HAYWARD, Calif., Nov. 9, 2017 /PRNewswire/ -- Impax
Laboratories, Inc. (NASDAQ: IPXL), today announced third
quarter 2017 financial results.
Total revenues in the third quarter 2017 were $206.4 million, a decrease of 9.4%, compared to
$227.9 million in the prior year
period as a decrease in sales of generic products was partially
offset by an increase in sales of specialty products.
GAAP net loss was $49.4 million or
a loss of $0.69 per share for the
third quarter 2017, compared to a loss of $179.3 million or a loss of $2.51 per share in the prior year period. The
third quarter 2017 results included a reserve charge for pre-launch
product inventory due to delays in anticipated regulatory
approvals, non-cash intangible asset impairment charges, and
restructuring and severance charges related to the Company's
operational and cost improvement plans. The third quarter 2016
results include non-cash intangible asset impairment charges
primarily related to the products acquired from Teva
Pharmaceuticals Industries Ltd. and affiliates of Allergan plc (the
"Teva Transaction").
Adjusted net income was $16.7
million or $0.23 per share in
the third quarter 2017, compared to $26.1
million or $0.37 per share in
the prior year period, primarily due to lower product revenue
caused by buyer consolidation and additional competition. Refer to
the attached "Non-GAAP Financial Measures" for a reconciliation of
all GAAP to non-GAAP items.
For the third quarter 2017, EBITDA (earnings before interest,
taxes, depreciation and amortization) was a loss of $15.4 million, compared to a loss of $247.9 million in the prior year period,
primarily as a result of the charges noted above. Adjusted EBITDA
was $45.6 million, compared to
$58.9 million in the prior year
period. Cash and cash equivalents were $157.7 million as of September 30, 2017.
"This quarter saw us execute on our Path Forward long-term
growth strategy with the announcement of the pending Amneal
Pharmaceuticals transaction," said Paul
Bisaro, President and Chief Executive Officer of Impax. "The
combination with Amneal will provide multiple opportunities to
drive strong future growth, including investment in high-growth
specialty assets. This combination will create a more diversified
company with one of the industry's leading high-value generic
product pipelines with broad R&D capabilities across dosage
forms. We are actively engaged in pre-integration planning and
continue to target a close in the first half of 2018."
"While our third quarter results were in line with our
expectations, we continue to navigate the challenging generic
market environment. As such, we accelerated our focus on aligning
infrastructure to support standalone revenue and earnings growth,
while closely controlling our expenses. We have made significant
progress on our operational and cost improvement plan as we
currently expect to complete the closure of our Middlesex, New Jersey packaging facility by
the end of 2017, ahead of schedule. Additionally, we are in
late-stage negotiations for the sale of our Taiwan manufacturing facility. If we are
successful in selling our Taiwan
facility by the end of the first quarter of 2018, we could realize
the anticipated cost savings by the end of 2018, approximately one
year ahead of schedule."
Business Segment Information
The Company has two reportable segments, the Impax Generics
division and the Impax Specialty Pharma division and does not
allocate general corporate services to either segment. All
information presented is on a GAAP basis unless otherwise
noted.
Impax Generics
Division Information (Unaudited; In thousands)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
|
|
|
|
Impax Generics Product
sales, net
|
$ 151,098
|
|
$
175,320
|
|
$ 436,134
|
|
$
467,094
|
Cost of
revenues
|
141,133
|
|
115,020
|
|
355,375
|
|
307,936
|
Cost of revenues
impairment charges
|
13,623
|
|
256,462
|
|
52,903
|
|
258,007
|
Gross (loss)
profit
|
(3,658)
|
|
(196,162)
|
|
27,856
|
|
(98,849)
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
5,570
|
|
6,103
|
|
20,072
|
|
12,442
|
Research and
development
|
12,241
|
|
15,375
|
|
50,632
|
|
46,113
|
In-process research
and development impairment charges
|
-
|
|
15,543
|
|
6,079
|
|
16,489
|
Patent litigation
expense
|
28
|
|
147
|
|
715
|
|
416
|
Total operating
expenses
|
17,839
|
|
37,168
|
|
77,498
|
|
75,460
|
Loss from
operations
|
$ (21,497)
|
|
$
(233,330)
|
|
$ (49,642)
|
|
$
(174,309)
|
|
|
|
|
|
|
|
|
Gross
margin
|
(2.4%)
|
|
(111.9%)
|
|
6.4%
|
|
(21.2%)
|
Adjusted gross profit
(a)
|
$
52,203
|
|
$
76,873
|
|
$ 166,294
|
|
$
192,634
|
Adjusted gross margin
(a)
|
34.5%
|
|
43.8%
|
|
38.1%
|
|
41.2%
|
|
(a)
|
Adjusted gross profit
is calculated as total revenues less adjusted cost of revenues.
Adjusted gross margin is calculated as adjusted gross profit
divided by total revenues. Refer to the "Non-GAAP Financial
Measures" for a reconciliation of GAAP to non-GAAP
items.
|
Total revenues for the Generics division in the third quarter
2017 were $151.1 million, a decrease
of 13.8%, compared to the prior year period. The decrease compared
to the prior year period was primarily due to revenue reductions
and increased competition on a few key products including
metaxalone, fenofibrate and oxymorphone ER, partially offset by
higher sales of epinephrine auto-injector, diclofenac sodium gel
3%, new product launches and products acquired as part of the Teva
Transaction.
Gross margin in the third quarter 2017 was a loss of 2.4%,
compared to a loss of 111.9% in the prior year period, primarily
due to lower impairment charges during the current year period,
partially offset by new product launch inventory reserves and
facility closure costs. Adjusted gross margin in the third quarter
2017 declined to 34.5%, compared to 43.8% in the prior year period,
primarily due to product sales mix and an increase in product
reserves for short dated inventory and lower-cost-to-market
adjustments on a few products acquired in the Teva Transaction,
Total operating expenses in the third quarter 2017 were
$17.8 million, compared to
$37.2 million in the prior year
period. The decline was primarily due to in-process research and
development impairment charges in the third quarter 2016 for which
there were no comparable amounts in the current year period.
Additionally, research and development expenses in the third
quarter 2017 declined compared to the prior year period primarily
as a result of the closure of the Company's Middlesex, New Jersey research and development
facility.
Impax Specialty
Pharma Division Information (Unaudited; In
thousands)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
|
|
|
|
Rytary® sales,
net
|
$
21,520
|
|
$
19,807
|
|
$
63,347
|
|
$
52,030
|
Zomig® sales,
net
|
13,899
|
|
15,257
|
|
36,081
|
|
39,963
|
All Other Specialty
Pharma Product sales, net
|
19,875
|
|
17,525
|
|
57,315
|
|
66,920
|
Total
revenues
|
55,294
|
|
52,589
|
|
156,743
|
|
158,913
|
Cost of
revenues
|
17,603
|
|
21,853
|
|
53,269
|
|
49,916
|
Gross
profit
|
37,691
|
|
30,736
|
|
103,474
|
|
108,997
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
16,135
|
|
16,358
|
|
49,279
|
|
46,309
|
Research and
development
|
3,580
|
|
4,740
|
|
14,525
|
|
13,824
|
In-process research
and development impairment charges
|
-
|
|
13,227
|
|
-
|
|
13,227
|
Patent litigation
expense
|
1,612
|
|
3,132
|
|
3,167
|
|
6,111
|
Total operating
expenses
|
21,327
|
|
37,457
|
|
66,971
|
|
79,471
|
Income (loss) from
operations
|
$
16,364
|
|
$
(6,721)
|
|
$
36,503
|
|
$
29,526
|
|
|
|
|
|
|
|
|
Gross
margin
|
68.2%
|
|
58.4%
|
|
66.0%
|
|
68.6%
|
Adjusted gross profit
(a)
|
$
46,792
|
|
$
38,152
|
|
$ 122,239
|
|
$ 127,472
|
Adjusted gross margin
(a)
|
84.6%
|
|
72.5%
|
|
78.0%
|
|
80.2%
|
|
(a)
|
Adjusted gross profit
is calculated as total revenues less adjusted cost of revenues.
Adjusted gross margin is calculated as adjusted gross profit
divided by total revenues. Refer to the "Non-GAAP Financial
Measures" for a reconciliation of GAAP to non-GAAP
items.
|
Total revenues for the Impax Specialty Pharma division in the
third quarter 2017 were $55.3
million, an increase of 5.1%, compared to the prior year
period, driven by higher sales of Rytary® and the
anthelmintic products franchise, partially offset by lower sales of
Zomig®.
Gross margin in the third quarter 2017 was 68.2%, compared to
58.4% in the prior year period primarily due to product sales mix,
lower amortization expenses and lower short dated inventory
reserves. Adjusted gross margin in the third quarter 2017 was
84.6%, compared to 72.5% in the prior year period, primarily due to
product sales mix and a decline in short dated inventory
reserve.
Total operating expenses in the third quarter 2017 were
$21.3 million, compared to
$37.5 million in the prior year
period. The decline was primarily due to in-process research and
development impairment charges of $13.2
million in the third quarter 2016 for which there was no
comparable amounts in the current year period. Additionally, total
operating expenses in the third quarter 2017 declined compared to
the prior year period due to lower research and development and
patent litigation expenses.
Corporate and
Other Information (Unaudited; In thousands)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
General and
administrative expenses
|
$
31,880
|
|
$
32,577
|
|
$
82,904
|
|
$
85,493
|
Unallocated corporate
expenses
|
$
(31,880)
|
|
$
(32,577)
|
|
$
(82,904)
|
|
$
(85,493)
|
General and administrative expenses in the third quarter 2017
were $31.9 million, a decrease of
2.1% compared to the prior year period.
Interest expense in the third quarter 2017 was $13.6 million, an increase of $2.5 million compared to the prior year period,
due to the $400.0 million Term Loan
Facility entered into by the Company in the third quarter 2016 to
finance the Teva Transaction.
2017 Financial Guidance
The Company's full year 2017 financial guidance is noted below.
The Company's full year 2017 estimates are based on management's
current expectations, including with respect to prescription
trends, pricing levels, inventory levels, and the anticipated
timing of future product launches and events.
The Company does not provide forward-looking guidance metrics as
outlined below on a GAAP basis as certain financial information,
such as restructuring and impairment charges and other items used
to determine such measures are not available and cannot be
reasonably estimated. The following statements are forward looking
and actual results could differ materially depending on market
conditions and the factors set forth under "Safe Harbor" below.
- UPDATED - Adjusted gross margins as a percent of total revenue
are expected to be approximately 47% (previously 47% to 49%).
- UPDATED - Adjusted research and development expenses, including
patent litigation expenses, across the generic and brand divisions
of approximately $84 million to $88
million (previously $93 million to
$97 million).
- Adjusted selling, general and administrative expenses of
approximately $190 million to $195
million.
- Adjusted interest expense of approximately $28 million.
- Capital expenditures of approximately $25 million to $30 million.
- Effective tax rate of approximately 33%.
- UPDATED - Full year 2017 adjusted net income per share of
$0.60 to $0.65 (previously
$0.55 to $0.70).
IPX203 Phase 2b Study Results
The Company recently completed the clinical phase of its Phase
2b study for IPX203, an investigational extended-release
formulation of carbidopa-levodopa (CD-LD) in advanced Parkinson's
disease patients. The Company is evaluating next steps in the
further development of IPX203.
In the multiple dose Phase 2b study, patients achieved an
average 2.2 hours reduction in "Off" time during the IPX203
treatment period compared to during the IR CD-LD treatment period
and 2.0 hours improvement in "Good On" time based on patient diary
data. Treatment-emergent adverse events (TEAEs) reported in
two or more subjects during IPX203 treatment included nausea,
dizziness, and dyskinesia. Results from the multiple dose Phase 2b
study confirmed earlier results of the Phase 2a single dose
study.
The Phase 2b study was a randomized 2-week, multiple dose,
multicenter, rater-blinded, active-controlled, crossover clinical
trial that evaluated IPX203 compared to immediate-release (IR)
CD-LD in patients with advanced Parkinson's disease (PD). It
enrolled 28 patients, ages 47 to 83 years, at 11 sites in the
United States. The study evaluated the safety and efficacy of
individualized doses of IPX203 based on a patient's prestudy
individualized regimen of CD-LD.
Conference Call Information
The Company will host a conference call with a slide
presentation on November 9, 2017 at
8:30 a.m. ET to discuss its results.
The call and presentation can also be accessed via a live Webcast
through the Investor Relations section of the Company's Web site,
www.impaxlabs.com. The number to call from within the United States is (877) 356-3814 and (706)
758-0033 internationally. The conference ID is 95367972. 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).
About Impax Laboratories, Inc.
Impax Laboratories, Inc. (Impax) is a 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 central nervous system
disorder branded products. Impax markets its generic products
through its Impax Generics division and markets its branded
products through the Impax Specialty Pharma division. Additionally,
where strategically appropriate, Impax develops marketing
partnerships to fully leverage its technology platform and pursues
partnership opportunities that offer alternative dosage form
technologies, such as injectables, nasal sprays, inhalers, patches,
creams, and ointments. 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: fluctuations in the Company's operating results and
financial condition; the volatility of the market price of the
Company's common stock; the Company's ability to successfully
develop and commercialize pharmaceutical products in a timely
manner; the impact of competition; the effect of any manufacturing
or quality control problems; the Company's ability to manage
its growth; risks related to acquisitions of or investments in
technologies, products or businesses; the risks related to the sale
or closure of our Taiwan
manufacturing facility; effects from fluctuations in currency
exchange rates between the U.S. dollar and the Taiwan dollar; risks relating to goodwill and
intangibles; the reduction or loss of business with any significant
customer; the substantial portion of the Company's total revenues
derived from sales of a limited number of products; the impact of
consolidation of the Company's customer base; the Company's ability
to sustain profitability and positive cash flows; the impact of any
valuation allowance on the Company's deferred tax assets; the
restrictions imposed by the Company's credit facility and
indenture; the Company's level of indebtedness and liabilities and
the potential impact on cash flow available for operations; the
availability of additional funds in the future; any delays or
unanticipated expenses in connection with the operation of the
Company's manufacturing facilities; the effect of foreign economic,
political, legal and other risks on the Company's operations
abroad; the uncertainty of patent litigation and other legal
proceedings; the increased government scrutiny on the Company's
agreements to settle patent litigations, product development risks
and the difficulty of predicting FDA filings and approvals;
consumer acceptance and demand for new pharmaceutical products; the
impact of market perceptions of the Company and the safety and
quality of the Company's products; the Company's determinations to
discontinue the manufacture and distribution of certain products;
the Company's ability to achieve returns on its investments in
research and development activities; changes to FDA approval
requirements; the Company's ability to successfully conduct
clinical trials; the Company's reliance on third parties to conduct
clinical trials and testing; the Company's lack of a license
partner for commercialization of Numient® (IPX066) outside of
the United States; impact of
illegal distribution and sale by third parties of counterfeits or
stolen products; the availability of raw materials and impact of
interruptions in the Company's supply chain; the Company's policies
regarding returns, rebates, allowances and chargebacks; the use of
controlled substances in the Company's products; the effect of
current economic conditions on the Company's industry, business,
results of operations and financial condition; disruptions or
failures in the Company's information technology systems and
network infrastructure caused by third party breaches or other
events; the Company's reliance on alliance and collaboration
agreements; the Company's reliance on licenses to proprietary
technologies; 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
effect of certain provisions in the Company's government contracts;
the Company's ability to protect its intellectual property;
exposure to product liability claims; changes in tax regulations;
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; 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; expansion of social media
platforms 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 the Company undertakes no obligation to update
publicly or revise any forward-looking statement, regardless of
whether new information becomes available, future developments
occur or otherwise.
Company Contact:
Mark
Donohue
Investor Relations and Corporate Communications
(215) 558-4526
www.impaxlabs.com
Impax
Laboratories, Inc. Consolidated Statements of
Operations (Unaudited; In thousands, except share and per
share data)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
|
|
|
|
Impax Generics,
net
|
$
151,098
|
|
$
175,320
|
|
$
436,134
|
|
$
467,094
|
Impax Specialty
Pharma, net
|
55,294
|
|
52,589
|
|
156,743
|
|
158,913
|
Total
revenues
|
206,392
|
|
227,909
|
|
592,877
|
|
626,007
|
Cost of
revenues
|
158,736
|
|
136,873
|
|
408,644
|
|
357,852
|
Cost of revenues
impairment charges
|
13,623
|
|
256,462
|
|
52,903
|
|
258,007
|
Gross profit
(loss)
|
34,033
|
|
(165,426)
|
|
131,330
|
|
10,148
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
Selling, general and
administrative
|
53,585
|
|
55,038
|
|
152,255
|
|
144,244
|
Research and
development
|
15,821
|
|
20,115
|
|
65,157
|
|
59,937
|
In-process research
and development impairment charges
|
-
|
|
28,770
|
|
6,079
|
|
29,716
|
Patent litigation
expense
|
1,640
|
|
3,279
|
|
3,882
|
|
6,527
|
Total operating
expenses
|
71,046
|
|
107,202
|
|
227,373
|
|
240,424
|
Loss from
operations
|
(37,013)
|
|
(272,628)
|
|
(96,043)
|
|
(230,276)
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest
expense
|
(13,636)
|
|
(11,089)
|
|
(40,385)
|
|
(27,874)
|
Interest
income
|
336
|
|
222
|
|
645
|
|
895
|
Reserve
for Turing receivable
|
-
|
|
-
|
|
(2,670)
|
|
(48,043)
|
Gain on
sale of intangible assets
|
-
|
|
-
|
|
11,850
|
|
-
|
Gain
(loss) on disposal of property, plant and equipment
|
4,708
|
|
(33)
|
|
4,963
|
|
111
|
Loss on
debt extinguishment
|
-
|
|
-
|
|
(1,215)
|
|
-
|
Change
in fair value of contingent consideration
|
(6,333)
|
|
-
|
|
(7,075)
|
|
-
|
Fixed
assets impairment charges
|
(828)
|
|
(134)
|
|
(3,022)
|
|
(134)
|
Other,
net
|
352
|
|
(206)
|
|
(7,929)
|
|
9
|
Loss before income
taxes
|
(52,414)
|
|
(283,868)
|
|
(140,881)
|
|
(305,312)
|
(Benefit from)
provision for income taxes
|
(3,045)
|
|
(104,531)
|
|
27,336
|
|
(112,866)
|
Net loss
|
$ (49,369)
|
|
$
(179,337)
|
|
$
(168,217)
|
|
$
(192,446)
|
|
|
|
|
|
|
|
|
Net loss per common
share:
|
|
|
|
|
|
|
|
Basic
|
$
(0.69)
|
|
$
(2.51)
|
|
$
(2.34)
|
|
$
(2.71)
|
Diluted
|
$
(0.69)
|
|
$
(2.51)
|
|
$
(2.34)
|
|
$
(2.71)
|
|
|
|
|
|
|
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
Basic
|
71,924,592
|
|
71,331,247
|
|
71,775,537
|
|
71,033,346
|
Diluted
|
71,924,592
|
|
71,331,247
|
|
71,775,537
|
|
71,033,346
|
Impax
Laboratories, Inc. Condensed Consolidated Balance
Sheets (Unaudited; In thousands)
|
|
|
September
30,
|
|
December
31,
|
|
2017
|
|
2016
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and
cash equivalents
|
$
157,658
|
|
$
180,133
|
Accounts
receivable, net
|
242,020
|
|
257,368
|
Inventory, net
|
172,786
|
|
175,230
|
Prepaid
expenses and other current assets
|
60,734
|
|
18,410
|
Total
current assets
|
633,198
|
|
631,141
|
Property, plant and
equipment, net
|
223,192
|
|
233,372
|
Intangible assets,
net
|
510,067
|
|
620,466
|
Goodwill
|
207,329
|
|
207,329
|
Deferred income
taxes, net
|
17,090
|
|
69,866
|
Other non-current
assets
|
58,278
|
|
60,844
|
Total
assets
|
$
1,649,154
|
|
$
1,823,018
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable and accrued expenses
|
$
306,202
|
|
$
303,605
|
Current
portion of contingent consideration
|
25,000
|
|
-
|
Current
portion of long-term debt, net
|
17,836
|
|
17,719
|
Total
current liabilities
|
349,038
|
|
321,324
|
Long-term debt,
net
|
767,935
|
|
813,545
|
Deferred income
taxes
|
1,950
|
|
-
|
Other non-current
liabilities
|
48,300
|
|
64,175
|
Total
liabilities
|
1,167,223
|
|
1,199,044
|
Total stockholders'
equity
|
481,931
|
|
623,974
|
Total liabilities and
stockholders' equity
|
$
1,649,154
|
|
$
1,823,018
|
Impax
Laboratories, Inc. Condensed Consolidated Statements of
Cash Flows (Unaudited; In thousands)
|
|
|
|
Nine Months
Ended
|
|
|
September
30,
|
|
|
2017
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
Net loss
|
$
(168,217)
|
|
$
(192,446)
|
Adjustments to
reconcile net loss to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
85,378
|
|
63,101
|
|
Non-cash interest
expense
|
19,289
|
|
16,604
|
|
Share-based
compensation expense
|
19,672
|
|
23,375
|
|
Deferred income
taxes, net and uncertain tax positions
|
53,626
|
|
(94,703)
|
|
Intangible asset
impairment charges
|
58,982
|
|
287,723
|
|
Reserve for Turing
receivable
|
2,670
|
|
48,043
|
|
Gain on sale of
intangible assets
|
(11,850)
|
|
-
|
|
Gain on disposal of
property, plant and equipment
|
(4,963)
|
|
(111)
|
|
Loss on debt
extinguishment
|
1,215
|
|
-
|
|
Change in fair value
of contingent consideration
|
7,075
|
|
-
|
|
Fixed asset
impairment charges
|
3,022
|
|
134
|
|
Other
|
(1,018)
|
|
-
|
|
Changes in assets and
liabilities which used cash
|
(18,072)
|
|
(47,663)
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
46,809
|
|
104,057
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Payment for business
acquisition
|
-
|
|
(585,800)
|
|
Purchases of
property, plant and equipment
|
(24,177)
|
|
(31,860)
|
|
Proceeds from sales
of property, plant and equipment
|
9,105
|
|
1,346
|
|
Proceeds from sales
of intangible assets
|
11,850
|
|
-
|
|
Proceeds from cash
surrender value of life insurance policy
|
529
|
|
-
|
|
Payments for
licensing agreements
|
-
|
|
(3,500)
|
|
Proceeds from
repayment of Tolmar loan
|
-
|
|
15,000
|
|
|
|
|
|
|
Net cash used in
investing activities
|
(2,693)
|
|
(604,814)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Proceeds from
issuance of term loan
|
-
|
|
400,000
|
|
Repayment of term
loan
|
(65,000)
|
|
-
|
|
Payment of deferred
financing fees
|
(818)
|
|
(11,867)
|
|
Payment of
withholding taxes related to restricted stock awards
|
(2,668)
|
|
(5,782)
|
|
Proceeds from
exercise of stock options and ESPP
|
847
|
|
9,137
|
|
|
|
|
|
|
Net cash (used in)
provided by financing activities
|
(67,639)
|
|
391,488
|
|
|
|
|
|
Effect of exchange
rate changes on cash and cash equivalents
|
1,048
|
|
1,041
|
Net decrease in cash
and cash equivalents
|
(22,475)
|
|
(108,228)
|
Cash and cash
equivalents, beginning of period
|
180,133
|
|
340,351
|
Cash and cash
equivalents, end of period
|
$
157,658
|
|
$
232,123
|
Impax
Laboratories, Inc. Non-GAAP Financial
Measures
|
|
Adjusted net income,
adjusted net income per diluted share, EBITDA, adjusted EBITDA,
adjusted cost of revenues, adjusted research and development
expenses and adjusted selling, general and administrative expenses
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 loss, GAAP net loss per
diluted share, GAAP cost of revenues, GAAP research and development
expenses and GAAP selling, general and administrative expenses 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 addition 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 calculations of
adjusted net income, adjusted net income per diluted share, EBITDA,
adjusted EBITDA, adjusted cost of revenues, adjusted research and
development expenses and adjusted selling, general and
administrative expenses, 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 loss to adjusted net income:
(Unaudited; In thousands, except per share data)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net loss
|
$
(49,369)
|
|
$(179,337)
|
|
$(168,217)
|
|
$(192,446)
|
Adjusted to add
(deduct):
|
|
|
|
|
|
|
|
Amortization
(a)
|
17,015
|
|
18,367
|
|
51,466
|
|
39,604
|
Non-cash interest
expense (b)
|
6,547
|
|
5,890
|
|
19,289
|
|
16,605
|
Business development
expenses (c)
|
2,888
|
|
2,072
|
|
3,037
|
|
4,289
|
Intangible asset
impairment charges (d)
|
13,623
|
|
285,232
|
|
58,982
|
|
287,723
|
Reserve for Turing receivable (e)
|
-
|
|
-
|
|
2,670
|
|
48,043
|
Turing legal expenses
(f)
|
214
|
|
5,443
|
|
(191)
|
|
5,443
|
Restructuring and
severance charges (g)
|
10,937
|
|
5,600
|
|
27,673
|
|
12,191
|
Fixed asset impairment
charges (h)
|
-
|
|
-
|
|
1,894
|
|
-
|
Lease termination for
office consolidation (i)
|
-
|
|
144
|
|
-
|
|
144
|
Gain on sale of
intangible assets (j)
|
-
|
|
-
|
|
(11,850)
|
|
-
|
Gain on disposal of
property, plant and equipment (k)
|
(4,379)
|
|
-
|
|
(4,729)
|
|
-
|
Loss on debt
extinguishment (l)
|
-
|
|
-
|
|
1,215
|
|
-
|
Middlesex plant
closure (m)
|
4,334
|
|
-
|
|
9,314
|
|
-
|
New product launch
inventory reserve (n)
|
20,478
|
|
-
|
|
20,478
|
|
-
|
Legal settlements
(o)
|
-
|
|
-
|
|
7,900
|
|
-
|
Other
(p)
|
6,393
|
|
622
|
|
9,610
|
|
922
|
Income tax effect
(q)
|
(11,998)
|
|
(117,884)
|
|
9,009
|
|
(150,504)
|
Adjusted net
income
|
$
16,683
|
|
$
26,149
|
|
$
37,550
|
|
$
72,014
|
|
|
|
|
|
|
|
|
Adjusted net income
per diluted share
|
$
0.23
|
|
$
0.37
|
|
$
0.52
|
|
$
1.00
|
Net loss per diluted
share
|
$
(0.69)
|
|
$
(2.51)
|
|
$
(2.34)
|
|
$
(2.71)
|
|
|
|
|
|
|
|
|
Diluted
weighted-average common shares outstanding
|
72,172,296
|
|
71,542,153
|
|
71,775,803
|
|
71,840,480
|
Impax
Laboratories, Inc.
|
Non-GAAP Financial
Measures
|
|
(a)
|
Reflects amortization
of intangible assets from the portfolio of products acquired from
Teva Pharmaceuticals Industries Ltd. and affiliates of Allergan plc
(the "Teva Transaction") in August 2016 and from the acquisition of
Tower Holdings, Inc. and its subsidiaries in March 2015 (the "Tower
Acquisition").
|
(b)
|
Related to
non-cash accretion of debt discount attributable to deferred
financing costs associated with the $400.0 million term loan
facility (the "Term Loan Facility") to finance the Teva Transaction
and the $600.0 million of outstanding 2% convertible senior notes,
as well as bifurcation of the conversion option of the convertible
notes.
|
(c)
|
Business development
expenses are professional fees primarily related to the Teva
Transaction and the proposed combination with Amneal
Pharmaceuticals that the Company announced in the fourth quarter of
2017.
|
(d)
|
The Company
recognized $13.6 million in intangible asset impairment charges
during the three months ended September 30, 2017, all of which was
recognized in cost of revenues impairment charges and entirely
attributable to one currently marketed product, acquired as part of
the Teva Transaction. The impairment charge was the result of
continued price erosion during the quarter with no offsetting
increase in customer demand, resulting in lower expected future
cash flows.
|
(e)
|
The Company recorded
a reserve in the amount of $48.0 million during the first quarter
2016, representing the full amount of the estimated receivable due
from Turing Pharmaceuticals AG as a result of the uncertainty of
the Company collecting the reimbursement amounts owed by Turing
related to the Company's sale of Daraprim® to Turing.
During the fourth quarter of 2016, the Company received $7.7
million in payments from Turing. During the nine month period ended
September 30, 2017, the Company increased the reserve balance by
$3.6 million to reflect additional estimated Medicaid rebate claims
due from Turing. The Company received an additional $0.9 million of
payments from Turing during the second quarter of 2017. As of
September 30, 2017, the $43.0 million estimated receivable due from
Turing was fully reserved.
|
(f)
|
The Company recorded
a credit in the first quarter 2017 for legal fees incurred as a
result of the Company's litigation against Turing alleging breach
of the terms of the Turing Asset Purchase Agreement in the
Company's sale of Daraprim® resulting from Turing's
failure to reimburse the Company for chargebacks and Medicaid
rebate liability.
|
(g)
|
During the third
quarter 2017, the Company recorded restructuring and severance
charges of $4.1 million related to the March 2016 announced closure
of the Company's Middlesex, New Jersey manufacturing and packaging
site. Additionally, the Company recorded restructuring and
severance charges of $6.9 million in the third quarter 2017
primarily related to the closure of generic research and
development activities at the Middlesex site as well as the
announced sale or closure of its Taiwan manufacturing facility as
part of the Company's consolidation and improvement plan announced
in May 2017. During the third quarter of 2016, the Company recorded
restructuring and severance charges of $5.5 million related to the
closure of its Middlesex manufacturing and packaging
site.
|
(h)
|
The Company recorded
an impairment charge relating to obsolete software in the second
quarter 2017.
|
(i)
|
During the third
quarter 2016, the Company consolidated its three Pennsylvania
locations into a new leased facility in Fort Washington,
Pennsylvania.
|
(j)
|
During the second
quarter 2017, the Company recorded a gain on the sale of 29 ANDAs
and one NDA for non-strategic approved generic products, the vast
majority of which were not marketed, and all acquired as part of
the Tower Acquisition.
|
(k)
|
During the third
quarter 2017, the Company recognized a gain of $4.4 million related
to the sale of a storage warehouse in Hayward,
California.
|
(l)
|
In the first
quarter 2017, the Company voluntarily prepaid $50.0 million of
principal on Term Loan Facility, resulting in a loss on debt
extinguishment of $1.2 million incurred to write-off a pro-rated
portion of the related deferred debt issuance costs.
|
(m)
|
During the third
quarter 2017, the Company recorded underabsorption charges in cost
of goods sold related to the closure of its Middlesex, New Jersey
facility, which ceased production activities at the end of the
first quarter 2017.
|
(n)
|
During the third
quarter 2017, the Company recorded a pre-launch inventory reserve
of $20.5 million, primarily related to colesevelam (generic
Welchol®).
|
(o)
|
During the second
quarter 2017, the Company recorded $7.9 million of legal settlement
expenses related to the potential settlement of certain current
outstanding litigation, a portion of which includes the expenses
related to the settlement of the contract dispute with Endo
International plc.
|
(p)
|
During the third
quarter 2017, the Company recorded charges totaling $6.4 million
related to a milestone payment to a third party partner under the
terms of a research and development agreement and the change in the
fair value of a contingent consideration due to Teva related to
methylphenidate hydrochloride (generic Comcerta®).
|
(q)
|
Adjusted income taxes
are calculated by tax effecting adjusted pre-tax income at the
applicable effective tax rate that will be determined by reference
to statutory tax rates in the relevant jurisdiction in which the
Company operates and includes current and deferred income tax
expense commensurate with the non-GAAP measure of
profitability.
|
The following table
reconciles reported net loss to adjusted EBITDA:
(Unaudited, In thousands)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Net loss
|
$
(49,369)
|
|
$
(179,337)
|
|
$
(168,217)
|
|
$
(192,446)
|
Adjusted to add
(deduct):
|
|
|
|
|
|
|
|
Interest
expense
|
13,636
|
|
11,089
|
|
40,385
|
|
27,874
|
Interest
income
|
(336)
|
|
(222)
|
|
(645)
|
|
(895)
|
Income
taxes
|
(3,045)
|
|
(104,531)
|
|
27,336
|
|
(112,866)
|
Depreciation and
amortization
|
23,708
|
|
25,059
|
|
72,161
|
|
59,350
|
EBITDA
|
(15,406)
|
|
(247,942)
|
|
(28,980)
|
|
(218,983)
|
|
|
|
|
|
|
|
|
Adjusted to add
(deduct):
|
|
|
|
|
|
|
|
Share-based
compensation expense
|
6,490
|
|
7,713
|
|
19,672
|
|
23,375
|
Business development
expenses
|
2,888
|
|
2,072
|
|
3,037
|
|
4,289
|
Intangible asset
impairment charges
|
13,623
|
|
285,232
|
|
58,982
|
|
287,723
|
Reserve for Turing receivable
|
-
|
|
-
|
|
2,670
|
|
48,043
|
Turing legal
expenses
|
214
|
|
5,443
|
|
(191)
|
|
5,443
|
Restructuring and
severance charges
|
10,937
|
|
5,600
|
|
27,673
|
|
12,191
|
Fixed asset impairment
charges
|
-
|
|
-
|
|
1,894
|
|
-
|
Lease termination for
office consolidation
|
-
|
|
144
|
|
-
|
|
144
|
Gain on sale of
intangible assets
|
-
|
|
-
|
|
(11,850)
|
|
-
|
Gain on disposal of
property, plant and equipment
|
(4,379)
|
|
-
|
|
(4,729)
|
|
-
|
Loss on debt
extinguishment
|
-
|
|
-
|
|
1,215
|
|
-
|
Middlesex plant
closure
|
4,334
|
|
-
|
|
9,314
|
|
-
|
New product launch
inventory reserve
|
20,478
|
|
-
|
|
20,478
|
|
-
|
Legal
settlements
|
-
|
|
-
|
|
7,900
|
|
-
|
Other
|
6,393
|
|
622
|
|
9,610
|
|
922
|
Adjusted
EBITDA
|
$
45,572
|
|
$
58,884
|
|
$ 116,695
|
|
$
163,147
|
Impax
Laboratories, Inc. Non-GAAP Financial
Measures (Unaudited; In thousands)
|
|
The following table
reconciles reported cost of revenues, research and development
expenses, and selling, general and administrative expenses to
adjusted cost of revenues, adjusted gross profit, adjusted gross
margin, adjusted research and development expenses, and adjusted
selling, general and administrative expenses:
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Cost of
revenues
|
$
158,736
|
|
$
136,873
|
|
$
408,644
|
|
$
357,852
|
Cost of revenues
impairment charges
|
13,623
|
|
256,462
|
|
52,903
|
|
258,007
|
Adjusted to
deduct:
|
|
|
|
|
|
|
|
Amortization
|
17,015
|
|
18,367
|
|
51,466
|
|
39,604
|
Intangible asset
impairment charges
|
13,623
|
|
256,462
|
|
52,903
|
|
258,007
|
Business
development
|
55
|
|
-
|
|
112
|
|
-
|
Restructuring and
severance charges
|
9,502
|
|
5,569
|
|
23,042
|
|
12,294
|
Lease termination for
office consolidation
|
-
|
|
53
|
|
-
|
|
53
|
Middlesex plant
closure
|
4,334
|
|
-
|
|
9,314
|
|
-
|
New product launch
inventory reserve
|
20,478
|
|
-
|
|
20,478
|
|
-
|
Adjusted cost of
revenues
|
$
107,352
|
|
$
112,884
|
|
$
304,232
|
|
$
305,901
|
|
|
|
|
|
|
|
|
Adjusted gross profit
(a)
|
$
99,040
|
|
$
115,025
|
|
$
288,645
|
|
$
320,106
|
Adjusted gross margin
(a)
|
48.0%
|
|
50.5%
|
|
48.7%
|
|
51.1%
|
|
|
|
|
|
|
|
|
Research and
development expenses
|
$
15,821
|
|
$
20,115
|
|
$
65,157
|
|
$
59,937
|
In-process research
and development impairment charges
|
-
|
|
28,770
|
|
6,079
|
|
29,716
|
Adjusted to
deduct:
|
|
|
|
|
|
|
|
Intangible asset
impairment charges
|
-
|
|
28,770
|
|
6,079
|
|
29,716
|
Restructuring and
severance charges
|
356
|
|
-
|
|
3,281
|
|
-
|
Other
|
60
|
|
622
|
|
2,535
|
|
922
|
Adjusted research and
development expenses
|
$
15,405
|
|
$
19,493
|
|
$
59,341
|
|
$
59,015
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses
|
$
53,585
|
|
$
55,038
|
|
$
152,255
|
|
$
144,244
|
Adjusted to
deduct:
|
|
|
|
|
|
|
|
Business development
expenses
|
2,833
|
|
2,072
|
|
2,925
|
|
4,289
|
Turing legal
expenses
|
214
|
|
5,443
|
|
(191)
|
|
5,443
|
Restructuring and
severance charges
|
511
|
|
31
|
|
782
|
|
72
|
Lease termination for
office consolidation
|
-
|
|
92
|
|
-
|
|
92
|
Adjusted selling,
general and administrative expenses
|
$
50,027
|
|
$
47,400
|
|
$
148,739
|
|
$
134,348
|
|
|
(a)
|
Adjusted gross profit
is calculated as total revenues less adjusted cost of revenues.
Adjusted gross margin is calculated as adjusted gross profit
divided by total
revenues.
|
Impax
Laboratories, Inc. Non-GAAP Financial
Measures (Unaudited; In thousands)
|
|
The following tables
reconcile the Impax Generics and Impax Specialty Pharma Divisions
reported cost of revenues to adjusted cost of revenues, adjusted
gross profit and adjusted gross margin:
|
|
Impax Generics
Division Information
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Cost of
revenues
|
$
141,133
|
|
$
115,020
|
|
$
355,375
|
|
$
307,936
|
Cost of revenues
impairment charges
|
13,623
|
|
256,462
|
|
52,903
|
|
258,007
|
Adjusted to
deduct:
|
|
|
|
|
|
|
|
Amortization
|
13,181
|
|
10,951
|
|
39,964
|
|
21,129
|
Intangible asset
impairment charges
|
13,623
|
|
256,462
|
|
52,903
|
|
258,007
|
Restructuring and
severance charges
|
4,245
|
|
5,569
|
|
15,779
|
|
12,294
|
Lease termination for
office consolidation
|
-
|
|
53
|
|
-
|
|
53
|
Middlesex plant
closure
|
4,334
|
|
-
|
|
9,314
|
|
-
|
New product launch
inventory reserve
|
20,478
|
|
-
|
|
20,478
|
|
-
|
Adjusted cost of
revenues
|
$
98,895
|
|
$
98,447
|
|
$
269,840
|
|
$
274,460
|
|
|
|
|
|
|
|
|
Adjusted gross profit
(a)
|
$
52,203
|
|
$
76,873
|
|
$
166,294
|
|
$
192,634
|
Adjusted gross margin
(a)
|
34.5%
|
|
43.8%
|
|
38.1%
|
|
41.2%
|
Impax Specialty
Pharma Division Information
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Cost of
revenues
|
$
17,603
|
|
$
21,853
|
|
$
53,269
|
|
$
49,916
|
Adjusted to
deduct:
|
|
|
|
|
|
|
|
Amortization
|
3,834
|
|
7,416
|
|
11,502
|
|
18,475
|
Restructuring and
severance charges
|
5,257
|
|
-
|
|
7,263
|
|
-
|
Adjusted cost of
revenues
|
$
8,512
|
|
$
14,437
|
|
$
34,504
|
|
$
31,441
|
|
|
|
|
|
|
|
|
Adjusted gross profit
(a)
|
$
46,782
|
|
$
38,152
|
|
$
122,239
|
|
$
127,472
|
Adjusted gross margin
(a)
|
84.6%
|
|
72.5%
|
|
78.0%
|
|
80.2%
|
|
|
(a)
|
Adjusted gross profit
is calculated as total revenues less adjusted cost of revenues.
Adjusted gross margin is calculated as adjusted gross profit
divided by total revenues.
|
Impax
Laboratories, Inc. Non-GAAP Financial
Measures (Unaudited; In thousands)
|
|
The following tables
reconcile the Impax Generics and Impax Specialty Pharma Divisions
reported (loss) income from operations to adjusted income from
operations:
|
|
Impax Generics
Division Information
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
GAAP loss from
operations
|
$
(21,497)
|
|
$
(233,330)
|
|
$
(49,642)
|
|
$
(174,309)
|
Adjusted to add
(deduct):
|
|
|
|
|
|
|
|
Amortization
|
13,181
|
|
10,951
|
|
39,964
|
|
21,129
|
Intangible asset
impairment charges
|
13,623
|
|
272,005
|
|
58,982
|
|
274,496
|
Restructuring and
severance charges
|
4,601
|
|
5,569
|
|
19,060
|
|
12,294
|
Lease termination for
office consolidation
|
-
|
|
144
|
|
-
|
|
144
|
Payments for licensing
agreements
|
60
|
|
622
|
|
2,535
|
|
922
|
Middlesex plant
closure
|
4,334
|
|
-
|
|
9,314
|
|
-
|
New product launch
inventory reserve
|
20,478
|
|
-
|
|
20,478
|
|
-
|
Adjusted income from
operations
|
$
34,780
|
|
$
55,961
|
|
$
100,691
|
|
$
134,676
|
Impax Specialty
Pharma Division Information
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
|
|
|
GAAP income (loss)
from operations
|
$
16,364
|
|
$
(6,721)
|
|
$
36,503
|
|
$
29,526
|
Adjusted to
add:
|
|
|
|
|
|
|
|
Amortization
|
3,834
|
|
7,416
|
|
11,502
|
|
18,475
|
Intangible asset
impairment charges
|
-
|
|
13,227
|
|
-
|
|
13,227
|
Restructuring and
severance charges
|
5,367
|
|
-
|
|
7,373
|
|
-
|
Adjusted income from
operations
|
$
25,565
|
|
$
13,922
|
|
$
55,378
|
|
$
61,228
|
View original
content:http://www.prnewswire.com/news-releases/impax-reports-third-quarter-2017-results-300552599.html
SOURCE Impax Laboratories, Inc.