x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
For the quarterly period ended September 30, 2012
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o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from _______________ to _______________
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Impax Laboratories, Inc.
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(Exact name of registrant as specified in its charter)
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Delaware
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65-0403311
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(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.)
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30831 Huntwood Avenue, Hayward, CA
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94544
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(Address of principal executive offices)
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(Zip Code)
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(510) 240-6000
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||
(Registrant’s telephone number, including area code)
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Not Applicable
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||
(Former name, former address and former fiscal year, if changed since last report)
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Large accelerated filer x
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Accelerated filer o
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Non-accelerated filer o(Do not check if a smaller reporting company)
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Smaller reporting company o
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PART I: FINANCIAL INFORMATION | ||
Item 1:
|
Financial Statements (unaudited)
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3
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- Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011
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3
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- Consolidated Statements of Operations for the three and nine months ended September 30, 2012 and 2011
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4
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- Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2012 and 2011
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5
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- Consolidated Statements of Cash Flows for the nine months ended September 30, 2012 and 2011
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6
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- Notes to Interim Consolidated Financial Statements
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8
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Item 2:
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Management’s Discussion and Analysis of Results of Operations and Financial Condition
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43
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Item 3:
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Quantitative and Qualitative Disclosures About Market Risk
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70
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Item 4:
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Controls and Procedures
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70
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PART II: OTHER INFORMATION
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||
Item 1:
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Legal Proceedings
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71
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Item 1A:
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Risk Factors
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71
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Item 2:
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Unregistered Sales of Equity Securities and Use of Proceeds
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71
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Item 3:
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Defaults Upon Senior Securities
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72
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Item 4:
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Mine Safety Disclosures
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72
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Item 5:
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Other Information
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72
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Item 6:
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Exhibits
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73
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SIGNATURES
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||
EXHIBIT INDEX
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September 30,
2012 |
December 31,
2011 |
|||||||
(unaudited)
|
||||||||
ASSETS
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents
|
$ | 172,692 | $ | 104,419 | ||||
Short-term investments
|
167,046 | 241,995 | ||||||
Accounts receivable, net
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97,770 | 153,773 | ||||||
Inventory, net
|
78,674 | 54,177 | ||||||
Deferred income taxes
|
43,170 | 37,853 | ||||||
Prepaid expenses and other current assets
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24,040 | 7,718 | ||||||
Total current assets
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583,392 | 599,935 | ||||||
Property, plant and equipment, net
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171,126 | 118,158 | ||||||
Other assets
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43,388 | 45,914 | ||||||
Deferred income taxes
|
21,553 | 28 | ||||||
Intangible assets, net
|
54,172 | 2,250 | ||||||
Goodwill
|
27,574 | 27,574 | ||||||
Total assets
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$ | 901,205 | $ | 793,859 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current liabilities:
|
||||||||
Accounts payable
|
$ | 28,331 | $ | 22,955 | ||||
Accrued expenses
|
86,549 | 68,990 | ||||||
Accrued profit sharing and royalty expenses
|
9,159 | 40,766 | ||||||
Accrued income taxes payable
|
6,862 | 1,126 | ||||||
Accrued product licensing payments
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40,000 | --- | ||||||
Deferred revenue
|
12,328 | 23,024 | ||||||
Total current liabilities
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183,229 | 156,861 | ||||||
Deferred revenue
|
15,092 | 17,131 | ||||||
Other liabilities
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21,242 | 16,861 | ||||||
Total liabilities
|
219,563 | 190,853 | ||||||
Commitments and contingencies (Note 10)
|
||||||||
Stockholders’ equity:
|
||||||||
Preferred stock, $0.01 par value, 2,000,000 shares authorized, 0 shares outstanding at September 30, 2012 and December 31, 2011
|
--- | --- | ||||||
Common stock, $0.01 par value, 90,000,000 shares authorized and 67,853,871 and 66,748,336 shares issued at September 30, 2012 and December 31, 2011, respectively
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679 | 667 | ||||||
Additional paid-in capital
|
310,984 | 285,966 | ||||||
Treasury stock - 243,729 shares
|
(2,157 | ) | (2,157 | ) | ||||
Accumulated other comprehensive income
|
4,367 | 1,724 | ||||||
Retained earnings
|
367,815 | 316,741 | ||||||
681,688
|
602,941 | |||||||
Noncontrolling interest
|
(46 | ) | 65 | |||||
Total stockholders’ equity
|
681,642 | 603,006 | ||||||
Total liabilities and stockholders’ equity
|
$ | 901,205 | $ | 793,859 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
2012 |
September 30,
2011 |
September 30,
2012 |
September 30,
2011 |
|||||||||||||
Revenues:
|
||||||||||||||||
Global Product sales, net
|
$ | 99,463 | $ | 97,661 | $ | 342,105 | $ | 301,124 | ||||||||
Impax Product sales, net
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43,327 | --- | 71,422 | --- | ||||||||||||
Rx Partner
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708 | 14,059 | 9,027 | 24,482 | ||||||||||||
OTC Partner
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763 | 879 | 2,237 | 4,006 | ||||||||||||
Research Partner
|
1,326 | 3,715 | 8,754 | 14,143 | ||||||||||||
Promotional Partner
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--- | 3,535 | 7,070 | 10,605 | ||||||||||||
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
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(371 | ) | 2,114 | 6,581 | 6,097 | |||||||||||
Selling, general and administrative
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28,927 | 16,318 | 75,030 | 48,406 | ||||||||||||
Total operating expenses
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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
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40 | 39 | 110 | 67 | ||||||||||||
Net income
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$ | 20,037 | $ | 17,220 | $ | 51,074 | $ | 43,633 | ||||||||
Net Income per share:
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||||||||||||||||
Basic
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$ | 0.30 | $ | 0.27 | $ | 0.78 | $ | 0.68 | ||||||||
Diluted
|
$ | 0.29 | $ | 0.26 | $ | 0.75 | $ | 0.65 | ||||||||
Weighted average common shares outstanding:
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||||||||||||||||
Basic
|
65,797,722 | 64,387,413 | 65,451,926 | 63,937,796 | ||||||||||||
Diluted
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68,366,849 | 66,986,758 | 68,230,487 | 67,318,658 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
September 30,
2012 |
September 30,
2011 |
September 30,
2012 |
September 30,
2011 |
|||||||||||||
Net income
|
$ | 20,037 | $ | 17,220 | $ | 51,074 | $ | 43,633 | ||||||||
Currency translation adjustments
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2,160 | (2,213 | ) | 2,643 | (1,392 | ) | ||||||||||
Comprehensive income
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$ | 22,197 | $ | 15,007 | $ | 53,717 | $ | 42,241 |
Nine Months Ended
|
||||||||
September 30,
2012 |
September 30,
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 | ||||||
Recognition of deferred charge-Zomig® royalty
|
24,997 | --- | ||||||
In-process research and development charge
|
1,550 | --- | ||||||
Accretion of interest income on short-term investments
|
(473 | ) | (665 | ) | ||||
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 | ) | ||||
Payments 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 |
Nine Months Ended
|
||||||||
(in $000’s)
|
September 30,
2012 |
September 30,
2011 |
||||||
Cash paid for interest
|
$ | 15 | $ | 151 | ||||
Cash paid for income taxes
|
$ | 39,268 | $ | 18,421 |
|
·
|
the delivered item has value to the customer on a stand-alone basis; and
|
|
·
|
if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the control of the vendor.
|
(in $000’s)
|
|
Gross
Unrecognized |
Gross
Unrecognized
|
Fair
|
||||||||||||
September 30, 2012
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Commercial paper
|
$ | 63,289 | $ | 33 | $ | -- | $ | 63,322 | ||||||||
Government sponsored enterprise obligations
|
33,335 | 5 | -- | 33,340 | ||||||||||||
Corporate bonds
|
70,422 | 26 | (3 | ) | 70,445 | |||||||||||
Total short-term investments
|
$ | 167,046 | $ | 64 | $ | (3 | ) | $ | 167,107 |
(in $000’s)
|
|
Gross
Unrecognized |
Gross
Unrecognized
|
Fair
|
||||||||||||
December 31, 2011
|
Cost
|
Gains
|
Losses
|
Value
|
||||||||||||
Commercial paper
|
$ | 69,341 | $ | 17 | $ | (5 | ) | $ | 69,353 | |||||||
Government sponsored enterprise obligations
|
100,928 | 32 | (13 | ) | 100,947 | |||||||||||
Corporate bonds
|
58,219 | 5 | (33 | ) | 58,191 | |||||||||||
Certificates of deposit
|
13,507 | 1 | (1 | ) | 13,507 | |||||||||||
Total short-term investments
|
$ | 241,995 | $ | 55 | $ | (52 | ) | $ | 241,998 |
(in $000’s)
|
September 30,
2012 |
December 31,
2011 |
||||||
Gross accounts receivable
|
$ | 172,621 | $ | 210,557 | ||||
Less: Rebate reserve
|
(41,160 | ) | (29,164 | ) | ||||
Less: Chargeback reserve
|
(25,352 | ) | (22,161 | ) | ||||
Less: Other deductions
|
(8,339 | ) | (5,459 | ) | ||||
Accounts receivable, net
|
$ | 97,770 | $ | 153,773 |
(in $000’s)
Rebate reserve |
September 30,
2012 |
December 31,
2011 |
||||||
Beginning balance
|
$ | 29,164 | $ | 23,547 | ||||
Provision recorded during the period
|
80,548 | 79,697 | ||||||
Credits issued during the period
|
(68,552 | ) | (74,080 | ) | ||||
Ending balance
|
$ | 41,160 | $ | 29,164 |
(in $000’s)
Chargeback reserve |
September 30,
2012 |
December 31,
2011 |
||||||
Beginning balance
|
$ | 22,161 | $ | 14,918 | ||||
Provision recorded during the period
|
149,947 | 166,504 | ||||||
Credits issued during the period
|
(146,756 | ) | (159,261 | ) | ||||
Ending balance
|
$ | 25,352 | $ | 22,161 |
(in $000’s)
|
September 30,
2012 |
December 31,
2011 |
||||||
Raw materials
|
$ | 30,497 | $ | 32,454 | ||||
Work in process
|
4,215 | 5,046 | ||||||
Finished goods
|
49,317 | 24,947 | ||||||
Total inventory
|
84,029 | 62,447 | ||||||
Less: Non-current inventory
|
5,355 | 8,270 | ||||||
Total inventory-current
|
$ | 78,674 | $ | 54,177 |
(in $000’s)
|
September 30,
2012 |
December 31,
2011 |
||||||
Deferred charge-Zomig® royalty
|
$ | 14,893 | $ | --- | ||||
Other prepaid expenses
|
9,147 | 7,718 | ||||||
Prepaid expenses and other current assets
|
$ | 24,040 | $ | 7,718 |
(in $000’s)
|
September 30,
2012 |
December 31,
2011 |
||||||
Land
|
$ | 5,773 | $ | 5,773 | ||||
Buildings and improvements
|
88,453 | 86,084 | ||||||
Equipment
|
109,293 | 75,589 | ||||||
Office furniture and equipment
|
9,970 | 8,910 | ||||||
Construction-in-progress
|
42,207 | 16,602 | ||||||
Property, plant and equipment, gross
|
255,696 | 192,958 | ||||||
Less: Accumulated depreciation
|
(84,570 | ) | (74,800 | ) | ||||
Property, plant and equipment, net
|
$ | 171,126 | $ | 118,158 |
(in $000’s)
|
Initial
|
Accumulated
|
Carrying
|
|||||||||
September 30, 2012
|
Cost
|
Amortization
|
Value
|
|||||||||
Amortized intangible assets:
|
||||||||||||
Zomig® product rights
|
$ | 43,870 | $ | (10,968 | ) | $ | 32,902 | |||||
Tolmar product rights
|
19,450 | (430 | ) | 19,020 | ||||||||
Other product rights
|
2,250 | --- | 2,250 | |||||||||
Total intangible assets
|
$ | 65,570 | $ | (11,398 | ) | $ | 54,172 |
(in $000’s)
|
Initial
|
Accumulated
|
Carrying
|
|||||||||
December 31, 2011
|
Cost
|
Amortization
|
Value
|
|||||||||
Amortized intangible assets:
|
||||||||||||
Zomig® product rights
|
$ | --- | $ | --- | $ | --- | ||||||
Tolmar product rights
|
--- | --- | --- | |||||||||
Other product rights
|
2,250 | --- | 2,250 | |||||||||
Total intangible assets
|
$ | 2,250 | $ | --- | $ | 2,250 |
(in $000s)
|
Amortization
Expense |
|||
2012
|
$ | 6,959 | ||
2013
|
14,378 | |||
2014
|
4,766 | |||
2015
|
4,766 | |||
2016
|
4,766 | |||
Thereafter
|
16,287 | |||
Totals
|
$ | 51,922 |
September 30,
|
December 31,
|
|||||||
(in $000’s)
|
2012
|
2011
|
||||||
Payroll-related expenses
|
$ | 20,433 | $ | 16,975 | ||||
Product returns
|
24,285 | 24,101 | ||||||
Medicaid rebates
|
23,137 | 17,479 | ||||||
Physician detailing sales force fees
|
1,969 | 1,655 | ||||||
Legal and professional fees
|
9,599 | 5,071 | ||||||
Shelf stock price protection
|
613 | 684 | ||||||
Other
|
6,513 | 3,025 | ||||||
Total accrued expenses
|
$ | 86,549 | $ | 68,990 |
(in $000’s)
|
September 30,
|
December 31,
|
||||||
Returns Reserve
|
2012
|
2011
|
||||||
Beginning balance
|
$ | 24,101 | $ | 33,755 | ||||
Provision related to sales recorded in the period
|
3,175 | 688 | ||||||
Credits issued during the period
|
(2,991 | ) | (10,342 | ) | ||||
Ending balance
|
$ | 24,285 | $ | 24,101 |
|
·
|
The outstanding principal amount of all revolving credit loans, together with accrued and unpaid interest thereon, will be due and payable on the maturity date, which will occur four years following the February 11, 2011 closing date.
|
|
·
|
Borrowings under the Revolving Credit Facility will bear interest, at the Company’s option, at either an Alternate Base Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 0.5% to 1.5%, or a LIBOR Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 1.5% to 2.5%. The Company is also required to pay an unused commitment fee ranging from 0.25% to 0.45% per annum based on the daily average undrawn portion of the Revolving Credit Facility. The applicable margin described above and the unused commitment fee in effect at any given time will be determined based on the Company’s Total Net Leverage Ratio (as defined in the Credit Agreement), which is based upon the Company’s consolidated total debt, net of unrestricted cash in excess of $100 million, compared to Consolidated EBITDA (as defined in the Credit Agreement) for the immediately preceding four quarters.
|
|
·
|
The Company may prepay any outstanding loan under the Revolving Credit Facility without premium or penalty.
|
|
·
|
The Company is required under the Credit Agreement and the Security Agreement to comply with a number of affirmative, negative and financial covenants. Among other things, these covenants (i) require the Company to provide periodic reports, notices of material events and information regarding collateral, (ii) restrict the Company’s ability, subject to certain exceptions and baskets, to incur additional indebtedness, grant liens on assets, undergo fundamental changes, change the nature of its business, make investments, undertake acquisitions, sell assets, make restricted payments (including the ability to pay dividends and repurchase stock) or engage in affiliate transactions, and (iii) require the Company to maintain a Total Net Leverage Ratio (which is, generally, total funded debt, net of unrestricted cash in excess of $100 million, over EBITDA for the preceding four quarters) of less than 3.75 to 1.00, a Senior Secured Leverage Ratio (which is, generally, total senior secured debt over EBITDA for the preceding four quarters) of less than 2.50 to 1.00 and a Fixed Charge Coverage Ratio (which is, generally, EBITDA for the preceding four quarters over the sum of cash interest expense, cash tax payments, scheduled funded debt payments and capital expenditures during such four quarter period) of at least 2.00 to 1.00 (with each such ratio as more particularly defined as set forth in the Credit Agreement). As of September 30, 2012, the Company was in compliance with the various covenants contained in the Credit Agreement and the Security Agreement.
|
|
·
|
The Credit Agreement contains customary events of default (subject to customary grace periods, cure rights and materiality thresholds), including, among others, failure to pay principal, interest or fees, violation of covenants, material inaccuracy of representations and warranties, cross-default and cross-acceleration of material indebtedness and other obligations, certain bankruptcy and insolvency events, certain judgments, certain events related to the Employee Retirement Income Security Act of 1974, as amended, and a change of control.
|
|
·
|
Following an event of default under the Credit Agreement, the Administrative Agent would be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement and seek other remedies that may be taken by secured creditors.
|
|
·
|
Designation of a development candidate. Following the designation of a development candidate, generally, IND-enabling animal studies for a new development candidate take 12 to 18 months to complete.
|
|
·
|
Initiation of a Phase I clinical trial. Generally, Phase I clinical trials take one to two years to complete.
|
|
·
|
Initiation or completion of a Phase II clinical trial. Generally, Phase II clinical trials take one to three years to complete.
|
|
·
|
Initiation or completion of a Phase III clinical trial. Generally, Phase III clinical trials take two to four years to complete.
|
|
·
|
Completion of a bioequivalence study. Generally, bioequivalence studies take three months to one year to complete.
|
|
·
|
Filing or acceptance of regulatory applications for marketing approval such as a New Drug Application in the United States or Marketing Authorization Application in Europe. Generally, it takes six to twelve months to prepare and submit regulatory filings and approximately two months for a regulatory filing to be accepted for substantive review.
|
|
·
|
Marketing approval in a major market, such as the United States or Europe. Generally it takes one to three years after an application is submitted to obtain approval from the applicable regulatory agency.
|
|
·
|
Marketing approval in a major market, such as the United States or Europe for a new indication of an already-approved product. Generally it takes one to three years after an application for a new indication is submitted to obtain approval from the applicable regulatory agency.
|
|
·
|
First commercial sale in a particular market, such as in the United States or Europe.
|
|
·
|
Product sales in excess of a pre-specified threshold, such as annual sales exceeding $100 million. The amount of time to achieve this type of milestone depends on several factors including but not limited to the dollar amount of the threshold, the pricing of the product and the pace at which customers begin using the product.
|
(in $000’s)
|
Nine Months
Ended |
Inception
Through |
||||||
Deferred revenue
|
2012
|
2011
|
||||||
Beginning balance
|
$ | 3,705 | $ | --- | ||||
Additions:
|
||||||||
Product related and cost sharing
|
--- | 427,916 | ||||||
Exclusivity charges
|
--- | (50,600 | ) | |||||
Other
|
--- | 12,527 | ||||||
Total additions
|
$ | --- | $ | 389,843 | ||||
Less: Amount recognized
|
(982 | ) | (189,698 | ) | ||||
Accounting adjustment
|
--- | (196,440 | ) | |||||
Total deferred revenue
|
$ | 2,723 | $ | 3,705 |
(in $000’s)
|
Nine Months
Ended |
Inception
Through
December 31,
|
||||||
Deferred revenue
|
2012
|
2011
|
||||||
Beginning balance
|
$ | 9,683 | $ | --- | ||||
Additions
|
1,487 | 100,030 | ||||||
Less: amount recognized
|
(2,126 | ) | (90,347 | ) | ||||
Total deferred revenue
|
$ | 9,044 | $ | 9,683 |
(in $000’s)
|
Nine Months
Ended |
Inception
Through |
||||||
Deferred product manufacturing costs
|
2012
|
2011
|
||||||
Beginning balance
|
$ | 8,846 | $ | -- | ||||
Additions
|
2,558 | 82,814 | ||||||
Less: amount recognized
|
(2,729 | ) | (73,968 | ) | ||||
Total deferred product manufacturing costs
|
$ | 8,675 | $ | 8,846 |
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
(in $000’s)
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Manufacturing expenses
|
$ | 559 | $ | 548 | $ | 1,726 | $ | 1,479 | ||||||||
Research and development
|
1,163 | 1,086 | 3,462 | 3,174 | ||||||||||||
Selling, general & administrative
|
2,101 | 1,864 | 6,958 | 4,979 | ||||||||||||
Total
|
$ | 3,823 | $ | 3,498 | $ | 12,146 | $ | 9,632 |
Number of Shares
Under Option |
Weighted Average
Exercise Price |
|||||||
Outstanding at December 31, 2011
|
5,073,097 | $ | 11.76 | |||||
Options granted
|
278,500 | $ | 20.90 | |||||
Options exercised
|
(983,276 | ) | $ | 11.23 | ||||
Options forfeited
|
(109,362 | ) | $ | 16.86 | ||||
Outstanding at September 30, 2012
|
4,258,959 | $ | 12.68 | |||||
Options exercisable at September 30, 2012
|
3,057,035 | $ | 11.29 |
Restricted Stock Awards
|
Number of Restricted
Stock Awards |
Weighted Average
Grant-Date |
||||||
Non-vested at December 31, 2011
|
1,663,911 | $ | 17.20 | |||||
Granted
|
321,250 | $ | 21.39 | |||||
Vested
|
(292,362 | ) | $ | 12.20 | ||||
Forfeited
|
(124,180 | ) | $ | 18.90 | ||||
Non-vested at September 30, 2012
|
1,568,619 | $ | 18.78 |
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|||||||||||||||
(in $000’s except per share amounts)
|
2012
|
2011
|
2012
|
2011
|
||||||||||||
Numerator:
|
||||||||||||||||
Net income
|
$ | 20,037 | $ | 17,220 | $ | 51,074 | $ | 43,633 | ||||||||
Denominator:
|
||||||||||||||||
Weighted average common shares outstanding
|
65,797,722 | 64,387,413 | 65,451,926 | 63,937,796 | ||||||||||||
Effect of dilutive stock options and restricted stock awards
|
2,569,127 | 2,599,345 | 2,778,561 | 3,380,862 | ||||||||||||
Diluted weighted average common shares outstanding
|
68,366,849 | 66,986,758 | 68,230,487 | 67,318,658 | ||||||||||||
Basic net income per share
|
$ | 0.30 | $ | 0.27 | $ | 0.78 | $ | 0.68 | ||||||||
Diluted net income per share
|
$ | 0.29 | $ | 0.26 | $ | 0.75 | $ | 0.65 |
(in $000’s)
|
Global
|
Impax
|
Corporate
|
Total
|
||||||||||||
Three Months Ended September 30, 2012
|
Division
|
Division
|
and Other
|
Company
|
||||||||||||
Revenues, net
|
$ | 100,430 | $ | 45,157 | $ | --- | $ | 145,587 | ||||||||
Cost of revenues
|
44,106 | 23,454 | --- | 67,560 | ||||||||||||
Research and development
|
12,392 | 7,620 | --- | 20,012 | ||||||||||||
Patent litigation (recovery) expense
|
(371 | ) | --- | --- | (371 | ) | ||||||||||
Income (loss) before provision for income taxes
|
$ | 40,513 | $ | 1,585 | $ | (12,466 | ) | $ | 29,632 |
(in $000’s)
|
Global
|
Impax
|
Corporate
|
Total
|
||||||||||||
Three Months Ended September 30, 2011
|
Division
|
Division
|
and Other
|
Company
|
||||||||||||
Revenues, net
|
$ | 114,546 | $ | 5,303 | $ | --- | $ | 119,849 | ||||||||
Cost of revenues
|
54,196 | 2,999 | --- | 57,195 | ||||||||||||
Research and development
|
11,487 | 7,352 | --- | 18,839 | ||||||||||||
Patent litigation expense
|
2,114 | --- | --- | 2,114 | ||||||||||||
Income (loss) before provision for income taxes
|
$ | 43,055 | $ | (6,680 | ) | $ | (10,992 | ) | $ | 25,667 |
(in $000’s)
|
Global
|
Impax
|
Corporate
|
Total
|
||||||||||||
Nine Months Ended September 30, 2012
|
Division
|
Division
|
and Other
|
Company
|
||||||||||||
Revenues, net
|
$ | 356,759 | $ | 83,856 | $ | --- | $ | 440,615 | ||||||||
Cost of revenues
|
177,690 | 44,522 | --- | 222,212 | ||||||||||||
Research and development
|
35,190 | 23,507 | --- | 58,697 | ||||||||||||
Patent litigation expense
|
6,581 | --- | --- | 6,581 | ||||||||||||
Income (loss) before provision for income taxes
|
$ | 125,816 | $ | (6,439 | ) | $ | (41,247 | ) | $ | 78,130 |
(in $000’s)
|
Global
|
Impax
|
Corporate
|
Total
|
||||||||||||
Nine Months Ended September 30, 2011
|
Division
|
Division
|
and Other
|
Company
|
||||||||||||
Revenues, net
|
$ | 338,453 | $ | 15,907 | $ | --- | $ | 354,360 | ||||||||
Cost of revenues
|
164,627 | 8,840 | --- | 173,467 | ||||||||||||
Research and development
|
34,728 | 27,580 | --- | 62,308 | ||||||||||||
Patent litigation expense
|
6,097 | --- | --- | 6,097 | ||||||||||||
Income (loss) before provision for income taxes
|
$ | 124,109 | $ | (24,629 | ) | $ | (35,070 | ) | $ | 64,410 |
2012 Quarter Ended:
|
||||||||||||
(in $000’s except shares and per share amounts)
|
March 31,
|
June 30,
|
September 30,
|
|||||||||
Revenue:
|
||||||||||||
Global Product sales, gross
|
$ | 185,671 | $ | 223,452 | $ | 178,630 | ||||||
Less:
|
||||||||||||
Chargebacks
|
39,155 | 50,670 | 47,366 | |||||||||
Rebates
|
20,589 | 26,847 | 24,285 | |||||||||
Product Returns
|
(329 | ) | 948 | 305 | ||||||||
Other credits
|
10,045 | 18,552 | 7,211 | |||||||||
Global Product sales, net
|
116,211 | 126,435 | 99,463 | |||||||||
Impax Product sales, net
|
--- | 28,091 | 43,327 | |||||||||
Rx Partner
|
4,416 | 3,903 | 708 | |||||||||
OTC Partner
|
691 | 783 | 763 | |||||||||
Research Partner
|
3,715 | 3,713 | 1,326 | |||||||||
Promotional Partner
|
3,535 | 3,535 | --- | |||||||||
Total revenues
|
128,568 | 166,460 | 145,587 | |||||||||
Gross profit
|
62,553 | 77,823 | 78,027 | |||||||||
Net income
|
$ | 12,365 | $ | 18,672 | $ | 20,037 | ||||||
Net income per share (basic)
|
$ | 0.19 | $ | 0.29 | $ | 0.30 | ||||||
Net income per share (diluted)
|
$ | 0.18 | $ | 0.27 | $ | 0.29 | ||||||
Weighted average common shares outstanding:
|
||||||||||||
Basic
|
65,122,240 | 65,482,700 | 65,797,722 | |||||||||
Diluted
|
67,907,263 | 67,954,573 | 68,366,849 |
2011 Quarter Ended:
|
||||||||||||
(in $000’s except shares and per share amounts)
|
March 31,
|
June 30,
|
September 30,
|
|||||||||
Revenue:
|
||||||||||||
Global Product sales, gross
|
$ | 151,832 | $ | 181,972 | $ | 169,519 | ||||||
Less:
|
||||||||||||
Chargebacks
|
35,216 | 39,395 | 39,690 | |||||||||
Rebates
|
12,709 | 17,392 | 18,014 | |||||||||
Product Returns
|
2,706 | 1,799 | 552 | |||||||||
Other credits
|
8,863 | 12,261 | 13,602 | |||||||||
Global Product sales, net
|
92,338 | 111,125 | 97,661 | |||||||||
Impax Product sales, net | --- | --- | --- | |||||||||
Rx Partner
|
4,120 | 6,303 | 14,059 | |||||||||
OTC Partner
|
1,943 | 1,184 | 879 | |||||||||
Research Partner
|
6,715 | 3,713 | 3,715 | |||||||||
Promotional Partner
|
3,535 | 3,535 | 3,535 | |||||||||
Total revenues
|
108,651 | 125,860 | 119,849 | |||||||||
Gross profit
|
58,537 | 59,702 | 62,654 | |||||||||
Net income
|
$ | 13,863 | $ | 12,550 | $ | 17,220 | ||||||
Net income per share (basic)
|
$ | 0.22 | $ | 0.20 | $ | 0.27 | ||||||
Net income per share (diluted)
|
$ | 0.21 | $ | 0.19 | $ | 0.26 | ||||||
Weighted average common shares outstanding:
|
||||||||||||
Basic
|
63,390,527 | 64,024,483 | 64,387,413 | |||||||||
Diluted
|
67,044,266 | 67,654,047 | 66,986,758 |
|
·
|
the “Global Product” sales channel: generic pharmaceutical prescription products we sell directly to wholesalers, large retail drug chains, and others;
|
|
·
|
the “Private Label” sales channel: generic pharmaceutical over-the-counter (“OTC”) and prescription products we sell to unrelated third parties who in-turn sell the product under their own label;
|
|
·
|
the “Rx Partner” sales channel: generic prescription products sold through unrelated third-party pharmaceutical entities pursuant to alliance and collaboration agreements; and
|
|
·
|
the “OTC Partner” sales channel: sales of generic pharmaceutical OTC products sold through unrelated third-party pharmaceutical entities pursuant to alliance and collaboration agreements.
|
September 30,
2012 |
December 31,
2011 |
|||||||
($ in 000’s)
|
||||||||
Chargeback reserve
|
||||||||
Beginning balance
|
$ | 22,161 | $ | 14,918 | ||||
Provision recorded during the period
|
137,190 | 166,504 | ||||||
Credits issued during the period
|
(142,526 | ) | (159,261 | ) | ||||
Ending balance
|
$ | 16,825 | $ | 22,161 | ||||
Provision as a percent of gross Global Product sales
|
23 | % | 23 | % |
September 30,
2012 |
December 31,
2011 |
|||||||
($ in 000’s)
|
||||||||
Rebate reserve
|
||||||||
Beginning balance
|
$ | 29,164 | $ | 23,547 | ||||
Provision recorded during the period
|
71,721 | 79,697 | ||||||
Credits issued during the period
|
(68,552 | ) | (74,080 | ) | ||||
Ending balance
|
$ | 32,333 | $ | 29,164 | ||||
Provision as a percent of gross Global Product sales
|
12 | % | 11 | % |
September 30,
2012 |
December 31,
2011 |
|||||||
($ in 000’s)
|
||||||||
Returns reserve
|
||||||||
Beginning balance
|
$ | 24,101 | $ | 33,755 | ||||
Provision related to sales recorded in the period
|
923 | 688 | ||||||
Credits issued during the period
|
(2,991 | ) | (10,342 | ) | ||||
Ending balance
|
$ | 22,033 | $ | 24,101 | ||||
Provision as a percent of gross Global Product sales
|
0.2 | % | 0.1 | % |
Three Months Ended
|
||||||||||||||||
September 30,
2012 |
September 30,
2011 |
Increase/
(Decrease) |
||||||||||||||
(in $000’s)
|
(unaudited)
|
(unaudited)
|
||||||||||||||
$
|
% | |||||||||||||||
Total revenues
|
$ | 145,587 | $ | 119,849 | $ | 25,738 | 21 | % | ||||||||
Gross profit
|
78,027 | 62,654 | 15,373 | 25 | % | |||||||||||
Income from operations
|
29,459 | 25,383 | 4,076 | 16 | % | |||||||||||
Income before income taxes
|
29,632 | 25,667 | 3,965 | 15 | % | |||||||||||
Provision for income taxes
|
9,635 | 8,486 | 1,149 | 14 | % | |||||||||||
19,997
|
17,181 | 2,816 | 16 | % | ||||||||||||
Non-controlling interest
|
40 | 39 | 1 | 3 | % | |||||||||||
Net income
|
$ | 20,037 | $ | 17,220 | $ | 2,817 | 16 | % |
Three Months Ended
|
||||||||||||||||
September 30,
2012 |
September 30,
2011 |
Increase/
(Decrease) |
||||||||||||||
(in $000’s)
|
(unaudited)
|
(unaudited)
|
||||||||||||||
Revenues:
|
$ | % | ||||||||||||||
Global Product sales, net
|
$ | 99,463 | $ | 97,661 | $ | 1,802 | 2 | % | ||||||||
Rx Partner
|
(792 | ) | 12,621 | (13,413 | ) | (106 | )% | |||||||||
OTC Partner
|
763 | 879 | (116 | ) | (13 | )% | ||||||||||
Research Partner
|
996 | 3,385 | (2,389 | ) | (71 | )% | ||||||||||
Total revenues
|
100,430 | 114,546 | (14,116 | ) | (12 | )% | ||||||||||
Cost of revenues
|
44,106 | 54,196 | (10,090 | ) | (19 | )% | ||||||||||
Gross profit
|
56,324 | 60,350 | (4,026 | ) | (7 | )% | ||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
12,392 | 11,487 | 905 | 8 | % | |||||||||||
Patent litigation (recovery) expense
|
(371 | ) | 2,114 | (2,485 | ) | (118 | )% | |||||||||
Selling, general and administrative
|
3,790 | 3,694 | 96 | 3 | % | |||||||||||
Total operating expenses
|
15,811 | 17,295 | (1,484 | ) | (9 | )% | ||||||||||
Income from operations
|
$ | 40,513 | $ | 43,055 | $ | (2,542 | ) | (6 | )% |
Three Months Ended
|
||||||||||||||||
September 30,
2012 |
September 30,
2011 |
Increase/
(Decrease) |
||||||||||||||
(in $000’s)
|
(unaudited)
|
(unaudited)
|
||||||||||||||
Revenues:
|
$ | % | ||||||||||||||
Impax Product sales, net
|
$ | 43,327 | $ | --- | $ | 43,327 |
nm
|
|||||||||
Rx Partner
|
1,500 | 1,438 | 62 | 4 | % | |||||||||||
Promotional Partner
|
--- | 3,535 | (3,535 | ) |
nm
|
|||||||||||
Research Partner
|
330 | 330 | --- | -- | ||||||||||||
Total revenues
|
45,157 | 5,303 | 39,854 | 752 | % | |||||||||||
Cost of revenues
|
23,454 | 2,999 | 20,455 | 682 | % | |||||||||||
Gross profit
|
21,703 | 2,304 | 19,399 | 842 | % | |||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
7,620 | 7,352 | 268 | 4 | % | |||||||||||
Selling, general and administrative
|
12,498 | 1,632 | 10,866 | 666 | % | |||||||||||
Total operating expenses
|
20,118 | 8,984 | 11,134 | 124 | % | |||||||||||
Income (loss) from operations
|
$ | 1,585 | $ | (6,680 | ) | $ | 8,265 |
nm
|
Three Months Ended
|
||||||||||||||||
September 30,
2012 |
September 30,
2011 |
Increase/
(Decrease) |
||||||||||||||
(in $000’s)
|
(unaudited)
|
(unaudited)
|
||||||||||||||
$ | % | |||||||||||||||
General and administrative expenses
|
$ | 12,639 | $ | 10,992 | $ | 1,647 | 15 | % | ||||||||
Loss from operations
|
(12,639 | ) | (10,992 | ) | (1,647 | ) | (15 | )% | ||||||||
Other income (expense), net
|
46 | 69 | (23 | ) | (33 | )% | ||||||||||
Interest income
|
272 | 268 | 4 | 1 | % | |||||||||||
Interest expense
|
(145 | ) | (53 | ) | (92 | ) | (174 | )% | ||||||||
Loss before income taxes
|
(12,466 | ) | (10,708 | ) | (1,758 | ) | (16 | )% | ||||||||
Provision for income taxes
|
$ | 9,635 | $ | 8,486 | $ | 1,149 | 14 | % |
Nine Months Ended
|
||||||||||||||||
September 30,
2012 |
September 30,
2011 |
Increase/
(Decrease) |
||||||||||||||
(in $000’s)
|
(unaudited)
|
(unaudited)
|
||||||||||||||
$ | % | |||||||||||||||
Total revenues
|
$ | 440,615 | $ | 354,360 | $ | 86,255 | 24 | % | ||||||||
Gross profit
|
218,403 | 180,893 | 37,510 | 21 | % | |||||||||||
Income from operations
|
78,095 | 64,082 | 14,013 | 22 | % | |||||||||||
Income before income taxes
|
78,130 | 64,410 | 13,720 | 21 | % | |||||||||||
Provision for income taxes
|
27,166 | 20,844 | 6,322 | 30 | % | |||||||||||
50,964
|
43,566 | 7,398 | 17 | % | ||||||||||||
Non-controlling interest
|
110 | 67 | 43 | 64 | % | |||||||||||
Net income
|
$ | 51,074 | $ | 43,633 | $ | 7,441 | 17 | % |
Nine Months Ended
|
||||||||||||||||
September 30,
2012 |
September 30,
2011 |
Increase/
(Decrease) |
||||||||||||||
(in $000’s)
|
(unaudited)
|
(unaudited)
|
||||||||||||||
Revenues:
|
$ | % | ||||||||||||||
Global Product sales, net
|
$ | 342,105 | $ | 301,124 | $ | 40,981 | 14 | % | ||||||||
Rx Partner
|
4,652 | 20,169 | (15,517 | ) | (77 | )% | ||||||||||
OTC Partner
|
2,237 | 4,006 | (1,769 | ) | (44 | )% | ||||||||||
Research Partner
|
7,765 | 13,154 | (5,389 | ) | (41 | )% | ||||||||||
Total revenues
|
356,759 | 338,453 | 18,306 | 5 | % | |||||||||||
Cost of revenues
|
177,690 | 164,627 | 13,063 | 8 | % | |||||||||||
Gross profit
|
179,069 | 173,826 | 5,243 | 3 | % | |||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
35,190 | 34,728 | 462 | 1 | % | |||||||||||
Patent litigation
|
6,581 | 6,097 | 484 | 8 | % | |||||||||||
Selling, general and administrative
|
11,482 | 8,892 | 2,590 | 29 | % | |||||||||||
Total operating expenses
|
53,253 | 49,717 | 3,536 | 7 | % | |||||||||||
Income from operations
|
$ | 125,816 | $ | 124,109 | $ | 1,707 | 1 | % |
Nine Months Ended
|
||||||||||||||||
September 30,
2012 |
September 30,
2011 |
Increase/
(Decrease) |
||||||||||||||
(in $000’s)
|
(unaudited)
|
(unaudited)
|
||||||||||||||
Revenues:
|
$ | % | ||||||||||||||
Impax Product sales, net
|
$ | 71,422 | $ | --- | $ | 71,422 |
nm
|
|||||||||
Rx Partner
|
4,375 | 4,313 | 62 | 1 | % | |||||||||||
Promotional Partner
|
7,070 | 10,605 | (3,535 | ) | (33 | )% | ||||||||||
Research Partner
|
989 | 989 | --- | -- | ||||||||||||
Total revenues
|
83,856 | 15,907 | 67,949 | 427 | % | |||||||||||
Cost of revenues
|
44,522 | 8,840 | 35,682 | 404 | % | |||||||||||
Gross profit
|
39,334 | 7,067 | 32,267 | 457 | % | |||||||||||
Operating expenses:
|
||||||||||||||||
Research and development
|
23,507 | 27,580 | (4,073 | ) | (15 | )% | ||||||||||
Selling, general and administrative
|
22,266 | 4,116 | 18,150 | 441 | % | |||||||||||
Total operating expenses
|
45,773 | 31,696 | 14,077 | 44 | % | |||||||||||
Loss from operations
|
$ | (6,439 | ) | $ | (24,629 | ) | $ | 18,190 | 74 | % |
Nine Months Ended
|
||||||||||||||||
September 30,
2012 |
September 30,
2011 |
Increase/
(Decrease) |
||||||||||||||
(in $000’s)
|
(unaudited)
|
(unaudited)
|
||||||||||||||
$ | % | |||||||||||||||
General and administrative expenses
|
$ | 41,282 | $ | 35,398 | $ | 5,884 | 17 | % | ||||||||
Loss from operations
|
(41,282 | ) | (35,398 | ) | (5,884 | ) | (17 | )% | ||||||||
Other income (expense), net
|
(129 | ) | (470 | ) | 341 | (73 | )% | |||||||||
Interest income
|
771 | 879 | (108 | ) | (12 | )% | ||||||||||
Interest expense
|
(607 | ) | (81 | ) | (526 | ) | 649 | % | ||||||||
Loss before income taxes
|
(41,247 | ) | (35,070 | ) | (6,177 | ) | (18 | )% | ||||||||
Provision for income taxes
|
$ | 27,166 | $ | 20,844 | $ | 6,322 | 30 | % |
|
·
|
The outstanding principal amount of all revolving credit loans, together with accrued and unpaid interest thereon, will be due and payable on the maturity date, which will occur four years following the February 11, 2011 closing date.
|
|
·
|
Borrowings under the Revolving Credit Facility will bear interest, at our option, at either an Alternate Base Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 0.5% to 1.5%, or a LIBOR Rate (as defined in the Credit Agreement) plus the applicable margin in effect from time to time ranging from 1.5% to 2.5%. We are also required to pay an unused commitment fee ranging from 0.25% to 0.45% per annum based on the daily average undrawn portion of the Revolving Credit Facility. The applicable margin described above and the unused commitment fee in effect at any given time will be determined based on the Company’s Total Net Leverage Ratio (as defined in the Credit Agreement), which is based upon our consolidated total debt, net of unrestricted cash in excess of $100 million, compared to Consolidated EBITDA (as defined in the Credit Agreement) for the immediately preceding four quarters.
|
|
·
|
We may prepay any outstanding loan under the Revolving Credit Facility without premium or penalty.
|
|
·
|
We are required under the Credit Agreement and the Security Agreement to comply with a number of affirmative, negative and financial covenants. Among other things, these covenants (i) require us to provide periodic reports, notices of material events and information regarding collateral, (ii) restrict our, subject to certain exceptions and baskets, to incur additional indebtedness, grant liens on assets, undergo fundamental changes, change the nature of its business, make investments, undertake acquisitions, sell assets, make restricted payments (including the ability to pay dividends and repurchase stock) or engage in affiliate transactions, and (iii) requires us to maintain a Total Net Leverage Ratio (which is, generally, our total funded debt, net of unrestricted cash in excess of $100 million, over our EBITDA for the preceding four quarters) of less than 3.75 to 1.00, a Senior Secured Leverage Ratio (which is, generally, our total senior secured debt over our EBITDA for the preceding four quarters) of less than 2.50 to 1.00 and a Fixed Charge Coverage Ratio (which is, generally, our EBITDA for the preceding four quarters over the sum of cash interest expense, cash tax payments, scheduled funded debt payments and capital expenditures during such four quarter period) of at least 2.00 to 1.00 (with each such ratio as more particularly defined as set forth in the Credit Agreement). At September 30, 2012, we were in compliance with the various covenants contained in the Credit Agreement and the Security Agreement.
|
|
·
|
The Credit Agreement contains customary events of default (subject to customary grace periods, cure rights and materiality thresholds), including, among others, failure to pay principal, interest or fees, violation of covenants, material inaccuracy of representations and warranties, cross-default and cross-acceleration of material indebtedness and other obligations, certain bankruptcy and insolvency events, certain judgments, certain events related to the Employee Retirement Income Security Act of 1974, as amended, and a change of control.
|
|
·
|
Following an event of default under the Credit Agreement, the Administrative Agent would be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement and seek other remedies that may be taken by secured creditors.
|
Period
|
Total Number of Shares (or Units) Purchased(1)
|
Average Price Paid Per Share (or Unit)
|
Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
|
|||||||||
July 1, 2012 to July 31, 2012
|
22,455 shares of common stock
|
$20.36 | — | — | |||||||||
August 1, 2012 to August 31, 2012
|
— | — | — | — | |||||||||
September 1, 2012 to September 30, 2012
|
4,776 shares of common stock
|
$23.69 | — | — |
(1)
|
Represents shares of our common stock we accepted during the indicated periods as a tax withholding from certain of our employees in connection with the vesting of shares of restricted stock pursuant to the terms of our 2002 Plan.
|
Exhibit No.
|
Description of Document
|
|
3.1
|
Amended and Restated Bylaws of Impax Laboratories, Inc. (1).
|
|
10.1
|
General Release and Waiver, effective as of July 17, 2012, by and among Arthur A. Koch, Jr. and the Company (2).
|
|
11.1
|
Statement re computation of per share earnings (incorporated by reference to Note 16 in the Notes to the unaudited interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q).
|
|
31.1
|
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of the Acting Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification of the Acting Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101
|
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011, (ii) Consolidated Statements of Operations for each of the three and nine months ended September 30, 2012 and September 30, 2011, (iii) Consolidated Statements of Comprehensive Income for each of the three and nine months ended September 30, 2012 and September 30, 2011, (iv) Consolidated Statements of Cash Flows for each of the nine months ended September 30, 2012 and September 30, 2011 and (v) Notes to Interim Consolidated Financial Statements.*
|
|
(1)
|
Incorporated by reference to the Company’s Current Report on Form 8-K filed on August 28, 2012.
|
|
(2)
|
Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 18, 2012.
|
Date: November 1, 2012
|
Impax Laboratories, Inc. | ||
By: |
/s/ Larry Hsu, Ph.D.
|
||
Name: Larry Hsu, Ph.D.
|
|||
Title: President and Chief Executive Officer | |||
(Principal Executive Officer) | |||
By: |
/s/ Bryan M. Reasons
|
||
Name: Bryan M. Reasons | |||
Title: Vice President, Finance and | |||
Acting Chief Financial Officer | |||
(Principal Financial and Accounting Officer) |
Exhibit No.
|
Description of Document
|
|
3.1
|
Amended and Restated Bylaws of Impax Laboratories, Inc. (1).
|
|
10.1
|
General Release and Waiver, effective as of July 17, 2012, by and among Arthur A. Koch, Jr. and the Company (2).
|
|
11.1
|
Statement re computation of per share earnings (incorporated by reference to Note 16 in the Notes to the unaudited interim Consolidated Financial Statements in this Quarterly Report on Form 10-Q).
|
|
31.1
|
Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of the Acting Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification of the Acting Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
101
|
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 2012 and December 31, 2011, (ii) Consolidated Statements of Operations for each of the three and nine months ended September 30, 2012 and September 30, 2011, (iii) Consolidated Statements of Comprehensive Income for each of the three and nine months ended September 30, 2012 and September 30, 2011, (iv) Consolidated Statements of Cash Flows for each of the nine months ended September 30, 2012 and September 30, 2011 and (v) Notes to Interim Consolidated Financial Statements.*
|
|
(1)
|
Incorporated by reference to the Company’s Current Report on Form 8-K filed on August 28, 2012.
|
|
(2)
|
Incorporated by reference to the Company’s Current Report on Form 8-K filed on July 18, 2012.
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012 of Impax Laboratories, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|||
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|||
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|||
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|||
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|||
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
November 1, 2012
|
By:
|
/s/ Larry Hsu, Ph.D.
|
|
Larry Hsu, Ph.D.
|
|||
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2012 of Impax Laboratories, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|||
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|||
(c)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|||
(d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|||
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
||||
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
November 1, 2012
|
By:
|
/s/ Bryan M. Reasons
|
|
Bryan M. Reasons
|
|||
Vice President, Finance, and Acting Chief Financial Officer
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
November 1, 2012
|
By:
|
/s/ Larry Hsu, Ph.D.
|
|
Larry Hsu, Ph.D.
|
|||
President and Chief Executive Officer
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
November 1, 2012
|
By:
|
/s/ Bryan M. Reasons
|
|
Bryan M. Reasons
|
|||
Vice President, Finance, and Acting Chief Financial Officer
|
Note 1 - The Company & Basis of Presentation (Detail)
|
9 Months Ended |
---|---|
Sep. 30, 2012
|
|
Number of Reportable Segments | 2 |
Number Of Channels | 4 |
Number Of Properties | 5 |
Number Of Leased Properties | 3 |
Noncontrolling Interest, Ownership Percentage by Parent | 57.54% |
Research And Development Center Facility [Member]
|
|
Number Of Properties | 2 |
Note 10 - Accrued Expenses, Commitments and Contingencies (Detail) - The Company’s Accrued Expenses (USD $)
In Thousands, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Payroll-related expenses | $ 20,433 | $ 16,975 |
Product returns | 24,285 | 24,101 |
Medicaid rebates | 23,137 | 17,479 |
Physician detailing sales force fees | 1,969 | 1,655 |
Legal and professional fees | 9,599 | 5,071 |
Shelf stock price protection | 613 | 684 |
Other | 6,513 | 3,025 |
Total accrued expenses | $ 86,549 | $ 68,990 |
Note 7 - Prepaid Expenses and Other Current Assets (Detail) - Prepaid expenses and other current assets (USD $)
In Thousands, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Deferred charge-Zomig® royalty | $ 14,893 | |
Other prepaid expenses | 9,147 | 7,718 |
Prepaid expenses and other current assets | $ 24,040 | $ 7,718 |
Note 18 - Legal and Regulatory Matters (Detail)
|
9 Months Ended |
---|---|
Sep. 30, 2012
|
|
Loss Contingency Patent Infringement Litigation Period Within Which Patent Holder May File Suit For Patent Infringement | 45 days |
Loss Contingency Patent Infringement Litigation Maximum Stay Period For Approval Of Abbreviated New Drug Application | 30 months |
Number Of Agreements | 2 |
Product under Teva Agreement in Litigation [Member]
|
|
Number Of Products | 1 |
Products under Litigation Cost Sharing Agreements [Member]
|
|
Number Of Products | 4 |
Note 10 - Accrued Expenses, Commitments and Contingencies (Detail) - A Roll Forward of the Product Returns Reserve (USD $)
In Thousands, unless otherwise specified |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2012
|
Dec. 31, 2011
|
|
Ending balance | $ 24,285 | $ 24,101 |
Returns Reserve [Member]
|
||
Beginning balance | 24,101 | 33,755 |
Provision related to sales recorded in the period | 3,175 | 688 |
Credits issued during the period | (2,991) | (10,342) |
Ending balance | $ 24,285 | $ 24,101 |
Note 6 - Inventory (Detail) - Inventory, net of carrying value reserves (USD $)
In Thousands, unless otherwise specified |
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Raw materials | $ 30,497 | $ 32,454 |
Work in process | 4,215 | 5,046 |
Finished goods | 49,317 | 24,947 |
Total inventory | 84,029 | 62,447 |
Less: Non-current inventory | 5,355 | 8,270 |
Total inventory-current | $ 78,674 | $ 54,177 |
Note 10 - Accrued Expenses, Commitments and Contingencies (Tables)
|
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accrued Liabilities [Table Text Block] |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Product Warranty Liability [Table Text Block] |
|
Note 19 - Supplementary Financial Information (unaudited) (Detail) - Selected financial information for the quarterly periods noted (USD $)
|
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Jun. 30, 2012
|
Mar. 31, 2012
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Global Product sales, gross | $ 178,630,000 | $ 223,452,000 | $ 185,671,000 | $ 169,519,000 | $ 181,972,000 | $ 151,832,000 | ||
Less: | ||||||||
Product Returns | 305,000 | 948,000 | (329,000) | 552,000 | 1,799,000 | 2,706,000 | ||
Total revenues | 145,587,000 | 166,460,000 | 128,568,000 | 119,849,000 | 125,860,000 | 108,651,000 | 440,615,000 | 354,360,000 |
Gross profit | 78,027,000 | 77,823,000 | 62,553,000 | 62,654,000 | 59,702,000 | 58,537,000 | 218,403,000 | 180,893,000 |
Net income | 20,037,000 | 18,672,000 | 12,365,000 | 17,220,000 | 12,550,000 | 13,863,000 | 51,074,000 | 43,633,000 |
Net income per share (basic) (in Dollars per share) | $ 0.30 | $ 0.29 | $ 0.19 | $ 0.27 | $ 0.20 | $ 0.22 | $ 0.78 | $ 0.68 |
Net income per share (diluted) (in Dollars per share) | $ 0.29 | $ 0.27 | $ 0.18 | $ 0.26 | $ 0.19 | $ 0.21 | $ 0.75 | $ 0.65 |
Weighted average common shares outstanding: | ||||||||
Basic (in Shares) | 65,797,722 | 65,482,700 | 65,122,240 | 64,387,413 | 64,024,483 | 63,390,527 | 65,451,926 | 63,937,796 |
Diluted (in Shares) | 68,366,849 | 67,954,573 | 67,907,263 | 66,986,758 | 67,654,047 | 67,044,266 | 68,230,487 | 67,318,658 |
Global Product Sales [Member]
|
||||||||
Less: | ||||||||
Sales Revenue Goods, Net | 99,463,000 | 126,435,000 | 116,211,000 | 97,661,000 | 111,125,000 | 92,338,000 | 342,105,000 | 301,124,000 |
Impax Product Sales [Member]
|
||||||||
Less: | ||||||||
Sales Revenue Goods, Net | 43,327,000 | 28,091,000 | 71,422,000 | |||||
Rx Partner [Member]
|
||||||||
Less: | ||||||||
Sales Revenue, Net | 708,000 | 3,903,000 | 4,416,000 | 14,059,000 | 6,303,000 | 4,120,000 | 9,027,000 | 24,482,000 |
OTC Partner [Member]
|
||||||||
Less: | ||||||||
Sales Revenue, Net | 763,000 | 783,000 | 691,000 | 879,000 | 1,184,000 | 1,943,000 | 2,237,000 | 4,006,000 |
Research Partner [Member]
|
||||||||
Less: | ||||||||
Sales Revenue Services, Net | 1,326,000 | 3,713,000 | 3,715,000 | 3,715,000 | 3,713,000 | 6,715,000 | 8,754,000 | 14,143,000 |
Promotional Partner [Member]
|
||||||||
Less: | ||||||||
Sales Revenue Services, Net | 3,535,000 | 3,535,000 | 3,535,000 | 3,535,000 | 3,535,000 | 7,070,000 | 10,605,000 | |
Chargeback Reserve [Member]
|
||||||||
Less: | ||||||||
Sales Allowances Goods | 47,366,000 | 50,670,000 | 39,155,000 | 39,690,000 | 39,395,000 | 35,216,000 | ||
Rebate Reserve [Member]
|
||||||||
Less: | ||||||||
Sales Allowances Goods | 24,285,000 | 26,847,000 | 20,589,000 | 18,014,000 | 17,392,000 | 12,709,000 | ||
Other Credits [Member]
|
||||||||
Less: | ||||||||
Sales Allowances Goods | $ 7,211,000 | $ 18,552,000 | $ 10,045,000 | $ 13,602,000 | $ 12,261,000 | $ 8,863,000 |
Note 18 - Legal and Regulatory Matters
|
9 Months Ended |
---|---|
Sep. 30, 2012
|
|
Legal Matters and Contingencies [Text Block] |
18.
LEGAL AND REGULATORY MATTERS
Patent
Litigation
There
is substantial litigation in the pharmaceutical, biological,
and biotechnology industries with respect to the manufacture,
use, and sale of new products which are the subject of
conflicting patent and intellectual property claims. One or
more patents typically cover most of the brand name
controlled release products for which the Company is
developing generic versions.
Under
federal law, when a drug developer files an ANDA for a
generic drug seeking approval before expiration of a patent,
which has been listed with the FDA as covering the brand name
product, the developer must certify its product will not
infringe the listed patent(s) and/or the listed patent is
invalid or unenforceable (commonly referred to as a
“Paragraph IV” certification). Notices of such
certification must be provided to the patent holder, who may
file a suit for patent infringement within 45 days of the
patent holder’s receipt of such notice. If the patent
holder files suit within the 45 day period, the FDA can
review and approve the ANDA, but is prevented from granting
final marketing approval of the product until a final
judgment in the action has been rendered in favor of the
generic drug developer, or 30 months from the date the notice
was received, whichever is sooner. Lawsuits have been filed
against the Company in connection with the Company’s
Paragraph IV certifications seeking an order delaying the
approval of the Company’s ANDA until expiration of the
patent(s) at issue in the litigation.
Should
a patent holder commence a lawsuit with respect to an alleged
patent infringement by the Company, the uncertainties
inherent in patent litigation make the outcome of such
litigation difficult to predict. The delay in obtaining FDA
approval to market the Company’s product candidates as
a result of litigation, as well as the expense of such
litigation, whether or not the Company is ultimately
successful, could have a material adverse effect on the
Company’s results of operations and financial position.
In addition, there can be no assurance that any patent
litigation will be resolved prior to the end of the 30-month
period. As a result, even if the FDA were to approve a
product upon expiration of the 30-month period, the Company
may elect to not commence marketing the product if patent
litigation is still pending.
The
Company is generally responsible for all of the patent
litigation fees and costs associated with current and future
products not covered by its alliance and collaboration
agreements. The Company has agreed to share legal expenses
with respect to third-party and Company products under the
terms of certain of the alliance and collaboration
agreements. Under the Teva Agreement, the Company and Teva
have agreed to share in fees and costs related to patent
infringement litigation associated with the products covered
by the Teva Agreement. One product under the Teva Agreement
currently remains in litigation (the methylphenidate product
described below), the litigation costs of which the parties
share equally. In addition to the Teva Agreement, the Company
is sharing litigation costs with respect to four products
under the terms of two separate agreements. The
Company records the costs of patent litigation as expense in
the period when incurred for products it has developed, as
well as for products which are the subject of an alliance or
collaboration agreement with a third-party.
Although
the outcome and costs of the asserted and unasserted claims
is difficult to predict, the Company does not expect the
ultimate liability, if any, for such matters to have a
material adverse effect on its financial condition, results
of operations, or cash flows.
Patent
Infringement Litigation
Pfizer
Inc., et aI. v. Impax Laboratories, Inc. (Tolterodine
LA)
In
March 2008, Pfizer Inc., Pharmacia & Upjohn Company LLC,
and Pfizer Health AB (collectively, “Pfizer”)
filed a complaint against the Company in the U.S. District
Court for the Southern District of New York, alleging the
Company’s filing of an ANDA relating to Tolterodine
Tartrate Extended Release Capsules, 4 mg, generic to
Detrol®
LA, infringes three Pfizer patents. The Company filed an
answer and counterclaims seeking declaratory judgment of
non-infringement, invalidity, or unenforceability with
respect to the patents in suit. In April 2008, the case was
transferred to the U.S. District Court for the District of
New Jersey. On September 3, 2008, an amended complaint
was filed alleging infringement based on the Company’s
ANDA amendment adding a 2mg strength. For one of the
patents-in-suit, U.S. Patent No. 5,382,600 (the
“600 patent”), expiring on September 25,
2012 with pediatric exclusivity, the Company agreed by
stipulation to be bound by the decision in Pfizer Inc. et
al. v. Teva Pharmaceuticals USA, Inc., Case
No. 04-1418 (D. N.J.). After the court conducted a bench
trial, in January 2010, it found the 600 patent not invalid.
That decision was appealed to the U.S. Court of Appeals for
the Federal Circuit, and in July 2011 the appeal was
withdrawn, making the trial court decision final and binding
on the Company. The parties have settled, and the case was
dismissed on August 22, 2012.
Warner
Chilcott Company, LLC., et.al. v. Impax Laboratories, Inc.
(Doxycycline Hyclate)
In
December 2008, Warner Chilcott Company, LLC, Warner Chilcott
(US), LLS and Mayne Pharma International Pty. Ltd. (together,
“Warner Chilcott”) filed suit against the Company
in the U.S. District Court for the District of New Jersey,
alleging patent infringement for the filing of the
Company’s ANDA relating to Doxycycline Hyclate Delayed
Release Tablets, 75 mg and 100 mg, generic to Doryx®.
The Company filed an answer and counterclaim. Thereafter, in
March 2009, Warner Chilcott filed another lawsuit in the same
jurisdiction, alleging patent infringement for the filing of
the Company’s ANDA for the 150 mg strength. A Markman
hearing was held and a decision was issued in July 2011. A
bench trial was conducted starting on February 1, 2012. In
April 2012, the District Court issued its decision finding
that the patent in both suits was not infringed by the
Company’s ANDAs and that the patent was not invalid.
Warner Chilcott appealed the district court’s
non-infringement decision. On September 7, 2012, the United
States Court of Appeals for the Federal Circuit affirmed the
district court’s decision of non-infringement.
Eurand,
Inc., et al. v. Impax Laboratories, Inc.
(Cyclobenzaprine)
In
January 2009, Eurand, Inc., Cephalon, Inc., and Anesta AG
(collectively, “Cephalon”) filed suit against the
Company in the U.S. District Court for the District of
Delaware (“District Court”), alleging patent
infringement for the filing of the Company’s ANDA
relating to Cyclobenzaprine Hydrochloride Extended Release
Capsules, 15 mg and 30 mg, generic to Amrix®.
This matter was settled and dismissed on October 11,
2010.
On
November 8, 2011, the District Court expressly named the
Company in an order enjoining it from engaging in the
commercial use, offer for sale, or sale within the United
States of any generic Amrix®.
On November 22, 2011, the Company filed a motion to reargue
and modify the injunction. Plaintiffs responded on December
9, 2011, with a motion for declaratory judgment, seeking a
declaration that Impax does not have the right to sell
generic Amrix®.
The Company responded on December 20, 2011, and moved to
enforce the terms of a settlement agreement entered into with
plaintiffs that it claims grants the Company the right to
sell generic Amrix®.
On March 15, 2012, the District Court denied the
Company’s motion and refused to modify the injunction.
The Company appealed the order and a hearing was held on
September 6, 2012. The Company remains enjoined, pending a
decision on the appeal.
Genzyme
Corporation v. Impax Laboratories, Inc. (Sevelamer
Hydrochloride)
In
March 2009, Genzyme Corporation filed suit against the
Company in the U.S. District Court for the District of
Maryland, alleging patent infringement for the filing of the
Company’s ANDA relating to Sevelamer Hydrochloride
Tablets, 400 mg and 800 mg, generic to Renagel®.
The Company filed an answer and counterclaim. The parties
have settled, and the case was dismissed on September 10,
2012.
Genzyme
Corporation v. Impax Laboratories, Inc. (Sevelamer
Carbonate)
In
April 2009, Genzyme Corporation filed suit against the
Company in the U.S. District Court for the District of
Maryland, alleging patent infringement for the filing of the
Company’s ANDA relating to Sevelamer Carbonate Tablets,
800 mg, generic to Renvela®.
The Company filed an answer and counterclaim. The parties
have settled, and the case was dismissed on September 10,
2012.
Genzyme
Corporation v. Impax Laboratories, Inc. (Sevelamer Carbonate
Powder)
In
July 2010, Genzyme Corporation filed suit against the Company
in the U.S. District Court for the District of Maryland,
alleging patent infringement for the filing of the
Company’s ANDA relating to Sevelamer Carbonate Powder,
2.4 g and 0.8 g packets, generic to Renvela®
powder. The Company filed an answer and counterclaim. The
parties have settled, and the case was dismissed on September
10, 2012.
The
Research Foundation of State University of New York et al. v.
Impax Laboratories, Inc.; Galderma Laboratories Inc., et al.
v. Impax Laboratories, Inc. (Doxycycline Monohydrate)
In
September 2009, The Research Foundation of State University
of New York; New York University; Galderma Laboratories Inc.;
and Galderma Laboratories, L.P. (collectively,
“Galderma”) filed suit against the Company in the
U.S. District Court for the District of Delaware alleging
patent infringement for the filing of the Company’s
ANDA relating to Doxycycline Monohydrate Delayed-Release
Capsules, 40 mg, generic to Oracea®.
In May 2011, Galderma Laboratories Inc., Galderma
Laboratories, L.P. and Supernus Pharmaceuticals, Inc. filed a
second lawsuit in Delaware alleging infringement of an
additional patent related to Oracea®.
The Company filed an answer and counterclaims in both
matters. In October 2009 for the first lawsuit and in July
2011 for the second lawsuit, the parties agreed to be bound
by the final judgment concerning infringement, validity and
enforceability of the patents at issue in an earlier-filed
case brought by Galderma and Supernus against another generic
drug manufacturer. Proceedings in the lawsuits involving the
Company were stayed pending resolution of the related matter.
In July 2011, a four-day trial was held in the case involving
the other generic manufacturer in the U.S. District Court for
the District of Delaware on the issues of patent infringement
and validity. In August 2011, the Court issued its decision
finding four of the five patents invalid and/or not
infringed, and the fifth patent, which expires in December
2027, infringed and not invalid. After proceedings related to
the remedy, on June 8, 2012, the Court entered final judgment
with respect to that litigation. On June 22, 2012, the Court
entered its final judgment with respect to the Company. All
parties filed notices of appeal and/or cross-appeal in July
2012. The decision of the District Court will be binding on
the Company unless reversed or modified on appeal or in
subsequent litigation.
Schering
Corporation, et al. v. Impax Laboratories, Inc.
(Ezetimibe/Simvastatin)
In
August 2010, Schering Corporation and MSP Singapore Company
LLC (together, “Schering”) filed suit against the
Company in the U.S. District Court for the District of New
Jersey (“District Court”) alleging patent
infringement for the filing of the Company’s ANDA
relating to Ezetimibe/Simvastatin Tablets, 10/80 mg, generic
to Vytorin®.
The Company filed an answer and counterclaim. In December
2010, the parties agreed to be bound by the final judgment
concerning validity and enforceability of the patents at
issue in cases brought by Schering against other generic drug
manufacturers that have filed ANDAs relating to this product,
and proceedings in the Company’s case were stayed. In
April 2012, the District Court issued a decision, finding
that the latest-expiring patent (U.S. Patent No. RE 42,461)
to be valid and enforceable. The decision of validity and
enforceability will be binding on the Company unless reversed
or modified on appeal or in subsequent litigation.
Abbott
Laboratories, et al. v. Impax Laboratories, Inc.
(Niacin-Simvastatin)
In
November 2010, Abbott Laboratories and Abbott Respiratory LLC
filed suit against the Company in the U.S. District Court for
the District of Delaware, alleging patent infringement for
the filing of the Company’s ANDA relating to
Niacin-Simvastatin Tablets, 1000/20 mg, generic to
Simcor®.
The Company filed an answer and counterclaim. The parties
have settled, and the case was dismissed on September 11,
2012.
ALZA
Corp., et al. v. Impax Laboratories, Inc., et al.
(Methylphenidate)
In
November 2010, ALZA Corp., Ortho-McNeil-Janssen
Pharmaceuticals, Inc. (together, “ALZA”) filed
suit against the Company in the U.S. District Court for the
District of Delaware, alleging patent infringement for the
filing of the Company’s ANDA relating to
Methylphenidate Hydrochloride Tablets, 54 mg, generic to
Concerta®.
Another complaint was subsequently filed to allege
infringement of the 18, 27 and 36 mg strengths, based on the
Company amending its ANDA to include those additional
strengths. The Company has filed its answers and
counterclaims to both complaints. The parties have settled,
and the case was dismissed on September 14, 2012.
Shire
LLC, et al. v. Impax Laboratories, Inc., et al.
(Guanfacine)
In
December 2010, Shire LLC, Supernus Pharmaceuticals, Inc., Amy
F.T. Arnsten, Ph.D., Pasko Rakic, M.D., and Robert D. Hunt,
M.D. (together, “Shire”) filed suit against the
Company in the U.S. District Court for the Northern District
of California alleging patent infringement for the filing of
the Company’s ANDA relating to Guanfacine Hydrochloride
Tablets, 4 mg, generic to Intuniv®.
In January, 2011 Shire amended its complaint to add the 1 mg,
2 mg, and 3 mg strengths, based on the Company amending its
ANDA to include those additional strengths. The Company filed
its answer and counterclaims. In March 2012, Shire dedicated
one of the patents-in-suit, U.S. Patent No. 5,854,290, to the
public. The Court conducted a Markman
hearing on May 30, 2012 and on June 1, 2012, the Court issued
an order construing the claims. On August 8, 2012,
the Court granted the Company’s motion for summary
judgment of noninfringement on the ‘290 patent. Trial
is scheduled for July 8, 2013.
Takeda
Pharmaceutical Co., Ltd, et al. v. Impax Laboratories, Inc.
(Dexlansoprazole)
In
April 2011, Takeda Pharmaceutical Co., Ltd., Takeda
Pharmaceuticals North America, Inc., Takeda Pharmaceuticals
LLC, and Takeda Pharmaceuticals America, Inc. (collectively,
“Takeda”) filed suit against the Company in the
U.S. District Court for the Northern District of California
alleging patent infringement based on the filing of the
Company’s ANDA relating to Dexlansoprazole Delayed
Release Capsules, 30 and 60 mg, generic to Dexilant®.
The Company filed an answer and counterclaims, including a
claim relating to false marking of an expired patent. Takeda
filed a motion to dismiss the Company’s false marking
counterclaim. Following the enactment of the America Invents
Act, the parties stipulated to dismissal of the false marking
claim. The trial court issued a claim construction ruling on
April 11, 2012. Discovery is ongoing and trial is set
for June 3, 2013.
Purdue
Pharma L.P., The P.F. Laboratories, Inc., Purdue
Pharmaceuticals L.P., Rhodes Technologies, Board of Regents
of the University of Texas System, and Grunenthal GmbH v.
Impax Laboratories, Inc. (Oxycodone)
In
April 2011, Purdue Pharma L.P., The P.F. Laboratories, Inc.,
Purdue Pharmaceuticals L.P., Rhodes Technologies, Board of
Regents of the University of Texas System, and Grunenthal
GmbH (collectively “Purdue”) filed suit against
the Company in the U.S. District Court for the Southern
District of New York alleging patent infringement based on
the filing of the Company’s ANDA relating to Oxycodone
Hydrochloride, Controlled Release tablets, 10, 15, 20, 30,
40, 60 and 80 mg, generic to Oxycontin®.
The Company filed an answer and counterclaims. Discovery is
proceeding, and no trial date has been set.
Avanir
Pharmaceuticals, Inc. et al. v. Impax Laboratories, Inc.
(Dextromethorphan/Quinidine)
In
August 2011, Avanir Pharmaceuticals, Inc., Avanir Holding
Co., and Center for Neurological Study filed suit against the
Company in the U.S. District Court for the District of
Delaware alleging patent infringement based on the filing of
the Company’s ANDA relating to
Dextromethorphan/Quinidine Capsules, 20 mg/10 mg, generic of
Nuedexta®.
The Company filed an answer and counterclaims. On October 8,
2012, Avanir Pharmaceuticals, Inc. filed suit against the
Company in the U.S. District Court for the District of
Delaware alleging patent infringement of a new patent, US
Patent 8,227,484, issued July 24, 2012, also based on the
filing of the Company’s ANDA relating to
Dextromethorphan/Quinidine Capsules, 20 mg/10 mg, generic of
Nuedexta. The Company filed an answer and counterclaims on
October 10, 2012. A claim construction hearing was conducted
on October 5, 2012. Discovery is proceeding, and trial is set
for September 2013.
GlaxoSmithKline
LLC, et al. v. Impax Laboratories, Inc., et al.
(Dutasteride/Tamsulosin)
In
September 2011, GlaxoSmithKline LLC and SmithKline Beecham
Corp. filed suit against the Company in the U.S. District
Court for the District of Delaware alleging patent
infringement based on the filing of the Company’s ANDA
relating to Dutasteride/Tamsulosin Capsules, 0.5 mg/0.4 mg,
generic of Jalyn®.
The Company filed an answer and counterclaim. Discovery is
closed. The Markman
hearing was held on September 4, 2012, and a decision is
pending. Trial is set for January 28, 2013.
Cephalon,
Inc. et al. v. Impax Laboratories, Inc. (Fentanyl
Citrate)
In
November 2011, Cephalon, Inc. and CIMA Labs, Inc. (together
“Cephalon”) filed suit against the Company in the
U.S. District Court for the District of Delaware, alleging
patent infringement of U.S. Patent Nos. 6,200,604, 6,974,590,
7,862,832, and 7,862,833, based on the filing of the
Company’s ANDA relating to Fentanyl Citrate Buccal
Tablets, 100, 200, 400, 600, and 800 mcg, generic to
Fentora®.
The Company filed an answer and counterclaims, as well as a
declaratory judgment action to include two other patents
(U.S. Patent Nos. 6,264,981 and 8,092,832). In response,
Cephalon alleged infringement of those two patents against
the Company. The Company also filed a supplemental
counterclaim seeking declaratory judgment regarding U.S.
Patent No. 8,119,158. Discovery is ongoing, and trial
is set for June 24, 2013.
Depomed,
Inc. v. Impax Laboratories, Inc. (Gabapentin)
In
April 2012, Depomed, Inc. filed suit against the Company in
the U.S. District Court for the District of New Jersey,
alleging patent infringement for the filing of the
Company’s ANDA related to Gabapentin Extended-Release
Tablets, 300 and 600 mg, generic to Gralise®. The
Company filed an answer and
counterclaim. On
October 24, 2012, the parties submitted a stipulation of
dismissal based on the withdrawal of the Company’s
ANDA.
Other
Litigation Related to the Company’s Business
Budeprion
XL Litigation
In
June 2009, the Company was named a co-defendant in class
action lawsuits filed in California state court in an action
titled Kelly v. Teva
Pharmaceuticals Indus. Ltd, et al., No. BC414812
(Calif. Superior Crt. L.A. County). Subsequently, additional
class action lawsuits were filed in Louisiana (Morgan v. Teva
Pharmaceuticals Indus. Ltd, et al., No. 673880
(24th Dist Crt., Jefferson Parish, LA.)), North Carolina
(Weber v.
Teva Pharmaceuticals Indus., Ltd., et al., No. 07
CV5002556, (N.C. Superior Crt., Hanover County)),
Pennsylvania (Rosenfeld v. Teva
Pharmaceuticals USA, Inc. et al.,
No. 2:09-CV-2811 (E.D. Pa.)), Florida (Henchenski and
Vogel v. Teva Pharmaceuticals Industries Ltd., et al.,
No. 2:09-CV-470-FLM-29SPC (M.D. Fla.)), Texas (Anderson v. Teva
Pharmaceuticals Indus., Ltd., et al.,
No. 3-09CV1200-M (N.D. Tex.)), Oklahoma (Brown et al. v.
Teva Pharmaceuticals Inds., Ltd., et al.,
No. 09-cv-649-TCK-PJC (N.D. OK)), Ohio (Latvala et al. v.
Teva Pharmaceuticals Inds., Ltd., et al.,
No. 2:09-cv-795 (S.D. OH)), Alabama (Jordan v. Teva
Pharmaceuticals Indus. Ltd et al., No. CV09-709 (Ala.
Cir. Crt. Baldwin County)), and Washington (Leighty v. Teva
Pharmaceuticals Indus. Ltd et al., No. CV09-01640 (W.
D. Wa.)). All of the complaints involve Budeprion XL, a
generic version of Wellbutrin XL®
that is manufactured by the Company and marketed by Teva, and
allege that, contrary to representations of Teva, Budeprion
XL is less effective in treating depression, and more likely
to cause dangerous side effects, than Wellbutrin XL. The
actions are brought on behalf of purchasers of Budeprion XL
and assert claims such as unfair competition, unfair trade
practices and negligent misrepresentation under state law.
Each lawsuit seeks damages in an unspecified amount
consisting of the cost of Budeprion XL paid by class members,
as well as any applicable penalties imposed by state law, and
disclaims damages for personal injury. The state court cases
were removed to federal court, and a petition for
multidistrict litigation to consolidate the cases in federal
court was granted. These cases and any subsequently filed
cases will be heard under the consolidated action entitled In
re: Budeprion XL Marketing Sales Practices, and Products
Liability Litigation, MDL No. 2107, in the United States
District Court for the Eastern District of Pennsylvania. The
Company filed a motion to dismiss and a motion to certify
that order for interlocutory appeal, both of which were
denied. Plaintiffs filed a motion for class certification and
the Company filed an opposition to that motion. The class
certification hearing was held on May 17, 2011. In
September 2011, the Company filed a summary judgment motion
on the grounds of plaintiffs’ claims are preempted
under federal law based on the United States Supreme Court
decision in PLIVA v.
Mensing. On January 6, 2012, the Company and
co-defendant Teva entered into a classwide settlement
agreement for all the actions included in the multidistrict
litigation. Pursuant to that settlement, the Company has
agreed to take certain actions related to the subject
product, to pay for class notice and settlement
administration, and to reimburse any attorney’s fees or
costs awarded by the Court to plaintiffs’ up to a
capped amount. The Company has accrued estimated costs
related to the settlement of this matter as of March 31,
2012. The settlement was finally approved by the Court on
July 2, 2012. A third party objector to the
settlement filed a notice of appeal on July 25, 2012. The
State of Texas moved to intervene in the case at the district
court on August 7, 2012 and also filed a notice of appeal of
the settlement on August 8, 2012. The district court denied
the motion for intervention on September 21,
2012. The
appeals of the third party objector and the State of Texas
were voluntarily withdrawn and the appeal was dismissed on
October 26, 2012.
Impax
Laboratories, Inc. v. Shire LLC and Shire Laboratories, Inc.
(generic Adderall XR®)
On
November 1, 2010, the Company filed suit against Shire
LLC and Shire Laboratories, Inc. (collectively
“Shire”) in the Supreme Court of the State of New
York, alleging breach of contract and other related claims
due to Shire’s failure to fill the Company’s
orders for the generic Adderall XR®
product as required by the parties’ Settlement
Agreement and License and Distribution Agreement, each signed
in January 2006. In addition, the Company filed a motion for
a preliminary injunction and a temporary restraining order
seeking to require Shire to fill product orders placed by the
Company. In November 2010, the case was removed to the U.S.
District Court for the Southern District of New York by Shire
based on diversity jurisdiction. Discovery is closed, and
currently no trial date has been set.
Civil
Investigative Demand from the FTC
On
May 2, 2012, the Company received a Civil Investigative
Demand (“CID”) from the United States Federal
Trade Commission (“FTC”) concerning its
investigation into the drug SOLODYN®
and its generic equivalents. According to the FTC, the
investigation is to determine whether Medicis Pharmaceutical
Corporation, the Company, and six other companies have
engaged or are engaged in unfair methods of competition in or
affecting commerce by (i) entering into agreements
regarding SOLODYN®
or its generic equivalents and/or (ii) engaging in other
conduct regarding the sale or marketing of SOLODYN®
or its generic equivalents. The Company is cooperating with
the FTC in producing documents and information in response to
the CID. To the knowledge of the Company no proceedings have
been initiated against the Company to date, however no
assurance can be given as to the timing or outcome of this
investigation.
|
Note 9 - Goodwill and Intangible Assets (Detail) (USD $)
|
3 Months Ended | 9 Months Ended | |
---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2012
|
Dec. 31, 2011
|
|
Goodwill | $ 27,574,000 | $ 27,574,000 | $ 27,574,000 |
Amortization of Intangible Assets | $ 6,902,000 | $ 11,398,000 | |
Minimum [Member] | Tolmar Product Rights [Member]
|
|||
Finite-Lived Intangible Asset, Useful Life | 5 years | ||
Maximum [Member] | Tolmar Product Rights [Member]
|
|||
Finite-Lived Intangible Asset, Useful Life | 12 years | ||
Tolmar Incorporation [Member] | Products Approved [Member]
|
|||
Number Of Products | 9 | ||
Tolmar Incorporation [Member] | Product Pending Approval [Member]
|
|||
Number Of Products | 2 | ||
Tolmar Incorporation [Member]
|
|||
Number Of Products | 11 | ||
Zomig Product Rights Tablet [Member]
|
|||
Finite-Lived Intangible Asset, Useful Life | 14 months | ||
Zomig Product Rights Orally Disintegrating Tablet [Member]
|
|||
Finite-Lived Intangible Asset, Useful Life | 11 months | ||
Zomig Product Rights Nasal Spray [Member]
|
|||
Finite-Lived Intangible Asset, Useful Life | 72 months |
Note 5 - Accounts Receivable (Detail) (USD $)
|
Sep. 30, 2012
|
Dec. 31, 2011
|
---|---|---|
Allowance for Doubtful Accounts Receivable, Current | $ 548,000 | $ 612,000 |
Note 17 - Segment Information (Tables)
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Sep. 30, 2012
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Schedule of Segment Reporting Information, by Segment [Table Text Block] |
|
Note 9 - Goodwill and Intangible Assets (Detail) - Expected amortization of Zomig® and Tolmar product rights (USD $)
In Thousands, unless otherwise specified |
Sep. 30, 2012
|
---|---|
2012 | $ 6,959 |
2013 | 14,378 |
2014 | 4,766 |
2015 | 4,766 |
2016 | 4,766 |
Thereafter | 16,287 |
Totals | $ 51,922 |
Note 16 - Earnings Per Share (Detail) - Reconciliation of basic and diluted net income per share of common stock (USD $)
In Thousands, except Share data, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Jun. 30, 2012
|
Mar. 31, 2012
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Numerator: | ||||||||
Net income (in Dollars) | $ 20,037 | $ 18,672 | $ 12,365 | $ 17,220 | $ 12,550 | $ 13,863 | $ 51,074 | $ 43,633 |
Weighted average common shares outstanding | 65,797,722 | 65,482,700 | 65,122,240 | 64,387,413 | 64,024,483 | 63,390,527 | 65,451,926 | 63,937,796 |
Effect of dilutive stock options and restricted stock awards | 2,569,127 | 2,599,345 | 2,778,561 | 3,380,862 | ||||
Diluted weighted average common shares outstanding | 68,366,849 | 67,954,573 | 67,907,263 | 66,986,758 | 67,654,047 | 67,044,266 | 68,230,487 | 67,318,658 |
Basic net income per share (in Dollars per share) | $ 0.30 | $ 0.29 | $ 0.19 | $ 0.27 | $ 0.20 | $ 0.22 | $ 0.78 | $ 0.68 |
Diluted net income per share (in Dollars per share) | $ 0.29 | $ 0.27 | $ 0.18 | $ 0.26 | $ 0.19 | $ 0.21 | $ 0.75 | $ 0.65 |
Note 7 - Prepaid Expenses and Other Current Assets (Detail) (USD $)
|
3 Months Ended | 9 Months Ended |
---|---|---|
Dec. 31, 2012
|
Sep. 30, 2012
|
|
Collaborative Arrangement Transition Payment Percentage Of Gross Profit | 100.00% | |
Collaborative Arrangement Acquisition Price | $ 130,000,000 | |
Proceeds from Collaborators | 46,240,000 | |
Royalty Expense | $ 14,893,000 | $ 24,997,000 |
Note 2 - Revenue Recognition
|
9 Months Ended | ||||||
---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
|||||||
Revenue Recognition [Text Block] |
2.
REVENUE RECOGNITION
The
Company recognizes revenue when the earnings process is
complete, which under SEC Staff Accounting Bulletin No. 104,
Topic No. 13, “Revenue Recognition” (“SAB
104”), is when revenue is realized or realizable and
earned, there is persuasive evidence a revenue arrangement
exists, delivery of goods or services has occurred, the sales
price is fixed or determinable, and collectability is
reasonably assured.
The
Company accounts for revenue arrangements with multiple
deliverables in accordance with FASB ASC Topic 605-25,
revenue recognition for arrangements with multiple elements,
which addresses the determination of whether an arrangement
involving multiple deliverables contains more than one unit
of accounting. A delivered item within an arrangement is
considered a separate unit of accounting only if both of the
following criteria are met:
Under
FASB ASC Topic 605-25, if both of the criteria above are not
met, then separate accounting for the individual deliverables
is not appropriate. Revenue recognition for arrangements with
multiple deliverables constituting a single unit of
accounting is recognized generally over the greater of the
term of the arrangement or the expected period of
performance, either on a straight-line basis or on a modified
proportional performance basis.
The
Company accounts for milestones related to research and
development activities in accordance with FASB ASC Topic
605-28, milestone method of revenue
recognition. FASB ASC Topic 605-28 allows for the
recognition of consideration, which is contingent on the
achievement of a substantive milestone, in its entirety in
the period the milestone is achieved. A milestone
is considered to be substantive if all of the following
criteria are met: the milestone is commensurate
with either: (1) the performance required to achieve the
milestone, or (2) the enhancement of the value of the
delivered items resulting from the performance required to
achieve the milestone; the milestone relates solely to past
performance; and, the milestone is reasonable relative to all
of the deliverables and payment terms within the
agreement.
Global
Product sales, net, and Impax Product sales,
net:
The
“Global Product sales, net” and “Impax
Product sales, net” line items of the statement of
operations, include revenue recognized related to shipments
of generic and branded pharmaceutical products to the
Company’s customers, primarily drug wholesalers and
retail chains. Gross sales revenue is recognized at the time
title and risk of loss passes to the customer, which is
generally when product is received by the customer. Global
and Impax Product revenue, net may include deductions from
the gross sales price related to estimates for chargebacks,
rebates, distribution service fees, returns, shelf-stock, and
other pricing adjustments. The Company records an estimate
for these deductions in the same period when the revenue is
recognized. A summary of each of these deductions is as
follows:
Chargebacks
The
Company has agreements establishing contract prices for
certain products with certain indirect customers, such as
managed care organizations, hospitals and government agencies
who purchase products from drug wholesalers. The contract
prices are lower than the prices the customer would otherwise
pay to the wholesaler, and the price difference is referred
to as a chargeback, which generally takes the form of a
credit memo issued by the Company to reduce the invoiced
gross selling price charged to the wholesaler. An estimated
accrued provision for chargeback deductions is recognized at
the time of product shipment. The primary factors considered
when estimating the provision for chargebacks are the average
historical chargeback credits given, the mix of products
shipped, and the amount of inventory on hand at the major
drug wholesalers with whom the Company does
business. The Company also monitors actual
chargebacks granted and compares them to the estimated
provision for chargebacks to assess the reasonableness of the
chargeback reserve at each quarterly balance sheet
date.
Rebates
The
Company maintains various rebate programs with its customers
in an effort to maintain a competitive position in the
marketplace and to promote sales and customer loyalty. The
rebates generally take the form of a credit memo to reduce
the invoiced gross selling price charged to a customer for
products shipped. An estimated accrued provision for rebate
deductions is recognized at the time of product shipment. The
primary factors the Company considers when estimating the
provision for rebates are the average historical experience
of aggregate credits issued, the mix of products shipped and
the historical relationship of rebates as a percentage of
total gross product sales, the contract terms and conditions
of the various rebate programs in effect at the time of
shipment, and the amount of inventory on hand at the major
drug wholesalers with whom the Company does
business. The Company also monitors actual rebates
granted and compares them to the estimated provision for
rebates to assess the reasonableness of the rebate reserve at
each quarterly balance sheet date.
Distribution
Service Fees
The
Company pays distribution service fees to several of its
wholesaler customers related to sales of its Impax
Products. The wholesalers are generally obligated
to provide the Company with periodic outbound sales
information as well as inventory levels of the
Company’s Impax Products held in their
warehouses. Additionally, the wholesalers have
agreed to manage the variability of their purchases and
inventory levels within specified days on hand
limits. An accrued provision for distribution
service fees is recognized at the time products are shipped
to wholesalers.
Returns
The
Company allows its customers to return product if approved by
authorized personnel in writing or by telephone with the lot
number and expiration date accompanying any request and if
such products are returned within six months prior to or
until twelve months following, the products’ expiration
date. The Company estimates and recognizes an
accrued provision for product returns as a percentage of
gross sales based upon historical experience. The
product return reserve is estimated using a historical lag
period, which is the time between when the product is sold
and when it is ultimately returned and estimated return rates
which may be adjusted based on various assumptions including
changes to internal policies and procedures, changes in
business practices, and commercial terms with customers,
competitive position of each product, amount of inventory in
the wholesaler supply chain, the introduction of new
products, and changes in market sales
information. The Company also considers other
factors, including significant market changes which may
impact future expected returns, and actual product
returns. The Company monitors actual returns on a
quarterly basis and may record specific provisions for
returns it believes are not covered by historical
percentages.
Shelf-Stock
Adjustments
Based
upon competitive market conditions, the Company may reduce
the selling price of certain Global Division
products. The Company may issue a credit against
the sales amount to a customer based upon their remaining
inventory of the product in question, provided the customer
agrees to continue to make future purchases of product from
the Company. This type of customer credit is
referred to as a shelf-stock adjustment, which is the
difference between the original selling price and the revised
lower sales price, multiplied by an estimate of the number of
product units on hand at a given date. Decreases in selling
prices are discretionary decisions made by the Company in
response to market conditions, including estimated launch
dates of competing products and declines in market
price. The Company records an estimate for
shelf-stock adjustments in the period it agrees to grant such
a credit memo to a customer.
Medicaid
As
required by law, the Company provides a rebate on drugs
dispensed under the Medicaid program. The Company determines
its estimated Medicaid rebate accrual primarily based on
historical experience of claims submitted by the various
states and other jurisdictions and any new information
regarding changes in the Medicaid program which may impact
the Company’s estimate of Medicaid rebates. In
determining the appropriate accrual amount, the Company
considers historical payment rates and processing lag for
outstanding claims and payments. The Company records
estimates for Medicaid rebates as a deduction from gross
sales, with corresponding adjustment to accrued
liabilities.
Cash
Discounts
The
Company offers cash discounts to its customers, generally 2%
of the gross selling price, as an incentive for paying within
invoice terms, which generally range from 30 to 90 days. An
estimate of cash discounts is recorded in the same period
when revenue is recognized.
Rx
Partner and OTC Partner:
The
“Rx Partner” and “OTC Partner” line
items of the statement of operations include revenue
recognized under alliance and collaboration agreements
between the Company and unrelated third-party pharmaceutical
companies. The Company has entered into these alliance
agreements to develop marketing and/or distribution
relationships with its partners to fully leverage its
technology platform.
The
Rx Partners and OTC Partners alliance agreements obligate the
Company to deliver multiple goods and/or services over
extended periods. Such deliverables include manufactured
pharmaceutical products, exclusive and semi-exclusive
marketing rights, distribution licenses, and research and
development services, among others. In exchange for these
deliverables, the Company receives payments from its alliance
agreement partners for product shipments and/or the provision
of research and development services, and may also receive
royalty, profit sharing, and/or upfront or periodic milestone
payments. Revenue received from the alliance agreement
partners for product shipments under these agreements is not
subject to deductions for chargebacks, rebates, product
returns, and other pricing adjustments. Royalty
and profit sharing amounts the Company receives under these
agreements are calculated by the respective alliance
agreement partner, with such royalty and profit share amounts
generally based upon estimates of net product sales or gross
profit which include estimates of deductions for chargebacks,
rebates, product returns, and other adjustments the alliance
agreement partners may negotiate with their respective
customers. The Company records the alliance
agreement partner's adjustments to such estimated amounts in
the period the alliance agreement partner reports the amounts
to the Company.
The
Company applies the guidance of ASC 605-25 “Multiple
Element Arrangements” to the Strategic Alliance
Agreement with Teva Pharmaceuticals Curacao N.V., a
subsidiary of Teva Pharmaceutical Industries Limited
(“Teva Agreement”). The Company looks
to the underlying delivery of goods and/or services which
give rise to the payment of consideration under the Teva
Agreement to determine the appropriate revenue
recognition. The Company initially defers
consideration received as a result of research and
development-related activities performed under the Teva
Agreement. The Company recognizes deferred revenue
on a straight-line basis over the Company’s expected
period of performance of such services. Consideration
received as a result of the manufacture and delivery of
products under the Teva Agreement is recognized at the time
title and risk of loss passes to the customer which is
generally when product is received by Teva. The
Company recognizes profit share revenue in the period
earned.
OTC
Partner revenue is related to an agreement with Pfizer Inc.
(formerly Wyeth) with respect to supply of an
over-the-counter pharmaceutical product and related research
and development services. The Company initially
defers all revenue earned under the OTC Partner
agreement. The Company also defers direct product
manufacturing costs to the extent such costs are reimbursable
by the OTC Partner. Product manufacturing costs in
excess of amounts reimbursable by the OTC Partner are
recognized as current period cost of revenue. The
Company recognizes revenue as OTC Partner revenue and
amortizes deferred product manufacturing costs as cost of
revenues as it fulfills contractual obligations. Revenue is
recognized and associated costs are amortized over the
agreement’s term of the arrangement or the expected
period of performance, using a modified proportional
performance method. Under the modified
proportional performance method of revenue recognition
utilized by the Company, the amount recognized in the period
of initial recognition is based upon the number of years
elapsed under the alliance and collaboration agreement
relative to the estimated total length of the recognition
period. Under this method, the amount of revenue recognized
in the year of initial recognition is determined by
multiplying the total amount realized by a fraction, the
numerator of which is the then current year of the alliance
and collaboration agreement and the denominator of which is
the total estimated life of the alliance and collaboration
agreement. The amount recognized as revenue during each
remaining year is an equal pro rata amount. Finally,
cumulative revenue recognized is limited to the extent of
cash collected and/or the fair value received. The result of
the modified proportional performance method is a greater
portion of the revenue is recognized in the initial period
with the remaining balance being recognized ratably over
either the remaining life of the arrangement or the expected
period of performance of the alliance and collaboration
agreement.
Research
Partner:
The
“Research Partner” line item of the statement of
operations includes revenue recognized under development
agreements with unrelated third-party pharmaceutical
companies. The development agreements generally
obligate the Company to provide research and development
services over multiple periods. In exchange for
this service, the Company received upfront payments upon
signing of each development agreement and is eligible to
receive contingent milestone payments, based upon the
achievement of contractually specified
events. Additionally, the Company may also receive
royalty payments from the sale, if any, of a successfully
developed and commercialized product under one of these
development agreements. Revenue received from the
achievement of contingent research and development
milestones, if any, will be recognized in its entirety in the
period when such payment is earned. Royalty fee
income, if any, will be recognized by the Company in the
period when the revenue is earned.
Promotional
Partner:
The
“Promotional Partner” line item of the statement
of operations includes revenue recognized under a promotional
services agreement with unrelated third-party pharmaceutical
companies. The promotional services agreement
obligated the Company to provide physician detailing sales
calls services to promote its partners’ branded drug
products over multiple periods. In exchange for
this service, the Company received fixed fees generally based
on either the number of sales force representatives utilized
in providing the services, or the number of sales calls made
up to contractual maximum amounts. The Company
recognized revenue from providing physician detailing sales
calls services as the services were provided in the period
when they were earned. The Company’s obligation to
provide physician detailing sales calls under the promotional
services agreement ended on June 30, 2012.
Shipping
and Handling Fees and Costs
Shipping
and handling fees related to sales transactions are recorded
as selling expense.
|
Note 14 - Share-Based Compensation (Detail) - Total Share-Based Compensation Expense Recognized in the Consolidated Statement of Operations (USD $)
In Thousands, unless otherwise specified |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
|
Share-Based Compensation Expense | $ 3,823 | $ 3,498 | $ 12,146 | $ 9,632 |
Manufacturing Expenses [Member]
|
||||
Share-Based Compensation Expense | 559 | 548 | 1,726 | 1,479 |
Research and Development Expense [Member]
|
||||
Share-Based Compensation Expense | 1,163 | 1,086 | 3,462 | 3,174 |
Selling, General and Administrative Expenses [Member]
|
||||
Share-Based Compensation Expense | $ 2,101 | $ 1,864 | $ 6,958 | $ 4,979 |