Eon Labs Reports Record Second Quarter 2004 Sales of $107.0 Million, an Increase of 35.9%, and Earnings of $28.8 Million, an Increase of 59.6%

Business Wire, July 22, 2004

LAURELTON, N.Y. -- Eon Labs, Inc. (Nasdaq:ELAB) today reported net income of $28.8 million for the second quarter ended June 30, 2004, compared to $18.0 million in the comparable quarter in 2003, an increase of 59.6%. For the six months ended June 30, 2004, net income was $61.1 million, compared to $33.1 million in the comparable period in 2003, an increase of 84.4%.

Diluted earnings per share was $0.32 for the second quarter ended June 30, 2004, compared to $0.20 per share in the comparable quarter in 2003, an increase of 60.0%. The second quarter ended June 30, 2004 included the receipt of a $3.0 million bond, which increased earnings by $0.02 per share, related to the settlement of all patent infringement litigation involving Bupropion HCl, ER 100mg and 150mg tablets. The second quarter ended June 30, 2003 included the recovery of legal fees of $3.5 million related to patent infringement litigation involving Nabumetone which increased earnings by $0.02 per share.

For the six months ended June 30, 2004, diluted earnings per share was $0.67 compared to $0.37 per share in the comparable period in 2003, an increase of 81.1%. The six months ended June 30, 2004 included income of $0.09 per share from the receipt of a $10 million payment to settle all patent infringement litigation related to Nabumetone and the receipt of a $3.0 million bond related to the settlement of all patent infringement litigation involving Bupropion HCl, ER 100mg and 150mg tablets. The six months ended June 30, 2003 included income of $0.02 per share from the $3.5 million recovery of legal fees related to patent infringement litigation involving Nabumetone.

Net sales were a record $107.0 million for the second quarter ended June 30, 2004, compared to $78.7 million in the comparable period in 2003, an increase of 35.9%. The sales growth in the second quarter was due principally to sales of Bupropion HCl, ER 100mg and 150mg tablets which were introduced during the first quarter of 2004. Other products introduced at the end of or subsequent to the second quarter ended June 30, 2003 that also contributed to the increase in net sales included Midodrine HCl, Metolazone USP, Mirtazapine, Benazepril HCl and Benazepril/HCTZ. Net sales were $211.2 million for the six months ended June 30, 2004, compared to $149.5 million in the comparable period in 2003, an increase of 41.2%.

Dr. Bernhard Hampl, President and Chief Executive Officer, commented, "Sales of Bupropion, combined with important contributions from our other products, resulted in record sales for the second quarter. With the higher investment levels in research and development, we are also on track to reach our targeted number of ANDA filings for the year."

Currently, the Company has 27 ANDAs pending with the FDA that represent aggregate annual brand sales in excess of $12.5 billion.

The Company expects net sales and diluted earnings per share for the third quarter of 2004 to be between $105 million and $110 million and $0.27 and $0.31 per share, respectively. For the full year 2004, the Company estimates net sales and diluted earnings per share to be between $420 million and $440 million and $1.21 and $1.25 per share, respectively. Full year guidance includes the receipt of a $10 million payment to settle all patent infringement litigation relating to Nabumetone and the receipt of a $3.0 million bond to settle all patent infringement litigation related to Bupropion HCl, ER 100mg and 150mg tablets. These amounts have been recorded as other income during the six months ended June 30, 2004 and increase expected diluted earnings per share for the full year by $0.09 per share.

FINANCIAL REVIEW

Gross profit as a percentage of net sales was 59.7% for the second quarter ended June 30, 2004 compared to 52.9% for the comparable quarter in 2003. The gross margin for the quarter ended June 30, 2004 reflected the benefit of a favorable product mix, principally from the introduction of Bupropion HCl, ER, and increased utilization of manufacturing capacity.

Other selling, general and administrative expenses increased to $12.4 million for the second quarter ended June 30, 2004, compared to $5.3 million in the same quarter in 2003. The second quarter ended June 30, 2003 included the recovery of legal fees aggregating $3.5 million related to patent infringement litigation involving Nabumetone. Excluding the recovery of legal fees, other selling, general and administrative expenses increased by $3.6 million. As a percentage of net sales, excluding the recovery of legal fees, other selling, general and administrative expenses increased 0.4% to 11.6% for the second quarter ended June 30, 2004 compared to the comparable quarter in 2003. The increase is primarily attributable to higher insurance premiums for product liability and directors' and officers' coverage, higher legal costs associated with patent infringement litigation and an increase in personnel related expenses.

Research and development expenses increased 17.8% to $6.7 million for the second quarter ended June 30, 2004, compared to $5.7 million in the same quarter in 2003. The increased research and development spending was primarily attributed to purchased materials offset principally by lower expenses for bio-studies and payments relating to the completion of defined milestones under third-party product development agreements due to the timing of such expenses.