Impax Laboratories Reports Third Quarter 2012 Results Adjusted EPS Increased to $0.48; GAAP EPS Increased to $0.29 Business Wire HAYWARD, Calif. -- October 30, 2012 Impax Laboratories, Inc. (NASDAQ: IPXL) today reported third quarter 2012 financial results. *Adjusted net income increased $15.3 million to $32.5 million in the third quarter 2012, or $0.48 per diluted share, compared to $17.2 million, or $0.26 per diluted share, in the prior year period. This increase was primarily driven by United States (U.S.) sales of Zomig^® which was licensed from AstraZeneca pursuant to the previously disclosed January 2012 License Agreement. Adjusted results exclude acquisition-related costs, as well as other items noted below. *GAAP net income increased $2.8 million to $20.0 million in the third quarter 2012, or $0.29 per diluted share, compared to $17.2 million, or $0.26 per diluted share, in the prior year period. *Total revenues increased 21% to $145.6 million in the third quarter 2012, compared to $119.8 million in the prior year period, primarily due to U.S. sales of Zomig^®. Partially offsetting this increase were lower generic Rx Partner and Research Partner revenues, as well as the completion in June 2012 of a three-year brand product promotional agreement for which there was no revenue recognized in the third quarter 2012 compared to the prior year period. *Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA), increased to $56.6 million in the third quarter 2012, compared to $32.5 million in the prior year period. Adjusted results exclude amortization and acquisition-related costs related to recent third-party business development transactions, the receipt of reimbursed costs pursuant to the settlement of litigation and expenses associated with the voluntary withdrawal of a generic product from the market. Please refer to “Non-GAAP Financial Measures” below for a reconciliation of GAAP to non-GAAP items. “Our U.S. promotional efforts of Zomig^® exceeded our expectations in the third quarter and support our brand commercial organization as we continue to prepare for the potential launch of Rytary^TM,” said Larry Hsu, Ph.D., president and CEO, Impax Laboratories, Inc. “The success of our brand business is an important element to the future growth of the Company.” “A few weeks ago, the U.S. Food and Drug Administration (FDA) notified us that Rytary’s^TM New Drug Application review date would be extended three months to January 21, 2013. We continue to have dialogue with the FDA on both this application and the resolution of the Hayward warning letter. We expect that upon the resolution of the warning letter, we should begin to see approvals for generic products in backlog and will look to commercialize these opportunities assuming the market dynamics remain attractive. In the meantime, we continue to explore investment opportunities that can deliver growth and progress the Company towards its long term generic and brand division goals,” Dr. Hsu concluded. Segment Information The Company has two reportable segments, the Global Pharmaceuticals Division (generic products & services) and the Impax Pharmaceuticals Division (brand products & services) and does not allocate general corporate services to either segment. Global Pharmaceuticals Division Information Three Months Ended Nine Months Ended (unaudited, amounts in September 30, September 30, thousands) 2012 2011 2012 2011 Revenues: Global Product $ 99,463 $ 97,661 $ 342,105 $ 301,124 sales, net Rx Partner (792 ) 12,621 4,652 20,169 OTC Partner 763 879 2,237 4,006 Research Partner 996 3,385 7,765 13,154 Total revenues 100,430 114,546 356,759 338,453 Cost of revenues 44,106 54,196 177,690 164,627 Gross profit 56,324 60,350 179,069 173,826 Operating expenses: Research and 12,392 11,487 35,190 34,728 development Patent litigation (371 ) 2,114 6,581 6,097 (recovery) expense Selling, general and 3,790 3,694 11,482 8,892 administrative Total operating 15,811 17,295 53,253 49,717 expenses Income from $ 40,513 $ 43,055 $ 125,816 $ 124,109 operations Global Pharmaceuticals Division revenues in the third quarter 2012 were $100.4 million, compared to $114.5 million in the prior year period, primarily due to lower Rx Partner and Research Partner revenues. For the third quarter 2012, Rx Partner revenues declined $13.4 million, as the Company realized a $7.4 million profit share adjustment in the third quarter 2011 from Teva Pharmaceuticals Industries Limited (“Teva”) for which there was no comparable amount in the third quarter 2012. Also contributing to the decline in the third quarter 2012 Rx revenues were lower sales of our generic products through our Strategic Alliance Agreement with Teva and an estimated $2.0 million charge for the voluntary withdrawal of bupropion XL 300 mg from the market. Research Partner revenues in the third quarter 2012 declined $2.4 million to $1.0 million, compared to the prior year period of $3.4 million, due to the extension of the revenue recognition period for the Joint Development Agreement with Medicis Pharmaceutical Corporation (the “Medicis Agreement”). During the third quarter 2012, the Company extended the estimated performance period from the previous recognition period ending November 2012 to November 2013 due to changes in the estimated timing of completion of certain research and development activities. Gross profit in the third quarter 2012 was $56.3 million, compared to $60.4 million in the prior year period. The decline in gross profit was due to the third quarter 2011 receipt of $7.4 million in profit share adjustment from Teva for which there was no comparable amount in the third quarter 2012, as well as the change in the estimated performance period for the Medicis Agreement. Partially offsetting the third quarter 2012 decrease in gross profit was a reduction in the royalty rate paid on sales of our authorized generic Adderall XR^® products as a result of additional generic competition and increased sales of higher margin products. Gross margin in the third quarter 2012 increased to 56%, compared to 53% in the prior year period, due to the reduction in the royalty rate and increased sales of higher margin products as noted above. Total generic operating expenses in the third quarter 2012 decreased $1.5 million to $15.8 million, compared to the prior year period of $17.3 million, due to lower patent litigation expenses resulting from the receipt of $5.0 million for reimbursement of legal fees received pursuant to the settlement of litigation. The increase in patent litigation expense before the $5.0 million reimbursement was the result of legal activity related to several Abbreviated New Drug Application cases. Impax Pharmaceuticals Division Information Three Months Ended Nine Months Ended (unaudited, amounts in September 30, September 30, thousands) 2012 2011 2012 2011 Revenues: Impax Product $ 43,327 $ - $ 71,422 $ - sales, net Rx Partner 1,500 1,438 4,375 4,313 Research 330 330 989 989 Partner Promotional - 3,535 7,070 10,605 Partner Total revenues 45,157 5,303 83,856 15,907 Cost of 23,454 2,999 44,522 8,840 revenues Gross profit 21,703 2,304 39,334 7,067 Operating expenses: Research and 7,620 7,352 23,507 27,580 development Selling, general and 12,498 1,632 22,266 4,116 administrative Total operating 20,118 8,984 45,773 31,696 expenses Income (loss) $ 1,585 $ (6,680 ) $ (6,439 ) $ (24,629 ) from operations Impax Pharmaceuticals Division revenues in the third quarter 2012 increased $39.9 million to $45.2 million, compared to the prior year period of $5.3 million, due to U.S. sales of Zomig^® pursuant to the AstraZeneca License Agreement for which there was no comparable amount in the prior year period. This increase was partially offset by a $3.5 million decline in Promotional Partner revenues as the Company’s detailing for Pfizer’s product Lyrica^® pursuant to the Co-Promotion Agreement ended on June 30, 2012. Gross profit of $21.7 million increased $19.4 million in the third quarter 2012, due to U.S. Zomig^® sales, compared to the prior year period of $2.3 million. Gross margin in the third quarter 2012 increased to 48%, compared to 43% in the prior year period. The third quarter 2012 gross margin was, however, negatively impacted by the inclusion of $21.6 million in cost of revenues for amortization and acquisition-related costs due to the Zomig^® transaction. Total brand operating expenses in the third quarter 2012 increased $11.1 million to $20.1 million, compared to the prior year period of $9.0 million, due to higher selling, general and administration expenses resulting from Zomig^® marketing costs, the expansion of the Company’s neurology focused sales force and pre-launch planning costs for Rytary^TM. Corporate and Other Three Months Ended Nine Months Ended (unaudited, amounts in September 30, September 30, thousands) 2012 2011 2012 2011 General and administrative $ 12,639 $ 10,992 $ 41,282 $ 35,398 expenses Loss from $ (12,639 ) $ (10,992 ) $ (41,282 ) $ (35,398 ) operations General and administrative expenses in the third quarter 2012 increased $1.6 million to $12.6 million, compared to the prior year period of $11.0 million, primarily due to increased consulting and personnel expenses. Cash and Short-term Investments Cash and short-term investments were $339.7 million as of September 30, 2012, compared to $346.4 million as of December 31, 2011. 2012 Financial Outlook The Company updated its 2012 financial outlook as noted below. Expense guidance: *UPDATED - Total R&D expenses across the generic and brand divisions to approximate $86.0 million with generic R&D of approximately $48.0 million and brand R&D of approximately $38.0 million. *UPDATED - Patent litigation expenses of approximately $13.0 million. In the third quarter 2012, the Company received a $5.0 million patent litigation settlement reimbursement. *SG&A expenses of approximately $113.0 million. Other outlook items: *Gross margins as a percent of total revenues of approximately 60%. *UPDATED - Effective tax rate of approximately 35%. *Capital expenditures of approximately $78.0 million. Revenue: *With the recent additional competition on fenofibrate capsules and generic Adderall XR^®, the Company expects its total revenues for the fourth quarter of 2012 to decline by approximately 15% to 20% from the third quarter of 2012. Conference Call Information The Company will host a conference call on October 30, 2012 at 12:00 p.m. EDT to discuss its results. The number to call from within the United States is (877) 356-3814 and (706) 758-0033 internationally. The call can also be accessed via a live Webcast through the Investor Relations section of the Company’s Web site, www.impaxlabs.com. A replay of the conference call will be available shortly after the call for a period of seven days. To access the replay, dial (855) 859-2056 (in the U.S.) and (404) 537-3406 (international callers). The access conference code is 39759746. About Impax Laboratories, Inc. Impax Laboratories, Inc. (NASDAQ: IPXL) is a technology based specialty pharmaceutical company applying its formulation expertise and drug delivery technology to the development of controlled-release and specialty generics in addition to the development of branded products. Impax markets its generic products through its Global Pharmaceuticals Division and markets branded products through the Impax Pharmaceuticals Division. Additionally, where strategically appropriate, Impax has developed marketing partnerships to fully leverage its technology platform. Impax Laboratories is headquartered in Hayward, California, and has a full range of capabilities in its Hayward, Philadelphia and Taiwan facilities. For more information, please visit the Company's Web site at: www.impaxlabs.com. "Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995: To the extent any statements made in this news release contain information that is not historical, these statements are forward-looking in nature and express the beliefs and expectations of management. Such statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause the Company’s future results, performance or achievements to differ significantly from the results, performance or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the effect of current economic conditions on the Company’s industry, business, financial position and results of operations, fluctuations in the Company’s revenues and operating income, the Company’s ability to successfully develop and commercialize pharmaceutical products, reductions or loss of business with any significant customer, the impact of consolidation of the Company’s customer base, the impact of competition, the Company’s ability to sustain profitability and positive cash flows, any delays or unanticipated expenses in connection with the operation of the Company’s Taiwan facility, the effect of foreign economic, political, legal and other risks on the Company’s operations abroad, the uncertainty of patent litigation, increased government scrutiny on the Company’s agreements with brand pharmaceutical companies, consumer acceptance and demand for new pharmaceutical products, the difficulty of predicting Food and Drug Administration filings and approvals, the Company’s inexperience in conducting clinical trials and submitting new drug applications, the Company’s ability to successfully conduct clinical trials, the Company’s reliance on third parties to conduct clinical trials and testing, the availability of raw materials and impact of interruptions in the Company’s supply chain, the use of controlled substances in the Company’s products, disruptions or failures in the Company’s information technology systems and network infrastructure, the Company’s reliance on alliance and collaboration agreements, the Company’s dependence on certain employees, the Company’s ability to comply with legal and regulatory requirements governing the healthcare industry, the regulatory environment, the Company’s ability to protect the Company’s intellectual property, exposure to product liability claims, changes in tax regulations, the Company’s ability to manage the Company’s growth, including through potential acquisitions, the restrictions imposed by the Company’s credit facility, uncertainties involved in the preparation of the Company’s financial statements, the Company’s ability to maintain an effective system of internal control over financial reporting, any manufacturing difficulties or delays, the effect of terrorist attacks on the Company’s business, the location of the Company’s manufacturing and research and development facilities near earthquake fault lines and other risks described in the Company’s periodic reports filed with the Securities and Exchange Commission.Forward-looking statements speak only as to the date on which they are made, and Impax undertakes no obligation to update publicly or revise any forward-looking statement, regardless of whether new information becomes available, future developments occur or otherwise. Impax Laboratories, Inc. Consolidated Statements of Operations (unaudited, amounts in thousands, except share and per share data) Three Months Ended Nine Months Ended September 30, September 30, 2012 2011 2012 2011 Revenues: Global Pharmaceuticals $ 100,430 $ 114,546 $ 356,759 $ 338,453 Division Impax Pharmaceuticals 45,157 5,303 83,856 15,907 Division Total revenues 145,587 119,849 440,615 354,360 Cost of 67,560 57,195 222,212 173,467 revenues Gross profit 78,027 62,654 218,403 180,893 Operating expenses: Research and 20,012 18,839 58,697 62,308 development Patent litigation (371 ) 2,114 6,581 6,097 (recovery) expense Selling, general and 28,927 16,318 75,030 48,406 administrative Total operating 48,568 37,271 140,308 116,811 expenses Income from 29,459 25,383 78,095 64,082 operations Other income 46 69 (129 ) (470 ) (expense), net Interest income 272 268 771 879 Interest (145 ) (53 ) (607 ) (81 ) expense Income before 29,632 25,667 78,130 64,410 income taxes Provision for 9,635 8,486 27,166 20,844 income taxes Net income before 19,997 17,181 50,964 43,566 noncontrolling interest Add back loss attributable to 40 39 110 67 noncontrolling interest Net income $ 20,037 $ 17,220 $ 51,074 $ 43,633 Net income per share: Basic $ 0.30 $ 0.27 $ 0.78 $ 0.68 Diluted $ 0.29 $ 0.26 $ 0.75 $ 0.65 Weighted average common shares outstanding: Basic 65,797,722 64,387,413 65,451,926 63,937,796 Diluted 68,366,849 66,986,758 68,230,487 67,318,658 Impax Laboratories, Inc. Condensed Consolidated Balance Sheets (unaudited, amounts in thousands) September 30, December 31, 2012 2011 Assets Current assets: Cash and cash equivalents $ 172,692 $ 104,419 Short-term investments 167,046 241,995 Accounts receivable, net 97,770 153,773 Inventory, net 78,674 54,177 Deferred tax asset 43,170 37,853 Prepaid expenses and other assets 24,040 7,718 Total current assets 583,392 599,935 Property, plant and equipment, net 171,126 118,158 Other assets 64,941 45,942 Intangible assets, net 54,172 2,250 Goodwill 27,574 27,574 Total assets $ 901,205 $ 793,859 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 121,742 $ 93,071 Accrued profit sharing and royalty 9,159 40,766 expenses Accrued product licensing payments 40,000 - Deferred revenue 12,328 23,024 Total current liabilities 183,229 156,861 Deferred revenue 15,092 17,131 Other liabilities 21,242 16,861 Total liabilities 219,563 $ 190,853 Total stockholders' equity 681,642 603,006 Total liabilities and stockholders' $ 901,205 $ 793,859 equity Impax Laboratories, Inc. Consolidated Statements of Cash Flows (unaudited, amounts in thousands) Nine Months Ended September 30, 2012 2011 Cash flows from operating activities: Net income $ 51,074 $ 43,633 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 23,273 11,903 Accretion of interest income on short-term (473 ) (665 ) investments Recognition of deferred charge – Zomig^® 24,997 - prepaid royalty In-process research and development charge 1,550 - Deferred income taxes (23,437 ) 4,464 Tax benefit related to the exercise of (3,515 ) (6,086 ) employee stock options Deferred revenue 1,738 2,182 Deferred product manufacturing costs (2,743 ) (1,275 ) Recognition of deferred revenue (16,236 ) (19,489 ) Amortization of deferred product 2,775 2,494 manufacturing costs Accrued profit sharing and royalty expense 67,427 67,210 Payments of profit sharing and royalty (99,034 ) (58,759 ) expense Share-based compensation expense 12,146 9,632 Bad debt expense - 163 Changes in certain assets and liabilities: Accounts receivable 56,003 (24,112 ) Inventory (24,497 ) (5,577 ) Prepaid expenses and other assets 47,446 (9,606 ) Accounts payable and accrued expenses 23,019 (6,871 ) Other liabilities 5,774 1,213 Net cash provided by operating activities 147,287 10,454 Cash flows from investing activities: Purchase of short-term investments (177,461 ) (280,602 ) Maturities of short-term investments 252,883 316,277 Purchases of property, plant and equipment (58,618 ) (18,433 ) Payment for product licensing rights (111,000 ) - Net cash (used in) provided by investing (94,196 ) 17,242 activities Cash flows from financing activities: Tax benefit related to the exercise of employee stock options and restricted 3,515 6,086 stock Proceeds from exercise of stock options 11,667 12,632 and ESPP Net cash provided by financing activities 15,182 18,718 Net increase in cash and cash equivalents 68,273 46,414 Cash and cash equivalents, beginning of 104,419 91,796 period Cash and cash equivalents, end of period $ 172,692 $ 138,210 Impax Laboratories, Inc. Non-GAAP Financial Measures Total adjusted net income, adjusted net income per diluted share and adjusted EBITDA are not measures of financial performance under generally accepted accounting principles (GAAP) and should not be construed as substitutes for, or superior to, GAAP net income, and net income per diluted share as a measure of financial performance. However, management uses both GAAP financial measures and the disclosed non-GAAP financial measures internally to evaluate and manage the Company’s operations and to better understand its business. Further, management believes the inclusion of non-GAAP financial measures provides meaningful supplementary information to and facilitates analysis by investors in evaluating the Company’s financial performance, results of operations and trends. The Company’s calculation of adjusted net income, adjusted net income per diluted share and adjusted EBITDA, may not be comparable to similarly designated measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment. The following table reconciles reported net income to adjusted net income. Three months ended Nine months ended (Unaudited, amounts in millions, except per September 30, September 30, share data) 2012 2011 2012 2011 Net income $ 20.0 $ 17.2 $ 51.1 $ 43.6 Adjusted to add (deduct): Amortization and acquisition-related 22.1 - 36.4 - costs^(a) Generic product 2.0 - 2.0 - withdrawal costs^(b) Patent litigation settlement (5.0 ) - (5.0 ) - reimbursement^(c) Gross profit earned on - - 46.2 - Zomig® Agreement Acquisition related in - - 1.6 - process R&D Employee severance - - 1.9 0.8 Inventory adjustment - - 3.5 - Lower of cost or market - - 1.7 - charge Income tax effect (6.6 ) - (30.4 ) (0.3 ) Adjusted net income $ 32.5 $ 17.2 $ 109.0 $ 44.1 Net income adjusted per $ 0.48 $ 0.26 $ 1.60 $ 0.66 diluted share Net income per diluted $ 0.29 $ 0.26 $ 0.75 $ 0.65 share Impax Laboratories, Inc. Non-GAAP Financial Measures The following table reconciles reported net income to adjusted EBITDA. Three months ended Nine months ended (Unaudited, amounts September 30, September 30, in millions) 2012 2011 2012 2011 Net income $ 20.0 $ 17.2 $ 51.1 $ 43.6 Adjusted to add (deduct): Interest income (0.3 ) (0.3 ) (0.8 ) (0.9 ) Interest expense 0.1 0.1 0.6 0.1 Depreciation and 4.3 3.5 11.9 11.9 other Income taxes 9.6 8.5 27.2 20.8 EBITDA 33.7 29.0 90.0 75.5 Adjusted to add: Amortization and acquisition-related 22.1 - 36.4 - costs^(a) Generic product 2.0 - 2.0 - withdrawal costs^(b) Patent litigation settlement (5.0 ) - (5.0 ) - reimbursement^(c) Gross profit earned - - 46.2 - on Zomig® Agreement Acquisition related - - 1.6 - in process R&D Employee severance - - 1.9 0.8 Inventory adjustment - - 3.5 - Lower of cost or - - 1.7 - market charge Share-based 3.8 3.5 12.1 9.6 compensation Adjusted EBITDA $ 56.6 $ 32.5 $ 190.4 $ 85.9 Amortization and acquisition-related costs from the January 2012 (a) Distribution, License, Development and Supply Agreement with AstraZeneca UK Limited and the June 2012 Development, Distribution and Supply Agreement with TOLMAR, Inc. The Company recorded a charge of $2.0 million related to the voluntary (b) withdrawal from the market of bupropion XL 300 mg, manufactured by Impax and marketed through our Strategic Alliance Agreement with Teva. (c) The Company received $5.0 million for reimbursement of legal fees pursuant to the settlement of litigation. Contact: Impax Laboratories, Inc. Mark Donohue, 215-558-4526 Sr. Director Investor Relations and Corporate Communications www.impaxlabs.com
Merck KGaA, Maker of Erbitux Cancer Drug, to Acquire Sigma-Aldrich for $17 Billion
Impax Laboratories Reports Third Quarter 2012 Results
Press spacebar to pause and continue. Press esc to stop.