Hi-Tech Pharmacal Reports a 15% Sales Increase and 33% EPS Increase for Fiscal 2006

Business Wire, July 12, 2006

AMITYVILLE, N.Y. -- Hi-Tech Pharmacal Co., Inc. (NASDAQ:HITK) today reported results for the quarter and fiscal year ended April 30, 2006.

Fourth Quarter Results

For the three months ended April 30, 2006, the Company reported net sales of $18.1 million, an increase of 3% from $17.6 million for the same period last year. Net income increased 11% to $2.1 million from $1.9 million, and fully diluted earnings per share were unchanged at $0.15.

During the quarter ended April 30, 2006, net sales of generic pharmaceutical products were $13.8 million, a decrease of 13% compared to $15.8 million for the same fiscal 2005 period. The decrease was primarily due to the weak cough and flu season lowering the demand for related products versus the same period last year when there was unusually high demand for these products. Additionally, the Company experienced pricing decreases on certain products.

Sales for the Health Care Products division ("HCP"), which markets the Company's branded OTC products, increased 53% to $2.5 million for the three months ended April 30, 2006 compared to $1.7 million for the same fiscal period the prior year. The increase was primarily the result of sales of the Zostrix(R) line of products, acquired in July 2005.

Fiscal Year Results

For the year ended April 30, 2006, the Company reported net sales of $78.0 million, an increase of 15% from net sales of $67.7 million for the year ended April 30, 2005. Net income increased 38% to $11.5 million or $0.85 per fully diluted share for the year ended April 30, 2006 compared to $8.3 million, or $0.64 per share, for the same period ended April 30, 2005.

Selling, general and administrative (SG&A) expenses increased to $23.2 million from $19.6 million, primarily due to increased advertising and promotional spending on Zostrix(R), higher legal fees, and increased amortization of intangibles relating to Naprelan(R), Zostrix(R) and Tanafed(R) DMX.

Research & Development expenses decreased to $3.3 million in fiscal 2006, from $4.4 million for fiscal 2005, due to spending in the previous year on the development of fluticasone propionate nasal spray, 0.05% mg/spray, the generic equivalent of GlaxoSmithKline's Flonase(R).

Generic Sales

Generic pharmaceutical product sales were $64.6 million compared to $57.2 million for the year ended April 30, 2006 and 2005, respectively, an increase of 13%. The increase was primarily due to the launch of new products during the year, and was partially offset by pricing decreases on certain in-line products.

Health Care Products Sales

The Health Care Products division had net sales of $9.8 million and $8.3 million for the year ended April 30, 2006 and 2005, respectively, an increase of 17%. The increase is primarily the result of sales of Zostrix(R).

Branded Prescription Products

The Company markets two prescription products, Naprelan(R) acquired in June 2004 and Tanafed DMX acquired in December 2005. Sales of these products totaled $3.7 million in fiscal 2006, up from $2.1 million in fiscal 2005 due to the acquisition of Tanafed(R) DMX and increased royalties from Blansett Pharmacal which markets the 375 mg strength of Naprelan(R).

David Seltzer, President and CEO, commented on the results: "We are pleased with our fiscal 2006 results, as our sales and income reached record highs. We launched five new products, received one final Abbreviated New Drug Application (ANDA) approval and one tentative approval, and strengthened our market share for several key prescription generic products. We submitted five ANDA's, including Paragraph IV submissions for Merck's Trusopt(R) and Cosopt(R), and our pipeline has never been more robust."

David Seltzer continued: "I am also pleased with the record sales for our HCP division which grew by 17%. While sales of Diabetic Tussin(R) were flat with the weak cold and flu season, we successfully integrated Zostrix(R) into the division and has been growing steadily quarter over quarter."

Hi-Tech currently has twelve products awaiting approval at the FDA. These products target brand sales of over $2.0 billion according to 2005 IMS data. Included in these products is fluticasone propionate nasal spray, which the Company submitted to the FDA in February 2005. Additionally, Hi-Tech has two products which received tentative approvals by the FDA - Levofloxacin ophthalmic solution USP, 0.5%, equivalent to Santen's Quixin(R) Ophthalmic Solution, 0.5%, and Ofloxacin otic solution, equivalent to Daiichi's Floxin(R) otic solution, 0.3%.

In addition to these products awaiting approval at the FDA, Hi-Tech has twenty products in active development targeting brand sales of over $1.0 billion, including sterile ophthalmic products, oral solutions and suspensions, and topical products.

The Company's management believes that net sales will grow between 5% and 15% for Fiscal Year 2007. This increase is dependent on new product launches which are expected in the second half of the fiscal year. The Company's ability to meet the forecast depends on such factors as the timing of new product launches, competition, legal proceedings and other market conditions.