Impax Laboratories, Inc. (NASDAQ: IPXL) today
reported first quarter ended March 31, 2011 financial results.
“Our revenue related to the sale of our generic and brand
products and services other than generic Flomax® and Adderall XR®
increased 11% in the first quarter of 2011. This was primarily due
to revenue recognized on milestones achieved during the quarter
under development agreements with partners and higher sales of
fenofibrate products.” said Larry Hsu, Ph.D., president and CEO,
Impax Laboratories, Inc.
“As expected, our first quarter 2011 year over year performance
was impacted by the one year anniversary of our exclusive launch of
generic Flomax®, the largest in our history, and to a lesser
extent, our continuing inability and frustration in obtaining
sufficient generic Adderall XR® product. While generic Flomax®
opportunities don’t occur every quarter, the significant cash
generated from this launch will be a large contributor to the
external growth initiatives we continue to explore.”
“We believe our pending generic pipeline of 39 products and 77
under development potentially includes other exclusive launch
opportunities. We are also enthused about the recent positive phase
III results for IPX066, our leading brand product candidate for
Parkinson’s disease. All of these pipeline opportunities provide
the potential to fuel future growth.”
First Quarter 2011
Results
Three Months Ended
March 31,
Revenues
2011
2010
$ change
% change
Generic and brand products and services $ 68.8 $ 61.8 $ 7.0 11 %
Generic Flomax ® 3.8 176.2 (172.4 ) (98 %) Generic Adderall XR®
36.1 85.3 (49.2 ) (58 %)
Total Revenues $ 108.7 $ 323.3 $ (214.6 ) (66
%)
- Earnings before interest, taxes,
depreciation and amortization (EBITDA), excluding adjusted items,
was $27.0 million compared to $216.8 million in the prior year
period (generic Flomax® contributed $167.9 million to the first
quarter 2010 EBITDA, excluding adjusted items).
- Net income, excluding adjusted items,
was $16.2 million compared to $133.9 million in the prior year
period (generic Flomax® contributed $104.7 million to the first
quarter 2010 net income, excluding adjusted items).
- Net income per diluted share, excluding
adjusted items, was $0.24 compared to $2.09 in the prior year
period (generic Flomax® contributed $1.64 to the first quarter 2010
net income per diluted share, excluding adjusted items).
- Net income was $13.9 million, or $0.21
per diluted share, compared to $131.5 million, or $2.06 per diluted
share in the prior year period.
Please refer to “Non-GAAP Financial Measures” below for a
reconciliation of GAAP to non-GAAP items.
Dr. Hsu further stated, “We remain disappointed with the ongoing
lack of sufficient supply of generic Adderall XR® to support
customer demand that could lead to stronger financial performance
for the Company. We received our first 2011 shipments but our
customer demand still greatly exceeds available supply. We continue
to pursue every available means to acquire sufficient product to
meet this demand and favorably resolve the issue as quickly as
possible. For the second quarter of 2011, assuming receipt of
promised shipments, we are cautiously optimistic that our generic
Adderall XR® sales could improve slightly over first quarter 2011
levels.”
“We continue to focus our attention on internal and external
growth initiatives. In 2011, we are determined to achieve our
generic Abbreviated New Drug Application filing goal of at least 12
new applications with at least three of these being first-to-file
or first-to-market opportunities. In addition, we remain on
schedule to file the New Drug Application for IPX066 in the fourth
quarter of 2011.”
Segment Information
The Company has two reportable segments, the Global
Pharmaceuticals Division (generic products & services) and the
Impax Pharmaceuticals Division (brand products & services) and
does not allocate general corporate services to either segment.
Global Pharmaceuticals Division Information
(unaudited; amounts in thousands)
Three Months Ended
March 31,
2011
2010
Revenues: Global product sales, net $ 91,946 $ 309,105 Private
Label Product sales 392 672 RX Partner 2,682 4,903 OTC Partner
1,943 1,765 Research Partner 6,385 3,385 Total
Revenues 103,348 319,830 Cost of revenues
47,174 76,432 Gross profit 56,174 243,398
Operating expenses: Research and development 9,776 9,435
Patent litigation 1,774 1,984 Selling, general and administrative
2,931 3,334 Total operating expenses 14,481
14,753 Income from operations $ 41,693 $ 228,645
First Quarter 2011
Global Pharmaceuticals Division revenues in the first quarter of
2011 were $103.3 million compared to $319.8 million in the prior
year period, the reduction in revenues were driven by a decrease in
Global Product sales, net, as discussed below.
During the first quarter of 2011, Global Product sales, net,
compared to the prior year period, were lower primarily due to
significantly reduced sales of generic Flomax® and authorized
generic Adderall XR® products, partially offset by higher sales of
generic fenofibrate products. As previously noted, the Company had
contractual market exclusivity for generic Flomax® starting on
March 2, 2010 and continuing for the succeeding eight week period
during which the Company was able to achieve high market-share
penetration. The addition of competing generic versions of Flomax®
entering the market in late April 2010 resulted in both price
erosion and reduction in the Company’s market share. The decrease
in sales of authorized generic Adderall XR® was principally the
result of supply disruptions in late 2010 and throughout the first
quarter of 2011. Also, in the prior year period, certain market
disruptions caused by supply shortages of generic Adderall XR® may
have impacted sales of a competitor and subsequently benefited the
Company’s first quarter of 2010 sales.
The Company’s Research Partner revenues increased $3.0 million
due to milestones achieved during the first quarter of 2011 under
the Medicis joint development agreement originally entered into in
the fourth quarter of 2008.
Gross profit of $56.2 million represents a 54% gross margin in
the first quarter of 2011, and was lower than the 76% gross margin
for the prior year period primarily due to the sales of our generic
Flomax® products which carried a higher average gross margin during
the contractual market exclusivity period as discussed above.
Total generic operating expenses of $14.5 million in the first
quarter of 2011 declined slightly over the prior year period.
Impax Pharmaceuticals Division Information
(unaudited; amounts in thousands)
Three Months Ended
March 31,
2011
2010
Revenues: Rx Partner $ 1,438 $ - Promotional Partner 3,535 3,503
Research Partner 330 - Total revenues
5,303 3,503 Cost of revenues
2,940 3,144 Gross profit 2,363
359 Operating expenses: Research and
development 9,714 8,874 Selling, general and administrative
1,107 809 Total operating expenses
10,821 9,683 Loss from operations $ (8,458 ) $
(9,324 )
First Quarter 2011
Impax Pharmaceuticals Division revenues in the first quarter of
2011 increased $1.8 million to $5.3 million over the prior year
period due to the addition of Rx Partner and Research Partner
revenues.
In the first quarter of 2011, the Company recognized $1.4
million of Rx Partner revenue related to the $11.5 million up-front
payment (recognized over 24 months) received under the License,
Development and Commercialization Agreement with Glaxo Group
Limited which was entered into in December 2010. In addition, the
Company recognized $0.3 million of Research Partner revenue
resulting from the Development and Co-Promotion Agreement with Endo
Pharmaceuticals, Inc, which was entered into in June 2010.
The Company is currently strategically 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 first quarter of 2011,
research and development expense increased $0.8 million to $9.7
million compared to the prior year period, primarily due to planned
spending on clinical studies for the Company’s leading drug
candidate IPX066 for Parkinson’s disease.
Corporate and Other
(unaudited; amounts in thousand)
Three Months Ended
March 31,
2011
2010
General and administrative $ 12,541 $ 8,342 Loss from
operations $ (12,541 ) $ (8,342 )
Corporate general and administrative expenses in the first
quarter of 2011 increased a planned $4.2 million compared to the
prior year period, due to an increase in legal fees and an increase
in systems implementation and integration expenses.
Cash and short-term investments were $350.0 million as of March
31, 2011, as compared to $348.4 million as of December 31,
2010.
2011 Financial Outlook
The Company previously updated its full year 2011 forecast on
February 24, 2011. The Company provides this further update to its
full year 2011 forecast.
- Cash flows from operating activities,
less capital expenditures (Free Cash Flow), planned to be
positive.
- Gross margins as a percent of total
revenues of approximately 50%.
- Total research and development expenses
across the generic and brand divisions to approximate $87 million
with generic R&D of approximately $47 million and brand R&D
of approximately $40 million.
- Patent litigation expenses of
approximately $13 million.
- Selling, general and administrative
expenses of approximately $65 million.
- Updated May 2011 - Effective tax rate
of approximately 37% to 38%.
- Capital expenditures to be
approximately $69 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 (888) 378-4398 and (719) 325-2144 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 (888)
203-1112 (in the U.S.) and (719) 457-0820 (international callers).
The access conference code is 1325719.
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 and results of
operations, the ability to maintain an effective system of internal
control over financial reporting, fluctuations in revenues and
operating income, the ability to successfully develop and
commercialize pharmaceutical products, reductions or loss of
business with any significant customer or a reduction in sales of
any significant product, the impact of competition, the ability to
sustain profitability and positive cash flows, any delays or
unanticipated expenses in connection with the operation of the
Taiwan facility, the effect of foreign economic, political, legal
and other risks on operations abroad, 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,
the ability to successfully conduct clinical trials, reliance on
alliance and collaboration agreements, the availability of raw
materials, the ability to comply with legal and regulatory
requirements, the regulatory environment, the ability to protect
the Company’s intellectual property, 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
(unaudited; amounts in thousands, except
share and per share data)
Three Months Ended March 31,
2011
2010
Revenues: Global Pharmaceuticals Division $ 103,348 $ 319,830 Impax
Pharmaceuticals Division 5,303 3,503
Total Revenues 108,651 323,333
Cost of revenues 50,114 79,576 Gross
profit 58,537 243,757 Operating
expenses: Research and development 19,490 18,309 Patent litigation
1,774 1,984 Selling, general and administrative 16,579
12,485 Total operating expenses 37,843
32,778 Income from operations 20,694
210,979 Other income (expense), net 3 (18 )
Interest income 321 82 Interest expense (16 ) (46 )
Income before income taxes 21,002 210,997 Provision for income
taxes 7,144 79,484 Net income before
noncontrolling interest 13,858 131,513 Add back gain (loss)
attributable to noncontrolling interest 5 (28
) Net Income $ 13,863 $ 131,485 Net Income per
share: Basic $ 0.22 $ 2.16 Diluted $ 0.21 $
2.06 Weighted average common shares outstanding:
Basic 63,390,527 61,008,015 Diluted 67,044,266 63,865,678
Impax Laboratories, Inc.
Condensed Consolidated Balance
Sheets
(amounts in thousands)
March 31, December 31,
2011
2010
(unaudited) Assets Current assets: Cash and cash equivalents $
140,731 $ 91,796 Short-term investments 209,225 256,605 Accounts
receivable, net 94,280 82,054 Inventory, net 48,840 44,549 Current
portion of deferred product manufacturing costs-alliance agreements
1,334 2,012 Current portion of deferred income taxes 39,333 39,271
Prepaid expenses and other current assets 3,763 4,407
Total current assets 537,506 520,694 Property, plant
and equipment, net 109,173 106,280 Deferred product manufacturing
costs-alliance agreements 8,022 8,223 Deferred income taxes, net
8,466 5,069 Other assets 26,934 25,478 Goodwill 27,574
27,574 Total assets $ 717,675 $ 693,318 Liabilities
and Stockholders Equity Current liabilities: Accounts payable $
16,014 $ 18,812 Accrued expenses 69,347 72,788 Accrued income taxes
payable 9,641 2,393 Accrued profit sharing and royalty expenses
17,127 14,147 Current portion of deferred revenue-alliance
agreements 23,229 18,276 Total current liabilities
135,358 126,416 Deferred revenue-alliance agreements
32,769 44,195 Other liabilities 16,656 14,558 Total
liabilities $ 184,783 $ 185,169 Total stockholders equity
532,892 508,149 Total liabilities and stockholders equity $
717,675 $ 693,318
Impax Laboratories, Inc.
Condensed Consolidated Statement of
Cash Flows
(unaudited; amounts in thousands)
Three Months Ended March 31,
2011
2010
Cash flows from operating activities: Net income $ 13,863 $ 131,485
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 3,457 2,946
Amortization of Credit Agreement deferred financing costs 5 25
Accretion of interest income on short-term investments (245 ) (64 )
Deferred income taxes (benefit) (1,106 ) 1,889 Provision for
uncertain tax positions 40 12 Tax benefit related to the exercise
of employee stock options (2,353 ) (738 ) Deferred revenue-Alliance
Agreements 910 5,495 Deferred product manufacturing costs-Alliance
Agreements (478 ) (3,427 ) Recognition of deferred revenue-Alliance
Agreements (7,384 ) (10,053 ) Amortization deferred product
manufacturing costs-Alliance Agreements 1,357 4,249 Accrued profit
sharing and royalty expense 17,090 41,307 Payments of profit
sharing and royalty expense (14,139 ) (53,695 ) Payments of accrued
litigation settlements - (5,865 ) Share-based compensation expense
2,887 2,873 Bad debt expense 62 91 Changes in assets and
liabilities: Accounts receivable (12,288 ) (138,929 ) Inventory
(4,291 ) (2,885 ) Prepaid expenses and other assets (949 ) (3,870 )
Accounts payable, accrued expenses and income taxes payable 2,518
64,678 Other liabilities 2,055 2,088
Net cash provided by operating activities $ 1,011 $ 37,612
Cash flows from investing activities: Purchase of
short-term investments (87,783 ) (23,055 ) Maturities of short-term
investments 135,408 35,103 Purchases of property, plant and
equipment (8,723 ) (3,116 ) Net cash investing
activities $ 38,902 $ 8,932 Cash flows from
financing activities: Tax benefit related to the exercise of
employee stock options 2,353 738 Proceeds from exercise of stock
options and ESPP 6,669 4,695 Net cash
provided by financing activities $ 9,022 $ 5,433
Net increase in cash and cash equivalents $ 48,935 $ 51,977
Cash and cash equivalents, beginning of period $ 91,796 $
31,770 Cash and cash equivalents, end of period $ 140,731
$ 83,747
Impax Laboratories, Inc.
First Quarter 2011
Non-GAAP Financial Measures
Net income excluding adjusted items, net
income per diluted share excluding adjusted items and EBITDA,
excluding adjusted items, are not measures of financial performance
under generally accepted accounting principles (GAAP) and should
not be construed as substitutes for, or superior to, net income,
and net income per diluted share as a measure of financial
performance. However, management uses both GAAP financial measures
and the disclosed non-GAAP financial measures internally to
evaluate and manage the Company’s operations and to better
understand its business. Further, management believes
the inclusion of non-GAAP financial measures provides meaningful
supplementary information to and facilitates analysis by investors
in evaluating the Company’s financial performance, results of
operations and trends. The Company’s calculation of net income
excluding adjusted items, net income per diluted share excluding
adjusted items and EBITDA, excluding adjusted 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.
The following table reconciles reported
net income to net income excluding adjusted items.
(Unaudited; in millions, except per share amounts)
Three months ended March 31, 2011
2010 Net income $ 13.9 $ 131.5 Adjusted to add
(deduct): Share-based compensation 2.9 2.9 Income tax effect
(0.6 ) (0.5 ) Net income excluding adjusted items $ 16.2
$ 133.9 Net income per diluted share excluding
adjusted items $ 0.24 $ 2.09 GAAP net income per diluted share $
0.21 $ 2.06
The following table reconciles reported
net income to EBITDA excluding adjusted items.
(Unaudited; amounts in millions)
Three months ended
March 31, 2011 2010 Net income $
13.9 $ 131.5 Adjusted to add (deduct): Interest income (0.3 ) (0.1
) Interest expense 0.0 0.0 Depreciation and amortization 3.5 2.9
Income taxes (7.1 ) 79.5 EBITDA $ 24.2
$ 213.9 Adjusted to add: Share-based compensation
2.9 2.9 EBITDA excluding adjusted items
$ 27.0 $ 216.8
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