HAYWARD, Calif., May 11, 2015 /PRNewswire/ -- Impax Laboratories, Inc. (NASDAQ: IPXL) today reported first quarter 2015 total revenues of $143.1 million (excluding RYTARY product sales of approximately $3 million that were deferred following launch), an increase of $24.4 million or 20.5%, compared to $118.7 million total revenues in the prior year period. This increase is the result of higher sales of the Company’s existing products (up 9.1%) and revenue from approximately three weeks of sales of products acquired in the Company’s acquisition of Tower Holdings, Inc. (including operating subsidiaries CorePharma LLC and Amedra Pharmaceuticals LLC), and Lineage Therapeutics Inc. (together, “Tower”) on March 9, 2015.
“With the Tower acquisition completed and RYTARY launched, we made significant progress in the first quarter executing our strategy of building a diversified specialty pharmaceutical company,” said Fred Wilkinson, president and chief executive officer of Impax Laboratories. “Our first quarter 2015 financial results were impacted by the timing of several meaningful events and we currently do not expect them to impact our full year 2015 financial results.”
“This quarter’s revenues were negatively impacted by the later than anticipated close of the Tower acquisition, the delayed launch of lamotrigine ODT, which was launched in April due to delayed receipt of inventory from our supplier, and the deferred recognition of product sales from the launch of RYTARY. In addition, product sales mix in the combined portfolio as well as costs related to successfully launching RYTARY and the financing of the Tower acquisition led to a reduction in our first quarter earnings.”
Adjusted diluted earnings per share (EPS) for the first quarter of 2015 was $0.09, compared to the first quarter 2014 adjusted diluted EPS of $0.24. On a GAAP basis, the Company reported a loss of $0.09 per diluted share for the first quarter 2015, compared to income of $0.09 per diluted share in the prior year period. The decrease in EPS is primarily attributable to unfavorable product sales mix and the timing of certain events as noted above. In addition, the first quarter 2015 results include approximately $8.5 million of expenses or $0.07 per diluted share associated with the launch of RYTARY and interest expense in connection with the Tower acquisition, for which there were no comparable amounts in the prior year period.
“Now that we have closed the Tower acquisition, our focus is on completing the integration and maximizing the immediate strategic benefits. We have accelerated the realization of the previously identified $10 million of synergies for 2015 and have currently identified incremental synergies of approximately $10 million for 2016. We also expect to benefit from the launch of RYTARY now that our neurology focused sales force is fully promoting the product. The combinations of these events, as well as up to 14 potential generic product launches, five of which were launched in April (including the launch of our first to file generic lamotrigine ODT tablets), are expected to contribute to our growth and support our full year 2015 financial guidance.”
“Although early, we are pleased with the launch of RYTARY. The growth of weekly prescription data is consistent with our projections.”
“Our balance sheet remains well positioned to support our continued pursuit of generic and branded strategic growth opportunities. We remain excited about the opportunities ahead of us and our plan to create value for patients, customers and our shareholders.”
Business Segment Information
The Company has two reportable segments, the Impax Generics Division (generic products and services) and the Impax Specialty Pharma Division (brand products and services) and does not allocate general corporate services to either segment. All information presented is on a GAAP basis unless otherwise noted on an adjusted basis.
Impax Generics Division Information | |||
(Unaudited, amounts in thousands) | |||
Three Months Ended | |||
March 31, | |||
2015 | 2014 | ||
Revenues: | |||
Impax Generics Product sales, net | $ 125,959 | $ 106,117 | |
Rx Partner | 2,239 | 2,435 | |
Other revenues | 543 | 589 | |
Total revenues | 128,741 | 109,141 | |
Cost of revenues | 76,472 | 57,022 | |
Gross profit | 52,269 | 52,119 | |
Operating expenses: | |||
Research and development | 10,863 | 11,217 | |
Patent litigation expense | 778 | 2,173 | |
Selling, general and administrative | 4,286 | 2,383 | |
Total operating expenses | 15,927 | 15,773 | |
Income from operations | $ 36,342 | $ 36,346 | |
Gross margin | 40.6% | 47.8% | |
Adjusted gross profit (a) | $ 57,909 | $ 65,890 | |
Adjusted gross margin (a) | 45.0% | 60.4% | |
(a) Adjusted gross profit is calculated as total revenues less adjusted cost of revenues. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. Refer to the “Non-GAAP Financial Measures” for a reconciliation of GAAP to non-GAAP items. |
Total revenues for the Impax Generics division increased 18.0% to $128.7 million in the first quarter 2015, compared to $109.1 million in the prior year period. The increase is due to the addition of $12.3 million in product sales from the Tower acquisition and $7.3 million from higher sales in existing Impax products.
Gross margin in the first quarter 2015 decreased to 40.6%, compared to gross margin of 47.8% in the prior year period. Adjusted gross margin in the first quarter 2015 decreased to 45.0%, compared to adjusted gross margin of 60.4% in the prior year period. The decrease in gross margin and adjusted gross margin was primarily the result of higher sales of lower margin generic products, the impact of additional competition on generic digoxin, the later than anticipated close of the Tower acquisition and the delayed launch of certain products.
Total operating expenses in the first quarter 2015 increased to $15.9 million, compared to $15.8 million in the prior year period, primarily due to higher selling, general and administrative expenses which were largely offset by reduced patent litigation expenses in the current period.
Impax Specialty Pharma Division Information | |||
(Unaudited, amounts in thousands) | |||
Three Months Ended | |||
March 31, | |||
2015 | 2014 | ||
Revenues: | |||
Impax Specialty Pharma Product sales, net | $ 14,128 | $ 9,309 | |
Other revenues | 227 | 268 | |
Total revenues | 14,355 | 9,577 | |
Cost of revenues | 7,390 | 4,074 | |
Gross profit | 6,965 | 5,503 | |
Operating expenses: | |||
Research and development | 4,099 | 10,524 | |
Patent litigation expense | 182 | - | |
Selling, general and administrative | 14,856 | 9,221 | |
Total operating expenses | 19,137 | 19,745 | |
Loss from operations | $ (12,172) | $ (14,242) | |
Gross margin | 48.5% | 57.5% | |
Adjusted gross profit (a) | $ 9,883 | $ 6,233 | |
Adjusted gross margin (a) | 68.8% | 65.1% | |
(a) Adjusted gross profit is calculated as total revenues less adjusted cost of revenues. Adjusted gross margin is calculated as adjusted gross profit divided by total revenues. Refer to the “Non-GAAP Financial Measures” for a reconciliation of GAAP to non-GAAP items. |
Total revenue for the Impax Specialty Pharma division increased 50.0% to $14.4 million in the first quarter 2015, compared to $9.6 million in the prior year period, due to higher sales of Zomig® nasal spray and the addition of $1.4 million of product sales from the Tower acquisition.
For the first quarter 2015, the Company deferred approximately $3.0 million of product sales of RYTARY as the product was launched at the end of the first quarter. In addition, the Company had received limited prescription data as of the end of the first quarter. Depending on further script data and wholesaler reorder patterns, the Company expects to recognize the deferred revenues related to the launch quantities during the second quarter 2015 and will recognize future revenues based on shipments before the end of the year.
Gross margin in the first quarter 2015 decreased to 48.5%, compared to 57.5% in the prior year period, due to an increase in amortization expense and the effect of a fair value step-up of inventory as a result of the Tower acquisition. Adjusted gross margin in the first quarter 2015 increased to 68.8%, compared to adjusted gross margin of 65.1% in the prior year period, due to higher sales as noted above.
Total operating expenses in the first quarter 2015 decreased to $19.1 million, compared to $19.7 million in the prior year period, as lower research and development expenses were partially offset by an increase in brand selling expenses relating to the launch of RYTARY. During the first quarter 2015, the Company spent $6.9 million on advertising and promotional costs, and the expansion of its neurology sales force to 77 reps from 64, due to the launch of RYTARY for which corresponding revenues were deferred as noted above
Corporate and Other | |||
(Unaudited, amounts in thousands) | |||
Three Months Ended | |||
March 31, | |||
2015 | 2014 | ||
General and administrative expenses | $ 31,018 | $ 13,873 | |
Loss from operations | $ (31,018) | $ (13,873) | |
General and administrative expenses in the first quarter 2015 increased $17.1 million to $31.0 million, compared to $13.9 million in the prior year period, primarily driven by business development expenses of $7.4 million and employee severance of $2.3 million related to the Tower acquisition. Excluding the business development and severance charges, total general and administrative expenses in the first quarter 2015 increased $7.4 million, primarily due to higher information technology costs and higher share-based compensation expense, compared to the prior year period.
Cash, cash equivalents and short-term investments were $163.1 million as of March 31, 2015, compared to $414.9 million as of December 31, 2014. The decrease is primarily due to the cash used to pay the purchase price in the Tower acquisition.
Interest expense in the first quarter 2015 was $4.0 million, an increase of $3.9 million, compared to the prior year period. The increase includes $2.3 million for ticking fees incurred relating to the $435.0 million term loan in connection with the Tower acquisition.
2015 Financial Guidance
The Company’s full year 2015 financial guidance remains unchanged from when it was issued on March 10, 2015. The Company’s full year 2015 estimates are based on management’s current belief about prescription trends, pricing levels, inventory levels, and the anticipated timing of future product launches and events. The Company’s estimates exclude the impact from any products for which the Company has not yet received approval from the U.S. Food and Drug Administration.
- Adjusted gross margins as a percent of total revenue are expected to be in the mid 50% range.
- Adjusted total research and development (R&D) expenses across the generic and brand divisions of approximately $80 million to $85 million (includes patent litigation expenses).
- Adjusted selling, general and administrative expenses of approximately $170 million to $180 million.
- Capital expenditures of approximately $45 million to $50 million.
- Effective tax rate of approximately 34% to 36% on a GAAP basis, which assumes that the U.S. R&D tax credit is renewed for 2015. The R&D tax credit expired on December 31, 2014. The Company anticipates that its non-GAAP effective tax rate may experience volatility as the Company’s tax benefits may be high compared to the Company’s operating income or loss.
Conference Call Information
The Company will host a conference call on May 11, 2015 at 4:30 p.m. ET to discuss its results. The call 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 29813940. 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.
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