##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of
1934
 For the quarterly period ended March 31, 2007
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 For the transition period from to
 Commission file number: 000-51445
 ADAMS RESPIRATORY THERAPEUTICS, INC.
 (Exact Name of Registrant as Specified in Charter)
 Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    75-2725552
(I.R.S. Employer Identification No.)
 4 Mill Ridge Lane
Chester, New Jersey 07930
(Address of principal executive offices including zip code)
 (908) 879-1400
(Registrants telephone number, including area code)
 þ o
  o o þ
 o þ




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##### 



ADAMS RESPIRATORY THERAPEUTICS, INC.
 INDEX
 PageSpecial Note Regarding Forward-looking StatementsPart I. Financial InformationItem 1. Financial Statements (Unaudited)


3Consolidated Balance Sheets  March 31, 2007 and June 30, 2006


3Consolidated Statements of Income  Three and nine months ended March 31, 2007
and 2006


4Consolidated Statement of Stockholders Equity  March 31, 2007


5Consolidated Statements of Cash Flows  Nine months ended March 31, 2007 and
2006


6Notes to Consolidated Financial Statements


7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations


16Item 3. Quantitative and Qualitative Disclosure of Market Risk


23Item 4. Controls and Procedures


24Part II. Other InformationItem 1. Legal Proceedings


25Item 1A. Risk Factors


25Item 6. Exhibits


29Signatures


30EX-10.1 SETTLEMENT AGREEMENTEX-31.1 SECTION 302 CERTIFICATION OF THE CEOEX-31.2 SECTION 302 CERTIFICATION OF THE CFOEX-32.1 SECTION 906 CERTIFICATION OF THE CEOEX-32.2 SECTION 906 CERTIFICATION OF THE CFO




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PART I  FINANCIAL INFORMATION
 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    Our need for additional inventory reserves;
    
    our involvement in litigation having a material adverse impact on our business,
financial condition, results of operations or cash flows;
    
    our obligations related to product returns;
    
    our ability to obtain sufficient quantities of raw materials, including dextromethorphan;
    
    our reliance on third parties to perform certain aspects of the manufacturing and
packaging of our products;
    
    our expectations of the seasonality of our product sales and related revenue
fluctuations;
    
    our intentions to grow our business by increasing the market share of our current
products and expanding our product portfolio and our expectation of increased expenses to
do so;
    
    our ability to meet our anticipated operating needs with our revenues, existing cash and
our Credit Facility;
    
    our need for additional capital to acquire and develop new products;
    
    the impact of our April 2007 recall of specific lots of Children's Mucinex liquid products;
    
    the timing of the USPTOs reexamination of the patentability of our delivery system for
guaifenesin and our ability to prevail in the reexamination process;
    
    the outcome of, and our plans with respect to, our erdosteine clinical development;
    
    our reliance on and continued consolidation of our top customers;
    
    an increase in stronger and more direct competition, including private label and generic competition;
    
    the FDAs timing and review of Mutuals ANDA and Mutual's ability to sell generic versions of certain of our products;
    
    the approval of our settlement agreement with Mutual;
    
    our expectations of continued pricing pressures;
    
    our ability to leverage our brand name and continue the successful marketing of our products;
    
    reimbursement of our products under state Medicaid programs; and
    
    our exposure to credit rate, interest rate and exchange rate risk.




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ITEM 1. FINANCIAL STATEMENTS.
 Adams Respiratory Therapeutics, Inc.
 
 Consolidated Balance Sheets
 (Amounts in thousands, except per share amounts)
 March 31,
    
    
    June 30,2007
    
    
    2006(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    37,692
    
    
    $
    34,815Short-term investments
    
    
    32,975
    
    
    
    22,223Accounts receivable, net
    
    
    31,092
    
    
    
    19,444Inventories, net
    
    
    42,881
    
    
    
    10,603Prepaid expenses and other assets
    
    
    6,209
    
    
    
    4,857AlleRx royalty interest held-for-sale
    
    
    3,771
    
    
    
    1,531Income taxes receivable
    
    
    4,138
    
    
    
    4,045Deferred tax assets
    
    
    6,152
    
    
    
    3,659Total current assets
    
    
    164,910
    
    
    
    101,177Property, plant and equipment, net of accumulated depreciation
    
    
    18,475
    
    
    
    7,388Deferred tax assets
    
    
    2,746
    
    
    
    2,545Intangible assets, net
    
    
    125,478
    
    
    
    125,597Other assets
    
    
    3,066
    
    
    
    15,883Total assets
    
    $
    314,675
    
    
    $
    252,590LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    19,587
    
    
    $
    15,189Accrued compensation and related items
    
    
    7,389
    
    
    
    5,769Accrued returns, chargebacks, rebates and other sales allowances
    
    
    9,054
    
    
    
    5,701Other current liabilities
    
    
    3,194
    
    
    
    1,648Total current liabilities
    
    
    39,224
    
    
    
    28,307Long-term liabilities:Deferred gain on sale of plant assets
    
    
    
    
    
    
    1,309Accrued royalties
    
    
    690
    
    
    
    701Total liabilities
    
    
    39,914
    
    
    
    30,317Stockholders equity:Preferred Stock $0.01 par value:Authorized shares  50,000, Issued and outstanding  none
    
    
    
    
    
    
    Common stock, $0.01 par value:Authorized shares  100,000Issued and outstanding shares  35,567 at March 31, 2007 and
34,874 at June 30, 2006
    
    
    356
    
    
    
    349Additional paid-in capital
    
    
    485,698
    
    
    
    464,877Accumulated deficit
    
    
    (211,277
    )
    
    
    (242,842
    )Accumulated other comprehensive loss
    
    
    (16
    )
    
    
    (111
    )Total stockholders equity
    
    
    274,761
    
    
    
    222,273Total liabilities and stockholders equity
    
    $
    314,675
    
    
    $
    252,590
  3




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Adams Respiratory Therapeutics, Inc.
 
 Consolidated Statements of Income
 (Amounts in thousands, except per share amounts)
 Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006(unaudited)Net sales
    
    $
    84,024
    
    
    $
    76,002
    
    
    $
    284,742
    
    
    $
    186,266Cost of goods sold
    
    
    23,691
    
    
    
    16,166
    
    
    
    79,647
    
    
    
    38,607Gross margin
    
    
    60,333
    
    
    
    59,836
    
    
    
    205,095
    
    
    
    147,659Selling, marketing & administrative
    
    
    52,629
    
    
    
    28,440
    
    
    
    138,575
    
    
    
    74,002Product development
    
    
    5,043
    
    
    
    3,837
    
    
    
    18,057
    
    
    
    11,359AlleRx charge
    
    
    
    
    
    
    
    
    
    
    2,699
    
    
    
    Other, net
    
    
    (1,165
    )
    
    
    (80
    )
    
    
    (2,867
    )
    
    
    (2,868
    )56,507
    
    
    
    32,197
    
    
    
    156,464
    
    
    
    82,493Income before income taxes
    
    
    3,826
    
    
    
    27,639
    
    
    
    48,631
    
    
    
    65,166Provision for income taxes
    
    
    962
    
    
    
    10,696
    
    
    
    17,066
    
    
    
    25,169Net income
    
    $
    2,864
    
    
    $
    16,943
    
    
    $
    31,565
    
    
    $
    39,997Income per common shareBasic
    
    $
    0.08
    
    
    $
    0.49
    
    
    $
    0.90
    
    
    $
    1.25Diluted
    
    $
    0.08
    
    
    $
    0.46
    
    
    $
    0.85
    
    
    $
    1.12Weighted-average of common shares
used in income per share
calculationBasic
    
    
    35,515
    
    
    
    34,355
    
    
    
    35,238
    
    
    
    31,884Diluted
    
    
    37,169
    
    
    
    36,759
    
    
    
    37,217
    
    
    
    35,653
  4




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Adams Respiratory Therapeutics, Inc.
 
 Consolidated Statement of Stockholders Equity
 (Amounts in thousands)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    EquityBalance as of June 30, 2006
    
    
    34,874
    
    
    $
    349
    
    
    $
    464,877
    
    
    $
    (242,842
    )
    
    $
    (111
    )
    
    $
    222,273Comprehensive income:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,565
    
    
    
    
    
    
    
    31,565Unrealized gain on marketable
securities, net of tax of $55
(unaudited)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    95Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,660Stock compensation expense
(unaudited)
    
    
    
    
    
    
    
    
    
    
    6,077
    
    
    
    
    
    
    
    
    
    
    
    6,077Exercise of stock options (unaudited)
    
    
    545
    
    
    
    6
    
    
    
    2,714
    
    
    
    
    
    
    
    
    
    
    
    2,720AlleRx conversion (unaudited)
    
    
    147
    
    
    
    1
    
    
    
    5,198
    
    
    
    
    
    
    
    
    
    
    
    5,199Exercise of warrants (unaudited)
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Tax benefit of stock options
(unaudited)
    
    
    
    
    
    
    
    
    
    
    6,832
    
    
    
    
    
    
    
    
    
    
    
    6,832Balance as of March 31, 2007
(unaudited)
    
    
    35,567
    
    
    $
    356
    
    
    $
    485,698
    
    
    $
    (211,277
    )
    
    $
    (16
    )
    
    $
    274,761
  5




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Adams Respiratory Therapeutics, Inc.
 
 Consolidated Statements of Cash Flows
 (Amounts in thousands)
 Nine Months EndedMarch 31,2007
    
    
    2006(unaudited)Operating ActivitiesNet income
    
    $
    31,565
    
    
    $
    39,997Adjustments to reconcile net income to net cash (used in)/provided by operating activities:Depreciation and amortization
    
    
    2,430
    
    
    
    902Stock compensation expense
    
    
    6,077
    
    
    
    3,501AlleRx charge
    
    
    2,699
    
    
    
    Loss on write-off of property, plant and equipment
    
    
    
    
    
    
    896Loss on lease, net of sublease income
    
    
    
    
    
    
    631Deferred taxes
    
    
    (2,639
    )
    
    
    1,102Changes in operating assets and liabilities:Accounts receivable
    
    
    (11,648
    )
    
    
    (28,107
    )Inventories
    
    
    (32,278
    )
    
    
    1,021Prepaid expenses and other current assets
    
    
    (1,279
    )
    
    
    (5,137
    )Intangible assets
    
    
    (192
    )
    
    
    Other assets
    
    
    (1,773
    )
    
    
    Accounts payable
    
    
    4,398
    
    
    
    4,527Income taxes
    
    
    (93
    )
    
    
    133Accrued expenses and other liabilities
    
    
    5,199
    
    
    
    1,489Net cash provided by operating activities
    
    
    2,466
    
    
    
    20,955Investing ActivitiesPurchases of property, plant and equipment
    
    
    (12,946
    )
    
    
    (3,488
    )Increase in investments and restricted cash
    
    
    (28,000
    )
    
    
    (35,599
    )Maturities of investments
    
    
    32,172
    
    
    
    Net cash used in investing activities
    
    
    (8,774
    )
    
    
    (39,087
    )Financing ActivitiesBorrowings on line of credit
    
    
    20,000
    
    
    
    Repayments of line of credit
    
    
    (20,000
    )
    
    
    Debt issuance costs
    
    
    (367
    )
    
    
    Proceeds from exercise of stock options and warrants
    
    
    2,720
    
    
    
    2,532Net proceeds from issuance of common stock
    
    
    
    
    
    
    107,772Excess tax benefit from exercise of stock options
    
    
    6,832
    
    
    
    16,766Net cash provided by financing activities
    
    
    9,185
    
    
    
    127,070Net increase in cash and cash equivalents
    
    
    2,877
    
    
    
    108,938Cash and cash equivalents at beginning of period
    
    
    34,815
    
    
    
    24,655Cash and cash equivalents at end of period
    
    $
    37,692
    
    
    $
    133,593
 Supplemental Schedule of Noncash Financing Activity
  Fair value of restricted common stock issued to JMED
    
    $
    5,199AlleRx charge recorded in the Companys Consolidated Statement of Income
    
    
    2,699Increase in
AlleRx royalty interest held-for-sale
    
    $
    2,500
  6




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Adams Respiratory Therapeutics, Inc.
 
 Notes to Consolidated Financial Statements (unaudited)
 ($ in thousands, except per share amounts)
 1. Summary of Significant Accounting Policies
 Basis of Presentation
   Principles of Consolidation
  Use of Estimates
  Manufacturing Assets Repurchase
  Inventories and Cost of Goods Sold
  7




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Adams Respiratory Therapeutics, Inc.
Notes to Consolidated Financial Statements (unaudited)
($ in thousands, except per share amounts)
 March 31,
    
    
    June 30,2007
    
    
    2006Raw materials
    
    $
    6,062
    
    
    $
    Work in progress
    
    
    5,471
    
    
    
    Finished goods
    
    
    31,518
    
    
    
    10,62743,051
    
    
    
    10,627Less: reserve for obsolescence
    
    
    (170
    )
    
    
    (24
    )Inventories, net
    
    $
    42,881
    
    
    $
    10,603
   Income Taxes
  Revenue Recognition
  8




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Adams Respiratory Therapeutics, Inc.
Notes to Consolidated Financial Statements (unaudited)
($ in thousands, except per share amounts)
  Recently Issued Accounting Pronouncements
 Accounting for Uncertainty in Income Taxes
 2. Supplementary Financial Information
 Allowances for Accounts Receivable
  Intangible Assets
  March 31,
    
    
    June 30,2007
    
    
    2006Intangible asset with indefinite life:Delsym trademark
    
    $
    122,000
    
    
    $
    122,000Amortizable intangible assets
    
    
    4,354
    
    
    
    4,162Accumulated amortization
    
    
    (876
    )
    
    
    (565
    )Net balance
    
    $
    3,478
    
    
    $
    3,597
    AlleRx Royalty Interest Held-For-Sale
  9




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Adams Respiratory Therapeutics, Inc.
Notes to Consolidated Financial Statements (unaudited)
($ in thousands, except per share amounts)
   Other Assets
  Accrued Returns, Chargebacks, Rebates and Other Sales Allowances
  AlleRx Charge
 Supplementary Financial Information  Intangible Assets
 10




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Adams Respiratory Therapeutics, Inc.
Notes to Consolidated Financial Statements (unaudited)
($ in thousands, except per share amounts)
 Other, net
  3. Benefit Plan
   4. Stockholders Equity
 Secondary Offerings
   Stock Compensation Plan
  11




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Adams Respiratory Therapeutics, Inc.
Notes to Consolidated Financial Statements (unaudited)
($ in thousands, except per share amounts)
  5 . Income per Common Share
  Three Months Ended
    
    
    Nine Months EndedMarch 31,
    
    
    March 31,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    2,864
    
    
    $
    16,943
    
    
    $
    31,565
    
    
    $
    39,997Average
shares outstanding  basic
    
    
    35,515
    
    
    
    34,355
    
    
    
    35,238
    
    
    
    31,884Weighted average dilutive stock options
    
    
    1,566
    
    
    
    2,254
    
    
    
    1,755
    
    
    
    2,225Weighted average assumed conversion of redeemable
convertible Preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,280Weighted average dilutive warrants, restricted
stock units and performance shares
    
    
    73
    
    
    
    150
    
    
    
    120
    
    
    
    264Weighted average dilutive JMED rights (See Note 2)
    
    
    15
    
    
    
    
    
    
    
    104
    
    
    
    Average
shares outstanding  diluted
    
    
    37,169
    
    
    
    36,759
    
    
    
    37,217
    
    
    
    35,653Income per common share:Basic
    
    $
    0.08
    
    
    $
    0.49
    
    
    $
    0.90
    
    
    $
    1.25Diluted
    
    $
    0.08
    
    
    $
    0.46
    
    
    $
    0.85
    
    
    $
    1.12
  6. Senior Revolving Credit Facility
  12




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Adams Respiratory Therapeutics, Inc.
Notes to Consolidated Financial Statements (unaudited)
($ in thousands, except per share amounts)
    7. Commitments and Contingencies
      13




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Adams Respiratory Therapeutics, Inc.
Notes to Consolidated Financial Statements (unaudited)
($ in thousands, except per share amounts)
    8. Net Sales Information
 Net Sales by Product
  Three months ended
    
    
    Nine months endedMarch 31,
    
    
    March 31,Product
    
    2007
    
    
    2006
    
    
    2007
    
    
    2006Mucinex SE
    
    $
    29,886
    
    
    $
    51,882
    
    
    $
    109,882
    
    
    $
    129,370Mucinex DM
    
    
    26,588
    
    
    
    18,272
    
    
    
    81,493
    
    
    
    41,372Mucinex D
    
    
    8,197
    
    
    
    4,689
    
    
    
    24,275
    
    
    
    14,365Childrens Mucinex
    
    
    4,068
    
    
    
    
    
    
    
    26,589
    
    
    
    Delsym
    
    
    16,226
    
    
    
    
    
    
    
    42,861
    
    
    
    Humibid SE(1)
    
    
    (941
    )
    
    
    1,159
    
    
    
    (358
    )
    
    
    1,159Net sales
    
    $
    84,024
    
    
    $
    76,002
    
    
    $
    284,742
    
    
    $
    186,266
 
 (1)
    
    Humibid SEs sales for the three and nine months ended March 31, 2007 includes
allowance for sales returns of approximately $1,100 relating to retail inventory of Humibid that
has expired or is approaching expiration. Concentration of Credit Risk
  14




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Adams Respiratory Therapeutics, Inc.
Notes to Consolidated Financial Statements (unaudited)
($ in thousands, except per share amounts)
 March 31,2007
    
    2006Wal-mart stores
    
    
    23
    %
    
    
    19
    %CVS
    
    
    13
    %
    
    
    11
    %Walgreens
    
    
    13
    %
    
    
    12
    %McKesson Drug Company
    
    
    6
    %
    
    
    11
    %
 15




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with the MD&A, financial statements and related notes included in our
Annual Report on Form 10-K for the fiscal year ended June 30, 2006, together with our financial
statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q . Some of the
information contained in this discussion and analysis or set forth elsewhere in this document,
including information with respect to our plans and strategy for our business and related
financing, includes forward-looking statements that involve risks and uncertainties. You should
review Part II, Item 1A. Risk Factors of this Quarterly Report on Form 10-Q and Part I, Item 1A.
Risk Factors in our Annual Report on Form 10-K for the fiscal year ended June 30, 2006, for a
discussion of important factors that could cause our actual results to differ materially from the
results described in or implied by the forward-looking statements contained in the following
discussion and analysis.
 Overview
  Mucinex SE.
 Mucinex DM.
 Mucinex D
 Humibid SE
 Delsym
 Childrens Mucinex
 Future Products.
  16




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Seasonality
 Recent Developments.
 Litigation
  AlleRx Royalty Interest
   17




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Manufacturing Assets Repurchase
  Critical Accounting Policies and Estimates
 Revenue Recognition.
 Inventories.
  Results of Operations
 Three and Nine Months Ended March 31, 2007 Compared to Three and Nine Months Ended March 31,
2006
 Net Sales.
 18




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Three Months Ended
    
    
    
    
    
    
    Nine Months EndedProduct
    
    March 31,
    
    
    Increase/
    
    
    March 31,
    
    
    Increase/(In thousands)
    
    2007
    
    
    2006
    
    
    (Decrease)
    
    
    2007
    
    
    2006
    
    
    (Decrease)Mucinex SE
    
    $
    29,886
    
    
    $
    51,882
    
    
    $
    (21,996
    )
    
    $
    109,882
    
    
    $
    129,370
    
    
    $
    (19,488
    )Mucinex DM
    
    
    26,588
    
    
    
    18,272
    
    
    
    8,316
    
    
    
    81,493
    
    
    
    41,372
    
    
    
    40,121Mucinex D
    
    
    8,197
    
    
    
    4,689
    
    
    
    3,508
    
    
    
    24,275
    
    
    
    14,365
    
    
    
    9,910Childrens Mucinex
    
    
    4,068
    
    
    
    
    
    
    
    4,068
    
    
    
    26,589
    
    
    
    
    
    
    
    26,589Delsym
    
    
    16,226
    
    
    
    
    
    
    
    16,226
    
    
    
    42,861
    
    
    
    
    
    
    
    42,861Humibid SE(1)
    
    
    (941
    )
    
    
    1,159
    
    
    
    (2,100
    )
    
    
    (358
    )
    
    
    1,159
    
    
    
    (1,517
    )Net Sales
    
    $
    84,024
    
    
    $
    76,002
    
    
    $
    8,022
    
    
    $
    284,742
    
    
    $
    186,266
    
    
    $
    98,476
 
 (1)
    
    During the quarter ended March 31, 2007, we updated our impairment analysis
for the Humibid intangible asset and concluded that the cumulative undiscounted cash flows for this
asset exceed its carrying value. Our management is currently evaluating the future of the Humibid
program. This intangible asset may have to be impaired if a decision is made at a future date to
discontinue marketing products under the Humibid trademark. Cost of Goods Sold.
 Selling, Marketing and Administrative.
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Product Development.
  AlleRx Charge
 Other, net.
  Income Taxes
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Liquidity and Capital Resources
        21




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Cash Flows
    Commitments and Contractual Obligations
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Off-Balance Sheet Arrangements
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Evaluation of Disclosure Controls and Procedures.
 Changes in Internal Control Over Financial Reporting.
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PART
II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
      
 ITEM 1A. RISK FACTORS.
  Risks Relating to Our Business
 We recently completed our phase IIb erdosteine clinical trial and are reviewing the final results
of this trial. If we determine the results were unsuccessful, or if the FDA or other regulatory
agencies do not accept or approve the
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results of such studies, this product may not successfully come to market and our business
prospects may suffer.
  An ANDA for a single-ingredient, extended-release formulation of guaifenesin has been filed with
the FDA.
    We depend heavily on the success of two of our existing products, Mucinex SE and Mucinex DM, and
the strength of the Mucinex brand. If we are unable to continue to successfully commercialize
Mucinex SE and Mucinex DM and build the Mucinex and Delsym brands with the introduction of new
products, our results of operations and future prospects will suffer.
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We depend on a limited number of customers for a large portion of our sales, and demands made by,
or the loss of, one or more of these customers could significantly reduce our margins or sales and
adversely affect our business and financial results.
  If we fail to obtain an adequate level of reimbursement for our products by Medicaid, our business
may be adversely affected. Additionally, many state Medicaid programs do not cover the costs of our
products and we cannot ensure that any Medicaid programs will continue to reimburse us for our
products.
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Regulatory Risks
 Our products are subject to recalls even after receiving FDA regulatory clearance or approval.
Recalls could harm our reputation and business.
   The sale of products containing pseudoephedrine is restricted by
additional federal and state government regulations, which may negatively
impact our sales of Mucinex D. If the sale of dextromethorphan undergoes
similar restrictions it could negatively impact sales of our products
containing dextromethorphan.
  Risks Related to Intellectual Property
 Our U.S. patent no. 6,372,252 is the subject of a request for reexamination, which the United
States Patent and Trade Mark Office, or USPTO, granted upon petition to the USPTO Director. If the
USPTO cancels our patent or substantially narrows the claims of our patent such that it no longer
protects our products from competition, our business will be materially harmed.
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ITEM 6. EXHIBITS.
 ExhibitNumber
    
    
    
    Description10.1*
    
    
    
    Settlement Agreement, dated March 21, 2007, between Adams
Respiratory Therapeutics, Inc., Mutual Pharmaceutical Co. and
United Research Laboratories, Inc., wholly owned subsidiaries of
Pharmaceutical Holdings Corp.31.1*
    
    
    
    Certification of the Chief Executive Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    
    
    Certification of the Chief Financial Officer pursuant to Rule
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    
    
    Certification of the Chief Executive Officer pursuant to Rule
13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2*
    
    
    
    Certification of the Chief Financial Officer pursuant to Rule
13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed with this Quarterly Report. 29




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SIGNATURES
  ADAMS RESPIRATORY THERAPEUTICS, INC.Date
May 15, 2007
    
    /s/ RITA M. OCONNOR

By: Rita M. OConnorIts: Chief Financial Officer and Treasurer
 30