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Sales & Earnings In Brief

This article was originally published in The Tan Sheet

Executive Summary

Costs eat into NBTY income: Despite a 21.9 percent increase in net sales to $651.7 million in the April-June period, NBTY reports flat net income due to higher costs and expenses. Net income in the firm's fiscal 2009 third quarter was $45.9 million, compared to $45.5 in the year-ago period, NBTY said July 27. The supplement manufacturer and retailer experienced a significantly higher cost of sales - up 36.9 percent to $359.2 million - and a $10.1 million charge for discontinued information technology projects "determined to be ineffective and uneconomical" and $4 million in legal expenses from the antitrust case associated with NBTY's purchase of U.K. retailer Julian Graves. However, advertising, promotion and catalog costs fell 34 percent to $23.6 million. CEO Scott Rudolph said in a same-day earnings call that he expects the private-label share of NBTY's sales to increase. "Because private-label sales traditionally have lower gross profits, our overall gross profit margin should decrease," he said. President and Chief Financial Officer Harvey Kamil said the gross margins and increased productivity in the third quarter appear to be sustainable and are more indicative of the Ronkonkoma, N.Y.-based firm's future performance than the first half of fiscal 2009, when net income growth suffered. High material costs hurt NBTY's bottom line in previous quarters, though Rudolph said the volatility in material pricing is beginning to stabilize (1"The Tan Sheet" April 27, 2009). The Julian Graves acquisition has been provisionally approved, but the execs said that following the U.K. Competition Commission's final decision - expected by Sept. 3 - it could take up to nine months to integrate the chain (2"The Tan Sheet" July 27, 2009, In Brief)

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Sales & Earnings In Brief

Santarus expects OTC Zegerid in 2010: The proton pump inhibitor's originator expects Merck/Schering-Plough to launch OTC Zegerid, should FDA approve it, in the first half of 2010. FDA's action date on the Zegerid switch application is set for December (1"The Tan Sheet" June 29, 2009, In Brief). In its Nov. 4 earnings release, San Diego-based Santarus raised its fiscal 2009 revenue guidance to $150 million from $145 million, but expects challenging quarters ahead due to changes in the PPI market, including this month's planned launch of Novartis' OTC Prevacid 24HR. Santarus increased product-related revenues 29.8 percent to $38.3 million in the third quarter. Rx Zegerid sales grew 12.1 percent to $31.5 million

Sales & Earnings In Brief

Santarus expects OTC Zegerid in 2010: The proton pump inhibitor's originator expects Merck/Schering-Plough to launch OTC Zegerid, should FDA approve it, in the first half of 2010. FDA's action date on the Zegerid switch application is set for December (1"The Tan Sheet" June 29, 2009, In Brief). In its Nov. 4 earnings release, San Diego-based Santarus raised its fiscal 2009 revenue guidance to $150 million from $145 million, but expects challenging quarters ahead due to changes in the PPI market, including this month's planned launch of Novartis' OTC Prevacid 24HR. Santarus increased product-related revenues 29.8 percent to $38.3 million in the third quarter. Rx Zegerid sales grew 12.1 percent to $31.5 million

NBTY turns Leiner corner

NBTY's acquisition of Leiner Health Products scared some investors initially, but now they see the integration of the private-label supplement maker as a success, NBTY President and Chief Financial Officer Harvey Kamil says. The stock market appreciates "that we were able to make" Leiner "a profitable acquisition," Kamil said Sept. 23 at the Canaccord Adams Healthy Living Conference. He said NBTY was "squeezed" because it paid "very high prices" for products to build up inventory to serve Leiner's customers. From buying Leiner in June 2008 through March 2009, NBTY took losses on many of the items it shipped, but it made the deal profitable after raising prices in April, Kamil added (1"The Tan Sheet" June 16, 2008). For the April-June period, the firm reported flat net income due to higher costs despite a 21.9 percent increase in net sales to $651.7 million (2"The Tan Sheet" Aug. 17, 2009)

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