Impax Laboratories, Inc. (NASDAQ: IPXL) today
reported its strongest financial results in its history due to
record sales from its Global products sales channel.
Fourth-Quarter
Highlights
- Total revenue increased to
$176.1 million, up $131.4 million over the prior year period
- Net income increased to $38.1
million, or $0.61 per diluted share, compared to $9.0 million, or
$0.15 per diluted share in the prior year
- Excluding special items
impacting comparability from the prior year period, net income
increased to $42.7 million, or $0.69 per diluted share, compared to
a loss of $4.6 million, or a loss of $0.08 per diluted share in the
prior year
Full Year Highlights
- Total revenue increased to
$358.4 million, up $148.3 million over the prior year period
- Net income increased to $50.1
million, or $0.82 per diluted share, compared to $16.0 million, or
$0.26 per diluted share in the prior year
- Excluding special items
impacting comparability from the prior year period, net income
increased to $55.9 million, or $0.91 per diluted share, compared to
$1.9 million or $0.03 per diluted share in the prior year
Please refer to the attached information and footnotes on pages
10 and 11 for a more detailed description of special items.
Larry Hsu, Ph.D., president and chief executive officer of Impax
Laboratories, said: “We are delighted with our record-breaking
financial results. Our fourth quarter and full year 2009 results
demonstrate our ability to capitalize on the significant
investments we continue to make in research and development. The
solid customer relationships we have developed were beneficial in
producing strong sales from our fenofibrate products and the
October 1 launch of generic Adderall XR®. Certain market
disruptions caused by product supply shortages in the fourth
quarter may have benefited sales of our Global Pharmaceutical
Division’s generic Adderall XR® product, therefore fourth quarter
sales may not be indicative of any future periods.”
Dr. Hsu continued, “In 2010, we will continue to focus on
capturing every market opportunity from those products, as well as
our expected launch of generic Flomax® (March 2) and several other
products in our pipeline. We expect to invest $77 million for
research and development in 2010, focusing on high-value ANDAs and
the development of IPX066, our primary brand product for
Parkinson’s disease. We believe these internally funded investments
being made today will position us to continue to capitalize on
current and future opportunities, producing above-average returns
in the years ahead.”
Fourth Quarter and Full Year 2009 Segment Information
The Company has two reportable segments, the Global
Pharmaceuticals Division (generic products) and the Impax
Pharmaceuticals Division (brand products) and does not allocate
general corporate services to either segment.
Global Pharmaceuticals Division Information
(amounts in thousands) Three Months Ended
December 31,
Twelve Months EndedDecember
31,
2009 2008 2009 2008 (unaudited) (unaudited)
(unaudited) (as adjusted) Revenues: (as adjusted) Global product
sales, net $ 163,935 $ 26,961 $ 287,079 $ 96,006 Private Label 244
850 5,513 2,596 Rx Partner (a) 3,652 9,679 33,835 81,778 OTC
Partner 1,587 3,207 6,842 15,946 Research Partner 3,274 833 11,680
833 Other 1 2 12 21 Total Revenues
172,693 41,532 344,961 197,180 Cost of
revenues 85,932 22,677 158,270 80,724
Gross profit (b) 86,761 18,855 186,691
116,456 Operating expenses: Research and development 9,937
11,184 38,698 42,930 Patent litigation 1,321 1,646 5,379 6,472
Selling, general and administrative 3,264 2,171
10,891 11,445 Total operating expenses 14,522
15,001 54,968 60,847 Income (loss) from
operations (b) $ 72,239 $ 3,854 $ 131,723 $ 55,609
(a) Rx Partner revenue for the twelve months ended December 31,
2008 includes $40.8 million from sales of generic OxyContin® which
ended in January 2008 pursuant to a litigation settlement
agreement, in connection with which there was no revenue from sales
of generic OxyContin® in 2009.
(b) Gross profit and income from operations for the twelve
months ended December 31, 2008 includes $38.7 million from the sale
of generic OxyContin® as noted in footnote (a).
Fourth Quarter 2009
Global Pharmaceuticals Division revenues in the fourth quarter
2009 increased $131.2 million to $172.7 million, driven by a
significant increase in net Global product sales, as discussed
below.
During the fourth quarter of 2009, net Global product sales
increased $137.0 million to $163.9 million over the same period in
2008 primarily due to sales of generic Adderall XR®, and to a
lesser extent, increased sales of our fenofibrate products.
Research Partner revenues increased $2.4 million to $3.3 million
resulting from a joint development agreement entered into during
the fourth quarter 2008. Partially offsetting these gains were a
$6.0 million decline in Rx Partner revenues primarily attributable
to reduced sales of generic Wellbutrin XL® 300mg and a $1.6 million
decline in OTC Partner revenues, primarily attributable to the
cessation of the Company’s obligation to supply Schering-Plough
with product effective December 31, 2008.
Cost of revenues was $85.9 million for the fourth quarter 2009,
an increase of $63.3 million primarily related to the increase in
net Global product sales offset by lower Rx Partner sales.
Gross profit for the fourth quarter 2009 increased $67.9 million
to $86.8 million primarily due to sales of generic Adderall XR® and
an increase in fenofibrate sales. Gross profit margin of 50% for
the fourth quarter 2009 increased almost 500 basis points over the
45% margin for the prior year period primarily due to increased
sales of generic Adderall XR® and higher-margined fenofibrate.
Total research and development expenses for the fourth quarter
2009 decreased $1.2 million to $9.9 million, compared to the prior
year primarily due to lower spending on biostudies.
Total selling, general and administrative expenses for the
fourth quarter 2009 increased $1.1 million to $3.3 million
primarily due to higher expenses associated with a higher level of
business development activities.
Generic division income from operations in the fourth quarter
2009 increased $68.4 million to $72.2 million, compared to $3.9
million in the prior year, primarily due to higher sales as noted
above.
Full Year 2009
For the full year 2009, total revenue increased $147.8 million
to $345.0 million, primarily due to an increase in net Global
product sales, as discussed below.
Net Global product sales increased $191.1 million to $287.1
million primarily due to sales of generic Adderall XR®, and to a
lesser extent, increased sales of our fenofibrate products. Private
label revenues increased $2.9 million to $5.5 million primarily due
to sales of loratadine/pseudoephedrine, the generic version of
Claritin® D 24-hour, as a result of a new supply agreement.
Research Partner revenues increased $10.8 million to $11.7 million
resulting from twelve months revenue recognition in 2009 as
compared to one month in 2008 of the $40 million upfront payment
received in December 2008 and the pro rata revenue recognition of
an aggregate $12 million from three milestone payments received
during 2009 under a joint development agreement entered into during
the fourth quarter 2008. Partially offsetting these revenue gains
were a $47.9 million decline in Rx Partner revenues primarily
attributable to the loss of revenue related to the cessation of
sales of generic OxyContin® ($40.8 million in 2008) and reduced
sales of generic Wellbutrin XL® 300mg, and a $9.1 million decline
in OTC Partner revenues, primarily attributable to the cessation of
the Company’s obligation to supply Schering-Plough with product
effective December 31, 2008.
Cost of revenues for the full year 2009 was $158.3 million, an
increase of $77.5 million primarily related to the increase in net
Global product sales.
Gross profit for the full year 2009 increased $70.2 million to
$186.7 million or approximately 54% of total revenues, compared to
$116.5, or 59% of total revenue in the prior year. The 500 basis
point reduction in gross margin is primarily due to the absence of
high-margin OxyContin® sales in 2009.
Total research and development expenses for the full year 2009
decreased $4.2 million to $38.7 million, compared to the prior year
primarily due to lower spending on biostudies and legal fees
related to patent expenses.
Patent litigation expense decreased $1.1 million to $5.4 million
due to lower overall charges related to ongoing patent litigation
matters.
Total selling, general and administrative expenses for the full
year 2009 decreased approximately $0.6 million primarily due to a
charge for severance expenses in the prior year, partially offset
by increased professional fees.
Global Pharmaceuticals Division income from operations for the
full year 2009 increased $76.1 million to $131.7 million, compared
to $55.6 million in the prior year, primarily due to higher sales
and the other factors noted above.
Impax Pharmaceuticals Division Information
(amounts in thousands)
Three Months EndedDecember 31,
Twelve Months EndedDecember
31,
2009 2008 2009 2008 (unaudited) (unaudited)
(unaudited) (as adjusted) (as adjusted) Promotional Partner $ 3,441
$ 3,163 $ 13,448 $ 12,891 Cost of revenues 2,792
2,914 12,043 11,245 Gross
profit 649 249 1,405
1,646 Operating expenses: Research and
development 6,593 4,778 24,576 16,307 Selling, general and
administrative 940 792 3,469
2,671 Total operating expenses 7,533
5,570 28,045 18,978
Loss from operations ($6,884 ) ($5,321 )
($26,640 ) ($17,332 )
Fourth Quarter 2009
Promotional Partner revenues in the fourth quarter 2009
increased 9% to $3.4 million. The change from the prior year period
is primarily the result of the commencement of physician detailing
services under the co-promotion agreement with Wyeth on July 1,
2009 and the high level of such details made in the fourth quarter
of 2009, while the promotional services agreement with Shire ended
on June 30, 2009.
Cost of revenues for the fourth quarter 2009 were $2.8 million,
down slightly from the prior year.
The Company is currently investing in research and development
to develop brand products which provide longer product life cycles
and the potential for significantly higher profit margins than
generic products. In the fourth quarter 2009, research and
development increased $1.8 million to $6.6 million, due to planned
increased spending on clinical studies and additional research
personnel.
The Company’s planned increase in investment in research and
development during the fourth quarter 2009 contributed to a brand
division loss from operations of $6.9 million compared to a loss
from operations of $5.3 million in the fourth quarter of 2008.
Full Year 2009
For the full year 2009, Promotional Partner revenues increased
4.3% to $13.4 million from the prior year primarily due to the
reason noted above. Cost of revenues increased 7.1% to $12.0
million from the prior year due to higher detailing sales force
expenses. Total research and development expenses increased 51% or
$8.3 million from the prior year due to planned spending on
clinical studies and additional research personnel. Selling,
general and administrative expenses increased 30% or $0.8 million
primarily due to the addition of executive personnel.
Other Operating Information
(amounts in thousands) Three Months Ended
December 31,
Twelve Months EndedDecember
31,
2009 2008 2009 2008 (unaudited) (unaudited)
(unaudited) (as adjusted) (as adjusted) Litigation settlement $
7,645 - $ 9,318 - General and administrative 5,581
8,459 25,352 34,354 Total operating
expenses 13,226 8,459 34,670
34,354 Loss from operations ($13,226 ) ($8,459 )
($34,670 ) ($34,354 )
Litigation settlement expenses were $7.6 million and $9.3
million for the fourth quarter and full year 2009, respectively. In
January 2010, the Company entered into an agreement to settle a
lawsuit related to its formerly marketed Lipram UL products and
reimburse the plaintiff for litigation costs. The litigation
settlement expenses for the fourth quarter and full year 2009 also
include legal and other professional fees incurred by the Company
in its defense against the lawsuit.
General and administrative expenses for the fourth quarter 2009
declined 34% to $5.6 million, primarily attributable to decreased
professional fees related to the examination and review of the
Company’s financial statements in conjunction with the financial
statements for the years 2004 through 2007 and the resulting
October 2008 filing with the SEC of the Company’s Registration
Statement on Form 10.
For the full year 2009, general and administrative expenses
declined 26% to $25.4 million primarily due to lower professional
fees related to the aforementioned examination and review of the
Company’s financial statements and lower management consulting
fees.
Interest income for the full year 2009 declined $3.5 million to
$0.8 million due to lower overall interest rates and lower average
cash and short-term investment balances.
Interest expense for the full year 2009 declined $4.5 million to
$0.2 million due to reduced amounts of average debt outstanding,
resulting from the Company’s June 2009 repurchase of its 3.5%
Debentures and its August 2009 repayment-in-full of a subordinated
promissory note.
Cash and Cash Equivalents
Cash and short-term investments, net of interest-bearing debt,
was $90.4 million as of December 31, 2009, as compared to $99.6
million as of December 31, 2008. The change in cash and short-term
investments, net from year-end 2008, included the Company’s June
15, 2009 repurchase of $12.75 million principal amount of its
outstanding 3.5% Debentures, and the funding of increased working
capital, including increased accounts receivable and inventory
balances.
Cash flow from operating activities was approximately a positive
$89.1 million before changes in certain working capital assets and
liabilities.
2010 Financial Outlook
The Company previously disclosed its 2010 financial outlook on
January 11, 2010. For 2010, the Company is currently
forecasting:
- Cash flows from operating
activities, before changes in working capital, less capital
expenditures (Free Cash Flow), planned to be positive.
- Gross margins as a percent of
total revenues to approximate 50%.
- Total research and development
expenses across the generic and brand divisions to approximate $77
million with generic R&D to approximate $41 million and brand
R&D to approximate $36 million.
- Patent litigation expenses of
approximately $11 million.
- Selling, general and
administrative expenses of approximately $50 million.
- Tax rate expected to be in the
low 40% range (assumes the R&D tax credit is renewed for
2010).
- Capital expenditures are
expected to be approximately $20 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 shortly after the
call for a period of seven days. To access the replay, dial (800)
642-1687 (in the U.S.) and (706) 645-9291 (international callers).
The access conference code is 52420707.
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, the effect of current economic conditions on the
Company’s industry, business, financial position, results of
operations and market value of its common stock, the ability to
maintain an effective system of internal control over financial
reporting, fluctuations in revenues and operating income,
reductions or loss of business with any significant customer, the
impact of competitive pricing and products and regulatory actions
on the Company’s products, the ability to sustain profitability and
positive cash flows, the ability to maintain sufficient capital to
fund operations, any delays or unanticipated expenses in connection
with the operation of the Taiwan facility, the ability to
successfully develop and commercialize pharmaceutical products, the
uncertainty of patent litigation, consumer acceptance and demand
for new pharmaceutical products, the difficulty of predicting Food
and Drug Administration filings and approvals, the inexperience of
the Company in conducting clinical trials and submitting new drug
applications, reliance on key alliance and collaboration
agreements, the availability of raw materials, the ability to
comply with legal and regulatory requirements governing the
healthcare industry, the regulatory environment, exposure to
product liability claims 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
(amounts in thousands, except
share and per share data)
Three Months Ended
December 31,
Twelve Months Ended
December 31,
2009 2008 2009 2008 (unaudited) (unaudited)
(unaudited) (as adjusted) Revenues: (as adjusted) Global
Pharmaceuticals Division (a) $ 172,693 $ 41,532 $ 344,961 $ 197,180
Impax Pharmaceuticals Division 3,441 3,163
13,448 12,891 Total Revenues
176,134 44,695 358,409 210,071
Cost of revenues 88,724 25,591
170,313 91,969 Gross profit (b)
87,410 19,104 188,096 118,102
Operating expenses: Research and development 16,530
15,962 63,274 59,237 Patent litigation 1,321 1,646 5,379 6,472
Litigation settlement 7,645 - 9,318 - Selling, general and
administrative 9,785 11,422 39,712
48,470 Total operating expenses 35,281
29,030 117,683 114,179
Income (loss) from operations 52,129 (9,926 )
70,413 3,923 Change in fair value of common
stock purchase warrant - 1,175 - 1,234 Loss on repurchase of 3.5%
Debentures - - - (113 ) Other income (expense), net 4 21,467 57
21,529 Interest income 117 937 753 4,218 Interest expense
490 (334 ) (246 ) (4,782 ) Income (loss)
before income taxes 52,740 13,319 70,977 26,009 Provision (benefit)
for income taxes 14,633 4,308 21,006
10,069 38,107 9,011 49,971 15,940 Add back
loss attributable to noncontrolling interest 37 (42 )
90 47 Net Income (loss) (c) $ 38,144 $
8,969 $ 50,061 $ 15,987 Net Income
(loss) per share: Basic $ 0.63 $ 0.15 $ 0.83 $ 0.27
Diluted $ 0.61 $ 0.15 $ 0.82 $ 0.26
Weighted average common shares outstanding: Basic 60,721,808
59,308,389 60,279,602 59,072,752 Diluted 62,288,318 60,624,452
61,080,184 60,782,721
(a) Global
Pharmaceuticals Division revenue for the twelve months ended
December 31, 2008 includes $40.8 million from sales of generic
OxyContin® which ended in January 2008 pursuant to a litigation
settlement agreement, in connection with which there was no revenue
from sales of generic OxyContin® in 2009.
(b) Gross profit for
the twelve months ended December 31, 2008 includes $38.7 million
from the sale of generic OxyContin® as noted in footnote (a).
(c) Net income from
operations for the twelve months ended December 31, 2008 includes
$21.2 million from the sale of generic OxyContin® as noted in
footnote (a).
Impax Laboratories,
Inc.
Condensed Consolidated Balance
Sheets
(amounts in thousands)
December 31, December 31, 2009 2008
(unaudited) (as adjusted) ASSETS Current assets: Cash and cash
equivalents $ 31,770 $ 69,275 Short-term investments 58,599 50,710
Accounts receivable, net 185,854 43,306 Inventory, net 49,130
32,305 Current portion of deferred product manufacturing
costs-alliance agreements 11,624 13,578 Current portion of deferred
income taxes 32,286 17,900 Prepaid expenses and other current
assets 4,748 9,298 Total current assets
374,011 236,372 Property, plant and equipment, net 101,650
95,629 Deferred product manufacturing costs-alliance agreements
96,619 93,144 Deferred income taxes, net 48,544 52,551 Other assets
12,358 9,017 Goodwill 27,574 27,574 Total assets $
660,756 $ 514,287 Liabilities and Stockholders Equity
Current liabilities: Current portion of long-term debt, net - $
14,416 Accounts payable 23,295 12,797 Accrued expenses 93,682
41,108 Accrued profit sharing and royalty expenses 53,695 252
Current portion of deferred revenue-alliance agreements 33,196
35,015 Current portion of accrued exclusivity period fee payments
due - 6,000 Total current liabilities 203,868
109,588 Long-term debt - 5,990 Deferred revenue-alliance
agreements 224,522 225,804 Other liabilities 10,139
13,255 Total liabilities 438,529 354,637 Stockholders
equity 222,227 159,650 Total liabilities and
stockholders equity $ 660,756 $ 514,287
Impax Laboratories,
Inc.
Condensed Consolidated
Statement of Cash Flows
(amounts in thousands)
Twelve Months Ended December 31 2009 2008 Cash
flows from operating activities: (unaudited) (as adjusted) Net
income $ 50,061 $ 15,987 Adjustments to reconcile net income to net
cash (used in) provided by operating activities: Depreciation
11,266 9,588 Amortization of 3.5% Debentures discount and deferred
financing costs 307 2,416 Amortization of Wachovia Credit Agreement
deferred financing costs 75 74 Bad debt expense 229 568 Deferred
income taxes (benefit) (10,379 ) 3,816 Tax benefit on reversal of
valuation allowance on deferred tax asset - - Tax benefit related
to the exercise of employee stock options (213 ) - Provision for
uncertain tax positions (6,308 ) 1,397 Loss, net of repurchase of
3.5% Debentures - 113 Deferred revenue - Rx Partners 35,295 94,876
Deferred product manufacturing costs - Rx Partners (24,089 )
(33,928 ) Deferred revenue recognized - Rx Partners (33,835 )
(81,778 ) Amortization deferred product manufacturing costs - Rx
Partners 18,410 22,713 Deferred revenue - OTC Partners 1,960 16,399
Deferred product manufacturing costs - OTC Partners (1,929 )
(16,087 ) Deferred revenue recognized - OTC Partners (6,842 )
(15,946 ) Amortization deferred product manufacturing costs - OTC
Partners 6,087 14,977 Deferred revenue - Research Partners 12,000
40,000 Deferred revenue recognized - Research Partners (11,680 )
(833 ) Accrued profit sharing and royalty expense 53,912 360 Other
adjustments (5,227 ) (9,076 ) Changes in assets and liabilities:
Accounts receivable (142,777 ) 7,629 Other assets and liabilities
45,520 (8,701 ) Net cash (used in) provided by
operating activities ($8,157 ) $ 64,564 Cash
flows from investing activities: Purchase of short-term investments
($66,626 ) ($202,133 ) Maturities of short-term investments 59,256
260,324 Acquisition of ANDA intellectual property rights (750 ) 0
Purchases of property, plant and equipment (13,667 )
(25,863 ) Net cash (used in) provided by investing activities
($21,787 ) $ 32,328 Cash flows from financing
activities: Repayment of long-term debt ($12,887 ) ($65,234 ) Tax
benefit related to the exercise of employee stock options $ 213 $ 0
Proceeds from exercise of stock options and purchases under the
ESPP 5,113 155 Net cash used in
financing activities ($7,561 ) ($65,079 ) Net
(decrease) increase in cash and cash equivalents ($37,505 ) $
31,813 Cash and cash equivalents, beginning of period $ 69,275 $
37,462 Cash and cash equivalents, end of period $ 31,770 $ 69,275
Impax Laboratories,
Inc.
Reconciliation Table
The Company’s calculation of net
income, income (loss) from operations and earnings per share
excluding certain special items 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. Net income, income (loss) from operations and earnings
per share excluding special items are not measures of financial
performance under generally accepted accounting principles (“GAAP”)
and should not be construed as substitutes for consolidated net
income, income (loss) from operations and earnings per share as a
measure of financial performance. However, management uses these
measures in comparing the Company’s historical performance and
believes that they provide meaningful and comparable information to
investors to assist in their analysis of the Company’s financial
performance relative to prior periods and its competitors.
The following tables reconcile
reported results to income adjusted for after-tax special items for
the three and twelve months ended December 31, 2009 and 2008.
Three Months Ended December 31, (in millions, except
per share amounts) 2009 (unaudited) 2008 (as adjusted)
Income (loss) from operations Net income (loss) Net
income (loss) per diluted share Income (loss) from operations
Net income (loss) Net income (loss) per diluted share
Reported income $ 52.1 $ 38.1 $ 0.61 ($9.9 ) $ 9.0 $ 0.15 Adjusted
to remove: Litigation settlement (a) 7.6 4.5 0.07 Antitrust
litigation settlement (b) (15.7 ) (0.26 ) Securities litigation
settlement (c)
2.2 0.04 Adjusted income(1) $
59.7 $ 42.7 $ 0.69 ($9.9 ) ($4.6
) ($0.08 ) Twelve Months Ended December 31, (in
millions, except per share amounts) 2009 (unaudited) 2008 (as
adjusted) Income (loss) from operations Net income (loss) Net
income (loss) per diluted share Income (loss) from operations Net
income (loss) Net income (loss) per diluted share Reported income $
70.4 $ 50.1 $ 0.82 $ 3.9 $ 16.0 $ 0.26 Adjusted to remove:
Litigation settlement (a) 9.3 5.8 0.09 Antitrust litigation
settlement (b) (16.3 ) (0.27 ) Securities litigation settlement (c)
2.3
0.04 Adjusted income(1) $ 79.7 $ 55.9
$ 0.91 $ 3.9 $ 1.9 $ 0.03
(1) The sum of the individual amounts may not equal total due to
rounding.
(a) Litigation
settlement
In January 2010, the Company entered into an agreement to settle
a lawsuit related to its previously marketed Lipram UL products.
Under the terms of the litigation settlement agreement, the Company
agreed to reimburse the plaintiff for certain litigation costs,
which was paid by the Company in January 2010. The Company recorded
an accrued expense for this payment in the year ended December 31,
2009. In the fourth quarter and full year 2009, the Company
recorded litigation settlement expense of $7.6 million ($4.5
million after-tax or $0.07 per diluted share) and $9.3 million
($5.8 million after-tax or $0.09 per diluted share), respectively,
which included legal and other professional fees incurred by the
Company in its defense against the lawsuit.
Impax Laboratories,
Inc.
Notes to Financial
Information
(b) Antitrust litigation
settlement
In November 2008, the Company
entered into an agreement to settle its antitrust claim against
Abbott Laboratories and Fournier Industrie et Sante related to the
Company ANDAs for Fenofibrate Tablets, 160mg and 54mg, generic to
TriCor®. Under the terms of the litigation settlement agreement,
the Company received $25.0 million ($15.7 million after-tax or
$0.26 per diluted share) in December 2008.
(c) Securities litigation
settlement
In January 2009, the Company
entered into an agreement settling the securities class actions
pending in the U.S. District Court for the Northern District of
California. Under the terms of the settlement, the Company agreed
to dismissal of the actions with prejudice, without admitting the
validity of the allegations of any liability, and agreed to pay
$9.0 million, of which the Company paid approximately $3.4 million
($2.2 million after-tax or $0.04 per diluted share) with the
balance funded by the Company’s directors and officers liability
insurance carriers.
Presentation of Deferred Revenue and Deferred
Product Manufacturing Cost Data
The following table summarizes the
additions to and deductions from deferred revenue and deferred
product manufacturing costs under the Company’s Teva, DAVA, OTC,
Medicis and Putney, Inc. alliance and collaboration 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, OTC
and Putney alliance agreements and straight line revenue
recognition for the Medicis joint development
agreement. The summarized information for the twelve
months ended December 31, 2009 is derived from the corresponding
tables for each of these separate alliance and collaboration
agreements set forth in the Alliance and Collaboration Agreement
footnote to the Company’s consolidated financial statements for the
twelve months ended December 31, 2009.
Twelve Months Inception Ended Through (amounts
in thousands) December 31, 2009 December 31, 2008 (unaudited)
Deferred revenue: Beginning balance $ 260,819 $ --- Deferrals
49,256 638,342 Less amounts recognized (52,357 )
(377,523 ) Ending deferred revenue $ 257,718 $ 260,819
Deferred product manufacturing costs: Beginning
balance $ 106,722 $ --- Deferrals 26,018 256,461 Less amounts
amortized (24,497 ) (149,739 ) Ending deferred
product manufacturing costs $ 108,243 $ 106,722
Note to the Financial Information Contained in this December
31, 2009 Earnings Release
As required, the Company adopted Financial Accounting Standards
Board Accounting Standards CodificationTM Topic 470 (FASB ASC 470),
discussing the accounting for convertible debt instruments which
may be settled in cash upon conversion, which was applied on a
retrospective basis, with the restatement of all reporting periods
beginning January 1, 2007. The 2008 financial results reported in
this press release are “as adjusted”, as they are prepared with the
retrospective application of FASB ASC 470.
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