Impax Reports Fourth Quarter and Full Year 2017 Results

Published: Mar 01, 2018

BRIDGEWATER, N.J., March 1, 2018 /PRNewswire/ -- Impax Laboratories, Inc. (NASDAQ: IPXL), today announced fourth quarter and full year 2017 financial results.

Fourth Quarter 2017

  • Total revenues in the fourth quarter 2017 were $182.9 million, a decrease of 7.8%, compared to $198.4 million in the prior year period due to a decrease in sales of generic products, partially offset by an increase in sales of specialty products.
  • GAAP net loss was $301.1 million or a loss of $4.18 per share for the fourth quarter 2017, compared to a loss of $279.6 million or a loss of $3.91 per share in the prior year period. The fourth quarter of 2017 includes $230.7 million of non-cash intangible asset impairment charges on a few currently marketed and in-development generic products primarily due to competition, and a $74.1 million impairment charge associated with the sale of the Taiwan manufacturing facility. The fourth quarter of 2016 includes non-cash intangible asset impairment charges of $253.9 million due to competition and product discontinuations primarily related to certain products acquired in the Company's acquisition of Tower Holdings, Inc. and subsidiaries in March 2015 (the "Tower Acquisition").
  • Adjusted net income was $7.6 million or $0.11 per share in the fourth quarter 2017, compared to $11.6 million or $0.16 per share in the prior year period, primarily due to lower generic product revenue. Refer to the attached "Non-GAAP Financial Measures" for a reconciliation of all GAAP to non-GAAP items.
  • EBITDA (earnings before interest, taxes, depreciation and amortization) was a loss of $274.8 million in the fourth quarter 2017, compared to a loss of $234.0 million in the prior year period, primarily as a result of the charges noted above. Adjusted EBITDA was $33.1 million, compared to $37.3 million in the prior year period.

Full Year 2017

  • Total revenues for the full year 2017 were $775.8 million, a decrease of 5.9%, compared to $824.4 million in the prior year due to a decrease in sales of generic products, partially offset by an increase in sales of specialty products.
  • GAAP net loss was $469.3 million or a loss of $6.53 per share for the full year 2017, compared to a loss of $472.0 million or a loss of $6.63 per share in the prior year, primarily a result of the items noted above. The full year 2017 GAAP results include $289.7 million of non-cash intangible asset impairment charges on a few currently marketed and in- development generic products primarily due to competition, and a $74.1 million impairment charge associated with the sale of the Taiwan manufacturing facility. The GAAP results for 2016 include non-cash intangible asset impairment charges of $541.6 million related to certain products acquired from Teva Pharmaceuticals Industries Ltd. and affiliates of Allergan plc in August 2016 (the "Teva Transaction") and from the Tower Acquisition.
  • Adjusted net income was $45.2 million or $0.63 per share for the full year 2017, compared to $83.7 million or $1.16 per share in the prior year, primarily due to lower generic product revenue caused by buyer consolidation and additional competition. Refer to the attached "Non-GAAP Financial Measures" for a reconciliation of all GAAP to non-GAAP items.
  • EBITDA for the full year 2017 was a loss of $303.8 million, compared to a loss of $453.0 million in the prior year, primarily as a result of the charges noted above. Adjusted EBITDA was $149.8 million, compared to $200.4 million in the prior year.

"2017 was a year of transition for Impax," said Paul Bisaro, President and Chief Executive Officer of Impax. "Throughout the year we successfully executed on our Path Forward growth strategy. We continued to build momentum in our Specialty Pharma franchise which delivered strong sales growth of Rytary® with an increase of 24% over 2016. Our Generics franchise, facing a challenging generic market environment, worked hard to mitigate the impact of those challenges on our business. "

"We also completed our operational and cost improvement program nearly one year ahead of schedule," continued Bisaro. "Key highlights included the sale of our Taiwan manufacturing subsidiary for $18.5 million, completing the closure of our Middlesex, New Jersey R&D and packaging facility, and completing our product optimization strategies across our generic portfolio. These actions are expected to generate run-rate savings of approximately $85 million."

"We made significant progress in preparing for our combination with Amneal Pharmaceuticals. Integration planning teams are finalizing key Day 1 plans to ensure business continuity following the close of the transaction. We remain excited about the value of this combination, which will create a more diversified company with one of the industry's leading high-value generic product pipelines. We are currently on track to close the transaction in the second quarter of 2018 and expect to provide combined company full year 2018 guidance after the close of the transaction."

Business Segment Information

The Company has two reportable segments, the Impax Generics division and the Impax Specialty Pharma division and does not allocate general corporate services to either segment. All information presented is on a GAAP basis unless otherwise noted.

    Impax Generics Division Information

    (Unaudited; In thousands)


                                                             Three Months Ended              Year Ended

                                                                December 31,                December 31,
                                                                ------------                ------------

                                                                 2017                  2016                2017          2016
                                                                 ----                  ----                ----          ----

    Revenues:

    Impax Generics Product sales, net                        $112,943              $139,226            $549,077      $606,320
                                                             --------              --------            --------      --------

    Cost of revenues                                          106,801               109,380             454,911       417,316

    Cost of revenues impairment charges                        43,961               206,312              96,865       464,319
                                                               ------               -------              ------       -------

    Gross loss                                               (37,819)            (176,466)            (2,699)    (275,315)
                                                              -------              --------              ------      --------

    Operating expenses:

    Selling, general and administrative                         8,223                 8,066              28,294        20,508

    Research and development                                   12,612                15,868              63,245        61,980

    In-process research and development impairment charges    186,731                11,275             192,809        27,765

    Fixed asset impairment charges                              5,577                     -              8,380             -

    Change in fair value of contingent consideration         (38,123)                    -           (31,048)            -

    Patent litigation expense                                     112                   413                 827           829

    Total operating expenses                                  175,132                35,622             262,507       111,082
                                                              -------                ------             -------       -------

    Loss from operations                                   $(212,951)           $(212,088)         $(265,206)   $(386,397)
                                                            =========             =========           =========     =========


    Gross margin                                              (33.5%)             (126.7%)             (0.5%)      (45.4%)

    Adjusted gross profit (a)                                 $35,401               $45,730            $209,073      $238,364

    Adjusted gross margin (a)                                   31.3%                32.8%              38.1%        39.3%

(a) Adjusted gross profit is calculated as total revenues less adjusted cost of revenues. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. Refer to the "Non-GAAP Financial Measures" for a reconciliation of GAAP to non-GAAP items.

Fourth Quarter 2017

Total revenues for the Generics division in the fourth quarter 2017 were $112.9 million, a decrease of 18.9%, compared to the prior year period. The decrease compared to the prior year period was primarily due to revenue reductions from increased competition on a few key products including diclofenac sodium gel, budesonide, fenofibrate and metaxalone, partially offset by higher revenue from epinephrine auto-injector and new product launches.

Gross margin in the fourth quarter 2017 was a loss of 33.5%, compared to a loss of 126.7% in the prior year period, primarily due to significantly lower impairment charges during the fourth quarter 2017. Adjusted gross margin in the fourth quarter 2017 declined to 31.3%, compared to 32.8% in the prior year period, primarily due to product sales mix.

Total operating expenses in the fourth quarter 2017 were $175.1 million, compared to $35.6 million in the prior year period, primarily due to significantly higher in-process research and development impairment charges as a result of either delays in the anticipated launch or additional competition on a few products acquired in the Teva Transaction. The Company also incurred fixed asset impairment charges related to the planned closure of the Middlesex, New Jersey manufacturing facility, which the Company subsequently sold in early 2018. The increase was partially offset by a change in the fair value of contingent consideration for generic Concerta® based on the Company's review of the anticipated timing and probability of the products launch and an assessment of the number of competitors expected in the market.

Full Year 2017

Total revenues for the Generics division for the full year 2017 were $549.1 million, a decrease of 9.4%, over the prior year. The decrease compared to the prior year was primarily due to increased competition on diclofenac sodium gel, metaxalone, generic Adderall XR® and fenofibrate. These decreases were partially offset by increased revenues from epinephrine auto-injector, budesonide and other products acquired as part of the Teva Transaction compared to the prior year.

Gross margin for the full year 2017 was a loss of 0.5%, compared to a loss of 45.4% in the prior year, primarily due to lower impairment charges during 2017. Adjusted gross margin for the full year 2017 declined to 38.1%, compared to 39.3% in the prior year, primarily due to product sales mix.

Total operating expenses for the full year 2017 were $262.5 million, compared to $111.1 million in the prior year. The increase was primarily due to in-process research and development impairment charges and fixed assets impairment charges, partially offset by a change in the fair value of contingent consideration, as noted above, compared to the prior year.

    Impax Specialty Pharma Division Information

    (Unaudited; In thousands)


                                                             Three Months Ended             Year Ended

                                                                December 31,               December 31,
                                                                ------------               ------------

                                                                2017                  2016                2017       2016
                                                                ----                  ----                ----       ----

    Revenues:

    Rytary(R) sales, net                                     $28,290               $21,803             $91,637    $73,833

    Zomig(R) sales, net                                       15,034                13,576              51,115     53,539

    All Other Specialty Pharma Product sales, net             26,643                23,817              83,958     90,737

    Total revenues                                            69,967                59,196             226,710    218,109
                                                              ------                ------             -------    -------

    Cost of revenues                                          19,679                19,667              80,212     69,583

    Cost of revenues impairment charges                            -               24,313                   -    24,313
                                                                 ---               ------                 ---    ------

    Gross profit                                              50,288                15,216             146,498    124,213
                                                              ------                ------             -------    -------

    Operating expenses:

    Selling, general and administrative                       18,670                15,139              67,949     61,448

    Research and development                                   3,077                 4,662              17,602     18,486

    In-process research and development impairment charges         -               11,973                   -    25,200

    Fixed asset impairment charges                            74,128                     -             74,128          -

    Patent litigation expense                                  1,111                   879               4,278      6,990

    Total operating expenses                                  96,986                32,653             163,957    112,124
                                                              ------                ------             -------    -------

    (Loss) income from operations                          $(46,698)            $(17,437)          $(17,459)   $12,089
                                                            ========              ========            ========    =======


    Gross margin                                               71.9%                25.7%              64.6%     56.9%

    Adjusted gross profit (a)                                $55,940               $46,945            $170,916   $174,417

    Adjusted gross margin (a)                                  80.0%                79.3%              75.4%     80.0%

(a) Adjusted gross profit is calculated as total revenues less adjusted cost of revenues. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. Refer to the "Non-GAAP Financial Measures" for a reconciliation of GAAP to non-GAAP items.

Fourth Quarter 2017

Total revenues for the Specialty Pharma division in the fourth quarter 2017 were $70.0 million, an increase of 18.2%, compared to the prior year period, driven by higher revenue from Rytary®, Zomig® and the anthelmintic products franchise.

Gross margin in the fourth quarter 2017 was 71.9%, compared to 25.7% in the prior year period, primarily due to impairment charges in the fourth quarter 2016 for which there were no comparable amounts in the fourth quarter of 2017. Adjusted gross margin in the fourth quarter 2017 was 80.0%, compared to 79.3% in the prior year period, primarily due to product sales mix.

Total operating expenses in the fourth quarter 2017 were $97.0 million, compared to $32.7 million in the prior year period. The increase was primarily due to fixed asset impairment charges associated with the Company's entry into an agreement with a third party to sell its Taiwan subsidiary and Taiwan operations, partially offset by lower in-process research and development impairment charges, compared to the prior year period. Additionally, selling, general and administrative expenses in the fourth quarter 2017 increased compared to the prior year period due to restructuring and severance-related charges as a result of a reorganization within the division.

Full Year 2017

Total revenues for the Specialty Pharma division for the full year 2017 were $226.7 million, an increase of 3.9% over the prior year. The increase from the prior year was primarily due to higher revenue from Rytary, partially offset by lower sales of our anthelmintic products franchise and Zomig.

Gross margin for the full year 2017 was 64.6%, compared to 56.9% in the prior year primarily due to impairment charges in 2016 for which there were no comparable amounts in 2017. Adjusted gross margin for the full year 2017 was 75.4%, compared to 80.0% in the prior year, primarily due to product sales mix.

Total operating expenses for the full year 2017 were $164.0 million, compared to $112.1 million in the prior year. The increase was primarily due to fixed asset impairment charges, partially offset by lower in-process research and development impairment charges, as noted above, compared to the prior year.

    Corporate and Other Information

    (Unaudited; In thousands)


                                        Three Months Ended             Year Ended

                                           December 31,               December 31,
                                           ------------               ------------

                                             2017                2016          2017          2016
                                             ----                ----          ----          ----

    General and administrative expenses   $37,123             $34,381      $120,027      $119,874
                                          -------             -------      --------      --------

    Unallocated corporate expenses      $(37,123)          $(34,381)   $(120,027)   $(119,874)
                                         ========            ========     =========     =========

Fourth Quarter 2017

General and administrative expenses in the fourth quarter 2017 were $37.1 million, compared to $34.4 million in the prior year period, primarily due to higher business development expenses partially offset by lower restructuring and severance related charges.

Full Year 2017

General and administrative expenses for the full year 2017 were $120.0 million, compared to $119.9 million for the full year 2016.

Interest expense, net for the full year 2017 was $53.4 million, an increase of $13.0 million compared to the prior year, due to the $400.0 million Term Loan Facility entered into by the Company in the third quarter 2016 to finance the Teva Transaction.

Conference Call Information

The Company will host a conference call with a slide presentation on March 1, 2018 at 8:30 a.m. ET to discuss its results. The call and presentation can also be accessed via a live Webcast through the Investor Relations section of the Company's Web site, www.impaxlabs.com. The number to call from within the United States is (877) 356-3814 and (706) 758-0033 internationally. The conference ID is 7677287. A replay of the conference call will be available shortly after the call for a period of seven days. To access the replay, dial (855) 859-2056 (in the U.S.) and (404) 537-3406 (international callers).

About Impax Laboratories, Inc.

Impax Laboratories, Inc. (Impax) is a specialty pharmaceutical company applying its formulation expertise and drug delivery technology to the development of controlled-release and specialty generics in addition to the development of central nervous system disorder branded products. Impax markets its generic products through its Impax Generics division and markets its branded products through the Impax Specialty Pharma division. Additionally, where strategically appropriate, Impax develops marketing partnerships to fully leverage its technology platform and pursues partnership opportunities that offer alternative dosage form technologies, such as injectables, nasal sprays, inhalers, patches, creams, and ointments. For more information, please visit the Company's Web site at: www.impaxlabs.com.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995:
To the extent any statements made in this news release contain information that is not historical; these statements are forward-looking in nature and express the beliefs and expectations of management. Such statements are based on current expectations and involve a number of known and unknown risks and uncertainties that could cause the Company's future results, performance, or achievements to differ significantly from the results, performance, or achievements expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, fluctuations in the Company's operating results and financial condition, the volatility of the market price of the Company's common stock, the Company's ability to successfully develop and commercialize pharmaceutical products in a timely manner, the impact of competition, the effect of any manufacturing or quality control problems, the Company's ability to manage its growth, risks related to acquisitions of or investments in technologies, products or businesses, risks relating to goodwill and intangibles, the reduction or loss of business with any significant customer, the substantial portion of the Company's total revenues derived from sales of a limited number of products, the impact of continuing consolidation of the Company's customer base, the Company's ability to sustain profitability and positive cash flows, the impact of any valuation allowance on the Company's deferred tax assets, the restrictions imposed by the Company's credit facility and indenture, the Company's level of indebtedness and liabilities and the potential impact on cash flow available for operations, the availability of additional funds in the future, any delays or unanticipated expenses in connection with the operation of the Company's manufacturing facilities or at its third party suppliers, the effect of foreign economic, political, legal and other risks on the Company's operations abroad, the uncertainty of patent litigation and other legal proceedings, the increased government scrutiny on the Company's agreements to settle patent litigations, product development risks and the difficulty of predicting FDA filings and approvals, consumer acceptance and demand for new pharmaceutical products, the impact of market perceptions of the Company and the safety and quality of its products, the Company's determinations to discontinue the manufacture and distribution of certain products, the Company's ability to achieve returns on its investments in research and development activities, changes to FDA approval requirements, the Company's ability to successfully conduct clinical trials, the Company's reliance on third parties to conduct clinical trials and testing, the Company's lack of a license partner for commercialization of Numient® (IPX066) outside of the United States and Taiwan, 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 the Company's supply chain, the Company's policies regarding returns, rebates, allowances and chargebacks, the use of controlled substances in the Company's products, the effect of global economic conditions on the Company's industry, business, results of operations and financial condition, disruptions or failures in the Company's information technology systems and network infrastructure caused by cyber-attacks or other third party breaches or other events, the Company's reliance on alliance and collaboration agreements, the Company's reliance on licenses to proprietary technologies, the Company's dependence on certain employees, the Company's ability to comply with legal and regulatory requirements governing the healthcare industry, the regulatory environment, the effect of certain provisions in the Company's government contracts, the Company's ability to protect its intellectual property, exposure to product liability claims, changes in tax regulations, uncertainties involved in the preparation of the Company's financial statements, the Company's ability to maintain an effective system of internal control over financial reporting, the effect of terrorist attacks on the Company's business, the location of the Company's manufacturing and research and development facilities near earthquake fault lines, expansion of social media platforms, risks related to the Company's proposed business combination with Amneal Pharmaceuticals, Inc. ("Amneal"), including whether the transactions (the "Combination") contemplated by the Business Combination Agreement dated as of October 17, 2017 by and among us, Amneal, Atlas Holdings, Inc., and K2 Merger Sub Corporation as amended by Amendment No. 1, dated November 21, 2017 and Amendment No. 2 dated December 16, 2017 (the "Business Combination Agreement") will be completed on the terms or timeline contemplated, if at all, the risk that governmental entities could take actions under antitrust laws to enjoin the completion of the Combination, business uncertainties and contractual restrictions while the Combination is pending, challenges related to the Company's integration with Amneal after the closing, the fact that ownership interests will not be adjusted if there is a change in value of the Company or Amneal, provisions in the Business Combination Agreement that may discourage other companies from acquiring the Company, transaction related costs related to the Combination and integration, the lower ownership and voting interests that the Company's stockholders will have in New Amneal after the closing, the pending litigation related to the Combination and other risks described in the Company's periodic reports filed with the Securities and Exchange Commission. Forward-looking statements speak only as to the date on which they are made, and the Company undertakes no obligation to update publicly or revise any forward-looking statement, regardless of whether new information becomes available, future developments occur or otherwise.

Company Contact:
Mark Donohue
Investor Relations and Corporate Communications
(215) 558-4526
www.impaxlabs.com

 

 

                                                                            Impax Laboratories, Inc.

                                                                     Consolidated Statements of Operations

                                                           (Unaudited; In thousands, except share and per share data)


                                                                                                                        Three Months Ended                   Year Ended

                                                                                                                           December 31,                     December 31,
                                                                                                                         ------------                  ------------

                                                                                                                            2017                  2016                    2017          2016
                                                                                                                            ----                  ----                    ----          ----

    Revenues:

    Impax Generics, net                                                                                                 $112,943              $139,226                $549,077      $606,320

    Impax Specialty Pharma, net                                                                                           69,967                59,196                 226,710       218,109
                                                                                                                          ------                ------                 -------       -------

    Total revenues                                                                                                       182,910               198,422                 775,787       824,429
                                                                                                                         -------               -------                 -------       -------

    Cost of revenues                                                                                                     126,480               129,047                 535,123       486,899

    Cost of revenues impairment charges                                                                                   43,961               230,625                  96,865       488,632
                                                                                                                          ------               -------                  ------       -------

    Gross profit (loss)                                                                                                   12,469             (161,250)                143,799     (151,102)
                                                                                                                          ------              --------                 -------      --------


    Operating expenses:

    Selling, general and administrative                                                                                   64,016                57,586                 216,270       201,830

    Research and development                                                                                              15,689                20,530                  80,847        80,466

    In-process research and development impairment charges                                                               186,731                23,248                 192,809        52,965

    Fixed asset impairment charges                                                                                        79,705                     -                 82,508             -

    Change in fair value of contingent consideration                                                                    (38,123)                    -               (31,048)            -

    Patent litigation expense                                                                                              1,223                 1,292                   5,105         7,819

    Total operating expenses                                                                                             309,241               102,656                 546,491       343,080
                                                                                                                         -------               -------                 -------       -------

    Loss from operations                                                                                               (296,772)            (263,906)              (402,692)    (494,182)
                                                                                                                        --------              --------                --------      --------


    Other expense, net:

       Interest expense, net                                                                                            (13,672)             (13,440)               (53,412)     (40,419)

       Reserve for Turing receivable                                                                                     (1,328)                7,731                 (3,999)     (40,312)

       Gain on sale of assets                                                                                                656                     -                 17,236           175

       Loss on debt extinguishment                                                                                             -                    -                (1,215)            -

       Other, net                                                                                                          1,036               (1,398)                (6,879)      (1,587)
                                                                                                                           -----                ------                  ------        ------

    Loss before income taxes                                                                                           (310,080)            (271,013)              (450,961)    (576,325)

    (Benefit from) provision for income taxes                                                                            (9,010)                8,572                  18,326     (104,294)
                                                                                                                          ------                 -----                  ------      --------

    Net loss                                                                                                          $(301,070)           $(279,585)             $(469,287)   $(472,031)
                                                                                                                       =========             =========               =========     =========


    Net loss per share:

    Basic                                                                                                                $(4.18)              $(3.91)                $(6.53)      $(6.63)
                                                                                                                          ======                ======                  ======        ======

    Diluted                                                                                                              $(4.18)              $(3.91)                $(6.53)      $(6.63)
                                                                                                                          ======                ======                  ======        ======


    Weighted-average common shares outstanding:

    Basic                                                                                                             72,098,533            71,487,071              71,856,950    71,147,397
                                                                                                                      ==========            ==========              ==========    ==========

    Diluted                                                                                                           72,098,533            71,487,071              71,856,950    71,147,397
                                                                                                                      ==========            ==========              ==========    ==========

 

 

                                                        Impax Laboratories, Inc.

                                                 Condensed Consolidated Balance Sheets

                                                       (Unaudited; In thousands)


                                                                                       December 31,            December 31,

                                                                                                          2017                    2016
                                                                                                          ----                    ----

    Assets

    Current assets:

       Cash and cash equivalents                                                                      $181,778                $180,133

       Accounts receivable, net                                                                        240,753                 257,368

       Inventory, net                                                                                  158,471                 175,230

       Prepaid expenses and other current assets                                                        21,086                  14,897

       Income tax receivable                                                                            61,201                   3,513

       Assets held for sale                                                                             32,266                       -

       Total current assets                                                                            695,555                 631,141
                                                                                                       -------                 -------

    Property, plant and equipment, net                                                                 124,813                 233,372

    Intangible assets, net                                                                             262,467                 620,466

    Goodwill                                                                                           207,329                 207,329

    Deferred income taxes, net                                                                               -                 69,866

    Other non-current assets                                                                            61,136                  60,844

    Total assets                                                                                    $1,351,300              $1,823,018
                                                                                                    ==========              ==========


    Liabilities and Stockholders' Equity

    Current liabilities:

       Accounts payable and accrued expenses                                                          $329,220                $303,605

       Liabilities held for sale                                                                         7,170                       -

       Current portion of long-term debt, net                                                           17,848                  17,719

       Total current liabilities                                                                       354,238                 321,324
                                                                                                       -------                 -------

    Long-term debt, net                                                                                769,524                 813,545

    Deferred income taxes                                                                                3,226                       -

    Other non-current liabilities                                                                       37,111                  64,175
                                                                                                        ------                  ------

    Total liabilities                                                                                1,164,099               1,199,044

    Total stockholders' equity                                                                         187,201                 623,974

    Total liabilities and stockholders' equity                                                      $1,351,300              $1,823,018
                                                                                                    ==========              ==========

 

 

                                                                                                                 Impax Laboratories, Inc.

                                                                                                      Condensed Consolidated Statements of Cash Flows

                                                                                                                 (Unaudited; In thousands)


                                                                                                                                                                   Year Ended

                                                                                                                                                                  December 31,
                                                                                                                                                                  ------------

                                                                                                                                                                     2017                      2016
                                                                                                                                                                     ----                      ----

    Cash flows from operating activities:

    Net loss                                                                                                                                          $(469,287)              $(472,031)

    Adjustments to reconcile loss to net cash provided by operating activities:

                                                                                Depreciation and amortization                                                       109,449                    88,348

                                                                                Non-cash interest expense                                                            25,950                    22,845

                                                                                Share-based compensation expense                                                     26,258                    32,180

                                                                                Deferred income taxes, net and uncertain tax positions                               74,873                 (127,405)

                                                                                Intangible asset impairment charges                                                 289,674                   541,597

                                                                                Reserve for Turing receivable                                                         3,999                    40,312

                                                                                Gain on sale of assets                                                             (17,236)                    (175)

                                                                                Loss on debt extinguishment                                                           1,215                         -

                                                                                Change in fair value of contingent consideration                                   (31,048)                        -

                                                                                Fixed asset impairment charges                                                       82,508                         -

                                                                                Other                                                                               (1,018)                    2,853

                                                                                Changes in assets and liabilities which used cash                                  (11,115)                 (44,674)

                                                                                Net cash provided by operating activities                                            84,222                    83,850
                                                                                                                                                                   ------


    Cash flows from investing activities:

                                                                                Payment for business acquisition                                                      (121)                (585,800)

                                                                                Purchases of property, plant and equipment                                         (26,749)                 (49,402)

                                                                                Proceeds from sale of property, plant and equipment                                   9,111                     1,360

                                                                                Payments for licensing agreements                                                      (50)                  (3,500)

                                                                                Investment in cash surrender value of insurance                                     (4,750)                  (4,750)

                                                                                Proceeds from cash surrender value of life insurance policy                             529                         -

                                                                                Proceeds from repayment of Tolmar loan                                                    -                   15,000

                                                                                Proceeds from sale of intangible assets                                              12,350                         -

                                                                                Net cash used in investing activities                                               (9,680)                (627,092)
                                                                                                                                                                  -------


    Cash flows from financing activities:

                                                                                Proceeds from issuance of term loan                                                       -                  400,000

                                                                                Repayment of term loan                                                             (70,000)                  (5,000)

                                                                                Payment of deferred financing fees                                                    (818)                 (11,867)

                                                                                Payment of withholding taxes related to restricted stock awards                     (4,231)                  (9,842)

                                                                                Proceeds from exercise of stock options and ESPP                                      1,379                     9,239

                                                                                Net cash (used in) provided by financing activities                                (73,670)                  382,530
                                                                                                                                                                 --------


    Effect of exchange rate changes on cash and cash equivalents                                                                                                      773                       494
                                                                                                                                                                      ---                       ---

    Net increase (decrease) in cash and cash equivalents                                                                                                            1,645                 (160,218)

    Cash and cash equivalents, beginning of period                                                                                                                180,133                   340,351

    Cash and cash equivalents, end of period                                                                                                            $181,778                 $180,133
                                                                                                                                                        ========                 ========

 

 

 

                                                                                               Impax Laboratories, Inc.

                                                                                              Non-GAAP Financial Measures


    Adjusted net income, adjusted net income per diluted share, EBITDA, adjusted EBITDA, adjusted cost of revenues, adjusted research and development expenses and adjusted selling, general and administrative expenses are not measures of financial performance under
     generally accepted accounting principles (GAAP) and should not be construed as substitutes for, or superior to, GAAP net loss, GAAP net loss per diluted share, GAAP cost of revenues, GAAP research and development expenses and GAAP selling, general and
     administrative expenses as a measure of financial performance. However, management uses both GAAP financial measures and the disclosed non-GAAP financial measures internally to evaluate and manage the Company's operations and to better understand its business.
     Further, management believes the addition of non-GAAP financial measures provides meaningful supplementary information to, and facilitates analysis by, investors in evaluating the Company's financial performance, results of operations and trends. The Company's
     calculations of adjusted net income, adjusted net income per diluted share, EBITDA, adjusted EBITDA, adjusted cost of revenues, adjusted research and development expenses and adjusted selling, general and administrative expenses, may not be comparable to similarly
     designated measures reported by other companies, since companies and investors may differ as to what type of events warrant adjustment.


    The following table reconciles reported net loss to adjusted net income:

    (Unaudited; In thousands, except per share data)


                                                                                                                                               Three months ended                             Year Ended

                                                                                                                                                   December 31,                              December 31,
                                                                                                                                                   ------------                              ------------

                                                                                                                                                       2017                      2016                      2017                      2016
                                                                                                                                                       ----                      ----                      ----                      ----

    Net loss                                                                                                                                     $(301,070)               $(279,585)               $(469,287)               $(472,031)

    Adjusted to add (deduct):

    Amortization (a)                                                                                                                                 16,909                    16,886                    68,375                    56,490

    Non-cash interest expense (b)                                                                                                                     6,660                     6,241                    25,950                    22,846

    Business development expenses (c)                                                                                                                 8,061                       251                    11,097                     4,540

    Intangible asset impairment charges (d)                                                                                                         230,692                   253,873                   289,674                   541,597

    Fixed asset impairment charges (e)                                                                                                               79,705                         -                   82,508                         -

    Reserve for Turing receivable (f)                                                                                                                 1,328                   (7,731)                    3,999                    40,312

    Turing legal expenses (g)                                                                                                                           642                     2,111                       451                     7,554

    Restructuring and severance charges (h)                                                                                                          13,483                    11,705                    49,563                    24,040

    Gain on sale of assets (i)                                                                                                                        (656)                        -                 (17,236)                        -

    Loss on extinguishment of debt                                                                                                                        -                        -                    1,215                         -

    Inventory related charges (j)                                                                                                                     6,224                         -                   26,702                         -

    Change in fair value of contingent consideration (k)                                                                                           (38,123)                        -                 (31,048)                        -

    Legal settlements                                                                                                                                     -                        -                    7,900                         -

    Other                                                                                                                                                 -                    2,762                     2,534                     3,684

    Income tax effect (l)                                                                                                                          (16,213)                    5,136                   (7,205)                (145,368)

    Adjusted net income                                                                                                                              $7,642                   $11,649                   $45,192                   $83,664
                                                                                                                                                     ======                   =======                   =======                   =======


    Adjusted net income per diluted share                                                                                                             $0.11                     $0.16                     $0.63                     $1.16
                                                                                                                                                      =====                     =====                     =====                     =====

    Net loss per diluted share                                                                                                                      $(4.18)                  $(3.91)                  $(6.53)                  $(6.63)
                                                                                                                                                     ======                    ======                    ======                    ======


    Adjusted diluted weighted-average common shares outstanding                                                                                  72,634,828                71,488,634                71,857,096                71,829,749
                                                                                                                                                 ==========                ==========                ==========                ==========

 

 

                    Impax Laboratories, Inc.
                   Non-GAAP Financial Measures


    (a)              Reflects amortization of intangible
                     assets from the portfolio of products
                     acquired from Teva Pharmaceuticals
                     Industries Ltd. and affiliates of
                     Allergan plc (the "Teva Transaction")
                     in August 2016 and from the acquisition
                     of Tower Holdings, Inc. and its
                     subsidiaries in March 2015 (the "Tower
                     Acquisition").

    (b)              Related to non-cash accretion of debt
                     discount attributable to deferred
                     financing costs associated with the
                     $400.0 million term loan facility (the
                     "Term Loan Facility") to finance the
                     Teva Transaction and the $600.0 million
                     of outstanding 2% convertible senior
                     notes, as well as bifurcation of the
                     conversion option of the convertible
                     notes.

    (c)              Business development expenses are
                     professional fees primarily related to
                     the Teva Transaction and the proposed
                     combination with Amneal Pharmaceuticals
                     that the Company announced in the
                     fourth quarter of 2017.

    (d)              The Company recognized $186.7 million of
                     impairment charges on in process
                     research and development (IPR&D)
                     product rights in the fourth quarter
                     2017, primarily related to two products
                     acquired in the Teva Transaction,
                     resulting from delays in launch and
                     increased competition. The Company
                     additionally incurred $44.0 million of
                     fourth quarter impairment charges on
                     two marketed products acquired in the
                     Teva Transaction and Tower Acquisition,
                     due to increased competition and
                     related price erosion.

    (e)              During the fourth quarter 2017, the
                     Company recorded fixed asset impairment
                     charges of $79.7 million primarily
                     related to the Taiwan and Middlesex,
                     New Jersey facilities. Sales of both
                     the Taiwan and Middlesex facilities
                     were completed during the first quarter
                     2018.

    (f)              During the fourth quarter 2017, the
                     Company increased the estimated
                     receivable due from Turing
                     Pharmaceuticals AG ("Turing") by $1.3
                     million to reflect additional estimated
                     Medicaid rebate claims due from Turing.

    (g)              The Company recorded a charge in the
                     fourth quarter 2017 for legal fees
                     incurred as a result of the Company's
                     litigation against Turing alleging
                     breach of the terms of the Turing Asset
                     Purchase Agreement in the Company's
                     sale of Daraprim(R) resulting from
                     Turing's failure to reimburse the
                     Company for chargebacks and Medicaid
                     rebate liability.

    (h)              During the fourth quarter 2017, the
                     Company recorded restructuring,
                     severance and other plant-related
                     charges of $13.5 million related to the
                     closure of its manufacturing, packaging
                     and R&D operations at the Middlesex,
                     New Jersey site as well as charges
                     related to the reorganization of its
                     Specialty Pharma division.

    (i)              During the fourth quarter 2017, the
                     Company recorded a gain on the sale of
                     an ANDA related to the Company's
                     Middlesex, New Jersey facility.

    (j)              During the fourth quarter 2017, the
                     Company recorded an approximate $6.2
                     million charge related to an
                     unfavorable supply agreement associated
                     with its exit of the Middlesex site.

    (k)              Represents the reduction in contingent
                     consideration liability related to a
                     product acquired in the Teva
                     Transaction. Based on timing and
                     probability of product launch, and
                     number of competitors expected in the
                     market, the Company concluded that fair
                     value of the contingent consideration
                     was zero at December 31, 2017.

    (l)              Adjusted income taxes are calculated by
                     tax effecting adjusted pre-tax income
                     at the applicable effective tax rate
                     that will be determined by reference to
                     statutory tax rates in the relevant
                     jurisdiction in which the Company
                     operates and includes current and
                     deferred income tax expense
                     commensurate with the non-GAAP measure
                     of profitability.

 

 

    The following table reconciles reported net loss to adjusted EBITDA:

    (Unaudited, In thousands)


                                                                          Three months ended              Year Ended

                                                                             December 31,                December 31,
                                                                             ------------                ------------

                                                                               2017                 2016              2017          2016
                                                                               ----                 ----              ----          ----

    Net loss                                                             $(301,070)          $(279,585)       $(469,287)   $(472,031)

    Adjusted to add (deduct):

    Interest expense, net                                                    13,672               13,440            53,412        40,419

    Income taxes                                                            (9,010)               8,572            18,326     (104,294)

    Depreciation and amortization                                            21,570               23,573            93,731        82,879

    EBITDA                                                                (274,838)           (234,000)        (303,818)    (453,027)
                                                                           --------             --------          --------      --------


    Adjusted to add (deduct):

    Share-based compensation expense                                          6,586                8,334            26,258        31,709

    Business development expenses                                             8,061                  251            11,097         4,540

    Intangible asset impairment charges                                     230,692              253,873           289,674       541,597

    Fixed asset impairment charges                                           79,705                    -           82,508             -

        Reserve for Turing receivable                                         1,328              (7,731)            3,999        40,312

    Turing legal expenses                                                       642                2,111               451         7,554

    Restructuring and severance charges                                      13,483               11,705            49,563        24,040

    Gain on sale of intangible assets                                         (656)                   -         (17,236)            -

    Loss on extinguishment of debt                                                -                   -            1,215             -

    Inventory related charges                                                 6,224                    -           26,702             -

    Change in fair value of contingent consideration                       (38,123)                   -         (31,048)            -

    Legal settlements                                                             -                   -            7,900             -

    Other                                                                         -               2,762             2,534         3,684

    Adjusted EBITDA                                                         $33,104              $37,305          $149,799      $200,409
                                                                            =======              =======          ========      ========

 

 

                                                                                         Impax Laboratories, Inc.

                                                                                       Non-GAAP Financial Measures

                                                                                        (Unaudited; In thousands)


    The following Adjusted Consolidated Statements of Operations reflects the impact of the items reconciling reported net loss to adjusted net income.


                                                                                                                                  Three Months Ended                Year Ended

                                                                                                                                      December 31,                 December 31,
                                                                                                                                      ------------                 ------------

                                                                                                                                          2017                2016               2017        2016
                                                                                                                                          ----                ----               ----        ----

    Revenues:

    Impax Generics, net                                                                                                               $112,943            $139,226           $549,077    $606,320

    Impax Specialty Pharma, net                                                                                                         69,967              59,196            226,710     218,109

    Total revenues, net                                                                                                                182,910             198,422            775,787     824,429
                                                                                                                                       -------             -------            -------     -------

    Cost of revenues                                                                                                                    91,569             105,747            395,798     411,648
                                                                                                                                        ------             -------            -------     -------

    Gross profit                                                                                                                        91,341              92,675            379,989     412,781
                                                                                                                                        ------              ------            -------     -------


    Operating expenses:

    Selling, general and administrative                                                                                                 51,637              49,933            200,376     184,281

    Research and development                                                                                                            15,591              19,930             74,935      78,944

    Patent litigation                                                                                                                    1,223               1,292              5,105       7,819

    Total operating expenses                                                                                                            68,451              71,155            280,416     271,044
                                                                                                                                        ------              ------            -------     -------

    Income from operations                                                                                                              22,890              21,520             99,573     141,737
                                                                                                                                        ------              ------             ------     -------


    Other income (expense):

       Interest expense, net                                                                                                           (7,012)            (7,199)          (27,462)   (17,573)

       Other, net                                                                                                                      (1,033)                764            (1,388)        574
                                                                                                                                        ------                 ---             ------         ---

    Income before income taxes                                                                                                          14,845              15,085             70,723     124,738

    Provision for income taxes                                                                                                           7,203               3,436             25,531      41,074
                                                                                                                                         -----               -----             ------      ------

    Adjusted net income                                                                                                                 $7,642             $11,649            $45,192     $83,664
                                                                                                                                        ======             =======            =======     =======


    Adjusted net income per common share:

    Diluted                                                                                                                              $0.11               $0.16              $0.63       $1.16
                                                                                                                                         =====               =====              =====       =====


    Adjusted weighted-average common shares outstanding:

    Diluted                                                                                                                         72,634,828          71,488,634         71,857,096  71,829,749
                                                                                                                                    ==========          ==========         ==========  ==========

 

 

                                                                                               Impax Laboratories, Inc.

                                                                                              Non-GAAP Financial Measures

                                                                                               (Unaudited; In thousands)


    The following table reconciles reported cost of revenues, research and development expenses, and selling, general and administrative expenses to adjusted cost of revenues, adjusted gross profit, adjusted gross margin, adjusted research and development expenses, and
     adjusted selling, general and administrative expenses:


                                                                                                                                      Three months ended                            Year Ended

                                                                                                                                         December 31,                              December 31,
                                                                                                                                         ------------                              ------------

                                                                                                                                            2017                         2016                          2017                          2016
                                                                                                                                            ----                         ----                          ----                          ----

    Cost of revenues                                                                                                                    $126,480                     $129,047                      $535,123                      $486,899

    Cost of revenues impairment charges                                                                                                   43,961                      230,625                        96,865                       488,632

    Adjusted to deduct:

    Amortization                                                                                                                          16,909                       16,886                        68,375                        56,490

    Intangible asset impairment charges                                                                                                   43,961                      230,625                        96,865                       488,632

    Business development                                                                                                                       -                           -                          112                             -

    Restructuring and severance charges                                                                                                   11,778                        6,414                        44,136                        18,761

    Inventory related charges                                                                                                              6,224                            -                       26,702                             -

    Adjusted cost of revenues                                                                                                            $91,569                     $105,747                      $395,798                      $411,648
                                                                                                                                         =======                     ========                      ========                      ========


    Adjusted gross profit (a)                                                                                                            $91,341                      $92,675                      $379,989                      $412,781

    Adjusted gross margin (a)                                                                                                              49.9%                       46.7%                        49.0%                        50.1%


    Research and development expenses                                                                                                    $15,689                      $20,530                       $80,847                       $80,466

    In-process research and development impairment charges                                                                               186,731                       23,248                       192,809                        52,965

    Adjusted to deduct:

    Intangible asset impairment charges                                                                                                  186,731                       23,248                       192,809                        52,965

    Restructuring and severance charges                                                                                                       98                            -                        3,378                             -

    Other                                                                                                                                      -                         600                         2,534                         1,522

    Adjusted research and development expenses                                                                                           $15,591                      $19,930                       $74,935                       $78,944
                                                                                                                                         =======                      =======                       =======                       =======


    Selling, general and administrative expenses                                                                                         $64,016                      $57,586                      $216,270                      $201,830

    Adjusted to deduct:

    Business development expenses                                                                                                          8,061                          251                        10,985                         4,540

    Turing legal expenses                                                                                                                    642                        2,111                           451                         7,554

    Restructuring and severance charges                                                                                                    3,676                        5,291                         4,458                         5,455

    Adjusted selling, general and administrative expenses                                                                                $51,637                      $49,933                      $200,376                      $184,281
                                                                                                                                         =======                      =======                      ========                      ========


    (a)   Adjusted gross profit is calculated as total revenues less adjusted cost of revenues. Adjusted gross margin is
          calculated as adjusted gross profit divided by total revenues.

 

 

                                                                                  Impax Laboratories, Inc.

                                                                                 Non-GAAP Financial Measures

                                                                                  (Unaudited; In thousands)


    The following tables reconcile the Impax Generics and Impax Specialty Pharma divisions reported cost of revenues to adjusted cost of revenues, adjusted gross profit and adjusted gross margin:


    Impax Generics Division Information

                                                                                                              Three months ended                           Year Ended

                                                                                                                 December 31,                             December 31,
                                                                                                                 ------------                             ------------

                                                                                                                    2017                         2016                         2017                      2016
                                                                                                                    ----                         ----                         ----                      ----

    Cost of revenues                                                                                            $106,801                     $109,380                     $454,911                  $417,316

    Cost of revenues impairment charges                                                                           43,961                      206,312                       96,865                   464,319

    Adjusted to deduct:

    Amortization                                                                                                  13,075                        9,470                       53,039                    30,599

    Intangible asset impairment charges                                                                           43,961                      206,312                       96,865                   464,319

    Restructuring and severance charges                                                                            9,960                        6,414                       35,054                    18,761

    Inventory related charges                                                                                      6,224                            -                      26,702                         -

    Business development                                                                                               -                           -                         112                         -

    Adjusted cost of revenues                                                                                    $77,542                      $93,496                     $340,004                  $367,956
                                                                                                                 =======                      =======                     ========                  ========


    Adjusted gross profit (a)                                                                                    $35,401                      $45,730                     $209,073                  $238,364

    Adjusted gross margin (a)                                                                                      31.3%                       32.8%                       38.1%                    39.3%


    Impax Specialty Pharma Division Information

                                                                                                              Three months ended                           Year Ended

                                                                                                                 December 31,                             December 31,
                                                                                                                 ------------                             ------------

                                                                                                                    2017                         2016                         2017                      2016
                                                                                                                    ----                         ----                         ----                      ----

    Cost of revenues                                                                                             $19,679                      $19,667                      $80,212                   $69,583

    Cost of revenues impairment charges                                                                                -                      24,313                            -                   24,313

    Adjusted to deduct:

    Amortization                                                                                                   3,834                        7,416                       15,336                    25,891

    Restructuring and severance charges                                                                            1,818                            -                       9,082                         -

    Intangible asset impairment charges                                                                                -                      24,313                            -                   24,313

    Adjusted cost of revenues                                                                                    $14,027                      $12,251                      $55,794                   $43,692
                                                                                                                 =======                      =======                      =======                   =======


    Adjusted gross profit (a)                                                                                    $55,940                      $46,945                     $170,916                  $174,417

    Adjusted gross margin (a)                                                                                      80.0%                       79.3%                       75.4%                    80.0%


    Corporate General and Administrative

                                                                                                              Three months ended                           Year Ended

                                                                                                                 December 31,                             December 31,
                                                                                                                 ------------                             ------------

                                                                                                                    2017                         2016                         2017                      2016
                                                                                                                    ----                         ----                         ----                      ----

    General and administrative expenses                                                                          $37,123                      $34,381                     $120,027                  $119,874

    Adjusted to deduct:

    Business development expenses                                                                                  8,061                          251                       10,985                     4,540

    Turing legal expenses                                                                                            642                        2,111                          451                     7,554

    Restructuring and severance charges                                                                              669                        5,291                        1,341                     5,363

    Adjusted general and administrative expenses                                                                 $27,751                      $26,728                     $107,250                  $102,417
                                                                                                                 =======                      =======                     ========                  ========


    (a)   Adjusted gross profit is calculated as total revenues less adjusted cost of revenues. Adjusted gross margin is
          calculated as adjusted gross profit divided by total revenues.

 

 

                                                                                  Impax Laboratories, Inc.

                                                                                Non-GAAP Financial Measures

                                                                                 (Unaudited; In thousands)


    The following tables reconcile the Impax Generics and Impax Specialty Pharma divisions reported (loss) income from operations to adjusted income from operations:


    Impax Generics Division Information

                                                                                                                    Three Months Ended                        Year Ended

                                                                                                                        December 31,                         December 31,
                                                                                                                        ------------                         ------------

                                                                                                                           2017                      2016                      2017          2016
                                                                                                                           ----                      ----                      ----          ----


    GAAP loss from operations                                                                                        $(212,951)               $(212,088)               $(265,206)   $(386,397)

    Adjusted to add (deduct):

    Amortization                                                                                                         13,075                     9,470                    53,039        30,599

    Intangible asset impairment charges                                                                                 230,692                   217,587                   289,674       492,084

    Restructuring and severance                                                                                          10,058                     6,414                    38,433        18,852

    Inventory related charges                                                                                             6,224                         -                   26,702             -

    Fixed asset impairment charges                                                                                        6,486                         -                    8,380             -

    Change in fair value of contingent consideration                                                                   (38,123)                        -                 (31,048)            -

    Business development expenses                                                                                             -                        -                      112             -

    Other                                                                                                                     -                      600                     2,535         1,522

    Adjusted income from operations                                                                                     $15,461                   $21,983                  $122,621      $156,660
                                                                                                                        =======                   =======                  ========      ========


    Impax Specialty Pharma Division Information

                                                                                                                    Three Months Ended                        Year Ended

                                                                                                                        December 31,                         December 31,
                                                                                                                        ------------                         ------------

                                                                                                                           2017                      2016                      2017          2016
                                                                                                                           ----                      ----                      ----          ----


    GAAP (loss) income from operations                                                                                $(46,698)                $(17,437)                $(17,459)      $12,089

    Adjusted to add:

    Amortization                                                                                                          3,834                     7,416                    15,336        25,891

    Intangible asset impairment charges                                                                                       -                   36,286                         -       49,513

    Restructuring and severance                                                                                           4,825                         -                   12,199             -

    Fixed asset impairment charges                                                                                       74,128                         -                   74,128             -

    Adjusted income from operations                                                                                     $36,089                   $26,265                   $84,204       $87,493
                                                                                                                        =======                   =======                   =======       =======

 

 

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SOURCE Impax Laboratories, Inc.

 

Company Codes: NASDAQ-NMS:IPXL
 

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