IMPAX PROVIDES FURTHER UPDATE OF PROGRESS IN FILING 10-K AND 10-Q AND
ESTIMATES OF RESULTS
HAYWARD California, August 3, 2005 (BUSINESS WIRE). Impax Laboratories,
Inc. (NASDAQ:IPXLE) today provided additional information concerning its
progress in filing its annual report on Form 10-K for the year ended December
31, 2004 and its quarterly reports on Form 10-Q for the three months ended March
31, 2005 and the three and six months ended June 30, 2005 and estimated results
for these periods. IMPAX previously disclosed that the uncertainty with respect
to its financial statements for these periods relates exclusively to the
determination of the appropriate periods in which to recognize revenues from
sales of products covered by its strategic alliance agreement with a subsidiary
of Teva Pharmaceutical Industries Ltd., and that the Company has sought the
advice of the Office of the Chief Accountant of the Securities and Exchange
Commission ("OCA") in the expectation that OCA's response will enable the
Company to complete its financial statements and file the two delayed reports
and its second quarter report for 2005.
In March 2005, IMPAX and Teva agreed upon the net sales and margin
amounts allocable to IMPAX from Teva's 2004 sales under the agreement and have
further agreed not to make any adjustments to those amounts. The Company's
request to OCA includes discussion of a proposed new revenue-recognition policy
with respect to these revenues and several alternatives that the Company has
considered. The Company's independent auditors have advised the Company that
they have not yet concluded whether they agree with the proposed policy, and it
is possible that advice received from OCA or the Company's auditors will result
in adoption of a revenue-recognition policy different from those the Company has
considered to date. Whatever policy is ultimately adopted, however, will have no
effect upon the Company's liquidity or cash position.
If the Company were to make no change in its revenue-recognition policy
it would expect to report revenues and net income of approximately $124.7
million and $0.8 million, respectively, for the year ended December 31, 2004,
revenues and net income of approximately $39.6 million and $6.1 million,
respectively, for the three months ended March 31, 2005, and revenues of $38.5
million and $76.8 million and net income of $3.9 million and $10.0 million for
the three and six months ended June 30, 2005, respectively. Net income for the
three- and six-month periods ended June 30, 2005 includes the write-off of
approximately $3.8 million of previously deferred financing costs associated
with the Company's $95 million 1.25% Convertible Senior Subordinated Debentures
due 2024, which were repaid on June 27, 2005.
Attached to this release are (1) a table summarizing the estimated
revenues, gross profits and net income for the periods indicated if the Company
were to make no change in its revenue-recognition policy and (2) a table showing
the percentage contributions of the principal sales channels to those estimated
revenues.
If the Company changes to the revenue-recognition policy proposed in
its request to OCA, the expected year-end results would change to revenues and
net income of approximately $138.6 million and $0.8 million, respectively, the
expected first-quarter results would change to revenues and net income of
approximately $35.6 million and $6.1 million, respectively, and the expected
second-quarter results would change to revenues and net income of approximately
$35.6 million and $3.9 million, respectively. One of the alternative policies
the Company considered and rejected would defer recognition of all 2004 revenues
relating to products subject to the Teva agreement to the first quarter of 2005.
If the Company were to adopt this alternative it would expect to report revenues
of approximately $83.2 million and net loss of $23.3 million, respectively, for
the year ended December 31, 2004 and revenues and net income of approximately
$81.1 million and $30.3 million, respectively, for the three months ended March
31, 2005.
Adoption of any of the new revenue-recognition policies proposed or
considered would require restatement of IMPAX's previously reported results for
the first three quarters of 2004. The following table presents IMPAX's revenues
and net income for each of those quarters as most recently reported, together
with the restated results IMPAX expects to report (1) if it adopts the policy
proposed in its request to OCA and (2) if it adopts the alternative deferring
all revenue to the first quarter of 2005.
POLICY USED
THROUGHOUT PROPOSED DEFERRAL
2004 POLICY POLICY
---- ------ ------
(in thousands)
2004 Q1:
Revenues ................... $34,500 $40,500 $15,000
Net Income (loss) .......... 5,200 5,200 (8,000)
2004 Q2:
Revenues ................... 30,600 35,800 22,800
Net Income (loss) .......... 300 300 (4,100)
2004 Q3:
Revenues ................... 30,700 36,200 19,800
Net Income (loss) .......... 700 700 (6,300)
2004 Q4:
Revenues ................... 28,900 26,100 25,600
Net Income (loss) .......... (5,400) (5,400) (4,900)
2005 Q1
Revenues ................... 39,600 35,600 81,100
Net Income (loss) .......... 6,100 6,100 30,300
2005 Q2
Revenues ................... 38,500 35,600 35,600
Net Income (loss) .......... 3,900 3,900 3,900
Through the first half of 2005 R & D expenses were approximately $3
million for the Company's branded products and $9 million for its generic
products. The Company expects to continue to invest in research and development
and expects to spend an additional $7-$8 million for branded products and
$15-$16 million for its generic products in the second half of 2005.
Additionally, through the first half of 2005, the Company invested $7.1
million in capital projects and expects to spend an additional $12-$14 million
during the second half of 2005, primarily on plant capacity and research
laboratory expansion.
The Company also reported that its available cash and investments at
June 30, 2005 was approximately $50 million after repayment of the $95 million
of debentures described above and approximately $7 million in borrowings under
its senior bank facilities.
Common shares outstanding totaled 58,959,328 at June 30, 2005 and there
were approximately 62.2 million average shares outstanding on a fully diluted
basis for the three months ended June 30, 2005.
The foregoing estimates and the information included in the attached
tables have not been audited or reviewed by the Company's auditors and are
subject to change based upon advice received from OCA and the Company's auditors
as to the appropriate accounting policy to be used and the results of the
auditors' reviews and audit. The estimates also do not reflect other accounting
changes that could result from such advice, review and audit.
IMPAX Laboratories, Inc. is a technology-based 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 branded products. IMPAX markets generic products through its
Global Pharmaceuticals division and intends to market its brand products
through the IMPAX Pharmaceuticals division. Additionally, where strategically
appropriate, IMPAX has developed marketing partnerships to fully leverage its
technology platform. IMPAX Laboratories is headquartered in Hayward, California,
and has a full range of capabilities in its Hayward and Philadelphia facilities.
For more information, please visit the Company 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 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, possible adverse effects
resulting from Impax's delay in filing its 2004 Form 10-K and first-quarter 2005
Form 10-Q, possible delisting from the NASDAQ National Market, 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 and commercialize pharmaceutical products,
Impax's reliance on key strategic alliances, the uncertainty of patent
litigation, the availability of raw materials, the regulatory environment,
dependence on patent and other protection for innovative products, exposure to
product liability 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, and Impax undertakes no obligation to update publicly or revise any
forward-looking statement, regardless of whether new information becomes
available, future developments occur or otherwise.
- --------------------------------------------------------------------------------
Estimated Revenues, Gross Profit and Income
For the Four Quarters Ended June 30, 2005
(Unaudited) Three Months Ended
----------------------------------
Sep-04 Dec-04 Mar-05 Jun-05
Total revenues 30,700 28,900 39,600 38,500
Gross profit 13,100 9,200 20,300 20,600
Net income 700 (5,400) 6,100 3,900
The foregoing amounts are estimates and subject to change. They have been
compiled based on the accounting method in place for 2004.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Estimated Revenues by Market Channel
For the Four Quarters Ended June 30, 2005
(Unaudited) Three Months Ended
----------------------------------
Sep-04 Dec-04 Mar-05 Jun-05
Global 48% 76% 52% 69%
Rx partners 35% 12% 38% 27%
OTC 16% 10% 8% 2%
----------------------------------
Net sales 99% 97% 98% 99%
Other revenue 1% 3% 2% 1%
----------------------------------
Total revenues 100% 100% 100% 100%
- --------------------------------------------------------------------------------