Attached files
| file | filename |
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| EX-99.2 - EXHIBIT 99.2 - Impax Laboratories, LLC | exhibit992.htm |
| 8-K - 8-K - Impax Laboratories, LLC | ipxl-3x01x2018x8k.htm |
Impax Reports Fourth Quarter and Full Year 2017 Results
‒ Q4 2017 Total Revenues of $183 Million; GAAP Net Loss Per Share of $4.18; Non-GAAP Adjusted Income Per Share of $0.11 ‒
‒ Full Year 2017 Total Revenues of $776 Million; GAAP Net Loss Per Share of $6.53; Non-GAAP Adjusted Income Per Share of $0.63 ‒
‒ Completes Operational and Cost Improvement Plans ‒
‒ Combination with Amneal Pharmaceuticals Expected to Close in the Second Quarter of 2018 ‒
BRIDGEWATER, NJ, March 1, 2018 – 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 |
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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.”
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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.
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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.
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Impax Specialty Pharma Division Information
(Unaudited; In thousands)
Three Months Ended | Year Ended | ||||||||||||||
December 31, | December 31, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Revenues: | |||||||||||||||
Rytary® sales, net | $ | 28,290 | $ | 21,803 | $ | 91,637 | $ | 73,833 | |||||||
Zomig® 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
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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
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(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
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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
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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 | |||||||||||
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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 | |||
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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 | ||||
Page 11 of 18
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 | |||||||||||
Page 12 of 18
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 first 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® 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. |
Page 13 of 18
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 | |||||||
Page 14 of 18
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 | |||||||||||
Page 15 of 18
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. |
Page 16 of 18
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 | 39.3 | % | |||||||
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. |
Page 17 of 18
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 | |||||||
Page 18 of 18