid:9)
`(Successor) (cid:9)
`1,816 (cid:9)
`
`$ (cid:9)
`
`July 12, 2012 to (cid:9)
`December 31, (cid:9)
`2012 (cid:9)
`(Successor) (cid:9)
`241 (cid:9)
`
`$ (cid:9)
`
`For the period
`January 1, 2012 to
`September 28,
`2012
`(Predecessor)
`—
`
`$ (cid:9)
`
`$ in thousands (cid:9)
`Restructuring costs (cid:9)
`
`In 2014, subsequent to the Par Sterile acquisition, we eliminated 25 redundant positions within Par Pharmaceutical and
`accrued severance and other employee-related costs for those employees affected by the workforce reduction. Additionally,
`due to the change in our product development strategy, we eliminated 44 redundant positions within our Irvine location and
`accrued severance and other employee-related costs for these employees affected by the workforce reduction.
`
`In January 2013, we initiated a restructuring of Par Specialty, our branded pharmaceuticals division, in anticipation of
`entering into a settlement agreement and CIA that terminated the DOJ's ongoing inv