APP Pharmaceuticals Reports 2008 Second Quarter Net Revenues of $198 Million, Operating...

APP Pharmaceuticals Reports 2008 Second Quarter Net Revenues of $198 Million, Operating Income of $53 Million

Second Quarter Net Revenues Increased 24 Percent, Income from
Operations Grew 31 Percent
SCHAUMBURG, Ill.--(Business Wire)--
APP Pharmaceuticals, Inc. (Nasdaq:APPX), a leading manufacturer of
multi-source and branded injectable pharmaceutical products, today
reported financial results for the second quarter and six months ended
June 30, 2008. As a result of the separation of Abraxis BioScience
from APP Pharmaceuticals in the fourth quarter of 2007, APP's business
is reported, for all periods presented, on a continuing operations
basis.

Second Quarter 2008 Financial Results

Net revenues increased 24 percent to $197.9 million, compared with
$159.3 million in the second quarter of 2007. Gross profit increased
to $94.1 million, compared with $80.2 million in the second quarter of
2007. Excluding $4.2 million for amortization of purchased products,
gross profit was $98.3 million, or 50 percent of net revenues,
compared with $84.3 million or 53 percent of net revenues, in the
second quarter of 2007.

Total operating expenses were $40.9 million, compared with $39.6
million in the 2007 second quarter. Research and development expenses
were $13.8 million compared with $12.7 million in last year's second
quarter, including costs associated with the technology transfer and
start-up of the Puerto Rico manufacturing facility. SG&A expenses were
$21.2 million, or 11 percent of net revenues, compared with $22.7
million, or 14 percent of net revenues, in the prior year second
quarter.

Income from operations increased 31 percent to $53.3 million
compared with $40.6 million in the 2007 second quarter. Net interest
expense was $13.5 million compared with $4.4 million in the last
year's second quarter, primarily reflecting the increase in borrowing
following the separation of Abraxis Bioscience, that was completed in
November 2007.

Net income was $23.9 million, or $0.15 per diluted share, compared
with second quarter 2007 income from continuing operations, net of
tax, of $22.8 million or $0.14 per diluted share on a continuing
operations basis.

The company reported adjusted income from continuing operations of
$38.5 million, or $0.24 per diluted share, compared with $36.3
million, or $0.23 per diluted share, in the second quarter of 2007,
which in each case excludes Puerto Rico facility pre-launch costs,
amortization expense, non-cash stock compensation expense, separation,
merger and other non-recurring costs (see table at the end of this
release).

"In the second quarter, solid revenue growth across our product
categories led to our strong financial performance," said Tom Silberg,
APP Pharmaceuticals' president and chief executive officer. "We have
revised upward our 2008 financial guidance to reflect strong second
quarter results as well as positive trends in our Critical Care and
Anesthetic/Analgesic products."

First Six Months of 2008 Financial Results

Net revenues increased 15 percent to $346.0 million, compared with
$299.6 million for the first six months of 2007. Gross profit was
$164.2 million compared with $145.6 million, in the first six months
of 2007. Excluding $8.3 million for amortization of purchased
products, gross profit was $172.5 million, or 50 percent of net
revenues, compared with $153.9 million or 51 percent of net revenues,
in the first half of 2007.

Total operating expenses were $78.5 million, compared with $75.8
million in the comparable 2007 period. Research and development
expenses were $26.2 million compared with $22.6 million in first six
months of last year, including Puerto Rico technology transfer costs.
SG&A expenses were $42.2 million or 12 percent of net revenues,
compared with $44.7 million or 15 percent of net revenues, in the
prior year six month period.

Income from operations increased 23 percent to $85.7 million
compared with $69.8 million in the 2007 six month period. Net interest
expense was $29.3 million compared with $8.0 million in the first six
months of last year, primarily reflecting the increase in borrowing
following the Abraxis Bioscience separation.

Net income, for the six months ending June 30, 2008, was $33.0
million, or $0.20 per diluted share, versus income from continuing
operations, net of tax, of $36.4 million, or $0.23 per diluted share.

The company reported adjusted net income from continuing
operations of $60.5 million, or $0.38 per diluted share, compared with
$62.6 million, or $0.39 per diluted share, which in each case excludes
Puerto Rico facility pre-launch costs, amortization expense, non-cash
stock compensation expense, separation, merger and other non-recurring
costs (see table at the end of this release).

APP currently has approximately 65 product candidates in various
stages of development, including 25 ANDAs pending with the FDA,
representing approximately $4 billion in 2007 annualized branded
sales.

Recent Events

APP has received FDA final approval for Colistimethate for
Injection. Shortly after the end of the quarter, the Company received
final approvals and launched additional dosages of Granisetron
Hydrochloride Injection.

2008 Financial Guidance

-- Total net revenues are expected to be in the range of $800 to
$820 million;

-- Gross margin is anticipated to be approximately 51 to 52
percent relative to total net revenues. This excludes $16.4
million in acquired product portfolio amortization and $2.1
million stock compensation;

-- R&D expense is expected to be approximately $25 to $30
million, excluding approximately $25 million associated with
technology transfer and capacity optimization of the Puerto
Rico manufacturing facility;

-- SG&A expenses are anticipated to be in the range of $75 to $80
million, which excludes expected non-cash stock compensation
expense of $6 million and approximately $20 million of merger
and separation related expenses;

-- Interest expense is expected to be approximately $60 million;

-- Income tax rate is expected to be approximately 41 percent;

-- Depreciation expense is expected to be approximately $20 to
$24 million;

-- Adjusted EBITDA is expected to be $325 to $350 million.
Adjustments, as noted above, reflect the exclusion of costs
associated with the technical transfer and operational
start-up of the Puerto Rico facility, expenses resulting from
the separation of Abraxis Bioscience, costs associated with
the ongoing Fresenius merger activities, non-cash compensation
costs, and miscellaneous non-recurring costs;

-- Adjusted EPS, reported on a consistent basis as Adjusted
EBITDA above, is anticipated to be $0.85 to $0.95.

Conference Call Information

On Friday, August 1, 2008, the company will host a conference call
with interested parties beginning at 7 a.m. PT (10 a.m. ET) to review
the company's financial results. The conference call will be available
to interested parties through a live audio webcast at
www.APPpharma.com and www.thomsonone.com. The call will also be
archived and accessible at both sites for six months.

Non-GAAP Financial Measures

The company believes that its presentation of non-GAAP financial
measures, such as adjusted net income, adjusted income from continuing
operations, EBITDA and adjusted EBITDA, provides useful supplementary
information to investors in understanding the underlying operating
performance of the company and facilitates additional analysis by
investors. The company also uses non-GAAP financial measures
internally for operating, budgeting and financial planning purposes.
The non-GAAP financial measures are in addition to, and not a
substitute for or superior to, measures of financial performance
calculated in accordance with GAAP. A reconciliation of GAAP net
income to adjusted net income for the three and six months ending June
30, 2008 is included with this news release.

About APP Pharmaceuticals

APP is a specialty drug company that develops, manufactures and
markets injectable pharmaceutical products, focusing on oncology,
anti-infective and critical care markets. The company is one of the
largest producers of injectables, with more than 100 generic products
in more than 400 dosage formulations. APP, headquartered in
Schaumburg, Illinois, has offices in Canada and manufacturing
operations in Illinois, New York and Puerto Rico and is traded on the
Nasdaq Global Market under the symbol APPX. For more information about
APP and the products it provides, please visit www.APPpharma.com.

Forward-Looking Statement

The statements contained in this news release that are not purely
historical are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended.
Forward-looking statements in this news release include statements
regarding our expectations, beliefs, hopes, goals, intentions,
initiatives or strategies, including statements regarding financial
guidance for 2008, trends in our product lines, and the development
and approval of product candidates. Because these forward-looking
statements involve risks and uncertainties, there are important
factors that could cause actual results to differ materially from
those in the forward- looking statements. These factors include, but
are not limited to, the continued market acceptance and demand of new
and existing products; the difficulties or delays in developing,
testing, obtaining regulatory approval of, and producing and marketing
of the company's products; the impact of competitive products and
pricing; the availability and pricing of ingredients used in the
manufacture of pharmaceutical products; and the ability to
successfully manufacture products in a time-sensitive and cost
effective manner. Additional relevant information concerning risks can
be found in APP Pharmaceuticals Form 10-K for the year ended December
31, 2007 and other documents it has filed with the Securities and
Exchange Commission.

The information contained in this news release is as of the date
of this release. APP assumes no obligations to update any
forward-looking statements contained in this news release as the
result of new information or future events or developments.

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APP Pharmaceuticals, Inc.
Consolidated Statements of Operation
(unaudited, in thousands, except per share amounts)

Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
Net revenues:
Critical care $113,532 $ 89,579 $204,714 $174,274
Anti-infective 59,296 50,749 102,256 90,529
Oncology 21,726 14,577 32,747 25,854
Contract manufacturing 3,364 4,422 6,280 8,938
--------- --------- --------- ---------
Total net revenues 197,918 159,327 345,997 299,595
Cost of sales 103,771 79,177 181,788 154,008
--------- --------- --------- ---------
Gross profit 94,147 80,150 164,209 145,587
--------- --------- --------- ---------
Percent to total net
revenues 47.6% 50.3% 47.5% 48.6%

Operating expenses
Research and development 13,833 12,678 26,163 22,642
Selling, general and
administrative 21,173 22,678 42,193 44,739
Amortization of merger
related intangibles 3,857 3,856 7,713 7,712
Separation costs 1,212 352 1,603 704
Merger related costs 805 - 805 -
--------- --------- --------- ---------
Total operating expenses 40,880 39,564 78,477 75,797
--------- --------- --------- ---------
Percent to total net
revenues 20.7% 24.8% 22.7% 25.3%
Income from operations 53,267 40,586 85,732 69,790
Percent to total net
revenues 26.9% 25.5% 24.8% 23.3%
Interest expense and other,
net (13,527) (4,377) (29,264) (7,987)
--------- --------- --------- ---------
Income from continuing
operations before income tax 39,740 36,209 56,468 61,803
Income tax expense 15,848 13,417 23,419 25,394
--------- --------- --------- ---------
Income from continuing
operations, net of income
tax 23,892 22,792 33,049 36,409
Loss from discontinued
operations, net of tax - 294 - (2,208)
--------- --------- --------- ---------
Net income $ 23,892 $ 23,086 $ 33,049 $ 34,201
========= ========= ========= =========

Basic earnings (loss) per
share:
Continuing operations $ 0.15 $ 0.14 $ 0.21 $ 0.23
========= ========= ========= =========
Discontinued operations - - - (0.02)
========= ========= ========= =========
Net income $ 0.15 $ 0.14 $ 0.21 $ 0.21
========= ========= ========= =========

Diluted earnings (loss) per
share:
Continuing operations $ 0.15 $ 0.14 $ 0.20 $ 0.23
========= ========= ========= =========
Discontinued operations - - - (0.02)
========= ========= ========= =========
Net income $ 0.15 $ 0.14 $ 0.20 $ 0.21
========= ========= ========= =========

Weighted - average common
shares outstanding:
Basic 160,375 159,384 160,443 159,423
========= ========= ========= =========
Diluted 161,155 160,353 161,287 160,481
========= ========= ========= =========

Selected ratios as a
percentage of total net
revenues:
Research and development 7.0% 8.0% 7.6% 7.6%
Selling, general and
administrative 10.7% 14.2% 12.2% 14.9%

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APP Pharmaceuticals, Inc.
GAAP to Adjusted Earnings from Continuing Operations Reconciliation
(unaudited, in thousands, except per share amounts)

Adjusted income from continuing operations and adjusted income from
continuing operations per diluted share are defined as income from
continuing operations and diluted earnings from continuing operations
per share, respectively, in each case excluding the impact of, non-
cash stock compensation expense, separation related costs,
amortization of acquired intangible assets and merger related
intangibles and Puerto Rico pre-launch costs. We believe that our
presentation of non-GAAP financial measures provides useful
supplementary information to investors in understanding our
underlying operating performance and facilitates additional analysis
by investors. We also use non-GAAP financial measures internally for
operating, budgeting and financial planning purposes. The non-GAAP
financial measures are in addition to, and not a substitute for or
superior to, measures of financial performance calculated in
accordance with GAAP. A reconciliation of GAAP income from continuing
operations to adjusted income from continuing operations for the
three months and six months ended June 30, 2008 is below:
*T

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For the three months For the six months
ended June 30 ended June 30
2008 2007 2008 2007
--------- --------- --------- ---------

Income from continuing
operations net of income tax $ 23,892 $ 22,792 $ 33,049 $ 36,409
Stock compensation expense 925 2,129 2,787 4,619
Intangible amortization 2,784 2,616 5,523 5,234
Separation, merger and
other non-recurring costs 1,933 217 2,185 435
Amortization of purchased
product rights 2,538 2,538 5,076 5,076
Puerto Rico pre-launch
costs 6,396 5,982 11,893 10,857
--------- --------- --------- ---------
Adjusted income from
continuing operations $ 38,468 $ 36,275 $ 60,513 $ 62,630
========= ========= ========= =========

Adjusted income from
continuing operations per
diluted share $ 0.24 $ 0.23 $ 0.38 $ 0.39
========= ========= ========= =========

Weighted - average common
shares outstanding diluted 161,155 160,354 161,287 160,481
========= ========= ========= =========

Income from continuing
operations per diluted share $ 0.15 $ 0.14 $ 0.21 $ 0.23
Stock compensation expense 0.01 0.01 0.02 0.03
Intangible amortization 0.02 0.02 0.03 0.03
Separation, merger and
other non-recurring costs 0.01 0.00 0.01 0.00
Amortization of purchased
product rights 0.01 0.02 0.03 0.03
Puerto Rico pre-launch
costs 0.04 0.04 0.08 0.07
--------- --------- --------- ---------
Adjusted income from
continuing operations per
diluted share $ 0.24 $ 0.23 $ 0.38 $ 0.39
========= ========= ========= =========

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APP Pharmaceuticals, Inc.
Reconciliation of Income from Continuing Operations to Adjusted EBITDA
Three and Six Months Ended June 30, 2008
(unaudited, in thousands)

We define adjusted EBITDA from continuing operations as income from
continuing operations, excluding the impact of depreciation and
amortization, interest expense net of interest income and other
income, income tax expense, non-cash stock-based compensation
expense, separation related costs and pre-launch costs associated
with Puerto Rico manufacturing facility. We use adjusted EBITDA from
continuing operations to provide meaningful supplemental information
to investors in understanding the underlying operating performance of
the business and facilitate additional analysis by investors. We
believe that adjusted EBITDA from continuing operations can assist
management and investors in assessing the financial operating
performance and underlying strength of our core business. Adjusted
EBITDA from continuing operations is not a recognized term under GAAP
and should not be considered in isolation of, or as a substitute for,
the information prepared and presented in accordance with GAAP.
Because not all companies calculate adjusted EBITDA from continuing
operations identically, our definition of adjusted EBITDA from
continuing operations may not be comparable to similarly titled
measures of other companies.
*T

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For the three For the six
months ended months ended
June 30 June 30
2008 2007 2008 2007
-------- -------- -------- --------

Income from continuing operations
net of income tax $ 23,892 $ 22,792 $ 33,049 $ 36,409
Depreciation 4,766 4,385 9,258 8,060
Amortization 8,009 8,347 16,004 16,696
Interest expense, net of
interest income 13,633 4,376 29,878 7,986
Provision for income taxes from
continuing operations 15,848 13,417 23,419 25,394
-------- -------- -------- --------
EBITDA from continuing operations 66,148 53,317 111,608 94,545

Stock-based compensation
expense 1,498 3,448 4,513 7,480
Puerto Rico pre-launch costs,
net of depreciation 6,409 6,104 11,356 11,079
Separation, merger and other
non-recurring costs 3,130 352 3,539 704
-------- -------- -------- --------
Adjusted EBITDA from continuing
operations $ 77,185 $ 63,221 $131,016 $113,808
======== ======== ======== ========

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APP Pharmaceuticals, Inc.
Consolidated Condensed Balance Sheets
(In thousands)
June 30, December 31,
2008 2007
----------- -------------
Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 73,890 $ 31,788
Accounts receivable, net of allowances 73,387 85,209
Inventories 169,680 149,191
Prepaid expenses and other current
assets 13,792 13,531
Current receivables from related parties - 6,996
Income tax receivable 1,471 -
Deferred income taxes 16,020 17,109
----------- -------------
Total current assets 348,240 303,824
Property, plant and equipment, net 131,476 132,528
Intangible assets, net of accumulated
amortization 447,949 463,154
Goodwill 160,239 160,239
Deferred financing costs and other non-
current assets, net 17,159 17,842
----------- -------------
Total assets $1,105,063 $1,077,587
=========== =============

Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $ 38,285 $ 36,502
Accrued liabilities 35,952 45,595
Current payable from related parties 1,024 -
Fair value of interest rate swap 2,084 -
Short term portion of long term debt 11,250 5,000
----------- -------------
Total current liabilities 88,595 87,097
----------- -------------

Long-term debt 986,250 995,000
Deferred income taxes, non-current 67,064 71,011
Other non-current liabilities 4,841 4,250
----------- -------------
Total liabilities 1,146,750 1,157,358

Total stockholders' deficit (41,687) (79,771)
----------- -------------
Total liabilities and stockholders'
deficit $1,105,063 $1,077,587
=========== =============
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Investors and Media:
APP Pharmaceuticals, Inc.
Maili Bergman, 310-405-7522
or
PondelWilkinson
Robert J. Jaffe/Rob Whetstone, 310-279-5969

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