Impax Laboratories, Inc. (NASDAQ: IPXL) today
reported net income increased 382% to $2.2 million during the first
quarter of 2009, compared with net income of $460,000 in the prior
year period, driven by an 18% increase in total revenue to $58.9
million and a 23% increase in gross profit to $32.7 million in the
first quarter of 2009. Earnings per diluted share for the first
quarter of 2009 increased to $0.04, compared with earnings per
diluted share of $0.01 in the prior year period.
Larry Hsu, Ph.D., president and chief executive officer of Impax
Laboratories, said: �Our positive first quarter financial results
in combination with a number of recent encouraging events are
confirmation that we continue to execute the right long-term
strategy. We recently experienced positive achievements with both
of our leading brand candidates, IPX056 and IPX066. We also
continue to receive optimistic news concerning several 2008 ANDA
filings as we now believe we are sole first-to-file on generic
versions of Doryx� 150 mg and Renvela� 800 mg.�
Dr. Hsu continued, �The investments we are making in research
and development are expected to drive future growth of the business
by achieving additional first-to-file generic product
opportunities. Throughout 2009 and beyond, we plan to continue to
invest in R&D across both our Global Pharmaceuticals and Impax
Pharmaceuticals divisions to drive long-term growth. We are off to
a strong start for 2009 and will remain focused on achieving our
current year financial outlook, ANDA filing goals and continued
progress on brand initiatives.�
Total revenues for the first quarter of 2009 increased 18% to
$58.9 million, compared to the prior year period, due primarily to
an increase in Global label product revenues, partially offset by a
decline in Rx Partner and OTC Partner revenues. Global label
revenues increased 70% to $39.1 million primarily due to higher
demand for fenofibrate products, the generic versions of Lofibra�
capsules, and an increase in sales of generic Wellbutrin� 150XL.
Private label product revenue increased 171% to $1.3 million
primarily due to sales of D24 loratadine/pseudoephedrine, the
generic version of Claritin� D 24-hour, as a result of a new supply
agreement. Research Partner revenue contributed $2.6 million to the
increase in total revenues, resulting from a Joint Development
Agreement entered into during the fourth quarter of 2008.
Rx Partner revenues for the first quarter of 2009 declined $8.1
million to $10.7 million primarily due to the Company�s cessation
of sales of generic OxyContin� (through our DAVA alliance
agreement) after the first quarter of 2008, and a reduction in
sales of generic Wellbutrin� XL 300mg (through our Teva alliance
agreement) due to price and market share erosion from increased
marketplace competition. Sales of generic OxyContin� were made
pursuant to a license from the patent holder which by its terms
expired in January 2008. OTC Partner revenue decreased $2.6 million
to $1.9 million primarily attributable to the expiration of the
Company�s obligation to supply Schering-Plough with product
effective December 31, 2008.
Gross profit for the first quarter of 2009 increased 23% to
$32.7 million and gross margin improved more than 200 basis points
to 55% compared to the prior year period. The increase in gross
profit and gross margin was primarily due to stronger margins in
the Global label product business, partially offset by the
cessation of higher margin sales of generic OxyContin� during the
first quarter of 2008 as discussed above.
Total research and development expenses for the first quarter of
2009 increased $2.7 million to $16.1 million, compared to the prior
year period, in line with our expanded R&D development
initiative noted above. Generic project activity increased $1.4
million to $10.5 million primarily due to increased spending on
bio-equivalency studies, acquisition of active pharmaceutical
ingredients and additional R&D personnel. The brand product
R&D activity increased $1.3 million to $5.5 million due to
higher spending on clinical trials, additional R&D personnel
and research supplies.
Patent litigation expenses for the first quarter of 2009
declined $700,000 or 40%, compared to the prior year period due to
settlements of litigation that was active in the first quarter of
2008.
Selling, general and administrative expenses for the first
quarter of 2009 increased $1.1 million, or 11%, compared to the
prior year period. The increase was primarily attributable to
higher salary and benefit expenses driven by the addition of
several executive level personnel and an increase in professional
fees primarily related to the examination and review of the
Company�s financial statements for the year ended December 31, 2008
and other public-company reporting requirements.
Interest income in the first quarter of 2009 declined $1.4
million to $149,000, compared to the prior year period. The decline
was due to lower average cash and short-term investment balances
during the first quarter of 2009 resulting from the use of funds to
repurchase at a discount a significant portion of the Company�s
3.5% Debentures in August and September 2008 and the repayment in
full of bank term loans in May 2008.
Interest expense in the first quarter of 2009 declined $1.5
million to $294,000, compared to the prior year period due to
reduced amounts of average debt outstanding as a result of the
repurchase of Debentures and repayment of the bank term loans noted
above.
Cash and short-term investments, net of interest-bearing debt,
decreased to $78.3 million as of March 31, 2009, compared with
$99.6 million as of December 31, 2008. The decrease in cash from
year-end 2008 was primarily due to customary changes in assets and
liabilities, including the timing of collection of accounts
receivables from first quarter 2009 sales. Cash flow from
operations before such changes in working capital items was a
positive $2.2 million.
Segment Information
The Company has two reportable segments, the Global
Pharmaceuticals Division (generic products) and the Impax
Pharmaceuticals Division (brand products).
Global Pharmaceuticals Division revenues in the first quarter of
2009 increased 19% over the prior year period primarily driven by
the 70% increase in Global label product sales as noted above.
Gross profit increased 23% resulting in a gross margin of 58%,
compared to a gross margin of 56% in the prior year period. These
positive improvements resulted in a 31%, or $4.4 million increase
in income before taxes in the first quarter of 2009.
Impax Pharmaceuticals Division revenues in the first quarter of
2009, derived from the co-promotion of Carbatrol�, a product of
Shire Plc, increased slightly over the prior year period, while
gross profit declined slightly due to modestly higher costs. The
Company is currently investing in R&D to develop brand products
which provide longer product life cycles and the potential for
significantly higher profit margins than generic products. In the
first quarter of 2009, the Company�s planned increased investment
in R&D resulted in a loss of $6.3 million in income before
taxes.
The following table highlights the quarterly financial
performance for each of these divisions.
(amounts in thousands) - unaudited � � � � Three Months Ended March
31, 2009
GlobalDivision (a)
ImpaxDivision (b)
Corporateand Other
TotalCompany
Revenue, net $ 55,629 $ 3,284 $ - $ 58,913 Cost of revenue 23,233
3,017 - 26,250 Research and development 10,542 5,514 - 16,056
Patent litigation 1,017 - - 1,017 Income (loss) before provision
for income taxes $ 18,609 (6,287 ) $ (8,267 ) $ 4,055 � Three
Months Ended March 31, 2008
GlobalDivision (a)
ImpaxDivision (b)
Corporateand Other
TotalCompany
Revenue, net $ 46,678 $ 3,252 $ - $ 49,930 Cost of revenue 20,410
2,968 - 23,378 Research and development 9,128 4,211 - 13,339 Patent
litigation 1,701 - - 1,701 Income (loss) before provision for
income taxes $ 14,176 (4,403 ) $ (8,745 ) $ 1,028
(a) Global Pharmaceuticals Division includes Global, Private
Label, Rx Partner, OTC Partner, Research Partner and Other product
sales
(b) Impax Pharmaceuticals Division includes Promotional Partner
product sales
2009 Financial Outlook
The Company previously disclosed its 2009 financial outlook for
the year ending December 31, 2009, on February 26, 2009. For the
full year 2009, the Company continues to forecast:
- Its third consecutive year of
positive cash flows from operations.
- Gross margins as a percent of
total revenues to approximate 50%.
- Total research and development
expenses across the generic and brand divisions to approximate $64
million with $40 million and $24 million allocated to generic and
brand R&D, respectively.
- Patent litigation expenses of
approximately $10 million.
- Selling, general and
administrative expenses of approximately $39 million.
Conference Call Information
The Company will host a conference call today at 11:00 a.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 2:00 p.m. EST on
May 5, 2009 through 11:59 p.m. EST May 12, 2009 and can be accessed
by dialing (800) 642-1687 in the United States or (706) 645-9291
internationally and using the access code 97387383.
About Impax Laboratories, Inc.
Impax Laboratories, Inc. 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 its branded products through
the Impax Pharmaceuticals division. Additionally, where
strategically appropriate, Impax has developed marketing
partnerships to fully leverage its technology platform. Impax is
headquartered in Hayward, California, and has a full range of
capabilities in its Hayward and Philadelphia 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; ability to timely file periodic reports required by the
Exchange Act; ability to maintain an effective system of internal
control over financial reporting; ability to sustain profitability
and positive cash flows; ability to maintain sufficient capital to
fund operations; any delays or unanticipated expenses in connection
with the construction of our Taiwan facility; ability to
successfully develop and commercialize pharmaceutical products; the
uncertainty of patent litigation; consumer acceptance and demand
for new pharmaceutical products; the impact of competitive products
and pricing; the difficulty of predicting Food and Drug
Administration filings and approvals; inexperience in conducting
clinical trials and submitting new drug applications; reliance on
key alliance agreements; the availability of raw materials; the
regulatory environment; exposure to product liability claims;
fluctuations in operating results and other risks described in our
Annual Report on Form 10-K for the year ended December 31, 2008.
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.
(tables to follow)
�
Impax Laboratories, Inc. Consolidated Statements of
Operations � (amounts in thousands, except share and per share
data)
Three Months Ended March 31, 2009 �
2008
(unaudited) (unaudited) Revenues: (as adjusted)(c) Global product
sales, net $ 39,121 $ 22,979 Private Label (a) 1,297 478 Rx Partner
10,736 18,805 OTC Partner 1,858 4,409 Research Partner (b) 2,611 -
Promotional Partner 3,284 3,252 Other � 6 � � 7 � Total Revenues �
58,913 � � 49,930 � � Cost of revenues � 26,250 � � 23,378 � Gross
profit � 32,663 � � 26,552 � � Operating expenses: Research and
development 16,056 13,339 Patent litigation 1,017 1,701 Selling,
general and administrative � 11,455 � � 10,362 � Total operating
expenses � 28,528 � � 25,402 � Income from operations � 4,135 � �
1,150 � Change in fair value of common stock purchase warrants - 44
Other income 65 61 Interest income 149 1,537 Interest expense �
(294 ) � (1,764 ) Income before income taxes 4,055 1,028 Provision
for income taxes � 1,836 � � 568 � Net Income $ 2,219 � $ 460 � �
Net Income per share: Basic $ 0.04 � $ 0.01 � Diluted $ 0.04 � $
0.01 � � Weighted average common shares outstanding: Basic
59,711,133 58,833,979 Diluted 60,222,215 61,126,768 �
Impax
Laboratories, Inc. Condensed Consolidated Balance Sheets
� (amounts in thousands)
March 31, December 31,
2009 2008 (unaudited) (as adjusted) (c)
ASSETS
Current assets: Cash and cash equivalents $ 38,044 $ 69,275
Short-term investments 60,311 50,710 Accounts receivable, net
61,813 43,306 Inventory, net 29,759 32,305 Current portion of
deferred product manufacturing costs-alliance agreements 14,136
13,578 Current portion of deferred income taxes 21,607 17,900
Prepaid expenses and other current assets � 4,371 � 9,298 Total
current assets � 230,041 � 236,372 Property, plant and equipment,
net 95,914 95,629 Deferred product manufacturing costs-alliance
agreements 94,839 93,144 Deferred income taxes, net 51,871 52,551
Other assets 11,892 9,017 Goodwill � 27,574 � 27,574 Total assets $
512,131 $ 514,287 �
Liabilities and Stockholders Equity
Current liabilities Current portion of long-term debt, net $ 14,536
$ 14,416 Accounts payable 11,795 12,797 Accrued expenses 34,811
41,360 Current portion of deferred revenue-alliance agreements
37,173 35,015 Current portion of accrued exclusivity period fee
payments due � 3,000 � 6,000 Total current liabilities � 101,315 �
109,588 Long-term debt 5,531 5,990 Deferred revenue-alliance
agreements 228,164 225,804 Other liabilities � 14,217 � 13,255
Total liabilities � 349,227 � 354,637 Stockholders equity � 162,904
� 159,650 Total liabilities and stockholders equity $ 512,131 $
514,287 �
Impax Laboratories, Inc. Consolidated Statement
of Cash Flows � (amounts in thousands)
Three Months Ended
March 31, 2009 �
2008 (unaudited) (unaudited)
Cash flows from operating activities: (as adjusted) (c) Net
income $ 2,219 $ 460 Adjustments to reconcile net income to net
cash used in operating activities: Depreciation 2,544 2,174
Amortization of discount and deferred financing costs on-3.5%
Debentures 150 851 Amortization of deferred financing costs on
Wachovia Credit Agreement - 37 Bad debt expense 23 39 Deferred
income taxes (3,027 ) 163 Provision for uncertain tax positions 218
- Deferred revenue - Rx Partners 13,837 57,149 Deferred product
manufacturing costs - Rx Partners (9,008 ) (10,887 ) Deferred
revenue recognized - Rx Partners (10,736 ) (18,805 ) Amortization
deferred product manufacturing costs - Rx Partners 5,982 7,454
Deferred revenue - OTC Partners 886 5,166 Deferred product
manufacturing costs - OTC Partners (911 ) (5,150 ) Deferred revenue
recognized - OTC Partners (1,858 ) (4,409 ) Amortization deferred
product manufacturing costs - OTC Partners 1,684 4,213 Deferred
revenue - Research Partners 5,000 - Deferred revenue recognized -
Research Partners (2,611 ) - Payments on exclusivity period fee
(3,000 ) (3,000 ) Payments on accrued litigation settlements (549 )
(549 ) Share-based compensation expense 1,437 1,625 Accretion of
interest income on short-term investments (36 ) (1,146 ) Change in
fair value of stock purchase warrants - (44 ) Changes in assets and
liabilities: Accounts receivable (18,530 ) (36,245 ) Inventory
2,546 861 Prepaid expenses and other assets 2,042 1,210 Accounts
payable and accrued expenses (7,119 ) (5,615 ) Other liabilities �
734 � � 530 � Net cash used in operating activities $ (18,083 ) $
(3,918 ) �
Cash flows from investing activities: Purchase of
short-term investments $ (27,810 ) $ (91,710 ) Maturities of
short-term investments 18,245 82,306 Purchases of property, plant
and equipment � (3,881 ) � (4,241 ) Net cash used in investing
activities $ (13,446 ) $ (13,645 ) �
Cash flows from financing
activities: Repayment of long-term debt $ (36 ) $ (66 )
Proceeds from exercise of stock options and purchases under the
ESPP � 334 � � 154 � Net cash provided by financing activities $
298 � $ 88 � � Net increase (decrease) in cash and cash equivalents
$ (31,231 ) $ (17,475 ) Cash and cash equivalents, beginning of
period $ 69,275 � $ 37,462 � Cash and cash equivalents, end of
period $ 38,044 � $ 19,987 �
Impax Laboratories,
Inc.Presentation of Deferred Revenue and Deferred Product
Manufacturing Cost Data
The following table summarizes the additions to and deductions
from the deferred revenue-alliance agreements and deferred product
manufacturing costs under the Company�s Teva, DAVA, OTC and Medicis
alliance agreements. This information is used to explain the
changes in the respective balance sheet accounts of deferred
revenue-alliance agreements and deferred product manufacturing
costs-alliance agreements. The table sets forth the amount of
revenue deferred in each period as well as the amount recognized in
the period under the Company�s modified proportional performance
method of revenue recognition for revenue earned under the Teva,
DAVA, and OTC alliance agreements and straight line revenue
recognition for the Medicis alliance agreement. The summarized
information for the three months ended March 31, 2009 is derived
from the corresponding tables for each of these separate alliance
agreements set forth in the Alliance Agreement footnote to the
Company�s unaudited interim consolidated financial statements for
the quarter ended March 31, 2009.
� (amounts in thousands)
Three Months Ended March 31,
2009 �
2008 (unaudited) (unaudited) Deferred revenue:
Beginning balance $ 260,819 $ 208,101 Deferrals 19,723 62,315 Less
amounts recognized � (15,205 ) � (23,214 ) Total deferred
revenue-alliance agreements(current and non-current) $ 265,337 � $
247,202 � � Deferred product manufacturing costs: Beginning balance
$ 106,722 $ 94,397 Deferrals 9,919 16,037 Less amounts amortized �
(7,666 ) � (11,667 ) Total deferred product manufacturing costs
(current and non-current) $ 108,975 � $ 98,767 �
Impax Laboratories,
Inc.Notes to the Financial InformationMarch 31,
2009
(a) � Private Label represents revenue recognized related to
shipments of generic pharmaceutical products to customers who sell
the product to third parties under their own label; this product is
not sold under the Company�s Global label. � (b) Research Partner
represents revenue recognized under a Joint Development Agreement
with Medicis Pharmaceutical Corporation. � (c) As required,
Financial Accounting Standards Board Staff Position APB 14-1,
�Accounting for Convertible Debt Instruments That May Be Settled in
Cash upon Conversion (Including Partial Cash Settlement)� was
applied on a retrospective basis, beginning with the year ended
December 31, 2007.
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