Impax Reports Second Quarter 2015 Financial Results

HAYWARD, Calif., Aug. 10, 2015 /PRNewswire/ -- Impax Laboratories, Inc. IPXL today reported second quarter 2015 financial results for the period ending June 30, 2015.

• Total revenues for the second quarter 2015 increased 14% to $214.2 million, compared to $188.1 million in the prior year period. The increase was primarily due to the addition of product revenues from the Company's acquisition on March 9, 2015 of Tower Holdings, Inc. and Lineage Therapeutics Inc. (together with its subsidiaries, "Tower"), and sales from new brand and generic product launched in 2015.

• Adjusted diluted earnings per share (EPS) for the second quarter of 2015 was $0.34, compared to the second quarter 2014 adjusted diluted EPS of $0.60. While total revenues increased in the second quarter 2015 as noted above, adjusted EPS decreased in the current year period primarily due to the absence of sales of high-margin authorized generic RENVELA^® in the current period, compared to revenues of $49.1 million from the product in the second quarter 2014. Also impacting the second quarter 2015 results were higher interest expense in connection with the financing for the Company's acquisition of Tower during the current period and a higher tax rate compared to the prior year period.

• On a GAAP basis, the Company reported a loss of $0.03 per diluted share for the second quarter 2015, compared to income of $0.50 per diluted share in the prior year period. GAAP EPS during the current period was impacted by the items noted above, as well as a charge for loss on the extinguishment of debt and higher amortization expense in connection with the Tower acquisition during the current period.

Fred Wilkinson, President and Chief Executive Officer of Impax, stated, "We delivered strong revenue growth in the second quarter driven by the addition of product sales from the Tower acquisition, as well as solid execution of recent product launches. The addition of the Tower generic product line coupled with the recent launch of six products from the Generics division more than offset the lost sales of authorized generic RENVELA during the quarter. Our Specialty Pharma division achieved profitability for the first time in two years as revenues more than tripled to $39.5 million compared to the same period last year, driven by the launch of RYTARY^®, continued growth of Zomig^® Nasal Spray and the addition of the brand products from Tower."

"Although total Company revenues increased by almost 14% in the second quarter, the overall gross margin declined primarily due to the addition of new generic products with lower margins compared to the margin of authorized generic RENVELA. Gross margin was also impacted by lower sales of our epinephrine auto-injector product during the current quarter due to a temporary supply disruption from our supplier. We have resolved the supply shortage and are in the process of re-stocking our customers. While we currently expect our gross margin to improve during the second half of 2015, we have revised our full year 2015 gross margin guidance from the previously stated mid 50% range to the low 50% range as a result of the product sales mix in the first half of this year."

"The integration of the Tower acquisition is essentially complete. We continue to focus on achieving the strategic benefits of this transaction and the previously identified synergies of approximately $20 million by the end of 2016. Our attention will now be aimed at improving our supply chain by increasing the efficiency of our internal and external network which is intended to improve product flow and capture cost efficiencies."

"This morning we announced the sale of Daraprim^®, a non-core asset we acquired in the Tower acquisition, for $55 million, recovering approximately 8% of the $700 million acquisition price. In late June, we adjusted our capital structure by issuing a convertible bond offering with a 2% coupon and terminated our term loan which had a floating interest rate of 5.5%, resulting in significant annual cash interest savings. The adjusted capital structure and the proceeds from the asset sale provide additional resources and balance sheet flexibility to pursue strategic growth opportunities," Mr. Wilkinson concluded.

Business Segment Information

The Company has two reportable segments, the Impax Generics Division (generic products and services) and the Impax Specialty Pharma Division (brand products and services) and does not allocate general corporate services to either segment. All information presented is on a GAAP basis unless otherwise noted on an adjusted basis.

 

 

Total revenues for the Impax Generics division decreased $1.7 million to $174.7 million in the second quarter 2015, compared to $176.4 million in the prior year period. The decrease was primarily due to the absence of authorized generic RENVELA sales during the current period compared to revenues of $49.1 million in the second quarter 2014, and significantly lower sales of generic digoxin as a result of additional competition during the current period. Also, Rx Partner and other generic revenues declined $9.0 million in the second quarter 2015, compared to the prior year period, primarily due to the receipt of $9.0 million in the second quarter 2014 from profit share and milestone payments earned pursuant to agreements with a couple of third-party pharmaceutical companies for which there were no comparable amounts in the current year period. The decrease in total revenues was partially offset by the addition of product sales from the Tower acquisition and sales from six generic products launched during the second quarter 2015.

Gross margin in the second quarter 2015 decreased to 36.6%, compared to gross margin of 60.4% in the prior year period. Adjusted gross margin in the second quarter 2015 decreased to 43.1%, compared to adjusted gross margin of 66.5% in the prior year period. The decrease in gross margin and adjusted gross margin was primarily the result of the favorable contribution from sales of authorized generic RENVELA in the second quarter 2014 for which there were no sales in the current quarter. In addition, the lower gross margin and adjusted gross margin in the second quarter 2015 was due to the current year impact of higher sales of lower margin generic products, additional competition on generic digoxin, and the temporary supply disruption of the epinephrine auto-injector product as noted above.

Total operating expenses in the second quarter 2015 increased to $21.5 million, compared to $17.1 million in the prior year period, primarily due to higher selling, general and administrative expenses and research and development expenses.

 

 

Total revenue for the Impax Specialty Pharma division increased $27.8 million to $39.5 million in the second quarter 2015, compared to $11.7 million in the prior year period, due to the launch of RYTARY at the end of the first quarter 2015 and the addition of product sales from the Tower acquisition.

Gross margin in the second quarter 2015 increased to 53.0%, compared to 27.7% in the prior year period, due to new product sales as noted above. Gross margins during the prior year period included the impact of a $3.6 million reserve for pre-launch inventory related to RYTARY as a result of a Complete Response Letter received in 2014 for which there was no similar amounts included in cost of revenues in the current year period. Adjusted gross margin in the second quarter 2015 increased to 80.6%, compared to adjusted gross margin of 33.9% in the prior year period, primarily due to the items noted above.

Total operating expenses in the second quarter 2015 decreased to $17.2 million, compared to $22.2 million in the prior year period, as lower research and development expenses were partially offset by an increase in brand selling expenses relating to the launch of RYTARY.

 

 

General and administrative expenses in the second quarter 2015 increased $11.6 million to $28.1 million, compared to $16.5 million in the prior year period. The increase was primarily driven by business development expenses including integration-related activities from the Tower acquisition, the addition of expenses from the acquired companies, higher information technology costs, increased legal expenses and higher share-based compensation expense, compared to the prior year period.

Cash and cash equivalents were $190.3 million as of June 30, 2015, compared to $414.9 million as of December 31, 2014. The decrease was due to the cash used during the current period to pay the purchase price in the Tower acquisition.

Interest expense in the second quarter 2015 was $7.0 million, an increase of $7.0 million, compared to the prior year period, primarily related to borrowings under the Company's $435 million senior secured term loan in connection with the Tower acquisition. Interest expense in the second quarter 2015 included $0.7 million in amortization of deferred financing costs. The term loan was repaid in its entirety and terminated on June 30, 2015.

The effective reported tax rate was 59.3% in the second quarter of 2015, compared with 35.6% in the prior year period as a result of a change in the timing and mix of U.S. and foreign income. The effective non-GAAP tax rate was 37.6% in the second quarter 2015, compared with 35.8% in the prior year period. Neither period includes the benefit of certain expired U.S. tax provisions, including the R&D tax credit.

2015 Financial Guidance

The Company's full year 2015 financial guidance has been updated as of August 10, 2015, as noted below. The Company's full year 2015 estimates are based on management's current belief about prescription trends, pricing levels, inventory levels, and the anticipated timing of future product launches and events. The Company's estimates exclude the impact from any products for which the Company has not yet received approval from the U.S. Food and Drug Administration.

• UPDATED - Adjusted gross margins as a percent of total revenue are expected to be in the low 50% range (previously mid 50% range).
• UPDATED - Adjusted total research and development (R&D) expenses across the generic and brand divisions of approximately $75 million to $80 million (previously $80 million to $85 million). This includes patent litigation expenses.
• Adjusted selling, general and administrative expenses of approximately $170 million to $180 million.
• NEW - Adjusted interest expense of approximately $14 million.
• Capital expenditures of approximately $45 million to $50 million.
• Effective tax rate of approximately 34% to 36% on a GAAP basis, which assumes that the U.S. R&D tax credit is renewed for 2015. The R&D tax credit expired on December 31, 2014. The Company anticipates that its non-GAAP effective tax rate may experience volatility as the Company's tax benefits may be high compared to the Company's operating income or loss.

Conference Call Information

The Company will host a conference call with a slide presentation on August 10, 2015 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 80278042. 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 revenues and operating income; the Company's ability to promptly correct the issues raised in the warning letter and Form 483 observations received from the FDA; the Company's ability to successfully develop and commercialize pharmaceutical products in a timely manner; reductions 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 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 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 with brand pharmaceutical companies; 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 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, 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; risks relating to goodwill and intangibles; changes in tax regulations; the Company's ability to manage growth, including through potential acquisitions and investments;  the integration of the acquired business of Tower Holdings, Inc. and Lineage Therapeutics Inc. by the Company being more difficult, time-consuming or costly than expected, operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) being greater than expected following the acquisition, the retention of certain key employees of the acquired business being difficult, the Company's and the acquired business's expected or targeted future financial and operating performance and results, the combined company's capacity to bring new products to market, and the possibility that the Company may be unable to achieve expected synergies and operating efficiencies in connection with the acquisition within the expected time-frames or at all, 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; 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/impax-reports-second-quarter-2015-financial-results-300125868.html

SOURCE Impax Laboratories, Inc.