Impax Laboratories Reports First Quarter 2014 Results

FDA Accepts RYTARY™ NDA Resubmission; Sets PDUFA Date of October 9, 2014 HAYWARD, Calif. , May 1, 2014 /PRNewswire/ -- Impax Laboratories, Inc. (NASDAQ: IPXL) today reported adjusted net income of $16.5 million , or $0.24 per diluted share for the first quarter ended March 31, 2014 , compared to adjusted net income of $25.3 million , or $0.37 per diluted share in the prior year period. On a GAAP basis, the Company recorded net income of $6.4 million , or $0.09 per diluted share for the first quarter 2014, compared to net income of $105.4 million , or $1.55 per diluted share in the prior year period. Adjusted net income and adjusted earnings per diluted share declined in the first quarter 2014 due to the loss of exclusivity of Zomig ® tablet and orally disintegrating tablet (ZMT) products in May 2013 . Partially offsetting the decline was an increase in generic revenues due to a favorable product mix and sales from new generic products launched in the second half of 2013 for which there were no comparable amounts in the prior year period. GAAP net income and GAAP earnings per diluted share declined in the first quarter 2014 primarily due to the recognition of one-time pre-tax payments in the first quarter 2013 totaling $150.0 million in connection with previously announced settlement and license agreements. Refer to the attached "Non-GAAP Financial Measures" for a reconciliation of GAAP to non-GAAP items. Total revenues for the first quarter 2014 were $118.7 million , compared to $148.5 million in the prior year period, as the $8.3 million increase in generic Global Product sales, net during the current period were more than offset by a $37.2 million decline in sales of Zomig products as noted above. "Our generics business is benefitting from recent marketing initiatives, as well as consistent success in commercializing the existing portfolio of products and capitalizing on new product launches," said Fred Wilkinson , president and chief executive officer of Impax Laboratories, Inc. "These events resulted in a $21.7 million increase in sales of our Global labeled products since the fourth quarter of 2013. In addition, we recently launched authorized generic RENVELA ® and expect it to be a significant contributor to our 2014 results." "A few weeks ago we resubmitted the New Drug Application (NDA) for RYTARY ™ . The U.S. Food and Drug Administration ( FDA ) has accepted the application and set the review date under the Prescription Drug User Fee Act (PDUFA) of October 9, 2014 . We remain committed to bringing this new treatment option to patients who are suffering from Parkinson's disease." "My management team and I will be focused on continuing the plan towards resolving the FDA quality and manufacturing issues in Hayward , while emphasizing the importance of a world class quality organization. We will leverage our resources to ensure we are capitalizing on the strategies related to the brand and generic businesses, and analyze our internal pipeline to identify opportunities for improvement and growth." "We will be looking to expand our product offerings and portfolio with strategic business development projects by utilizing our financial resources and balance sheet. I am confident we will drive growth and build value for our employees and stockholders." Business Segment Information The Company has two reportable segments, the Global Pharmaceuticals Division (generic products and services) and the Impax Pharmaceuticals Division (brand products and services) and does not allocate general corporate services to either segment. All information presented is on a GAAP basis unless otherwise noted on an adjusted basis. Global Pharmaceuticals Division Information Three Months Ended (unaudited, amounts in thousands) March 31, 2014 2013 Revenues: Global Product sales, net $ 106,117 $ 97,785 Rx Partner 2,435 3,114 Other revenues 589 737 Total revenues 109,141 101,636 Cost of revenues 57,022 61,444 Gross profit 52,119 40,192 Operating expenses: Research and development 11,217 11,711 Patent litigation expense 2,173 4,278 Selling, general and administrative 2,383 5,043 Total operating expenses 15,773 21,032 Income from operations $ 36,346 $ 19,160 Gross margin 47.8% 39.5% Adjusted gross profit (1) $ 65,890 $ 55,594 Adjusted gross margin (1) 60.4% 54.7% (1) Adjusted gross profit is calculated as total revenues less adjusted cost of revenues. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. Refer to the "Non-GAAP Financial Measures" for a reconciliation of GAAP to non-GAAP items. For the first quarter 2014, Global Product sales, net increased $8.3 million to $106.1 million , compared to $97.8 million in the prior year period. The increase was primarily due to a favorable product mix and sales of new products launched in the second half of 2013 for which there were no comparable amounts in the prior year period. Gross margin in the first quarter 2014 increased to 47.8%, compared to gross margin of 39.5% in the prior year period. Adjusted gross margin in the first quarter 2014 increased to 60.4%, compared to adjusted gross margin of 54.7% in the prior year period. The increase in gross margin and adjusted gross margin primarily reflects the favorable product mix and new product launches as noted above. Total Global Pharmaceuticals operating expenses in the first quarter 2014 decreased to $15.8 million , compared to $21.0 million in the prior year period, primarily due to reduced marketing and patent litigation expenses. Impax Pharmaceuticals Division Information Three Months Ended (unaudited, amounts in thousands) March 31, 2014 2013 Revenues: Impax Product sales, net $ 9,309 $ 46,521 Other revenues 268 332 Total revenues 9,577 46,853 Cost of revenues 4,074 29,174 Gross profit 5,503 17,679 Operating expenses: Research and development 10,524 7,894 Selling, general and administrative 9,221 12,764 Total operating expenses 19,745 20,658 Loss from operations $ (14,242) $ (2,979) Gross margin 57.5% 37.7% Adjusted gross profit (1) $ 6,233 $ 29,408 Adjusted gross margin (1) 65.1% 62.8% (1) Adjusted gross profit is calculated as total revenues less adjusted cost of revenues. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. Refer to the "Non-GAAP Financial Measures" for a reconciliation of GAAP to non-GAAP items. For the first quarter 2014, Impax Product sales, net decreased $37.2 million to $9.3 million , compared to $46.5 million in the prior year period, due to lower sales of Zomig tablet and ZMT products from the loss of exclusivity as noted above, partially offset by higher sales of Zomig nasal spray which has patents expiring as late as May 2021 . Gross margin in the first quarter 2014 increased to 57.5%, compared to 37.7% in the prior year period, primarily due to significantly lower amortization and acquisition related costs and an inventory reserve charge recorded in the first quarter 2013 for pre-launch inventory related to RYTARY, as a result of the Complete Response Letter received in January 2013 . Adjusted gross margin in the first quarter 2014 increased to 65.1%, compared to adjusted gross margin of 62.8% in the prior year period. Total Impax Pharmaceuticals operating expenses in the first quarter 2014 decreased to $19.7 million , compared to $20.7 million in the prior year period. The decrease is primarily due to lower costs related to the Zomig products and the reduction of the branded sales force during the third quarter 2013. This was partially offset by a payment during the current period of $2.0 million to a development partner under a license agreement. Corporate and Other Three Months Ended (unaudited, amounts in thousands) March 31, 2014 2013 General and administrative expenses $ 13,873 $ 11,910 Loss from operations $ (13,873) $ (11,910) General and administrative expenses in the first quarter 2014 increased to $13.9 million , compared to $11.9 million in the prior year period, primarily due to higher litigation expenses. Cash and Short-term Investments Cash, cash equivalents and short-term investments decreased to $390.4 million as of March 31, 2014 , compared to $413.1 million as of December 31, 2013 , primarily due to a $21.0 million quarterly tax payment during the current year period. 2014 Financial Guidance Impax Laboratories full year 2014 estimates are based on management's current belief about prescription trends, pricing levels, inventory levels, and the anticipated timing of future product launches and events. Adjusted gross margins as a percent of total revenue are expected to be in the mid 50% range. Total research and development (R&D) expenses across the generic and brand divisions of approximately $82.0 million to $88.0 million ; generic R&D expenses of approximately $46.0 million to $49.0 million and brand R&D expenses of approximately $36.0 million to $39.0 million . Patent litigation expenses of approximately $11.0 million to $13.0 million . Selling, general and administrative expenses of approximately $115.0 million to $120.0 million . Capital expenditures of approximately $40.0 million to $45.0 million . Hayward facility remediation costs of approximately $25.0 million to $30.0 million . Effective tax rate of approximately 32% to 34% on a GAAP basis, which assumes that the U.S. R&D tax credit is renewed for 2014. The R&D tax credit expired on December 31, 2013 . The Company anticipates that its non-GAAP effective tax rate may experience volatility as the Company's tax benefits may be high compared to the Company's operating income or loss. Conference Call Information The Company will host a conference call on May 1, 2014 at 4:30 p.m. ET to discuss its results. The call can also be accessed via a live Webcast through the Investor Relations section of the Company's Web site, www.impaxlabs.com . The number to call from within the United States is (877) 356-3814 and (706) 758-0033 internationally. The conference ID is 25386332. 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). About Impax Laboratories, Inc. Impax Laboratories, Inc. ( Impax ) 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 central nervous system disorder branded products. Impax markets its generic products through its Global Pharmaceuticals division and markets its branded products through the Impax Pharmaceuticals division. Additionally, where strategically appropriate, Impax develops marketing partnerships to fully leverage its technology platform and pursues partnership opportunities that offer alternative dosage form technologies, such as injectables, nasal sprays, inhalers, patches, creams, and ointments. 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: fluctuations in revenues and operating income; the Company's ability to promptly correct the issues raised in the warning letter and Form 483 observations received from the FDA ; the Company's ability to successfully develop and commercialize pharmaceutical products in a timely manner; reductions or loss of business with any significant customer; the impact of consolidation of the Company's customer base; the impact of competition; the substantial portion of our total revenues derived from sales of a limited number of products; 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 manufacturing facilities; the effect of foreign economic, political, legal, and other risks on the Company's operations abroad; the uncertainty of patent litigation and other legal proceedings; the increased government scrutiny on the Company's agreements with brand pharmaceutical companies; product development risks and the difficulty of predicting FDA filings and approvals; consumer acceptance and demand for new pharmaceutical products; the impact of market perceptions of the Company and the safety and quality of the Company's products; the Company's determinations to discontinue the manufacture and distribution of certain products; the Company's ability to achieve returns on its investments in research and development activities; 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 Company's lack of a license partner for commercialization of IPX066 outside of the United States ; impact of illegal distribution and sale by third parties of counterfeits or stolen products; the availability of raw materials and impact of interruptions in the Company's supply chain; the Company's policies regarding returns, allowances and chargebacks; the use of controlled substances in the Company's products; the effect of current economic conditions on our industry, business, results of operations and financial condition; 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 reliance on licenses to proprietary technologies; 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 its intellectual property; exposure to product liability claims; risks relating to goodwill and intangibles; changes in tax regulations; the Company's ability to manage 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; 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; expansion of social media platforms 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 the Company undertakes no obligation to update publicly or revise any forward-looking statement, regardless of whether new information becomes available, future developments occur or otherwise. Company Contact: Mark Donohue Investor Relations and Corporate Communications (215) 558-4526 www.impaxlabs.com Impax Laboratories, Inc. Consolidated Statements of Operations (unaudited, amounts in thousands, except share and per share data) Three Months Ended March 31, 2014 2013 Revenues: Global Pharmaceuticals Division, net $ 109,141 $ 101,636 Impax Pharmaceuticals Division, net 9,577 46,853 Total revenues 118,718 148,489 Cost of revenues 61,096 90,618 Gross profit 57,622 57,871 Operating expenses: Research and development 21,741 19,605 Patent litigation expense 2,173 4,278 Selling, general and administrative 25,477 29,717 Total operating expenses 49,391 53,600 Income from operations 8,231 4,271 Other income, net 76 149,456 Interest income 388 276 Interest expense (65) (283) Income before income taxes 8,630 153,720 Provision for income taxes 2,205 48,278 Net income $ 6,425 $ 105,442 Net income per share: Basic $ 0.09 $ 1.59 Diluted $ 0.09 $ 1.55 Weighted average common shares outstanding: Basic 67,702,296 66,487,470 Diluted 69,938,872 68,178,355 Impax Laboratories, Inc. Condensed Consolidated Balance Sheets (unaudited, amounts in thousands) March 31, December 31, 2014 2013 Assets Current assets: Cash and cash equivalents $ 129,372 $ 184,612 Short-term investments 261,055 228,521 Accounts receivable, net 119,521 112,993 Inventory, net 76,159 70,107 Deferred income taxes 51,333 50,788 Prepaid expenses and other assets 12,003 12,721 Total current assets 649,443 659,742 Property, plant and equipment, net 189,661 188,191 Other assets 91,163 91,746 Intangible assets, net 24,364 29,670 Goodwill 27,574 27,574 Total assets $ 982,205 $ 996,923 Liabilities and Stockholders' Equity Current liabilities: Accounts payable and accrued expenses $ 109,398 $ 138,347 Accrued profit sharing and royalty expenses 10,617 11,560 Deferred revenue 3,200 3,983 Total current liabilities 123,215 153,890 Deferred revenue 4,000 4,267 Other liabilities 29,806 28,563 Total liabilities 157,021 186,720 Total stockholders' equity 825,184 810,203 Total liabilities and stockholders' equity $ 982,205 $ 996,923 Impax Laboratories, Inc. Condensed Consolidated Statements of Cash Flows (unaudited, amounts in thousands) Three Months Ended March 31, 2014 2013 Cash flows from operating activities: Net income $ 6,425 $ 105,442 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 8,015 12,397 Provision for inventory reserves 1,952 22,810 Intangible asset impairment charges 2,876 - Charge for licensing agreement 2,000 - Accretion of interest income on short-term investments (223) (158) Deferred income tax benefit (2,879) (2,799) Tax impact related to the exercise of employee stock options (920) 3 Recognition of deferred revenue (1,050) (1,113) Accrued profit sharing and royalty expense 10,608 22,541 Payments of profit sharing and royalty expense (11,537) (4,925) Share-based compensation expense 4,386 4,359 Other receivable - (102,049) Changes in assets and liabilities which (used) provided cash (36,729) 1,937 Net cash (used in) provided by operating activities (17,076) 58,445 Cash flows from investing activities: Purchase of short-term investments (133,754) (60,515) Maturities of short-term investments 101,443 65,993 Purchases of property, plant and equipment (9,782) (9,361) Payment for licensing agreement (2,000) - Net cash used in investing activities (44,093) (3,883) Cash flows from financing activities: Proceeds from exercise of stock options and ESPP 5,977 1,554 Tax impact related to the exercise of employee stock options and restricted stock 920 (3) Net cash provided by financing activities 6,897 1,551 Effect of exchange rate changes on cash and cash equivalents (968) (698) Net (decrease) increase in cash and cash equivalents (55,240) 55,415 Cash and cash equivalents, beginning of period 184,612 142,162 Cash and cash equivalents, end of period $ 129,372 $ 197,577 Impax Laboratories, Inc. Non-GAAP Financial Measures Adjusted net income, adjusted net income per diluted share, EBITDA, adjusted cost of revenues and adjusted research and development expenses 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, GAAP net income per diluted share, GAAP cost of revenues and GAAP research and development expenses 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 calculations of adjusted net income, adjusted net income per diluted share, EBITDA, adjusted cost of revenues and adjusted research and development expenses, 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 (Unaudited, amounts in thousands, except per share data) March 31, 2014 2013 Net income $ 6,425 $ 105,442 Adjusted to add (deduct): Amortization and acquisition-related costs (a) 2,430 7,142 Hayward facility remediation costs (b) 8,517 1,936 Employee severance (c) 678 - Payments received from litigation settlement (d) - (150,049) Intangible asset impairment charges (e) 2,876 - Provision for inventory reserve (f) - 18,053 R&D partner milestone payment (g) - 2,000 Loss on asset disposal (h) - 881 Payment for licensing agreement (i) 2,000 - Income tax effect (6,445) 39,877 Adjusted net income $ 16,481 $ 25,282 Adjusted net income per diluted share $ 0.24 $ 0.37 Net income per diluted share $ 0.09 $ 1.55 (a) Resulting from the June 2012 Development, Supply and Distribution Agreement (Tolmar Agreement) with TOLMAR, Inc. (Tolmar) and the January 2012 AstraZeneca Agreement. (b) Remediation costs relating to the Hayward, CA manufacturing facility. (c) Included in "Cost of revenues" on the Consolidated Statements of Operations. (d) Reflects the receipt of a pre-tax payment of $102.0 million from Endo Health Solutions Inc. in connection with a previously announced settlement and license agreement and $48.0 million from Shire LLC (Shire) in connection with the settlement of litigation relating to supply of authorized generic Adderall XR® products to the Company under the terms of the License and Supply Agreement with Shire. Included in "Other income, net" on the Consolidated Statements of Operations. (e) In June 2012, the Company entered into the Tolmar Agreement which granted to the Company an exclusive license to commercialize up to 11 generic topical prescription drug products, including nine then currently approved products and two products then pending approval at the FDA, in the United States and its territories. During the first quarter 2014, as a result of a decline in pricing on a currently approved product, the Company revised the projections for the Tolmar product and performed an intangible asset impairment analysis. Based on the results of this analysis, the Company recorded a $2.9 million charge to cost of revenues for the Global Pharmaceuticals Division, which was 100% of the remaining net book value. (f) An inventory reserve charge relating to discontinued products, a reserve of pre-launch inventory for RYTARY ™ and other generic products as a result of the delay in the anticipated regulatory approvals. (g) The Company recorded a $2.0 million milestone payment under the terms of a research and development partnership agreement. Included in Global Pharmaceuticals Division research and development expense. (h) Included in "Other income, net" on the Consolidated Statements of Operations. (i) In January 2014, the Company entered into a Development and Commercialization Agreement with DURECT Corporation and paid an upfront fee of $2.0 million. Included in Impax Pharmaceuticals Division research and development expense. The following table reconciles reported net income to adjusted EBITDA. Three months ended (Unaudited, amounts in thousands, except per share data) March 31, 2014 2013 Net income $ 6,425 $ 105,442 Adjusted to add (deduct): Interest income (388) (276) Interest expense 65 283 Depreciation and other 5,585 5,256 Income taxes 2,205 48,278 EBITDA 13,892 158,983 Adjusted to add (deduct): Amortization and acquisition-related costs 2,430 7,142 Hayward facility remediation costs 8,517 1,936 Employee severance 678 - Payments received from litigation settlement - (150,049) Intangible asset impairment charges 2,876 - Provision for inventory reserve - 18,053 R&D partner milestone payment - 2,000 Loss on asset disposal - 881 Payment for licensing agreement 2,000 - Share-based compensation 4,386 4,359 Adjusted EBITDA $ 34,779 $ 43,305 Impax Laboratories, Inc. Non-GAAP Financial Measures The following table reconciles total Company reported cost of revenues and research and development expenses, to adjusted cost of revenues, adjusted gross profit, adjusted gross margin and adjusted research and development expenses. Three months ended (Unaudited, amounts in thousands) March 31, 2014 2013 Cost of revenues $ 61,096 $ 90,618 Adjusted to deduct: Amortization and acquisition-related costs 2,430 7,142 Hayward facility remediation costs 8,517 1,936 Employee severance 678 - Intangible asset impairment charge 2,876 - Provision for inventory reserve - 18,053 Adjusted cost of revenues $ 46,595 $ 63,487 Adjusted gross profit (1) $ 72,123 $ 85,002 Adjusted gross margin (1) 60.8% 57.2% Research and development expenses $ 21,741 $ 19,605 Adjusted to deduct: Payment for licensing agreement (2) 2,000 - R&D partner milestone payment (3) - 2,000 Adjusted research and development expenses $ 19,741 $ 17,605 (1) Adjusted gross profit is calculated as total revenues less adjusted cost of revenues. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. (2) Included within the Impax Pharmaceuticals Division reported results. (3) Included within the Global Pharmaceuticals Division reported results. Impax Laboratories, Inc. Non-GAAP Financial Measures The following tables reconcile the Global Pharmaceuticals Division and the Impax Pharmaceuticals Division reported cost of revenues to adjusted cost of revenues, adjusted gross profit and adjusted gross margin. Global Pharmaceuticals Division Information Three months ended (unaudited, amounts in thousands) March 31, 2014 2013 Cost of revenues $ 57,022 $ 61,444 Adjusted to deduct: Amortization and acquisition-related costs 1,700 430 Hayward facility remediation costs 8,517 1,936 Employee severance 678 - Provision for inventory reserve - 13,036 Intangible asset impairment charge 2,876 - Adjusted cost of revenues $ 43,251 $ 46,042 Adjusted gross profit (1) $ 65,890 $ 55,594 Adjusted gross margin (1) 60.4% 54.7% Impax Pharmaceuticals Division Information Three months ended (unaudited, amounts in thousands) March 31, 2014 2013 Cost of revenues $ 4,074 $ 29,174 Adjusted to deduct: Amortization and acquisition-related costs 730 6,712 Provision for inventory reserve - 5,017 Adjusted cost of revenues $ 3,344 $ 17,445 Adjusted gross profit (1) $ 6,233 $ 29,408 Adjusted gross margin (1) 65.1% 62.8% (1) Adjusted gross profit is calculated as total revenues less adjusted cost of revenues. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. SOURCE Impax Laboratories, Inc. About Us Overview Leadership Global presence Overview United States India Ireland Responsibility Innovating Access Overview Timeline Pipeline Innovative Drug Delivery Technologies GRANDE® KRONOTEC® Support Overview Parkinson's Community Essential Medicines Overview Biosciences Specialty Generics Drug Safety Quality Connect Linkedin X Facebook Youtube © Amneal Pharmaceuticals LLC. All rights reserved. Expandend Access Policy Copyright & Legal Disclaimer Privacy Notice Web Accessibility NABP DDA Back to top

The release as fetched from its publisher. amneal.com ↗