Impax Laboratories, Inc. (NASDAQ: IPXL) today reported strong growth in the second quarter of 2010 due to an increase in sales from its Global Product sales channel. Total revenue increased $94.7 million to $153.1 million driven by continued strong sales of generic Adderall XR® and generic Flomax® for which there were no amounts in the second quarter of 2009, as well as increased sales of the Company's fenofibrate products. Net income increased to $31.3 million, or $0.48 per diluted share, compared to $3.0 million, or $0.05 per diluted share in the prior year period.
Larry Hsu, Ph.D., president and chief executive officer of Impax Laboratories, said: "Once again our strategic focus drove results that far exceeded the prior year. We benefited from the remaining weeks of exclusive sales of generic Flomax® before competitors entered the market in late April. This short-term exclusivity period was significant, accounting for almost $204 million in sales and $190 million in gross profit since our March 2010 launch of the product. We also continued to see strong demand for our generic Adderall XR® product; however, sales concentrated in a few large accounts where pull-through was slow and on-going supply issues with our supplier constrained our ability to expand our market share. We have improved the management of our inventories and we recently began to see an improvement in the supply of generic Adderall XR®. We will aggressively work to fill customer demand."
Dr. Hsu continued, "Our strong financial performance for the first half of 2010 has already exceeded full year 2009 results. This exceptional performance has placed us in a stronger financial position than at anytime in our history. With a very healthy balance sheet consisting of more than $328 million in cash and short-term investments and no debt, we have significant resources to re-invest in our vital strategic initiatives. We continue to aggressively pursue generic and brand opportunities to acquire products, technologies or companies with compelling business strategies to drive near and long term growth."
Second Quarter 2010 Segment Information
The Company has two reportable segments, the Global Pharmaceuticals Division (generic products) and the Impax Pharmaceuticals Division (brand products) and does not allocate general corporate services to either segment.
Global Pharmaceuticals Division Information
Second Quarter 2010
Global Pharmaceuticals Division revenues in the second quarter of 2010 increased $94.3 million to $149.5 million, driven by a significant increase in Global Product sales, net, as discussed below.
During the second quarter of 2010, Global Product sales, net, increased $100.3 million to $137.6 million over the same period in 2009 primarily due to strong sales of generic Adderall XR®, generic Flomax® and, to a lesser extent, increased sales of the Company's fenofibrate products. On March 2, 2010, the Company successfully launched generic Flomax® which contributed $27.4 million to second quarter 2010 sales ($203.7 million of sales for the six months ended June 30, 2010). The Company was the only supplier of generic Flomax® for the succeeding eight weeks ending April 27, 2010, after which competitors entered the market, resulting in price erosion and reduction in the Company's market share. Partially offsetting these gains was a $5.3 million decline in Rx Partner revenue and a $1.9 million decline in Private Label revenue. The decline in Rx Partner revenue is primarily attributable to reduced sales of generic Wellbutrin® products as competition continues to erode the Company's market share, while Private Label products sales declined due to lower demand for the Company's generic loratadine/PSE products.
Gross profit for the second quarter of 2010 increased $52.7 million to $83.9 million primarily due to sales of generic Adderall XR®, generic Flomax® which contributed $22.4 million to second quarter 2010 profits (total gross profit for the six months ended June 30, 2010 was $190.3 million) and an increase in fenofibrate sales. Gross profit margin of 56% for the second quarter 2010 declined from the 57% margin for the prior year period due to the slightly higher concentration of lower-margin products.
Research and development expenses for the second quarter of 2010 increased $1.4 million to $10.9 million, compared to the prior year primarily due to higher spending on clinical studies and outside development costs.
Selling, general and administrative expenses for the second quarter of 2010 increased $0.6 million to $3.1 million due to increased customer freight and higher marketing expenses, both related to higher sales levels as noted above.
Global Pharmaceuticals Division income from operations in the second quarter 2010 increased $50.3 million to $68.1 million, compared to $17.7 million in the prior year, due to the increase in sales as noted above.
Impax Pharmaceuticals Division Information
Second Quarter 2010
Promotional Partner revenues in the second quarter of 2010 were $3.5 million, a slight increase over the prior year as the Company continues to meet its physician detailing objectives.
The Company is currently investing in research and development to develop brand products which provide longer product life cycles and the potential for significantly higher profit margins than generic products. In the second quarter of 2010, research and development increased $4.6 million to $10.8 million, primarily due to planned increased spending on clinical studies for the Company's leading drug candidate for Parkinson's disease.
The Company's planned increase in investment in research and development during the second quarter of 2010 contributed to an Impax Pharmaceuticals Division loss from operations of $11.2 million compared to a loss from operations of $6.9 million in the second quarter of 2009.
Corporate and Other Information
Total corporate operating expenses for the second quarter of 2010 increased $0.8 million to $7.6 million, due to higher general and administrative expenses attributable to increased compensation and higher insurance costs related to increasing levels of business activity.
Cash and Short-term Investments
Cash and short-term investments were $328.1 million as of June 30, 2010, as compared to $90.4 million as of December 31, 2009. The change in cash and short-term investments from year-end 2009 is due to strong product sales as noted above.
2010 Financial Outlook
The Company previously updated its full year 2010 forecast on May 4, 2010. The Company provides this further update to its full year 2010 forecast.
- Cash flows from operating activities, before changes in working capital, less capital expenditures (Free Cash Flow), planned to be positive.
- Updated May 2010 - gross margins as a percent of total revenues to approximate 50% for the balance of the year.
- Updated August 2010 - Total research and development expenses across the generic and brand divisions to approximate $83 million with generic R&D to approximate $41 million and brand R&D to approximate $42 million (an increase of approximately $6 million due to higher costs of clinical studies for the Company's leading drug candidate for Parkinson's disease).
- Patent litigation expenses of approximately $11 million.
- Selling, general and administrative expenses of approximately $50 million.
- Updated May 2010 - estimated consolidated effective tax rate of approximately 40% (without renewal in 2010 of the federal R&D tax credit).
- Capital expenditures expected to be approximately $20 million.