Kos to buy back up to 7 million shares to offset stock compensation costs, return value

By Jennifer Lanning Drey

Eugene, Ore., May 9 - Kos Pharmaceuticals Inc.'s board of directors approved a program to repurchase up to 7 million shares, a move intended to continue its efforts to counter the costs associated with stock-based compensation and to return value to shareholders.

"Our repurchase program is designed to return value to shareholders and enhance our long-term earnings per share growth rate," said Kevin Clarke, executive vice president and chief financial officer, in a company conference call held Tuesday.

The buyback represents the potential repurchase of shares totaling approximately 15% of the current outstanding shares and will offset several years' worth of share issuance under the company's incentive programs, Clark said in the same conference call.

Kos noted it first addressed the costs of stock-based compensation in its year-end conference call in February.

Under the buyback program, shares can be bought back through open market purchases and privately negotiated transactions.

The timing and actual number of shares repurchased will depend on factors including price, corporate and regulatory requirements, capital availability and other market conditions. The program does not have an expiration date.

In connection with the board-approved plan, Kos has also agreed to borrow $30 million under an existing revolving credit and loan agreement by June 30, the proceeds of which will be used to repurchase shares.

Kos said it is in the strongest financial position in its history and expects to see continued growth through a new licensing agreement it has signed with a subsidiary of SkyePharma PLC and through drug advancements.

Kos, which has spent more than $100 million on product acquisitions in last 12 months, reported that for the first quarter of 2006 revenue increased by 11% to $170.8 million, up from $153.3 million for the first quarter of 2005. Adjusted for the reduction in wholesaler inventories of $26.4 million, revenues would have been up $197.2 million, an increase of 29% over the same period one year ago.

Plans 1 or 2 new products a year

The company also said it intends to launch at least one or two new products each year, beginning in 2007 and lasting into the next decade.

In line with that plan, the Kos intends to have data from three phase 3 trials of potential drug candidates, Icatibant HAE, Simcor and Niaspan/Iovastatin in peripheral arterial disease, before the end of the year. It is also on track to submit a supplemental New Drug Application for Optimized Niaspan NF in the third quarter of this year and a New Drug Application for Simcor in the first quarter of 2007.

Through its license agreement with SkyePharma, Kos gained U.S. rights to Flutiform, a trademarked treatment for asthma and chronic obstructive pulmonary diseas, currently in phase 3 development. Its potential launch date is 2009, and its total market is projected to be valued at approximately $12.3 billion that year.

Based in Cranbury, N.J., Kos Pharmaceuticals is a specialty pharmaceutical company engaged in developing, commercializing, manufacturing and marketing proprietary prescription products for treatment of chronic diseases with a particular focus on cardiovascular, metabolic and respiratory disease areas.

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