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Impax Laboratories Reports First Quarter 2011 Financial Results

^{Published on 2011-05-03 20:21:39 - Market Wire}
 

HAYWARD, Calif.--([ BUSINESS WIRE ])--Impax Laboratories, Inc.(NASDAQ: IPXL) today reported first quarter ended March 31, 2011 financial results.

aOur 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.a said Larry Hsu, Ph.D., president and CEO, Impax Laboratories, Inc.

aAs 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 dona™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.a

aWe 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 Parkinsona™s disease. All of these pipeline opportunities provide the potential to fuel future growth.a

First Quarter 2011 Results

• 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 aNon-GAAP Financial Measuresa below for a reconciliation of GAAP to non-GAAP items.

Dr. Hsu further stated, aWe 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.a

aWe 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.a

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

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 Companya™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 Companya™s first quarter of 2010 sales.

The Companya™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

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 Companya™s leading drug candidate IPX066 for Parkinsona™s disease.

Corporate and Other

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 Companya™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 Companya™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 Companya™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 Companya™s intellectual property, exposure to product liability claims and other risks described in the Companya™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.