10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2014

OR 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________

Commission file number: 001-34263

Impax Laboratories, Inc.
(Exact name of registrant as specified in its charter)
Delaware	65-0403311
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
30831 Huntwood Avenue, Hayward, CA	94544
(Address of principal executive offices)	(Zip Code)

                                      (510) 240-6000                                      

(Registrant’s telephone number, including area code)

                                                                 Not Applicable                                                              

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ☒	Accelerated filer ☐
Non-accelerated filer ☐ (Do not check if a smaller reporting company)	Smaller reporting company ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐   No ☒

As of August 1, 2014, there were 70,698,855 shares of the registrant’s common stock outstanding.

Impax Laboratories, Inc.

INDEX 

PART I: FINANCIAL INFORMATION
Item 1:	Financial Statements (unaudited)	3
- Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013		3
- Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2013		4
- Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2014 and 2013		5
- Consolidated Statements of Cash Flows for the six months ended June 30, 2014 and 2013		6
- Notes to Interim Consolidated Financial Statements		8
Item 2:	Management’s Discussion and Analysis of Results of Operations and Financial Condition	46
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	71
Item 4:	Controls and Procedures	71
PART II: OTHER INFORMATION
Item 1:	Legal Proceedings	72
Item 1A:	Risk Factors	72
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3:	Defaults Upon Senior Securities	74
Item 4:	Mine Safety Disclosures	74
Item 5:	Other Information	74
Item 6:	Exhibits	75
SIGNATURES
EXHIBIT INDEX

2

PART I: FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

Impax Laboratories, Inc.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except share and per share data)

(unaudited)

	June 30, 2014			December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	159,139		$	184,612
Short-term investments		253,888			228,521
Accounts receivable, net		163,896			112,993
Inventory, net		84,796			70,107
Deferred income taxes		50,844			50,788
Prepaid expenses and other current assets		6,985			12,721
Total current assets		719,548			659,742
Property, plant and equipment, net		194,076			188,191
Other assets		56,321			57,820
Deferred income taxes		38,272			33,926
Intangible assets, net		22,770			29,670
Goodwill		27,574			27,574
Total assets	$	1,058,561		$	996,923
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	36,614		$	26,824
Accrued expenses		104,239			111,523
Accrued profit sharing and royalty expenses		13,079			11,560
Deferred revenue		2,417			3,983
Total current liabilities		156,349			153,890
Deferred revenue		3,733			4,267
Other liabilities		29,738			28,563
Total liabilities		189,820			186,720
Commitments and contingencies (Notes 9 and 17)
Stockholders’ equity:
Preferred stock, $0.01 par value, 2,000,000 shares authorized, 0 shares outstanding at June 30, 2014 and December 31, 2013		---			---
Common stock, $0.01 par value, 90,000,000 shares authorized and 70,955,140 and 69,927,609 shares issued at June 30, 2014 and December 31, 2013, respectively		709			699
Additional paid-in capital		353,695			336,648
Treasury stock - 243,729 shares		(2,157	)		(2,157	)
Accumulated other comprehensive income		1,125			1,140
Retained earnings		515,369			473,873
Total stockholders’ equity		868,741			810,203
Total liabilities and stockholders’ equity	$	1,058,561		$	996,923

The accompanying notes are an integral part of these interim consolidated financial statements.

3

Impax Laboratories, Inc.

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except share and per share data)

(unaudited)

	Three Months Ended					Six Months Ended
	June 30, 2014		June 30, 2013			June 30, 2014		June 30, 2013
Revenues:
Global Division revenues, net	$	176,394	$	93,965		$	285,534	$	195,602
Impax Division revenues, net		11,727		35,666			21,305		82,518
Total revenues		188,121		129,631			306,839		278,120
Cost of revenues		78,349		70,744			139,445		161,361
Gross profit		109,772		58,887			167,394		116,759
Operating expenses:
Research and development		21,252		15,540			42,993		35,145
Patent litigation expense		1,767		4,304			3,940		8,582
Selling, general and administrative		32,817		33,275			58,294		62,993
Total operating expenses		55,836		53,119			105,227		106,720
Income from operations		53,936		5,768			62,167		10,039
Other income, net		31		2,997			107		152,453
Interest income		365		315			753		591
Interest expense		93		(45	)		28		(328	)
Income before income taxes		54,425		9,035			63,055		162,755
Provision for income taxes		19,354		3,416			21,559		51,694
Net income	$	35,071	$	5,619		$	41,496	$	111,061
Net income per share:
Basic	$	0.52	$	0.08		$	0.61	$	1.67
Diluted	$	0.50	$	0.08		$	0.59	$	1.62
Weighted average common shares outstanding:
Basic		68,095,159		66,748,864			67,899,894		66,618,889
Diluted		70,313,491		68,287,948			70,195,329		68,382,004

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.

4

Impax Laboratories, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(amounts in thousands)

(unaudited)

	Three Months Ended					Six Months Ended
	June 30, 2014		June 30, 2013			June 30, 2014			June 30, 2013
Net income	$	35,071	$	5,619		$	41,496		$	111,061
Currency translation adjustments		2,420		(307	)		(15	)		(3,804	)
Comprehensive income	$	37,491	$	5,312		$	41,481		$	107,257

The accompanying notes are an integral part of these unaudited interim consolidated financial statements. 

5

Impax Laboratories, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

(unaudited)

	Six Months Ended
	June 30, 2014			June 30, 2013
Cash flows from operating activities:
Net income	$	41,496		$	111,061
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		16,303			24,179
Charge for licensing agreement		2,000			---
Intangible asset impairment charge		2,876			---
Provision for inventory reserves		10,320			22,536
Accretion of interest income on short-term investments		(421	)		(335	)
Deferred income taxes – net and uncertain tax positions		(4,786	)		(6,873	)
Tax impact related to the exercise of employee stock options and restricted stock		(1,507	)		(446	)
Recognition of deferred revenue		(2,100	)		(2,226	)
Accrued profit sharing and royalty expense		23,582			38,011
Payments of profit sharing and royalty expense		(22,063	)		(27,392	)
Share-based compensation expense		9,520			10,503
Changes in certain assets and liabilities:
Accounts receivable		(50,903	)		(11,231	)
Inventory		(25,400	)		(19,590	)
Prepaid expenses and other assets		5,671			7,563
Accounts payable and accrued expenses		6,273			21,788
Other liabilities		1,559			1,596
Net cash provided by operating activities		12,420			169,144
Cash flows from investing activities:
Purchase of short-term investments		(235,388	)		(220,284	)
Maturities of short-term investments		210,442			147,948
Purchases of property, plant and equipment		(18,271	)		(20,075	)
Payments for licensing agreements		(3,000	)		---
Net cash used in investing activities		(46,217	)		(92,411	)
Cash flows from financing activities:
Tax impact related to the exercise of employee stock options and restricted stock		1,507			446
Proceeds from exercise of stock options and ESPP		7,660			4,351
Net cash provided by financing activities		9,167			4,797
Effect of exchange rate changes on cash and cash equivalents		(843	)		(709	)
Net (decrease) increase in cash and cash equivalents		(25,473	)		80,821
Cash and cash equivalents, beginning of period		184,612			142,162
Cash and cash equivalents, end of period	$	159,139		$	222,983

6

Supplemental disclosure of non-cash investing and financing activities:

	Six Months Ended
(in $000's)	June 30, 2014		June 30, 2013
Cash paid for interest	$	16	$	87
Cash paid for income taxes	$	28,955	$	8,333

Accrued vendor invoices of approximately $2,282,000 and $1,183,000 at June 30, 2014 and 2013, respectively, are excluded from the purchase of property, plant, and equipment and the change in accounts payable and accrued expenses and prepaid and other assets. Depreciation expense was $5,054,000 and $4,740,000 for the three months ended June 30, 2014 and 2013, respectively, and was $10,027,000 and $9,500,000 for the six months ended June 30, 2014 and 2013, respectively.

The accompanying notes are an integral part of these unaudited interim consolidated financial statements.  

7

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. THE COMPANY & BASIS OF PRESENTATION

Impax Laboratories, Inc. (“Impax” or “Company”) is a technology-based, specialty pharmaceutical company. The Company has two reportable segments, referred to as the “Global Pharmaceuticals Division” (“Global Division”) and the “Impax Pharmaceuticals Division” (“Impax Division”).

The Global Division develops, manufactures, sells, and distributes generic pharmaceutical products primarily through four sales channels: the “Global products” sales channel, for generic pharmaceutical prescription products the Company sells directly to wholesalers, large retail drug chains, and others; the “Private Label” sales channel, for generic pharmaceutical over-the-counter (“OTC”) and prescription products the Company sells to unrelated third-party customers who in turn sell the product to third parties under their own label; the “Rx Partner” sales channel, for generic prescription products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance agreements; and the “OTC Partner” sales channel, for generic pharmaceutical OTC products sold through unrelated third-party pharmaceutical entities under their own labels pursuant to alliance and supply agreements. Revenues from the “Global Products” sales channel and the “Private Label” sales channel are reported under the caption “Global Product sales, net” in “Note 18 – Supplementary Financial Information.” The Company also generates revenue from research and development services provided under a joint development agreement with an unrelated third-party pharmaceutical company, and reports such revenue under the caption “Other Revenues” in “Note 18 – Supplementary Financial Information.” The Company provides these services through the research and development group in the Global Division. Revenues from the “OTC Partner” sales channel are also reported under the caption “Other Revenues” in “Note 18 – Supplementary Financial Information.”

The Impax Division is engaged in the development of proprietary brand pharmaceutical products that the Company believes represent improvements to already-approved pharmaceutical products addressing central nervous system (“CNS”) disorders. The Impax Division currently has one internally developed late stage branded pharmaceutical product candidate, RYTARY™ (IPX066), an extended release capsule formulation of carbidopa-levodopa for the symptomatic treatment of Parkinson’s disease, for which the New Drug Application (“NDA”) was accepted for filing by the U.S. Food and Drug Administration (“FDA”) in February 2012 and for which the Company received a Complete Response Letter from the FDA in January 2013. In April 2014, after discussions with the FDA, the Company resubmitted an NDA for RYTARY™. The NDA was accepted for filing by the FDA in April 2014 and the FDA informed the Company that the Prescription Drug User Fee Act (“PDUFA”) date is October 9, 2014. The Company has also initiated the preparation of required documents for a European Market Authorization Application filing for RYTARY™, currently targeted for filing during the second half of 2014. In addition to RYTARY™, the Impax Division has a number of other product candidates that are in varying stages of development. The Impax Division is also engaged in the sale and distribution of Zomig^® (zolmitriptan) products, indicated for the treatment of migraine headaches, under the terms of a Distribution, License, Development and Supply Agreement (“AZ Agreement”) with AstraZeneca UK Limited (“AstraZeneca”) in the United States and in certain United States territories. Revenues from Impax-labeled branded Zomig^® products are reported under the caption “Impax Product sales, net” in “Note 18 – Supplementary Financial Information.” Finally, the Company generates revenue in the Impax Division from research and development services provided under a development and license agreement with another unrelated third-party pharmaceutical company, and reports such revenue under the caption “Other Revenues” in “Note 18 – Supplementary Financial Information.”

In California, the Company utilizes a combination of owned and leased facilities mainly located in Hayward. The Company’s primary properties in California consist of a leased office building used as the Company’s corporate headquarters, in addition to five properties it owns, including a research and development center facility and a manufacturing facility. Additionally, the Company leases three facilities in Hayward, utilized for additional research and development, administrative services, equipment storage and quality assurance support. In Pennsylvania, the Company owns a packaging, warehousing, and distribution center located in Philadelphia and leases a facility in New Britain used for sales and marketing, finance, and administrative personnel, as well as providing additional warehouse space. Outside the United States, in Taiwan, Republic of China (“R.O.C.”), the Company owns a manufacturing facility.

8

The accompanying unaudited interim consolidated financial statements of the Company, have been prepared based upon United States Securities and Exchange Commission (“SEC”) rules permitting reduced disclosure for interim periods, and include all adjustments necessary for a fair presentation of statements of operations, statements of comprehensive income, statements of cash flows, and financial condition for the interim periods shown, including normal recurring accruals and other items, noted below. While certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to SEC rules and regulations, the Company believes the disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements of the Company include the accounts of the operating parent company, Impax Laboratories, Inc., its wholly owned subsidiaries, including Impax Laboratories (Taiwan) Inc., Impax Laboratories USA, LLC, ThoRx Laboratories, Inc., Impax Laboratories (Netherlands) BV and Impax Laboratories (Netherlands) CV, and an equity investment in Prohealth Biotech, Inc. (“Prohealth”), in which the Company held a 57.54% majority ownership interest at June 30, 2014. All significant intercompany accounts and transactions have been eliminated.

The unaudited results of operations and cash flows for the interim period are not necessarily indicative of the expected results of the Company’s operations for any other interim period or for the full year ending December 31, 2014. The unaudited interim consolidated financial statements and footnotes should be read in conjunction with the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the SEC, wherein a more complete discussion of significant accounting policies and certain other information can be found.

The preparation of financial statements in conformity with GAAP and the rules and regulations of the SEC requires the use of estimates and assumptions, based on complex judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant judgments are employed in estimates used in determining values of tangible and intangible assets, legal contingencies, tax assets and tax liabilities, fair value of share-based compensation related to equity incentive awards issued to employees and directors, and estimates used in applying the Company’s revenue recognition policy including those related to accrued chargebacks, rebates, product returns, Medicare, Medicaid, and other government rebate programs, shelf-stock adjustments, and the timing and amount of deferred and recognized revenue and deferred and amortized product manufacturing costs related to alliance and collaboration agreements. Actual results may differ from estimated results. Certain prior year amounts have been reclassified to conform to the current year presentation.

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, covering a wide range of matters, including, among others, patent litigation, and product and clinical trial liability. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 450, "Contingencies," the Company records accrued loss contingencies when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company, in accordance with FASB ASC Topic 450, does not recognize gain contingencies until realized.

Management transition

During the three month period ended March 31, 2014, the Company announced a management change. The Company’s then Senior Vice President, Global Operations announced plans to retire and a Senior Vice President, Technical Operations was appointed. The Company’s then Senior Vice President, Global Operations subsequently retired from the Company in July 2014. In conjunction with the transition, the Company recorded $0.9 million in separation charges and accelerated share-based compensation expense in the six month period ended June 30, 2014.

CEO transition

On June 25, 2013, the Company announced that Dr. Larry Hsu planned to retire as President and Chief Executive Officer of Impaxand on April 21, 2014, Dr. Hsu retired from those positions at Impax. Dr. Hsu currently remains as a member of the Board of Directors. In connection with his retirement, Dr. Hsu entered into a Separation Agreement with the Company dated June 24, 2013 (the “Separation Agreement”). Pursuant to the Separation Agreement, the Company provided Dr. Hsu with certain termination benefits and payments. The Company recorded $5.0 million in costs associated with Dr. Hsu’s retirement in the three month period ended June 30, 2013, comprised of $2.7 million of separation pay and benefits and $2.3 million of accelerated expense related to Dr. Hsu’s outstanding stock options and restricted stock.

9

Workforce reduction

On June 4, 2013, the Company committed to a reduction in the Company’s workforce, eliminating approximately 110 positions, with the majority of these positions at the Company’s Hayward, California manufacturing facility. The reduction in workforce is part of the Company’s efforts to streamline its operations in response to the need to reduce expenses and adapt to changing market conditions. The Company recorded an accrual for severance and related termination costs of $3.0 million in the three month period ended June 30, 2013 as a result of this workforce reduction. As of December 31, 2013, all accrued severance and related termination costs had been paid.

10

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:

● 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.

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:

Global Product sales, net and Impax Product sales, net 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.  

11

2. REVENUE RECOGNITION (continued)

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 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 and Other Government Pricing Programs

As required by law, the Company provides a rebate on drugs dispensed under the Medicaid program, Medicare Part D, TRICARE, and other United States government pricing programs. The Company determines its estimated government 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 various programs which may impact the Company’s estimate of government 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 government rebates as a deduction from gross sales, with corresponding adjustment to accrued liabilities.  

12

2. REVENUE RECOGNITION (continued)

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 contracts 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. In exchange for these deliverables, the Company receives payments from its agreement partners for product shipments and research and development services, and may also receive other payments including royalty, profit sharing, upfront, and 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 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 agreement partner reports the amounts to the Company.

The Company applies the updated 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. The Company recognizes revenue received as a result of the manufacture and delivery of products under the Teva Agreement 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 agreements with Pfizer Inc. (formerly Wyeth) and L. Perrigo Company with respect to the supply of over-the-counter pharmaceutical products. The OTC Partner sales channel is no longer a core area of the business, and the over-the-counter pharmaceutical products the Company sells through this sales channel are older products which are only sold to Pfizer and Perrigo, and which are currently sold at a loss, on a fully absorbed basis. The Company is currently only required to manufacture the over-the-counter pharmaceutical products under its agreements with Pfizer and Perrigo. The Company recognizes profit share revenue in the period earned.

13

2. REVENUE RECOGNITION (continued)

Research Partner:

The Research Partner contracts include 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. The Company recognizes revenue received from the provision of research and development services, including the upfront payment and the milestone payments received before January 1, 2011 on a straight-line basis over the expected period of performance of the research and development services. The Company recognizes revenue received from the achievement of contingent research and development milestones after January 1, 2011 in the period such payment is earned. Royalty fee income, if any, will be recognized by the Company in the period when the revenue is earned.

Shipping and Handling Fees and Costs

Shipping and handling fees related to sales transactions are recorded as selling expense.  

14

3. RECENT ACCOUNTING PRONOUNCEMENTS

In March 2013, the FASB issued updated guidance on foreign currency matters. The update applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. The Company adopted this guidance on January 1, 2014 and the adoption did not have a material effect on its consolidated financial statements.

In July 2013, the FASB issued updated guidance related to presentation of an unrecognized tax benefit. The guidance requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward, or similar tax loss, or tax credit carryforward, rather than as a liability under certain circumstances. The Company adopted this guidance on January 1, 2014 and the adoption did not have a material effect on its consolidated financial statements.

In May 2014, the FASB issued updated guidance regarding the accounting for and disclosures of revenue recognition. The update provides a single comprehensive model for accounting for revenue from contracts with customers. The model requires that revenue recognized reflect the actual consideration to which the entity expects to be entitled in exchange for the goods or services defined in the contract, including in situations with multiple performance obligations. This guidance will be the same for both U.S. GAAP and International Financial Reporting Standards (IFRS) and is effective for annual and interim periods beginning after December 15, 2016. The Company is currently evaluating the effect that this guidance may have on its consolidated financial statements.

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4. INVESTMENTS

Investments consist of commercial paper and corporate bonds. The Company’s policy is to invest in only high quality “AAA-rated” or investment-grade securities. Investments in debt securities are accounted for as “held-to-maturity’ and are recorded at amortized cost, which approximates fair value, generally based upon observable market values of similar securities. The Company has historically held all investments in debt securities until maturity, and has the ability and intent to continue to do so. All of the Company’s investments have remaining contractual maturities of less than 12 months and are classified as short-term. Upon maturity, the Company uses a specific identification method.

A summary of short-term investments as of June 30, 2014 and December 31, 2013 is as follows:  

(in $000’s) June 30, 2014	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
Commercial paper	$	121,440	$	35	$	(1	)	$	121,474
Corporate bonds		132,448		8		(26	)		132,430
Total short-term investments	$	253,888	$	43	$	(27	)	$	253,904

(in $000’s) December 31, 2013	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
Commercial paper	$	91,480	$	26	$	--		$	91,506
Corporate bonds		137,041		13		(21	)		137,033
Total short-term investments	$	228,521	$	39	$	(21	)	$	228,539

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5. ACCOUNTS RECEIVABLE

The composition of accounts receivable, net is as follows:

(in $000’s)	June 30, 2014			December 31, 2013
Gross accounts receivable	$	289,246		$	246,319
Less: Rebate reserve		(83,420	)		(88,449	)
Less: Chargeback reserve		(31,680	)		(37,066	)
Less: Other deductions		(10,250	)		(7,811	)
Accounts receivable, net	$	163,896		$	112,993

A roll forward of the rebate and chargeback reserves activity for the six months ended June 30, 2014 and the year ended December 31, 2013 is as follows:

(in $000’s) Rebate reserve	June 30, 2014			December 31, 2013
Beginning balance	$	88,449		$	46,011
Provision recorded during the period		128,141			193,288
Credits issued during the period		(133,170	)		(150,850	)
Ending balance	$	83,420		$	88,449

(in $000’s) Chargeback reserve	June 30, 2014			December 31, 2013
Beginning balance	$	37,066		$	18,410
Provision recorded during the period		224,569			389,707
Credits issued during the period		(229,955	)		(371,051	)
Ending balance	$	31,680		$	37,066

Other deductions include allowance for uncollectible amounts and cash discounts. The Company maintains an allowance for doubtful accounts for estimated losses resulting from amounts deemed to be uncollectible from its customers, with such allowances for specific amounts on certain accounts. The Company had an allowance for uncollectible amounts of $528,000 and $539,000 at June 30, 2014 and December 31, 2013, respectively. 

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6. INVENTORY

Inventory is stated at the lower of cost or market. Cost is determined using a standard cost method, and the cost flow assumption is first in, first out (“FIFO”) flow of goods. Standard costs are revised annually, and significant variances between actual costs and standard costs are apportioned to inventory and cost of goods sold based upon inventory turnover. Costs include materials, labor, quality control, and production overhead. Inventory is adjusted for short-dated, unmarketable inventory equal to the difference between the cost of inventory and the estimated value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by the Company, additional inventory write-downs may be required. Consistent with industry practice, the Company may build pre-launch inventories of certain products which are pending required approval from the FDA and/or resolution of patent infringement litigation, when, in the Company’s assessment, such action is appropriate to increase the commercial opportunity and FDA approval is expected in the near term and/or the litigation will be resolved in the Company’s favor. The Company accounts for all costs of idle facilities, excess freight and handling costs, and wasted materials (spoilage) as a current period charge in accordance with GAAP.

Inventory, net of carrying value reserves at June 30, 2014 and December 31, 2013 consisted of the following: 

(in $000’s)	June 30, 2014		December 31, 2013
Raw materials	$	32,447	$	27,981
Work in process		3,297		1,434
Finished goods		56,347		47,416
Total inventory		92,091		76,831
Less: Non-current inventory		7,295		6,724
Total inventory-current	$	84,796	$	70,107

Inventory carrying value reserves were $28,026,000 and $17,702,000 at June 30, 2014 and December 31, 2013, respectively. During the three month period ended March 31, 2013, the Company decided to discontinue the manufacture and distribution of certain unprofitable products after the Company conducted a strategic review of its currently manufactured generic product portfolio. As a result of this decision, the Company recorded an inventory reserve of $6.7 million related to the discontinued products. In additionduring the three month period ended March 31, 2013, upon receipt of the Complete Response Letter for RYTARY™, the Company evaluated the impact of the expected delay of FDA approval on its ability to sell the associated inventory. The Company determined that a reserve of $5.0 million was appropriate and recorded this amount in the three month period ended March 31, 2013. During the three month period ended March 31, 2013, the Company also recorded a $6.4 million reserve for pre-launch inventory of a product manufactured for another third-party pharmaceutical company due to the anticipated delayed launch of such product as a result of the warning letter related to our Hayward, California manufacturing facility. The carrying value of unapproved inventory less reserves was $10,028,000 and $6,462,000 at June 30, 2014 and December 31, 2013, respectively.

The Company recognizes pre-launch inventories at the lower of its cost or the expected net selling price. Cost is determined using a standard cost method, which approximates actual cost, and assumes a FIFO flow of goods. Costs of unapproved products are the same as approved products and include materials, labor, quality control, and production overhead. When the Company concludes that FDA approval is expected within approximately six months for a drug product candidate, the Company may begin to schedule manufacturing process validation studies as required by the FDA to demonstrate the production process can be scaled up to manufacture commercial batches. Consistent with industry practice, the Company may build quantities of unapproved product inventory pending final FDA approval and/or resolution of patent infringement litigation, when, in the Company’s assessment, such action is appropriate to increase its commercial product opportunity, and FDA approval is expected in the near term, and/or the litigation will be resolved in the Company’s favor. The capitalization of unapproved pre-launch inventory involves risks, including, among other items, FDA approval may not occur; approvals may require additional or different testing and/or specifications than used for unapproved inventory, and in cases where the unapproved inventory is for a product subject to litigation, the litigation may not be resolved or settled in the Company’s favor. If any of these risks materialize and the launch of the unapproved product inventory is delayed or prevented, then the net carrying value of unapproved inventory may be partially or fully reserved. Generally, the selling price of a generic pharmaceutical product is at a discount from the corresponding brand product selling price. Typically, a generic drug is easily substituted for the corresponding brand product, and once a generic product is approved, the pre-launch inventory is typically sold within the next three months. If the market prices become lower than the product inventory carrying costs, then the pre-launch inventory value is reduced to such lower market value. If the inventory produced exceeds the estimated market acceptance of the generic product and becomes short-dated, a carrying value reserve will be recorded. In all cases, the carrying value of the Company's pre-launch product inventory is lower than the respective estimated net selling prices.

To the extent inventory is not scheduled to be utilized in the manufacturing process and/or sold within twelve months of the balance sheet date, it is included as a component of other non-current assets. Amounts classified as non-current inventory consist of raw materials, net of valuation reserves. Raw materials generally have a shelf life of approximately three to five years, while finished goods generally have a shelf life of approximately two years.

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7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net consisted of the following:

(in $000’s)	June 30, 2014			December 31, 2013
Land	$	5,773		$	5,773
Buildings and improvements		152,397			139,657
Equipment		121,440			114,950
Office furniture and equipment		12,452			11,523
Construction-in-progress		11,060			15,910
Property, plant and equipment, gross	$	303,122		$	287,813
Less: Accumulated depreciation		(109,046	)		(99,622	)
Property, plant and equipment, net	$	194,076		$	188,191

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8. GOODWILL AND INTANGIBLE ASSETS

Goodwill was $27,574,000 at June 30, 2014 and December 31, 2013, and the Company attributes the entire carrying amount of goodwill to the Global Division. Goodwill is tested at least annually for impairment or whenever events or changes in circumstances have occurred which could have a material adverse effect on the estimated fair value of the reporting unit, and thus indicate a potential impairment of the goodwill carrying value. The Company concluded the carrying value of goodwill was not impaired as of December 31, 2013.

Intangible assets consisted of the following:

(in $000’s) June 30, 2014	Initial Cost		Accumulated Amortization			Impairment			Carrying Value
Amortized intangible assets:
Zomig® product rights	$	41,783	$	(30,101	)	$	---		$	11,682
Tolmar product rights		31,450		(6,533	)		(16,032	)		8,885
Perrigo product rights		1,000		(297	)		---			703
Other product rights		2,250		---			(750	)		1,500
Total intangible assets	$	76,483	$	(36,931	)	$	(16,782	)	$	22,770

(in $000’s) December 31, 2013	Initial Cost		Accumulated Amortization			Impairment			Carrying Value
Amortized intangible assets:
Zomig® product rights	$	41,783	$	(28,641	)	$	---		$	13,142
Tolmar product rights		31,450		(3,266	)		(13,156	)		15,028
Other product rights		2,250		---			(750	)		1,500
Total intangible assets	$	75,483	$	(31,907	)	$	(13,906	)	$	29,670

The Zomig^® product rights under the Distribution, License, Development and Supply Agreement (“AZ Agreement”) with AstraZeneca UK Limited (“AstraZeneca”) were amortized on a straight-line basis over a period of 14 months starting in April 2012 and ending upon the expiration of the underlying patent for the tablet and over a period of 11 months starting in July 2012 and ending upon the expiration of the underlying patent for the orally disintegrating tablet. The Zomig^® product rights under the AZ Agreement are also being amortized over a period of 72 months starting in July 2012 for the nasal spray. In June 2012, the Company entered into a Development, Supply and Distribution Agreement (the “Tolmar Agreement”) with TOLMAR, Inc. (“Tolmar”). Under the terms of the Tolmar Agreement, Tolmar granted to the Company an exclusive license to commercialize up to 11 generic topical prescription drug products, including ten currently approved products and one product pending approval at the FDA, in the United States and its territories. Under the terms of the Tolmar Agreement, Tolmar is responsible for developing and manufacturing the products, and the Company is responsible for the marketing and sale of the products. During the three month period ended September 30, 2013, as a result of the most recent market share data obtained by the Company and the Company’s revised five year projections for the Tolmar product lines, the Company performed an intangible asset impairment test on the Tolmar products. Based on the results of the impairment analysis, the Company recorded a $13.2 million impairment charge to cost of revenues for the Global Division in the three month period ended September 30, 2013. During the three month period ended March 31, 2014, as a result of a further decline in pricing, the Company revised its projections and performed an intangible asset impairment analysis. Based on the results of this analysis, the Company recorded a $2.9 million charge to cost of revenues for the Global Pharmaceuticals Division, which was 100% of the remaining net book value of this asset. The remaining carrying value of the Tolmar product rights are being amortized over the remaining estimated useful lives of the underlying products over a period ranging from five to 12 years, starting upon commencement of commercialization activities by the Company during the year ended December 31, 2012. Information concerning the AZ Agreement and the Tolmar Agreement can be found in “Note 12 - Alliance and Collaboration Agreements.” During the three month period ended June 30, 2014, the Company paid a $1.0 million milestone payment to Perrigo Company, plc (“Perrigo”) in conjunction with its launch of a generic version of Astepro^® nasal spray pursuant to a development agreement between the Company and an affiliate of Perrigo. The milestone was capitalized as an intangible asset acquisition and will be amortized over the expected cash flows of the product. Other product rights consist of Abbreviated New Drug Applications (“ANDAs”) which have been filed with the FDA. During the three month period ended September 30, 2013, as a result of a decision by management to withdraw one of these ANDAs and no longer seek FDA approval, the Company recorded an intangible asset impairment charge of $0.8 million in research and development expense, representing the full carrying value of the ANDA. For the remaining ANDAs, the Company will either commence amortization upon FDA approval and commercialization over the estimated useful life of the product rights, or will expense the related costs immediately upon failure to obtain FDA approval. Amortization expense is included as a component of cost of revenues on the consolidated statement of operations and was $2,594,000 and $3,174,000 for the three month periods ended June 30, 2014 and 2013, respectively, and $5,024,000 and $10,315,000 for the six month periods ended June 30, 2014 and 2013, respectively.

20

The following schedule shows the expected amortization of the Zomig^®, Tolmar and Perrigo product rights as of June 30, 2014 for the next five years and thereafter: 

(in $000s)	Amortization Expense
2014	$	4,594
2015		4,898
2016		3,923
2017		3,738
2018		2,121
Thereafter		1,996
Totals	$	21,270

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9. ACCRUED EXPENSES, COMMITMENTS AND CONTINGENCIES

The following table sets forth the Company’s accrued expenses:  

(in $000’s)	June 30, 2014		December 31, 2013
Payroll-related expenses	$	23,769	$	27,985
Product returns		29,817		28,089
Government rebates		19,882		23,351
Accrued shelf-stock		1,984		774
Legal and professional fees		4,760		3,162
Income taxes payable		17,562		21,186
Physician detailing sales force fees		1,119		1,512
Other		5,346		5,464
Total accrued expenses	$	104,239	$	111,523

Product Returns

The Company maintains a return policy to allow customers to return product within specified guidelines. At the time of sale, the Company estimates a provision for product returns based upon historical experience for sales made through its Global Products and Impax Products sales channels. Sales of product under the Private Label, Rx Partner and OTC Partner alliance and collaboration agreements are generally not subject to returns. A roll forward of the product return reserve for the six month period ended June 30, 2014 and the year ended December 31, 2013 is as follows:

(in $000’s) Returns Reserve	June 30, 2014			December 31, 2013
Beginning balance	$	28,089		$	23,440
Provision related to sales recorded in the period		6,831			11,015
Credits issued during the period		(5,103	)		(6,366	)
Ending balance	$	29,817		$	28,089

Taiwan Facility Construction

The Company has entered into several contracts relating to ongoing construction at its manufacturing facility located in Jhunan, Taiwan, R.O.C. As of June 30, 2014, the Company had remaining obligations under these contracts of approximately $3,685,000.

Purchase Order Commitments

As of June 30, 2014, the Company had $46,198,000 of open purchase order commitments, primarily for raw materials. The terms of these purchase order commitments are less than one year in duration.

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10. INCOME TAXES

The Company calculates its interim income tax provision in accordance with FASB ASC Topics 270 and 740. At the end of each interim period, the Company makes an estimate of the annual United States domestic and foreign jurisdictions’ expected effective tax rates and applies these rates to its respective year-to-date taxable income or loss. The computation of the annual estimated effective tax rates at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year, projections of the proportion of income (or loss) earned and taxed in the United States, and the various state and local tax jurisdictions, as well as tax jurisdictions outside the United States, along with permanent differences, and the likelihood of deferred tax asset utilization. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is acquired or additional information is obtained. The computation of the annual estimated effective tax rate includes modifications, which were projected for the year, for share-based compensation and state research and development credits, among others. In addition, the effect of changes in enacted tax laws, rates, or tax status is recognized in the interim period in which the respective change occurs.

During the six month period ended June 30, 2014, the Company recognized an aggregate consolidated tax provision of $21,559,000 for United States domestic and foreign income taxes. In the six month period ended June 30, 2013, the Company recognized an aggregate consolidated tax provision of $51,694,000 for United States domestic and foreign income taxes. The decrease in the tax provision resulted from lower consolidated income before taxes in the six month period ended June 30, 2014, as compared to the same period in the prior year. The effective tax rate of 34% for the six month period ended June 30, 2014 was higher than the effective tax rate of 32% for the prior year period primarily as a result of the expiration of the Federal Research and Experimental Credit as of December 31, 2013. Other contributing factors to the rate fluctuation include a change in the timing and mix of United States and foreign income; the exclusion of a zero-rate jurisdiction from the interim effective tax rate calculation; and an increase in the deferred tax asset related to a state research and development tax credit carryforward in a state with indefinite carryforwards.

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11. REVOLVING LINE OF CREDIT

The Company has a Credit Agreement, as amended (the “Credit Agreement”) with Wells Fargo Bank, N.A., as a lender and as administrative agent (the “Administrative Agent”). The Credit Agreement provides the Company with a revolving line of credit in the aggregate principal amount of up to $50,000,000 (the “Revolving Credit Facility”). Under the Revolving Credit Facility, up to $10,000,000 is available for letters of credit, the outstanding face amounts of which reduce availability under the Revolving Credit Facility on a dollar for dollar basis. Proceeds under the Credit Agreement may be used for working capital, general corporate and other lawful purposes. The Company has not yet borrowed any amounts under the Revolving Credit Facility.

The Company’s borrowings under the Credit Agreement are secured by substantially all of the personal property assets of the Company pursuant to a Security Agreement (the “Security Agreement”) entered into by the Company and the Administrative Agent. As further security, the Company also pledged to the Administrative Agent, 65% of the Company’s equity interest in its wholly owned subsidiary Impax Laboratories (Taiwan), Inc., all of the Company’s equity interests in its wholly owned domestic subsidiaries and must similarly pledge all or a portion of its equity interest in future subsidiaries. Under the Credit Agreement, among other things:

● 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 on February 11, 2015. There were no balances outstanding under the credit facility as of June 30, 2014 or December 31, 2013.

● 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, Consolidated EBITDA of at least $50.0 million and Minimum Liquidity (which is, generally unrestricted cash and cash equivalents) of at least $100.0 million. As of June 30, 2014, 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.

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11. REVOLVING LINE OF CREDIT (continued)

● 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.

During the six month periods ended June 30, 2014 and 2013, unused line fees incurred under the Credit Agreement were $62,000 and $61,000, respectively.

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12. ALLIANCE AND COLLABORATION AGREEMENTS

The Company has entered into several alliance, collaboration, license and distribution agreements, and similar agreements with respect to certain of its products and services, with unrelated third-party pharmaceutical companies. The consolidated statement of operations includes revenue recognized under agreements the Company has entered into to develop marketing and/or distribution relationships with its partners to fully leverage its technology platform and revenue recognized under development agreements which generally obligate the Company to provide research and development services over multiple periods.

The Company’s alliance and collaboration agreements often include milestones and provide for milestone payments upon achievement of these milestones. Generally, the milestone events contained in the Company’s alliance and collaboration agreements coincide with the progression of the Company’s products and technologies from pre-commercialization to commercialization.

The Company groups pre-commercialization milestones in its alliance and collaboration agreements into clinical and regulatory categories, each of which may include the following types of events:

Clinical Milestone Events:

● 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.

Regulatory Milestone Events:

● 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.

Commercialization milestones in the Company’s alliance and collaboration agreements may include the following types of events:

● 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.

26

12. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

License and Distribution Agreement with Shire

In January 2006, the Company entered into a License and Distribution Agreement with an affiliate of Shire Laboratories, Inc. (“Prior Shire Agreement”), under which the Company received a non-exclusive license to market and sell an authorized generic of Shire’s Adderall XR^® product (“AG Product”) subject to certain conditions, but in any event by no later than January 1, 2010. The Company commenced sales of the AG Product in October 2009. On February 7, 2013, the Company entered into an Amended and Restated License and Distribution Agreement with Shire (the “Amended and Restated Shire Agreement”), which amended and restated the Prior Shire Agreement. The Amended and Restated Shire Agreement was entered into by the parties in connection with the settlement of the Company’s litigation with Shire relating to Shire’s supply of the AG Product to the Company under the Prior Shire Agreement. During the three month period ended March 31, 2013, the Company received a payment in the amount of $48,000,000 from Shire in connection with such litigation settlement, which was recorded in the first quarter of 2013 as "Other Income" on the consolidated statement of operations. The Amended and Restated Shire Agreement provides for Shire to supply the AG Product and for the Company to market and sell the AG Product subject to the terms and conditions thereof until the earlier of (i) the first commercial sale of the Company’s generic equivalent product to Adderall XR® and (ii) September 30, 2014 (the “Supply Term”), subject to certain continuing obligations of the parties upon expiration or early termination of the Supply Term, including Shire’s obligation to deliver AG Products still owed to the Company as of the end of the Supply Term. The Company is required to pay a profit share to Shire on sales of the AG Product, of which the Company owed a profit share payable to Shire of $10,160,000 and $10,926,000 on sales of the AG Product during the six month periods ended June 30, 2014 and 2013, respectively, with a corresponding charge included in the cost of revenues line on the consolidated statement of operations.

Development, Supply and Distribution Agreement with TOLMAR, Inc.

In June 2012, the Company entered into the Tolmar Agreement with Tolmar. Under the terms of the Tolmar Agreement, Tolmar granted to the Company an exclusive license to commercialize up to 11 generic topical prescription drug products, including ten currently approved products and one product pending approval at the FDA, in the United States and its territories. Under the terms of the Tolmar Agreement, Tolmar is responsible for developing and manufacturing the products, and the Company is responsible for marketing and sale of the products. The Company is required to pay a profit share to Tolmar on sales of each product commercialized pursuant to the terms of the Tolmar Agreement. The Company owed a profit share payable to Tolmar of $6,402,000 and $1,266,000 during the six month periods ended June 30, 2014 and 2013, respectively, with a corresponding charge included in the cost of revenues line on the consolidated statement of operations. The Company paid Tolmar a $21,000,000 upfront payment upon signing of the agreement and a $1,000,000 milestone payment in the year ended December 31, 2012. The Company has the potential to pay up to $24,000,000 in additional contingent milestone payments if certain commercialization and regulatory events occur. The upfront payment for the Tolmar product rights has been allocated to the underlying topical products based upon the relative fair value of each product and is being amortized over the remaining estimated useful life of each underlying product, ranging from five to 12 years, starting upon commencement of commercialization activities by the Company during the second half of 2012. The amortization of the Tolmar product rights is included as a component of cost of revenues on the consolidated statement of operations. The Company initially allocated $1,550,000 of the upfront payment to two products which are still in development and recorded such amount as in-process research and development expense in its results of operations for the year ended December 31, 2012. The Company similarly recorded the $1,000,000 milestone paid in the year ended December 31, 2012 as a research and development expense. Contingent milestone payments will be initially recognized in the period the triggering event occurs. Milestone payments which are contingent upon commercialization events will be accounted for as an additional cost of acquiring the product license rights. Milestone payments that are contingent upon regulatory approval events will be capitalized and amortized over the remaining estimated useful life of the approved product. As discussed in “Note 8 – Goodwill and Intangible Assets,” the Company recorded intangible asset impairment charges to cost of revenues of $13.2 million in the three month period ended September 30, 2013 and $2.9 million in the three month period ended March 31, 2014 related to the Tolmar product rights acquired under the Tolmar Agreement. During the fourth quarter of 2013, the Company made a $12.0 million payment to Tolmar upon Tolmar’s achievement of a regulatory milestone event in accordance with the terms of the Tolmar Agreement.

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The Company entered into a Loan and Security Agreement with Tolmar in March 2012 (the “Tolmar Loan Agreement”), under which the Company has agreed to lend to Tolmar one or more loans through December 31, 2014, in an aggregate amount not to exceed $15,000,000. As of June 30, 2014, Tolmar has borrowed $15,000,000 under the Tolmar Loan Agreement. The outstanding principal amount of, including any accrued and unpaid interest on, the loans under the Tolmar Loan Agreement are payable by Tolmar beginning from March 31, 2017 through March 31, 2020 or the maturity date, in accordance with the terms therein. Tolmar may prepay all or any portion of the outstanding balance of the loans prior to the maturity date without penalty or premium.

Strategic Alliance Agreement with Teva

The Company entered into a Strategic Alliance Agreement with Teva in June 2001 (“Teva Agreement”). The Teva Agreement commits the Company to develop and manufacture, and Teva to distribute, a specified number of controlled release generic pharmaceutical products (“generic products”), each for a 10-year period. The Company identified the following deliverables under the Teva Agreement: (i) the manufacture and delivery of generic products; (ii) the provision of research and development activities (including regulatory services) related to each product; and (iii) market exclusivity associated with the products. In July 2010, the Teva Agreement was amended to terminate the provisions of the Teva Agreement with respect to the Omeprazole (generic to Prilosec®) 10mg, 20mg and 40mg products. Additionally, in exchange for the return of product rights, the Company agreed to pay to Teva a profit share on future sales of the fexofenadine HCI/pseudoephedrine (generic to Allegra-D®) product, if any, but in no event will such profit share payments exceed an aggregate amount of $3,000,000. The Company recognized previously deferred revenue related to the Teva Agreement of $654,000 in the six month periods ended June 30, 2014 and 2013. No additional amounts were deferred during the six month periods ended June 30, 2014 and 2013.

OTC Partners Alliance Agreement

In June 2002, the Company entered into a Development, License and Supply Agreement with Pfizer Inc. (formerly Wyeth) (the “Pfizer Agreement”), for a term of approximately 15 years, relating to the Company’s Loratadine and Pseudoephedrine Sulfate 5 mg/120 mg 12-hour Extended Release Tablets and Loratadine and Pseudoephedrine Sulfate 10 mg/240 mg 24-hour Extended Release Tablets for the OTC market. The Pfizer Agreement included payments to the Company upon achievement of development milestones, as well as royalties paid to the Company by Pfizer on its sales of the product. Pfizer launched this product in May 2003 as Alavert® D-12 Hour. In February 2005, the agreement was partially cancelled with respect to the 24-hour Extended Release Product due to lower than planned sales volume. In December 2011, Pfizer and the Company entered into an agreement with L. Perrigo Company whereby the parties agreed that the Company would supply the Company’s Loratadine and Pseudoephedrine Sulfate 5 mg/120 mg 12-hour Extended Release Tablets to Perrigo in the United States and its territories (the “Perrigo Agreement”). The Company previously developed the products, and is currently only responsible for manufacturing the products, and Pfizer and Perrigo are responsible for marketing and sale of the products. The Pfizer and Perrigo Agreements are no longer a core area of the Company’s business, and the over-the-counter pharmaceutical products the Company sells under both agreements are older products which are only sold to Pfizer and to Perrigo, and which are sold at a loss, on a fully absorbed basis. The Company recognizes profit share revenue in the period earned.

Joint Development Agreement with Valeant Pharmaceuticals International, Inc.

In November 2008, the Company and Valeant Pharmaceuticals International, Inc., formerly Medicis Pharmaceutical Corporation (“Valeant”), entered into a Joint Development Agreement (“Joint Development Agreement”) and a License and Settlement Agreement. The Joint Development Agreement provides for the Company and Valeant to collaborate in the development of a total of five dermatology products, including four of the Company’s generic products and one branded advanced form of Valeant’s SOLODYN^® product. Under the provisions of the Joint Development Agreement the Company received a $40,000,000 upfront payment, paid by Valeant in December 2008. The Company has also received an aggregate of $15,000,000 in milestone payments composed of two $5,000,000 milestone payments, paid by Valeant in March 2009 and September 2009, a $2,000,000 milestone payment paid by Valeant in December 2009, and a $3,000,000 milestone payment paid by Valeant in March 2011. The Company has the potential to receive up to an additional $8,000,000 of contingent regulatory milestone payments each of which the Company believes to be substantive, as well as the potential to receive royalty payments from sales, if any, by Valeant of its advanced form SOLODYN^® brand product. Finally, to the extent the Company commercializes any of its four generic dermatology products covered by the Joint Development Agreement, the Company will pay to Valeant a gross profit share on sales of such products. The Company began selling one of the four dermatology products during the year ended December 31, 2011. During the three month period ended March 31, 2013, the Company extended the revenue recognition period for the Joint Development Agreement from the previous recognition period ending in November 2013 to December 2014, due to changes in the estimated timing of completion of certain research and development activities. This change was made on a prospective basis, and resulted in a reduced quarterly amount of revenue recognized in 2013 and the first half of 2014, as compared to prior year quarters, and a reduced periodic amount of revenue to be recognized in future periods.

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License, Development and Commercialization Agreement & Supply Agreement with Glaxo Group Limited

In December 2010, the Company entered into a License, Development and Commercialization Agreement with Glaxo Group Limited (“GSK”). Under the terms of the agreement with GSK, GSK received an exclusive license to develop and commercialize IPX066 (brand name RYTARY™ in the United States) throughout the world, except in the United States and Taiwan, and certain follow-on products at the option of GSK. Under the terms of the agreement, GSK paid an $11,500,000 upfront payment in December 2010, and the Company had the potential to receive up to $169,000,000 of contingent milestone payments. The upfront payment was recognized as revenue on a straight-line basis over the Company’s expected period of performance to provide research and development services which ended on December 31, 2012. In April 2013, the Company and GSK announced that they were terminating their collaboration for the development and commercialization of IPX066 outside the United States and Taiwan as a result of delays in the anticipated regulatory approval and launch dates in countries in which GSK has rights to commercialize the product and terminated the License, Development and Commercialization Agreement. At the end of July 2013, GSK’s rights to develop and commercialize IPX066 outside the United States and Taiwan were transferred back to the Company.

Distribution, License, Development and Supply Agreement with AstraZeneca UK Limited

In January 2012, the Company entered into the AZ Agreement with AstraZeneca. Under the terms of the AZ Agreement, AstraZeneca granted to the Company an exclusive license to commercialize the tablet, orally disintegrating tablet and nasal spray formulations of Zomig® (zolmitriptan) products for the treatment of migraine headaches in the United States and in certain United States territories, except during an initial transition period when AstraZeneca fulfilled all orders of Zomig® products on the Company’s behalf and AstraZeneca paid to the Company the gross profit on such Zomig® products. The Company is obligated to fulfill certain minimum requirements with respect to the promotion of currently approved Zomig® products as well as other dosage strengths of such products approved by the FDA in the future. The Company may, but has no obligation to, develop and commercialize additional products containing zolmitriptan and additional indications for Zomig®, subject to certain restrictions as set forth in the AZ Agreement. The Company will be responsible for conducting clinical studies and preparing regulatory filings related to the development of any such additional products and would bear all related costs. During the term of the AZ Agreement, AstraZeneca will continue to be the holder of the NDA for existing Zomig® products, as well as any future dosage strengths thereof approved by the FDA, and will be responsible for certain regulatory and quality-related activities for such Zomig® products. AstraZeneca will manufacture and supply Zomig® products to the Company and the Company will purchase its requirements of Zomig® products from AstraZeneca until a date determined in the AZ Agreement. Thereafter, AstraZeneca may terminate its supply obligations upon certain advance notice to the Company, in which case the Company would have the right to manufacture or have manufactured its own requirements for the applicable Zomig® product.

Beginning from January 2013, the Company is obligated to pay AstraZeneca tiered royalties on net sales of Zomig® products, depending on brand exclusivity and subject to customary reductions and other terms and conditions set forth in the AZ Agreement. The Company owed a royalty payable to AstraZeneca of $5,888,000 and $25,598,000 during the six month periods ended June 30, 2014 and 2013, respectively, with a corresponding charge included in the cost of revenues line on the consolidated statement of operations. The Company is also obligated to pay AstraZeneca royalties after a certain specified date based on gross profit from sales of authorized generic versions of the Zomig products subject to certain terms and conditions set forth in the AZ Agreement. In May 2013, the Company’s exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and the Company launched authorized generic versions of those products in the United States.

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12. ALLIANCE AND COLLABORATION AGREEMENTS (continued)

Development and Co-Promotion Agreement with Endo Pharmaceuticals, Inc.

In June 2010, the Company and Endo Pharmaceuticals, Inc. ("Endo") entered into a Development and Co-Promotion Agreement (“Endo Agreement”) under which the Company and Endo have agreed to collaborate in the development and commercialization of a next-generation advanced form of the Company’s lead brand product candidate ("Endo Agreement Product"). Under the provisions of the Endo Agreement, in June 2010, Endo paid to the Company a $10,000,000 upfront payment. The Company has the potential to receive up to an additional $30,000,000 of contingent milestone payments, which includes $15,000,000 contingent upon the achievement of clinical events, $5,000,000 contingent upon the achievement of regulatory events, and $10,000,000 contingent upon the achievement of commercialization events. The Company believes all milestones under the Endo Agreement are substantive. Upon commercialization of the Endo Agreement Product in the United States, Endo will have the right to co-promote such product to non-neurologists, which will require the Company to pay Endo a co-promotion service fee of up to 100% of the gross profits attributable to prescriptions for the Endo Agreement Product which are written by the non-neurologists.

The Company is recognizing the $10,000,000 upfront payment as revenue on a straight-line basis over a period of 103 months, which is the estimated expected period of performance of research and development activities under the Endo Agreement, commencing with the June 2010 effective date of the Endo Agreement and ending in December 2018, the estimated date of FDA approval of the Company's NDA. The FDA approval of the Endo Agreement Product NDA represents the end of the Company’s expected period of performance, as the Company will have no further contractual obligation to perform research and development activities under the Endo Agreement, and therefore the earnings process will be completed. Deferred revenue is recorded as a liability captioned “Deferred revenue” on the consolidated balance sheet and deferred revenue under the Endo Agreement was $4,804,000 as of June 30, 2014. Revenue recognized under the Endo Agreement is reported in the line item “Other Revenues” in “Note 18 - Supplementary Financial Information.” The Company determined the straight-line method aligns revenue recognition with performance as the level of research and development activities performed under the Endo Agreement are expected to be performed on a ratable basis over the Company’s estimated expected period of performance. Upon FDA approval of the Company’s Endo Agreement Product NDA, the Company will have the right (but not the obligation) to begin manufacture and sale of such product. The Company will sell its manufactured branded product to customers in the ordinary course of business through its Impax Pharmaceuticals Division. The Company will account for any sale of the product covered by the Endo Agreement as current period revenue. The co-promotion service fee paid to Endo, as described above, if any, will be accounted for as a current period selling expense as incurred.

The Company and Endo also entered into a Settlement and License Agreement in June 2010 (the “Endo Settlement Agreement”) pursuant to which Endo agreed to make a payment to the Company should Prescription Sales of Opana® ER (as defined in the Endo Settlement Agreement) fall below a predetermined contractual threshold in the quarter immediately prior to the Company launching a generic version of Opana® ER. As a result of the Company’s launch of its generic version of Opana ER in January 2013 and Endo’s Prescription Sales of Opana ER during the fourth quarter of 2012, the Company recorded a $102,049,000 settlement gain during the three month period ended March 31, 2013, which is included in “Other Income” in the consolidated statement of operations.

Agreement with DURECT Corporation

During the three month period ended March 31, 2014, the Company entered into an agreement with DURECT Corporation (“Durect”) granting Impax the exclusive worldwide rights to develop and commercialize DURECT’s investigational transdermal bupivacaine patch for the treatment of pain associated with post-herpetic neuralgia (PHN), referred to by the Company as IPX239. The Company paid Durect a $2,000,000 up-front payment upon signing of the agreement. The Company has the potential to pay up to $61,000,000 in additional contingent milestone payments upon the achievement of predefined development and commercialization milestones. If IPX239 is commercialized, Durect would also receive a tiered royalty on product sales.

Agreement with Actavis plc

In July 2014, the Company acquired two generic products from Actavis plc (“Actavis”) pursuant to a Purchase Agreement and a Supply Agreement. The acquisition includes one product marketed under an ANDA and one approved ANDA that is currently not yet marketed.

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13. SHARE-BASED COMPENSATION

The Company recognizes the grant date fair value of each stock option and restricted stock award over its vesting period. Stock options and restricted stock awards are granted under the Company’s Second Amended and Restated 2002 Equity Incentive Plan (“2002 Plan”) and generally vest over a three or four year period and have a term of ten years. Total share-based compensation expense recognized in the consolidated statement of operations during the three and six month periods ended June 30, 2014 and 2013 was as follows:  

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000’s)	2014		2013		2014		2013
Manufacturing expenses	$	597	$	208	$	1,492	$	880
Research and development		1,379		1,352		2,781		2,728
Selling, general and administrative		3,158		4,585		5,247		6,895
Total	$	5,134	$	6,145	$	9,520	$	10,503

The following table summarizes stock option activity during the six month period ended June 30, 2014:  

	Number of Shares Under Option			Weighted Average Exercise Price per Share
Outstanding at December 31, 2013		3,770,905		$	14.01
Options granted		381,100		$	25.03
Options exercised		(504,242	)	$	15.26
Options forfeited		(261,929	)	$	20.14
Outstanding at June 30, 2014		3,385,834		$	14.61
Options exercisable at June 30, 2014		2,623,294		$	12.34

The Company estimated the fair value of each stock option award on the grant date using the Black-Scholes option pricing model. Expected volatility is based solely on historical volatility of the Company’s common stock. The expected term calculation is based on the “simplified” method described in SAB No. 107, Share-Based Payment and SAB No. 110, Share-Based Payment, as the result of the simplified method provides a reasonable estimate in comparison to the Company’s actual experience. The risk-free interest rate is based on the U.S. Treasury yield at the date of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield of zero is based on the fact that the Company has never paid cash dividends on its common stock, and has no present intention to pay cash dividends.

A summary of the Company’s non-vested restricted stock awards activity during the six month period ended June 30, 2014 is presented below:  

Restricted Stock Awards	Number of Restricted Stock Awards			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2013		2,123,835		$	21.13
Granted		718,615		$	22.80
Vested		(183,283	)	$	21.42
Forfeited		(161,960	)	$	20.38
Non-vested at June 30, 2014		2,497,207		$	21.63

The Company grants restricted stock awards to certain eligible employees and directors as a component of its long-term incentive compensation program. The restricted stock award grants are made in accordance with the Company’s 2002 Plan, and typically specify that the shares of common stock underlying the restricted stock awards are not issued until they vest. The restricted stock awards generally vest ratably over a three or four year period from the date of grant.  

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As of June 30, 2014, the Company had total unrecognized share-based compensation expense, net of estimated forfeitures, of $48,597,280 related to all of its share-based awards, which will be recognized over a weighted-average period of 1.95 years. As of June 30, 2014, the Company estimated 2,997,000 stock options and 2,211,000 shares of restricted stock awards granted to employees which were vested or expected to vest. The intrinsic value of stock options exercised during the six month periods ended June 30, 2014 and 2013 was $5,005,000 and $5,113,000, respectively. The total fair value of restricted stock awards which vested during the six month periods ended June 30, 2014 and 2013 was $3,865,000 and $3,069,000, respectively. As of June 30, 2014, the Company had 2,883,657 shares of common stock available for issuance of stock options, restricted stock awards, and/or stock appreciation rights.

14. STOCKHOLDERS’ EQUITY

Preferred Stock

Pursuant to its certificate of incorporation, the Company is authorized to issue 2,000,000 shares, $0.01 par value per share, “blank check” preferred stock, which enables the Board of Directors, from time to time, to create one or more new series of preferred stock. Each series of preferred stock issued can have the rights, preferences, privileges and restrictions designated by the Board of Directors. The issuance of any new series of preferred stock could affect, among other things, the dividend, voting, and liquidation rights of the Company’s common stock. During the six month periods ended June 30, 2014 and 2013, the Company did not issue any preferred stock.

Common Stock

The Company’s certificate of incorporation, as amended, authorizes the Company to issue 90,000,000 shares of common stock with $0.01 par value.

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15. EARNINGS PER SHARE

The Company's earnings per share (EPS) includes basic net income per share, computed by dividing net income (as presented on the consolidated statement of operations), by the weighted average number of shares of common stock outstanding for the period, along with diluted net income per share, computed by dividing net income by the weighted average number of shares of common stock adjusted for the dilutive effect of common stock equivalents outstanding during the period. A reconciliation of basic and diluted net income per share of common stock for the three and six month periods ended June 30, 2014 and 2013 was as follows:  

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000’s except share and per share amounts)	2014		2013		2014		2013
Numerator:
Net income	$	35,071	$	5,619	$	41,496	$	111,061
Denominator:
Weighted average common shares outstanding		68,095,159		66,748,864		67,899,894		66,618,889
Effect of dilutive stock options and restricted stock awards		2,218,332		1,539,084		2,295,435		1,763,115
Diluted weighted average common shares outstanding		70,313,491		68,287,948		70,195,329		68,382,004
Basic net income per share	$	0.52	$	0.08	$	0.61	$	1.67
Diluted net income per share	$	0.50	$	0.08	$	0.59	$	1.62

For the three month periods ended June 30, 2014 and 2013, the Company excluded 909,100 and 2,330,114, respectively, and for the six month periods ended June 30, 2014 and 2013, the Company excluded 921,100 and 1,677,129, respectively, of shares issuable upon the exercise of stock options and unvested restricted stock awards from the computation of diluted net income per common share as the effect of these options and unvested restricted stock awards would have been anti-dilutive. Quarterly computations of net income per share amounts are made independently for each quarterly reporting period, and the sum of the per share amounts for the quarterly reporting periods may not equal the per share amounts for the year-to-date reporting period.  

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16. SEGMENT INFORMATION

The Company has two reportable segments, the Global Division and the Impax Division. The Global Division develops, manufactures, sells, and distributes generic pharmaceutical products, primarily through the following sales channels: the Global Products sales channel for sales of generic prescription products directly to wholesalers, large retail drug chains, and others; the Private Label Product sales channel for generic over-the-counter and prescription products sold to unrelated third-party customers who, in turn, sell the products under their own label; the Rx Partner sales channel for generic prescription products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance agreements; and the OTC Partner sales channel for over-the-counter products sold through unrelated third-party pharmaceutical entities under their own labels pursuant to alliance and supply agreements. Revenues from the “Global Products” sales channel and the “Private Label” sales channel are reported under the caption “Global Product sales, net” in “Note 18 – Supplementary Financial Information.” The Company also generates revenue in its Global Division from research and development services provided under a joint development agreement with another unrelated third-party pharmaceutical company, and reports such revenue under the caption “Other Revenues” revenue in “Note 18 – Supplementary Financial Information.” Revenues from the “OTC Partner” sales channel are also reported under the caption “Other Revenues” in “Note 18 – Supplementary Financial Information.”

 The Impax Division is engaged in the development of proprietary brand pharmaceutical products that the Company believes represent improvements to already-approved pharmaceutical products addressing CNS disorders. The Impax Division currently has one internally developed late stage branded pharmaceutical product candidate, RYTARY™, an extended release capsule formulation of carbidopa-levodopa for the symptomatic treatment of Parkinson’s disease, for which the NDA was accepted for filing by the FDA in February 2012 and for which the Company received a Complete Response Letter from the FDA in January 2013. In April 2014, after discussions with the FDA, the Company resubmitted an NDA for RYTARY™. The NDA was accepted for filing by the FDA in April 2014 and the FDA informed the Company that the Prescription Drug User Fee Act (“PDUFA”) date is October 9, 2014. The Company has also initiated the preparation of required documents for a European Market Authorization Application filing for RYTARY™, currently targeted for filing during the second half of 2014. In addition to RYTARY™, the Impax Division has a number of other product candidates that are in varying stages of development. The Impax Division is also engaged in the sale and distribution of Zomig® (zolmitriptan) products, indicated for the treatment of migraine headaches, under the terms of the AZ Agreement with AstraZeneca in the United States and in certain United States territories. Revenues from Impax-labeled branded Zomig® products are reported under the caption “Impax Product sales, net” in “Note 18 – Supplementary Financial Information.” Finally, the Company generates revenue in the Impax Division from research and development services provided under a development and license agreement with another unrelated third-party pharmaceutical company, and reports such revenue under the caption “Other Revenues” revenue in “Note 18 – Supplementary Financial Information.”

The Company’s chief operating decision maker evaluates the financial performance of the Company’s segments based upon segment income (loss) before income taxes. Items below income (loss) from operations are not reported by segment, except litigation settlements, since they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision maker. Additionally, general and administrative expenses, certain selling expenses, certain litigation settlements, and non-operating income and expenses are included in “Corporate and Other.” The Company does not report balance sheet information by segment since it is not reviewed by the Company’s chief operating decision maker. The accounting policies for the Company’s segments are the same as those described above in the discussion of "Revenue Recognition" and in the “Summary of Significant Accounting Policies” in the Company's Form 10-K for the year ended December 31, 2013. The Company has no inter-segment revenue.  

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16. SEGMENT INFORMATION (continued)

The tables below present segment information reconciled to total Company consolidated financial results, with segment operating income or loss including gross profit less direct research and development expenses and direct selling expenses as well as any litigation settlements, to the extent specifically identified by segment:  

(in $000’s) Three Months Ended June 30, 2014	Global Division		Impax Division			Corporate and Other			Total Company
Revenues, net	$	176,394	$	11,727		$	---		$	188,121
Cost of revenues		69,872		8,477			---			78,349
Research and development		10,745		10,507			---			21,252
Patent litigation expense		1,767		---			---			1,767
Income (loss) before provision for income taxes	$	89,438	$	(18,991	)	$	(16,022	)	$	54,425

(in $000’s) Three Months Ended June 30, 2013	Global Division		Impax Division		Corporate and Other			Total Company
Revenues, net	$	93,965	$	35,666	$	---		$	129,631
Cost of revenues		54,727		16,017		---			70,744
Research and development		9,291		6,249		---			15,540
Patent litigation expense		4,304		---		---			4,304
Income (loss) before provision for income taxes	$	21,761	$	1,564	$	(14,290	)	$	9,035

(in $000’s) Six Months Ended June 30, 2014	Global Division		Impax Division			Corporate and Other			Total Company
Revenues, net	$	285,534	$	21,305		$	---		$	306,839
Cost of revenues		126,894		12,551			---			139,445
Research and development		21,962		21,031			---			42,993
Patent litigation expense		3,940		---			---			3,940
Income (loss) before provision for income taxes	$	125,783	$	(33,232	)	$	(29,496	)	$	63,055

(in $000’s) Six Months Ended June 30, 2013	Global Division		Impax Division			Corporate and Other		Total Company
Revenues, net	$	195,602	$	82,518		$	---	$	278,120
Cost of revenues		116,171		45,190			---		161,361
Research and development		21,002		14,143			---		35,145
Patent litigation expense		8,582		---			---		8,582
Income (loss) before provision for income taxes	$	40,921	$	(1,414	)	$	123,248	$	162,755

Foreign Operations

The Company’s wholly owned subsidiary, Impax Laboratories (Taiwan) Inc., is constructing a manufacturing facility in Jhunan, Taiwan R.O.C. which is utilized for manufacturing, research and development, warehouse, and administrative functions, with approximately $142,067,000 of net carrying value of assets, composed principally of a building and equipment, included in the Company's consolidated balance sheet at June 30, 2014.  

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17. 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. 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.  

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17. LEGAL AND REGULATORY MATTERS (continued)

Patent Infringement Litigation

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 (the “District Court”) 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 District Court on the issues of patent infringement and validity. In August 2011, the District 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 District Court entered final judgment with respect to that litigation. On June 22, 2012, the District Court entered its final judgment with respect to the Company. All parties filed notices of appeal and/or cross-appeal in July 2012. The briefing at the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”) was completed for all parties on January 28, 2013. The decision of the District Court will be binding on the Company unless reversed or modified on appeal or in subsequent litigation. On August 7, 2013, the Federal Circuit affirmed-in-part, reversed-in-part, and remanded the case to the District Court. The finding that the fifth patent was infringed and not invalid was affirmed, as was the finding that the asserted independent claims of the other four patents were invalid and/or not infringed. The Federal Circuit reversed the District Court’s finding that some of the dependent claims of the four patents were invalid and remanded for further proceedings. On January 6, 2014, the parties entered into a Stipulation of Dismissal and on January 7, 2014, the court entered an Order granting the Stipulation of Dismissal.

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 (the “District Court”) 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. The trial court issued a claim construction ruling on April 11, 2012. In November 2012, the Company and Takeda filed cross motions for summary judgment regarding infringement and validity of the patents at issue. On April 8, 2013, the District Court ruled on the summary judgment motions as follows: (i) granted the Company’s motion for non-infringement of U.S. Patent No. 7,790,755, (ii) granted Takeda’s motion of infringement of U.S. Patent Nos. 6,664,276, 6,462,058 and 6,939,971 and (iii) denied the Company’s motion of invalidity for U.S. Patent No. 6,939,971. A bench trial was conducted beginning on June 5, 2013, and a decision was rendered on October 17, 2013, finding the asserted claims of U.S. Patent Nos. 6,462,058, 6,664,276, and 6,939,971 infringed and not invalid. The Company filed a notice of appeal of the District Court’s decision on the 6,462,058, 6,664,276, and 6,939,971 patents to the United States Court of Appeals for the Federal Circuit and Takeda filed a notice of appeal of the District Court decision on the 7,790,755 patent to the Federal Circuit.

In May 2013, Takeda filed another complaint against the Company in the District Court, alleging infringement of U.S. Patent No. 8,173,158 based on the filing of the Company’s ANDA relating to Dexlansoprazole Delayed Release Capsules, 30 and 60 mg, generic to Dexilant®. Takeda filed an amended complaint in July 2013, alleging infringement of another patent, U.S. Patent No. 8,461,187. The Company filed an answer and counterclaims. Following a hearing on claim construction on June 5, 2014, the Court issued a claim construction order on June 6, 2014. Discovery is proceeding, and trial is scheduled for April 13, 2015.

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17. LEGAL AND REGULATORY MATTERS (continued)

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, U.S. 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 bench trial was conducted beginning on September 9, 2013. On April 30, 2014, the district court issued its decision finding two of the three patents infringed, while finding the third patent not infringed by the Company, and finding all three patents not invalid.The parties settled the litigation and the case was dismissed on June 17, 2014.

 Endo Pharmaceuticals Inc. and Grunenthal GmbH v. Impax Laboratories, Inc. and ThoRx Laboratories, Inc. (Oxymorphone hydrochloride); Endo Pharmaceuticals Inc. and Grunenthal GmbH v. Impax Laboratories, Inc. (Oxymorphone hydrochloride)

In November 2012, Endo Pharmaceuticals, Inc. and Grunenthal GmbH (collectively, “Endo”) filed suit against ThoRx Laboratories, Inc., a wholly owned subsidiary of the Company (“ThoRx”), and the Company in the U.S. District Court for the Southern District of New York alleging patent infringement based on the filing of ThoRx’s ANDA relating to Oxymorphone Hydrochloride, Extended Release tablets, 5, 7.5, 10, 15, 20, 30 and 40 mg, generic to Opana ER®. In January 2013, Endo filed a separate 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 the same products. ThoRx and the Company filed an answer and counterclaims to the November 2012 suit and the Company filed an answer and counterclaims with respect to the January 2013 suit. Discovery is proceeding. No trial date has been set.

Pfizer Inc. and UCB Pharma GMBH v. Impax Laboratories, Inc. (Fesoterodine)

In June 2013, Pfizer Inc. and UCB Pharma GMBH 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 Fesoterodine Fumarate Extended-Release Tablets, 4 and 8 mg, generic to Toviaz®. The Company filed its answer and counterclaims. Discovery is proceeding, and trial is scheduled for July 13, 2015.

Meda Pharmaceuticals Inc. v. Perrigo Israel Pharmaceuticals Ltd., Perrigo Company, L. Perrigo Company and Impax Laboratories, Inc. (Azelastine HCl)

In May 2013, Meda Pharmaceuticals, Inc. (“Meda”) filed suit against the Company in the United States District Court for the District of New Jersey, alleging that the Company participated in, contributed to, aided, abetted, and/or induced infringement of Meda’s United States Patent No. 8,071,073 based on the submission by Perrigo Israel Pharmaceutical Ltd., Perrigo Company and L. Perrigo Company of an ANDA relating to Azelastine Hydrochloride Nasal Spray (0.15%, eq. 0.1876 mg base/spray), generic to Astepro®. The parties settled the litigation and the case was dismissed on June 20, 2014.

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Warner Chilcott Co., LLC and Warner Chilcott (US), LLC  v. Impax Laboratories, Inc. (Risedronate)

In October 2013, Warner Chilcott Co., LLC and Warner Chilcott (US), LLC  (together, “Warner Chilcott”) filed suit against the Company in the United States District Court for the District of New Jersey, alleging patent infringement based on the filing of the Company’s ANDA relating to Risedronate Sodium Delayed Release Tablets, 35 mg, generic to Atelvia®. The case was consolidated with actions brought by Warner Chilcott against other generic defendants for trial, which began on July 14, 2014. The parties settled the litigation and the case was dismissed on July 16, 2014.

Impax Laboratories Inc. and AstraZeneca AB v. Lannett Holdings, Inc.

In July 2014, the Company filed suit against Lannett Holdings, Inc. in the United States District Court for the District of Delaware, alleging patent infringement based on the filing of Lannett’s ANDA relating to Zolmitriptan Nasal Spray, 5mg, generic to Zomig® Nasal Spray.

Other Litigation Related to the Company’s Business

Civil Investigative Demand from the FTC (Minocycline Hydrochloride)

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 relates to whether Medicis Pharmaceutical Corporation, now a wholly owned subsidiary of Valeant Pharmaceuticals International, Inc. (“Medicis”), 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 investigation. To the knowledge of the Company, no FTC proceedings have been initiated against the Company to date, however no assurance can be given as to the timing or outcome of this investigation.

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17. LEGAL AND REGULATORY MATTERS (continued) 

Solodyn® Antitrust Class Actions

From July to October 2013, thirteen class action complaints were filed against manufacturers of the brand drug Solodyn® and its generic equivalents, including the Company.

On July 22, 2013, Plaintiff United Food and Commercial Workers Local 1776 & Participating Employers Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On July 23, 2013, Plaintiff Rochester Drug Co-Operative, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On August 1, 2013, Plaintiff International Union of Operating Engineers Local 132 Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Northern District of California on behalf of itself and others similarly situated. On August 29, 2013, this Plaintiff withdrew its complaint from the United States District Court for the Northern District of California, and on August 30, 2013, re-filed the same complaint in the United States Court for the Eastern District of Pennsylvania, on behalf of itself and others similarly situated.

On August 9, 2013, Plaintiff Local 274 Health & Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On August 12, 2013, Plaintiff Sheet Metal Workers Local No. 25 Health & Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On August 27, 2013, Plaintiff Fraternal Order of Police, Fort Lauderdale Lodge 31, Insurance Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On August 29, 2013, Plaintiff Heather Morgan, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On August 30, 2013, Plaintiff Plumbers & Pipefitters Local 178 Health & Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On September 9, 2013, Plaintiff Ahold USA, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.

On September 24, 2013, Plaintiff City of Providence, Rhode Island, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Arizona on behalf of itself and others similarly situated.

On October 2, 2013, Plaintiff International Union of Operating Engineers Stationary Engineers Local 39 Health & Welfare Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.

On October 7, 2013, Painters District Council No. 30 Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.

On October 25, 2013, Plaintiff Man-U Service Contract Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated. 

On March 13, 2014, Plaintiff Allied Services Division Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.

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17. LEGAL AND REGULATORY MATTERS (continued)

On March 19, 2014, Plaintiff NECA-IBEW Welfare Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.

In each case, the complaints allege that Medicis engaged in an overarching anticompetitive scheme by, among other things, filing frivolous patent litigation lawsuits, submitting frivolous Citizen Petitions, and entering into anticompetitive settlement agreements with several generic manufacturers, including the Company, to delay generic competition of Solodyn® and in violation of state and federal antitrust laws. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution.

On February 25, 2014, the United States Judicial Panel on Multidistrict Litigation ordered the pending actions transferred to the District of Massachusetts for coordinated pretrial proceedings, as In Re Solodyn (Minocycline Hydrochloride) Antitrust Litigation.

Civil Investigative Demand from the FTC (Oxymorphone Hydrochloride)

On February 25, 2014, the Company received a CID from the FTC concerning its investigation into the drug Opana® ER and its generic equivalents. According to the FTC, the investigation relates to whether Endo Pharmaceuticals, Inc. (“Endo”), the Company, and other companies have engaged or are engaged in unfair methods of competition in or affecting commerce by (i) entering into agreements regarding Opana® ER or its generic equivalents and/or (ii) engaging in other conduct regarding the regulatory filings, sale or marketing of Opana® ER or its generic equivalents. The Company intends to cooperate with the FTC in producing documents and information in response to the CID. To the knowledge of the Company, no proceedings by the FTC have been initiated against the Company at this time, however no assurance can be given as to the timing or outcome of this investigation.

Opana ER® Antitrust Class Actions

From June to July 2014, four class action complaints were filed against manufacturers of the brand drug Opana ER® and the Company.

On June 4, 2014, Plaintiff Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On June 4, 2014, Plaintiff Rochester Drug Co-Operative, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On June 6, 2014, Plaintiff Value Drug Company, a direct purchaser, filed a class action complaint in the United States District Court for the Northern District of California on behalf of itself and others similarly situated. On June 26, 2014, this Plaintiff withdrew its complaint from the United States District Court for the Northern District of California, and on July 16, 2014, re-filed the same complaint in the United States District Court for the Northern District of Illinois, on behalf of itself and others similarly situated.

On June 19, 2014, Plaintiff Wisconsin Masons’ Health Care Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Northern District of Illinois on behalf of itself and others similarly situated.

In each case, the complaints allege that Endo engaged in an anticompetitive scheme by, among other things, entering into an anticompetitive settlement agreement with the Company to delay generic competition of Opana ER® and in violation of state and federal antitrust laws. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution.

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Securities and Derivative Class Actions

On March 7, 2013 and April 8, 2013, two class action complaints were filed against the Company and certain current and former officers and directors of the Company in the United States District Court for the Northern District of California by Denis Mulligan, individually and on behalf of others similarly situated, and Haverhill Retirement System, individually and on behalf of others similarly situated, respectively (“Securities Class Actions”), alleging that the Company and those named officers and directors violated the federal securities law by making materially false and misleading statements and/or failed to disclose material adverse facts to the public in connection with manufacturing deficiencies at the Hayward, California manufacturing facility, including but not limited to the impact the deficiencies would have on the Company’s ability to gain approval from the FDA for the Company’s branded product candidate, RYTARY™ and its generic version of Concerta®. These two Securities Class Actions have subsequently been consolidated, assigned to the same judge, and lead plaintiff has been chosen. The plaintiff’s consolidated amended complaint was filed on September 13, 2013. The Company filed a motion to dismiss the consolidated amended complaint on November 14, 2013. On April 18, 2014, the Court denied the Company’s motion to dismiss. Discovery is proceeding, and a trial date has not been set.

On March 19, 2013, Virender Singh, derivatively on behalf of the Company, filed a state court action against certain current and former officers and directors for breach of fiduciary duty and unjust enrichment in the Superior Court of the State of California County of Santa Clara, asserting similar allegations as those in the Securities Class Actions. That action has been stayed pending resolution of the Securities Class Actions. In addition, the Company is aware of two letters from stockholders demanding action by the Company’s board of directors, including to: (i) undertake an independent internal investigation into management’s alleged violations of Delaware and/or federal law; (ii) commence a civil action against members of management to recover damages sustained as a result of alleged breaches of fiduciary duties; and/or (iii) spearhead meaningful corporate reform to address alleged internal control inadequacies. Each letter further states that if such action is not commenced within a reasonable period of time, the stockholder will commence a stockholder’s derivative action on behalf of the Company.

Attorney General of the State of Connecticut Interrogatories and Subpoena Duces Tecum

On July 14, 2014, the Company received a subpoena and interrogatories (the “Subpoena”) from the State of Connecticut Attorney General (“Connecticut AG”) concerning its investigation into sales of the Company’s generic product, digoxin. According to the Connecticut AG, the investigation is to determine whether anyone engaged in a contract, combination or conspiracy in restraint of trade or commerce which has the effect of (i) fixing, controlling or maintaining prices or (ii) allocating or dividing customers or territories relating to the sale of digoxin in violation of Connecticut state antitrust law. The Company intends to cooperate with the Connecticut AG in producing documents and information in response to the Subpoena. To the knowledge of the Company, no proceedings by the Connecticut AG have been initiated against the Company at this time, however no assurance can be given as to the timing or outcome of this investigation.

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18. SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)

Selected financial information for the quarterly periods noted is as follows:

	2014 Quarters Ended:
(in $000’s except shares and per share amounts)	March 31		June 30
Revenue:
Global Product sales, gross	$	265,850	$	375,269
Less:
Chargebacks		95,714		110,518
Rebates		52,054		74,079
Product Returns		1,294		5,140
Other credits		10,671		21,571
Global Product sales, net		106,117		163,961
Rx Partner		2,435		9,204
Other Revenues		589		3,229
Global Division revenues, net		109,141		176,394
Impax Product sales, gross		20,643		24,375
Less:
Chargebacks		8,230		10,107
Rebates		1,070		938
Product Returns		181		216
Other credits		1,853		1,654
Impax Product sales, net		9,309		11,460
Other Revenues		268		267
Impax Division revenues, net		9,577		11,727
Total revenues		118,718		188,121
Gross profit		57,622		109,772
Net income	$	6,425	$	35,071
Net income per share (basic)	$	0.09	$	0.52
Net income per share (diluted)	$	0.09	$	0.50
Weighted average: common shares outstanding:
Basic		67,702,296		68,095,159
Diluted		69,938,872		70,313,491

Quarterly computations of net income per share amounts are made independently for each quarterly reporting period, and the sum of the per share amounts for the quarterly reporting periods may not equal the per share amounts for the year-to-date reporting period.

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18. SUPPLEMENTARY FINANCIAL INFORMATION (unaudited) (continued)

Selected financial information for the quarterly periods noted is as follows: 

	2013 Quarters Ended:
(in $000’s except shares and per share amounts)	March 31		June 30
Revenue:
Global Product sales, gross	$	197,956	$	217,721
Less:
Chargebacks		64,345		82,013
Rebates		30,572		35,649
Product Returns		94		1,989
Other credits		5,160		8,312
Global Product sales, net		97,785		89,758
Rx Partner		3,114		3,668
Other Revenues		737		539
Global Division revenues, net		101,636		93,965
Impax Product sales, gross		69,292		48,300
Less:
Chargebacks		7,790		10,095
Rebates		6,236		(1,735	)
Product Returns		1,490		2,197
Other credits		7,255		2,409
Impax Product sales, net		46,521		35,334
Other Revenues		332		332
Impax Division revenues, net		46,853		35,666
Total revenues		148,489		129,631
Gross profit		57,871		58,887
Net income	$	105,442	$	5,619
Net income per share (basic)	$	1.59	$	0.08
Net income per share (diluted)	$	1.55	$	0.08
Weighted average: common shares outstanding:
Basic		66,487,470		66,748,864
Diluted		68,178,355		68,287,948

Quarterly computations of net income per share amounts are made independently for each quarterly reporting period, and the sum of the per share amounts for the quarterly reporting periods may not equal the per share amounts for the year-to-date reporting period.  

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19. SUBSEQUENT EVENTS

On July 29, 2014, the Company announced that the FDA performed a general current Good Manufacturing Practices (cGMP) inspection and a Pre-Approval Inspection (PAI) for RYTARY™ at the Company’s Taiwan manufacturing facility from July 21 to July 26, 2014. At the conclusion of the inspection, the FDA issued a Form 483 with ten inspectional observations. On August 4, 2014, the Company announced that the FDA performed a re-inspection of the Company’s Hayward, California manufacturing facility from June 16 to July 31, 2014 and at the conclusion of the inspection, the FDA issued a Form 483 with seven inspectional observations, two of which were designated as repeat observations. The FDA did not provide any status or classification to either of the Form 483 observations and pursuant to its established regulatory process, will defer classification of the observations until it has reviewed the Company’s response to the inspections. The Company is currently working on its responses to the observations. The Company has also not been informed by the FDA of the impact the Form 483s will have on RYTARY™’s October 9, 2014 PDUFA review date.

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ITEM 2. Management’s Discussion and Analysis of Results of Operations and Financial Condition

The following discussion and analysis, as well as other sections in this Quarterly Report on Form 10-Q, should be read in conjunction with the unaudited interim consolidated financial statements and related notes to the unaudited interim consolidated financial statements included elsewhere herein.

Statements included in this Quarterly Report on Form 10-Q that do not relate to present or historical conditions are “forward-looking statements.” Such forward-looking statements involve risks and uncertainties that could cause results or outcomes to differ materially from those expressed in the forward-looking statements. Forward-looking statements may include statements relating to our plans, strategies, objectives, expectations and intentions. Words such as “believes,” “forecasts,” “intends,” “possible,” “estimates,” “anticipates,” “plans,” ”will,” “should,” “could” and similar expressions are intended to identify forward-looking statements. Our ability to predict results or the effect of events on our operating results is inherently uncertain. Forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those discussed in this Quarterly Report on Form 10-Q. Such risks and uncertainties include, fluctuations in our revenues and operating income, our ability to promptly correct the issues raised in the warning letter and Form 483 observations received from the FDA, our ability to successfully develop and commercialize pharmaceutical products in a timely manner, reductions or loss of business with any significant customer, the impact of consolidation of our customer base, the impact of competition, the substantial portion of our total revenues derived from sales of a limited number of products, our ability to sustain profitability and positive cash flows, any delays or unanticipated expenses in connection with the operation of our manufacturing facilities, the effect of foreign economic, political, legal and other risks on our operations abroad, the uncertainty of patent litigation and other legal proceedings, the increased government scrutiny on our agreements with brand pharmaceutical companies, product development risks and the difficulty of predicting FDA filings and approvals, consumer acceptance and demand for new pharmaceutical products, the impact of market perceptions of us and the safety and quality of our products, our determinations to discontinue the manufacture and distribution of certain products, our ability to achieve returns on our investments in research and development activities, our inexperience in conducting clinical trials and submitting new drug applications, our ability to successfully conduct clinical trials, our reliance on third parties to conduct clinical trials and testing, our lack of a license partner for commercialization of IPX066 outside of the United States, the impact of illegal distribution and sale by third parties of counterfeits or stolen products, the availability of raw materials and impact of interruptions in our supply chain, our policies regarding returns, rebates, allowances and chargebacks, the use of controlled substances in our products, the effect of current economic conditions on our industry, business, results of operations and financial condition, disruptions or failures in our information technology systems and network infrastructure, our reliance on alliance and collaboration agreements, our reliance on licenses to proprietary technologies, our dependence on certain employees, our ability to comply with legal and regulatory requirements governing the healthcare industry, the regulatory environment, our ability to protect our intellectual property, exposure to product liability claims, risks relating to goodwill and intangibles, changes in tax regulations, our ability to manage our growth, including through potential acquisitions, the restrictions imposed by our credit facility, uncertainties involved in the preparation of our financial statements, our ability to maintain an effective system of internal control over financial reporting, the effect of terrorist attacks on our business, the location of our manufacturing and research and development facilities near earthquake fault lines, expansion of social media platforms and other risks described herein and in our Annual Report on Form 10-K for the year ended December 31, 2013. You should not place undue reliance on forward-looking statements. Such statements speak only as to the date on which they are made, and we undertake no obligation to update or revise any forward-looking statement, regardless of future developments or availability of new information, except to the extent required by applicable law.    

RYTARY™ is a trademark of Impax Laboratories, Inc. Other names are for informational purposes only and are used to identify companies and products and may be trademarks of their respective owners.

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Overview

We are a technology based, specialty pharmaceutical company applying formulation and development expertise, as well as our drug delivery technology, to the development, manufacture and marketing of controlled-release and niche generics, in addition to the development of branded products. We operate in two segments, referred to as the “Global Pharmaceuticals Division” or “Global Division” and the “Impax Pharmaceuticals Division” or “Impax Division.” The Global Division concentrates its efforts on the development, manufacture, sale and distribution of our generic products, which are the pharmaceutical and therapeutic equivalents of brand-name drug products and are usually marketed under their established nonproprietary drug names rather than by a brand name. Our Impax Division is currently focused on the development of proprietary brand pharmaceutical products that we believe represent improvements to already-approved pharmaceutical products addressing central nervous system (“CNS”) disorders. The Impax Division is also engaged in the sale and distribution of Zomig^® (zolmitriptan) products, indicated for the treatment of migraine headaches, under the terms of a Distribution, License, Development and Supply Agreement (“AZ Agreement”) with AstraZeneca UK Limited (“AstraZeneca”) in the United States and in certain United States territories. Each of the Global Division and the Impax Division also generates revenue from research and development services provided to unrelated third-party pharmaceutical entities.

We plan to continue to expand our Global Division through targeted ANDAs and a first-to-file and first-to-market strategy and to continue to evaluate and pursue external growth initiatives, including acquisitions and partnerships. We focus our efforts on developing, manufacturing, selling and distributing controlled-release generic versions of selected brand-name pharmaceuticals covering a broad range of therapeutic areas and having technically challenging drug-delivery mechanisms or unique product formulations. We employ our technologies and formulation expertise to develop generic products that reproduce brand-name products’ physiological characteristics but do not infringe any valid patents relating to such brand-name products. Generic products contain the same active ingredient and are of the same route of administration, dosage form, strength and indication(s) as brand-name products already approved for use in the United States by the FDA. We generally focus our generic product development on brand-name products as to which the patents covering the active pharmaceutical ingredient have expired or are near expiration, and we employ our proprietary formulation expertise to develop controlled-release technologies that do not infringe patents covering the brand-name products’ controlled-release technologies. We also develop, manufacture, sell and distribute specialty generic pharmaceuticals that we believe present one or more competitive advantages, such as difficulty in raw materials sourcing, complex formulation or development characteristics or special handling requirements. Our Global Division also generates revenues from research and development services provided under a joint development agreement with an unrelated third-party pharmaceutical entity. In addition to our focus on solid oral dosage products, we have expanded our generic pharmaceutical products portfolio to include alternative dosage form products, primarily through alliance and collaboration agreements with third parties, such as our development, supply and distribution agreement with TOLMAR, Inc. (“Tolmar”) pursuant to which we received an exclusive license to commercialize up to 11 generic topical prescription drug products, including ten currently approved products and one product pending at the FDA, in the United States and its territories.

We sell and distribute generic pharmaceutical products primarily through four sales channels:

● 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, collaboration and supply agreements.

As of August 1, 2014, we marketed 97 generic pharmaceutical products representing dosage variations of 30 different pharmaceutical compounds through our Global Division, and five other generic pharmaceutical products, representing dosage variations of two different pharmaceutical compounds, through our alliance and collaboration agreement partners. As of August 1, 2014, our marketed generic products included, but were not limited to, authorized generic Adderall XR®, fenofibrate (generic to Lofibra®) and authorized generic Renvela®.

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The Impax Division is focused on developing proprietary branded pharmaceuticals products for the treatment of CNS disorders, which include migraine, multiple sclerosis and Parkinson’s disease, and the promotion and sale of branded pharmaceutical products through our specialty sales force. We believe that we have the research, development and formulation expertise to develop branded products that will deliver significant improvements over existing therapies.

Our branded pharmaceutical product portfolio consists of commercial CNS products and development stage projects. In February 2012, we licensed from AstraZeneca the exclusive U.S. commercial rights to Zomig^® (zolmitriptan) tablet, orally disintegrating tablet and nasal spray formulations pursuant to the terms of the AZ Agreement and began sales of the Zomig® products under our label during the year ended December 31, 2012 through our specialty sales force. As part of the AZ Agreement, we also have non-exclusive rights to develop new products containing zolmitriptan and to exclusively commercialize these products in the United States in connection with the Zomig^® brand. With the addition of Zomig^® to the promotional product portfolio, we increased our specialty sales team during 2012. In May 2013, our exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and we launched authorized generic versions of those products in the United States.

In the development of our pipeline products, we apply formulation and development expertise to develop differentiated, modified, or controlled-release versions of drug substances that are currently marketed either in the United States or outside the United States. We currently have one late-stage branded pharmaceutical product candidate which we are developing internally, RYTARY™ (IPX066) for the treatment of symptomatic Parkinson’s disease, for which an NDA was accepted for filing by the FDA in February 2012. In January 2013, the FDA issued a Complete Response Letter regarding the NDA for RYTARY™. A Complete Response Letter is issued by the FDA’s Center for Drug Evaluation and Research when the review cycle for a pharmaceutical product candidate is complete and the application is not yet ready for approval. In the Complete Response Letter, the FDA indicated that it required a satisfactory re-inspection of our Hayward manufacturing facility as a result of the warning letter issued to us in May 2011 before the NDA may be approved by the FDA due to the facility’s involvement in the development of RYTARY™ and supportive manufacturing and distribution activities. During the assessment of the NDA, we withdrew our Hayward site as an alternative site of commercial production at launch for RYTARY™. In April 2014, after discussions with the FDA, we resubmitted an NDA for RYTARY™. The NDA was accepted for filing by the FDA in April 2014 and the FDA informed us that the Prescription Drug User Fee Act (“PDUFA”) date is October 9, 2014. We have also initiated the preparation of required documents for a European Market Authorization Application filing for RYTARY™, currently targeted for filing during the second half of 2014. We have a number of other product candidates that are in varying stages of development and currently intend to expand our portfolio of branded pharmaceutical products through internal development and through licensing and acquisition.

We have entered into several alliance and collaboration agreements with respect to certain of our products and services and may enter into similar agreements in the future. These agreements typically obligate us 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. Our alliance and collaboration agreements often include milestones and provide for milestone payments upon achievement of these milestones. For more information about the types of milestone events in our agreements and how we categorize them, see “Item 1. Financial Statements — Note 12 to Interim Consolidated Financial Statements.”

We are dependent on third-party pharmaceutical companies to supply us with some of our products and have experienced some disruptions in supply of certain of such products. For instance, pursuant to a license and distribution agreement, we are dependent on a third-party pharmaceutical company to supply us with our authorized generic Adderall XR^®, which we market and sell. We experienced disruptions related to the supply of our authorized generic Adderall XR^® from this third-party pharmaceutical company and in late 2010, we filed suit against the third-party supplier for breach of contract and other related claims due to a failure to fill our orders as required by the license and distribution agreement. We entered into a settlement agreement and an amended and restated license and distribution agreement with the third-party supplier in February 2013. If we suffer supply disruptions related to our products, including disruptions related to our authorized generic Adderall XR® product in the future, our revenues and relationships with our customers may be materially adversely affected.

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Quality Control

In late May 2011, we received a warning letter from the FDA related to an on-site FDA inspection of our Hayward, California manufacturing facility citing deviations from current Good Manufacturing Practices (cGMP), which are extensive regulations governing manufacturing practices for finished pharmaceutical products and which establish requirements for manufacturing processes, stability testing, record keeping and quality standards and controls. The FDA observations set forth in the warning letter related to sampling and testing of in-process materials and drug products, production record review, and our process for investigating the failure of certain manufacturing batches (or portions of batches) to meet specifications.

During the quarters ended March 31, 2012 and March 31, 2013, the FDA conducted inspections of our Hayward manufacturing facility and at the conclusion of each inspection, we received a Form 483. The Form 483 issued during the quarter ended March 31, 2012 contained observations primarily relating to our Quality Control Laboratory and the Form 483 issued during the quarter ended March 31, 2013 contained several observations pertaining to the operations of the Hayward facility, three of which were designated by the FDA as repeat observations from inspections that occurred prior to the warning letter. We provided the FDA with what we believe to be our complete written responses relating to the observations in the warning letter and the Form 483 issued in 2012. In connection with the Form 483 issued in 2013, we provided our written response to the FDA during the first quarter ended March 31, 2013 and continue to provide the FDA with updates. In late October 2013, at the FDA’s request, we participated in a regulatory meeting with representatives of the FDA to provide additional information and clarifications on our response and updates related to the Form 483 issued in 2013. The FDA performed a re-inspection of our Hayward manufacturing facility during June and July 2014. At the conclusion of the re-inspection, the FDA issued a Form 483 with seven inspectional observations, two of which were designated by the FDA as repeat observations from the inspection that occurred in 2013. To date, we have not been informed by the FDA as to whether a satisfactory re-inspection of our Hayward manufacturing facility will be required to close out the warning letter and resolve the 2014 Form 483 observationson our Hayward manufacturing facility.

In July 2014, the FDA conducted an inspection of our Taiwan manufacturing facility and at the conclusion of the inspection, we received a Form 483 with ten observations. The FDA did not provide any status or classification to either the Form 483 observations on our Hayward or Taiwan manufacturing facilities and, pursuant to its established regulatory process, will wait until they have received and reviewed our responses to classify those inspections. We also have not been informed by the FDA of the impact the Form 483s will have on RYTARY’s PDUFA review date of October 9, 2014.

To date, the FDA has not notified us of any additional enforcement actionsat either the Hayward or Taiwan manufacturing facilities; however, no assurance can be given as to whether the FDA will take any further actions. We are currently working on our response and updates to the Form 483s and we intend to continue to provide updates to the agency. We are currently cooperating with the FDA to close out the warning letter and resolve the Form 483 observations. The warning letter and Form 483 observations do not currently place restrictions on our ability to manufacture and ship our existing products.

We have taken a number of steps to review our quality control and manufacturing systems and standards and are working with third-party experts to assist us with our review and in enhancing such systems and standards. This work is ongoing and we are committed to improving our quality control and manufacturing practices. We cannot be assured, however, that the FDA will be satisfied with our corrective actions and as such, we cannot be assured of when the warning letter will be closed out. Unless and until the warning letter is closed out and the Form 483 observations resolved, it is possible we may be subject to additional regulatory action by the FDA as a result of current or future FDA observations, including, among others, monetary sanctions or penalties, product recalls or seizure, injunctions, total or partial suspension of production and/or distribution, and suspension or withdrawal of regulatory approvals. Additionally, the FDA has withheld and may continue to withhold approval of pending drug applications listing our Hayward, California facility as a manufacturing location of finished dosage forms until the warning letter is closed out and the Form 483 observations on our Hayward facility are resolved. Further, other federal agencies, our customers and partners in our alliance, development, collaboration and other partnership agreements with respect to our products and services may take the warning letter and Form 483 observations into account when considering the award of contracts or the continuation or extension of such partnership agreements. If we are unable promptly to correct the issues raised in the warning letter and Form 483 observations, our business, consolidated results of operations and consolidated financial condition could be materially and adversely affected.  

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Critical Accounting Estimates

The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) and the rules and regulations of the U.S. Securities & Exchange Commission (“SEC”) require the use of estimates and assumptions, based on complex judgments considered reasonable, and affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant judgments are employed in estimates used in determining values of tangible and intangible assets, legal contingencies, tax assets and tax liabilities, fair value of share-based compensation related to equity incentive awards issued to employees and directors, and estimates used in applying the Company’s revenue recognition policy including those related to accrued chargebacks, rebates, distribution service fees, product returns, Medicare, Medicaid, and other government rebate programs, shelf-stock adjustments, and the timing and amount of deferred and recognized revenue and deferred and amortized manufacturing costs under the Company's several alliance and collaboration agreements. Actual results may differ from estimated results. Certain prior year amounts have been reclassified to conform to the current year presentation.

Although we believe our estimates and assumptions are reasonable when made, they are based upon information available to us at the time they are made. We periodically review the factors having an influence on our estimates and, if necessary, adjust such estimates. Although historically our estimates have generally been reasonably accurate, due to the risks and uncertainties involved in our business and evolving market conditions, and given the subjective element of the estimates made, actual results may differ from estimated results. This possibility may be greater than normal during times of pronounced economic volatility.

Global Product sales, net, and Impax Product sales, net. We recognize revenue from direct sales in accordance with SEC Staff Accounting Bulletin No. 104, Topic 13 "Revenue Recognition" (“SAB 104”). We recognize revenue from direct product sales at the time title and risk of loss pass to customers, which is generally when product is received by the customer. We establish accrued provisions for estimated chargebacks, rebates, distribution service fees, product returns, shelf-stock and other pricing adjustments in the period we record the related sales.

Consistent with industry practice, we record an accrued provision for estimated deductions for chargebacks, rebates, distribution service fees, product returns, Medicare, Medicaid, and other government rebate programs, shelf-stock adjustments, and other pricing adjustments, in the same period when we recognize revenue. The objective of recording provisions for these deductions at the time of sale is to provide a reasonable estimate of the aggregate amount we expect to ultimately credit our customers. Since arrangements giving rise to the various sales credits are typically time driven (i.e. particular promotions entitling customers who make purchases of our products during a specific period of time to certain levels of rebates or chargebacks), these deductions represent important reductions of the amounts those customers would otherwise owe us for their purchases of those products. Customers typically process their claims for deductions in a reasonably timely manner, usually within the established payment terms. We monitor actual credit memos issued to our customers and compare actual amounts to the estimated provisions, in the aggregate, for each deduction category to assess the reasonableness of the various reserves at each quarterly balance sheet date. Differences between our estimated provisions and actual credits issued have not been significant, and are accounted for in the current period as a change in estimate in accordance with GAAP. We do not have the ability to specifically link any particular sales credit to an exact sales transaction and since there have been no material differences, we believe our systems and procedures are adequate for managing our business. An event such as the failure to report a particular promotion could result in a significant difference between the estimated amount accrued and the actual amount claimed by the customer, and, while there have been none to date, we would evaluate the particular events and factors giving rise to any such significant difference in determining the appropriate accounting.

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Chargebacks. We have agreements establishing contract prices for specified products with some of our indirect customers, such as managed care organizations, hospitals, and government agencies who purchase our products from drug wholesalers. The contract prices are lower than the prices the customer would otherwise pay to the wholesaler, and the difference is referred to as a chargeback, which generally takes the form of a credit memo issued by us to reduce the gross sales amount we invoiced to our wholesaler customer. We recognize an estimated accrued provision for chargeback deductions at the time we ship the products to our wholesaler customers. The primary factors we consider when estimating the accrued 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 we do business. We monitor aggregate actual chargebacks granted and compare them to the estimated accrued provision for chargebacks to assess the reasonableness of the chargeback reserve at each quarterly balance sheet date. The following table is a roll-forward of the activity in the chargeback reserve for the six months ended June 30, 2014 and the year ended December 31, 2013:

	June 30, 2014			December 31, 2013
	($ in 000’s)
Chargeback reserve
Beginning balance	$	37,066		$	18,410
Provision recorded during the period		224,569			389,707
Credits issued during the period		(229,955	)		(371,051	)
Ending balance	$	31,680		$	37,066
Provision as a percent of gross product sales		33	%		34	%

As noted in the table above, the provision for chargebacks, as a percent of gross product sales, remained flat during the six month period ended June 30, 2014, as compared to the year ended December 31, 2013.

Rebates. In an effort to maintain a competitive position in the marketplace and to promote sales and customer loyalty, we maintain various rebate programs with our customers to whom we market our products through our Global Division Global Products sales channel. The rebates generally take the form of a credit memo to reduce the invoiced gross sales amount charged to a customer for products shipped. We recognize an estimated accrued provision for rebate deductions at the time of product shipment. The primary factors we consider 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 which we do business. We also monitor aggregate actual rebates granted and compare them to the estimated aggregate provision for rebates to assess the reasonableness of the aggregate rebate reserve at each quarterly balance sheet date. The following table is a roll-forward of the activity in the rebate reserve for the six months ended June 30, 2014 and the year ended December 31, 2013:

	June 30, 2014			December 31, 2013
	($ in 000’s)
Rebate reserve
Beginning balance	$	88,449		$	46,011
Provision recorded during the period		128,141			193,288
Credits issued during the period		(133,170	)		(150,850	)
Ending balance	$	83,420		$	88,449
Provision as a percent of gross product sales		19	%		17	%

As noted in the table above, the provision for rebates, as a percent of gross product sales, increased from 17% during the year ended December 31, 2013 to 19% during the six months ended June 30, 2014 as a result of product sales mix, as well as the impact of additional rebates resulting from the recent formation of a new alliance between a major wholesaler and major retailer.

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Returns. We allow our customers to return product (i) if approved by authorized personnel in writing or by telephone with the lot number and expiration date accompanying any request and (ii) if such products are returned within six months prior to, or until twelve months following, the products’ expiration date. We estimate and recognize an accrued provision for product returns as a percentage of gross sales based upon historical experience of product sales. We estimate the product return reserve using a historical lag period, which is the time between when the product is sold and when it is ultimately returned, and return rates, adjusted by estimates of the future return rates based on various assumptions, which may include 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. We also consider other factors, including significant market changes which may impact future expected returns, and actual product returns. We monitor aggregate actual product returns on a quarterly basis and we may record specific provisions for product returns we believe are not covered by historical percentages. The following table is a roll-forward of the activity in the product returns reserve for the six months ended June 30, 2014 and the year ended December 31, 2013:

	June 30, 2014			December 31, 2013
	($ in 000’s)
Returns reserve
Beginning balance	$	28,089		$	23,440
Provision related to sales recorded in the period		6,831			11,015
Credits issued during the period		(5,103	)		(6,366	)
Ending balance	$	29,817		$	28,089
Provision as a percent of gross product sales		1.0	%		1.0	%

As noted in the table above, the provision for returns as a percent of gross product sales remained flat during the six month period ended June 30, 2014, as compared to the year ended December 31, 2013.

Medicaid and Other Government Pricing Programs. As required by law, we provide a rebate payment on drugs dispensed under the Medicaid, Medicare Part D, TRICARE, and other U.S. government pricing programs. We determine our estimate of the accrued rebate reserve for government programs primarily based on historical experience of claims submitted by the various states, and other jurisdictions, and any new information regarding changes in the pricing programs which may impact our estimate of rebates. In determining the appropriate accrual amount, we consider historical payment rates and processing lag for outstanding claims and payments. We record estimates for government rebate payments as a deduction from gross sales, with corresponding adjustments to accrued liabilities. The accrual for payments under government pricing programs totaled $19,882,000 and $23,351,000 as of June 30, 2014 and December 31, 2013, respectively.

Shelf-Stock Adjustments. Based upon competitive market conditions, we may reduce the selling price of some of our products to customers for certain future product shipments. We 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 us. This type of customer credit is referred to as a shelf-stock adjustment, which is the difference between the sales 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 us in response to market conditions, including estimated launch dates of competing products and estimated declines in market price. The accrued reserve for shelf-stock adjustments totaled $1,984,000 and $774,000 as of June 30, 2014 and December 31, 2013, respectively.

Estimated Lives of Alliance and Collaboration Agreements. The revenue we receive under our alliance and collaboration agreements is not subject to adjustment for estimated chargebacks, rebates, product returns and other pricing adjustments as such adjustments are included in the amounts we receive from our alliance partners. However, because we may defer revenue we receive under our alliance agreements, and recognize it over the estimated life of the related agreement, or our expected period of performance, we are required to estimate the recognition period under each such agreement in order to determine the amount of revenue to be recognized in each period. Sometimes this estimate is based on the fixed term of the particular alliance agreement. In other cases the estimate may be based on more subjective factors as noted in the following paragraph. While changes to the estimated recognition periods have been infrequent, such changes, should they occur, may have a significant impact on our consolidated financial statements.

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As an illustration, the consideration received from the provision of research and development services under the Joint Development Agreement with Valeant Pharmaceuticals International, Inc., formerly Medicis Pharmaceutical Corporation (“Valeant Agreement”), including the upfront fee and milestone payments received before January 1, 2011, have been initially deferred and are being recognized as revenue on a straight-line basis over our expected period of performance to provide research and development services under the Valeant Agreement. The completion of the final deliverable under the Valeant Agreement represents the end of our estimated expected period of performance, as we will have no further contractual obligation to perform research and development services under the Valeant Agreement, and therefore the earnings process will be complete. The expected period of performance was initially estimated to be a 48 month period, starting in December 2008, upon receipt of the $40.0 million upfront payment, and ending in November 2012. During the year ended December 31, 2012, we extended the end of the revenue recognition period for the Valeant Agreement from November 2012 to November 2013 and during the three month period ended March 31, 2013, we further extended the end of the revenue recognition period for the agreement from November 2013 to December 2014 due to changes in the estimated timing of completion of certain research and development activities under the agreement. This change in estimate was made on a prospective basis and resulted in a reduced quarterly amount of revenue recognized in 2013 and the first half of 2014, as compared to prior year quarters, and a reduced periodic amount of revenue to be recognized in future periods. If there are additional changes in the estimated timing of the completion of the final deliverable under the Valeant Agreement, the revenue recognition period will change on a prospective basis at such time the event occurs. If we were to further extend the revenue recognition period, the amount of revenue recognized in future periods would further reduce.

Share-Based Compensation. We recognize the grant date fair value of each option and restricted share over its vesting period. Options and restricted shares granted under the 2002 Plan typically vest over a three or four year period and have a term of ten years. We estimate the fair value of each stock option award on the grant date using the Black-Scholes-Merton option-pricing model. Expected volatility is determined based on historical volatility of our common stock. We base the expected term calculation on the “simplified” method described in SAB No. 107, Share-Based Payment, and SAB No. 110, Share-Based Payment, because it provides a reasonable estimate in comparison to our actual experience. We base the risk-free interest rate on the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield is zero as we have never paid cash dividends on our common stock and have no present intention to pay cash dividends.

Income Taxes. We are subject to United States federal, state and local income taxes and Taiwan R.O.C. income taxes. We create a deferred tax asset, or a deferred tax liability, when we have temporary differences between the financial statement carrying values (GAAP) and the tax bases of our assets and liabilities.

We calculate our interim income tax provision in accordance with FASB ASC Topics 270 and 740. At the end of each interim period, we make an estimate of the annual U.S. domestic and foreign jurisdictions’ expected effective tax rates and apply these rates to their respective year-to-date taxable income or loss. The computation of the annual estimated effective tax rates at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year, projections of the proportion of income (or loss) earned and taxed in the United States, and the various state and local tax jurisdictions, as well as tax jurisdictions outside the United States, along with permanent differences, and the likelihood of deferred tax asset utilization. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is acquired, or additional information is obtained. The computation of the annual estimated effective tax rate includes modifications, which were projected for the year, for share-based compensation charges and state research and development credits, among others. In addition, we recognize the effect of changes in enacted tax laws, rates, or tax status in the interim period in which the respective change occurs.

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Contingencies. In the normal course of business, we are subject to loss contingencies, such as legal proceedings and claims arising out of our business, covering a wide range of matters, including, among others, patent litigation, shareholder lawsuits, and product and clinical trial liability. In accordance with FASB ASC Topic 450 - Contingencies, we record accrued loss contingencies when it is probable a liability will be incurred and the amount of loss can be reasonably estimated and we do not recognize gain contingencies until realized.

Goodwill. In accordance with FASB ASC Topic 350, "Goodwill and Other Intangibles," rather than recording periodic amortization of goodwill, goodwill is subject to an annual assessment for impairment by applying a fair-value-based test. Under FASB ASC Topic 350, if the fair value of the reporting unit exceeds the reporting unit’s carrying value, including goodwill, then goodwill is considered not impaired, making further analysis not required. We consider each of our Global Division and Impax Division operating segments to be a reporting unit, as this is the lowest level for each of which discrete financial information is available. We attribute the entire carrying amount of goodwill to the Global Division. We concluded the carrying value of goodwill was not impaired as of December 31, 2013, as the fair value of the Global Division exceeded its carrying value. We perform our annual goodwill impairment test in the fourth quarter of each year. We estimate the fair value of the Global Division using a discounted cash flow model for both the reporting unit and the enterprise, as well as earnings and revenue multiples per common share outstanding for enterprise fair value. In addition, on a quarterly basis, we perform a review of our business operations to determine whether events or changes in circumstances have occurred that could have a material adverse effect on the estimated fair value of the reporting unit, and thus indicate a potential impairment of the goodwill carrying value. If such events or changes in circumstances were deemed to have occurred, we would perform an interim impairment analysis, which may include the preparation of a discounted cash flow model, or consultation with one or more valuation specialists, to analyze the impact, if any, on our assessment of the reporting unit’s fair value. To date, we have not deemed there to be any significant adverse changes in the legal, regulatory or business environment in which we conduct our operations. 

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Results of Operations

Three Months Ended June 30, 2014 Compared to the Three Months Ended June 30, 2013

Overview:

The following table sets forth our summarized, consolidated results of operations for the three month periods ended June 30, 2014 and 2013: 

	Three Months Ended
	June 30, 2014		June 30, 2013		Increase/ (Decrease)
(in $000’s)	(unaudited)
					$		%
Total revenues	$	188,121	$	129,631	$	58,490		45	%
Gross profit		109,772		58,887		50,885		86	%
Income from operations		53,936		5,768		48,168	nm
Income before income taxes		54,425		9,035		45,390	nm
Provision for income taxes		19,354		3,416		15,938	nm
Net income	$	35,071	$	5,619	$	29,452	nm

 *nm-not meaningful

Total revenues for the three month period ended June 30, 2014 increased $58.5 million, or 45%, as compared to the same period in 2013. New product launches increased revenues during the three month period ended June 30, 2014 by $61.5 million, or 47%, compared to the prior year period, primarily related to sales of our authorized generic Renvela® tablets and authorized generic Trilipix® delayed release capsules, in addition to generic Solaraze®. Decreased product volumes (excluding new product launches) decreased revenues during the three month period ended June 30, 2014 by $3.6 million, or 3%, compared to the prior year period, while selling price and product mix increased revenues by $0.5 million, or 0.4%, compared to the prior year period. Revenues from our Global Division increased $82.4 million during the three month period ended June 30, 2014, as compared to the prior year period, driven primarily by sales of our authorized generic Renvela® tablets and Trilipix® delayed release capsules, in addition to our Digoxin and generic Solaraze® products. Revenues from our Impax Division decreased $23.9 million in the three month period ended June 30, 2014 as compared to the same period in 2013, as a result of a decline in sales of our Impax-labeled branded Zomig® products. In May 2013, our exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and we launched authorized generic versions of those products in the United States.

Net income for the three month period ended June 30, 2014 was $35.1 million, an increase of $29.5 million as compared to net income of $5.6 million for the three month period ended June 30, 2013. The increase was primarily attributable to the profit earned from the launch of our authorized generic Renvela® product during the current year period.

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Global Division

The following table sets forth results of operations for the Global Division for the three month periods ended June 30, 2014 and 2013:

	Three Months Ended
	June 30,		June 30,		Increase/
	2014		2013		(Decrease)
(in $000’s)	(unaudited)
					$			%
Revenues:
Global Product sales, net	$	163,961	$	89,758	$	74,203			83	%
Rx Partner		9,204		3,668		5,536		nm
Other Revenues		3,229		539		2,690		nm
Total revenues		176,394		93,965		82,429			88	%
Cost of revenues		69,872		54,727		15,145			28	%
Gross profit		106,522		39,238		67,284		nm
Operating expenses:
Research and development		10,745		9,291		1,454			16	%
Patent litigation expense		1,767		4,304		(2,537	)		(59	)%
Selling, general and administrative		4,572		3,882		690			18	%
Total operating expenses		17,084		17,477		(393	)		(2	)%
Income from operations	$	89,438	$	21,761	$	67,677		nm

*nm-not meaningful

Revenues

Total revenues for the Global Division for the three month period ended June 30, 2014, were $176.4 million, an increase of 88% over the same period in 2013, principally resulting from the increase in Global Product sales, net, as discussed below.

Global Product sales, net, were $164.0 million for the three month period ended June 30, 2014, an increase of 83% over the same period in 2013, primarily due to the launch of our authorized generic Renvela® tablets in the three month period ended June 30, 2014, in addition to the launch of our authorized generic Trilipix® delayed release capsules and generic Solaraze® during the second half of 2013, for which there were no comparable amounts in the prior year period, as well as higher sales of our Digoxin products. Any diminution in the consolidated revenue and/or gross profit of any of our products due to competition and/or product supply delays or disruptions or any other reasons in future periods may materially and adversely affect our consolidated results of operations in such future periods.

Rx Partner revenues were $9.2 million for the three month period ended June 30, 2014, an increase of $5.5 million from the prior year period, resulting from a profit share receipt of $3.3 million under our agreement with Perrigo Company, plc (“Perrigo”) related to the launch of generic Astepro®, in addition to higher profit share earned under the Teva Agreement of $2.2 million, in each case during the three month period ended June 30, 2014, as compared to the prior year period.

Other Revenues were $3.2 million for the three month period ended June 30, 2014, with the increase of $2.7 million from the prior year period primarily resulting from the receipt of a milestone payment pursuant to our agreement with a third-party pharmaceutical company.

Cost of Revenues

Cost of revenues was $69.9 million for the three month period ended June 30, 2014, an increase of $15.1 million compared to the prior year period, primarily related to increased costs of $14.6 million associated with the higher revenue described above. In addition, there was an increase in remediation-related expenses of $4.1 million in the three month period ended June 30, 2014, as compared to the prior year period. These increases were partially offset by $2.2 million in separation costs primarily related to the reduction in force recorded in the three month period ended June 30, 2013, for which there is no comparable charge in the current year period, and $1.3 million as a result of production efficiencies during the current quarter.

57

Gross Profit

Gross profit for the three month period ended June 30, 2014 was $106.5 million, or approximately 60% of total revenues, as compared to $39.2 million, or approximately 42% of total revenues, in the prior year period. Gross profit in the current year period increased, on a percentage basis, when compared to gross profit in the prior year period due primarily to the favorable product contribution from higher margin products.

Research and Development Expenses

Total research and development expenses for the three month period ended June 30, 2014 were $10.7 million, an increase of 16%, as compared to $9.3 million in the prior year period. Generic research and development expenses increased by $1.5 million as compared to the prior year period primarily due to an increase in research and development project spending of $0.7 million as a result of the timing of research and development projects, in addition to increased personnel costs of $0.5 million associated with the transfer of employees from our quality improvement programs and new product management group to our research and development team, as well as higher incentive compensation costs of $0.3 million.

Patent Litigation Expenses

Patent litigation expenses for the three month period ended June 30, 2014 were $1.8 million, as compared to $4.3 million for the three month period ended June 30, 2013. The decrease in patent litigation expenses of $2.5 million compared to the prior year period was the result of legal activity related to several cases in the prior year period for which there was no corresponding activity in the current year period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three month period ended June 30, 2014 were $4.6 million, as compared to $3.9 million for the three month period ended June 30, 2013. The increase of $0.7 million compared to the prior year period was primarily the result of an increase in selling and marketing expenses of $0.5 million, in addition to $0.2 million of higher spending on consulting fees for software system upgrades.

58

Impax Division

The following table sets forth results of operations for the Impax Division for the three month periods ended June 30, 2014 and 2013:

	Three Months Ended
	June 30,			June 30,		Increase/
	2014			2013		(Decrease)
(in $000’s)	(unaudited)
						$			%
Revenues:
Impax Product sales, net	$	11,460		$	35,334	$	(23,874	)		(68	)%
Other Revenues		267			332		(65	)		(20	)%
Total revenues		11,727			35,666		(23,939	)		(67	)%
Cost of revenues		8,477			16,017		(7,540	)		(47	)%
Gross profit		3,250			19,649		(16,399	)		(83	)%
Operating expenses:
Research and development		10,507			6,249		4,258			68	%
Selling, general and administrative		11,734			11,836		(102	)		(1	)%
Total operating expenses		22,241			18,085		4,156			23	%
(Loss) income from operations	$	(18,991	)	$	1,564	$	(20,555	)	nm

*nm-not meaningful

Revenues

Total revenues for the Impax Division were $11.7 million for the three month period ended June 30, 2014, a decrease of $23.9 million over the same period in the prior year, due to lower sales of our Impax-labeled branded Zomig® products which we began selling during the year ended December 31, 2012. In May 2013, our exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and we launched authorized generic versions of those products in the United States. We continue to commercialize the branded Zomig® nasal spray which has U.S. patents expiring as late as May 2021. Other Revenues for the three month period ended June 30, 2014 were $0.3 million, representing the recognition of an initial $10.0 million upfront payment we received in June 2010 under a Development and Co-Promotion Agreement with Endo Pharmaceuticals, Inc. We are currently recognizing this upfront payment as revenue on a straight-line basis over our expected period of performance during the development period, which we currently estimate to be the 103 month period ending December 2018.

Cost of Revenues

Cost of revenues was $8.5 million for the three month period ended June 30, 2014, a decrease of $7.5 million over the prior year period, commensurate with a reduction in revenues and lower amortization costs related to the loss of exclusivity on branded Zomig® tablets and orally disintegrating tablets and an increase in inventory reserves.

Gross Profit

Gross profit for the three month period ended June 30, 2014 was $3.3 million, a decrease of $16.4 million over the prior year period, commensurate with a reduction in revenues and other costs noted above.

59

Research and Development Expenses

Total research and development expenses for the three month period ended June 30, 2014 were $10.5 million, an increase of $4.3 million as compared to $6.2 million in the prior year period. The increase was primarily driven by an increase in research and development expenses related to our branded initiatives.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $11.7 million for the three month period ended June 30, 2014, a decrease of $0.1 million as compared to $11.8 million in the prior year period.

60

Corporate and Other

The following table sets forth corporate general and administrative expenses, as well as other items of income and expense presented below income or loss from operations for the three month periods ended June 30, 2014 and 2013:

	Three Months Ended
	June 30,			June 30,			Increase/
	2014			2013			(Decrease)
(in $000’s)	(unaudited)
							$			%
General and administrative expenses	$	16,511		$	17,557		$	(1,046	)		(6	)%
Loss from operations		(16,511	)		(17,557	)		1,046			(6	)%
Other income, net		31			2,997			(2,966	)		(99	)%
Interest income		365			315			50			16	%
Interest expense		93			(45	)		138		nm
Loss before income taxes		(16,022	)		(14,290	)		(1,732	)		12	%
Provision for income taxes	$	19,354		$	3,416		$	15,938		nm

*nm-not meaningful

General and Administrative Expenses

General and administrative expenses for the three month period ended June 30, 2014 were $16.5 million, a 6% decrease over the same period in 2013. The decrease was principally driven by lower transitional costs of $3.3 million in the three month period ended June 30, 2014related to the resignation and appointment, respectively, of our previous and new President and Chief Executive Officer, as compared to the prior year period, partially offset by higher expenses for incentive compensation of $1.1 million, litigation of $0.9 million and information technology of $0.3 million.

Other Income, net

Other Income, net of less than $0.1 million primarily resulted from net realized exchange rate gains on foreign currency denominated transactions during the three month period ended June 30, 2014. Other Income, net of $3.0 million in the three month period ended June 30, 2013 primarily resulted from a $3.0 million gain in connection with the settlement of litigation recorded in Other Income during the three month period ended June 30, 2013.

Interest Income

Interest income in the three month period ended June 30, 2014 was $0.4 million, and was relatively consistent with the same period in 2013.

Interest Expense

Interest expense in the three month period ended June 30, 2014 reflected income of less than $0.1 million, as compared to expense of less than $0.1 million in the same period in 2013, as a result of the release of an accrual for estimated interest related to our provision for uncertain tax positions during the three month period ended June 30, 2014.

Income Taxes

During the three month period ended June 30, 2014, we recorded an aggregate tax provision of $19.4 million for U.S. domestic income taxes and for foreign income taxes. In the three month period ended June 30, 2013, we recorded an aggregate tax provision of $3.4 million for U.S. domestic income taxes and for foreign income taxes. The increase in the tax provision resulted from higher pretax income for the three month period ended June 30, 2014 compared to the three month period ended June 30, 2013. The effective tax rate was 36% for the three month period ended June 30, 2014 and 38% for the three month period ended June 30, 2013. The decrease in the effective tax rate was primarily the result of a change in the timing and mix of U.S. and foreign income. Other contributing factors to the rate fluctuation include the exclusion of a zero-rate jurisdiction from the interim effective tax rate calculation in 2014; the expiration of the Federal Research and Experimental Creditas of December 31, 2013; and an increase in the deferred tax asset related to a state research and development tax credit carryforward in a state with indefinite carryforwards. We are closely monitoring the events and circumstances that determine the need for a valuation allowance against these credits. Should we determine the need for such a valuation allowance, it could materially and adversely affect our business, results of operations and financial condition.

61

Results of Operations

Six Months Ended June 30, 2014 Compared to the Six Months Ended June 30, 2013

Overview:

The following table sets forth our summarized, consolidated results of operations for the six month periods ended June 30, 2014 and 2013: 

	Six Months Ended
	June 30, 2014		June 30, 2013		Increase/ (Decrease)
(in $000’s)	(unaudited)
					$			%
Total revenues	$	306,839	$	278,120	$	28,719			10	%
Gross profit		167,394		116,759		50,635			43	%
Income from operations		62,167		10,039		52,128		nm
Income before income taxes		63,055		162,755		(99,700	)		(61	)%
Provision for income taxes		21,559		51,694		(30,135	)		(58	)%
Net income	$	41,496	$	111,061	$	(69,565	)		(63	)%

*nm-not meaningful

Total revenues for the six month period ended June 30, 2014 increased $28.7 million, or 10%, as compared to the same period in 2013. New product launches increased revenues during the six month period ended June 30, 2014 by $74.9 million, or 27%, compared to the prior year period, primarily related to sales of our authorized generic Renvela® tablets and authorized generic Trilipix® delayed release capsules, in addition to generic Solaraze®. Decreased product volumes (excluding new product launches) decreased revenues during the six month period ended June 30, 2014 by $41.9 million, or 15%, compared to the prior year period, while selling price and product mix also decreased revenues by $4.3 million, or 2%, compared to the prior year period. Revenues from our Global Division increased $89.9 million during the six month period ended June 30, 2014, as compared to the prior year period, driven primarily by sales of our authorized generic Renvela® tablets and Trilipix® delayed release capsules, in addition to higher sales of our Digoxin and generic Solaraze® products. Revenues from our Impax Division decreased $61.2 million in the six month period ended June 30, 2014 as compared to the same period in 2013, as a result of a decline in sales of our Impax-labeled branded Zomig® products. In May 2013, our exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and we launched authorized generic versions of those products in the United States.

Net income for the six month period ended June 30, 2014 was $41.5 million, a decrease of $69.6 million as compared to net income of $111.1 million for the six month period ended June 30, 2013. The decrease was primarily attributable to a $102 million gain in connection with the settlement of litigation and the June 2010 settlement and license agreement with Endo which we recorded as “Other Income” in the six month period ended June 30, 2013, as well as the receipt of a $48.0 million payment from Shire in the six month period ended June 30, 2013, in connection with the settlement of litigation. Also contributing to the decrease in net income was a decline in sales of our Impax-labeled branded Zomig® products, as discussed above, that was partially offset by increased Global sales on several of our higher margin products.

62

Global Division

The following table sets forth results of operations for the Global Division for the six month periods ended June 30, 2014 and 2013:

	Six Months Ended
	June 30,		June 30,		Increase/
	2014		2013		(Decrease)
(in $000’s)	(unaudited)
					$			%
Revenues:
Global Product sales, net	$	270,078	$	187,563	$	82,515			44	%
Rx Partner		11,639		6,781		4,858			72	%
Other Revenues		3,817		1,258		2,559		nm
Total revenues		285,534		195,602		89,932			46	%
Cost of revenues		126,894		116,171		10,723			9	%
Gross profit		158,640		79,431		79,209			100	%
Operating expenses:
Research and development		21,962		21,002		960			5	%
Patent litigation expense		3,940		8,582		(4,642	)		(54	)%
Selling, general and administrative		6,955		8,926		(1,971	)		(22	)%
Total operating expenses		32,857		38,510		(5,653	)		(15	)%
Income from operations	$	125,783	$	40,921	$	84,862		nm

*nm-not meaningful

Revenues

Total revenues for the Global Division for the six month period ended June 30, 2014, were $285.5 million, an increase of 46% over the same period in 2013, principally resulting from the increase in Global Product sales, net, as discussed below.

Global Product sales, net, were $270.1 million for the six month period ended June 30, 2014, an increase of $82.5 million over the same period in 2013, primarily due to sales of our authorized generic Renvela® tablets launched during the three month period ended June 30, 2014, in addition to the launch of our authorized generic Trilipix® delayed release capsules and generic Solaraze® during the second half of 2013, for which there were no comparable amounts in the prior year period, as well higher sales of our Digoxin products. Any diminution in the consolidated revenue and/or gross profit of any of our products, due to competition and/or product supply delays or disruptions or any other reasons in future periods may materially and adversely affect our consolidated results of operations in such future periods.

Rx Partner revenues were $11.6 million for the six month period ended June 30, 2014, an increase of $4.8 million from the prior year period, resulting from the receipt of a $3.3 million profit share payment pursuant to our agreement with Perrigo, related to the launch of generic Astepro®, in addition to higher profit share revenue of $2.5 million earned under the Teva Agreement, partially offset by lower product volume during the six month period ended June 30, 2014, as compared to the prior year period.

Other Revenues were $3.8 million for the six month period ended June 30, 2014, with the increase of $2.5 million from the prior year period primarily resulting from the receipt of a milestone payment pursuant to our agreement with a third-party pharmaceutical company, in addition to higher volumes on our product marketed under our OTC Partner alliance agreement with Pfizerduring the six month period ended June 30, 2014, as compared to the prior year period.

Cost of Revenues

Cost of revenues was $126.9 million for the six month period ended June 30, 2014, an increase of $10.7 million compared to the prior year period, primarily related to increased costs of $14.9 million associated with the higher revenue described above. In addition, there was an increase in remediation-related expenses of $10.7 million in the six month period ended June 30, 2014, as compared to the prior year period. These increases were partially offset by a decrease of $13.0 million for inventory reserves for products we discontinued and other reserves for pre-launch inventory recorded in the six month period ended June 30, 2013, due to delays caused by the warning letter related to our Hayward, California manufacturing facility, for which there were no comparable charges in the current period, as well as a decline of $1.6 million in separation costs primarily related to the reduction in force recorded in the six month period ended June 30, 2013.

63

Gross Profit

Gross profit for the six month period ended June 30, 2014 was $158.6 million, or approximately 56% of total revenues, as compared to $79.4 million, or approximately 41% of total revenues, in the prior year period. Gross profit in the current year period increased, on a percentage basis, when compared to gross profit in the prior year period due primarily to the favorable product contribution from higher margin products and lower COGS variances described above.

Research and Development Expenses

Total research and development expenses for the six month period ended June 30, 2014 were $22.0 million, an increase of $1.0 million, as compared to $21.0 million in the prior year period. Generic research and development expenses increased by $1.0 million as compared to the prior year period primarily due to a $2.3 million increase in research and development project activities, partially offset by a $2.0 million milestone payment made to a research and development partner in the six month period ended June 30, 2013 that was not present in the current period. Additionally, there were increased personnel costs of $0.5 million related to the transfer of employees from our quality improvement programs and new product management group to our research and development team.

Patent Litigation Expenses

Patent litigation expenses for the six month period ended June 30, 2014 were $3.9 million, as compared to $8.6 million for the six month period ended June 30, 2013. The decrease in patent litigation expenses of $4.7 million compared to the prior year period was the result of legal activity related to several cases in the prior year period for which there was no corresponding activity in the present period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six month period ended June 30, 2014 were $6.9 million, as compared to $8.9 million for the six month period ended June 30, 2013. The decrease of $2.0 million compared to the prior year period was primarily the result of a reduction in selling and marketing expenses.

64

Impax Division

The following table sets forth results of operations for the Impax Division for the six month periods ended June 30, 2014 and 2013:

	Six Months Ended
	June 30,			June 30,			Increase/
	2014			2013			(Decrease)
(in $000’s)	(unaudited)
							$			%
Revenues:
Impax Product sales, net	$	20,769		$	81,855		$	(61,086	)		(75	)%
Other Revenues		536			663			(127	)		(19	)%
Total revenues		21,305			82,518			(61,213	)		(74	)%
Cost of revenues		12,551			45,190			(32,639	)		(72	)%
Gross profit		8,754			37,328			(28,574	)		(77	)%
Operating expenses:
Research and development		21,031			14,143			6,888			49	%
Selling, general and administrative		20,955			24,599			(3,644	)		(15	)%
Total operating expenses		41,986			38,742			3,244			8	%
Loss from operations	$	(33,232	)	$	(1,414	)	$	(31,818	)	nm

*nm-not meaningful

Revenues

Total revenues for the Impax Division were $21.3 million for the six month period ended June 30, 2014, a decrease of $61.2 million over the same period in the prior year, due to lower sales of our Impax-labeled branded Zomig® products which we began selling during the year ended December 31, 2012. In May 2013, our exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and we launched authorized generic versions of those products in the United States. We continue to commercialize the branded Zomig® nasal spray which has U.S. patents expiring as late as May 2021. Other Revenues for the six month period ended June 30, 2014 were $0.5 million, representing the recognition of an initial $10.0 million upfront payment we received in June 2010 under a Development and Co-Promotion Agreement with Endo Pharmaceuticals, Inc. We are currently recognizing this upfront payment as revenue on a straight-line basis over our expected period of performance during the development period, which we currently estimate to be the 103 month period ending December 2018.

Cost of Revenues

Cost of revenues was $12.6 million for the six month period ended June 30, 2014, a decrease of $32.6 million over the prior year period, commensurate with a reduction in revenues and lower amortization costs related to the loss of exclusivity on branded Zomig® tablets and orally disintegrating tablets.

Gross Profit

Gross profit for the six month period ended June 30, 2014 was $8.8 million, a decrease of $28.6 million over the prior year period, commensurate with a reduction in revenues and other costs noted above.

65

Research and Development Expenses

Total research and development expenses for the six month period ended June 30, 2014 were $21.0 million, an increase of $6.9 million as compared to $14.1 million in the prior year period. The increase was primarily driven by a $2.0 million upfront fee paid to DURECT Corporation (“Durect”) under an agreement to acquire the exclusive worldwide rights to develop and commercialize Durect’s investigational transdermal bupivacaine patch for the treatment of pain associated with PHN, referred to as IPX239, and an increase in research and development expenses related to our branded initiatives.

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $21.0 million for the six month period ended June 30, 2014, a decrease of $3.6 million as compared to $24.6 million in the prior year period. The decrease was primarily driven by a $1.9 million reduction in sales force expenses due to a reduction in force and a $1.9 million reduction in advertising and promotion expenses for Zomig® due to loss of exclusivity of branded Zomig® tablets and orally disintegrating tablets.

66

Corporate and Other

The following table sets forth corporate general and administrative expenses, as well as other items of income and expense presented below income or loss from operations for the six month periods ended June 30, 2014 and 2013:

	Six Months Ended
	June 30,			June 30,			Increase/
	2014			2013			(Decrease)
(in $000’s)	(unaudited)
							$			%
General and administrative expenses	$	30,384		$	29,468		$	916			3	%
Loss from operations		(30,384	)		(29,468	)		(916	)		3	%
Other income, net		107			152,453			(152,346	)		(100	)%
Interest income		753			591			162			27	%
Interest expense		28			(328	)		356		nm
(Loss) income before income taxes		(29,496	)		123,248			(152,744	)	nm
Provision for income taxes	$	21,559		$	51,694		$	(30,135	)		(58	)%

*nm-not meaningful

General and Administrative Expenses

General and administrative expenses for the six month period ended June 30, 2014 were $30.4 million, an increase of $0.9 million over the same period in 2013. The increase was principally driven by higher expenses for litigation of $1.7 million, information technology of $1.2 million and incentive compensation of $0.5 million, partially offset by lower transitional costs of $2.6 million during the six month period ended June 30, 2014associated with the resignation and appointment, respectively, of our previous and new President and Chief Executive Officer, as compared to the prior year period.

Other Income, net

Other Income, net of $0.1 million primarily resulted from realized exchange rate gains on foreign currency denominated transactions during the six month period ended June 30, 2014. Other Income, net of $152.5 million in the six month period ended June 30, 2013 primarily resulted from a $102 million gain in connection with the settlement of litigation and the June 2010 settlement and license agreement with Endo which we recorded as “Other Income” in the six month period ended June 30, 2013, as well as a $48 million payment received from Shire in connection with the settlement of litigation in the six month period ended June 30, 2013. Partially offsetting this income was a $0.9 million loss on disposal of software recoded during the six month period ended June 30, 2013.

Interest Income

Interest income in the six month period ended June 30, 2014 was $0.8 million, a slight increase over the same period in 2013.

Interest Expense

Interest expense in the six month period ended June 30, 2014 reflected income of less than $0.1 million, as compared to expense of $0.3 million in the same period in 2013, as a result of the release of an accrual for estimated interest related to our provision for uncertain tax positions during the six month period ended June 30, 2014.

Income Taxes

During the six month period ended June 30, 2014, we recorded an aggregate tax provision of $21.6 million for U.S. domestic income taxes and for foreign income taxes. In the six month period ended June 30, 2013, we recorded an aggregate tax provision of $51.7 million for U.S. domestic income taxes and for foreign income taxes. The decrease in the tax provision resulted from lower pretax income for the six month period ended June 30, 2014 compared to the six month period ended June 30, 2013. The effective tax rate was 34% for the six month period ended June 30, 2014 and 32% for the six month period ended June 30, 2013. The increase in the effective tax rate was primarily as a result of the expiration of the Federal Research and Experimental Credit as of December 31, 2013. Other contributing factors to the rate fluctuation include a change in the timing and mix of U.S. and foreign income; the exclusion of a zero-rate jurisdiction from the interim effective tax rate calculation in 2014; and an increase in the deferred tax asset related to a state research and development tax credit carryforward in a state with indefinite carryforwards. We are closely monitoring the events and circumstances that determine the need for a valuation allowance against these credits. Should we determine the need for such a valuation allowance, it could materially and adversely affect our business, results of operations and financial condition.

67

Liquidity and Capital Resources

We have historically funded our operations with the proceeds from the sale of debt and equity securities, and more recently, with cash from operations. Currently, our principal source of liquidity is cash from operations, consisting of the proceeds from the sales of our products and the provision of services, as well as payments received in connection with legal settlements.

We expect to incur significant operating expenses, including research and development activities and patent litigation expenses, for the foreseeable future. In addition, we are generally required to make cash expenditures to manufacture and/or acquire finished product inventory in advance of selling the finished product to our customers and collecting payment for such product sales, which may result in a significant use of cash. We believe our existing cash and cash equivalents and short-term investment balances, together with cash expected to be generated from operations, and our bank revolving line of credit, will be sufficient to meet our cash requirements through the next 12 months. We may seek additional financing through alliance, collaboration, and licensing agreements, as well as from the debt or equity capital markets to fund the planned capital expenditures, our research and development plans, potential acquisitions, and potential revenue shortfalls due to delays in new product introductions.

Cash and Cash Equivalents

At June 30, 2014, we had $159.1 million in cash and cash equivalents, a decrease of $25.5 million as compared to December 31, 2013. As more fully discussed below, the decrease in cash and cash equivalents during the six month period ended June 30, 2014 was primarily driven by $46.2 million of net cash used in investing activities.

Cash Flows

Six Month Period Ended June 30, 2014 Compared to the Six Month Period Ended June 30, 2013

Net cash provided by operating activities for the six month period ended June 30, 2014 was $12.4 million, a decrease of $156.7 million as compared to the prior year period of $169.1 million net cash provided by operating activities. The period over period decrease in net cash provided by operating activities principally resulted from the receipt of a $102 million payment in connection with the settlement of litigation under the June 2010 settlement and license agreement with Endo and the receipt of a $48.0 million payment from Shire in connection with the settlement of litigation during the six month period ended June 30, 2013. In addition, an increase in accounts receivable from the prior year period primarily related to the launch of authorized generic RENVELA® resulted in a $50.9 million use of cash for the six month period ended June 30, 2014, compared to the same period in the prior year when accounts receivable resulted in an $11.2 million use of cash. An increase in net inventory during the current period also contributed to the decrease in cash provided by operating activities. The increase in inventory during the current period was in part related to recent product launches. In addition, reduced profit sharing accruals related to the loss of exclusivity on branded Zomig® tablets and orally disintegrating tablets in 2013 contributed to the decline in cash flow from operations.

Net cash used in investing activities for the six month period ended June 30, 2014, was $46.2 million, compared to the prior year period of $92.4 million of net cash used in investing activities. The period over period decrease in net cash used was due primarily to a decrease in net purchases of short-term investments during the six month period ended June 30, 2014 resulting in a $24.9 million use of cash, as compared to net purchases of short-term investments during the same period in the prior year period resulting in a $72.3 million use of cash. In the prior year, we had higher net purchases of short-term investments as a result of the litigation settlements noted above. In addition, during the six month period ended June 30, 2014, we made $3.0 million in payments for product licensing rights pursuant to third-party agreements.

Net cash provided by financing activities for the six month period ended June 30, 2014 was $9.2 million, representing an increase of $4.4 million as compared to $4.8 million of net cash provided by financing activities in the prior year period. The period over period increase in net cash provided by financing activities was due to a $3.3 million increase in cash proceeds received from the exercise of stock options and contributions to the employee stock purchase plan, as well as a $1.1 million increase in the tax benefit related to the exercise of employee stock options and vesting of restricted stock.  

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Outstanding Debt Obligations

Senior Lenders; Wells Fargo Bank, N.A.

We have a Credit Agreement, as amended (the “Credit Agreement”) with Wells Fargo Bank, N. A., as a lender and as administrative agent (the “Administrative Agent”). The Credit Agreement provides us with a revolving line of credit in the aggregate principal amount of up to $50.0 million (the “Revolving Credit Facility”). Under the Revolving Credit Facility, up to $10.0 million is available for letters of credit, the outstanding face amounts of which reduce availability under the Revolving Credit Facility on a dollar for dollar basis. Proceeds under the Credit Agreement may be used for working capital, general corporate and other lawful purposes. We have not yet borrowed any amounts under the Revolving Credit Facility.

Borrowings under the Credit Agreement are secured by substantially all of our personal property assets pursuant to a Security Agreement (the “Security Agreement”) entered into by us and the Administrative Agent. As further security, we also pledged to the Administrative Agent 65% of our equity interest in Impax Laboratories (Taiwan), Inc., all of our equity interests in our wholly owned domestic subsidiaries and must similarly pledge all or a portion of our equity interest in future subsidiaries. Under the Credit Agreement, among other things:

● 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 on February 11, 2015.There were no balances outstanding under the credit facility as of June 30, 2014 or December 31, 2013.

● 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 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, Consolidated EBITDA of at least $50.0 million and Minimum Liquidity (which is, generally unrestricted cash and cash equivalents) of at least $100.0 million. As of June 30, 2014, 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.

During the six month periods ended June 30, 2014 and 2013, unused line fees incurred under the Credit Agreement were $62,000 and $61,000, respectively

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Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of June 30, 2014.

Contractual Obligations

As of June 30, 2014, there were no significant changes to our contractual obligations as set forth in our Annual Report on Form 10-K for the year ended December 31, 2013.

Recent Accounting Pronouncements 

In March 2013, the FASB issued updated guidance on foreign currency matters. The update applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. We were required to adopt this guidance on January 1, 2014 and the adoption did not have a material effect on our consolidated financial statements.

In July 2013, the FASB issued updated guidance related to presentation of an unrecognized tax benefit. The guidance requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward, or similar tax loss, or tax credit carryforward, rather than as a liability under certain circumstances. We were required to adopt this guidance on January 1, 2014 and the adoption did not have a material effect on our consolidated financial statements. 

 In May 2014, the FASB issued updated guidance regarding the accounting for and disclosures of revenue recognition. The update provides a single comprehensive model for accounting for revenue from contracts with customers. The model requires that revenue recognized reflect the actual consideration to which the entity expects to be entitled in exchange for the goods or services defined in the contract, including in situations with multiple performance obligations. This guidance will be the same for both US GAAP and International Financial Reporting Standards (IFRS) and is effective for annual and interim periods beginning after December 15, 2016. We are currently evaluating the effect that this guidance may have on our consolidated financial statements.

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ITEM 3.     Quantitative and Qualitative Disclosures About Market Risk

There were no material changes to the quantitative and qualitative disclosures about market risk set forth in our Annual Report on Form 10-K for the year ended December 31, 2013.

ITEM 4.     Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) that are designed to ensure that information required to be disclosed by us in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including its principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as defined in Rule 13a-15(e) of the Exchange Act, were effective as of June 30, 2014 at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

During the quarter ended June 30, 2014, there were no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Limitations on the Effectiveness of Controls

Systems of disclosure controls and internal controls over financial reporting and their associated policies and procedures, no matter how well conceived and operated, are designed to provide a reasonable, but not an absolute, level of assurance the objectives of the system of control are achieved. Further, the design of a control system must be balanced against resource constraints, and therefore the benefits of controls must be considered relative to their costs. Given the inherent limitations in all systems of controls, no evaluation of controls can provide absolute assurance all control issues and instances of fraud, if any, within a company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Accordingly, given the inherent limitations in a cost-effective system of internal control, financial statement misstatements due to error or fraud may occur and may not be detected. Our disclosure controls and procedures are designed to provide a reasonable assurance of achieving their objectives. We conduct periodic evaluations of our systems of controls to enhance, where necessary, our control policies and procedures.  

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PART II.     Other Information

Item 1.        Legal Proceedings

Information pertaining to legal proceedings can be found in “Item 1. Financial Statements – Note 17. Legal and Regulatory Matters” and is incorporated by reference herein.

Item 1A.     Risk Factors

During the quarter ended June 30, 2014, except as set forth below, there were no material changes to the risk factors included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013. Please carefully consider the information set forth in this Quarterly Report on Form 10-Q and the risk factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, which could materially affect our business, consolidated financial condition or consolidated results of operations. The risks described herein, and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 are not the only risks we face. Additional risks and uncertainties not currently known to us or which we currently deem to be immaterial may also materially adversely affect our business, consolidated financial condition and/or consolidated results of operations.

We have received a warning letter and Form 483 observations from the FDA. If we are unable to promptly correct the issues raised in the warning letter and/or Form 483 observations, our business, results of operations and financial condition could be materially and adversely affected.

In late May 2011, we received a warning letter from the FDA related to an on-site FDA inspection of our Hayward, California manufacturing facility citing deviations from current Good Manufacturing Practices (cGMP), which are extensive regulations governing manufacturing practices for finished pharmaceutical products and which establish requirements for manufacturing processes, stability testing, record keeping and quality standards and controls. The FDA observations set forth in the warning letter related to sampling and testing of in-process materials and drug products, production record review, and our process for investigating the failure of certain manufacturing batches (or portions of batches) to meet specifications. During the quarters ended March 31, 2012 and March 31, 2013, the FDA conducted inspections of our Hayward manufacturing facility and at the conclusion of each inspection, we received a Form 483. The Form 483 issued during the quarter ended March 31, 2012 contained observations primarily relating to our Quality Control Laboratory and the Form 483 issued during the quarter ended March 31, 2013 contained several observations pertaining to the operations of the Hayward facility, three of which were designated by the FDA as repeat observations from inspections that occurred prior to the warning letter. We provided the FDA with what we believe to be our complete written responses relating to the observations in the warning letter and the Form 483 issued in 2012. In connection with the Form 483 issued in 2013, we provided our written response to the FDA during the first quarter ended March 31, 2013 and continue to provide the FDA with updates. In late October 2013, at the FDA’s request, we participated in a regulatory meeting with representatives of the FDA to provide additional information and clarifications on our response and updates related to the Form 483 issued in 2013. The FDA performed a re-inspection of our Hayward manufacturing facility during June and July 2014. At the conclusion of the re-inspection, the FDA issued a Form 483 with seven inspectional observations, two of which were designated by the FDA as repeat observations from the inspection that occurred in 2013. To date, we have not been informed by the FDA as to whether a satisfactory re-inspection of our Hayward manufacturing facility will be required to close out the warning letter and resolve the 2014 Form 483 observations on our Hayward manufacturing facility.

In July 2014, the FDA conducted an inspection of our Taiwan manufacturing facility and at the conclusion of the inspection, we received a Form 483 with ten observations. The FDA did not provide any status or classification to either the Form 483 observations on our Hayward or Taiwan manufacturing facilities and, pursuant to its established regulatory process, will wait until they have received and reviewed our responses to classify those inspections. We also have not been informed by the FDA of the impact the Form 483s will have on RYTARY’s PDUFA review date of October 9, 2014.

To date, the FDA has not notified us of any additional enforcement actions at either the Hayward or Taiwan manufacturing facilities, however, no assurance can be given as to whether the FDA will take any further actions. We are currently working on our response and updates to the Form 483s and we intend to continue to provide updates to the agency. We are currently cooperating with the FDA to close out the warning letter and resolve the Form 483 observations. The warning letter and Form 483 observations do not currently place restrictions on our ability to manufacture and ship our existing products.

We have taken a number of steps to review our quality control and manufacturing systems and standards and are working with third-party experts to assist us with our review and in enhancing such systems and standards. This work is ongoing and we are committed to improving our quality control and manufacturing practices. We cannot be assured, however, that the FDA will be satisfied with our corrective actions and as such, we cannot be assured of when the warning letter will be closed out. Unless and until the warning letter is closed out and the Form 483 observations resolved, it is possible we may be subject to additional regulatory action by the FDA as a result of current or future FDA observations, including, among others, monetary sanctions or penalties, product recalls or seizure, injunctions, total or partial suspension of production and/or distribution, and suspension or withdrawal of regulatory approvals. Additionally, the FDA has withheld and may continue to withhold approval of pending drug applications listing our Hayward, California facility as a manufacturing location of finished dosage forms until the warning letter is closed out and the Form 483 observations on our Hayward facility are resolved. Further, other federal agencies, our customers and partners in our alliance, development, collaboration and other partnership agreements with respect to our products and services may take the warning letter and Form 483 observations into account when considering the award of contracts or the continuation or extension of such partnership agreements. If we are unable promptly to correct the issues raised in the warning letter and Form 483 observations, our business, consolidated results of operations and consolidated financial condition could be materially and adversely affected.

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Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information regarding the purchases of our equity securities by us during the three months ended June 30, 2014.

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
April 1, 2014 to April 30, 2014	41,863 shares of common stock		$	25.32		—		—
May 1, 2014 to May 31, 2014	10,541 shares of common stock		$	26.39		—		—
June 1, 2014 to June 30, 2014		—		—		—		—

(1) Represents shares of our common stock that 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.

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ITEM 3.     Defaults Upon Senior Securities.

Not Applicable.

ITEM 4.     Mine Safety Disclosures.

Not Applicable.

ITEM 5.     Other Information.

Not Applicable.  

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ITEM 6.     Exhibits

Exhibit No.	Description of Document
3.1	Amended and Restated Bylaws of Impax Laboratories, Inc., effective May 14, 2014.(1)
10.1	Amendment dated as of April 1, 2014 to the Employment Agreement dated as of December 12, 2012 by and between Impax Laboratories, Inc. and Bryan Reasons.*(2)
10.2	Amendment dated as of April 1, 2014 to the Employment Agreement dated as of January 1, 2010 by and between Impax Laboratories, Inc. and Michael Nestor.*(2)
10.3	Amendment dated as of April 1, 2014 to the Employment Agreement dated as of November 7, 2011 by and between Impax Laboratories, Inc. and Carole Ben-Maimon, M.D.*(2)
10.4	Amendment dated as of April 1, 2014 to the Employment Agreement dated as of May 2, 2011 by and between Impax Laboratories, Inc. and Mark Schlossberg.*(2)
10.5	Employment Agreement dated April 21, 2014 by and between Impax Laboratories, Inc. and G. Frederick Wilkinson.*(3)
10.6.1	Employment Agreement dated November 28, 2011 by and between Impax Laboratories, Inc. and Jeffrey Nornhold.*
10.6.2	Amendment dated April 1, 2014 to Employment Agreement dated November 28, 2011 by and between Impax Laboratories, Inc. and Jeffrey Nornhold.*
10.6.3	Letter Agreement dated April 1, 2014 between Impax Laboratories, Inc. and Jeffrey Nornhold.*
11.1	Statement re computation of per share earnings (incorporated by reference to Note 15 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 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 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 June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013, (ii) Consolidated Statements of Operations for each of the three and six months ended June 30, 2014 and 2013, (iii) Consolidated Statements of Comprehensive Income for each of the three and six months ended June 30, 2014 and 2013, (iv) Consolidated Statements of Cash Flows for each of the six months ended June 30, 2014 and 2013 and (v) Notes to Interim Consolidated Financial Statements.

*Management contract, compensatory plan or arrangement.

(1) Incorporated by reference to the Company’s Current Report on Form 8-K filed on May 16, 2014.

(2) Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 2, 2014.

(3) Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 24, 2014.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. 

Date: August 6, 2014		Impax Laboratories, Inc.
	By:	/s/ G. Frederick Wilkinson
		Name: G. Frederick Wilkinson
		Title: President and Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Bryan M. Reasons
		Name: Bryan M. Reasons
		Title: Chief Financial Officer and Senior Vice President, Finance (Principal Financial and Accounting Officer)

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EXHIBIT INDEX

Exhibit No.	Description of Document
3.1	Amended and Restated Bylaws of Impax Laboratories, Inc., effective May 14, 2014.(1)
10.1	Amendment dated as of April 1, 2014 to the Employment Agreement dated as of December 12, 2012 by and between Impax Laboratories, Inc. and Bryan Reasons.*(2)
10.2	Amendment dated as of April 1, 2014 to the Employment Agreement dated as of January 1, 2010 by and between Impax Laboratories, Inc. and Michael Nestor.*(2)
10.3	Amendment dated as of April 1, 2014 to the Employment Agreement dated as of November 7, 2011 by and between Impax Laboratories, Inc. and Carole Ben-Maimon, M.D.*(2)
10.4	Amendment dated as of April 1, 2014 to the Employment Agreement dated as of May 2, 2011 by and between Impax Laboratories, Inc. and Mark Schlossberg.*(2)
10.5	Employment Agreement dated April 21, 2014 by and between Impax Laboratories, Inc. and G. Frederick Wilkinson.*(3)
10.6.1	Employment Agreement dated November 28, 2011 by and between Impax Laboratories, Inc. and Jeffrey Nornhold.*
10.6.2	Amendment dated April 1, 2014 to Employment Agreement dated November 28, 2011 by and between Impax Laboratories, Inc. and Jeffrey Nornhold.*
10.6.3	Letter Agreement dated April 1, 2014 between Impax Laboratories, Inc. and Jeffrey Nornhold.*
11.1	Statement re computation of per share earnings (incorporated by reference to Note 15 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 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 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 June 30, 2014, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets as of June 30, 2014 and December 31, 2013, (ii) Consolidated Statements of Operations for each of the three and six months ended June 30, 2014 and 2013, (iii) Consolidated Statements of Comprehensive Income for each of the three and six months ended June 30, 2014 and 2013, (iv) Consolidated Statements of Cash Flows for each of the six months ended June 30, 2014 and 2013 and (v) Notes to Interim Consolidated Financial Statements.

*Management contract, compensatory plan or arrangement.

(1) Incorporated by reference to the Company’s Current Report on Form 8-K filed on May 16, 2014.

(2) Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 2, 2014.

(3) Incorporated by reference to the Company’s Current Report on Form 8-K filed on April 24, 2014.

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EX-10

Exhibit 10.6.1

EX-10

Exhibit 10.6.2

AMENDMENT TO
EMPLOYMENT AGREEMENT

THIS AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made and entered into effective as of April 1, 2014 (the “Effective Date”), by and between Impax Laboratories, Inc., a Delaware corporation (the “Company”), and Jeffrey Nornhold (the “Executive”).

WHEREAS, the Company and the Executive are parties to that certain Employment Agreement between the Company and Executive, dated as of November 28, 2011 (the “Agreement”), which sets forth the terms of the Executive’s employment with the Company;

WHEREAS, the Company and the Executive desire to amend the Agreement, as set forth herein.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and conditions herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Executive hereby agree as follows, effective as of the Effective Date.

1.             The second sentence of Section 1.1 of the Agreement is hereby deleted and replaced in its entirety with the following:

“The Agreement will automatically be renewed for single one-year periods unless written notice of non-renewal (a “Non-Renewal Notice”) is provided by either party at least ninety (90) days prior to the end of the Initial Term or the successive one-year period then in effect or unless earlier terminated as provided in the Agreement.”

2.             The first sentence of Section 1.2.1 of the Agreement is hereby deleted and replaced in its entirety with the following:

“During the period commencing April 1, 2014 and ending on the last day of the Term (the “Promotion Term”), the Executive shall have the title of Senior Vice President, Technical Operations for the Company and shall have general responsibility for all manufacturing plant operations (including global internal operations and external contract manufacturing organizations and internal and external packaging and distributions facilities), facilities engineering, maintenance, safety, security, and technical support, for ensuring that the products manufactured by the Company are of the highest quality and ensuring the Company is in compliance at all times with good manufacturing practices, company requirements, and all applicable federal and state regulatory requirements, and such other authorities, duties and responsibilities as may from time to time be delegated to him by the Chief Executive Officer of the Company.”

3.             Section 2.1 of the Agreement is hereby deleted and replaced in its entirety with the following:

“During the Promotion Term, the Executive shall be entitled to receive an annualized base salary of $440,926.84 (paid biweekly at $16,958.72, less standard deductions and withholdings), subject to increase or decrease, as determined by the Board or its Compensation Committee from time to time in its discretion, payable in accordance with the payroll practices of the Company (the “Base Salary”).”

4.             The following is hereby added to the end of Section 2.3 of the Agreement:

“Without limiting the foregoing, in May 2014, the Executive shall receive a grant of stock options and/or restricted stock when equity award grants are made to other executives of the Company on similar terms and conditions and in similar amounts to similarly situated executives, as may be adjusted by the Compensation Committee, in its sole discretion, to reflect the equity grant received by the Executive in October 2013.”

5.             The word “or” at the end of Section 5.1.3(vii) of the Agreement is hereby deleted.

6.             The following sentence is hereby inserted as Section 5.1.3(viii) of the Agreement and the remaining subsection of Section 5.1.3 of the Agreement is hereby renumbered accordingly:

“(viii)      the delivery to Executive by the Company of a Non-Renewal Notice; or”

7.             Section 5.4.2(i) of the Agreement is hereby deleted and replaced in its entirety with the following:

“(i)     Subject to Section 9.9.2, an amount equal to the sum of (x) the balance of the Base Salary due under the Agreement or one and one half (1.5) times the Base Salary as then in effect (without taking into account any reduction therein that constitutes a basis for Good Reason), whichever is the greater, plus (y) an amount equal to one and one half (1.5) times the average of the Incentive Bonus the Executive received from the Company for all fiscal years completed during the Term, with the aggregate amount due paid in equal installments on the Company’s normal payroll dates for a period of twelve (12) months from the Date of Termination in accordance with the normal payroll practices of the Company, with each such payment deemed to be a separate payment for the purposes of Code Section 409A (as defined below).”

8.             Section 5.4.3(i) of the Agreement is hereby deleted and replaced in its entirety with the following:

“(i)     subject to Section 9.9.2, an amount equal to the sum of (x) the balance of the Base Salary due under the Agreement or two and one quarter (2.25) times the Base Salary as then in effect (without taking into account any reduction therein that constitutes a basis for Good Reason), whichever is the greater, plus (y) an amount equal to two and one quarter (2.25) times the average of the Incentive Bonus the Executive received from the Company for all fiscal years completed during the Term, with the aggregate amount due paid in equal installments on the Company’s normal payroll dates for a period of twelve (12) months from the Date of Termination in accordance with the normal payroll practices of the Company, with each such payment deemed to be a separate payment for the purposes of Code Section 409A (as defined below).”

9.             Counterparts.  This Amendment may be executed in one or more facsimile, electronic or original counterparts, each of which shall be deemed an original and both of which together shall constitute the same instrument.

10.           Ratification. All terms and provisions of the Agreement not amended hereby, either expressly or by necessary implication, shall remain in full force and effect. The Agreement, as hereby amended, and any attachments thereto, constitute the entire agreement between the parties with respect to their subject matter and supersede all prior agreements, arrangements, dealings or writings between the parties, and from and after the date of this Amendment, all references to the term “Agreement” in this Amendment or the original Agreement shall include the terms contained in this Amendment.

[Signature Page Follows]

IN WITNESS WHEREOF, this Amendment to Employment Agreement has been duly executed by or on behalf of the parties hereto as of the Effective Date. 

EXECUTIVE	IMPAX LABORATORIES, INC.
/s/ Jeffrey D. Nornhold	By:	/s/ Robert L. Burr
Name: Jeffrey D. Nornhold		Name: Robert L. Burr
		Title: Chairman of the Board of Directors

EX-10

Exhibit 10.6.3

Private & Confidential

April 1, 2014

Jeffrey D. Nornhold

357 Golden Grass Drive

Alamo, CA 95407

Dear Jeffrey: 

As an incentive to you to maintain your employment with Impax Laboratories, Inc. (the “Company”), and in consideration of your continued services to the Company, the Company wishes to offer to you an increase in your annual cash bonus opportunity, a one-time cash retention bonus opportunity and a one-time performance bonus opportunity, subject to the terms and conditions of this letter agreement (the “Letter Agreement”).

The Company treats information regarding compensation as highly confidential and we take great efforts on behalf of our employees to respect the privacy of their individualized compensation arrangements. We encourage you to do the same: please honor our efforts in this regard and respect your colleagues by not sharing the contents of this Letter Agreement with them.

1. Incentive Bonus. For the period on and after April 1, 2014 (the “Commencement Date”), your Incentive Bonus (as defined in that certain Employment Agreement between you and the Company, dated as of November 28, 2011, as amended) shall be targeted at 60% of your annual base salary paid after the Commencement Date and may be paid out at up to 90% of your 2014 annual base salary paid after the Commencement Date, in each case, depending on the achievement of certain business and individual objectives and criteria.

2. Retention Bonus.

(a) You will be eligible to receive a retention bonus in the amount of $569,530.50 (the “Retention Bonus”), which constitutes approximately one-hundred percent (100%) of your annual base salary ($367,439.03) plus one-hundred percent (100%) of your target bonus ($202,091.48, which constitutes 55% of your annual base salary), each as of March 14, 2014, subject to the terms and conditions of this Letter Agreement.

(b) Your eligibility for the Retention Bonus is contingent on you remaining an employee of the Company in good standing during the period (the “Service Period”) commencing on the date of this Letter Agreement and ending on the earlier of April 1, 2015 or the date your employment with the Company is terminated by the Company for other than Cause (as defined in that certain Employment Agreement between you and the Company, dated as of November 2011, as amended). If your employment with the Company terminates for any reason prior to the end of the Service Period, you will not be eligible for the Retention Bonus.

(c) Notwithstanding anything to the contrary in this Letter Agreement, the Retention Bonus will be prorated over the Service Period for any days that you are on an approved leave of absence.

3. Performance Bonus.

(a) You will also be eligible to receive a one-time bonus in the amount not to exceed $200,000 (the “Performance Bonus”, and together with the Retention Bonus, the “Special Bonuses”), subject to the terms and conditions of this Letter Agreement.

(b) Your entitlement to, and amount of, the Performance Bonus is contingent on the Compensation Committee’s’ determination , which among other matters, will consider (i) the Company’s receipt of Voluntary Action Indicated (VAI) status or better from the Food and Drug Administration allowing for the approval of generic products currently on hold due to the Food and Drug Administration warning letter relating to our Hayward site with minimal disruption of commercial production at the Company’s facilities in Hayward, California and Taiwan, as determined by the Company, (ii) Food and Drug Administration approval of the New Drug Application for RYTARY (unless non-approval is caused by reasons unrelated to manufacturing or other quality compliance, in which case this subclause (ii) shall be deemed satisfied) (the “Performance Goals”) on or prior to December 31, 2015 (such achievement, a “Qualifying Achievement”), and (iii) your continued employment with the Company as Senior Vice President, Global Quality Affairs, or higher through the date of the Qualifying Achievement. In the event that the Qualifying Achievement has not occurred on or prior to December 31, 2015 or your employment with the Company is terminated, or you are demoted to a level below Senior Vice President, for any reason prior to the Qualifying Achievement, you will not be eligible for a Performance Bonus.

4. Payment. The Company will make reasonable efforts to pay any Special Bonus earned or awarded pursuant to this Letter Agreement, less required withholding obligations and authorized deductions, within thirty (30) days following the date such Special Bonus becomes earned.

5. No Effect on Other Compensation or Benefits. The Special Bonuses will not be deemed part of base salary for any bonus calculations, not be subject to the Company’s deferred compensation plan and not be taken into account in determining the amount of any other Company provided benefit.

6. Acknowledgements. You acknowledge and agree that:

(a) your employment remains “at-will” and nothing herein shall be construed as a guarantee of continued employment for any specific period of time;

(b) in signing this Letter Agreement, you are not relying on any promises or representations, whether written or oral, not contained in this Letter Agreement, and have decided to sign based solely on the terms of this Letter Agreement;

(c) nothing in this Letter Agreement shall be considered a guarantee that you will receive a Special Bonus or that you will have any right to other incentives or bonus opportunities;

(d) you have not filed or authorized the filing of any complaints, charges or lawsuits against the Company or any affiliate of the Company with any governmental agency or court and have no intent to file any such filings or knowledge of any claims which could implicate such filings; and

(e) you have been paid all compensation, wages, bonuses, commissions, and/or benefits to which you may be entitled as of the payroll date immediately preceding the date of this Letter Agreement.

2 

7. Miscellaneous.

(a) Governing Law. This Letter Agreement shall be governed by and construed in accordance with the laws of the State of California without regard to conflict of law principles.

(b) Assignment and Transfer. Your rights and obligations under this Letter Agreement shall not be transferable by assignment or otherwise, and any purported assignment, transfer or delegation thereof shall be void. This Letter Agreement shall inure to the benefit of, and be binding upon and enforceable by, any purchaser of substantially all of the Company’s assets, any corporate successor to the Company or any assignee thereof.

(c) Entire Agreement. This Letter Agreement contains the entire agreement and understanding between you and the Company with respect to the Special Bonuses, and supersedes any prior or contemporaneous written or oral agreements, representations and warranties between you and the Company regarding any entitlement to any retention or other special bonus.

(d) Amendment and Waiver. This Letter Agreement may not be amended, modified, waived or discharged except by a writing signed by both you and the Company. No failure or neglect of either party hereto in any instance to exercise any right, power or privilege hereunder or under law shall constitute a waiver of any other right, power or privilege or of the same right, power or privilege in any other instance.

(e) Dispute Resolution. Any dispute arising under this Letter Agreement shall be resolved in accordance with the Arbitration of Disputes Agreement attached to this Letter Agreement.

(f) Counterparts. This Letter Agreement may be executed in multiple counterparts, each of which shall be considered to have the force and effect of an original.

We are pleased to offer you this opportunity to participate in the continued growth and success of the Company. If you agree to the terms and conditions of the Letter Agreement, please sign below and return the original, together with an original signed copy of the Arbitration of Disputes Agreement, to Mark A. Schlossberg by April 1, 2014; otherwise, this Letter Agreement will be deemed null and void.

		Sincerely,
		/s/ Robert L. Burr
		Robert L. Burr
		Impax Laboratories, Inc.
		Chairman of the Board of Directors
Acknowledged and agreed to:
(Signature)	/s/ Jeffrey D. Nornhold	April 1, 2014
	Jeffrey D. Nornhold	Date

3 

EX-31

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, G. Frederick Wilkinson, certify:

1.	I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014 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.

August 6, 2014	By:	/s/ G. Frederick Wilkinson
		G. Frederick Wilkinson
		President and Chief Executive Officer

EX-31

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Bryan M. Reasons, certify:

1.	I have reviewed this Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014 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.

August 6, 2014	By:	/s/ Bryan M. Reasons
		Bryan M. Reasons
		Chief Financial Officer and Senior Vice President, Finance

EX-32

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Impax Laboratories, Inc. (the “Company”) for the fiscal quarter ended June 30, 2014 (the “Report”), G. Frederick Wilkinson, President and Chief Executive Officer, hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), that:

(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.

August 6, 2014	By:	/s/ G. Frederick Wilkinson
		G. Frederick Wilkinson
		President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

EX-32

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Impax Laboratories, Inc. (the “Company”) for the fiscal quarter ended June 30, 2014 (the “Report”), Bryan M. Reasons, Chief Financial Officer, and Senior Vice President, Finance hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), that:

(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.

August 6, 2014	By:	/s/ Bryan M. Reasons
		Bryan M. Reasons
		Chief Financial Officer and Senior Vice President, Finance

The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code) and is not being filed as part of the Report or as a separate disclosure document.

XML

Supplemental Cash Flow Information (Details) - Supplemental Disclosure of Non-cash Investing and Financing Activities (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Supplemental Disclosure of Non-cash Investing and Financing Activities [Abstract]
Cash paid for interest	$ 16	$ 87
Cash paid for income taxes	$ 28,955	$ 8,333

XML

Note 9 - Accrued Expenses, Commitments and Contingencies (Details) - A Roll Forward of the Product Return Reserve (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Note 9 - Accrued Expenses, Commitments and Contingencies (Details) - A Roll Forward of the Product Return Reserve [Line Items]
Ending balance	$ 29,817	$ 28,089
Returns Reserve [Member]
Note 9 - Accrued Expenses, Commitments and Contingencies (Details) - A Roll Forward of the Product Return Reserve [Line Items]
Beginning balance	28,089	23,440
Provision related to sales recorded in the period	6,831	11,015
Credits issued during the period	(5,103)	(6,366)
Ending balance	$ 29,817	$ 28,089

XML

Note 7 - Property, Plant and Equipment (Details) - Property, Plant and Equipment, Net (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Property, Plant and Equipment, Net [Abstract]
Land	$ 5,773	$ 5,773
Buildings and improvements	152,397	139,657
Equipment	121,440	114,950
Office furniture and equipment	12,452	11,523
Construction-in-progress	11,060	15,910
Property, plant and equipment, gross	303,122	287,813
Less: Accumulated depreciation	(109,046)	(99,622)
Property, plant and equipment, net	$ 194,076	$ 188,191

XML

Note 10 - Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Income Tax Disclosure [Abstract]
Income Tax Expense (Benefit)	$ 19,354,000	$ 3,416,000	$ 21,559,000	$ 51,694,000
Effective Income Tax Rate Reconciliation, Percent			34.00%	32.00%

XML

Note 6 - Inventory (Details) (USD $)								6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Mar. 31, 2013 Finished and Unfinished Inventory Related to Discontinued Products [Member]	Mar. 31, 2013 Impact of Expected Delay of FDA Approval [Member]	Mar. 31, 2013 Additional Pre-launch Inventory of Product Manufactured for Third-Party [Member]	Jun. 30, 2014 Unapproved Inventory [Member]	Dec. 31, 2013 Unapproved Inventory [Member]	Jun. 30, 2014 Raw Materials [Member]	Jun. 30, 2014 Finished Goods [Member]
Note 6 - Inventory (Details) [Line Items]
Inventory Valuation Reserves	$ 28,026,000	$ 17,702,000	$ 6,700,000	$ 5,000,000	$ 6,400,000
Unapproved Product Inventory Net						$ 10,028,000	$ 6,462,000
Inventory Turnover Period Minimum								3 years
Inventory Turnover Period Maximum								5 years	2 years

XML

Note 9 - Accrued Expenses, Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2014

Accrued Liabilities Disclosure [Abstract]

Schedule of Accrued Liabilities [Table Text Block]

(in $000’s)	June 30, 2014		December 31, 2013
Payroll-related expenses	$	23,769	$	27,985
Product returns		29,817		28,089
Government rebates		19,882		23,351
Accrued shelf-stock		1,984		774
Legal and professional fees		4,760		3,162
Income taxes payable		17,562		21,186
Physician detailing sales force fees		1,119		1,512
Other		5,346		5,464
Total accrued expenses	$	104,239	$	111,523

Schedule of Product Warranty Liability [Table Text Block]

(in $000’s) Returns Reserve	June 30, 2014			December 31, 2013
Beginning balance	$	28,089		$	23,440
Provision related to sales recorded in the period		6,831			11,015
Credits issued during the period		(5,103	)		(6,366	)
Ending balance	$	29,817		$	28,089

XML

Note 12 - Alliance and Collaboration Agreements (Details) (USD $)	3 Months Ended			6 Months Ended		3 Months Ended				6 Months Ended																	3 Months Ended		12 Months Ended	1 Months Ended				6 Months Ended			1 Months Ended	12 Months Ended	1 Months Ended	25 Months Ended	6 Months Ended			1 Months Ended	6 Months Ended	1 Months Ended	6 Months Ended	12 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended			3 Months Ended	6 Months Ended		1 Months Ended	6 Months Ended		12 Months Ended	6 Months Ended						6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Mar. 31, 2014 Cost of Sales [Member]	Sep. 30, 2013 Cost of Sales [Member]	Mar. 31, 2014 Cost of Sales [Member] Tolmar Product Rights [Member]	Sep. 30, 2013 Cost of Sales [Member] Tolmar Product Rights [Member]	Jun. 30, 2014 IND-enabling Animal Studies for New Development Candidate [Member] Minimum [Member]	Jun. 30, 2014 IND-enabling Animal Studies for New Development Candidate [Member] Maximum [Member]	Jun. 30, 2014 Phase 1 Trials [Member] Minimum [Member]	Jun. 30, 2014 Phase 1 Trials [Member] Maximum [Member]	Jun. 30, 2014 Phase 2 Trials [Member] Minimum [Member]	Jun. 30, 2014 Phase 2 Trials [Member] Maximum [Member]	Jun. 30, 2014 Phase 3 Trials [Member] Minimum [Member]	Jun. 30, 2014 Phase 3 Trials [Member] Maximum [Member]	Jun. 30, 2014 Bioequivalence Studies [Member] Minimum [Member]	Jun. 30, 2014 Bioequivalence Studies [Member] Maximum [Member]	Jun. 30, 2014 Preparation And Submission Of Regulatory Filings [Member] Minimum [Member]	Jun. 30, 2014 Preparation And Submission Of Regulatory Filings [Member] Maximum [Member]	Jun. 30, 2014 Acceptance Of Regulatory Filings For Substantive Review [Member]	Jun. 30, 2014 Potential Marketing Approval One [Member] Minimum [Member]	Jun. 30, 2014 Potential Marketing Approval One [Member] Maximum [Member]	Jun. 30, 2014 Potential Marketing Approval Two [Member] Minimum [Member]	Jun. 30, 2014 Potential Marketing Approval Two [Member] Maximum [Member]	Jun. 30, 2014 Milestone Payments [Member] Tolmar Incorporated [Member]	Dec. 31, 2013 Milestone Payments [Member] Tolmar Incorporated [Member]	Dec. 31, 2012 Milestone Payments [Member] Tolmar Incorporated [Member]	Mar. 31, 2011 Milestone Payments [Member] Valeant [Member]	Dec. 31, 2009 Milestone Payments [Member] Valeant [Member]	Sep. 30, 2009 Milestone Payments [Member] Valeant [Member]	Mar. 31, 2009 Milestone Payments [Member] Valeant [Member]	Jun. 30, 2014 Milestone Payments [Member] Valeant [Member]	Jun. 30, 2014 Milestone Payments [Member] Glaxo Group Limited [Member]	Jun. 30, 2014 Milestone Payments [Member] Endo Pharmaceuticals Incorporation [Member]	Dec. 31, 2008 Up-front Payment Arrangement [Member] Valeant [Member]	Dec. 31, 2010 Up-front Payment Arrangement [Member] Glaxo Group Limited [Member]	Jun. 30, 2010 Up-front Payment Arrangement [Member] Endo Pharmaceuticals Incorporation [Member]	Mar. 31, 2011 Milestone Payment Arrangement [Member] Valeant [Member]	Jun. 30, 2014 Clinical Milestone Events [Member] Endo Pharmaceuticals Incorporation [Member]	Jun. 30, 2014 Regulatory Milestone Events [Member] Endo Pharmaceuticals Incorporation [Member]	Jun. 30, 2014 Commercialization Events [Member] Endo Pharmaceuticals Incorporation [Member]	Jun. 30, 2012 Products Approved [Member] Tolmar Incorporated [Member]	Jun. 30, 2014 Products Approved [Member] Tolmar Incorporated [Member]	Jun. 30, 2012 Product Pending Approval [Member] Tolmar Incorporated [Member]	Jun. 30, 2014 Product Pending Approval [Member] Tolmar Incorporated [Member]	Dec. 31, 2012 Products in Development [Member] Tolmar Incorporated [Member]	Jun. 30, 2014 Generic Products [Member] Valeant [Member]	Jun. 30, 2014 Generic Products [Member] Actavis Plc [Member]	Jun. 30, 2014 Branded Advanced Form of Solodyn Product [Member] Valeant [Member]	Jun. 30, 2014 Abbreviated New Drug Applications [Member] Actavis Plc [Member]	Jun. 30, 2014 Tolmar Product Rights [Member] Minimum [Member]	Jun. 30, 2014 Tolmar Product Rights [Member] Maximum [Member]	Jun. 30, 2014 Specified Threshold [Member]	Mar. 31, 2013 Shire Laboratories Incorporated [Member]	Jun. 30, 2014 Shire Laboratories Incorporated [Member]	Jun. 30, 2013 Shire Laboratories Incorporated [Member]	Jun. 30, 2012 Tolmar Incorporated [Member]	Jun. 30, 2014 Tolmar Incorporated [Member]	Jun. 30, 2013 Tolmar Incorporated [Member]	Dec. 31, 2012 Tolmar Incorporated [Member]	Jun. 30, 2014 Teva Pharmaceutical Industries Limited [Member]	Jun. 30, 2013 Teva Pharmaceutical Industries Limited [Member]	Jun. 30, 2014 Pfizer Incorporated [Member]	Jun. 30, 2014 Valeant [Member]	Jun. 30, 2014 Astra Zeneca [Member]	Jun. 30, 2013 Astra Zeneca [Member]	Jun. 30, 2014 Endo Pharmaceuticals Incorporation [Member]	Mar. 31, 2014 DURECT Corporation [Member]	Jun. 30, 2014 DURECT Corporation [Member]	Jun. 30, 2014 Actavis Plc [Member]
Note 12 - Alliance and Collaboration Agreements (Details) [Line Items]
Completion Period										12 months	18 months	1 year	2 years	1 year	3 years	2 years	4 years	3 months	1 year	6 months	12 months	2 months	1 year	3 years	1 year	3 years
Product Sales																																																							$ 100,000,000
Litigation Settlement, Amount																																																								48,000,000
Increase (Decrease) in Other Accrued Liabilities																																																									10,160,000	10,926,000		6,402,000	1,266,000
Number Of Products																																												10	10	1	1	2	4	1	1	1							11	11						5						2
Collaborative Arrangement Up Front Payment																																																														21,000,000								2,000,000
Collaborative Arrangement Required Payment Net																											1,000,000	12,000,000	1,000,000
Collaborative Arrangement Maximum Contingent Payments Amount																																		8,000,000	169,000,000	30,000,000					15,000,000	5,000,000	10,000,000																	24,000,000											61,000,000
Finite-Lived Intangible Asset, Useful Life																																																					5 years	12 years
Research and Development Expense	21,252,000	15,540,000		42,993,000	35,145,000																								1,000,000																			1,550,000
Impairment of Intangible Assets (Excluding Goodwill)				2,876,000		2,900,000	13,200,000	2,900,000	13,200,000
Maximum Loan Amount Pursuant to Loan and Security Agreement	15,000,000			15,000,000
Loans Receivable, Net	15,000,000			15,000,000
Service Agreement Term																																																															10 years		15 years
Collaborative Arrangement Maximum Profit Share Payments Amount																																																															3,000,000
Deferred Revenue, Revenue Recognized																																																															654,000	654,000
Collaborative Arrangement Contingent Payments Received And Potentially To Be Received																														3,000,000	2,000,000	5,000,000	5,000,000				40,000,000			15,000,000
Deferred Revenue, Additions																																						11,500,000	10,000,000
Accrued Royalties																																																																			5,888,000	25,598,000
Collaborative Arrangement Copromotion Service Fee Percentage																																																																					100.00%
Deferred Revenue Estimated Period Of Recognition																																																																					103 months
Deferred Revenue																																																																					4,804,000
Gain (Loss) Related to Litigation Settlement			$ 102,049,000

XML

Note 18 - Supplementary Financial Information (unaudited)

6 Months Ended

Jun. 30, 2014

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information [Text Block]

18. SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)

Selected financial information for the quarterly periods noted is as follows:

	2014 Quarters Ended:
(in $000’s except shares and per share amounts)	March 31		June 30
Revenue:
Global Product sales, gross	$	265,850	$	375,269
Less:
Chargebacks		95,714		110,518
Rebates		52,054		74,079
Product Returns		1,294		5,140
Other credits		10,671		21,571
Global Product sales, net		106,117		163,961
Rx Partner		2,435		9,204
Other Revenues		589		3,229
Global Division revenues, net		109,141		176,394
Impax Product sales, gross		20,643		24,375
Less:
Chargebacks		8,230		10,107
Rebates		1,070		938
Product Returns		181		216
Other credits		1,853		1,654
Impax Product sales, net		9,309		11,460
Other Revenues		268		267
Impax Division revenues, net		9,577		11,727
Total revenues		118,718		188,121
Gross profit		57,622		109,772
Net income	$	6,425	$	35,071
Net income per share (basic)	$	0.09	$	0.52
Net income per share (diluted)	$	0.09	$	0.50
Weighted average: common shares outstanding:
Basic		67,702,296		68,095,159
Diluted		69,938,872		70,313,491

Quarterly computations of net income per share amounts are made independently for each quarterly reporting period, and the sum of the per share amounts for the quarterly reporting periods may not equal the per share amounts for the year-to-date reporting period.

Selected financial information for the quarterly periods noted is as follows: 

	2013 Quarters Ended:
(in $000’s except shares and per share amounts)	March 31		June 30
Revenue:
Global Product sales, gross	$	197,956	$	217,721
Less:
Chargebacks		64,345		82,013
Rebates		30,572		35,649
Product Returns		94		1,989
Other credits		5,160		8,312
Global Product sales, net		97,785		89,758
Rx Partner		3,114		3,668
Other Revenues		737		539
Global Division revenues, net		101,636		93,965
Impax Product sales, gross		69,292		48,300
Less:
Chargebacks		7,790		10,095
Rebates		6,236		(1,735	)
Product Returns		1,490		2,197
Other credits		7,255		2,409
Impax Product sales, net		46,521		35,334
Other Revenues		332		332
Impax Division revenues, net		46,853		35,666
Total revenues		148,489		129,631
Gross profit		57,871		58,887
Net income	$	105,442	$	5,619
Net income per share (basic)	$	1.59	$	0.08
Net income per share (diluted)	$	1.55	$	0.08
Weighted average: common shares outstanding:
Basic		66,487,470		66,748,864
Diluted		68,178,355		68,287,948

Quarterly computations of net income per share amounts are made independently for each quarterly reporting period, and the sum of the per share amounts for the quarterly reporting periods may not equal the per share amounts for the year-to-date reporting period.  

XML

Note 8 - Goodwill and Intangible Assets (Details) - Intangible Assets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Amortized intangible assets:
Initial cost	$ 76,483	$ 75,483
Accumulated amortization	(36,931)	(31,907)
Impairment	(16,782)	(13,906)
Carrying value	22,770	29,670
Other Product Rights [Member]
Amortized intangible assets:
Initial cost	2,250	2,250
Impairment	(750)	(750)
Carrying value	1,500	1,500
Zomig Product Rights [Member]
Amortized intangible assets:
Initial cost	41,783	41,783
Accumulated amortization	(30,101)	(28,641)
Carrying value	11,682	13,142
Tolmar Product Rights [Member]
Amortized intangible assets:
Initial cost	31,450	31,450
Accumulated amortization	(6,533)	(3,266)
Impairment	(16,032)	(13,156)
Carrying value	8,885	15,028
Perrigo Product Rights [Member]
Amortized intangible assets:
Initial cost	1,000
Accumulated amortization	(297)
Carrying value	$ 703

XML

Note 4 - Investments (Details) - A Summary of Short-Term Investments (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 253,888	$ 228,521
Gross Unrecognized Gains	43	39
Gross Unrecognized Losses	(27)	(21)
Fair Value	253,904	228,539
Commercial Paper [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	121,440	91,480
Gross Unrecognized Gains	35	26
Gross Unrecognized Losses	(1)
Fair Value	121,474	91,506
Corporate Bonds [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	132,448	137,041
Gross Unrecognized Gains	8	13
Gross Unrecognized Losses	(26)	(21)
Fair Value	$ 132,430	$ 137,033

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Note 18 - Supplementary Financial Information (unaudited) (Tables)

6 Months Ended

Jun. 30, 2014

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information [Table Text Block]

	2014 Quarters Ended:
(in $000’s except shares and per share amounts)	March 31		June 30
Revenue:
Global Product sales, gross	$	265,850	$	375,269
Less:
Chargebacks		95,714		110,518
Rebates		52,054		74,079
Product Returns		1,294		5,140
Other credits		10,671		21,571
Global Product sales, net		106,117		163,961
Rx Partner		2,435		9,204
Other Revenues		589		3,229
Global Division revenues, net		109,141		176,394
Impax Product sales, gross		20,643		24,375
Less:
Chargebacks		8,230		10,107
Rebates		1,070		938
Product Returns		181		216
Other credits		1,853		1,654
Impax Product sales, net		9,309		11,460
Other Revenues		268		267
Impax Division revenues, net		9,577		11,727
Total revenues		118,718		188,121
Gross profit		57,622		109,772
Net income	$	6,425	$	35,071
Net income per share (basic)	$	0.09	$	0.52
Net income per share (diluted)	$	0.09	$	0.50
Weighted average: common shares outstanding:
Basic		67,702,296		68,095,159
Diluted		69,938,872		70,313,491

	2013 Quarters Ended:
(in $000’s except shares and per share amounts)	March 31		June 30
Revenue:
Global Product sales, gross	$	197,956	$	217,721
Less:
Chargebacks		64,345		82,013
Rebates		30,572		35,649
Product Returns		94		1,989
Other credits		5,160		8,312
Global Product sales, net		97,785		89,758
Rx Partner		3,114		3,668
Other Revenues		737		539
Global Division revenues, net		101,636		93,965
Impax Product sales, gross		69,292		48,300
Less:
Chargebacks		7,790		10,095
Rebates		6,236		(1,735	)
Product Returns		1,490		2,197
Other credits		7,255		2,409
Impax Product sales, net		46,521		35,334
Other Revenues		332		332
Impax Division revenues, net		46,853		35,666
Total revenues		148,489		129,631
Gross profit		57,871		58,887
Net income	$	105,442	$	5,619
Net income per share (basic)	$	1.59	$	0.08
Net income per share (diluted)	$	1.55	$	0.08
Weighted average: common shares outstanding:
Basic		66,487,470		66,748,864
Diluted		68,178,355		68,287,948

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Note 9 - Accrued Expenses, Commitments and Contingencies (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Note 9 - Accrued Expenses, Commitments and Contingencies (Details) [Line Items]
Commitments and Contingencies
Purchase Order Commitments	46,198,000
Purchase Commitment Period	1 year
Taiwan Facility Construction [Member]
Note 9 - Accrued Expenses, Commitments and Contingencies (Details) [Line Items]
Commitments and Contingencies	$ 3,685,000

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Note 17 - Legal and Regulatory Matters (Details)	1 Months Ended			6 Months Ended	2 Months Ended	4 Months Ended	1 Months Ended
	Apr. 30, 2014	Aug. 31, 2011	Sep. 30, 2009	Jun. 30, 2014	Jul. 31, 2014 Subsequent Event [Member] Opana ER [Member]	Oct. 31, 2013 Solodyn [Member]	Apr. 08, 2013 Securities Class Actions [Member]
Note 17 - Legal and Regulatory Matters (Details) [Line Items]
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
Loss Contingency, Patents Found Not Infringed, Number		4
Loss Contingency, Patents Allegedly Infringed, Number	3		5
Loss Contingency, Patents Found Infringed, Number	2
Number of Class Action Complaints					4	13	2

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Note 13 - Share-Based Compensation (Details) - A Summary of Non-Vested Restricted Stock Awards (USD $)	6 Months Ended
	Jun. 30, 2014
A Summary of Non-Vested Restricted Stock Awards [Abstract]
Non-vested	2,123,835
Non-vested	$ 21.13
Granted	718,615
Granted	$ 22.80
Vested	(183,283)
Vested	$ 21.42
Forfeited	(161,960)
Forfeited	$ 20.38
Non-vested	2,497,207
Non-vested	$ 21.63

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Note 6 - Inventory (Details) - Inventory, Net of Carrying Value Reserves (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Inventory, Net of Carrying Value Reserves [Abstract]
Raw materials	$ 32,447	$ 27,981
Work in process	3,297	1,434
Finished goods	56,347	47,416
Total inventory	92,091	76,831
Less: Non-current inventory	7,295	6,724
Total inventory-current	$ 84,796	$ 70,107

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Note 2 - Revenue Recognition

6 Months Ended

Jun. 30, 2014

Revenue Recognition [Abstract]

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:

● 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.

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:

Global Product sales, net and Impax Product sales, net 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 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 and Other Government Pricing Programs

As required by law, the Company provides a rebate on drugs dispensed under the Medicaid program, Medicare Part D, TRICARE, and other United States government pricing programs. The Company determines its estimated government 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 various programs which may impact the Company’s estimate of government 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 government 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 contracts 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. In exchange for these deliverables, the Company receives payments from its agreement partners for product shipments and research and development services, and may also receive other payments including royalty, profit sharing, upfront, and 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 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 agreement partner reports the amounts to the Company.

The Company applies the updated 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. The Company recognizes revenue received as a result of the manufacture and delivery of products under the Teva Agreement 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 agreements with Pfizer Inc. (formerly Wyeth) and L. Perrigo Company with respect to the supply of over-the-counter pharmaceutical products. The OTC Partner sales channel is no longer a core area of the business, and the over-the-counter pharmaceutical products the Company sells through this sales channel are older products which are only sold to Pfizer and Perrigo, and which are currently sold at a loss, on a fully absorbed basis. The Company is currently only required to manufacture the over-the-counter pharmaceutical products under its agreements with Pfizer and Perrigo. The Company recognizes profit share revenue in the period earned.

Research Partner:

The Research Partner contracts include 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. The Company recognizes revenue received from the provision of research and development services, including the upfront payment and the milestone payments received before January 1, 2011 on a straight-line basis over the expected period of performance of the research and development services. The Company recognizes revenue received from the achievement of contingent research and development milestones after January 1, 2011 in the period such payment is earned. Royalty fee income, if any, will be recognized by the Company in the period when the revenue is earned.

Shipping and Handling Fees and Costs

Shipping and handling fees related to sales transactions are recorded as selling expense.  

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Note 14 - Stockholders' Equity (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2013
Stockholders' Equity Note [Abstract]
Preferred Stock, Shares Authorized	2,000,000	2,000,000
Preferred Stock, Par or Stated Value Per Share (in Dollars per share)	$ 0.01	$ 0.01
Preferred Stock, Shares Issued	0		0
Common Stock, Shares Authorized	90,000,000	90,000,000
Common Stock, Par or Stated Value Per Share (in Dollars per share)	$ 0.01	$ 0.01

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Note 5 - Accounts Receivable (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Receivables [Abstract]
Allowance for Doubtful Accounts Receivable, Current	$ 528,000	$ 539,000

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Note 5 - Accounts Receivable (Tables)

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

(in $000’s)	June 30, 2014			December 31, 2013
Gross accounts receivable	$	289,246		$	246,319
Less: Rebate reserve		(83,420	)		(88,449	)
Less: Chargeback reserve		(31,680	)		(37,066	)
Less: Other deductions		(10,250	)		(7,811	)
Accounts receivable, net	$	163,896		$	112,993

Allowance for Credit Losses on Financing Receivables [Table Text Block]

(in $000’s) Rebate reserve	June 30, 2014			December 31, 2013
Beginning balance	$	88,449		$	46,011
Provision recorded during the period		128,141			193,288
Credits issued during the period		(133,170	)		(150,850	)
Ending balance	$	83,420		$	88,449

(in $000’s) Chargeback reserve	June 30, 2014			December 31, 2013
Beginning balance	$	37,066		$	18,410
Provision recorded during the period		224,569			389,707
Credits issued during the period		(229,955	)		(371,051	)
Ending balance	$	31,680		$	37,066

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Note 4 - Investments (Tables)

6 Months Ended

Jun. 30, 2014

Investments Schedule [Abstract]

Held-to-maturity Securities [Table Text Block]

(in $000’s) June 30, 2014	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
Commercial paper	$	121,440	$	35	$	(1	)	$	121,474
Corporate bonds		132,448		8		(26	)		132,430
Total short-term investments	$	253,888	$	43	$	(27	)	$	253,904

(in $000’s) December 31, 2013	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
Commercial paper	$	91,480	$	26	$	--		$	91,506
Corporate bonds		137,041		13		(21	)		137,033
Total short-term investments	$	228,521	$	39	$	(21	)	$	228,539

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Note 11 - Revolving Line of Credit (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Note 11 - Revolving Line of Credit (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 50,000,000
Equity Interest Pledged As Collateral	65.00%
Long-term Line of Credit	0		0
Minimum Unrestricted Cash as Defined in Credit Agreement	100,000,000
Total Net Leverage Ratio	3.75
Senior Secured Leverage Ratio	2.50
Minimum Consolidated EBITDA	50,000,000
Minimum Liquidity	100,000,000
Debt Instrument, Unused Borrowing Capacity, Fee	62,000	61,000
Letter of Credit [Member]
Note 11 - Revolving Line of Credit (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 10,000,000
Alternate Base Rate [Member] | Minimum [Member]
Note 11 - Revolving Line of Credit (Details) [Line Items]
Debt Instrument, Basis Spread on Variable Rate	0.50%
Alternate Base Rate [Member] | Maximum [Member]
Note 11 - Revolving Line of Credit (Details) [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.50%
London Interbank Offered Rate (LIBOR) [Member] | Minimum [Member]
Note 11 - Revolving Line of Credit (Details) [Line Items]
Debt Instrument, Basis Spread on Variable Rate	1.50%
London Interbank Offered Rate (LIBOR) [Member] | Maximum [Member]
Note 11 - Revolving Line of Credit (Details) [Line Items]
Debt Instrument, Basis Spread on Variable Rate	2.50%
Minimum [Member]
Note 11 - Revolving Line of Credit (Details) [Line Items]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.25%
Maximum [Member]
Note 11 - Revolving Line of Credit (Details) [Line Items]
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.45%

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Note 5 - Accounts Receivable (Details) - The Composition of Accounts Receivable, Net (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
The Composition of Accounts Receivable, Net [Abstract]
Gross accounts receivable	$ 289,246	$ 246,319
Less: Rebate reserve	(83,420)	(88,449)
Less: Chargeback reserve	(31,680)	(37,066)
Less: Other deductions	(10,250)	(7,811)
Accounts receivable, net	$ 163,896	$ 112,993

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Note 6 - Inventory (Tables)

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

(in $000’s)	June 30, 2014		December 31, 2013
Raw materials	$	32,447	$	27,981
Work in process		3,297		1,434
Finished goods		56,347		47,416
Total inventory		92,091		76,831
Less: Non-current inventory		7,295		6,724
Total inventory-current	$	84,796	$	70,107

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Note 7 - Property, Plant and Equipment (Tables)

6 Months Ended

Jun. 30, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

(in $000’s)	June 30, 2014			December 31, 2013
Land	$	5,773		$	5,773
Buildings and improvements		152,397			139,657
Equipment		121,440			114,950
Office furniture and equipment		12,452			11,523
Construction-in-progress		11,060			15,910
Property, plant and equipment, gross	$	303,122		$	287,813
Less: Accumulated depreciation		(109,046	)		(99,622	)
Property, plant and equipment, net	$	194,076		$	188,191

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Note 1 - The Company & Basis of Presentation

6 Months Ended

Jun. 30, 2014

Disclosure Text Block [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

1. THE COMPANY & BASIS OF PRESENTATION

Impax Laboratories, Inc. (“Impax” or “Company”) is a technology-based, specialty pharmaceutical company. The Company has two reportable segments, referred to as the “Global Pharmaceuticals Division” (“Global Division”) and the “Impax Pharmaceuticals Division” (“Impax Division”).

The Global Division develops, manufactures, sells, and distributes generic pharmaceutical products primarily through four sales channels: the “Global products” sales channel, for generic pharmaceutical prescription products the Company sells directly to wholesalers, large retail drug chains, and others; the “Private Label” sales channel, for generic pharmaceutical over-the-counter (“OTC”) and prescription products the Company sells to unrelated third-party customers who in turn sell the product to third parties under their own label; the “Rx Partner” sales channel, for generic prescription products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance agreements; and the “OTC Partner” sales channel, for generic pharmaceutical OTC products sold through unrelated third-party pharmaceutical entities under their own labels pursuant to alliance and supply agreements. Revenues from the “Global Products” sales channel and the “Private Label” sales channel are reported under the caption “Global Product sales, net” in “Note 18 – Supplementary Financial Information.” The Company also generates revenue from research and development services provided under a joint development agreement with an unrelated third-party pharmaceutical company, and reports such revenue under the caption “Other Revenues” in “Note 18 – Supplementary Financial Information.” The Company provides these services through the research and development group in the Global Division. Revenues from the “OTC Partner” sales channel are also reported under the caption “Other Revenues” in “Note 18 – Supplementary Financial Information.”

The Impax Division is engaged in the development of proprietary brand pharmaceutical products that the Company believes represent improvements to already-approved pharmaceutical products addressing central nervous system (“CNS”) disorders. The Impax Division currently has one internally developed late stage branded pharmaceutical product candidate, RYTARY™ (IPX066), an extended release capsule formulation of carbidopa-levodopa for the symptomatic treatment of Parkinson’s disease, for which the New Drug Application (“NDA”) was accepted for filing by the U.S. Food and Drug Administration (“FDA”) in February 2012 and for which the Company received a Complete Response Letter from the FDA in January 2013. In April 2014, after discussions with the FDA, the Company resubmitted an NDA for RYTARY™. The NDA was accepted for filing by the FDA in April 2014 and the FDA informed the Company that the Prescription Drug User Fee Act (“PDUFA”) date is October 9, 2014. The Company has also initiated the preparation of required documents for a European Market Authorization Application filing for RYTARY™, currently targeted for filing during the second half of 2014. In addition to RYTARY™, the Impax Division has a number of other product candidates that are in varying stages of development. The Impax Division is also engaged in the sale and distribution of Zomig^® (zolmitriptan) products, indicated for the treatment of migraine headaches, under the terms of a Distribution, License, Development and Supply Agreement (“AZ Agreement”) with AstraZeneca UK Limited (“AstraZeneca”) in the United States and in certain United States territories. Revenues from Impax-labeled branded Zomig^® products are reported under the caption “Impax Product sales, net” in “Note 18 – Supplementary Financial Information.” Finally, the Company generates revenue in the Impax Division from research and development services provided under a development and license agreement with another unrelated third-party pharmaceutical company, and reports such revenue under the caption “Other Revenues” in “Note 18 – Supplementary Financial Information.”

In California, the Company utilizes a combination of owned and leased facilities mainly located in Hayward. The Company’s primary properties in California consist of a leased office building used as the Company’s corporate headquarters, in addition to five properties it owns, including a research and development center facility and a manufacturing facility. Additionally, the Company leases three facilities in Hayward, utilized for additional research and development, administrative services, equipment storage and quality assurance support. In Pennsylvania, the Company owns a packaging, warehousing, and distribution center located in Philadelphia and leases a facility in New Britain used for sales and marketing, finance, and administrative personnel, as well as providing additional warehouse space. Outside the United States, in Taiwan, Republic of China (“R.O.C.”), the Company owns a manufacturing facility.

The accompanying unaudited interim consolidated financial statements of the Company, have been prepared based upon United States Securities and Exchange Commission (“SEC”) rules permitting reduced disclosure for interim periods, and include all adjustments necessary for a fair presentation of statements of operations, statements of comprehensive income, statements of cash flows, and financial condition for the interim periods shown, including normal recurring accruals and other items, noted below. While certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted pursuant to SEC rules and regulations, the Company believes the disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements of the Company include the accounts of the operating parent company, Impax Laboratories, Inc., its wholly owned subsidiaries, including Impax Laboratories (Taiwan) Inc., Impax Laboratories USA, LLC, ThoRx Laboratories, Inc., Impax Laboratories (Netherlands) BV and Impax Laboratories (Netherlands) CV, and an equity investment in Prohealth Biotech, Inc. (“Prohealth”), in which the Company held a 57.54% majority ownership interest at June 30, 2014. All significant intercompany accounts and transactions have been eliminated.

The unaudited results of operations and cash flows for the interim period are not necessarily indicative of the expected results of the Company’s operations for any other interim period or for the full year ending December 31, 2014. The unaudited interim consolidated financial statements and footnotes should be read in conjunction with the consolidated financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 as filed with the SEC, wherein a more complete discussion of significant accounting policies and certain other information can be found.

The preparation of financial statements in conformity with GAAP and the rules and regulations of the SEC requires the use of estimates and assumptions, based on complex judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant judgments are employed in estimates used in determining values of tangible and intangible assets, legal contingencies, tax assets and tax liabilities, fair value of share-based compensation related to equity incentive awards issued to employees and directors, and estimates used in applying the Company’s revenue recognition policy including those related to accrued chargebacks, rebates, product returns, Medicare, Medicaid, and other government rebate programs, shelf-stock adjustments, and the timing and amount of deferred and recognized revenue and deferred and amortized product manufacturing costs related to alliance and collaboration agreements. Actual results may differ from estimated results. Certain prior year amounts have been reclassified to conform to the current year presentation.

In the normal course of business, the Company is subject to loss contingencies, such as legal proceedings and claims arising out of its business, covering a wide range of matters, including, among others, patent litigation, and product and clinical trial liability. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 450, "Contingencies," the Company records accrued loss contingencies when it is probable a liability has been incurred and the amount of loss can be reasonably estimated. The Company, in accordance with FASB ASC Topic 450, does not recognize gain contingencies until realized.

Management transition

During the three month period ended March 31, 2014, the Company announced a management change. The Company’s then Senior Vice President, Global Operations announced plans to retire and a Senior Vice President, Technical Operations was appointed. The Company’s then Senior Vice President, Global Operations subsequently retired from the Company in July 2014. In conjunction with the transition, the Company recorded $0.9 million in separation charges and accelerated share-based compensation expense in the six month period ended June 30, 2014.

CEO transition

On June 25, 2013, the Company announced that Dr. Larry Hsu planned to retire as President and Chief Executive Officer of Impax and on April 21, 2014, Dr. Hsu retired from those positions at Impax. Dr. Hsu currently remains as a member of the Board of Directors. In connection with his retirement, Dr. Hsu entered into a Separation Agreement with the Company dated June 24, 2013 (the “Separation Agreement”). Pursuant to the Separation Agreement, the Company provided Dr. Hsu with certain termination benefits and payments. The Company recorded $5.0 million in costs associated with Dr. Hsu’s retirement in the three month period ended June 30, 2013, comprised of $2.7 million of separation pay and benefits and $2.3 million of accelerated expense related to Dr. Hsu’s outstanding stock options and restricted stock.

Workforce reduction

On June 4, 2013, the Company committed to a reduction in the Company’s workforce, eliminating approximately 110 positions, with the majority of these positions at the Company’s Hayward, California manufacturing facility. The reduction in workforce is part of the Company’s efforts to streamline its operations in response to the need to reduce expenses and adapt to changing market conditions. The Company recorded an accrual for severance and related termination costs of $3.0 million in the three month period ended June 30, 2013 as a result of this workforce reduction. As of December 31, 2013, all accrued severance and related termination costs had been paid.

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Note 8 - Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

(in $000’s) June 30, 2014	Initial Cost		Accumulated Amortization			Impairment			Carrying Value
Amortized intangible assets:
Zomig® product rights	$	41,783	$	(30,101	)	$	---		$	11,682
Tolmar product rights		31,450		(6,533	)		(16,032	)		8,885
Perrigo product rights		1,000		(297	)		---			703
Other product rights		2,250		---			(750	)		1,500
Total intangible assets	$	76,483	$	(36,931	)	$	(16,782	)	$	22,770

(in $000’s) December 31, 2013	Initial Cost		Accumulated Amortization			Impairment			Carrying Value
Amortized intangible assets:
Zomig® product rights	$	41,783	$	(28,641	)	$	---		$	13,142
Tolmar product rights		31,450		(3,266	)		(13,156	)		15,028
Other product rights		2,250		---			(750	)		1,500
Total intangible assets	$	75,483	$	(31,907	)	$	(13,906	)	$	29,670

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

(in $000s)	Amortization Expense
2014	$	4,594
2015		4,898
2016		3,923
2017		3,738
2018		2,121
Thereafter		1,996
Totals	$	21,270

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Note 1 - The Company & Basis of Presentation (Details) (USD $) In Millions, unless otherwise specified	0 Months Ended	3 Months Ended	6 Months Ended
	Jun. 04, 2013	Jun. 30, 2013	Jun. 30, 2014
Note 1 - The Company & Basis of Presentation (Details) [Line Items]
Number of Reportable Segments			2
Number Of Channels			4
Number of Internally Developed Late Stage Branded Pharmaceutical Product Candidate			1
Number Of Properties			5
Number Of Leased Properties			3
Equity Method Investment, Ownership Percentage			57.54%
Restructuring and Related Cost, Number of Positions Eliminated	110
Restructuring and Related Cost, Incurred Cost (in Dollars)		$ 3.0
Senior Vice President [Member] | Severance Charges and Accelerated Equity Expense [Member]
Note 1 - The Company & Basis of Presentation (Details) [Line Items]
Employee-related Liabilities (in Dollars)			0.9
President and CEO [Member] | Separation Pay and Benefits [Member]
Note 1 - The Company & Basis of Presentation (Details) [Line Items]
Employee-related Liabilities (in Dollars)		2.7
President and CEO [Member] | Accelerated Expense Outstanding Options and Restricted Stock [Member]
Note 1 - The Company & Basis of Presentation (Details) [Line Items]
Employee-related Liabilities (in Dollars)		2.3
President and CEO [Member]
Note 1 - The Company & Basis of Presentation (Details) [Line Items]
Employee-related Liabilities (in Dollars)		$ 5.0

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Note 9 - Accrued Expenses, Commitments and Contingencies (Details) - The Company’s Accrued Expenses (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
The Company’s Accrued Expenses [Abstract]
Payroll-related expenses	$ 23,769	$ 27,985
Product returns	29,817	28,089
Government rebates	19,882	23,351
Accrued shelf-stock	1,984	774
Legal and professional fees	4,760	3,162
Income taxes payable	17,562	21,186
Physician detailing sales force fees	1,119	1,512
Other	5,346	5,464
Total accrued expenses	$ 104,239	$ 111,523

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Consolidated Balance Sheets (Current Period Unaudited) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 159,139,000	$ 184,612,000
Short-term investments	253,888,000	228,521,000
Accounts receivable, net	163,896,000	112,993,000
Inventory, net	84,796,000	70,107,000
Deferred income taxes	50,844,000	50,788,000
Prepaid expenses and other current assets	6,985,000	12,721,000
Total current assets	719,548,000	659,742,000
Property, plant and equipment, net	194,076,000	188,191,000
Other assets	56,321,000	57,820,000
Deferred income taxes	38,272,000	33,926,000
Intangible assets, net	22,770,000	29,670,000
Goodwill	27,574,000	27,574,000
Total assets	1,058,561,000	996,923,000
Current liabilities:
Accounts payable	36,614,000	26,824,000
Accrued expenses	104,239,000	111,523,000
Accrued profit sharing and royalty expenses	13,079,000	11,560,000
Deferred revenue	2,417,000	3,983,000
Total current liabilities	156,349,000	153,890,000
Deferred revenue	3,733,000	4,267,000
Other liabilities	29,738,000	28,563,000
Total liabilities	189,820,000	186,720,000
Commitments and contingencies (Notes 9 and 17)
Stockholders’ equity:
Preferred stock, $0.01 par value, 2,000,000 shares authorized, 0 shares outstanding at June 30, 2014 and December 31, 2013
Common stock, $0.01 par value, 90,000,000 shares authorized and 70,955,140 and 69,927,609 shares issued at June 30, 2014 and December 31, 2013, respectively	709,000	699,000
Additional paid-in capital	353,695,000	336,648,000
Treasury stock - 243,729 shares	(2,157,000)	(2,157,000)
Accumulated other comprehensive income	1,125,000	1,140,000
Retained earnings	515,369,000	473,873,000
Total stockholders’ equity	868,741,000	810,203,000
Total liabilities and stockholders’ equity	$ 1,058,561,000	$ 996,923,000

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Note 5 - Accounts Receivable (Details) - A Roll Forward of the Rebate and Chargeback Reserves Activity (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Financing Receivable, Allowance for Credit Losses [Line Items]
Ending balance	$ 31,680	$ 37,066
Ending balance	83,420	88,449
Rebate Reserve [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	88,449	46,011
Provision recorded during the period	128,141	193,288
Credits issued during the period	(133,170)	(150,850)
Ending balance	83,420	88,449
Chargeback Reserve [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Provision recorded during the period	224,569	389,707
Credits issued during the period	(229,955)	(371,051)
Ending balance	31,680	37,066
Beginning balance	$ 37,066	$ 18,410

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net income	$ 41,496	$ 111,061
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	16,303	24,179
Charge for licensing agreement	2,000
Intangible asset impairment charge	2,876
Provision for inventory reserves	10,320	22,536
Accretion of interest income on short-term investments	(421)	(335)
Deferred income taxes – net and uncertain tax positions	(4,786)	(6,873)
Tax impact related to the exercise of employee stock options and restricted stock	(1,507)	(446)
Recognition of deferred revenue	(2,100)	(2,226)
Accrued profit sharing and royalty expense	23,582	38,011
Payments of profit sharing and royalty expense	(22,063)	(27,392)
Share-based compensation expense	9,520	10,503
Changes in certain assets and liabilities:
Accounts receivable	(50,903)	(11,231)
Inventory	(25,400)	(19,590)
Prepaid expenses and other assets	5,671	7,563
Accounts payable and accrued expenses	6,273	21,788
Other liabilities	1,559	1,596
Net cash provided by operating activities	12,420	169,144
Cash flows from investing activities:
Purchase of short-term investments	(235,388)	(220,284)
Maturities of short-term investments	210,442	147,948
Purchases of property, plant and equipment	(18,271)	(20,075)
Payments for licensing agreements	(3,000)
Net cash used in investing activities	(46,217)	(92,411)
Cash flows from financing activities:
Tax impact related to the exercise of employee stock options and restricted stock	1,507	446
Proceeds from exercise of stock options and ESPP	7,660	4,351
Net cash provided by financing activities	9,167	4,797
Effect of exchange rate changes on cash and cash equivalents	(843)	(709)
Net (decrease) increase in cash and cash equivalents	(25,473)	80,821
Cash and cash equivalents, beginning of period	184,612	142,162
Cash and cash equivalents, end of period	$ 159,139	$ 222,983

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Note 13 - Share-Based Compensation (Details) - Share-Based Compensation Expense Recognized by the Company (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-Based Compensation	$ 5,134	$ 6,145	$ 9,520	$ 10,503
Manufacturing Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-Based Compensation	597	208	1,492	880
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-Based Compensation	1,379	1,352	2,781	2,728
Selling, General and Administrative Expenses [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Share-Based Compensation	$ 3,158	$ 4,585	$ 5,247	$ 6,895

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Note 15 - Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000’s except share and per share amounts)	2014		2013		2014		2013
Numerator:
Net income	$	35,071	$	5,619	$	41,496	$	111,061
Denominator:
Weighted average common shares outstanding		68,095,159		66,748,864		67,899,894		66,618,889
Effect of dilutive stock options and restricted stock awards		2,218,332		1,539,084		2,295,435		1,763,115
Diluted weighted average common shares outstanding		70,313,491		68,287,948		70,195,329		68,382,004
Basic net income per share	$	0.52	$	0.08	$	0.61	$	1.67
Diluted net income per share	$	0.50	$	0.08	$	0.59	$	1.62

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Note 16 - Segment Information (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Note 16 - Segment Information (Details) [Line Items]
Number of Reportable Segments	2
Number of Internally Developed Late Stage Branded Pharmaceutical Product Candidate	1
Assets (in Dollars)	$ 1,058,561,000	$ 996,923,000
Taiwan Facility Construction [Member]
Note 16 - Segment Information (Details) [Line Items]
Assets (in Dollars)	$ 142,067,000

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Note 15 - Earnings Per Share

6 Months Ended

Jun. 30, 2014

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

15. EARNINGS PER SHARE

The Company's earnings per share (EPS) includes basic net income per share, computed by dividing net income (as presented on the consolidated statement of operations), by the weighted average number of shares of common stock outstanding for the period, along with diluted net income per share, computed by dividing net income by the weighted average number of shares of common stock adjusted for the dilutive effect of common stock equivalents outstanding during the period. A reconciliation of basic and diluted net income per share of common stock for the three and six month periods ended June 30, 2014 and 2013 was as follows:  

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000’s except share and per share amounts)	2014		2013		2014		2013
Numerator:
Net income	$	35,071	$	5,619	$	41,496	$	111,061
Denominator:
Weighted average common shares outstanding		68,095,159		66,748,864		67,899,894		66,618,889
Effect of dilutive stock options and restricted stock awards		2,218,332		1,539,084		2,295,435		1,763,115
Diluted weighted average common shares outstanding		70,313,491		68,287,948		70,195,329		68,382,004
Basic net income per share	$	0.52	$	0.08	$	0.61	$	1.67
Diluted net income per share	$	0.50	$	0.08	$	0.59	$	1.62

For the three month periods ended June 30, 2014 and 2013, the Company excluded 909,100 and 2,330,114, respectively, and for the six month periods ended June 30, 2014 and 2013, the Company excluded 921,100 and 1,677,129, respectively, of shares issuable upon the exercise of stock options and unvested restricted stock awards from the computation of diluted net income per common share as the effect of these options and unvested restricted stock awards would have been anti-dilutive. Quarterly computations of net income per share amounts are made independently for each quarterly reporting period, and the sum of the per share amounts for the quarterly reporting periods may not equal the per share amounts for the year-to-date reporting period.  

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Note 16 - Segment Information (Tables)

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment [Table Text Block]

(in $000’s) Three Months Ended June 30, 2014	Global Division		Impax Division			Corporate and Other			Total Company
Revenues, net	$	176,394	$	11,727		$	---		$	188,121
Cost of revenues		69,872		8,477			---			78,349
Research and development		10,745		10,507			---			21,252
Patent litigation expense		1,767		---			---			1,767
Income (loss) before provision for income taxes	$	89,438	$	(18,991	)	$	(16,022	)	$	54,425

(in $000’s) Three Months Ended June 30, 2013	Global Division		Impax Division		Corporate and Other			Total Company
Revenues, net	$	93,965	$	35,666	$	---		$	129,631
Cost of revenues		54,727		16,017		---			70,744
Research and development		9,291		6,249		---			15,540
Patent litigation expense		4,304		---		---			4,304
Income (loss) before provision for income taxes	$	21,761	$	1,564	$	(14,290	)	$	9,035

(in $000’s) Six Months Ended June 30, 2014	Global Division		Impax Division			Corporate and Other			Total Company
Revenues, net	$	285,534	$	21,305		$	---		$	306,839
Cost of revenues		126,894		12,551			---			139,445
Research and development		21,962		21,031			---			42,993
Patent litigation expense		3,940		---			---			3,940
Income (loss) before provision for income taxes	$	125,783	$	(33,232	)	$	(29,496	)	$	63,055

(in $000’s) Six Months Ended June 30, 2013	Global Division		Impax Division			Corporate and Other		Total Company
Revenues, net	$	195,602	$	82,518		$	---	$	278,120
Cost of revenues		116,171		45,190			---		161,361
Research and development		21,002		14,143			---		35,145
Patent litigation expense		8,582		---			---		8,582
Income (loss) before provision for income taxes	$	40,921	$	(1,414	)	$	123,248	$	162,755

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Note 17 - Legal and Regulatory Matters

6 Months Ended

Jun. 30, 2014

Disclosure Text Block Supplement [Abstract]

Legal Matters and Contingencies [Text Block]

17. 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. 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

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 (the “District Court”) 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 District Court on the issues of patent infringement and validity. In August 2011, the District 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 District Court entered final judgment with respect to that litigation. On June 22, 2012, the District Court entered its final judgment with respect to the Company. All parties filed notices of appeal and/or cross-appeal in July 2012. The briefing at the United States Court of Appeals for the Federal Circuit (the “Federal Circuit”) was completed for all parties on January 28, 2013. The decision of the District Court will be binding on the Company unless reversed or modified on appeal or in subsequent litigation. On August 7, 2013, the Federal Circuit affirmed-in-part, reversed-in-part, and remanded the case to the District Court. The finding that the fifth patent was infringed and not invalid was affirmed, as was the finding that the asserted independent claims of the other four patents were invalid and/or not infringed. The Federal Circuit reversed the District Court’s finding that some of the dependent claims of the four patents were invalid and remanded for further proceedings. On January 6, 2014, the parties entered into a Stipulation of Dismissal and on January 7, 2014, the court entered an Order granting the Stipulation of Dismissal.

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 (the “District Court”) 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. The trial court issued a claim construction ruling on April 11, 2012. In November 2012, the Company and Takeda filed cross motions for summary judgment regarding infringement and validity of the patents at issue. On April 8, 2013, the District Court ruled on the summary judgment motions as follows: (i) granted the Company’s motion for non-infringement of U.S. Patent No. 7,790,755, (ii) granted Takeda’s motion of infringement of U.S. Patent Nos. 6,664,276, 6,462,058 and 6,939,971 and (iii) denied the Company’s motion of invalidity for U.S. Patent No. 6,939,971. A bench trial was conducted beginning on June 5, 2013, and a decision was rendered on October 17, 2013, finding the asserted claims of U.S. Patent Nos. 6,462,058, 6,664,276, and 6,939,971 infringed and not invalid. The Company filed a notice of appeal of the District Court’s decision on the 6,462,058, 6,664,276, and 6,939,971 patents to the United States Court of Appeals for the Federal Circuit and Takeda filed a notice of appeal of the District Court decision on the 7,790,755 patent to the Federal Circuit.

In May 2013, Takeda filed another complaint against the Company in the District Court, alleging infringement of U.S. Patent No. 8,173,158 based on the filing of the Company’s ANDA relating to Dexlansoprazole Delayed Release Capsules, 30 and 60 mg, generic to Dexilant®. Takeda filed an amended complaint in July 2013, alleging infringement of another patent, U.S. Patent No. 8,461,187. The Company filed an answer and counterclaims. Following a hearing on claim construction on June 5, 2014, the Court issued a claim construction order on June 6, 2014. Discovery is proceeding, and trial is scheduled for April 13, 2015.

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, U.S. 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 bench trial was conducted beginning on September 9, 2013. On April 30, 2014, the district court issued its decision finding two of the three patents infringed, while finding the third patent not infringed by the Company, and finding all three patents not invalid. The parties settled the litigation and the case was dismissed on June 17, 2014.

 Endo Pharmaceuticals Inc. and Grunenthal GmbH v. Impax Laboratories, Inc. and ThoRx Laboratories, Inc. (Oxymorphone hydrochloride); Endo Pharmaceuticals Inc. and Grunenthal GmbH v. Impax Laboratories, Inc. (Oxymorphone hydrochloride)

In November 2012, Endo Pharmaceuticals, Inc. and Grunenthal GmbH (collectively, “Endo”) filed suit against ThoRx Laboratories, Inc., a wholly owned subsidiary of the Company (“ThoRx”), and the Company in the U.S. District Court for the Southern District of New York alleging patent infringement based on the filing of ThoRx’s ANDA relating to Oxymorphone Hydrochloride, Extended Release tablets, 5, 7.5, 10, 15, 20, 30 and 40 mg, generic to Opana ER®. In January 2013, Endo filed a separate 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 the same products. ThoRx and the Company filed an answer and counterclaims to the November 2012 suit and the Company filed an answer and counterclaims with respect to the January 2013 suit. Discovery is proceeding. No trial date has been set.

Pfizer Inc. and UCB Pharma GMBH v. Impax Laboratories, Inc. (Fesoterodine)

In June 2013, Pfizer Inc. and UCB Pharma GMBH 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 Fesoterodine Fumarate Extended-Release Tablets, 4 and 8 mg, generic to Toviaz®. The Company filed its answer and counterclaims. Discovery is proceeding, and trial is scheduled for July 13, 2015.

Meda Pharmaceuticals Inc. v. Perrigo Israel Pharmaceuticals Ltd., Perrigo Company, L. Perrigo Company and Impax Laboratories, Inc. (Azelastine HCl)

In May 2013, Meda Pharmaceuticals, Inc. (“Meda”) filed suit against the Company in the United States District Court for the District of New Jersey, alleging that the Company participated in, contributed to, aided, abetted, and/or induced infringement of Meda’s United States Patent No. 8,071,073 based on the submission by Perrigo Israel Pharmaceutical Ltd., Perrigo Company and L. Perrigo Company of an ANDA relating to Azelastine Hydrochloride Nasal Spray (0.15%, eq. 0.1876 mg base/spray), generic to Astepro®. The parties settled the litigation and the case was dismissed on June 20, 2014.

Warner Chilcott Co., LLC and Warner Chilcott (US), LLC  v. Impax Laboratories, Inc. (Risedronate)

In October 2013, Warner Chilcott Co., LLC and Warner Chilcott (US), LLC  (together, “Warner Chilcott”) filed suit against the Company in the United States District Court for the District of New Jersey, alleging patent infringement based on the filing of the Company’s ANDA relating to Risedronate Sodium Delayed Release Tablets, 35 mg, generic to Atelvia®. The case was consolidated with actions brought by Warner Chilcott against other generic defendants for trial, which began on July 14, 2014. The parties settled the litigation and the case was dismissed on July 16, 2014.

Impax Laboratories Inc. and AstraZeneca AB v. Lannett Holdings, Inc.

In July 2014, the Company filed suit against Lannett Holdings, Inc. in the United States District Court for the District of Delaware, alleging patent infringement based on the filing of Lannett’s ANDA relating to Zolmitriptan Nasal Spray, 5mg, generic to Zomig® Nasal Spray.

Other Litigation Related to the Company’s Business

Civil Investigative Demand from the FTC (Minocycline Hydrochloride)

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 relates to whether Medicis Pharmaceutical Corporation, now a wholly owned subsidiary of Valeant Pharmaceuticals International, Inc. (“Medicis”), 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 investigation. To the knowledge of the Company, no FTC proceedings have been initiated against the Company to date, however no assurance can be given as to the timing or outcome of this investigation.

Solodyn® Antitrust Class Actions

From July to October 2013, thirteen class action complaints were filed against manufacturers of the brand drug Solodyn® and its generic equivalents, including the Company.

On July 22, 2013, Plaintiff United Food and Commercial Workers Local 1776 & Participating Employers Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On July 23, 2013, Plaintiff Rochester Drug Co-Operative, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On August 1, 2013, Plaintiff International Union of Operating Engineers Local 132 Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Northern District of California on behalf of itself and others similarly situated. On August 29, 2013, this Plaintiff withdrew its complaint from the United States District Court for the Northern District of California, and on August 30, 2013, re-filed the same complaint in the United States Court for the Eastern District of Pennsylvania, on behalf of itself and others similarly situated.

On August 9, 2013, Plaintiff Local 274 Health & Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On August 12, 2013, Plaintiff Sheet Metal Workers Local No. 25 Health & Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On August 27, 2013, Plaintiff Fraternal Order of Police, Fort Lauderdale Lodge 31, Insurance Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On August 29, 2013, Plaintiff Heather Morgan, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On August 30, 2013, Plaintiff Plumbers & Pipefitters Local 178 Health & Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On September 9, 2013, Plaintiff Ahold USA, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.

On September 24, 2013, Plaintiff City of Providence, Rhode Island, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Arizona on behalf of itself and others similarly situated.

On October 2, 2013, Plaintiff International Union of Operating Engineers Stationary Engineers Local 39 Health & Welfare Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.

On October 7, 2013, Painters District Council No. 30 Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.

On October 25, 2013, Plaintiff Man-U Service Contract Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated. 

On March 13, 2014, Plaintiff Allied Services Division Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.

On March 19, 2014, Plaintiff NECA-IBEW Welfare Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.

In each case, the complaints allege that Medicis engaged in an overarching anticompetitive scheme by, among other things, filing frivolous patent litigation lawsuits, submitting frivolous Citizen Petitions, and entering into anticompetitive settlement agreements with several generic manufacturers, including the Company, to delay generic competition of Solodyn® and in violation of state and federal antitrust laws. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution.

On February 25, 2014, the United States Judicial Panel on Multidistrict Litigation ordered the pending actions transferred to the District of Massachusetts for coordinated pretrial proceedings, as In Re Solodyn (Minocycline Hydrochloride) Antitrust Litigation.

Civil Investigative Demand from the FTC (Oxymorphone Hydrochloride)

On February 25, 2014, the Company received a CID from the FTC concerning its investigation into the drug Opana® ER and its generic equivalents. According to the FTC, the investigation relates to whether Endo Pharmaceuticals, Inc. (“Endo”), the Company, and other companies have engaged or are engaged in unfair methods of competition in or affecting commerce by (i) entering into agreements regarding Opana® ER or its generic equivalents and/or (ii) engaging in other conduct regarding the regulatory filings, sale or marketing of Opana® ER or its generic equivalents. The Company intends to cooperate with the FTC in producing documents and information in response to the CID. To the knowledge of the Company, no proceedings by the FTC have been initiated against the Company at this time, however no assurance can be given as to the timing or outcome of this investigation.

Opana ER® Antitrust Class Actions

From June to July 2014, four class action complaints were filed against manufacturers of the brand drug Opana ER® and the Company.

On June 4, 2014, Plaintiff Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On June 4, 2014, Plaintiff Rochester Drug Co-Operative, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On June 6, 2014, Plaintiff Value Drug Company, a direct purchaser, filed a class action complaint in the United States District Court for the Northern District of California on behalf of itself and others similarly situated. On June 26, 2014, this Plaintiff withdrew its complaint from the United States District Court for the Northern District of California, and on July 16, 2014, re-filed the same complaint in the United States District Court for the Northern District of Illinois, on behalf of itself and others similarly situated.

On June 19, 2014, Plaintiff Wisconsin Masons’ Health Care Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Northern District of Illinois on behalf of itself and others similarly situated.

In each case, the complaints allege that Endo engaged in an anticompetitive scheme by, among other things, entering into an anticompetitive settlement agreement with the Company to delay generic competition of Opana ER® and in violation of state and federal antitrust laws. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution.

Securities and Derivative Class Actions

On March 7, 2013 and April 8, 2013, two class action complaints were filed against the Company and certain current and former officers and directors of the Company in the United States District Court for the Northern District of California by Denis Mulligan, individually and on behalf of others similarly situated, and Haverhill Retirement System, individually and on behalf of others similarly situated, respectively (“Securities Class Actions”), alleging that the Company and those named officers and directors violated the federal securities law by making materially false and misleading statements and/or failed to disclose material adverse facts to the public in connection with manufacturing deficiencies at the Hayward, California manufacturing facility, including but not limited to the impact the deficiencies would have on the Company’s ability to gain approval from the FDA for the Company’s branded product candidate, RYTARY™ and its generic version of Concerta®. These two Securities Class Actions have subsequently been consolidated, assigned to the same judge, and lead plaintiff has been chosen. The plaintiff’s consolidated amended complaint was filed on September 13, 2013. The Company filed a motion to dismiss the consolidated amended complaint on November 14, 2013. On April 18, 2014, the Court denied the Company’s motion to dismiss. Discovery is proceeding, and a trial date has not been set.

On March 19, 2013, Virender Singh, derivatively on behalf of the Company, filed a state court action against certain current and former officers and directors for breach of fiduciary duty and unjust enrichment in the Superior Court of the State of California County of Santa Clara, asserting similar allegations as those in the Securities Class Actions. That action has been stayed pending resolution of the Securities Class Actions. In addition, the Company is aware of two letters from stockholders demanding action by the Company’s board of directors, including to: (i) undertake an independent internal investigation into management’s alleged violations of Delaware and/or federal law; (ii) commence a civil action against members of management to recover damages sustained as a result of alleged breaches of fiduciary duties; and/or (iii) spearhead meaningful corporate reform to address alleged internal control inadequacies. Each letter further states that if such action is not commenced within a reasonable period of time, the stockholder will commence a stockholder’s derivative action on behalf of the Company.

Attorney General of the State of Connecticut Interrogatories and Subpoena Duces Tecum

On July 14, 2014, the Company received a subpoena and interrogatories (the “Subpoena”) from the State of Connecticut Attorney General (“Connecticut AG”) concerning its investigation into sales of the Company’s generic product, digoxin. According to the Connecticut AG, the investigation is to determine whether anyone engaged in a contract, combination or conspiracy in restraint of trade or commerce which has the effect of (i) fixing, controlling or maintaining prices or (ii) allocating or dividing customers or territories relating to the sale of digoxin in violation of Connecticut state antitrust law. The Company intends to cooperate with the Connecticut AG in producing documents and information in response to the Subpoena. To the knowledge of the Company, no proceedings by the Connecticut AG have been initiated against the Company at this time, however no assurance can be given as to the timing or outcome of this investigation.

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Note 18 - Supplementary Financial Information (unaudited) (Details) - Selected Financial Information for the Quarterly Periods Noted (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				6 Months Ended		3 Months Ended																6 Months Ended		3 Months Ended																								6 Months Ended		3 Months Ended				6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014 Global Division [Member] Chargeback Reserve [Member]	Mar. 31, 2014 Global Division [Member] Chargeback Reserve [Member]	Jun. 30, 2013 Global Division [Member] Chargeback Reserve [Member]	Mar. 31, 2013 Global Division [Member] Chargeback Reserve [Member]	Jun. 30, 2014 Global Division [Member] Rebate Reserve [Member]	Mar. 31, 2014 Global Division [Member] Rebate Reserve [Member]	Jun. 30, 2013 Global Division [Member] Rebate Reserve [Member]	Mar. 31, 2013 Global Division [Member] Rebate Reserve [Member]	Jun. 30, 2014 Global Division [Member] Other Credits [Member]	Mar. 31, 2014 Global Division [Member] Other Credits [Member]	Jun. 30, 2013 Global Division [Member] Other Credits [Member]	Mar. 31, 2013 Global Division [Member] Other Credits [Member]	Jun. 30, 2014 Global Division [Member]	Mar. 31, 2014 Global Division [Member]	Jun. 30, 2013 Global Division [Member]	Mar. 31, 2013 Global Division [Member]	Jun. 30, 2014 Global Division [Member]	Jun. 30, 2013 Global Division [Member]	Jun. 30, 2014 Global Division [Member] Rx Partner [Member]	Mar. 31, 2014 Global Division [Member] Rx Partner [Member]	Jun. 30, 2013 Global Division [Member] Rx Partner [Member]	Mar. 31, 2013 Global Division [Member] Rx Partner [Member]	Jun. 30, 2014 Global Division [Member] Other Revenues [Member]	Mar. 31, 2014 Global Division [Member] Other Revenues [Member]	Jun. 30, 2013 Global Division [Member] Other Revenues [Member]	Mar. 31, 2013 Global Division [Member] Other Revenues [Member]	Jun. 30, 2014 Impax Division [Member] Chargeback Reserve [Member]	Mar. 31, 2014 Impax Division [Member] Chargeback Reserve [Member]	Jun. 30, 2013 Impax Division [Member] Chargeback Reserve [Member]	Mar. 31, 2013 Impax Division [Member] Chargeback Reserve [Member]	Jun. 30, 2014 Impax Division [Member] Rebate Reserve [Member]	Mar. 31, 2014 Impax Division [Member] Rebate Reserve [Member]	Jun. 30, 2013 Impax Division [Member] Rebate Reserve [Member]	Mar. 31, 2013 Impax Division [Member] Rebate Reserve [Member]	Jun. 30, 2014 Impax Division [Member] Other Credits [Member]	Mar. 31, 2014 Impax Division [Member] Other Credits [Member]	Jun. 30, 2013 Impax Division [Member] Other Credits [Member]	Mar. 31, 2013 Impax Division [Member] Other Credits [Member]	Jun. 30, 2014 Impax Division [Member]	Mar. 31, 2014 Impax Division [Member]	Jun. 30, 2013 Impax Division [Member]	Mar. 31, 2013 Impax Division [Member]	Jun. 30, 2014 Impax Division [Member]	Jun. 30, 2013 Impax Division [Member]	Jun. 30, 2014 Impax Division [Member] Other Revenues [Member]	Mar. 31, 2014 Impax Division [Member] Other Revenues [Member]	Jun. 30, 2013 Impax Division [Member] Other Revenues [Member]	Mar. 31, 2013 Impax Division [Member] Other Revenues [Member]	Jun. 30, 2014 Chargeback Reserve [Member]	Dec. 31, 2013 Chargeback Reserve [Member]	Jun. 30, 2014 Rebate Reserve [Member]	Dec. 31, 2013 Rebate Reserve [Member]
Revenue:
Sales revenue goods, gross																			$ 375,269	$ 265,850	$ 217,721	$ 197,956																							$ 24,375	$ 20,643	$ 48,300	$ 69,292
Less:
Sales allowances goods							110,518	95,714	82,013	64,345	74,079	52,054	35,649	30,572	21,571	10,671	8,312	5,160															10,107	8,230	10,095	7,790	938	1,070	(1,735)	6,236	1,654	1,853	2,409	7,255											224,569	389,707	128,141	193,288
Product Returns																			5,140	1,294	1,989	94																							216	181	2,197	1,490
Sales revenue goods, net																			163,961	106,117	89,758	97,785																							11,460	9,309	35,334	46,521
Sales revenue net																									9,204	2,435	3,668	3,114	3,229	589	539	737																			267	268	332	332
Revenues	188,121	118,718	129,631	148,489	306,839	278,120													176,394	109,141	93,965	101,636	285,534	195,602																					11,727	9,577	35,666	46,853	21,305	82,518
Gross profit	109,772	57,622	58,887	57,871	167,394	116,759
Net income	$ 35,071	$ 6,425	$ 5,619	$ 105,442	$ 41,496	$ 111,061
Net income per share (basic) (in Dollars per share)	$ 0.52	$ 0.09	$ 0.08	$ 1.59	$ 0.61	$ 1.67
Net income per share (diluted) (in Dollars per share)	$ 0.50	$ 0.09	$ 0.08	$ 1.55	$ 0.59	$ 1.62
Weighted average: common shares outstanding:
Basic (in Shares)	68,095,159	67,702,296	66,748,864	66,487,470	67,899,894	66,618,889
Diluted (in Shares)	70,313,491	69,938,872	68,287,948	68,178,355	70,195,329	68,382,004

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Supplemental Cash Flow Information

6 Months Ended

Jun. 30, 2014

Supplemental Cash Flow Elements [Abstract]

Cash Flow, Supplemental Disclosures [Text Block]

Supplemental disclosure of non-cash investing and financing activities:

	Six Months Ended
(in $000's)	June 30, 2014		June 30, 2013
Cash paid for interest	$	16	$	87
Cash paid for income taxes	$	28,955	$	8,333

Accrued vendor invoices of approximately $2,282,000 and $1,183,000 at June 30, 2014 and 2013, respectively, are excluded from the purchase of property, plant, and equipment and the change in accounts payable and accrued expenses and prepaid and other assets. Depreciation expense was $5,054,000 and $4,740,000 for the three months ended June 30, 2014 and 2013, respectively, and was $10,027,000 and $9,500,000 for the six months ended June 30, 2014 and 2013, respectively.

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Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Preferred Stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Preferred Stock, shares authorized	2,000,000	2,000,000
Preferred Stock, shares outstanding	0	0
Common stock, par value (in Dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized	90,000,000	90,000,000
Common stock, shares issued	70,955,140	69,927,609
Treasury stock, shares	243,729	243,729

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Note 10 - Income Taxes

6 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

10. INCOME TAXES

The Company calculates its interim income tax provision in accordance with FASB ASC Topics 270 and 740. At the end of each interim period, the Company makes an estimate of the annual United States domestic and foreign jurisdictions’ expected effective tax rates and applies these rates to its respective year-to-date taxable income or loss. The computation of the annual estimated effective tax rates at each interim period requires certain estimates and assumptions including, but not limited to, the expected operating income for the year, projections of the proportion of income (or loss) earned and taxed in the United States, and the various state and local tax jurisdictions, as well as tax jurisdictions outside the United States, along with permanent differences, and the likelihood of deferred tax asset utilization. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is acquired or additional information is obtained. The computation of the annual estimated effective tax rate includes modifications, which were projected for the year, for share-based compensation and state research and development credits, among others. In addition, the effect of changes in enacted tax laws, rates, or tax status is recognized in the interim period in which the respective change occurs.

During the six month period ended June 30, 2014, the Company recognized an aggregate consolidated tax provision of $21,559,000 for United States domestic and foreign income taxes. In the six month period ended June 30, 2013, the Company recognized an aggregate consolidated tax provision of $51,694,000 for United States domestic and foreign income taxes. The decrease in the tax provision resulted from lower consolidated income before taxes in the six month period ended June 30, 2014, as compared to the same period in the prior year. The effective tax rate of 34% for the six month period ended June 30, 2014 was higher than the effective tax rate of 32% for the prior year period primarily as a result of the expiration of the Federal Research and Experimental Credit as of December 31, 2013. Other contributing factors to the rate fluctuation include a change in the timing and mix of United States and foreign income; the exclusion of a zero-rate jurisdiction from the interim effective tax rate calculation; and an increase in the deferred tax asset related to a state research and development tax credit carryforward in a state with indefinite carryforwards.

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Document And Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 01, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	IMPAX LABORATORIES INC
Document Type	10-Q
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		70,698,855
Amendment Flag	false
Entity Central Index Key	0001003642
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Well-known Seasoned Issuer	Yes
Document Period End Date	Jun. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Note 11 - Revolving Line of Credit

6 Months Ended

Jun. 30, 2014

Line Of Credit Facilities [Abstract]

Line Of Credit Facilities [Text Block]

11. REVOLVING LINE OF CREDIT

The Company has a Credit Agreement, as amended (the “Credit Agreement”) with Wells Fargo Bank, N.A., as a lender and as administrative agent (the “Administrative Agent”). The Credit Agreement provides the Company with a revolving line of credit in the aggregate principal amount of up to $50,000,000 (the “Revolving Credit Facility”). Under the Revolving Credit Facility, up to $10,000,000 is available for letters of credit, the outstanding face amounts of which reduce availability under the Revolving Credit Facility on a dollar for dollar basis. Proceeds under the Credit Agreement may be used for working capital, general corporate and other lawful purposes. The Company has not yet borrowed any amounts under the Revolving Credit Facility.

The Company’s borrowings under the Credit Agreement are secured by substantially all of the personal property assets of the Company pursuant to a Security Agreement (the “Security Agreement”) entered into by the Company and the Administrative Agent. As further security, the Company also pledged to the Administrative Agent, 65% of the Company’s equity interest in its wholly owned subsidiary Impax Laboratories (Taiwan), Inc., all of the Company’s equity interests in its wholly owned domestic subsidiaries and must similarly pledge all or a portion of its equity interest in future subsidiaries. Under the Credit Agreement, among other things:

● 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 on February 11, 2015. There were no balances outstanding under the credit facility as of June 30, 2014 or December 31, 2013.

● 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, Consolidated EBITDA of at least $50.0 million and Minimum Liquidity (which is, generally unrestricted cash and cash equivalents) of at least $100.0 million. As of June 30, 2014, 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.

During the six month periods ended June 30, 2014 and 2013, unused line fees incurred under the Credit Agreement were $62,000 and $61,000, respectively.

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Consolidated Statements of Operations (Unaudited) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Revenues:
Revenues	$ 188,121,000	$ 129,631,000	$ 306,839,000	$ 278,120,000
Cost of revenues	78,349,000	70,744,000	139,445,000	161,361,000
Gross profit	109,772,000	58,887,000	167,394,000	116,759,000
Operating expenses:
Research and development	21,252,000	15,540,000	42,993,000	35,145,000
Patent litigation expense	1,767,000	4,304,000	3,940,000	8,582,000
Selling, general and administrative	32,817,000	33,275,000	58,294,000	62,993,000
Total operating expenses	55,836,000	53,119,000	105,227,000	106,720,000
Income from operations	53,936,000	5,768,000	62,167,000	10,039,000
Other income, net	31,000	2,997,000	107,000	152,453,000
Interest income	365,000	315,000	753,000	591,000
Interest expense	93,000	(45,000)	28,000	(328,000)
Income before income taxes	54,425,000	9,035,000	63,055,000	162,755,000
Provision for income taxes	19,354,000	3,416,000	21,559,000	51,694,000
Net income	35,071,000	5,619,000	41,496,000	111,061,000
Net income per share:
Basic (in Dollars per share)	$ 0.52	$ 0.08	$ 0.61	$ 1.67
Diluted (in Dollars per share)	$ 0.50	$ 0.08	$ 0.59	$ 1.62
Weighted average common shares outstanding:
Basic (in Shares)	68,095,159	66,748,864	67,899,894	66,618,889
Diluted (in Shares)	70,313,491	68,287,948	70,195,329	68,382,004
Global Division [Member]
Revenues:
Revenues	176,394,000	93,965,000	285,534,000	195,602,000
Cost of revenues	69,872,000	54,727,000	126,894,000	116,171,000
Operating expenses:
Research and development	10,745,000	9,291,000	21,962,000	21,002,000
Patent litigation expense	1,767,000	4,304,000	3,940,000	8,582,000
Income before income taxes	89,438,000	21,761,000	125,783,000	40,921,000
Impax Division [Member]
Revenues:
Revenues	11,727,000	35,666,000	21,305,000	82,518,000
Cost of revenues	8,477,000	16,017,000	12,551,000	45,190,000
Operating expenses:
Research and development	10,507,000	6,249,000	21,031,000	14,143,000
Income before income taxes	$ (18,991,000)	$ 1,564,000	$ (33,232,000)	$ (1,414,000)

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Note 5 - Accounts Receivable

6 Months Ended

Jun. 30, 2014

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

5. ACCOUNTS RECEIVABLE

The composition of accounts receivable, net is as follows:

(in $000’s)	June 30, 2014			December 31, 2013
Gross accounts receivable	$	289,246		$	246,319
Less: Rebate reserve		(83,420	)		(88,449	)
Less: Chargeback reserve		(31,680	)		(37,066	)
Less: Other deductions		(10,250	)		(7,811	)
Accounts receivable, net	$	163,896		$	112,993

A roll forward of the rebate and chargeback reserves activity for the six months ended June 30, 2014 and the year ended December 31, 2013 is as follows:

(in $000’s) Rebate reserve	June 30, 2014			December 31, 2013
Beginning balance	$	88,449		$	46,011
Provision recorded during the period		128,141			193,288
Credits issued during the period		(133,170	)		(150,850	)
Ending balance	$	83,420		$	88,449

(in $000’s) Chargeback reserve	June 30, 2014			December 31, 2013
Beginning balance	$	37,066		$	18,410
Provision recorded during the period		224,569			389,707
Credits issued during the period		(229,955	)		(371,051	)
Ending balance	$	31,680		$	37,066

Other deductions include allowance for uncollectible amounts and cash discounts. The Company maintains an allowance for doubtful accounts for estimated losses resulting from amounts deemed to be uncollectible from its customers, with such allowances for specific amounts on certain accounts. The Company had an allowance for uncollectible amounts of $528,000 and $539,000 at June 30, 2014 and December 31, 2013, respectively. 

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Note 4 - Investments

6 Months Ended

Jun. 30, 2014

Investments Schedule [Abstract]

Investment [Text Block]

4. INVESTMENTS

Investments consist of commercial paper and corporate bonds. The Company’s policy is to invest in only high quality “AAA-rated” or investment-grade securities. Investments in debt securities are accounted for as “held-to-maturity’ and are recorded at amortized cost, which approximates fair value, generally based upon observable market values of similar securities. The Company has historically held all investments in debt securities until maturity, and has the ability and intent to continue to do so. All of the Company’s investments have remaining contractual maturities of less than 12 months and are classified as short-term. Upon maturity, the Company uses a specific identification method.

A summary of short-term investments as of June 30, 2014 and December 31, 2013 is as follows:  

(in $000’s) June 30, 2014	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
Commercial paper	$	121,440	$	35	$	(1	)	$	121,474
Corporate bonds		132,448		8		(26	)		132,430
Total short-term investments	$	253,888	$	43	$	(27	)	$	253,904

(in $000’s) December 31, 2013	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
Commercial paper	$	91,480	$	26	$	--		$	91,506
Corporate bonds		137,041		13		(21	)		137,033
Total short-term investments	$	228,521	$	39	$	(21	)	$	228,539

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Note 16 - Segment Information

6 Months Ended

Jun. 30, 2014

Segment Reporting [Abstract]

Segment Reporting Disclosure [Text Block]

16. SEGMENT INFORMATION

The Company has two reportable segments, the Global Division and the Impax Division. The Global Division develops, manufactures, sells, and distributes generic pharmaceutical products, primarily through the following sales channels: the Global Products sales channel for sales of generic prescription products directly to wholesalers, large retail drug chains, and others; the Private Label Product sales channel for generic over-the-counter and prescription products sold to unrelated third-party customers who, in turn, sell the products under their own label; the Rx Partner sales channel for generic prescription products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance agreements; and the OTC Partner sales channel for over-the-counter products sold through unrelated third-party pharmaceutical entities under their own labels pursuant to alliance and supply agreements. Revenues from the “Global Products” sales channel and the “Private Label” sales channel are reported under the caption “Global Product sales, net” in “Note 18 – Supplementary Financial Information.” The Company also generates revenue in its Global Division from research and development services provided under a joint development agreement with another unrelated third-party pharmaceutical company, and reports such revenue under the caption “Other Revenues” revenue in “Note 18 – Supplementary Financial Information.” Revenues from the “OTC Partner” sales channel are also reported under the caption “Other Revenues” in “Note 18 – Supplementary Financial Information.”

 The Impax Division is engaged in the development of proprietary brand pharmaceutical products that the Company believes represent improvements to already-approved pharmaceutical products addressing CNS disorders. The Impax Division currently has one internally developed late stage branded pharmaceutical product candidate, RYTARY™, an extended release capsule formulation of carbidopa-levodopa for the symptomatic treatment of Parkinson’s disease, for which the NDA was accepted for filing by the FDA in February 2012 and for which the Company received a Complete Response Letter from the FDA in January 2013. In April 2014, after discussions with the FDA, the Company resubmitted an NDA for RYTARY™. The NDA was accepted for filing by the FDA in April 2014 and the FDA informed the Company that the Prescription Drug User Fee Act (“PDUFA”) date is October 9, 2014. The Company has also initiated the preparation of required documents for a European Market Authorization Application filing for RYTARY™, currently targeted for filing during the second half of 2014. In addition to RYTARY™, the Impax Division has a number of other product candidates that are in varying stages of development. The Impax Division is also engaged in the sale and distribution of Zomig® (zolmitriptan) products, indicated for the treatment of migraine headaches, under the terms of the AZ Agreement with AstraZeneca in the United States and in certain United States territories. Revenues from Impax-labeled branded Zomig® products are reported under the caption “Impax Product sales, net” in “Note 18 – Supplementary Financial Information.” Finally, the Company generates revenue in the Impax Division from research and development services provided under a development and license agreement with another unrelated third-party pharmaceutical company, and reports such revenue under the caption “Other Revenues” revenue in “Note 18 – Supplementary Financial Information.”

The Company’s chief operating decision maker evaluates the financial performance of the Company’s segments based upon segment income (loss) before income taxes. Items below income (loss) from operations are not reported by segment, except litigation settlements, since they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision maker. Additionally, general and administrative expenses, certain selling expenses, certain litigation settlements, and non-operating income and expenses are included in “Corporate and Other.” The Company does not report balance sheet information by segment since it is not reviewed by the Company’s chief operating decision maker. The accounting policies for the Company’s segments are the same as those described above in the discussion of "Revenue Recognition" and in the “Summary of Significant Accounting Policies” in the Company's Form 10-K for the year ended December 31, 2013. The Company has no inter-segment revenue.  

The tables below present segment information reconciled to total Company consolidated financial results, with segment operating income or loss including gross profit less direct research and development expenses and direct selling expenses as well as any litigation settlements, to the extent specifically identified by segment:  

(in $000’s) Three Months Ended June 30, 2014	Global Division		Impax Division			Corporate and Other			Total Company
Revenues, net	$	176,394	$	11,727		$	---		$	188,121
Cost of revenues		69,872		8,477			---			78,349
Research and development		10,745		10,507			---			21,252
Patent litigation expense		1,767		---			---			1,767
Income (loss) before provision for income taxes	$	89,438	$	(18,991	)	$	(16,022	)	$	54,425

(in $000’s) Three Months Ended June 30, 2013	Global Division		Impax Division		Corporate and Other			Total Company
Revenues, net	$	93,965	$	35,666	$	---		$	129,631
Cost of revenues		54,727		16,017		---			70,744
Research and development		9,291		6,249		---			15,540
Patent litigation expense		4,304		---		---			4,304
Income (loss) before provision for income taxes	$	21,761	$	1,564	$	(14,290	)	$	9,035

(in $000’s) Six Months Ended June 30, 2014	Global Division		Impax Division			Corporate and Other			Total Company
Revenues, net	$	285,534	$	21,305		$	---		$	306,839
Cost of revenues		126,894		12,551			---			139,445
Research and development		21,962		21,031			---			42,993
Patent litigation expense		3,940		---			---			3,940
Income (loss) before provision for income taxes	$	125,783	$	(33,232	)	$	(29,496	)	$	63,055

(in $000’s) Six Months Ended June 30, 2013	Global Division		Impax Division			Corporate and Other		Total Company
Revenues, net	$	195,602	$	82,518		$	---	$	278,120
Cost of revenues		116,171		45,190			---		161,361
Research and development		21,002		14,143			---		35,145
Patent litigation expense		8,582		---			---		8,582
Income (loss) before provision for income taxes	$	40,921	$	(1,414	)	$	123,248	$	162,755

Foreign Operations

The Company’s wholly owned subsidiary, Impax Laboratories (Taiwan) Inc., is constructing a manufacturing facility in Jhunan, Taiwan R.O.C. which is utilized for manufacturing, research and development, warehouse, and administrative functions, with approximately $142,067,000 of net carrying value of assets, composed principally of a building and equipment, included in the Company's consolidated balance sheet at June 30, 2014.  

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Note 12 - Alliance and Collaboration Agreements

6 Months Ended

Jun. 30, 2014

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Collaborative Arrangement Disclosure [Text Block]

12. ALLIANCE AND COLLABORATION AGREEMENTS

The Company has entered into several alliance, collaboration, license and distribution agreements, and similar agreements with respect to certain of its products and services, with unrelated third-party pharmaceutical companies. The consolidated statement of operations includes revenue recognized under agreements the Company has entered into to develop marketing and/or distribution relationships with its partners to fully leverage its technology platform and revenue recognized under development agreements which generally obligate the Company to provide research and development services over multiple periods.

The Company’s alliance and collaboration agreements often include milestones and provide for milestone payments upon achievement of these milestones. Generally, the milestone events contained in the Company’s alliance and collaboration agreements coincide with the progression of the Company’s products and technologies from pre-commercialization to commercialization.

The Company groups pre-commercialization milestones in its alliance and collaboration agreements into clinical and regulatory categories, each of which may include the following types of events:

Clinical Milestone Events:

● 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.

Regulatory Milestone Events:

● 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.

Commercialization milestones in the Company’s alliance and collaboration agreements may include the following types of events:

● 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.

License and Distribution Agreement with Shire

In January 2006, the Company entered into a License and Distribution Agreement with an affiliate of Shire Laboratories, Inc. (“Prior Shire Agreement”), under which the Company received a non-exclusive license to market and sell an authorized generic of Shire’s Adderall XR^® product (“AG Product”) subject to certain conditions, but in any event by no later than January 1, 2010. The Company commenced sales of the AG Product in October 2009. On February 7, 2013, the Company entered into an Amended and Restated License and Distribution Agreement with Shire (the “Amended and Restated Shire Agreement”), which amended and restated the Prior Shire Agreement. The Amended and Restated Shire Agreement was entered into by the parties in connection with the settlement of the Company’s litigation with Shire relating to Shire’s supply of the AG Product to the Company under the Prior Shire Agreement. During the three month period ended March 31, 2013, the Company received a payment in the amount of $48,000,000 from Shire in connection with such litigation settlement, which was recorded in the first quarter of 2013 as "Other Income" on the consolidated statement of operations. The Amended and Restated Shire Agreement provides for Shire to supply the AG Product and for the Company to market and sell the AG Product subject to the terms and conditions thereof until the earlier of (i) the first commercial sale of the Company’s generic equivalent product to Adderall XR® and (ii) September 30, 2014 (the “Supply Term”), subject to certain continuing obligations of the parties upon expiration or early termination of the Supply Term, including Shire’s obligation to deliver AG Products still owed to the Company as of the end of the Supply Term. The Company is required to pay a profit share to Shire on sales of the AG Product, of which the Company owed a profit share payable to Shire of $10,160,000 and $10,926,000 on sales of the AG Product during the six month periods ended June 30, 2014 and 2013, respectively, with a corresponding charge included in the cost of revenues line on the consolidated statement of operations.

Development, Supply and Distribution Agreement with TOLMAR, Inc.

In June 2012, the Company entered into the Tolmar Agreement with Tolmar. Under the terms of the Tolmar Agreement, Tolmar granted to the Company an exclusive license to commercialize up to 11 generic topical prescription drug products, including ten currently approved products and one product pending approval at the FDA, in the United States and its territories. Under the terms of the Tolmar Agreement, Tolmar is responsible for developing and manufacturing the products, and the Company is responsible for marketing and sale of the products. The Company is required to pay a profit share to Tolmar on sales of each product commercialized pursuant to the terms of the Tolmar Agreement. The Company owed a profit share payable to Tolmar of $6,402,000 and $1,266,000 during the six month periods ended June 30, 2014 and 2013, respectively, with a corresponding charge included in the cost of revenues line on the consolidated statement of operations. The Company paid Tolmar a $21,000,000 upfront payment upon signing of the agreement and a $1,000,000 milestone payment in the year ended December 31, 2012. The Company has the potential to pay up to $24,000,000 in additional contingent milestone payments if certain commercialization and regulatory events occur. The upfront payment for the Tolmar product rights has been allocated to the underlying topical products based upon the relative fair value of each product and is being amortized over the remaining estimated useful life of each underlying product, ranging from five to 12 years, starting upon commencement of commercialization activities by the Company during the second half of 2012. The amortization of the Tolmar product rights is included as a component of cost of revenues on the consolidated statement of operations. The Company initially allocated $1,550,000 of the upfront payment to two products which are still in development and recorded such amount as in-process research and development expense in its results of operations for the year ended December 31, 2012. The Company similarly recorded the $1,000,000 milestone paid in the year ended December 31, 2012 as a research and development expense. Contingent milestone payments will be initially recognized in the period the triggering event occurs. Milestone payments which are contingent upon commercialization events will be accounted for as an additional cost of acquiring the product license rights. Milestone payments that are contingent upon regulatory approval events will be capitalized and amortized over the remaining estimated useful life of the approved product. As discussed in “Note 8 – Goodwill and Intangible Assets,” the Company recorded intangible asset impairment charges to cost of revenues of $13.2 million in the three month period ended September 30, 2013 and $2.9 million in the three month period ended March 31, 2014 related to the Tolmar product rights acquired under the Tolmar Agreement. During the fourth quarter of 2013, the Company made a $12.0 million payment to Tolmar upon Tolmar’s achievement of a regulatory milestone event in accordance with the terms of the Tolmar Agreement.

The Company entered into a Loan and Security Agreement with Tolmar in March 2012 (the “Tolmar Loan Agreement”), under which the Company has agreed to lend to Tolmar one or more loans through December 31, 2014, in an aggregate amount not to exceed $15,000,000. As of June 30, 2014, Tolmar has borrowed $15,000,000 under the Tolmar Loan Agreement. The outstanding principal amount of, including any accrued and unpaid interest on, the loans under the Tolmar Loan Agreement are payable by Tolmar beginning from March 31, 2017 through March 31, 2020 or the maturity date, in accordance with the terms therein. Tolmar may prepay all or any portion of the outstanding balance of the loans prior to the maturity date without penalty or premium.

Strategic Alliance Agreement with Teva

The Company entered into a Strategic Alliance Agreement with Teva in June 2001 (“Teva Agreement”). The Teva Agreement commits the Company to develop and manufacture, and Teva to distribute, a specified number of controlled release generic pharmaceutical products (“generic products”), each for a 10-year period. The Company identified the following deliverables under the Teva Agreement: (i) the manufacture and delivery of generic products; (ii) the provision of research and development activities (including regulatory services) related to each product; and (iii) market exclusivity associated with the products. In July 2010, the Teva Agreement was amended to terminate the provisions of the Teva Agreement with respect to the Omeprazole (generic to Prilosec®) 10mg, 20mg and 40mg products. Additionally, in exchange for the return of product rights, the Company agreed to pay to Teva a profit share on future sales of the fexofenadine HCI/pseudoephedrine (generic to Allegra-D®) product, if any, but in no event will such profit share payments exceed an aggregate amount of $3,000,000. The Company recognized previously deferred revenue related to the Teva Agreement of $654,000 in the six month periods ended June 30, 2014 and 2013. No additional amounts were deferred during the six month periods ended June 30, 2014 and 2013.

OTC Partners Alliance Agreement

In June 2002, the Company entered into a Development, License and Supply Agreement with Pfizer Inc. (formerly Wyeth) (the “Pfizer Agreement”), for a term of approximately 15 years, relating to the Company’s Loratadine and Pseudoephedrine Sulfate 5 mg/120 mg 12-hour Extended Release Tablets and Loratadine and Pseudoephedrine Sulfate 10 mg/240 mg 24-hour Extended Release Tablets for the OTC market. The Pfizer Agreement included payments to the Company upon achievement of development milestones, as well as royalties paid to the Company by Pfizer on its sales of the product. Pfizer launched this product in May 2003 as Alavert® D-12 Hour. In February 2005, the agreement was partially cancelled with respect to the 24-hour Extended Release Product due to lower than planned sales volume. In December 2011, Pfizer and the Company entered into an agreement with L. Perrigo Company whereby the parties agreed that the Company would supply the Company’s Loratadine and Pseudoephedrine Sulfate 5 mg/120 mg 12-hour Extended Release Tablets to Perrigo in the United States and its territories (the “Perrigo Agreement”). The Company previously developed the products, and is currently only responsible for manufacturing the products, and Pfizer and Perrigo are responsible for marketing and sale of the products. The Pfizer and Perrigo Agreements are no longer a core area of the Company’s business, and the over-the-counter pharmaceutical products the Company sells under both agreements are older products which are only sold to Pfizer and to Perrigo, and which are sold at a loss, on a fully absorbed basis. The Company recognizes profit share revenue in the period earned.

Joint Development Agreement with Valeant Pharmaceuticals International, Inc.

In November 2008, the Company and Valeant Pharmaceuticals International, Inc., formerly Medicis Pharmaceutical Corporation (“Valeant”), entered into a Joint Development Agreement (“Joint Development Agreement”) and a License and Settlement Agreement. The Joint Development Agreement provides for the Company and Valeant to collaborate in the development of a total of five dermatology products, including four of the Company’s generic products and one branded advanced form of Valeant’s SOLODYN^® product. Under the provisions of the Joint Development Agreement the Company received a $40,000,000 upfront payment, paid by Valeant in December 2008. The Company has also received an aggregate of $15,000,000 in milestone payments composed of two $5,000,000 milestone payments, paid by Valeant in March 2009 and September 2009, a $2,000,000 milestone payment paid by Valeant in December 2009, and a $3,000,000 milestone payment paid by Valeant in March 2011. The Company has the potential to receive up to an additional $8,000,000 of contingent regulatory milestone payments each of which the Company believes to be substantive, as well as the potential to receive royalty payments from sales, if any, by Valeant of its advanced form SOLODYN^® brand product. Finally, to the extent the Company commercializes any of its four generic dermatology products covered by the Joint Development Agreement, the Company will pay to Valeant a gross profit share on sales of such products. The Company began selling one of the four dermatology products during the year ended December 31, 2011. During the three month period ended March 31, 2013, the Company extended the revenue recognition period for the Joint Development Agreement from the previous recognition period ending in November 2013 to December 2014, due to changes in the estimated timing of completion of certain research and development activities. This change was made on a prospective basis, and resulted in a reduced quarterly amount of revenue recognized in 2013 and the first half of 2014, as compared to prior year quarters, and a reduced periodic amount of revenue to be recognized in future periods.

License, Development and Commercialization Agreement & Supply Agreement with Glaxo Group Limited

In December 2010, the Company entered into a License, Development and Commercialization Agreement with Glaxo Group Limited (“GSK”). Under the terms of the agreement with GSK, GSK received an exclusive license to develop and commercialize IPX066 (brand name RYTARY™ in the United States) throughout the world, except in the United States and Taiwan, and certain follow-on products at the option of GSK. Under the terms of the agreement, GSK paid an $11,500,000 upfront payment in December 2010, and the Company had the potential to receive up to $169,000,000 of contingent milestone payments. The upfront payment was recognized as revenue on a straight-line basis over the Company’s expected period of performance to provide research and development services which ended on December 31, 2012. In April 2013, the Company and GSK announced that they were terminating their collaboration for the development and commercialization of IPX066 outside the United States and Taiwan as a result of delays in the anticipated regulatory approval and launch dates in countries in which GSK has rights to commercialize the product and terminated the License, Development and Commercialization Agreement. At the end of July 2013, GSK’s rights to develop and commercialize IPX066 outside the United States and Taiwan were transferred back to the Company.

Distribution, License, Development and Supply Agreement with AstraZeneca UK Limited

In January 2012, the Company entered into the AZ Agreement with AstraZeneca. Under the terms of the AZ Agreement, AstraZeneca granted to the Company an exclusive license to commercialize the tablet, orally disintegrating tablet and nasal spray formulations of Zomig® (zolmitriptan) products for the treatment of migraine headaches in the United States and in certain United States territories, except during an initial transition period when AstraZeneca fulfilled all orders of Zomig® products on the Company’s behalf and AstraZeneca paid to the Company the gross profit on such Zomig® products. The Company is obligated to fulfill certain minimum requirements with respect to the promotion of currently approved Zomig® products as well as other dosage strengths of such products approved by the FDA in the future. The Company may, but has no obligation to, develop and commercialize additional products containing zolmitriptan and additional indications for Zomig®, subject to certain restrictions as set forth in the AZ Agreement. The Company will be responsible for conducting clinical studies and preparing regulatory filings related to the development of any such additional products and would bear all related costs. During the term of the AZ Agreement, AstraZeneca will continue to be the holder of the NDA for existing Zomig® products, as well as any future dosage strengths thereof approved by the FDA, and will be responsible for certain regulatory and quality-related activities for such Zomig® products. AstraZeneca will manufacture and supply Zomig® products to the Company and the Company will purchase its requirements of Zomig® products from AstraZeneca until a date determined in the AZ Agreement. Thereafter, AstraZeneca may terminate its supply obligations upon certain advance notice to the Company, in which case the Company would have the right to manufacture or have manufactured its own requirements for the applicable Zomig® product.

Beginning from January 2013, the Company is obligated to pay AstraZeneca tiered royalties on net sales of Zomig® products, depending on brand exclusivity and subject to customary reductions and other terms and conditions set forth in the AZ Agreement. The Company owed a royalty payable to AstraZeneca of $5,888,000 and $25,598,000 during the six month periods ended June 30, 2014 and 2013, respectively, with a corresponding charge included in the cost of revenues line on the consolidated statement of operations. The Company is also obligated to pay AstraZeneca royalties after a certain specified date based on gross profit from sales of authorized generic versions of the Zomig products subject to certain terms and conditions set forth in the AZ Agreement. In May 2013, the Company’s exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and the Company launched authorized generic versions of those products in the United States.

Development and Co-Promotion Agreement with Endo Pharmaceuticals, Inc.

In June 2010, the Company and Endo Pharmaceuticals, Inc. ("Endo") entered into a Development and Co-Promotion Agreement (“Endo Agreement”) under which the Company and Endo have agreed to collaborate in the development and commercialization of a next-generation advanced form of the Company’s lead brand product candidate ("Endo Agreement Product"). Under the provisions of the Endo Agreement, in June 2010, Endo paid to the Company a $10,000,000 upfront payment. The Company has the potential to receive up to an additional $30,000,000 of contingent milestone payments, which includes $15,000,000 contingent upon the achievement of clinical events, $5,000,000 contingent upon the achievement of regulatory events, and $10,000,000 contingent upon the achievement of commercialization events. The Company believes all milestones under the Endo Agreement are substantive. Upon commercialization of the Endo Agreement Product in the United States, Endo will have the right to co-promote such product to non-neurologists, which will require the Company to pay Endo a co-promotion service fee of up to 100% of the gross profits attributable to prescriptions for the Endo Agreement Product which are written by the non-neurologists.

The Company is recognizing the $10,000,000 upfront payment as revenue on a straight-line basis over a period of 103 months, which is the estimated expected period of performance of research and development activities under the Endo Agreement, commencing with the June 2010 effective date of the Endo Agreement and ending in December 2018, the estimated date of FDA approval of the Company's NDA. The FDA approval of the Endo Agreement Product NDA represents the end of the Company’s expected period of performance, as the Company will have no further contractual obligation to perform research and development activities under the Endo Agreement, and therefore the earnings process will be completed. Deferred revenue is recorded as a liability captioned “Deferred revenue” on the consolidated balance sheet and deferred revenue under the Endo Agreement was $4,804,000 as of June 30, 2014. Revenue recognized under the Endo Agreement is reported in the line item “Other Revenues” in “Note 18 - Supplementary Financial Information.” The Company determined the straight-line method aligns revenue recognition with performance as the level of research and development activities performed under the Endo Agreement are expected to be performed on a ratable basis over the Company’s estimated expected period of performance. Upon FDA approval of the Company’s Endo Agreement Product NDA, the Company will have the right (but not the obligation) to begin manufacture and sale of such product. The Company will sell its manufactured branded product to customers in the ordinary course of business through its Impax Pharmaceuticals Division. The Company will account for any sale of the product covered by the Endo Agreement as current period revenue. The co-promotion service fee paid to Endo, as described above, if any, will be accounted for as a current period selling expense as incurred.

The Company and Endo also entered into a Settlement and License Agreement in June 2010 (the “Endo Settlement Agreement”) pursuant to which Endo agreed to make a payment to the Company should Prescription Sales of Opana® ER (as defined in the Endo Settlement Agreement) fall below a predetermined contractual threshold in the quarter immediately prior to the Company launching a generic version of Opana® ER. As a result of the Company’s launch of its generic version of Opana ER in January 2013 and Endo’s Prescription Sales of Opana ER during the fourth quarter of 2012, the Company recorded a $102,049,000 settlement gain during the three month period ended March 31, 2013, which is included in “Other Income” in the consolidated statement of operations.

Agreement with DURECT Corporation

During the three month period ended March 31, 2014, the Company entered into an agreement with DURECT Corporation (“Durect”) granting Impax the exclusive worldwide rights to develop and commercialize DURECT’s investigational transdermal bupivacaine patch for the treatment of pain associated with post-herpetic neuralgia (PHN), referred to by the Company as IPX239. The Company paid Durect a $2,000,000 up-front payment upon signing of the agreement. The Company has the potential to pay up to $61,000,000 in additional contingent milestone payments upon the achievement of predefined development and commercialization milestones. If IPX239 is commercialized, Durect would also receive a tiered royalty on product sales.

Agreement with Actavis plc

In July 2014, the Company acquired two generic products from Actavis plc (“Actavis”) pursuant to a Purchase Agreement and a Supply Agreement. The acquisition includes one product marketed under an ANDA and one approved ANDA that is currently not yet marketed.

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Note 8 - Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets Disclosure [Text Block]

8. GOODWILL AND INTANGIBLE ASSETS

Goodwill was $27,574,000 at June 30, 2014 and December 31, 2013, and the Company attributes the entire carrying amount of goodwill to the Global Division. Goodwill is tested at least annually for impairment or whenever events or changes in circumstances have occurred which could have a material adverse effect on the estimated fair value of the reporting unit, and thus indicate a potential impairment of the goodwill carrying value. The Company concluded the carrying value of goodwill was not impaired as of December 31, 2013.

Intangible assets consisted of the following:

(in $000’s) June 30, 2014	Initial Cost		Accumulated Amortization			Impairment			Carrying Value
Amortized intangible assets:
Zomig® product rights	$	41,783	$	(30,101	)	$	---		$	11,682
Tolmar product rights		31,450		(6,533	)		(16,032	)		8,885
Perrigo product rights		1,000		(297	)		---			703
Other product rights		2,250		---			(750	)		1,500
Total intangible assets	$	76,483	$	(36,931	)	$	(16,782	)	$	22,770

(in $000’s) December 31, 2013	Initial Cost		Accumulated Amortization			Impairment			Carrying Value
Amortized intangible assets:
Zomig® product rights	$	41,783	$	(28,641	)	$	---		$	13,142
Tolmar product rights		31,450		(3,266	)		(13,156	)		15,028
Other product rights		2,250		---			(750	)		1,500
Total intangible assets	$	75,483	$	(31,907	)	$	(13,906	)	$	29,670

The Zomig^® product rights under the Distribution, License, Development and Supply Agreement (“AZ Agreement”) with AstraZeneca UK Limited (“AstraZeneca”) were amortized on a straight-line basis over a period of 14 months starting in April 2012 and ending upon the expiration of the underlying patent for the tablet and over a period of 11 months starting in July 2012 and ending upon the expiration of the underlying patent for the orally disintegrating tablet. The Zomig^® product rights under the AZ Agreement are also being amortized over a period of 72 months starting in July 2012 for the nasal spray. In June 2012, the Company entered into a Development, Supply and Distribution Agreement (the “Tolmar Agreement”) with TOLMAR, Inc. (“Tolmar”). Under the terms of the Tolmar Agreement, Tolmar granted to the Company an exclusive license to commercialize up to 11 generic topical prescription drug products, including ten currently approved products and one product pending approval at the FDA, in the United States and its territories. Under the terms of the Tolmar Agreement, Tolmar is responsible for developing and manufacturing the products, and the Company is responsible for the marketing and sale of the products. During the three month period ended September 30, 2013, as a result of the most recent market share data obtained by the Company and the Company’s revised five year projections for the Tolmar product lines, the Company performed an intangible asset impairment test on the Tolmar products. Based on the results of the impairment analysis, the Company recorded a $13.2 million impairment charge to cost of revenues for the Global Division in the three month period ended September 30, 2013. During the three month period ended March 31, 2014, as a result of a further decline in pricing, the Company revised its projections and performed an intangible asset impairment analysis. Based on the results of this analysis, the Company recorded a $2.9 million charge to cost of revenues for the Global Pharmaceuticals Division, which was 100% of the remaining net book value of this asset. The remaining carrying value of the Tolmar product rights are being amortized over the remaining estimated useful lives of the underlying products over a period ranging from five to 12 years, starting upon commencement of commercialization activities by the Company during the year ended December 31, 2012. Information concerning the AZ Agreement and the Tolmar Agreement can be found in “Note 12 - Alliance and Collaboration Agreements.” During the three month period ended June 30, 2014, the Company paid a $1.0 million milestone payment to Perrigo Company, plc (“Perrigo”) in conjunction with its launch of a generic version of Astepro^® nasal spray pursuant to a development agreement between the Company and an affiliate of Perrigo. The milestone was capitalized as an intangible asset acquisition and will be amortized over the expected cash flows of the product. Other product rights consist of Abbreviated New Drug Applications (“ANDAs”) which have been filed with the FDA. During the three month period ended September 30, 2013, as a result of a decision by management to withdraw one of these ANDAs and no longer seek FDA approval, the Company recorded an intangible asset impairment charge of $0.8 million in research and development expense, representing the full carrying value of the ANDA. For the remaining ANDAs, the Company will either commence amortization upon FDA approval and commercialization over the estimated useful life of the product rights, or will expense the related costs immediately upon failure to obtain FDA approval. Amortization expense is included as a component of cost of revenues on the consolidated statement of operations and was $2,594,000 and $3,174,000 for the three month periods ended June 30, 2014 and 2013, respectively, and $5,024,000 and $10,315,000 for the six month periods ended June 30, 2014 and 2013, respectively.

The following schedule shows the expected amortization of the Zomig^®, Tolmar and Perrigo product rights as of June 30, 2014 for the next five years and thereafter: 

(in $000s)	Amortization Expense
2014	$	4,594
2015		4,898
2016		3,923
2017		3,738
2018		2,121
Thereafter		1,996
Totals	$	21,270

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Note 13 - Share-Based Compensation (Details) - Summary of Stock Option Activity (USD $)	6 Months Ended
	Jun. 30, 2014
Summary of Stock Option Activity [Abstract]
Options Outstanding	3,770,905
Options Outstanding	$ 14.01
Options exercisable at June 30, 2014	2,623,294
Options exercisable at June 30, 2014	$ 12.34
Options granted	381,100
Options granted	$ 25.03
Options exercised	(504,242)
Options exercised	$ 15.26
Options forfeited	(261,929)
Options forfeited	$ 20.14
Options Outstanding	3,385,834
Options Outstanding	$ 14.61

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Note 6 - Inventory

6 Months Ended

Jun. 30, 2014

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

6. INVENTORY

Inventory is stated at the lower of cost or market. Cost is determined using a standard cost method, and the cost flow assumption is first in, first out (“FIFO”) flow of goods. Standard costs are revised annually, and significant variances between actual costs and standard costs are apportioned to inventory and cost of goods sold based upon inventory turnover. Costs include materials, labor, quality control, and production overhead. Inventory is adjusted for short-dated, unmarketable inventory equal to the difference between the cost of inventory and the estimated value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by the Company, additional inventory write-downs may be required. Consistent with industry practice, the Company may build pre-launch inventories of certain products which are pending required approval from the FDA and/or resolution of patent infringement litigation, when, in the Company’s assessment, such action is appropriate to increase the commercial opportunity and FDA approval is expected in the near term and/or the litigation will be resolved in the Company’s favor. The Company accounts for all costs of idle facilities, excess freight and handling costs, and wasted materials (spoilage) as a current period charge in accordance with GAAP.

Inventory, net of carrying value reserves at June 30, 2014 and December 31, 2013 consisted of the following: 

(in $000’s)	June 30, 2014		December 31, 2013
Raw materials	$	32,447	$	27,981
Work in process		3,297		1,434
Finished goods		56,347		47,416
Total inventory		92,091		76,831
Less: Non-current inventory		7,295		6,724
Total inventory-current	$	84,796	$	70,107

Inventory carrying value reserves were $28,026,000 and $17,702,000 at June 30, 2014 and December 31, 2013, respectively. During the three month period ended March 31, 2013, the Company decided to discontinue the manufacture and distribution of certain unprofitable products after the Company conducted a strategic review of its currently manufactured generic product portfolio. As a result of this decision, the Company recorded an inventory reserve of $6.7 million related to the discontinued products. In addition during the three month period ended March 31, 2013, upon receipt of the Complete Response Letter for RYTARY™, the Company evaluated the impact of the expected delay of FDA approval on its ability to sell the associated inventory. The Company determined that a reserve of $5.0 million was appropriate and recorded this amount in the three month period ended March 31, 2013. During the three month period ended March 31, 2013, the Company also recorded a $6.4 million reserve for pre-launch inventory of a product manufactured for another third-party pharmaceutical company due to the anticipated delayed launch of such product as a result of the warning letter related to our Hayward, California manufacturing facility. The carrying value of unapproved inventory less reserves was $10,028,000 and $6,462,000 at June 30, 2014 and December 31, 2013, respectively.

The Company recognizes pre-launch inventories at the lower of its cost or the expected net selling price. Cost is determined using a standard cost method, which approximates actual cost, and assumes a FIFO flow of goods. Costs of unapproved products are the same as approved products and include materials, labor, quality control, and production overhead. When the Company concludes that FDA approval is expected within approximately six months for a drug product candidate, the Company may begin to schedule manufacturing process validation studies as required by the FDA to demonstrate the production process can be scaled up to manufacture commercial batches. Consistent with industry practice, the Company may build quantities of unapproved product inventory pending final FDA approval and/or resolution of patent infringement litigation, when, in the Company’s assessment, such action is appropriate to increase its commercial product opportunity, and FDA approval is expected in the near term, and/or the litigation will be resolved in the Company’s favor. The capitalization of unapproved pre-launch inventory involves risks, including, among other items, FDA approval may not occur; approvals may require additional or different testing and/or specifications than used for unapproved inventory, and in cases where the unapproved inventory is for a product subject to litigation, the litigation may not be resolved or settled in the Company’s favor. If any of these risks materialize and the launch of the unapproved product inventory is delayed or prevented, then the net carrying value of unapproved inventory may be partially or fully reserved. Generally, the selling price of a generic pharmaceutical product is at a discount from the corresponding brand product selling price. Typically, a generic drug is easily substituted for the corresponding brand product, and once a generic product is approved, the pre-launch inventory is typically sold within the next three months. If the market prices become lower than the product inventory carrying costs, then the pre-launch inventory value is reduced to such lower market value. If the inventory produced exceeds the estimated market acceptance of the generic product and becomes short-dated, a carrying value reserve will be recorded. In all cases, the carrying value of the Company's pre-launch product inventory is lower than the respective estimated net selling prices.

To the extent inventory is not scheduled to be utilized in the manufacturing process and/or sold within twelve months of the balance sheet date, it is included as a component of other non-current assets. Amounts classified as non-current inventory consist of raw materials, net of valuation reserves. Raw materials generally have a shelf life of approximately three to five years, while finished goods generally have a shelf life of approximately two years.

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Note 7 - Property, Plant and Equipment

6 Months Ended

Jun. 30, 2014

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

7. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net consisted of the following:

(in $000’s)	June 30, 2014			December 31, 2013
Land	$	5,773		$	5,773
Buildings and improvements		152,397			139,657
Equipment		121,440			114,950
Office furniture and equipment		12,452			11,523
Construction-in-progress		11,060			15,910
Property, plant and equipment, gross	$	303,122		$	287,813
Less: Accumulated depreciation		(109,046	)		(99,622	)
Property, plant and equipment, net	$	194,076		$	188,191

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Note 9 - Accrued Expenses, Commitments and Contingencies

6 Months Ended

Jun. 30, 2014

Accrued Liabilities Disclosure [Abstract]

Accrued Liabilities Disclosure [Text Block]

9. ACCRUED EXPENSES, COMMITMENTS AND CONTINGENCIES

The following table sets forth the Company’s accrued expenses:  

(in $000’s)	June 30, 2014		December 31, 2013
Payroll-related expenses	$	23,769	$	27,985
Product returns		29,817		28,089
Government rebates		19,882		23,351
Accrued shelf-stock		1,984		774
Legal and professional fees		4,760		3,162
Income taxes payable		17,562		21,186
Physician detailing sales force fees		1,119		1,512
Other		5,346		5,464
Total accrued expenses	$	104,239	$	111,523

Product Returns

The Company maintains a return policy to allow customers to return product within specified guidelines. At the time of sale, the Company estimates a provision for product returns based upon historical experience for sales made through its Global Products and Impax Products sales channels. Sales of product under the Private Label, Rx Partner and OTC Partner alliance and collaboration agreements are generally not subject to returns. A roll forward of the product return reserve for the six month period ended June 30, 2014 and the year ended December 31, 2013 is as follows:

(in $000’s) Returns Reserve	June 30, 2014			December 31, 2013
Beginning balance	$	28,089		$	23,440
Provision related to sales recorded in the period		6,831			11,015
Credits issued during the period		(5,103	)		(6,366	)
Ending balance	$	29,817		$	28,089

Taiwan Facility Construction

The Company has entered into several contracts relating to ongoing construction at its manufacturing facility located in Jhunan, Taiwan, R.O.C. As of June 30, 2014, the Company had remaining obligations under these contracts of approximately $3,685,000.

Purchase Order Commitments

As of June 30, 2014, the Company had $46,198,000 of open purchase order commitments, primarily for raw materials. The terms of these purchase order commitments are less than one year in duration.

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Note 15 - Earnings Per Share (Details) - Reconciliation of Basic and Diluted Earnings per Share (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2014	Jun. 30, 2013
Reconciliation of Basic and Diluted Earnings per Share [Abstract]
Net income (in Dollars)	$ 35,071	$ 6,425	$ 5,619	$ 105,442	$ 41,496	$ 111,061
Weighted average common shares outstanding	68,095,159	67,702,296	66,748,864	66,487,470	67,899,894	66,618,889
Effect of dilutive stock options and restricted stock awards	2,218,332		1,539,084		2,295,435	1,763,115
Diluted weighted average common shares outstanding	70,313,491	69,938,872	68,287,948	68,178,355	70,195,329	68,382,004
Basic net income per share (in Dollars per share)	$ 0.52	$ 0.09	$ 0.08	$ 1.59	$ 0.61	$ 1.67
Diluted net income per share (in Dollars per share)	$ 0.50	$ 0.09	$ 0.08	$ 1.55	$ 0.59	$ 1.62

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Note 16 - Segment Information (Details) - Segment Information Reconciled to Total Company Consolidated Financial Results (USD $)	3 Months Ended				6 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Jun. 30, 2013	Mar. 31, 2013	Jun. 30, 2014	Jun. 30, 2013
Segment Reporting Information [Line Items]
Revenues, net	$ 188,121,000	$ 118,718,000	$ 129,631,000	$ 148,489,000	$ 306,839,000	$ 278,120,000
Cost of revenues	78,349,000		70,744,000		139,445,000	161,361,000
Research and development	21,252,000		15,540,000		42,993,000	35,145,000
Patent litigation expense	1,767,000		4,304,000		3,940,000	8,582,000
Income (loss) before provision for income taxes	54,425,000		9,035,000		63,055,000	162,755,000
Global Division [Member]
Segment Reporting Information [Line Items]
Revenues, net	176,394,000	109,141,000	93,965,000	101,636,000	285,534,000	195,602,000
Cost of revenues	69,872,000		54,727,000		126,894,000	116,171,000
Research and development	10,745,000		9,291,000		21,962,000	21,002,000
Patent litigation expense	1,767,000		4,304,000		3,940,000	8,582,000
Income (loss) before provision for income taxes	89,438,000		21,761,000		125,783,000	40,921,000
Impax Division [Member]
Segment Reporting Information [Line Items]
Revenues, net	11,727,000	9,577,000	35,666,000	46,853,000	21,305,000	82,518,000
Cost of revenues	8,477,000		16,017,000		12,551,000	45,190,000
Research and development	10,507,000		6,249,000		21,031,000	14,143,000
Income (loss) before provision for income taxes	(18,991,000)		1,564,000		(33,232,000)	(1,414,000)
Corporate and Other [Member]
Segment Reporting Information [Line Items]
Income (loss) before provision for income taxes	$ (16,022,000)		$ (14,290,000)		$ (29,496,000)	$ 123,248,000

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Note 15 - Earnings Per Share (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	909,100	2,330,114	921,100	1,677,129

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Note 13 - Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000’s)	2014		2013		2014		2013
Manufacturing expenses	$	597	$	208	$	1,492	$	880
Research and development		1,379		1,352		2,781		2,728
Selling, general and administrative		3,158		4,585		5,247		6,895
Total	$	5,134	$	6,145	$	9,520	$	10,503

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	Number of Shares Under Option			Weighted Average Exercise Price per Share
Outstanding at December 31, 2013		3,770,905		$	14.01
Options granted		381,100		$	25.03
Options exercised		(504,242	)	$	15.26
Options forfeited		(261,929	)	$	20.14
Outstanding at June 30, 2014		3,385,834		$	14.61
Options exercisable at June 30, 2014		2,623,294		$	12.34

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

Restricted Stock Awards	Number of Restricted Stock Awards			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2013		2,123,835		$	21.13
Granted		718,615		$	22.80
Vested		(183,283	)	$	21.42
Forfeited		(161,960	)	$	20.38
Non-vested at June 30, 2014		2,497,207		$	21.63

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Note 8 - Goodwill and Intangible Assets (Details) - Expected Amortization Expense (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014
Expected Amortization Expense [Abstract]
2014	$ 4,594
2015	4,898
2016	3,923
2017	3,738
2018	2,121
Thereafter	1,996
Totals	$ 21,270

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Note 14 - Stockholders' Equity

6 Months Ended

Jun. 30, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

14. STOCKHOLDERS’ EQUITY

Preferred Stock

Pursuant to its certificate of incorporation, the Company is authorized to issue 2,000,000 shares, $0.01 par value per share, “blank check” preferred stock, which enables the Board of Directors, from time to time, to create one or more new series of preferred stock. Each series of preferred stock issued can have the rights, preferences, privileges and restrictions designated by the Board of Directors. The issuance of any new series of preferred stock could affect, among other things, the dividend, voting, and liquidation rights of the Company’s common stock. During the six month periods ended June 30, 2014 and 2013, the Company did not issue any preferred stock.

Common Stock

The Company’s certificate of incorporation, as amended, authorizes the Company to issue 90,000,000 shares of common stock with $0.01 par value.

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Note 19 - Subsequent Events

6 Months Ended

Jun. 30, 2014

Subsequent Events [Abstract]

Subsequent Events [Text Block]

19. SUBSEQUENT EVENTS

On July 29, 2014, the Company announced that the FDA performed a general current Good Manufacturing Practices (cGMP) inspection and a Pre-Approval Inspection (PAI) for RYTARY™ at the Company’s Taiwan manufacturing facility from July 21 to July 26, 2014. At the conclusion of the inspection, the FDA issued a Form 483 with ten inspectional observations. On August 4, 2014, the Company announced that the FDA performed a re-inspection of the Company’s Hayward, California manufacturing facility from June 16 to July 31, 2014 and at the conclusion of the inspection, the FDA issued a Form 483 with seven inspectional observations, two of which were designated as repeat observations. The FDA did not provide any status or classification to either of the Form 483 observations and pursuant to its established regulatory process, will defer classification of the observations until it has reviewed the Company’s response to the inspections. The Company is currently working on its responses to the observations. The Company has also not been informed by the FDA of the impact the Form 483s will have on RYTARY™’s October 9, 2014 PDUFA review date.

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Note 8 - Goodwill and Intangible Assets (Details) (USD $)	3 Months Ended			6 Months Ended			3 Months Ended					12 Months Ended	1 Months Ended	6 Months Ended	1 Months Ended	6 Months Ended						1 Months Ended	6 Months Ended
	Jun. 30, 2014	Mar. 31, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013	Mar. 31, 2014 Cost of Sales [Member]	Sep. 30, 2013 Cost of Sales [Member]	Sep. 30, 2013 Research and Development Expense [Member] Abbreviated New Drug Applications [Member]	Jun. 30, 2014 Milestone Payments [Member] Tolmar Incorporated [Member]	Dec. 31, 2013 Milestone Payments [Member] Tolmar Incorporated [Member]	Dec. 31, 2012 Milestone Payments [Member] Tolmar Incorporated [Member]	Jun. 30, 2012 Products Approved [Member] Tolmar Incorporated [Member]	Jun. 30, 2014 Products Approved [Member] Tolmar Incorporated [Member]	Jun. 30, 2012 Product Pending Approval [Member] Tolmar Incorporated [Member]	Jun. 30, 2014 Product Pending Approval [Member] Tolmar Incorporated [Member]	Jun. 30, 2014 Zomig Product Rights Tablet [Member]	Jun. 30, 2014 Zomig Product Rights Orally Disintegrating Tablet [Member]	Jun. 30, 2014 Zomig Product Rights Nasal Spray [Member]	Jun. 30, 2014 Tolmar Product Rights [Member] Minimum [Member]	Jun. 30, 2014 Tolmar Product Rights [Member] Maximum [Member]	Jun. 30, 2012 Tolmar Incorporated [Member]	Jun. 30, 2014 Tolmar Incorporated [Member]
Note 8 - Goodwill and Intangible Assets (Details) [Line Items]
Goodwill	$ 27,574,000			$ 27,574,000		$ 27,574,000
Finite-Lived Intangible Asset, Useful Life																	14 months	11 months	72 months	5 years	12 years
Number Of Products													10	10	1	1						11	11
Impairment of Intangible Assets (Excluding Goodwill)				2,876,000			2,900,000	13,200,000	800,000
Impairment of Intangible Assets (Excluding Goodwill), Percent of Carrying Value		100.00%
Collaborative Arrangement Required Payment Net										1,000,000	12,000,000	1,000,000
Amortization of Intangible Assets	$ 2,594,000		$ 3,174,000	$ 5,024,000	$ 10,315,000

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Note 2 - Revenue Recognition (Details)	6 Months Ended
	Jun. 30, 2014
Note 2 - Revenue Recognition (Details) [Line Items]
Cash Discount Discount Rate	2.00%
Minimum [Member]
Note 2 - Revenue Recognition (Details) [Line Items]
Cash Discount Invoice Terms	30 days
Maximum [Member]
Note 2 - Revenue Recognition (Details) [Line Items]
Cash Discount Invoice Terms	90 days

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Consolidated Statements of Comprehensive Income (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Net income	$ 35,071	$ 5,619	$ 41,496	$ 111,061
Currency translation adjustments	2,420	(307)	(15)	(3,804)
Comprehensive income	$ 37,491	$ 5,312	$ 41,481	$ 107,257

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Note 3 - Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2014

New Accounting Pronouncements and Changes in Accounting Principles [Abstract]

New Accounting Pronouncements and Changes in Accounting Principles [Text Block]

3. RECENT ACCOUNTING PRONOUNCEMENTS

In March 2013, the FASB issued updated guidance on foreign currency matters. The update applies to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets within a foreign entity. The Company adopted this guidance on January 1, 2014 and the adoption did not have a material effect on its consolidated financial statements.

In July 2013, the FASB issued updated guidance related to presentation of an unrecognized tax benefit. The guidance requires an entity to present an unrecognized tax benefit as a reduction of a deferred tax asset for a net operating loss (NOL) carryforward, or similar tax loss, or tax credit carryforward, rather than as a liability under certain circumstances. The Company adopted this guidance on January 1, 2014 and the adoption did not have a material effect on its consolidated financial statements.

In May 2014, the FASB issued updated guidance regarding the accounting for and disclosures of revenue recognition. The update provides a single comprehensive model for accounting for revenue from contracts with customers. The model requires that revenue recognized reflect the actual consideration to which the entity expects to be entitled in exchange for the goods or services defined in the contract, including in situations with multiple performance obligations. This guidance will be the same for both U.S. GAAP and International Financial Reporting Standards (IFRS) and is effective for annual and interim periods beginning after December 15, 2016. The Company is currently evaluating the effect that this guidance may have on its consolidated financial statements.

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Note 13 - Share-Based Compensation (Details) (USD $)	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Note 13 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Expected Dividend Rate	0.00%
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized (in Dollars)	$ 48,597,280
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 346 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number (in Shares)	2,997,000
undefined (in Shares)	2,211,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value (in Dollars)	5,005,000	5,113,000
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Fair Value (in Dollars)	$ 3,865,000	$ 3,069,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)	2,883,657
Stock Options and Restricted Stock Awards [Member]
Note 13 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period	10 years
Stock Options and Restricted Stock Awards [Member] | Minimum [Member]
Note 13 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Stock Options and Restricted Stock Awards [Member] | Maximum [Member]
Note 13 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	4 years
Restricted Stock Awards [Member] | Minimum [Member]
Note 13 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Restricted Stock Awards [Member] | Maximum [Member]
Note 13 - Share-Based Compensation (Details) [Line Items]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	4 years

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Supplemental Cash Flow Information (Tables)

6 Months Ended

Jun. 30, 2014

Supplemental Cash Flow Elements [Abstract]

Schedule of Cash Flow, Supplemental Disclosures [Table Text Block]

	Six Months Ended
(in $000's)	June 30, 2014		June 30, 2013
Cash paid for interest	$	16	$	87
Cash paid for income taxes	$	28,955	$	8,333

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Supplemental Cash Flow Information (Details) (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Supplemental Cash Flow Elements [Abstract]
Accrued Vendor Invoices			$ 2,282,000	$ 1,183,000
Depreciation	$ 5,054,000	$ 4,740,000	$ 10,027,000	$ 9,500,000

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Note 13 - Share-Based Compensation

6 Months Ended

Jun. 30, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

13. SHARE-BASED COMPENSATION

The Company recognizes the grant date fair value of each stock option and restricted stock award over its vesting period. Stock options and restricted stock awards are granted under the Company’s Second Amended and Restated 2002 Equity Incentive Plan (“2002 Plan”) and generally vest over a three or four year period and have a term of ten years. Total share-based compensation expense recognized in the consolidated statement of operations during the three and six month periods ended June 30, 2014 and 2013 was as follows:  

	Three Months Ended June 30,				Six Months Ended June 30,
(in $000’s)	2014		2013		2014		2013
Manufacturing expenses	$	597	$	208	$	1,492	$	880
Research and development		1,379		1,352		2,781		2,728
Selling, general and administrative		3,158		4,585		5,247		6,895
Total	$	5,134	$	6,145	$	9,520	$	10,503

The following table summarizes stock option activity during the six month period ended June 30, 2014:  

	Number of Shares Under Option			Weighted Average Exercise Price per Share
Outstanding at December 31, 2013		3,770,905		$	14.01
Options granted		381,100		$	25.03
Options exercised		(504,242	)	$	15.26
Options forfeited		(261,929	)	$	20.14
Outstanding at June 30, 2014		3,385,834		$	14.61
Options exercisable at June 30, 2014		2,623,294		$	12.34

The Company estimated the fair value of each stock option award on the grant date using the Black-Scholes option pricing model. Expected volatility is based solely on historical volatility of the Company’s common stock. The expected term calculation is based on the “simplified” method described in SAB No. 107, Share-Based Payment and SAB No. 110, Share-Based Payment, as the result of the simplified method provides a reasonable estimate in comparison to the Company’s actual experience. The risk-free interest rate is based on the U.S. Treasury yield at the date of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield of zero is based on the fact that the Company has never paid cash dividends on its common stock, and has no present intention to pay cash dividends.

A summary of the Company’s non-vested restricted stock awards activity during the six month period ended June 30, 2014 is presented below:  

Restricted Stock Awards	Number of Restricted Stock Awards			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2013		2,123,835		$	21.13
Granted		718,615		$	22.80
Vested		(183,283	)	$	21.42
Forfeited		(161,960	)	$	20.38
Non-vested at June 30, 2014		2,497,207		$	21.63

The Company grants restricted stock awards to certain eligible employees and directors as a component of its long-term incentive compensation program. The restricted stock award grants are made in accordance with the Company’s 2002 Plan, and typically specify that the shares of common stock underlying the restricted stock awards are not issued until they vest. The restricted stock awards generally vest ratably over a three or four year period from the date of grant.  

As of June 30, 2014, the Company had total unrecognized share-based compensation expense, net of estimated forfeitures, of $48,597,280 related to all of its share-based awards, which will be recognized over a weighted-average period of 1.95 years. As of June 30, 2014, the Company estimated 2,997,000 stock options and 2,211,000 shares of restricted stock awards granted to employees which were vested or expected to vest. The intrinsic value of stock options exercised during the six month periods ended June 30, 2014 and 2013 was $5,005,000 and $5,113,000, respectively. The total fair value of restricted stock awards which vested during the six month periods ended June 30, 2014 and 2013 was $3,865,000 and $3,069,000, respectively. As of June 30, 2014, the Company had 2,883,657 shares of common stock available for issuance of stock options, restricted stock awards, and/or stock appreciation rights.