IPXL Impax Laboratories, Inc. (delisted)

Impax Laboratories, Inc. (NASDAQ: IPXL) today reported strong growth in the second quarter of 2010 due to an increase in sales from its Global Product sales channel. Total revenue increased $94.7 million to $153.1 million driven by continued strong sales of generic Adderall XR® and generic Flomax® for which there were no amounts in the second quarter of 2009, as well as increased sales of the Company’s fenofibrate products. Net income increased to $31.3 million, or $0.48 per diluted share, compared to $3.0 million, or $0.05 per diluted share in the prior year period.

Larry Hsu, Ph.D., president and chief executive officer of Impax Laboratories, said: “Once again our strategic focus drove results that far exceeded the prior year. We benefited from the remaining weeks of exclusive sales of generic Flomax® before competitors entered the market in late April. This short-term exclusivity period was significant, accounting for almost $204 million in sales and $190 million in gross profit since our March 2010 launch of the product. We also continued to see strong demand for our generic Adderall XR® product; however, sales concentrated in a few large accounts where pull-through was slow and on-going supply issues with our supplier constrained our ability to expand our market share. We have improved the management of our inventories and we recently began to see an improvement in the supply of generic Adderall XR®. We will aggressively work to fill customer demand.”

Dr. Hsu continued, “Our strong financial performance for the first half of 2010 has already exceeded full year 2009 results. This exceptional performance has placed us in a stronger financial position than at anytime in our history. With a very healthy balance sheet consisting of more than $328 million in cash and short-term investments and no debt, we have significant resources to re-invest in our vital strategic initiatives. We continue to aggressively pursue generic and brand opportunities to acquire products, technologies or companies with compelling business strategies to drive near and long term growth.”

Second Quarter 2010 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 June 30 Six Months Ended June 30, 2010   2009 2010   2009 (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Global Product sales, net $ 137,638 $ 37,387 $ 446,743 $ 76,508 Private Label 339 2,220 1,011 3,517

Rx Partner

5,802 11,119 10,705 21,855 OTC Partner 2,309 1,628 4,074 3,486 Research Partner 3,384 2,833 6,769 5,444 Other   -   5   -   11 Total Revenues   149,472   55,192   469,302   110,821 Cost of revenues   65,599   24,007   142,031   47,240 Gross profit   83,873   31,185   327,271   63,581   Operating expenses: Research and development 10,929 9,578 20,364 19,853 Patent litigation 1,769 1,394 3,753 2,411 Selling, general and administrative   3,113   2,473   6,448   5,066 Total operating expenses   15,811   13,445   30,565   27,330 Income from operations $ 68,062 $ 17,740 $ 296,706 $ 36,251  

Second Quarter 2010

Global Pharmaceuticals Division revenues in the second quarter of 2010 increased $94.3 million to $149.5 million, driven by a significant increase in Global Product sales, net, as discussed below.

During the second quarter of 2010, Global Product sales, net, increased $100.3 million to $137.6 million over the same period in 2009 primarily due to strong sales of generic Adderall XR®, generic Flomax® and, to a lesser extent, increased sales of the Company’s fenofibrate products. On March 2, 2010, the Company successfully launched generic Flomax® which contributed $27.4 million to second quarter 2010 sales ($203.7 million of sales for the six months ended June 30, 2010). The Company was the only supplier of generic Flomax® for the succeeding eight weeks ending April 27, 2010, after which competitors entered the market, resulting in price erosion and reduction in the Company’s market share. Partially offsetting these gains was a $5.3 million decline in Rx Partner revenue and a $1.9 million decline in Private Label revenue. The decline in Rx Partner revenue is primarily attributable to reduced sales of generic Wellbutrin® products as competition continues to erode the Company’s market share, while Private Label products sales declined due to lower demand for the Company’s generic loratadine/PSE products.

Gross profit for the second quarter of 2010 increased $52.7 million to $83.9 million primarily due to sales of generic Adderall XR®, generic Flomax® which contributed $22.4 million to second quarter 2010 profits (total gross profit for the six months ended June 30, 2010 was $190.3 million) and an increase in fenofibrate sales. Gross profit margin of 56% for the second quarter 2010 declined from the 57% margin for the prior year period due to the slightly higher concentration of lower-margin products.

Research and development expenses for the second quarter of 2010 increased $1.4 million to $10.9 million, compared to the prior year primarily due to higher spending on clinical studies and outside development costs.

Selling, general and administrative expenses for the second quarter of 2010 increased $0.6 million to $3.1 million due to increased customer freight and higher marketing expenses, both related to higher sales levels as noted above.

Global Pharmaceuticals Division income from operations in the second quarter 2010 increased $50.3 million to $68.1 million, compared to $17.7 million in the prior year, due to the increase in sales as noted above.

Impax Pharmaceuticals Division Information

    (amounts in thousands) Three Months Ended June 30 Six Months Ended June 30, 2010   2009 2010   2009 (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Promotional Partner $ 3,500 $ 3,224 $ 7,003 $ 6,508 Research Partner 110   - 110 - Total revenues 3,610 3,224 7,113 6,508 Cost of revenues 3,293 3,277 6,437 6,294 Gross profit 317 (53) 676 214   Operating expenses: Research and development 10,755 6,134 19,629 11,649 Selling, general and administrative 738 727 1,547 1,767 Total operating expenses 11,493 6,861 21,176 13,416 Loss from operations $ (11,176) $ (6,914) $ (20,500) $ (13,202)  

Second Quarter 2010

Promotional Partner revenues in the second quarter of 2010 were $3.5 million, a slight increase over the prior year as the Company continues to meet its physician detailing objectives.

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 second quarter of 2010, research and development increased $4.6 million to $10.8 million, primarily due to planned increased spending on clinical studies for the Company’s leading drug candidate for Parkinson’s disease.

The Company’s planned increase in investment in research and development during the second quarter of 2010 contributed to an Impax Pharmaceuticals Division loss from operations of $11.2 million compared to a loss from operations of $6.9 million in the second quarter of 2009.

Corporate and Other Information

    (amounts in thousands) Three Months Ended June 30, Six Months Ended June 30,   2010       2009     2010       2009   (unaudited) (unaudited) (unaudited) (unaudited)   Litigation settlement $ - $ 619 $ - $ 855 General and administrative   7,592     6,220     15,934     14,072   Total operating expenses   7,592     6,839     15,934     14,927   Loss from operations $ (7,592 )   $ (6,839 ) $ (15,934 )   $ (14,927 )  

Total corporate operating expenses for the second quarter of 2010 increased $0.8 million to $7.6 million, due to higher general and administrative expenses attributable to increased compensation and higher insurance costs related to increasing levels of business activity.

Cash and Short-term Investments

Cash and short-term investments were $328.1 million as of June 30, 2010, as compared to $90.4 million as of December 31, 2009. The change in cash and short-term investments from year-end 2009 is due to strong product sales as noted above.

2010 Financial Outlook

The Company previously updated its full year 2010 forecast on May 4, 2010. The Company provides this further update to its full year 2010 forecast.

• Cash flows from operating activities, before changes in working capital, less capital expenditures (Free Cash Flow), planned to be positive.
• Updated May 2010 - gross margins as a percent of total revenues to approximate 50% for the balance of the year.
• Updated August 2010 - Total research and development expenses across the generic and brand divisions to approximate $83 million with generic R&D to approximate $41 million and brand R&D to approximate $42 million (an increase of approximately $6 million due to higher costs of clinical studies for the Company’s leading drug candidate for Parkinson’s disease).
• Patent litigation expenses of approximately $11 million.
• Selling, general and administrative expenses of approximately $50 million.
• Updated May 2010 - estimated consolidated effective tax rate of approximately 40% (without renewal in 2010 of the federal R&D tax credit).
• Capital expenditures 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 87118465.

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 third-party 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, 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 June 30, Six Months Ended June 30,   2010       2009     2010       2009   (unaudited) (unaudited) (unaudited) (unaudited) Revenues: Global Pharmaceuticals Division $ 149,472 $ 55,192 $ 469,302 $ 110,821 Impax Pharmaceuticals Division   3,610     3,224     7,113     6,508   Total Revenues   153,082     58,416     476,415     117,329     Cost of revenues   68,892     27,284     148,468     53,534   Gross profit   84,190     31,132     327,947     63,795     Operating expenses: Research and development 21,684 15,712 39,993 31,502 Patent litigation 1,769 1,394 3,753 2,411 Litigation settlement - 619 - 855 Selling, general and administrative   11,443     9,420     23,929     20,905   Total operating expenses   34,896     27,145     67,675     55,673   Income from operations   49,294     3,987     260,272     8,122   Other (expense) income, net (25 ) 3 (42 ) 58 Interest income 192 307 274 456 Interest expense   (23 )   (256 )   (70 )   (550 ) Income before income taxes 49,438 4,041 260,434 8,086 Provision for income taxes   18,130     1,043     97,613     2,879   Net income before noncontrolling interest 31,308 2,998 162,821 5,207 Add back loss attributable to noncontrolling interest   40     15     12     25   Net Income $ 31,348   $ 3,013   $ 162,833   $ 5,232     Net Income per share: Basic $ 0.51   $ 0.05   $ 2.65   $ 0.09   Diluted $ 0.48   $ 0.05   $ 2.51   $ 0.09     Weighted average common shares outstanding: Basic 61,876,599 60,112,308 61,444,707 59,912,829 Diluted 65,538,805 60,552,344 64,887,770 60,384,179    

Impax Laboratories, Inc.

Condensed Consolidated Balance Sheets

(amounts in thousands)

  June 30, December 31, 2010 2009 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 177,444 $ 31,770 Short-term investments 150,666 58,599 Accounts receivable, net 136,015 185,854 Inventory, net 42,576 49,130 Current portion of deferred product manufacturing costs-alliance agreements 10,647 11,624 Current portion of deferred income taxes 35,047 32,286 Prepaid expenses and other current assets   2,380   4,748 Total current assets   554,775   374,011 Property, plant and equipment, net 103,021 101,650 Deferred product manufacturing costs-alliance agreements 96,962 96,619 Deferred income taxes, net 43,086 48,544 Other assets 22,704 12,358 Goodwill   27,574   27,574 Total assets $ 848,122 $ 660,756   LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Accounts payable $ 20,291 $ 23,295 Accrued expenses 73,144 62,055 Accrued income taxes payable 47,054 31,627 Accrued profit sharing and royalty expenses 30,671 53,695 Current portion of deferred revenue-alliance agreements   33,477   33,196 Total current liabilities   204,637   203,868 Deferred revenue-alliance agreements 224,347 224,522 Other liabilities   12,034   10,139 Total liabilities $ 441,018 $ 438,529 Total stockholders equity   407,104   222,227 Total liabilities and stockholders equity $ 848,122 $ 660,756      

Impax Laboratories, Inc.

Condensed Consolidated Statement of Cash Flows

(amounts in thousands)

  Six Months Ended June 30, 2010 2009 (unaudited) (unaudited) Cash flows from operating activities: Net income $ 162,833 $ 5,232 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 6,068 5,192 Amortization of 3.5% Debentures discount and deferred financing costs - 301 Amortization of Credit Agreement deferred financing costs 25 25 Bad debt expense 153 45 Deferred income taxes (benefit) 7,026 (6,972) Provision for uncertain tax positions 24 463 Tax benefit related to the exercise of employee stock options (4,329) - Deferred revenue-Alliance Agreements 21,764 33,891 Deferred product manufacturing costs-Alliance Agreements (8,791) (15,957) Deferred revenue recognized-Alliance Agreements (21,658) (30,785) Amortization deferred product manufacturing costs-Alliance Agreements 9,425 13,884 Accrued profit sharing and royalty expense 71,902 424 Profit sharing and royalty payments (94,925) (277) Payments on exclusivity period fee - (6,000) Payments on accrued litigation settlements (5,865) (4,556) Share-based compensation expense 5,234 3,193 Accretion of interest income on short-term investments (168) (277) Changes in assets and liabilities: Accounts receivable 49,686 (10,269) Inventory 6,554 (703) Prepaid expenses and other assets (7,852) 1,899 Accounts payable,accrued expenses and income taxes payable 29,151 7,751 Other liabilities   1,859   1,437 Net cash provided by (used in) operating activities $ 228,116 $ (2,059)   Cash flows from investing activities: Purchase of short-term investments (195,450) (41,772) Maturities of short-term investments 103,551 31,687 Purchases of property, plant and equipment   (7,690)   (5,367) Net cash used in investing activities $ (99,589) $ (15,452)   Cash flows from financing activities: Repayment of long-term debt - (12,823) Tax benefit related to the exercise of employee stock options 4,329 - Proceeds from exercise of stock options and the ESPP   12,818   3,257 Net cash provided by (used in) financing activities $ 17,147 $ (9,566)   Net increase (decrease) in cash and cash equivalents $ 145,674 $ (27,077) Cash and cash equivalents, beginning of period $ 31,770 $ 69,275 Cash and cash equivalents, end of period $ 177,444 $ 42,198