Impax Laboratories, Inc. (NASDAQ: IPXL) today
reported fourth quarter and full year ended December 31, 2011
financial results.
Fourth Quarter 2011
Results
- Total revenues increased to $158.6
million, compared to $99.1 million in the prior year period
primarily due to higher sales of generic Adderall XR®.
- Net income increased to $21.9 million,
or $0.33 per diluted share, compared to $12.4 million, or $0.19 per
diluted share, in the prior year period.
- Adjusted earnings before interest,
taxes, depreciation and amortization (Adjusted EBITDA), increased
to $40.4 million compared to $16.8 million in the prior year
period.
Full Year 2011 Results
- Total revenues decreased to $512.9
million compared to $879.5 million in the prior year. The decline
was due to significantly reduced sales of generic Flomax®, as the
Company had contractual market exclusivity for this generic product
for an eight-week period in 2010, during which the Company was able
to achieve high market share penetration. Full year 2010 also
included $196.4 million of generic Rx Partner revenues due to the
change in accounting for the Teva Agreement as described
below.
- Net income was $65.5 million, or $0.97
per diluted share, compared to $250.4 million, or $3.82 per diluted
share, in the prior year. The decline was primarily attributable to
lower generic Flomax® sales and the change in accounting for the
Teva Agreement.
- Adjusted net income, excluding the
change in accounting for the Teva Agreement, decreased to $65.5
million, or $0.97 per diluted share, compared to adjusted net
income of $186.7 million, or $2.85 per diluted share, in the prior
year, primarily attributable to lower generic Flomax® sales.
- Adjusted EBITDA, was $125.6 million
compared to $316.1 million in the prior year.
Please refer to “Non-GAAP Financial Measures” below for a
reconciliation of GAAP to non-GAAP items.
“Our improved fourth quarter 2011 results were driven by the
receipt of product shipments from our third-party supplier of
generic Adderall XR®,” said Larry Hsu, Ph.D., president and CEO,
Impax Laboratories, Inc. “The supply helped us alleviate some of
the customer backorder for the product. We continue to pursue every
available means to acquire sufficient product to meet strong
demand.”
Dr. Hsu continued, “Throughout 2011, we continued to focus on
internal and external growth initiatives. Our internal generic
pipeline of pending products continues to expand with 45 ANDAs
pending at the FDA. We are also expanding our generic partnership
portfolio of alternate dosage form products. All of these
opportunities have the potential to generate growth within our
generics portfolio in the years ahead.”
Dr. Hsu concluded, “We are also excited about the prospects that
our brand business offers from both our research efforts and
business development initiatives. Our New Drug Application for
IPX066 was accepted by the FDA and the process to prepare for
launch upon approval is well underway. In addition, our License
Agreement for Zomig® will contribute meaningfully to our 2012 and
2013 financial performance. We will continue to actively pursue
generic and branded internally developed products and business
development candidates that offer long term growth
opportunities.”
Segment Information – Fourth Quarter and Full Year
2011
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 December
31,
Twelve Months Ended December
31,
2011 2010 2011
2010 Revenues: Global Product sales, net $
142,694 $ 85,630 $ 443,818 $ 624,963 Rx Partner (a) 6,164 3,773
26,333 217,277 OTC Partner 1,015 2,449 5,021 8,888 Research Partner
3,384 3,385 16,538 13,539 Total
Revenues 153,257 95,237 491,710 864,667 Cost of revenues
78,086 45,854 242,713 328,163 Gross profit
75,171 49,383 248,997 536,504 Operating
expenses: Research and development 11,441 11,703 46,169 44,311
Patent litigation 1,409 1,599 7,506 6,384 Selling, general and
administrative 3,219 4,254 13,157
15,404 Total operating expenses 16,069 17,556
66,832 66,099 Income from operations $ 59,102 $ 31,827 $
182,165 $ 470,405
(a) In 2010, the Company materially modified its Strategic
Alliance Agreement with Teva and applied the revised revenue
recognition standards of FASB ASC 605-25 Multiple Element
Arrangements. Application of the revised standards resulted in the
recognition of previously deferred net revenue that would have been
recognized over the remaining life of the Teva agreement under the
prior standards.
The following table reflects the impact on the Global
Pharmaceuticals Division results for the year ended December 31,
2010 due to the change in revenue recognition under the Company’s
Strategic Alliance Agreement with Teva.
(Unaudited, amounts in thousands) Twelve
Months Ended December 31, 2010 As Reported Impact of change
Adjusted Global Pharmaceuticals Division revenues $ 864,667
$ 196,440 $ 668,227 Rx Partner revenues 217,277 196,440 20,837 Cost
of revenues 328,163 95,426 232,737 Gross profit 536,504 101,014
435,490 Income from operations $ 470,405 $ 101,014 $ 369,391
Fourth Quarter 2011
Global Pharmaceuticals Division revenues increased $58.1 million
to $153.3 million in the fourth quarter 2011, compared to $95.2
million in the prior year, due to higher Global Product sales, net,
and Rx Partner sales.
For the fourth quarter 2011, Global Product sales, net, were
$142.7 million, up $57.1 million from the prior year primarily due
to higher sales of authorized generic Adderall XR® products ($84.2
million in the fourth quarter 2011 compared to $29.5 million in the
prior year). Due to the inconsistency of product shipments, as well
as on-going litigation with the Company’s supplier, the Company is
not in a position to provide sales expectations for generic
Adderall XR®. Consistent with prior quarters, sales of generic
Adderall XR® will depend upon the amount of product received by the
Company.
Rx Partner revenues in the fourth quarter 2011 increased $2.4
million to $6.2 million, compared to the prior year, primarily due
to the receipt of profit share earned by the Company under the Teva
Agreement.
Gross profit of $75.2 million represented a 49% gross margin in
the fourth quarter 2011, and was lower than the gross margin of 52%
for the prior year primarily due to higher sales of certain lower
margin products in the fourth quarter 2011.
Total generic operating expenses in the fourth quarter 2011
decreased $1.5 million to $16.1 million, compared to the prior
year, due to lower spending on selling, general and administrative
expenses.
Full Year 2011
Global Pharmaceuticals Division revenues, excluding the 2010
change in accounting for the Teva agreement as noted above,
declined $176.5 million to $491.7 million for the full year 2011,
compared to the prior year, due to lower Global Product sales,
net.
For the full year 2011, Global Product sales, net, were $443.8
million, down $181.2 million, compared to $625.0 million in the
prior year, due to significantly reduced sales of generic Flomax®
($8.0 million in 2011 compared to $215.0 million in 2010),
partially offset by higher sales of other Global label products,
net.
Rx Partner revenues, excluding the 2010 change in accounting for
the Teva agreement as noted above, increased $5.5 million to $26.3
million for the full year 2011, compared to the prior year. The
increase was due to the receipt of profit share earned by the
Company under the Teva Agreement.
Gross profit of $249.0 million represented a 51% gross margin
for the full year 2011, and was lower than the prior year’s
adjusted gross margin excluding the 2010 change in accounting for
the Teva agreement of 65% (unadjusted gross margin was 62% in
2010), primarily due to higher sales of generic Flomax® in
2010.
Total generic operating expenses of $66.8 million for the full
year 2011 increased slightly over the prior year.
Impax Pharmaceuticals Division Information
(unaudited, amounts in thousands)
Three Months Ended December
31,
Twelve Months Ended December
31,
2011 2010
2011 2010 Revenues: Rx
Partner $ 1,437 $ - $ 5,750 $ - Promotional Partner 3,535 3,535
14,140 14,073 Research Partner 330 330
1,319 769 Total revenues 5,302 3,865
21,209 14,842 Cost of revenues 3,071 2,803
11,911 12,083 Gross profit
2,231 1,062 9,298
2,759 Operating expenses: Research and development 8,952
11,256 36,532 41,912 Selling, general and administrative
3,319 1,033 7,435 3,510
Total operating expenses 12,271 12,289
43,967 45,422 Loss from
operations $ (10,040 ) $ (11,227 ) $ (34,669 ) $ (42,663 )
Fourth Quarter 2011
Impax Pharmaceuticals Division revenues in the fourth quarter
2011 increased $1.4 million to $5.3 million over the prior year,
due to the addition of Rx Partner revenues.
In the fourth quarter 2011, the Company recognized $1.4 million
of Rx Partner revenues related to the $11.5 million up-front
payment (amortized over 24 months) received under the License,
Development and Commercialization Agreement with Glaxo Group
Limited which commenced in December 2010.
Total brand operating expenses in the fourth quarter 2011 were
flat compared to the prior year.
Full Year 2011
Impax Pharmaceuticals Division revenues for the full year 2011
increased $6.4 million to $21.2 million over the prior year, due to
the addition of Rx Partner revenues.
For the full year 2011, the Company recognized $5.8 million of
Rx Partner revenues related to the $11.5 million up-front payment
(amortized over 24 months) received under the License, Development
and Commercialization Agreement with Glaxo Group Limited which
commenced in December 2010.
Total brand operating expenses for the full year 2011 decreased
$1.5 million to $44.0 million, compared to the prior year, due to a
decline in research and development expenses, partially offset by
higher selling, general and administrative expenses.
Corporate and Other
(unaudited, amounts in thousands)
Three Months Ended December
31,
Twelve Months Ended December
31,
2011 2010
2011 2010 General and
administrative expenses $ 13,533 $ 10,907 $ 47,885
$ 34,418 Loss from operations $ (13,533 ) $ (10,907 )
$ (47,885 ) $ (34,418 )
Fourth Quarter 2011
General and administrative expenses in the fourth quarter 2011
increased $2.6 million compared to the prior year primarily due to
an increase in legal fees and compensation expenses.
Full Year 2011
General and administrative expenses for the full year 2011
increased $13.5 million compared to the prior year, primarily due
to an increase in legal fees, compensation expenses and information
technology systems related expenses.
Cash and Short-term Investments
Cash and short-term investments were $346.4 million as of
December 31, 2011, as compared to $348.4 million as of December 31,
2010.
2012 Financial Outlook
The Company’s 2012 financial outlook which was last updated on
February 1, 2012 is noted below.
- Gross margins as a percent of total
revenues of approximately 60%.
- Total research and development
(R&D) expenses across the generic and brand divisions to
approximate $89.0 million with generic R&D of approximately
$48.0 million and brand R&D of approximately $41.0
million.
- Patent litigation expenses of
approximately $10.0 million.
- Selling, general and administrative
(SG&A) expenses of approximately $113.0 million.
- Effective tax rate of approximately
36%.
- Capital expenditures of approximately
$78.0 million.
Conference Call Information
The Company will host a conference call on February 28, 2012 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 (855) 859-2056 (in the U.S.) and (404)
537-3406 (international callers). The access conference code is
47067474.
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 governing the pharmaceuticals and healthcare
industries, 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 December
31,
Twelve Months Ended December
31,
2011 2010
2011 2010 Revenues:
Global Pharmaceuticals Division $ 153,257 $ 95,237 $ 491,710 $
864,667 Impax Pharmaceuticals Division 5,302
3,865 21,209 14,842 Total
Revenues 158,559 99,102 512,919 879,509 Cost of revenues
81,157 48,657 254,624
340,246 Gross profit 77,402 50,445
258,295 539,263 Operating
expenses: Research and development 20,393 22,959 82,701 86,223
Patent litigation 1,409 1,599 7,506 6,384 Selling, general and
administrative 20,071 16,194
68,477 53,332 Total operating expenses
41,873 40,752 158,684
145,939 Income from operations 35,529 9,693 99,611 393,324
Other expense, net (2,119 ) (182 ) (2,589 ) (315 ) Interest income
270 357 1,149 1,037 Interest expense (76 ) (59 )
(157 ) (167 ) Income before income taxes 33,604 9,809
98,014 393,879 Provision for income taxes 11,772
(2,594 ) 32,616 143,521 Net
income before noncontrolling interest 21,832 12,403 65,398 250,358
Add back loss attributable to noncontrolling interest 30
19 97 60 Net
Income $ 21,862 $ 12,422 $ 65,495 $ 250,418
Net Income per share: Basic $ 0.34 $ 0.20
$ 1.02 $ 4.04 Diluted $ 0.33 $ 0.19
$ 0.97 $ 3.82 Weighted average common
shares outstanding: Basic 64,687,753 62,807,768 64,126,855
62,037,908 Diluted 67,029,407 66,210,101 67,319,989 65,565,132
Impax Laboratories, Inc.
Condensed Consolidated Balance Sheets
(unaudited, amounts in thousands)
December 31, December 31, 2011
2010 Assets Current assets: Cash and cash equivalents
$ 104,419 $ 91,796 Short-term investments 241,995 256,605 Accounts
receivable, net 153,773 82,054 Inventory, net 54,177 44,549
Deferred product manufacturing costs 1,413 2,012 Deferred income
taxes 37,853 39,271 Prepaid expenses and other current assets
6,305 4,407 Total current assets 599,935
520,694 Property, plant and equipment, net 118,158 106,280
Deferred product manufacturing costs 7,433 8,223 Other assets
40,759 30,547 Goodwill 27,574 27,574 Total assets $
793,859 $ 693,318 Liabilities and Stockholders' Equity
Current liabilities: Accounts payable $ 22,955 $ 18,812 Accrued
expenses 70,116 75,181 Accrued profit sharing and royalty expenses
40,766 14,147 Deferred revenue 23,024 18,276 Total
current liabilities 156,861 126,416 Deferred revenue
17,131 44,195 Other liabilities 16,861 14,558 Total
liabilities 190,853 185,169 Total stockholders' equity
603,006 508,149 Total liabilities and stockholders' equity $
793,859 $ 693,318
Impax Laboratories, Inc.
Consolidated Statements of Cash Flows
(unaudited, amounts in thousands)
Twelve Months Ended December 31,
2011 2010 Cash flows from
operating activities: Net income $ 65,495 $ 250,418 Adjustments to
reconcile net income to net cash provided by operating activities:
Depreciation and amortization 15,682 12,649 Amortization of Credit
Agreement deferred financing costs 28 25 Bad debt expense 163 277
Deferred income taxes 13,463 42,662 Tax benefit related to the
exercise of employee stock options (6,535 ) (6,172 ) Change in
accrual for uncertain tax positions 178 280 Deferred revenue 2,568
35,704 Deferred product manufacturing costs (1,721 ) (10,640 )
Recognition of deferred revenue (25,579 ) (230,951 ) Amortization
deferred product manufacturing costs 3,111 108,648 Accrued profit
sharing and royalty expense 107,760 101,247 Profit sharing and
royalty payments (81,145 ) (140,794 ) Share-based compensation
expense 12,685 10,714 Accretion of interest income on short-term
investments (870 ) (638 ) Payments of accrued litigation
settlements - (5,865 ) Changes in assets and liabilities: Accounts
receivable (71,882 ) 103,523 Inventory (9,628 ) 4,581 Prepaid
expenses and other assets (17,627 ) (12,092 ) Accounts payable and
accrued expenses (2,042 ) (17,896 ) Other liabilities 2,254
4,081 Net cash provided by operating
activities 6,358 249,761 Cash
flows from investing activities: Purchase of short-term investments
(359,646 ) (403,086 ) Maturities of short-term investments 375,126
205,718 Purchases of property, plant and equipment (30,524 )
(16,267 ) Net cash used in investing activities
(15,044 ) (213,635 ) Cash flows from financing
activities: Tax benefit related to the exercise of employee stock
options 6,535 6,172 Proceeds from exercise of stock options and
ESPP 14,774 17,728 Net cash provided by
financing activities 21,309 23,900
Net increase in cash and cash equivalents 12,623 60,026 Cash
and cash equivalents, beginning of year 91,796
31,770 Cash and cash equivalents, end of year $ 104,419
$ 91,796
Impax Laboratories, Inc. Non-GAAP
Financial Measures
Total adjusted net income, adjusted net income per diluted share
and adjusted EBITDA, 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, 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 adjusted net income, adjusted
net income per diluted share and adjusted EBITDA, 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.
(Unaudited, in millions, except per
share amounts)
Three months ended December
31,
Twelve months ended December
31,
2011 2010
2011 2010 Net income $ 21.9 $
12.4 $ 65.5 $ 250.4 Adjusted to add (deduct): Employee severance -
0.7 - 0.7 Change in accounting principle - - - (101.0 ) Income tax
effect - (0.2 ) - 36.6 Adjusted
net income $ 21.9 $ 12.9 $ 65.5 $ 186.7
Adjusted net income per diluted share $ 0.33 $ 0.19 $ 0.97 $ 2.85
Net income per diluted share $ 0.33 $ 0.19 $ 0.97 $ 3.82
Impax Laboratories, Inc. Non-GAAP
Financial Measures
The following table reconciles reported net income to adjusted
EBITDA.
Three months ended December
31,
Twelve months ended December
31,
2011 2010
2011 2010 Net income $
21.9 $ 12.4 $ 65.5 $ 250.4 Adjusted to add (deduct): Interest
income (0.3 ) (0.4 ) (1.1 ) (1.0 ) Interest expense 0.1 0.1 0.2 0.2
Depreciation, amortization and other 3.8 3.6 15.7 12.6 Income taxes
11.8 (2.6 ) 32.6 143.5
EBITDA 37.3 13.1 112.9
405.7 Adjusted to add (deduct):
Share-based compensation 3.1 3.0 12.7 10.7 Employee severance - 0.7
- 0.7 Change in accounting principle (a) - -
- (101.0 ) Adjusted EBITDA $ 40.4
$ 16.8 $ 125.6 $ 316.1
(a)
Material
Modification to Teva Agreement
In July 2010, the Company entered into a material modification of
its Strategic Alliance Agreement with Teva, and as a result the
Company will apply the revised accounting standards of FASB ASC
605-25 Multiple Element Arrangements (“ASC 605-25”) which became
effective for agreements entered into or materially modified on or
after June 15, 2010, to its recognition of revenue under the Teva
Agreement. The Company applied the accounting principles of ASC
605-25 on a prospective basis beginning in the quarter ended
September 30, 2010. For the twelve months ended December 31, 2010,
the application of ASC 605-25 resulted in recognition of previously
deferred revenue and related costs, with the effect of increasing
Rx Partner revenue by $196.4 million and increasing cost of
revenues by $95.4 million. Diluted earnings per share increased by
approximately $0.98 for the twelve months ended December 31, 2010,
respectively, as a result of the prospective application of ASC
605-25.
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