IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 1
IMPAX LABORATORIES
MODERATOR: BARRY EDWARDS
NOVEMBER 9, 2004
8:00 AM CT
Operator: Welcome to the IMPAX Laboratories Third Quarter Conference
Call. At this time, all participants are in a listen-only
mode. Following management's prepared remarks we will hold
a question and answer session.
To ask a question, please press star followed by 1 on your
touch tone phone. If anyone has difficulty hearing the
conference, please press star 0 for operator assistance.
As a reminder, this conference is being recorded today,
November 9, 2004. I would now like to turn the call over
to Kim Golodetz. Please go ahead, ma'am.
Kim Golodetz: Thank you. This is Kim Golodetz with Lippert Heilshorn &
Associates. Thank you all for participating in today's
call which will cover IMPAX's 2004 Third Quarter financial
results. Joining me from IMPAX Laboratories are Barry
Edwards, Chief Executive Officer and Cornel Spiegler,
Chief Financial Officer.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 2
This conference call will follow the standard format
beginning with prepared remarks by management and then
we'll open up the call to your questions.
Earlier today, IMPAX released financial results for the
third quarter of 2004. If you have not received this news
release, or if you would like to be added to the company's
distribution list, please call Lippert Heilshorn in Los
Angeles at (310) 691-7100.
This call is being broadcast live over the Internet. A
replay will be available on the company Web site for 14
days. A telephone replay will be available for 48 hours by
dialing (800) 642-1687 from the U.S., or (706) 645-9291
for international callers, and entering reservation
1751374.
Before we begin, I would like to caution that to the
extent any statements made during this conference call
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
IMPAX'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, IMPAX's ability to obtain sufficient capital to fund
its operations, the difficulty of predicting FDA filings
and approvals, consumer acceptance and demand for new
pharmaceutical products, the impact of competitive
products and pricing, IMPAX's ability to successfully
develop a commercialized pharmaceutical product, IMPAX's
reliance on strategic alliances, the uncertainty of patent
litigations, the ability of raw materials, the regulatory
environment, dependence on patents and other protection
for innovative products, exposure to product liability
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 3
claims, fluctuations in operating results and other risks,
detailed from time to time in IMPAX's filings with the
Securities and Exchange Commission.
Forward-looking statements speak only as to the date on
which they are made, today, November 9, 2004. IMPAX
undertakes no obligation to update publicly or revise any
forward-looking statements regardless of whether new
information becomes available due to developments that
occur or otherwise.
This call is the property of IMPAX Laboratories. Any
re-distribution, re-transmission or re-broadcast of this
call in any form without the express written consent of
IMPAX is strictly prohibited.
With that said, I would like to turn the call over to
Barry Edwards. Barry?
Barry Edwards: Thank you Kim. Thanks everyone for participating in
IMPAX's Third Quarter 2004 Conference Call. As you may see
from the press release we issued this morning, we had
revenues of $30.7 million, an 86% increase over the third
quarter of 2003. In addition, we reported a profitable
quarter ending $735,000 or 1 cent per share on a fully
diluted basis.
Much of the increase over 2003 was due to shipments of
Bupropion Hydrochloride Extended Release tablets, generics
of Wellbutrin SR and Zyban by our marketing partner Teva.
We received a total of two (AME) approvals from FDA during
the quarter, bringing our total for the year to nine. And
we also announced a re-statement of first quarter and
second quarter of 2004 financial results. We'll dedicate a
portion of this call to explain the re-statement,
including some background information as well as the
changes that we'll cover in our financial statement.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 4
Now I'll turn the call over to Cornel who will go over the
details of the income statement, balance sheet. And then
following our usual format, I'll discuss progress we're
making in executing the business strategy. Cornel?
Cornel Spiegler: Thank you Barry. Good morning everyone. Before going to
more depth about our financial results for the Q3 2004, I
would like to discuss the process by which our strategic
partner Teva reinforced the IMPAX's financial results of
the product marketed by them according to the June 2001
strategic alliance agreement.
On a monthly basis we receive a financial report from Teva
indicating primarily the gross sales in dollars and in
units then separating the net sales and the gross margins
and the impact by product. Under the terms of this
agreement, Teva has the sole and exclusive right to
determine all the terms and conditions of sales to its
customers including pricing, discounts, allowances,
returns, rebates, price adjustments and other sales
credit.
We at IMPAX review the appropriate information, follow up
with their personnel when we have questions or comments.
Therefore we record the revenues and gross margins from
those Bupropion sales based on a monthly financial
reporting from Teva.
The September 2004 financial report indicated two measures
of sales credit issued by Teva in September 2004, which
was our share of this credit for an aggregate of about
$3.5 million. The September 2004 report also indicated,
for the first time, that no sales returns were deducted
from the net sales. As a result of all our discussions
with Teva it was determined this credit related to March
2004 sales. Our agreement was (unintelligible) for the
company that carried we need to re-state the Q1 and Q2
2004 financial results as follows.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 5
The Q1 net revenues were reduced by $4,308,000 from
$38,853,000 to $34,545,000 and the reported net income was
reduced $3,832,000 from $9,048,000 to $5,216,000.
Accordingly the reported earnings per share were reduced
by 7 cents from 16 cents to 9 cents basic and 8 cents on a
diluted basis respectively.
The Q2 net revenues were reduced by $281,000 from
$30,845,000 to $30,564,000 and the reported net income was
reduced by $251,000 from $572,000 to $321,000. The
reported earnings per share remained at 1 cent basic and
fully diluted.
We'll file today the Form 12b-25 to extend the deadline
for the filing of our Form 10-Q for the quarter ending
September 30, 2004. The amended Forms 10-Q for the first
and second quarter were completed and are currently being
reviewed by our independent auditors.
And now to the third quarter results. Total revenues for
the third quarter 2004 were $30.7 million, up 86% of the
total revenue of $16.5 million in the prior year third
quarter and slightly higher sequentially from the total
revenues of $30.6 million in the second quarter of 2004.
The year over year increases are primarily due to
shipments of generic version of Wellbutrin SR, Bupropion
Hydrochloride 100 and 150 mg Controlled Release Tablets
and generic Demeclocycline Hydrochloride 150 and 300 mg
Tablets which commenced during the first quarter of 2004,
and Zyban, Bupropion Hydrochloride and Sinemet CR,
Carbidopa/Levodopa Extended Release Tablets which we began
marketing during the second quarter of 2004.
Last quarter we began breaking down our product sales to
our three marketing channels to help investors understand
and better track our revenue growth. The categories are
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 6
direct sales from which to compare to our Global
Pharmaceutical division which we call Global; generic
prescription products to marketing buyers based on our
strategic alliance agreement with Andrx, Teva, which we
call Rx partners; and sales of OTC products to marketing
pointers based on OTC agreements such as the one we have
with Schering, Wyeth, Novartis and recently with Leiner,
which we call OTC.
For the three months ending September 30, 2004, from the
$30.3 million in product sales, $14.6 million was marketed
by our Global division, compared to $10.2 million in the
same period of last year. $10.8 million was sold through
Rx partners compared zero last year. And $4.9 million of
OTC sales compared to $5.7 million last year.
The $4.4 million increase in global products over 2003
third quarter was primarily due to new products such as
the Demeclocycline, with net sales of about $2.7 million,
and the Carbidopa/Levodopa with net sales of about $2.1
million, partially offset by lower sales of Carbidopa.
Gross margin for the 2004 third quarter was $13.1 million,
or about 43% of total revenues compared to gross margins
of $3.5 million, or about 21% of total revenues in the
prior third quarter and higher sequentially from $12
million and approximately 39% of total revenues in the
second quarter of 2004.
The year over year increase in the gross margin is
primarily due to the introduction of new products and last
year was higher margins such as Bupropion Hydrochloride,
Demeclocycline Hydrochloride, Flavoxate and
Carbidopa/Levodopa.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 7
The research and development expenses for the three months
ended September 30, 2004, prior to reimbursement, were
$4.9 million, which was about $1.6 million higher than the
2003 third quarter. The year over year increase was due
primarily to higher personnel costs, to biostudies,
clinical studies and new produce introduction.
Capital litigation costs for the three months ended
September 30, 2004 were approximately $3.3 million
compared to $845,000 for the same period of 2003. The year
to year increase for the three months was primarily due to
an ongoing patent litigation related to our ANDA for
(unintelligible) capsules and our (unintelligible)
tablets, (unintelligible) tablets, (unintelligible),
tablet engineering or capsules.
(Spending) expenses for the three months ended September
30, 2004 was $980,000 as compared to $546,000 for the same
period in 2003 primarily due to higher personnel costs and
the newly leased office expense.
The G&A expenses for the three months ended September 30,
2004 were $3.3 million as compared to $2.3 for the same
period in 2003, primarily due to higher insurance premiums
and personnel costs.
The net income for the quarter was $735,000 or 1 cent per
share compared with a net loss of $3.6 million, or
negative 7 cents per share for the same period in 2003.
Weighted average common shares in the quarter was 58.5
million and the same amount was available this quarter.
For the nine months ended September 30, 2004, total
revenues were $95.8 million, up approximately 128%
compared to total revenues of $42 million in the
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 8
comparable period of last year. From 91.8 million product
sales in the first nine months of 2004, 40.5 million were
marketed through our Global division, compared to 27
million last year, 38.7 million were sold through our Rx
partners, compared to zero last year, and 12.6 million
were OTC sales compared to 13.4 million last year.
Net income for the first nine months of 2004 was $6.3
million, or 10 cents per fully diluted share, compared to
a net loss of $9.1 million or negative 18 cents per share
in the first nine months of 2003.
Turning now to balance sheet items. The total cash
position of the company as of September 30, 2004 was $89.6
million, compared to $15.5 million at December 31, 2003.
The increase in cash balance was primarily due to the
private placement of 1.25% $95 million convertible senior
subordinated debentures private placement completed in the
second quarter of 2004.
Our inventories were at $38.2 million at September 30,
2004, compared with $28.5 million at December 31, 2003.
Our inventories reflect additional product launches in
preparation for launch totaling $1.7 million for
Loratadine and $2.1 million for OxyContin. Due to higher
sales, our accounts receivable was $19.7 million at the
end of the quarter compared with $9.9 million at the end
of 2003. Our DSO days sales were outstanding, improving
from 61 days at June 30, 2004 to 56 days at September 30,
2004.
Our capital expenditures for the nine months ended
September 30, 2004 were $8.7 million compared to $3.1 in
the comparable period in 2003. As previously disclosed, we
expect to spend between $15 to $20 million for the next 12
months from all the client CAPEX expenditures.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 9
Barry will talk to you now about private development and
our progress in several other areas.
Barry Edwards: Thank you Cornel. As I mentioned earlier in the call, we
received two final approvals in the quarter. These were
for generic versions of Glucophage XR, which is Metformin
Hydrochloride Extended Release Tablets, the 500 mg
strength, and a generic version of OxyContin 80 mg, which
is Oxycodone Hydrochloride Extended Release Tablets. This
brings our total number of approvals for the year to nine,
seven of them final approvals, two of them tentative
approvals.
After the end of the quarter we began marketing our
previously approved Midodrine 2.5 and 5 mg tablets through
our Global Pharmaceuticals division. Also, after the end
of the quarter, we made the first shipments to our newest
OTC partner, Leiner Health Products, for our Loratadine
Orally Disintegrating Tablets and for Loratadine
Pseudoephedrine 24 Hour Extended Release Tablets. We
expect Leiner will begin marketing these products as
private label store brand products before the end of the
year.
Last quarter we referred to working on four to five
upcoming new product launches. We are now at a point where
we have taken four of those products into the market.
Based on approvals in hand and the progress of our
applications under review, we could possibly have two or
more additional new product launches this year. As a
result, our inventory levels are likely to remain high as
we prepare support for these possible new product
launches.
On the development side, today our product portfolio
consists of 23 approved ANDAs, 14 applications pending at
FDA, targeting approximately $4.3 billion in market sales.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 10
Our R&D group continues to work on tech transfer projects
as we transition products from R&D into our manufacturing
facility, as well as on new product opportunities. Our
increased R&D spending in the last quarter is indicative
in an increase in activity directed toward new product
filings.
On the litigation front, while there is significant
activity and various paragraph for litigations during the
quarter, as evidenced by the higher at litigation expense,
there were no significant changes in the litigation status
or timing.
In closing, I would remind you as more complete
information regarding our development timeline and
business strategy can be found in the corporate
presentation posted and updated from time to time on our
Web site at www.impaxlabs.com.
Operator, at this time we're ready to field some
questions.
Operator: Ladies and gentlemen, if you wish to register for a
question for today's question and answer session, you will
need to press star then the number 1 on your telephone.
You will hear a prompt to acknowledge your request.
If your question has been answered and you wish to
withdraw your polling request, you may do so by pressing
star then the number 2. If you are using a speakerphone,
please pick up your handset before entering your request.
One moment, please, for the first question.
Your first question comes from Greg Gilbert with Merrill
Lynch.
Gregory Gilbert: Thanks. I have a couple of obvious questions to start
with. First of all, Barry, can you provide us any color on
where your Wellbutrin 200 application stands and any FDA
dialogue you've had. And also, on OxyContin 80, has your
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 11
risk management program been approved and what are your
thoughts post the appeals hearing?
Barry Edwards: Thanks, Greg. On the Bupropion 200 mg, you know, we
continue to see that progress on normal - what we consider
a normal review - through FDA. We have been in
communication with the agency, you know, regarding various
questions they have and still believe that, you know, it's
on track for approval in a normal review time frame.
On the Oxycodone product, as we noted earlier, we do have
a final approval on that, and, you know, as we mentioned,
when we have the final approval, we're still working with
FDA on a risk management program. We continue to work with
the agency toward getting their final okay on the program
and, you know, think that we're making good progress on
that.
With respect to the oral argument in the Endo/Purdue
appellate case last week, as I think we mentioned on
previous calls, we're in discussions, and we look at that
as another data point that will be used when we consider
the launch of the product once we get the final clearance
from FDA on the R&D.
Gregory Gilbert: Okay, and then as a follow-up, Cornel, can you provide us
cash flow from ops and CAPEX?
Cornel Spiegler: The CAPEX I did mention.
Gregory Gilbert: Okay.
Cornel Spiegler: But how much we spent on the CAPEX for the first three
quarters - I'll go back to my notes here.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 12
Gregory Gilbert: Okay. We'll get it off the transcript. Sorry about that.
How about cash...
Cornel Spiegler: The cash from operations was filing negative because we
continued to pay down accounts payable and, you know, the
inventory build up. So it was filing negative cash for
operations.
Gregory Gilbert: Then you mentioned Methylphenidate inventory. Is that
Concerta or something else?
Barry Edwards: Yes, that would be the generic version of Concerta.
Gregory Gilbert: Okay.
Barry Edwards: Yeah, we call it by the generic name, all four strengths.
Gregory Gilbert: Is this the first time you've mentioned that?
Cornel Spiegler: That's correct.
Gregory Gilbert: Okay. Barry, care to offer any color on how that's
progressing and the impact of the citizens petition filing
and a label change?
Barry Edwards: You know, I think the FDA has, you know, publicly
stated that they received additional information from J&J
with respect to the petition, and I believe their position
at that point was that they would need additional time to
review that information to come to a decision. And, you
know, we have no more direct information than what they've
said publicly.
Gregory Gilbert: Okay. Thanks. I'll get back in line.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 13
Barry Edwards: Okay. Thanks Greg.
Operator: Your next question comes from Adam Greene with First
Albany Capital.
Adam Greene: Thanks. Good morning everyone. Relative to Wellbutrin SR,
what should we expect in the fourth quarter regarding any
potential for rebate and inventory issues or pattern, and
any impact of fourth quarter sales relative to the third
quarter level of $11 million? And also, I'm interested to
hear your thoughts on the new TriCor formulation - what if
anything you're hearing from managed care regarding the
switch on that product.
Barry Edwards: Okay, thanks Adam. You know, with respect to the
Wellbutrin SR, the generic Wellbutrin SR and the impact on
fourth quarter, you know, we've had, as you can expect, a
number of discussions with our strategic partner and we
put in place, you know, additional meetings and, you know,
working on an approved reporting system so that we get the
information on a more timely basis.
You know, during discussions with Teva, they have
indicated that they're not seeing any great pricing
pressure, which has been consistent with what, you know,
they've been saying for the past several months. So, you
know, we don't see from that side any additional pressures
on fourth quarter.
You know, the risks, you know, with the products are, I
think, pretty much the same as they have been, which is,
you know, that the risk of additional new competitors
coming into the market or the current players, you know,
wanting to make a move to increase their market share.
I think overall on a proportional basis, the market shares
have held pretty steady and, you know, shortly after the
launch, probably from sometime in the second quarter on,
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 14
you know, the market shares have held pretty parallel with
one another for the different players.
So, you know, at this point there's nothing that we can
see, you know, that I can give you any more direct
information on the fourth quarter other than the
historical information that everybody has at this point.
Adam Greene: Okay. And on TriCor?
Barry Edwards: On TriCor, you know, that was a recent announcement by
Abbott that they had a new formulation of their TriCor
tablets which is the generically known fenofibrate. You
know, we haven't as of yet at this point, gotten any
feedback from the market with respect to the launch, the
timing of the launch, and withdrawal of the current
product and how that, you know, might impact the market
for the current generic version that is pending.
You know, this is the second time that Abbott has made a
move in the market like this with respect with the
fenofibrate capsules in the switch. I think that could be
regarded as being a successful exercise on their part in
terms of shifting market into a new product and preserving
market share. And, you know, I think over the next several
weeks and months we'll be able to get a little bit more
clarity on the progress on the switch from the caplet to
the new tablet.
Adam Greene: Great. Thank you.
Operator: Your next question comes from Michael Tong with Wachovia
Securities.
Michael Tong: Hi - good morning.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 15
Barry just a couple of follow-up questions on generic
Wellbutrin SR. Have you had any discussions with Teva as
to what they see in terms of trade inventory level? Has it
normalized and if it has when did it occur?
And also with respect to timing, Wellbutrin SR shipment in
the third quarter, was there - pretty much spread evenly
throughout the quarter or was there a disproportionate
amount that came after - that occurred in the last week of
the quarter?
And finally on OxyContin did you hear anything last week
at the Appellate Court that would change how you pursue
that product operationally?
Barry Edwards: Thanks Michael, you know, let me go back to try to answer
them in the order you asked.
As far as the inventory in the trade channels, you know,
we - as you know, you know, Teva's the marketer of the
product and they have more direct information on the - in
fact inventory level, you know, but our impression from
the sales flow that we've seen over the last quarter is
that the inventories at the customers have normalized and
that, you know, we're seeing a pull through that is
running somewhat in parallel to the prescription volumes
that are being reported for the product.
You know with respect to the sales rate, you know, our
experience, you know, again just looking back at the
numbers that are reported to us by Teva, you know, the
quarters tend to be somewhat lumpy. And I think, you know,
that's probably a factor of, you know, them making
shipments to very large customers and depending on the
timing of a shipment to those customers within the
quarter, you know, we see this lumpiness in terms of the
unit flow out.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 16
On the OxyContin, you know, as I mentioned in response to
the earlier question, you know, we've looked at this as
another data point, you know, we did have representatives
at the hearing first hand in order to get a better feel
for the arguments that were being made. And, you know, the
information that we gleaned from that, you know, will
certainly be part of the overall equation that we
consider, you know, as we move forward with the product.
Michael Tong: Right but more specifically has it changed how you looked
at that product?
Barry Edwards: I mean since we haven't made a formal determination on it
I think at this point I have to say no. It didn't change
the way we look at it.
Michael Tong: Great. Thanks.
Operator: Your next question comes from Chris Schott with CSFB.
Chris Schott: Great. Thank you.
Just a quick question with regards to, I mean, when we
were looking forward with some of these Teva related
product sales are you going to have any greater ability to
maybe smooth out some of the sales trends there so that
we're not going to - I guess in an effort to kind of avoid
restatements when we see customer rebates? Is there any
update on that?
Barry Edwards: Well, you know, Chris there's a couple of different
things, you know, as far as, you know, controlling the
sales flow out from Teva into the customer base, you know,
there's very little if anything we can do to control that,
you know, they have sole responsibility for the sales and
marketing, you know, of the products.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 17
I think where, you know, we haven't - where we're working
to improve the system is in the flow of information with
respect to, you know, things that happen in the normal
course of this business which are the credits, charges,
rebates, et cetera.
I mean Cornel I don't know if you can add a little bit?
Cornel Spiegle: Yes (unintelligible) a couple things about. We have a very
good relation with Teva personnel and they've been very
cooperative when providing the information when we ask
them.
I think the problem what happened was the first and second
quarter being a new launch product what is material to us
may not be material exactly to them and I think per our
discussion with them they've agreed to improve the
reporting and that's what we saw in September already. And
also we'll continue to have monthly meetings and quarterly
meetings with them to make sure that the information they
reported to us is proper and according with GAAP so we
don't have any kind of future misstatements in the future.
Chris Schott: Great - thank you.
One other quick question. With regards to your - the (OTC)
business as you begin shipments to your new partner this
quarter is that something we should think of as being at
all significant or is that a relatively small...?
Barry Edwards: I think, you know, because it's the initial shipments and,
you know, they're getting prepared for their launch it's -
have a relatively small impact.
Chris Schott: Okay great. Thank you.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 18
Operator: Your next question comes from Andrew Swanson with
Citigroup.
Andrew Swanson: Good morning.
It's really just a housekeeping question more than
anything else. I know you touched on this in your initial
comments but what I heard was that there was a $3.85
million sales credit related to March 2004. Actually - my
sense is you actually restated by a little bit more than
that and then also into the second quarter. Could you just
walk through that process one more time for us please?
Cornel Spiegle: Yes sure. The difference is sales return reserves. As I
mentioned earlier that in the report that we got in
September we did find out from Teva that they did not
accrue for us the estimated returns therefore - with
broken product. So we discussed with them or suggested a
return rate which they use on overall basis for all their
products and we - therefore we had to go back and
calculate the estimated reserve returns for the sales of
Bupropion for the first and the second quarter.
So what you see the difference between the 3.5 million
amount mentioned, 4.3, the difference is the estimated
sales returns for the first quarter. The 281,000 in the
second quarter was completely the sales return estimates.
Andrew Swanson: And so you'll then be - you'll be able to use that rate
for all future Teva products going forward.
Cornel Spiegel: Correct. For future the same rate we discussed with them.
Again, when monitor quarterly - we discussed again any
changes in the rates or any kind of - if we see a
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 19
significant increase in returns or lower returns we'll
monitor and adjust the rate accordingly but the answer is
yes.
Barry Edwards: (Andy) just as a further clarification, you know, Teva had
set up its own reserve for the return. It just wasn't
reported in the, you know, Bupropion reports that we
received and it wasn't until September that we became
aware that it wasn't included.
Andrew Swanson: Thank you.
Operator: Your next question comes from David Maris with Banc of
America.
David Maris: Good morning - a few questions.
First, to clarify something that Cornel said Barry I think
you mentioned that this was the first disclosure of the
Concerta but from what I recall you also disclosed it last
month at (Angelo's) conference. If you can just clarify it
if this is the first disclosure of it.
Then on the pipeline if you could talk about how many
products do you expect to launch over the next six months
and how many of those launches are the dates pretty much
fixed and how many could be held up by litigation,
citizen's petition, et cetera?
Barry Edwards: Okay with respect to the Methylphenidate, you know, I
think what Cornel was referring to was this is the first
conference call that we've disclosed that, you know, one
of the previously undisclosed projects with Teva was the
Methylphenidate generic of Concerta. And, you know, the -
we had updated the corporate presentation a little over a
week ago and that was used at the (Contraberg) conference
where it was listed in the Teva joint venture project and,
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 20
you know, it became disclosed at that conference and on
the Web site. You know and in this conference call and in
the reporting, you know, the major reason for the
disclosure was the, you know, existence of the inventory
that we've been building up in anticipation of the new
product launch once the citizen's petition issues are
resolved - the final approvals are granted.
Going to your second question regarding the possible new
product launches over the next six months, you know, I
think there's two that are - three that are fairly well
known as potential candidates and those are the Oxycodone
80 milligram, the Methylphenidate Extended Release and the
Bupropion 200 milligram.
I think, you know, with the Oxycodone, you know, we've
discussed several times, you know, through the call
already that the situation that we've got the final
approval, still working with FDA on the RMP, and, you
know, evaluating the legal situation.
On the Methylphenidate again there's a specific
(unintelligible) pending at FDA. It's been pending for
over eight months now and, you know, we hope to, you know,
see some indication from FDA on the progress they're
making on that.
And then on the Bupropion 200, you know, that one is, you
know, undergoing a routine review and I think has - does
not have the same type of timing issues or questions that
the other two do.
As far as other product launches again, over the coming
six months, you know, the ones that I'm looking at, you
know, at this point aren't involved in Paragraph 4
litigation and, you know, should be relatively free of
encumbrances in getting into the market other than the
regular FDA review.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 21
David Maris: And just as a follow-up how many of those - how many
products of that type are there and then you may have
already covered this but how many ANDAs do you expect to
file in 2004 and is that a slowdown from previous years?
Barry Edwards: With respect to, you know, possible new product launches
over the next six months, you know, we've said that we
could get two or more by year end and I think that beyond
that going out to a six month time horizon probably
another - possibly another two to three beyond that. So,
you know, that puts us in the four to five range over the
next six months.
With respect to ANDAs for 2004, you know, our target is
six, you know, we still think that's achievable. As we've
noted before it's, you know, it's going to be lumpy.
There's going to be a lot of filings to make that number
in the fourth quarter. It is slightly lower than what we
did last year in terms of ANDAs. But I think, you know,
we've picked up the pace this year in the second half of
the year and, you know, have gotten, you know, the R&D
team back focused on new product development, you know as
I mentioned earlier in the remarks, you know, since we've
gotten through a large number of product startups and
validation throughout the course of this year which really
did take a lot of their time and attention.
David Maris: Okay and just the last clarification. Of the four to five
is that inclusive of the two to three that are up in the
air?
Barry Edwards: Yes.
David Maris: Okay great. Thank you very much.
Barry Edwards: You're welcome (Dave).
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 22
Operator: Your next question comes from Jeffrey Long-McGie with
ThinkEquity.
Jeffrey Long-McGie: Thank you.
In terms of how we, you know, on the outside of your stock
should think about the issue of willful infringement with
regards to the OxyContin 80 milligram, what - now in terms
of what you get from your lawyers is it a range - if they
say you have a 75% likelihood of being successful is that
enough to avoid willful infringement or do you have to
have a complete legal statement that says you guys are
going to win your case in order to avoid willful
infringement on that product?
Barry Edwards: You know Jeffrey I think that it's a very specific
question where it's difficult to give a very specific
answer. You know in these litigations there's a lot of
different factors that come into play. There's a lot of
information and I think that, you know, it's the overall
sum of the parts in terms of what's occurred in other
similar litigation, what, you know, your product is, what
your opinions are, what the assessments are, and the
review that occurs on a larger basis, you know, goes into
that determination. But, you know, I can't give you a very
specific answer because I don't think there really is one.
Jeffrey Long-McGie: Okay and if you think that Endo's going to lose this
appeal would you still consider launching with respect to,
you know, obviously you have some non-infringement claims
as well?
Barry Edwards: You know I think we're looking at the Endo appeal as we've
said earlier as an additional data point and we'll make
our assessment, you know, independent or, you know, you
know, at - utilizing that again as a data point. I don't
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 23
think that our, you know, assessment of whether they're
likely to prevail or not is going to be the sole
determinant in our decision whether or not to go forward.
Jeffrey Long-McGie: Thank you.
Operator: Your next question comes from Hossein Ekrami with Sturza.
Hossein Ekrami: Yes - good morning. Thanks for taking my call.
Barry have you seen a slowdown in FDA review period and
what would you characterize as a normal review period for
controlled release drug at the moment?
And the second question I have is on Wellbutrin SR. Did
they trend in line with prescription demand in the third
quarter?
Barry Edwards: Okay, you know, as far as FDA reviews, I mean, on the
applications that we have pending I'd say we have seen a
slowdown. In particular there's a couple of applications
where I think, you know, we've seen what FDA has disclosed
as a problem with the division of bioequivalents where the
comments came much later in the review than, you know, we
had been used to. I think FDA has also made statements
over the last several weeks that, you know, they're
working to correct those issues. (Unintelligible), you
know, seem to be largely created by the influx of new
applications.
Hossein Ekrami: Okay.
Barry Edwards: As far as the - on the Wellbutrin SR, you know, I think as
far as the revenues matching the prescriptions, you know,
I'm looking at it on the quarter overall that roughly the
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 24
units sold out, you know, are in a reasonable range of the
prescription data that's been reported.
Hossein Ekrami: Okay. Thank you very much.
Barry Edwards: You're welcome.
Operator: Your next question comes from Greg Gilbert with Merrill
Lynch.
Gregory Gilbert: Hey I have a couple follow-ups.
First, what's your goal for filing the 10-Q?
Cornel Spiegel: Okay as I mentioned earlier that the first and second
quarter 10-Qs were completed yesterday and they were sent
over to the accountants and their review. The Q3 was done
Friday. It's being reviewed by them also. Unfortunately
the way it works you have to file the Q1 and then the Q2
in order to complete the Q3 filing so we expect by the end
of the week to file all the 10-Qs.
Gregory Gilbert: Okay thanks.
Barry on Wellbutrin 200 just thinking about how that
market may shake out we know that a large generic player
will be launching against you there. Normally we would
assume that a larger company would gain disproportionate
share versus IMPAX on a typical launch, do you agree with
that and do you think it's a different scenario because
you're a pure generic and they're an authorized generic?
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 25
Barry Edwards: Yes to the first question, you know, the second question's
a little bit harder to answer, you know, I think there's
been a general feeling that customers prefer to deal with
generic manufacturers as opposed to purely a distributor.
Gregory Gilbert: Right.
Barry Edwards: But, you know, I don't have any data that would, you know,
to back that up or help you to come to any conclusion from
that.
Gregory Gilbert: Okay.
Barry Edwards: It's just a fact.
Gregory Gilbert: And then can - any general comments Barry on pricing or
volume or just general behavior on your global product
sales as - just a I guess a question about the competitive
landscape there.
Barry Edwards: Yes.
Gregory Gilbert: Anything worth noting?
Barry Edwards: Well, you know, one of the things to keep in mind with our
product line, you know, we are a slice of the market. Our
product tends not to have as many competitors as, you
know, the generic group overall. So, you know, what we're
seeing maybe different than what's reported overall for
the industry, you know, we're seeing, you know, sporadic
price competition in some accounts on some products but
nothing that I would, you know, classify as, you know,
broad based price degradation across the product line.
Gregory Gilbert: Thanks a lot.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 26
Barry Edwards: You're welcome.
Operator: Your next question comes from Adam Greene with First
Albany Capital.
Adam Greene: Just a follow-up question on Concerta. Were all four
strains filed together and based on your conversations
with the FDA would you expect them all to be approved at
the same time?
Barry Edwards: Adam, you know, as happens regularly for us I
think the highest strength was filed first. We followed up
with the three lower strengths and, you know, you know, we
believe that all four are at a point where they would be
approved at the same time.
Adam Greene: Great. Thank you.
Operator: Your next question comes from Michael Tong with Wachovia
Securities.
Michael Tong: Hi Barry.
You haven't touched on your branded side of the business
on this call at all. Is there any update there and any
indication as to when we might see a filing on the branded
side?
Barry Edwards: You know we haven't touched on it primarily because, you
know, there really isn't any significant updates. You know
we continue to work on the different projects we have, you
know, there is activity - a considerable amount of
activity in the company and we're seeing progress
internally but it hasn't resulted in anything that, you
know, you've been able to see at this point.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 27
You know as far as product filing, you know, our goal has
been to try and get, you know, one filing in the brand
area per year and, you know, we're still comfortable that
we'll be able to do that. You know I think, you know, one
of the signs you're seeing that there's activity in that
area is, you know, we have an increase in clinical study
cost related to some of the studies that we've been doing
on these products to move them along the development time
- in this development timeframe.
Michael Tong: Just quickly on the goal of filing one per year, when does
that start?
Barry Edwards: You know I think our goal we set out last year was one per
year and we got one filed in September and one on December
31. So, you know, the approximate one-year timeframe will
be coming up in the next several months I would say.
Michael Tong: Okay great. Thanks.
Barry Edwards: You're welcome.
Operator: Once again ladies and gentlemen as a reminder to register
for a question please press star then the number 1 on your
telephone keypad.
There are no further questions at this time. Please
proceed with your presentation or any closing remarks.
Barry Edwards: Okay Operator thank you.
You know at this point we have no further comments other
than to thank everyone for their participation in the call
and, you know, look forward to talking to you next
quarter.
IMPAX LABORATORIES
Moderator: Barry Edwards
11-09-04/8:00 am CT
Confirmation #1751374
Page 28
Operator: Ladies and gentlemen...
Man: Thank you very much.
Operator: ...that concludes your conference call for today. We thank
you for your participation.
END