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Impax Laboratories Reports Third Quarter 2012 Results

Cash and Short-term Investments

Cash and short-term investments were $339.7 million as of September 30, 2012, compared to $346.4 million as of December 31, 2011.

2012 Financial Outlook

The Company updated its 2012 financial outlook as noted below.

Expense guidance:

  • UPDATED - Total R&D expenses across the generic and brand divisions to approximate $86.0 million with generic R&D of approximately $48.0 million and brand R&D of approximately $38.0 million.
  • UPDATED - Patent litigation expenses of approximately $13.0 million. In the third quarter 2012, the Company received a $5.0 million patent litigation settlement reimbursement.
  • SG&A expenses of approximately $113.0 million.

Other outlook items:

  • Gross margins as a percent of total revenues of approximately 60%.
  • UPDATED - Effective tax rate of approximately 35%.
  • Capital expenditures of approximately $78.0 million.

Revenue:

  • With the recent additional competition on fenofibrate capsules and generic Adderall XR ®, the Company expects its total revenues for the fourth quarter of 2012 to decline by approximately 15% to 20% from the third quarter of 2012.

Conference Call Information

The Company will host a conference call on October 30, 2012 at 12:00 p.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 39759746.

About Impax Laboratories, Inc.

Impax Laboratories, Inc. (NASDAQ: IPXL) 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 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, fluctuations in the Company’s revenues and operating income, the Company’s ability to successfully develop and commercialize pharmaceutical products, reductions or loss of business with any significant customer, the impact of consolidation of the Company’s customer base, the impact of competition, the Company’s ability to sustain profitability and positive cash flows, any delays or unanticipated expenses in connection with the operation of the Company’s Taiwan facility, the effect of foreign economic, political, legal and other risks on the Company’s operations abroad, the uncertainty of patent litigation, increased government scrutiny on the Company’s agreements with brand pharmaceutical companies, consumer acceptance and demand for new pharmaceutical products, the difficulty of predicting Food and Drug Administration filings and approvals, the Company’s inexperience in conducting clinical trials and submitting new drug applications, the Company’s ability to successfully conduct clinical trials, the Company’s reliance on third parties to conduct clinical trials and testing, the availability of raw materials and impact of interruptions in the Company’s supply chain, the use of controlled substances in the Company’s products, disruptions or failures in the Company’s information technology systems and network infrastructure, the Company’s reliance on alliance and collaboration agreements, the Company’s dependence on certain employees, the Company’s ability to comply with legal and regulatory requirements governing the healthcare industry, the regulatory environment, the Company’s ability to protect the Company’s intellectual property, exposure to product liability claims, changes in tax regulations, the Company’s ability to manage the Company’s growth, including through potential acquisitions, the restrictions imposed by the Company’s credit facility, uncertainties involved in the preparation of the Company’s financial statements, the Company’s ability to maintain an effective system of internal control over financial reporting, any manufacturing difficulties or delays, the effect of terrorist attacks on the Company’s business, the location of the Company’s manufacturing and research and development facilities near earthquake fault lines 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     Nine Months Ended
September 30, September 30,
2012     2011 2012     2011
Revenues:
Global Pharmaceuticals Division $ 100,430 $ 114,546 $ 356,759 $ 338,453
Impax Pharmaceuticals Division   45,157     5,303     83,856     15,907  
Total revenues 145,587 119,849 440,615 354,360
 
Cost of revenues   67,560     57,195     222,212     173,467  
Gross profit   78,027     62,654     218,403     180,893  
Operating expenses:
Research and development 20,012 18,839 58,697 62,308
Patent litigation (recovery) expense (371 ) 2,114 6,581 6,097
Selling, general and administrative   28,927     16,318     75,030     48,406  
Total operating expenses   48,568     37,271     140,308     116,811  
Income from operations 29,459 25,383 78,095 64,082
Other income (expense), net 46 69 (129 ) (470 )
Interest income 272 268 771 879
Interest expense   (145 )   (53 )   (607 )   (81 )
Income before income taxes 29,632 25,667 78,130 64,410
Provision for income taxes   9,635     8,486     27,166     20,844  
Net income before noncontrolling interest 19,997 17,181 50,964 43,566
Add back loss attributable to noncontrolling interest   40     39     110     67  
Net income $ 20,037   $ 17,220   $ 51,074   $ 43,633  
 
Net income per share:
Basic $ 0.30   $ 0.27   $ 0.78   $ 0.68  
Diluted $ 0.29   $ 0.26   $ 0.75   $ 0.65  
 
Weighted average common shares outstanding:
Basic 65,797,722 64,387,413 65,451,926 63,937,796
Diluted 68,366,849 66,986,758 68,230,487 67,318,658
 
 

Impax Laboratories, Inc.

Condensed Consolidated Balance Sheets

(unaudited, amounts in thousands)

 
      September 30,     December 31,
2012 2011
Assets
Current assets:
Cash and cash equivalents $ 172,692 $ 104,419
Short-term investments 167,046 241,995
Accounts receivable, net 97,770 153,773
Inventory, net 78,674 54,177
Deferred tax asset 43,170 37,853
Prepaid expenses and other assets   24,040   7,718
Total current assets   583,392   599,935
Property, plant and equipment, net 171,126 118,158
Other assets 64,941 45,942
Intangible assets, net 54,172 2,250
Goodwill   27,574   27,574
Total assets $ 901,205 $ 793,859
 
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 121,742 $ 93,071
Accrued profit sharing and royalty expenses 9,159 40,766
Accrued product licensing payments 40,000 -
Deferred revenue   12,328   23,024
Total current liabilities   183,229   156,861
Deferred revenue 15,092 17,131
Other liabilities   21,242   16,861
Total liabilities 219,563 $ 190,853
Total stockholders' equity   681,642   603,006
Total liabilities and stockholders' equity $ 901,205 $ 793,859
 
 

Impax Laboratories, Inc.

Consolidated Statements of Cash Flows

(unaudited, amounts in thousands)

 
      Nine Months Ended
September 30,
2012     2011
Cash flows from operating activities:
Net income $ 51,074 $ 43,633
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 23,273 11,903
Accretion of interest income on short-term investments (473 ) (665 )
Recognition of deferred charge – Zomig ® prepaid royalty 24,997 -
In-process research and development charge 1,550 -
Deferred income taxes (23,437 ) 4,464
Tax benefit related to the exercise of employee stock options (3,515 ) (6,086 )
Deferred revenue 1,738 2,182
Deferred product manufacturing costs (2,743 ) (1,275 )
Recognition of deferred revenue (16,236 ) (19,489 )
Amortization of deferred product manufacturing costs 2,775 2,494
Accrued profit sharing and royalty expense 67,427 67,210
Payments of profit sharing and royalty expense (99,034 ) (58,759 )
Share-based compensation expense 12,146 9,632
Bad debt expense - 163
Changes in certain assets and liabilities:
Accounts receivable 56,003 (24,112 )
Inventory (24,497 ) (5,577 )
Prepaid expenses and other assets 47,446 (9,606 )
Accounts payable and accrued expenses 23,019 (6,871 )
Other liabilities   5,774     1,213  
Net cash provided by operating activities   147,287     10,454  
 
Cash flows from investing activities:
Purchase of short-term investments (177,461 ) (280,602 )
Maturities of short-term investments 252,883 316,277
Purchases of property, plant and equipment (58,618 ) (18,433 )
Payment for product licensing rights   (111,000 )   -  
Net cash (used in) provided by investing activities   (94,196 )   17,242  
 
Cash flows from financing activities:
Tax benefit related to the exercise of employee stock options and restricted stock 3,515 6,086
Proceeds from exercise of stock options and ESPP   11,667     12,632  
Net cash provided by financing activities   15,182     18,718  
 
Net increase in cash and cash equivalents 68,273 46,414
Cash and cash equivalents, beginning of period   104,419     91,796  
Cash and cash equivalents, end of period $ 172,692   $ 138,210  
 

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.

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