Impax Laboratories Management Discusses Q2 2012 Results - Earnings Call Transcript

Impax Laboratories (IPXL)

Q2 2012 Earnings Call

July 31, 2012 11:00 am ET

Executives

Mark Donohue - Senior Director of Investor Relations & Corporate Communications

Larry Hsu - Chief Executive Officer, President and Director

Bryan M. Reasons - Acting Chief Financial Officer

Michael J. Nestor - Divisional President of Impax Pharmaceuticals

Carole S. Ben-Maimon - President of Global Pharmaceuticals Division

Analysts

Shibani Malhotra - RBC Capital Markets, LLC, Research Division

Corey B. Davis - Jefferies & Company, Inc., Research Division

Randall Stanicky - Canaccord Genuity, Research Division

Elliot Wilbur - Needham & Company, LLC, Research Division

Gregory Waterman - Goldman Sachs Group Inc., Research Division

Sumant S. Kulkarni - BofA Merrill Lynch, Research Division

David Amsellem - Piper Jaffray Companies, Research Division

Michael Kallai Tong - Wells Fargo Securities, LLC, Research Division

Dewey Steadman

Ken Cacciatore - Cowen and Company, LLC, Research Division

Ami Fadia - UBS Investment Bank, Research Division

James F. Molloy - ThinkEquity LLC, Research Division

Presentation

Operator

Good morning. My name is Reshaira, and I will be your conference operator today. At this time, I would like to welcome everyone to the Impax Laboratories Second Quarter 2012 Earnings Conference Call. [Operator Instructions] Thank you, Mr. Donohue, you may begin your conference.

Mark Donohue

Thank you. Good morning, and welcome to Impax's second quarter 2012 earnings conference call. This morning, Dr. Larry Hsu, our President and Chief Executive Officer; and Bryan Reasons, our acting Chief Financial Officer, will have some comments on our second quarter results and other business items. Following their prepared remarks, both will be available to take any questions you may have.

Also on the call and available for questions are Dr. Carole Ben-Maimon, President of Global Pharmaceuticals; and Michael Nestor, President of Impax Pharmaceuticals.

Our discussion today may include certain forward-looking statements, and actual results may differ from those presented here. The factors that could cause such a difference are outlined in our SEC filings and on our website. Our discussion today includes certain non-GAAP measures as defined by the SEC.

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 provide meaningful supplementary information to and facilitate analysis by investors in evaluating the company's financial performance, results of operations and trends. A reconciliation of GAAP to non-GAAP measures is available in our second quarter 2012 earnings release, which can be found within the Investor Relations section of our website at www.impaxlabs.com.

With that, it's a pleasure to turn our call over to Dr. Larry Hsu.

Larry Hsu

Thank you, Mark. Good morning, and thanks for joining us. The second quarter was a good revenue and earnings quarter for Impax. Total net revenue increased to 32% to $166 million and adjusted earnings per diluted share increased to $0.41 to $0.60 over last year's second quarter. Our adjusted results benefited from U.S. Zomig tables sales, which we began selling under the Impax Pharmaceutical label on April 1, and the gross profit earnings from AstraZeneca on sales of the Zomig ODT and the nasal spray formulations. These accretive transactions contributed just over 2/3 of the growth in our second quarter 2012 revenue and adjusted EPS, compared to the second quarter of 2011. Also contributing to our year-over-year growth was higher generic Adderall XR sales due to increased delivery from our third-party supplier.

This morning, we announced that the FDA recently completed a preapproval inspection of Rytary and an undisclosed generic drug at our Taiwan facility and that there were no Form 483 observations. We were pleased to receive this news as we have committed significant resources to improving the operation of all of our production facilities and into strengthen our company-wide quality system. We continue to work at resolving the recent observation at the Hayward site and look forward to the FDA returning to reinspect the facility in order to close out the warning letter.

We are pleased with the transaction -- with the transition and the launch of the U.S. Zomig franchise through our brand division. Our neurology focused sales force initiated a concentrated promotional and a sampling after to the neurology target audience. We are optimistic that our efforts should continue to pay dividends.

Our generic Adderall XR sales have improved the past 3 quarters as we continue to receive supply. At this point, it is still too early to predict the impact of the recent approval of another generic Adderall XR product. We will be monitoring the market dynamics and should have a better picture in the next 2 to 3 months. But it is important to remember a few things: first of all, the royalty rate that we paid this quarter declined by 60% from the previous rate; second, the PEA [ph] can also play a significant role since every player will need the DA approve the quota for the purchase of this controlled substance; and third, we have been serving our customers for more than 2.5 years and understanding their needs.

While Zomig and the generic Adderall XR are significant contributors to our results, we are actively working to enhance our market of product portfolio and the pipeline of a pending product, both internally and through partnership. We recently announced an agreement with TOLMAR to commercialize up to 9 current approved generic topical prescription product. This agreement also included 2 additional generic topical products, of which one is a first-to-file product. We anticipate that after a brief transition period, we will begin marketing those products late in the third quarter or early fourth quarter. This transaction is expected to be accretive to our 2012 EPS and allow us to accelerate our entry into alternative dosage form area.

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