IMPAX LABORATORIES INC, 10-Q filed on 5/10/2017
Quarterly Report
DOCUMENT AND ENTITY INFORMATION
3 Months Ended
Mar. 31, 2017
Apr. 28, 2017
Document and Entity Information [Abstract]
 
 
Entity Registrant Name
IMPAX LABORATORIES INC 
 
Trading Symbol
ipxl 
 
Entity Central Index Key
0001003642 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Large Accelerated Filer 
 
Document Type
10-Q 
 
Document Period End Date
Mar. 31, 2017 
 
Document Fiscal Year Focus
2017 
 
Document Fiscal Period Focus (i.e. Q1,Q2,Q3,FY)
Q1 
 
Amendment Flag
false 
 
Entity Common Stock, Shares Outstanding
 
73,700,666 
Entity Well-known Seasoned Issuer
Yes 
 
Entity Voluntary Filers
No 
 
Entity Current Reporting Status
Yes 
 
CONSOLIDATED BALANCE SHEETS (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 157,252 
$ 180,133 
Accounts receivable, net
214,018 
257,368 
Inventory, net
195,564 
175,230 
Prepaid expenses and other current assets
27,043 
18,410 
Total current assets
593,877 
631,141 
Property, plant and equipment, net
240,240 
233,372 
Intangible assets, net
557,874 
620,466 
Goodwill
207,329 
207,300 
Deferred income taxes, net
37,842 
69,866 
Other non-current assets
58,798 
60,844 
Total assets
1,695,960 
1,823,018 
Current liabilities:
 
 
Accounts payable
73,350 
58,952 
Accrued expenses
231,691 
244,653 
Current portion of contingent consideration
18,538 
0 
Current portion of long-term debt, net
17,813 
17,719 
Total current liabilities
341,392 
321,324 
Long-term debt, net
765,101 
813,545 
Other non-current liabilities
48,592 
64,175 
Total liabilities
1,155,085 
1,199,044 
Commitments and contingencies (Notes 19 and 20)
   
   
Stockholders’ equity:
 
 
Preferred stock, $0.01 par value, 2,000,000 shares authorized; No shares issued or outstanding at March 31, 2017 and December 31, 2016
0 
0 
Common stock, $0.01 par value, 150,000,000 shares authorized; 74,048,203 issued and 73,804,474 outstanding shares at March 31, 2017; 73,948,340 issued and 73,704,611 outstanding shares at December 31, 2016
740 
739 
Treasury stock at cost: 243,729 shares at March 31, 2017 and December 31, 2016
(2,157)
(2,157)
Additional paid-in capital
543,083 
535,056 
(Accumulated deficit) retained earnings
(1,590)
98,192 
Accumulated other comprehensive income (loss)
799 
(7,856)
Total stockholders’ equity
540,875 
623,974 
Total liabilities and stockholders’ equity
$ 1,695,960 
$ 1,823,018 
CONSOLIDATED BALANCE SHEETS (Unaudited) (Parentheticals) (USD $)
Mar. 31, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]
 
 
Preferred stock, par value (in Dollars per share)
$ 0.01 
$ 0.01 
Preferred stock, shares authorized
2,000,000 
2,000,000 
Preferred stock, shares issued
0 
0 
Preferred stock, shares outstanding
0 
0 
Common stock, par value (in Dollars per share)
$ 0.01 
$ 0.01 
Common stock, shares authorized
150,000,000 
150,000,000 
Common stock, shares issued
74,048,000 
73,948,340 
Common stock, shares outstanding
73,804,474 
73,704,611 
Treasury stock, shares
243,729 
243,729 
CONSOLIDATED STATEMENTS OF INCOME (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Revenues:
 
 
Total revenues
$ 184,403 
$ 225,508 
Cost of revenues
120,232 
122,918 
Cost of revenues impairment charges
39,280 
0 
Gross profit
24,891 
102,590 
Operating expenses:
 
 
Selling, general and administrative
47,055 
44,298 
Research and development
22,489 
19,022 
In-process research and development impairment charges
6,079 
0 
Patent litigation
1,072 
1,319 
Total operating expenses
76,695 
64,639 
(Loss) income from operations
(51,804)
37,951 
Other income (expense):
 
 
Interest expense
(13,380)
(8,331)
Interest income
154 
333 
Reserve for Turing receivable
(317)
(48,043)
Loss on debt extinguishment
(1,215)
0 
Other, net
(968)
596 
Loss before income taxes
(67,530)
(17,494)
Provision for (benefit from) income taxes
30,901 
(7,100)
Net loss
(98,431)
(10,408)
Net loss per common share:
 
 
Basic (in Dollars per share)
$ (1.37)
$ (0.15)
Diluted (in Dollars per share)
$ (1.37)
$ (0.15)
Weighted-average common shares outstanding:
 
 
Basic (in Shares)
71,594,472 
70,665,000 
Diluted (in Shares)
71,594,000 
70,665,394 
Impax Generics, net
 
 
Revenues:
 
 
Total revenues
134,147 
170,079 
Impax Specialty Pharma, net
 
 
Revenues:
 
 
Total revenues
$ 50,256 
$ 55,429 
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Net Income (Loss) Attributable to Parent
 
 
Net loss
$ (98,431)
$ (10,408)
Other comprehensive loss component:
 
 
Currency translation adjustment
8,655 
3,043 
Comprehensive loss
$ (89,776)
$ (7,365)
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Cash flows from operating activities:
 
 
Net loss
$ (98,431)
$ (10,408)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
Depreciation and amortization
25,751 
15,720 
Non-cash interest expense
6,312 
5,305 
Share-based compensation expense
6,957 
7,278 
Deferred income taxes, net and uncertain tax positions
32,195 
(12,078)
Intangible asset impairment charges
45,400 
0 
Reserve for Turing receivable
317 
48,043 
Loss on debt extinguishment
1,215 
0 
Other
(562)
0 
Changes in certain assets and liabilities:
 
 
Accounts receivable
43,033 
61,960 
Inventory
(19,153)
(13,243)
Prepaid expenses and other assets
(6,525)
(1,572)
Accounts payable and accrued expenses
806 
(23,835)
Other liabilities
2,531 
1,735 
Net cash provided by operating activities
39,805 
78,905 
Cash flows from investing activities:
 
 
Purchases of property, plant and equipment
(8,679)
(10,882)
Payments for licensing agreements
0 
(3,500)
Proceeds from cash surrender value of life insurance policy
529 
0 
Net cash used in investing activities
(8,150)
(14,382)
Cash flows from financing activities:
 
 
Repayment of term loan
(55,000)
0 
Payment of deferred financing fees
(818)
0 
Payment of withholding taxes related to restricted stock awards
(448)
(1,003)
Proceeds from exercises of stock options and ESPP
170 
7,662 
Net cash (used in) provided by financing activities
(56,096)
6,659 
Effect of exchange rate changes on cash and cash equivalents
1,560 
645 
Net (decrease) increase in cash and cash equivalents
(22,881)
71,827 
Cash and cash equivalents, beginning of period
180,133 
340,351 
Cash and cash equivalents, end of period
157,252 
412,178 
Supplemental disclosure of cash flow information:
 
 
Cash paid for interest
3,871 
7 
Cash paid for income taxes
$ 3,500 
$ 2,475 
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS
Impax Laboratories, Inc. (“Impax” or the “Company”) is a specialty pharmaceutical company that focuses on developing, manufacturing, marketing and distributing generic and branded pharmaceutical products. The Company has two reportable segments, referred to as “Impax Generics” and “Impax Specialty Pharma.” The Impax Generics division focuses on a broad range of therapeutic areas, including products having technically challenging drug-delivery mechanisms or unique product formulations. In addition to developing solid oral dosage products, the Impax Generics division’s portfolio includes alternative dosage form products, primarily through alliance and collaboration agreements with third parties. The Company’s Impax Specialty Pharma division is focused on the development and promotion, through the Company’s specialty sales force, of proprietary branded pharmaceutical products for the treatment of central nervous system (“CNS”) disorders and other select specialty segments.
Operating and Reporting Structure
The Company currently operates in two divisions: the Impax Generics division and the Impax Specialty Pharma division. The Impax Generics division includes the Company’s legacy Global Pharmaceuticals business as well as the acquired businesses of CorePharma, LLC ("CorePharma") and Lineage Therapeutics, Inc. ("Lineage") from the Company's acquisition of Tower Holdings, Inc. ("Tower") and its subsidiaries on March 9, 2015 (the "Tower Acquisition"). The Impax Specialty Pharma division includes the legacy Impax Pharmaceuticals business as well as the acquired business of Amedra Pharmaceuticals, LLC ("Amedra") from the Tower Acquisition.
Impax Generics develops, manufactures, sells, and distributes generic pharmaceutical products primarily through the following four sales channels: the “Impax Generics” sales channel, for generic pharmaceutical prescription products the Company sells directly to wholesalers, large retail drug chains, and others; the “Private Label” sales channel, for generic pharmaceutical over-the-counter (“OTC”) and prescription products the Company sells to unrelated third-party customers who, in turn, sell the product to third parties under their own label; the “Rx Partner” sales channel, for generic prescription products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance agreements; and the “OTC Partner” sales channel, for generic pharmaceutical OTC products sold through unrelated third-party pharmaceutical entities under their own labels pursuant to alliance and supply agreements. Revenues from the “Impax Generics” sales channel and the “Private Label” sales channel are reported under the caption “Impax Generics sales, net” in “Note 22. Supplementary Financial Information.” Revenues from the “OTC Partner” sales channel are reported under the caption “Other Revenues” in “Note 22. Supplementary Financial Information.”
Impax Specialty Pharma is engaged in the development, sale and distribution of proprietary brand pharmaceutical products that the Company believes represent improvements to already-approved pharmaceutical products addressing CNS disorders and other select specialty segments. Impax Specialty Pharma currently has one internally developed branded pharmaceutical product, Rytary® (IPX066), an extended release oral capsule formulation of carbidopa-levodopa for the treatment of Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide intoxication and/or manganese intoxication, which was approved by the FDA on January 7, 2015 and which the Company began marketing in the United States in April 2015. The Company received marketing authorization from the European Commission for Numient® (the brand name of IPX066 outside of the United States) during the fourth quarter of fiscal year 2015. In addition to Rytary®, Impax Specialty Pharma is also currently engaged in the sale and distribution of four other branded products; the more significant include Zomig® (zolmitriptan) products, indicated for the treatment of migraine headaches, under the terms of a Distribution, License, Development and Supply Agreement with AstraZeneca UK Limited (“AstraZeneca”) in the United States and in certain U.S. territories (the "AZ Agreement"), and Emverm® (mebendazole) 100 mg chewable tablets, indicated for the treatment of pinworm, whipworm, common roundworm, common hookworm, and American hookworm in single or mixed infections. Revenues from Impax-labeled branded products are reported under the caption “Impax Specialty Pharma sales, net” in “Note 22. Supplementary Financial Information.” Impax Specialty Pharma also has a number of product candidates that are in varying stages of development. See “Note 21. Segment Information,” for financial information about our segments for the three months ended March 31, 2017 and 2016.
Operating Locations
    
The Company owns and/or leases facilities in California, Pennsylvania, New Jersey and Taiwan, Republic of China (“R.O.C.”). In California, the Company utilizes a combination of owned and leased facilities mainly located in Hayward. The Company’s primary properties in California consist of a leased office building used as the Company’s corporate headquarters, in addition to five properties it owns, including a research and development center facility and a manufacturing facility. Additionally, the Company leases two facilities in Hayward, utilized for additional research and development, equipment storage and quality assurance support. In Pennsylvania, the Company leases office space for sales and marketing, finance, and administrative personnel in Fort Washington. In New Jersey, the Company leases manufacturing, packaging, research and development and warehousing facilities in Middlesex and office space in Bridgewater. Outside the United States, in Taiwan, R.O.C., the Company owns a manufacturing facility.

Management Changes

On March 27, 2017, the Company announced that its Board of Directors had appointed Paul M. Bisaro as President and Chief Executive Officer and as a director of the Company, effective as of March 27, 2017. Mr. Bisaro succeeded J. Kevin Buchi, a member of the Company's Board of Directors, who served as the Company's Interim President and Chief Executive Officer since December 19, 2016 following G. Frederick Wilkinson's separation from the Company as described below. Mr. Buchi currently remains a member of the Company's Board of Directors. In connection with his appointment as President and Chief Executive Officer, Mr. Bisaro and the Company entered into an Employment Agreement dated March 24, 2017 (the “Employment Agreement”). The initial term of the Employment Agreement expires on March 27, 2019, unless further extended or earlier terminated, and automatically renews for single one-year periods unless either party provides a written notice of non-renewal at least 90 days prior to the end of the applicable term or unless it is terminated earlier.

On December 20, 2016, the Company announced that G. Frederick Wilkinson and the Company had mutually agreed that Mr. Wilkinson would separate from his positions as President and Chief Executive Officer and resign as a member of its Board of Directors, effective December 19, 2016. In connection with his separation from the Company, Mr. Wilkinson and the Company entered into a General Release and Waiver dated as of December 19, 2016 (the “General Release and Waiver”). Pursuant to the General Release and Waiver, the Company provided Mr. Wilkinson with certain termination benefits and payments. The Company recorded $5.4 million in costs associated with Mr. Wilkinson’s separation in the year ended December 31, 2016, comprised of $4.9 million of separation pay and benefits and $0.5 million of expense related to the accelerated vesting of certain of Mr. Wilkinson’s outstanding stock options and restricted stock awards pursuant to the terms of the General Release and Waiver.
BUSINESS ACQUISITION
BUSINESS ACQUISITION
BUSINESS ACQUISITION
Teva Transaction

On August 3, 2016, the Company completed its previously announced acquisition of (A) certain assets related to (i) 15 then currently marketed generic pharmaceutical products, (ii) one then approved generic product and two then tentatively approved strengths of a then currently marketed product, which at the time of the closing had not yet launched, (iii) one pipeline generic product and one pipeline strength of a then currently marketed product, which at the time of the closing were pending approval by the FDA and (iv) one generic product then under development, and (B) the return to the Company of its full commercial rights to its pending ANDA for the generic equivalent to Concerta® (methylphenidate hydrochloride), a product the Company previously partnered with Teva Pharmaceuticals USA, Inc. (“Teva USA”) (collectively, the products and pipeline products and the assets related thereto in (A) and (B), the “Acquired Product Lines” and the transactions related thereto the “Teva Transaction”), pursuant to (x) an Asset Purchase Agreement, dated as of June 20, 2016, as amended on June 30, 2016, with Teva Pharmaceutical Industries Ltd. (“Teva”), acting directly or through its affiliates (the “Teva APA”), (y) an Asset Purchase Agreement, dated as of June 20, 2016, as amended on June 30, 2016, with affiliates of Allergan plc (“Allergan”), (the “Allergan APA” and collectively with the Teva APA, the "APAs"), and (z) a Termination Agreement, dated as of June 20, 2016, between the Company and Teva USA, terminating each party’s rights and obligations with respect to methylphenidate hydrochloride under the Strategic Alliance Agreement, dated June 27, 2001, as amended between the Company and Teva USA. The aggregate purchase price for the Acquired Product Lines pursuant to the terms of the Teva APA and the Allergan APA, including the upfront payment to Teva in accordance with the Termination Agreement, was $585.8 million in cash at closing. The Company is also obligated to make future payments to Teva of up to $40.0 million under the terms of the Termination Agreement, payable upon the achievement of specified commercialization events related to methylphenidate hydrochloride. The Teva Transaction was part of the divestiture process mandated by the Federal Trade Commission in connection with the acquisition by Teva of the U.S. generics business of Allergan.

The Company financed the Teva Transaction utilizing cash on hand and $400.0 million, the full amount of borrowing available, from its Term Loan Facility with Royal Bank of Canada, as discussed in "Note 12. Debt." To date, the Company has incurred total acquisition-related costs of $3.8 million for the Teva Transaction, largely during the second and third quarters of 2016, and of which minimal amounts were incurred during the three months ended March 31, 2017 and 2016.

The acquisition of the foregoing currently marketed and pipeline products fits with the Company’s strategic priorities of maximizing its Generics Division’s platform and optimizing research and development opportunities. Through the Teva Transaction, the Company expects to expand its portfolio of difficult-to-manufacture or limited-competition products and maximize utilization of its existing manufacturing facilities in Hayward, California and Taiwan.

As part of the closing of the Teva Transaction, the Company, Teva and Allergan agreed to certain transition related services pursuant to which the Company agreed to manage the payment process for certain commercial chargebacks and rebates on behalf of Teva and Allergan related to products each of Teva and Allergan sold into the channel prior to the closing date. On August 18, 2016, the Company received a payment totaling $42.4 million from Teva and Allergan, which represented their combined estimate of the amount of commercial chargebacks and rebates to be paid by the Company on their behalf to wholesalers who purchased products from Teva and Allergan prior to the closing. Pursuant to the agreed upon transition services, Teva and Allergan are obligated to reimburse the Company for additional payments related to chargebacks and rebates made on their behalf in excess of the $42.4 million. If the total payments made by the Company on behalf of Teva and Allergan are less than $42.4 million, the Company is obligated to refund the difference to Teva and/or Allergan. As of March 31, 2017, the Company had paid $29.1 million on behalf of Teva and Allergan related to chargebacks and rebates as described above and $13.3 million remained in accrued expenses on the consolidated balance sheet.

Purchase Accounting and Consideration

Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 805, Business Combinations ("ASC 805") defines a business as consisting of inputs and processes applied to those inputs that have the ability to create outputs. The Company has determined that the Acquired Product Lines meet the definition of a business and, accordingly, has accounted for the Teva Transaction as a business combination under the acquisition method of accounting.
    
The following is an estimate of the purchase price for the Teva Transaction as of the closing date of August 3, 2016 (in thousands):

 
Estimated Fair Value
Purchase price per the APAs
$
575,800

Upfront payment pursuant to Termination Agreement
10,000

     Total cash consideration
585,800

Fair value of contingent consideration pursuant to Termination Agreement (1)
30,100

     Total consideration transferred
$
615,900


(1) The contingent consideration arrangement pursuant to the Termination Agreement potentially requires the Company to pay up to $40.0 million of additional consideration to Teva upon the achievement of specified commercialization events related to methylphenidate hydrochloride. The $30.1 million fair value of the potential contingent consideration payments recognized on the acquisition date was estimated by applying a probability-weighted expected return methodology.

Recognition and Measurement of Assets Acquired at Fair Value

The Company has allocated the purchase price for the Teva Transaction based upon the estimated fair value of the assets acquired at the date of acquisition.

    
The following is an estimate of the fair value of the intangible and tangible assets acquired in connection with the Teva Transaction on the closing date of August 3, 2016 (in thousands):

 
Estimated Fair Value
Intangible assets
$
613,032

Inventory - raw materials
2,868

     Total assets acquired
$
615,900



Intangible Assets

The following identifies the Company’s allocations of purchase price to intangible assets, including the weighted-average amortization period, in total and by major intangible asset class as of the closing date (in thousands):

 
Estimated Fair Value
 
Weighted-Average Estimated Useful Life
Marketed product rights
$
455,529

 
19 years
Acquired IPR&D product rights (1)
157,503

 
n/a
     Total intangible assets
$
613,032

 
 

(1) "IPR&D" refers to the Company's in-process research and development product rights. Pursuant to the Termination Agreement, Teva returned to the Company its full commercial rights to its pending ANDA for the generic equivalent to Concerta® (methylphenidate hydrochloride), a product the Company previously partnered with Teva USA under a Strategic Alliance Agreement dated June 27, 2001, as amended. As a result, the Company recognized an intangible asset of $78.9 million related to the reacquired IPR&D. The Company engaged a third-party valuation specialist to measure the value of the reacquired product right using a discounted cash flow analysis. The asset was determined to be indefinite-lived based on the market participant methodology prescribed in ASC 805.

The estimated fair value of the in-process research and development and identifiable intangible assets was determined using the “income approach,” which is a valuation technique that provides an estimate of the fair value of an asset based on market participant expectations of the cash flows an asset would generate over its remaining useful life. The assumptions, including the expected projected cash flows, utilized in the purchase price allocation and in determining the purchase price were based on management's best estimates as of the closing date of the Teva Transaction on August 3, 2016. Some of the more significant assumptions inherent in the development of those asset valuations include the estimated net cash flows for each year for each asset or product (including net revenues, cost of sales, research and development costs, selling and marketing costs and working capital / contributory asset charges), the appropriate discount rate to select in order to measure the risk inherent in each future cash flow stream, the assessment of each asset’s life cycle, the potential regulatory and commercial success risks, competitive trends impacting the asset and each cash flow stream, as well as other factors. The discount rate used to arrive at the present value at the closing date of the intangible assets was 6.7%. No assurances can be given that the underlying assumptions used to prepare the discounted cash flow analysis will not change. For these and other reasons, actual results may vary significantly from estimated results. During the third and fourth quarters of 2016, the Company recognized impairment charges totaling $308.4 million related to the intangible assets from the Teva Transaction. During the first quarter of 2017, the Company recognized impairment charges of $41.8 million related to the intangible assets from the Teva Transaction as described in "Note 10. Intangible Assets and Goodwill" below.

Unaudited Pro Forma Results of Operations

The unaudited pro forma combined results of operations for the three months ended March 31, 2016 (assuming the closing of the Teva Transaction occurred on January 1, 2015) are as follows (in thousands):

 
 
Three Months Ended March 31, 2016
Total revenues
 
$
269,721

Net income
 
1,053



The pro forma adjustments reflected herein include only those adjustments that are directly attributable to the Teva Transaction, factually supportable and expected to have a continuing impact on the Company. The pro forma results have been prepared for comparative purposes only and are not necessarily indicative of the actual results of operations had the closing of the Teva Transaction taken place on January 1, 2015. Furthermore, the pro forma results do not purport to project the future results of operations of the Company.

The unaudited pro forma information reflects primarily the following adjustments:

•Adjustments to amortization expense related to identifiable intangible assets acquired;
•Adjustments to interest expense to reflect the Company's Term Loan Facility (described in “Note 12. Debt”); and
•
Adjustments to selling, general and administrative expense related to transaction costs directly attributable to the transaction including the elimination of minimal amounts in the pro forma results for the three months ended March 31, 2016.

All of the items above were adjusted for the applicable tax impact.
BASIS OF PRESENTATION
BASIS OF PRESENTATION
BASIS OF PRESENTATION
Interim Financial Statements
The accompanying unaudited interim consolidated financial statements have been prepared from the books and records of the Company in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and Rule 10-01 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”), which permit reduced disclosures for interim periods. All adjustments necessary for a fair presentation of the accompanying balance sheets and statements of operations, comprehensive loss, and cash flows have been made. Although these interim consolidated financial statements do not include all of the information and footnotes required for complete annual financial statements, management believes the disclosures are adequate to make the information presented not misleading. Unaudited interim results of operations and cash flows are not necessarily indicative of the results that may be expected for the full year. Unaudited interim consolidated financial statements and footnotes should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC, wherein a more complete discussion of significant accounting policies and certain other information can be found.
Principles of Consolidation
The Company's unaudited interim consolidated financial statements include the accounts of the operating parent company, Impax Laboratories, Inc., its wholly owned subsidiaries, including Impax Laboratories USA, LLC, Impax Laboratories (Taiwan), Inc., ThoRx Laboratories, Inc., Impax International Holdings, Inc., Impax Holdings, LLC, Impax Laboratories (Netherlands) C.V., Impax Laboratories (Netherlands) B.V., Impax Laboratories Ireland Limited, Lineage and Tower, including operating subsidiaries CorePharma, Amedra Pharmaceuticals, Mountain LLC and Trail Services, Inc., in addition to an equity investment in Prohealth Biotech (Taiwan), Inc. (“Prohealth”), in which the Company held a 57.54% majority ownership interest at March 31, 2017. All significant intercompany accounts and transactions have been eliminated.
Foreign Currency Translation
The Company translates the assets and liabilities of the Taiwan dollar functional currency of its majority-owned affiliate Prohealth and its wholly-owned subsidiary Impax Laboratories (Taiwan), Inc. into the U.S. dollar reporting currency using exchange rates in effect at the end of each reporting period. The revenues and expenses of these entities are translated using an average of the rates in effect during the reporting period. Gains and losses from these translations are recorded as currency translation adjustments included in the consolidated statements of comprehensive loss.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") and the rules and regulations of the U.S. Securities & Exchange Commission ("SEC") requires the use of estimates and assumptions, based on complex judgments considered reasonable, which affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant judgments are employed in estimates used in determining values of tangible and intangible assets, contingent consideration, legal contingencies, tax assets and tax liabilities, fair value of share-based compensation related to equity incentive awards issued to employees and directors, and estimates used in applying the Company’s revenue recognition policy, including those related to accrued chargebacks, rebates, product returns, Medicare, Medicaid, and other government rebate programs, shelf-stock adjustments, and the timing and amount of deferred and recognized revenue and deferred and amortized product manufacturing costs related to alliance and collaboration agreements. Actual results may differ from estimated results.
Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company's complete Summary of Significant Accounting Policies can be found in "Item 15. Exhibits and Financial Statement Schedules - Note 4. Summary of Significant Accounting Policies" in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC. Certain significant accounting policies have been repeated below.

Revenue Recognition

The Company recognizes revenue when the earnings process is complete, which under SEC Staff Accounting Bulletin No. 104, Topic No. 13, “Revenue Recognition” (“SAB 104”), is when revenue is realized or realizable and earned, there is persuasive evidence a revenue arrangement exists, delivery of goods or services has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.

The Company accounts for material revenue arrangements which contain multiple deliverables in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 605-25, Revenue Recognition - Multiple-Element Arrangements ("ASC 605-25"), which addresses the determination of whether an arrangement involving multiple deliverables contains more than one unit of accounting. A delivered item within an arrangement is considered a separate unit of accounting only if both of the following criteria are met:

•
the delivered item has value to the customer on a stand-alone basis; and

•
if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the control of the vendor.

Under ASC 605-25, if both of the criteria above are not met, then separate accounting for the individual deliverables is not appropriate. Revenue recognition for arrangements with multiple deliverables constituting a single unit of accounting is recognized generally over the greater of the term of the arrangement or the expected period of performance, either on a straight-line basis or on a modified proportional performance method.

The Company accounts for milestones related to research and development activities in accordance with FASB ASC Topic 605-28, Revenue Recognition - Milestone Method ("ASC 605-28"). ASC Topic 605-28 allows for the recognition of consideration, which is contingent on the achievement of a substantive milestone, in its entirety in the period the milestone is achieved. A milestone is considered to be substantive if all of the following criteria are met:

•
the milestone is commensurate with either (1) the performance required to achieve the milestone or (2) the enhancement of the value of the delivered items resulting from the performance required to achieve the milestone;

•
the milestone relates solely to past performance; and

•
the milestone payment is reasonable relative to all of the deliverables and payment terms within the agreement.

Impax Generics revenues, net and Impax Specialty Pharma revenues, net

The Impax Generics revenues, net and Impax Specialty Pharma revenues, net include revenue recognized related to shipments of generic and branded pharmaceutical products to the Company’s customers, primarily drug wholesalers and retail chains. Gross sales revenue is recognized at the time title and risk of loss passes to the customer, which is generally when product is received by the customer. Net revenues may include deductions from the gross sales price related to estimates for chargebacks, rebates and administrative fees, distribution service fees, returns, shelf-stock adjustments, and other pricing adjustments. The Company records an estimate for these deductions in the same period when revenue is recognized. A description of each of these gross-to-net deductions follows.

•
Chargebacks

The Company has agreements establishing contract prices for certain products with certain indirect customers, such as retail pharmacy chains, group purchasing organizations, managed care organizations, hospitals and government agencies who purchase products from drug wholesalers. The contract prices are lower than the prices the customer would otherwise pay to the wholesaler, and the price difference is referred to as a chargeback, which generally takes the form of a credit memo issued by the Company to reduce the invoiced gross selling price charged to the wholesaler. An estimated accrued provision for chargeback deductions is recognized at the time of product shipment. The primary factors considered when estimating the provision for chargebacks are the average historical chargeback credits given, the mix of products shipped, and the amount of inventory on hand at the major drug wholesalers with whom the Company does business. The Company also monitors actual chargebacks granted and compares them to the estimated provision for chargebacks to assess the reasonableness of the chargeback reserve at each quarterly balance sheet date.

•
Rebates and Administrative Fees

The Company maintains various rebate and administrative fee programs with its customers in an effort to maintain a competitive position in the marketplace and to promote sales and customer loyalty. The rebates generally take the form of a credit memo to reduce the invoiced gross selling price charged to a customer for products shipped. An estimated accrued provision for rebate deductions is recognized at the time of product shipment. The primary factors the Company considers when estimating the provision for rebates are the average historical experience of aggregate credits issued, the mix of products shipped and the historical relationship of rebates as a percentage of total gross product sales, the contract terms and conditions of the various rebate programs in effect at the time of shipment, and the amount of inventory on hand at the major drug wholesalers with whom the Company does business. The Company also monitors actual rebates granted and compares them to the estimated provision for rebates to assess the reasonableness of the rebate reserve at each quarterly balance sheet date.

•
Distribution Service Fees

The Company pays distribution service fees to several of its wholesaler customers related to sales of its Impax Products. The wholesalers are generally obligated to provide the Company with periodic outbound sales information as well as inventory levels of the Company’s Impax Products held in their warehouses. Additionally, the wholesalers have agreed to manage the variability of their purchases and inventory levels within specified days on hand limits. An accrued provision for distribution service fees is recognized at the time products are shipped to wholesalers.

•
Returns

The Company allows its customers to return product if approved by authorized personnel in writing or by telephone with the lot number and expiration date accompanying any request and if such products are returned within six months prior to or until twelve months following, the product’s expiration date. The Company estimates and recognizes an accrued provision for product returns as a percentage of gross sales based upon historical experience. The product return reserve is estimated using a historical lag period, which is the time between when the product is sold and when it is ultimately returned, and estimated return rates which may be adjusted based on various assumptions including: changes to internal policies and procedures, business practices, commercial terms with customers, and the competitive position of each product; the amount of inventory in the wholesale and retail supply chain; the introduction of new products; and changes in market sales information. The Company also considers other factors, including significant market changes which may impact future expected returns and actual product returns. The Company monitors actual returns on a quarterly basis and may record specific provisions for returns it believes are not covered by historical percentages.

•
Shelf-Stock Adjustments

Based upon competitive market conditions, the Company may reduce the selling price of certain Impax Generics division products. The Company may issue a credit against the sales amount to a customer based upon their remaining inventory of the product in question, provided the customer agrees to continue to make future purchases of product from the Company. This type of customer credit is referred to as a shelf-stock adjustment, which is the difference between the initial sales price and the revised lower sales price, multiplied by an estimate of the number of product units on hand at a given date. Decreases in selling prices are discretionary decisions made by the Company in response to market conditions, including estimated launch dates of competing products and declines in market price. The Company records an estimate for shelf-stock adjustments in the period it agrees to grant such a credit memo to a customer.

•
Cash Discounts

The Company offers cash discounts to its customers, generally 2% to 3% of the gross selling price, as an incentive for paying within invoice terms, which generally range from 30 to 90 days. An estimate of cash discounts is recorded in the same period when revenue is recognized.

•
Medicaid and Other U.S. Government Pricing Programs

As required by law, the Company provides a rebate on drugs dispensed under the Medicaid program, Medicare Part D, TRICARE, and other U.S. government pricing programs. The Company determines its estimated government rebate accrual primarily based on historical experience of claims submitted by the various states and other jurisdictions and any new information regarding changes in the various programs which may impact the Company’s estimate of government rebates. In determining the appropriate accrual amount, the Company considers historical payment rates and processing lag for outstanding claims and payments. The Company records estimates for government rebates as a deduction from gross sales, with a corresponding adjustment to accrued liabilities.

•
Rx Partner and OTC Partner

The Rx Partner and OTC Partner contracts include revenue recognized under alliance and collaboration agreements between the Company and unrelated third-party pharmaceutical companies. The Company has entered into these alliance agreements to develop marketing and/or distribution relationships with its partners to fully leverage its technology platform.

The Rx Partners and OTC Partners alliance agreements obligate the Company to deliver multiple goods and/or services over extended periods. Such deliverables include manufactured pharmaceutical products, exclusive and semi-exclusive marketing rights, distribution licenses, and research and development services. In exchange for these deliverables the Company receives payments from its agreement partners for product shipments and research and development services, and may also receive other payments including royalties, profit sharing payments, and upfront and periodic milestone payments. Revenue received from the alliance agreement partners for product shipments under these agreements is not subject to deductions for chargebacks, rebates, product returns, and other pricing adjustments. Royalty and profit sharing amounts the Company receives under these agreements are calculated by the respective agreement partner, with such royalty and profit share amounts generally based upon estimates of net product sales or gross profit which include estimates of deductions for chargebacks, rebates, product returns, and other adjustments the alliance agreement partners may negotiate with their respective customers. The Company records the agreement partner's adjustments to such estimated amounts in the period the agreement partner reports the amounts to the Company.

The Company applies the updated guidance of ASC 605-25 to the Strategic Alliance Agreement, as amended, with Teva Pharmaceuticals USA, Inc., an affiliate of Teva Pharmaceutical Industries Limited (the “Teva Agreement”). The Company looks to the underlying delivery of goods and/or services which give rise to the payment of consideration under the Teva Agreement to determine the appropriate revenue recognition. The Company initially defers consideration received as a result of research and development-related activities performed under the Teva Agreement. The Company recognizes deferred revenue on a straight-line basis over the expected period of performance for such services. Consideration received as a result of the manufacture and delivery of products under the Teva Agreement is recognized at the time title and risk of loss passes to the customer, which is generally when product is received by Teva. The Company recognizes profit share revenue in the period earned.

OTC Partner revenue is related to agreements with Pfizer, Inc., formerly Wyeth LLC (“Pfizer”) and L. Perrigo Company (“Perrigo”) with respect to the supply of the Company's over-the-counter pharmaceutical product Loratadine and Pseudoephedrine Sulfate 5 mg/129 mg 12-hour Extended Release Tablets (the "D12 Product"). The OTC Partner sales channel is no longer a core area of the business, and the over-the-counter pharmaceutical products the Company sells through this sales channel are older products which are now only sold to Pfizer and Perrigo. The Company is currently only required to manufacture the over-the-counter pharmaceutical products under its agreements with Pfizer and Perrigo. The Company recognizes profit share revenue in the period earned. During the quarter ended September 30, 2016, the Company sold the ANDAs for both the D12 Product and the Loratadine and Pseudoephedrine Sulfate 10 mg/240 mg 24-hour Extended Release Tablets, in addition to other specified assets, to Perrigo pursuant to an asset purchase agreement with Perrigo dated as of March 31, 2016 (the "Perrigo APA"). Under the terms of the Perrigo APA, the Company will also continue to supply the D-12 Product to Pfizer and Perrigo until the date that is the earliest of (i) the date Perrigo’s manufacturing facility is approved to manufacture the D-12 Product and (ii) December 31, 2017 (the "Supply End Date"). On the Supply End Date, the Company will assign and transfer its supply agreement with Pfizer in its entirety to Perrigo in accordance with the Perrigo APA.

•
Research Partner

The Research Partner contract revenue results from development agreements the Company enters into with unrelated third-party pharmaceutical companies. The development agreements generally obligate the Company to provide research and development services over multiple periods. In exchange for this service, the Company generally receives upfront payments upon signing of each development agreement and is eligible to receive contingent milestone payments, payment of which is based upon the achievement of contractually specified events. Additionally, the Company may also receive royalty payments from the sale, if any, of a successfully developed and commercialized product under one of these development agreements. The Company recognizes revenue received from the achievement of contingent research and development milestones in the period such payment is earned. Royalty revenue, if any, will be recognized as current period revenue when earned.
RECENT ACCOUNTING PRONOUNCEMENTS
RECENT ACCOUNTING PRONOUNCEMENTS
RECENT ACCOUNTING PRONOUNCEMENTS 
In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, “Revenue from Contracts with Customers” (Topic 606), regarding the accounting for and disclosures of revenue recognition, with an effective date for annual and interim periods beginning after December 15, 2016. This update provides a single comprehensive model for accounting for revenue from contracts with customers. The model requires that revenue recognized reflect the actual consideration to which the entity expects to be entitled in exchange for the goods or services defined in the contract, including in situations with multiple performance obligations. In July 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which deferred the effective date of the previously issued revenue recognition guidance by one year. The guidance will be effective for annual and interim periods beginning after December 15, 2017. In April 2016 and May 2016, the FASB issued ASU 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing" and ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients," respectively. Both of these updates provide improvements and clarification to the previously issued revenue recognition guidance. The new standard can be adopted using one of two methods: the full retrospective method, which requires the standard to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company currently expects to adopt the new revenue recognition standard in 2018 using the modified retrospective method. The Company is currently evaluating the impact that adoption will have on its consolidated financial statements. The majority of the Company's revenue relates to the sale of finished products to various customers, and though the Company is still evaluating the impact of this standard, management does not currently believe that the adoption will have a material impact on these transactions. The Company is continuing to evaluate the impact on certain less significant transactions involving third-party collaborations and other arrangements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): “Simplifying the Measurement of Inventory,” with guidance regarding the accounting for and measurement of inventory. The update requires that inventory measured using first-in, first-out ("FIFO") shall be measured at the lower of cost and net realizable value. When there is evidence that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. The guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this guidance during the first quarter of 2017, and it did not have a material effect on the Company's consolidated financial statements.

    
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), with guidance regarding the accounting for and disclosure of leases. The update requires lessees to recognize all leases, including operating leases, with a term greater than 12 months on the balance sheet. This update also requires lessees and lessors to disclose key information about their leasing transactions. The guidance will be effective for annual and interim periods beginning after December 15, 2018. The Company is currently evaluating the effect that this guidance will have on its consolidated financial statements and related disclosures. The Company expects the implementation of this standard to have an impact on its consolidated financial statements and related disclosures as its aggregate future minimum lease payments were $30.2 million as of December 31, 2016 under its current portfolio of non-cancelable leases for land, office space, and manufacturing, warehouse and research and development facilities with various expiration dates between April 2017 and December 2027. The Company anticipates recognition of additional assets and corresponding liabilities related to these leases on its consolidated balance sheet.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): "Contingent Put and Call Options in Debt Instruments," with guidance regarding the accounting for embedded derivatives related to debt contracts. The update clarifies that determining whether the economic characteristics of a put or call are clearly and closely related to its debt host requires only an assessment of the four-step decision sequence outlined in FASB ASC paragraph 815-15-25-24. The update also indicates that entities are not required to separately assess whether the contingency itself is clearly and closely related. The guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this guidance during the first quarter of 2017, and it did not have an effect on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): "Improvements to Employee Share-Based Payment Accounting," with guidance regarding the simplification of accounting for share-based payment award transactions. The update changes the accounting for such areas as the accounting and cash flow classification for excess tax benefits and deficiencies; forfeitures; and tax withholding requirements and cash flow classification. The guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted the new guidance effective January 1, 2017 and elected to eliminate the use of a forfeiture rate estimate in the determination of share-based compensation expense for restricted stock awards using the modified retrospective transition method, which resulted in a $1.4 million charge to opening retained earnings for 2017. In addition, the Company is now presenting the cash paid for tax withholdings on stock options exercised and restricted stock awards vested retrospectively in cash flows from financing activities as opposed to the historical presentation in cash flows from operating activities. Excess tax benefits or deficiencies, historically recorded to additional paid-in capital, are recorded to income tax expense as they occur on a prospective basis.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): "Classification of Certain Cash Receipts and Cash Payments," with guidance intended to reduce the diversity in practice regarding how certain cash receipts and cash payments are presented and classified within the statement of cash flows. The update addresses eight specific cash flow issues including debt prepayment or debt extinguishment costs, the settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)), distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The guidance will be effective for annual and interim periods beginning after December 15, 2017. The Company is currently evaluating the effect that this guidance may have on its consolidated financial statements.
In October 2016, the FASB issued ASU-2016-16, Income Taxes (Topic 740): "Intra-Entity Transfers of Assets Other Than Inventory," with guidance intended to more faithfully represent the economics of intra-entity asset transfers. The update clarifies that entities must recognize the income tax consequences of intra-entity asset transfers, other than inventory, when the transfer occurs. The guidance will be effective for annual and interim periods beginning after December 15, 2017. The Company is currently evaluating the effect that this guidance may have on its consolidated financial statements.
In January 2017, the FASB issued ASU-2017-01, Business Combinations (Topic 805): "Clarifying the Definition of a Business," with guidance intended to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The update provides a screen to determine whether an integrated set of assets and activities constitute a business. If the screen is not met, it (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) removes the evaluation of whether a market participant could replace the missing elements. The guidance will be effective for annual and interim periods beginning after December 15, 2017 and should be applied prospectively. The Company is currently evaluating the effect that this guidance may have on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323), which add to and amend SEC paragraphs pursuant to the SEC Staff Announcements at the September 22, 2016 and November 17, 2016 Emerging Issues Task Force (EITF) meetings. The guidance provides additional disclosure requirements regarding the impact of recently issued accounting standards on the financial statements of a registrant when such standards are adopted in a future period. The Company adopted this guidance during the first quarter of 2017, and it did not have an effect on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU-2017-04, Intangibles - Goodwill and Other (Topic 350): "Simplifying the Test for Goodwill Impairment," which removes the second step of the two-step goodwill impairment test. In order to reduce the cost and complexity of testing goodwill for impairment, entities are now only required to perform a one-step quantitative impairment test and to record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of a reporting unit to determine if the quantitative impairment test is necessary. Entities should apply the guidance on a prospective basis and disclose the nature of and reason for the change in accounting principle upon transition. The guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The Company adopted this guidance as of the first quarter of 2017, and it did not have an effect on the Company’s consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), which provides clarification regarding the scope of the asset derecognition guidance and accounting for partial sales of nonfinancial assets. The update defines an in substance nonfinancial asset and clarifies that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it. All businesses and nonprofit activities within the scope of Subtopic 610-20 are excluded from the amendments in this update. This guidance will be effective for annual and interim periods beginning after December 15, 2017 and is required to be applied at the same time as ASU 2014-09 (described above) is applied. The guidance can be applied using one of two methods: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the guidance recognized against retained earnings as of the beginning of the fiscal year of adoption. The Company is currently evaluating the effect that this guidance may have on its consolidated financial statements.
FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS
FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS
FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS 

The carrying values of cash equivalents, accounts receivable, prepaid expenses and other current assets, and accounts payable in the Company’s consolidated balance sheets approximated their fair values as of March 31, 2017 and December 31, 2016 due to their short-term nature.     

Certain of the Company’s financial instruments are measured at fair value using a three-level hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows: 

•
Level 1 - Inputs are quoted prices for identical instruments in active markets.

•
Level 2 - Inputs are quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; or model-derived valuations whose inputs are observable or whose significant value drivers are observable.

•
Level 3 - Inputs are unobservable and reflect the Company's own assumptions, based on the best information available, including the Company's own data.

The carrying amounts and fair values of the Company’s financial instruments at March 31, 2017 and December 31, 2016 are indicated below (in thousands): 

 
As of March 31, 2017
 
 
 
 
 
Fair Value Measurement Based on
 
Carrying
Amount
 
Fair Value
 
Quoted Prices in Active Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
 
 
Deferred Compensation Plan asset(1)
$
35,257

 
$
35,257

 
$
—

 
$
35,257

 
$
—

Liabilities
 
 
 
 
 
 
 
 
 
Term Loan Facility due August 2021, current portion (2)
$
20,000

 
$
20,000

 
$
—

 
$
20,000

 
$
—

Term Loan Facility due August 2021, long-term portion (2)
$
320,000

 
$
320,000

 
$
—

 
$
320,000

 
$
—

2% Convertible Senior Notes due June 2022 (3)
$
600,000

 
$
493,500

 
$
493,500

 
$
—

 
$
—

Deferred Compensation Plan liabilities (1)
$
31,113

 
$
31,113

 
$
—

 
$
31,113

 
$
—

Contingent consideration, current portion (4)
$
18,538

 
$
18,538

 
$
—

 
$
—

 
$
18,538

Contingent consideration, long-term portion (4)
$
12,791

 
$
12,791

 
$
—

 
$
—

 
$
12,791


 
As of December 31, 2016
 
 
 
 
 
Fair Value Measurement Based on
 
Carrying
Amount
 
Fair Value
 
Quoted Prices in Active Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
 
 
Deferred Compensation Plan asset(1)
$
37,382

 
$
37,382

 
$
—

 
$
37,382

 
$
—

Liabilities
 
 
 
 
 
 
 
 
 
Term Loan Facility due August 2021, current portion (2)
$
20,000

 
$
20,000

 
$
—

 
$
20,000

 
$
—

Term Loan Facility due August 2021, long-term portion (2)
$
375,000

 
$
375,000

 
$
—

 
$
375,000

 
$
—

2% Convertible Senior Notes due June 2022 (3)
$
600,000

 
$
469,800

 
$
469,800

 
$
—

 
$
—

Deferred Compensation Plan liabilities (1)
$
28,582

 
$
28,582

 
$
—

 
$
28,582

 
$
—

Contingent consideration, long-term portion (4)
$
31,048

 
$
31,048

 
$
—

 
$
—

 
$
31,048



(1)
The Deferred Compensation Plan liabilities are non-current liabilities recorded at the value of the amount owed to the plan participants, with changes in value recognized as compensation expense in the Company’s consolidated statements of operations. The calculation of the Deferred Compensation Plan obligation is derived from observable market data by reference to hypothetical investments selected by the participants and is included in the line items captioned “Other non-current liabilities” on the Company’s consolidated balance sheets. The Company invests participant contributions in corporate-owned life insurance (“COLI”) policies, for which the cash surrender value is included in the line item captioned “Other non-current assets” on the Company’s consolidated balance sheets.

(2)
The difference between the amount shown as the carrying value in the above tables and the amount shown on the Company’s consolidated balance sheets at March 31, 2017 and December 31, 2016 represents the unaccreted discount related to deferred debt issuance costs.

(3)
The difference between the amount shown as the carrying value in the above tables and the amount shown on the Company’s consolidated balance sheets at March 31, 2017 and December 31, 2016 represents the unaccreted discounts related to deferred debt issuance costs and bifurcation of the conversion feature of the notes.

(4)
The contingent consideration liability represents future consideration potentially payable to Teva upon the achievement of specified commercialization events related to methylphenidate hydrochloride in accordance with the Termination Agreement related to the Teva Transaction as described in "Note 2. Business Acquisition." A discounted cash flow valuation model was used to value the contingent consideration. The valuation is based on significant unobservable inputs, including the probability and timing of successful product launch and the expected number of competitors at the time of launch and the launch anniversary date. The Company conducts a quarterly review of the underlying inputs and assumptions and significant changes in unobservable inputs could result in material changes to the contingent consideration liability. Changes in the value of the contingent consideration liability are included in "Other income (expense)" on the Company's consolidated statements of operations. A 5% increase or decrease in the probability of successful product launch would cause the fair value of the contingent consideration to both increase and decrease by $1.6 million, respectively. An increase or decrease in the number of competitors at the date of the product launch or the first anniversary would cause the fair value of the contingent consideration to decrease by $13.5 million and increase by $5.2 million, respectively. The maximum aggregate amount in contingent consideration payments the Company could be expected to make to Teva in accordance with the Termination Agreement related to methylphenidate hydrochloride is $40.0 million.

The following table presents the changes in Level 3 instruments measured on a recurring basis for the three months ended March 31, 2017 (in thousands):

 
As of
December 31, 2016
 
Change in
Fair Value Included
in Earnings (1)
 
As of
March 31, 2017
Total contingent consideration
$
31,048

 
281

 
$
31,329


(1)
Earnings effect is included in Other, net in Other income (expense) in the Company's consolidated statement of operations.
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE
ACCOUNTS RECEIVABLE
The composition of accounts receivable, net is as follows (in thousands):
 
March 31, 2017
 
December 31, 2016
Gross accounts receivable (1)
$
648,918

 
$
794,173

Less: Rebate reserve
(225,243
)
 
(293,816
)
Less: Chargeback reserve
(138,903
)
 
(151,978
)
Less: Distribution services reserve
(9,400
)
 
(18,318
)
Less: Discount reserve
(16,646
)
 
(17,957
)
Less: Uncollectible accounts reserve (2)
(44,708
)
 
(54,736
)
Accounts receivable, net
$
214,018

 
$
257,368



(1) Includes estimated $40.6 million and $40.3 million as of March 31, 2017 and December 31, 2016, respectively, receivable due from Turing Pharmaceuticals AG ("Turing") for reimbursement of Daraprim® chargebacks and Medicaid rebate liabilities pursuant to an Asset Purchase Agreement between the Company and Turing dated August 7, 2015 (the "Turing APA"). In accordance with the terms of the Turing APA and in accordance with federal laws and regulations, the Company receives, and is initially responsible for processing and paying (subject to reimbursement by Turing), all chargebacks and rebates resulting from utilization by Medicaid, Medicare and other federal, state and local government programs, health plans and other health care providers for products sold under the Company's labeler code. Under the terms of the Turing APA, Turing is responsible for liabilities related to chargebacks and rebates that arise as a result of Turing's marketing or selling related activities in connection with Daraprim®. Refer to "Note 20. Legal and Regulatory Matters" for a description of the Company's suit against Turing related to, among other matters, Turing's failure to reimburse the Company for chargebacks and Medicaid rebate liabilities when due.

(2) As a result of the uncertainty of collection from Turing that developed during the first quarter of 2016, the Company recorded a reserve of $48.0 million as of March 31, 2016, which represented the full amount of the estimated receivable due from Turing. During the fourth quarter of 2016, the Company received a $7.7 million payment from Turing. During the first quarter of 2017, the Company increased the reserve balance by $0.3 million to reflect additional estimated Medicaid rebate claims due from Turing. As of March 31, 2017, the $40.6 million estimated receivable due from Turing was fully reserved.

A rollforward of the rebate and chargeback reserves activity for the three months ended March 31, 2017 and the year ended December 31, 2016 is as follows (in thousands):
 
Three Months Ended
 
Year Ended
Rebate reserve
March 31, 2017
 
December 31, 2016
Beginning balance
$
293,816

 
$
265,229

Provision recorded during the period
164,792

 
756,774

Credits issued during the period
(233,365
)
 
(728,187
)
Ending balance
$
225,243

 
$
293,816


The payment mechanisms for rebates in the Impax Generics and Impax Specialty Pharma divisions are different, which impacts the location on the Company's consolidated balance sheets. Impax Generics rebates are classified as "Accounts receivable, net" on the Company's consolidated balance sheets. Impax Specialty Pharma rebates are classified as "Accrued expenses" on the Company's consolidated balance sheets.

 
Three Months Ended
 
Year Ended
Chargeback reserve
March 31, 2017
 
December 31, 2016
Beginning balance
$
151,978

 
$
102,630

Provision recorded during the period
308,572

 
1,011,400

Credits issued during the period
(321,647
)
 
(962,052
)
Ending balance
$
138,903

 
$
151,978

INVENTORY
INVENTORY
INVENTORY
Inventory, net of carrying value reserves, as of March 31, 2017 and December 31, 2016 consisted of the following (in thousands): 
 
March 31, 2017
 
December 31, 2016
Raw materials
$
65,580

 
$
53,808

Work in process
5,056

 
3,280

Finished goods
137,874

 
130,879

     Total inventory
208,510

 
187,967

     Less: Non-current inventory
12,946

 
12,737

            Total inventory - current
$
195,564

 
$
175,230


Inventory carrying value reserves were $55.6 million and $38.0 million at March 31, 2017 and December 31, 2016, respectively.
The Company recognizes pre-launch inventories at the lower of its cost or the expected net selling price. Cost is determined using a standard cost method, which approximates actual cost, and assumes a FIFO flow of goods. Costs of unapproved products are the same as approved products and include materials, labor, quality control, and production overhead. When the Company concludes FDA approval is expected within approximately six months, the Company will generally begin to schedule manufacturing process validation studies as required by the FDA to demonstrate the production process can be scaled up to manufacture commercial batches. Consistent with industry practice, the Company may build quantities of pre-launch inventories of certain products pending required final FDA approval and/or resolution of patent infringement litigation, when, in the Company’s assessment, such action is appropriate to prepare for the anticipated commercial launch, FDA approval is expected in the near term, and/or the related litigation will be resolved in the Company’s favor. The capitalization of unapproved pre-launch inventory involves risks, including, among other items, FDA approval of product may not occur; approvals may require additional or different testing and/or specifications than used for unapproved inventory; and, in cases where the unapproved inventory is for a product subject to litigation, the litigation may not be resolved or settled in favor of the Company. If any of these risks were to materialize and the launch of the unapproved product delayed or prevented, then the net carrying value of unapproved inventory may be partially or fully reserved. Generally, the selling price of a generic pharmaceutical product is at discount from the corresponding brand product selling price. Typically, a generic drug is easily substituted for the corresponding branded product, and once a generic product is approved, the pre-launch inventory is typically sold within the subsequent three months. If the market prices become lower than the product inventory carrying costs, then the pre-launch inventory value is reduced to such lower market value. If the inventory produced exceeds the estimated market acceptance of the generic product and becomes short-dated, a carrying value reserve will be recorded. In all cases, the carrying value of the Company's pre-launch product inventory is lower than the respective estimated net selling prices. The carrying value of unapproved inventory less reserves was $47.1 million and $29.2 million at March 31, 2017 and December 31, 2016, respectively.
To the extent inventory is not scheduled to be utilized in the manufacturing process and/or sold within twelve months of the balance sheet date, it is included as a component of other non-current assets. Amounts classified as non-current inventory consist of raw materials, net of valuation reserves. Raw materials generally have a shelf life of approximately three to five years, while finished goods generally have a shelf life of approximately two years.
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, net of accumulated depreciation, consists of the following (in thousands):

 
March 31, 2017
 
December 31, 2016
Land
$
5,603

 
$
5,603

Buildings and improvements
180,134

 
174,303

Equipment
149,373

 
143,818

Office furniture and equipment
16,312

 
15,767

Construction-in-progress
55,214

 
50,191

    Property, plant and equipment, gross
406,636

 
389,682

    Less: Accumulated depreciation
(166,396
)
 
(156,310
)
           Property, plant and equipment, net
$
240,240

 
$
233,372



Depreciation expense was $7.8 million and $6.3 million for the three months ended March 31, 2017 and March 31, 2016, respectively.

Unpaid vendor invoices relating to purchases of property, plant and equipment of $4.3 million and $4.5 million, which were accrued as of March 31, 2017 and March 31, 2016, respectively, have been excluded from the purchase of property, plant, and equipment and the change in accounts payable and accrued expenses in the Company’s consolidated statements of cash flows.
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL
INTANGIBLE ASSETS AND GOODWILL
Intangible Assets

The Company’s intangible assets include both finite lived and indefinite-lived assets. Finite lived intangible assets, consisting of marketed product rights and royalties received from product sales by the Company’s third party partners, are amortized over the estimated useful life of the asset based on the pattern in which the economic benefits are expected to be consumed or otherwise used up or, if that pattern is not readily determinable, on a straight-line basis. The remaining weighted-average amortization period for the Company's finite lived intangible assets not yet fully amortized is 7.4 years as of March 31, 2017. Indefinite-lived intangible assets consist of acquired IPR&D product rights and acquired future royalty rights to be paid based on other companies’ net sales of products not yet approved. IPR&D assets acquired in a business combination are considered indefinite-lived until the completion or abandonment of the associated research and development efforts. Amortization over the estimated useful life will commence at the time of the respective product’s launch. If FDA approval to market the product is not obtained, the Company will immediately expense the related capitalized cost.

Finite lived intangible assets are tested for impairment when events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. All of the Company's indefinite-lived intangible assets are tested for impairment at least annually during the fourth quarter of the fiscal year, or more often if indicators of impairment are present. Impairment testing requires management to estimate the future undiscounted cash flows of an intangible asset using assumptions believed to be reasonable, but which are unpredictable and inherently uncertain. Actual future cash flows may differ from the estimates used in the impairment testing. The Company recognizes an impairment loss when and to the extent that the estimated fair value of an intangible asset is less than its carrying value.

The following tables show the gross carrying values and accumulated amortization, where applicable, of the Company’s intangible assets by type for the Company’s consolidated balance sheets presented (in thousands):

March 31, 2017
Gross Carrying Value
 
Accumulated Amortization
 
Intangible Assets, Net
Amortized intangible assets:
 
 
 
 
 
Marketed product rights
$
487,909

 
$
(156,478
)
 
$
331,431

Royalties
339

 
(339
)
 
—

 
488,248

 
(156,817
)
 
331,431

Non-amortized intangible assets:
 
 
 
 
 
Acquired IPR&D product rights
225,308

 
—

 
225,308

Acquired future royalty rights
1,135

 
—

 
1,135

 
226,443

 
—

 
226,443

Total intangible assets
$
714,691

 
$
(156,817
)
 
$
557,874


December 31, 2016
Gross Carrying Value
 
Accumulated Amortization
 
Intangible Assets, Net
Amortized intangible assets:
 
 
 
 
 
Marketed product rights
$
524,733

 
$
(139,245
)
 
$
385,488

Royalties
339

 
(339
)
 
—

 
525,072

 
(139,584
)
 
385,488

Non-amortized intangible assets:
 
 
 
 
 
Acquired IPR&D product rights
232,576

 
—

 
232,576

Acquired future royalty rights
2,402

 
—

 
2,402

 
234,978

 
—

 
234,978

Total intangible assets
$
760,050

 
$
(139,584
)
 
$
620,466



During the first quarter of 2017, the Company recognized a total of $45.4 million of intangible asset impairment charges, of which $39.3 million was recognized in cost of revenues impairment charges and $6.1 million was recognized in in-process research and development impairment charges on the Company's consolidated statement of operations. The $45.4 million impairment charge was almost entirely attributable to three products, two of which are currently marketed products and one of which is an IPR&D product, all acquired as part of the Teva Transaction. For the currently marketed products, the impairment charge was the result of continued significant price and volume erosion during the first quarter of 2017 without an offsetting increase in customer demand, resulting in significantly lower expected future cash flows. For the IPR&D product, the impairment charge was the result of increased estimated research and development expenses and a delay in the anticipated product launch due to a change in the regulatory strategy to secure FDA approval of such product.

Also during the first quarter of 2017, the Company commercially launched a product acquired as IPR&D as part of the Teva Transaction and, as a result, transferred the $2.5 million asset value from non-amortized, indefinite-lived acquired IPR&D product rights to amortized, finite lived marketed product rights. This asset will be amortized over an estimated useful life of seven years based on the pattern of economic benefit expected to be realized through 2023.

The Company recognized amortization expense of $17.2 million and $8.8 million for the three months ended March 31, 2017 and 2016, respectively, in cost of revenues in the consolidated statements of operations presented. Assuming no changes to the gross carrying amount of finite-lived intangible assets, amortization expense for fiscal years 2017 through 2021 is estimated to be in the range of $31.1 million to $67.5 million annually.
Goodwill
Goodwill had a carrying value on the Company's consolidated balance sheets of $207.3 million and $207.3 million at March 31, 2017 and December 31, 2016, respectively. At March 31, 2017, the Company attributed $147.6 million and $59.7 million to the Impax Generics division and the Impax Specialty Pharma division, respectively.
ACCRUED EXPENSES
ACCRUED EXPENSES
ACCRUED EXPENSES
The following table sets forth the Company’s accrued expenses (in thousands):  

 
March 31, 2017
 
December 31, 2016
Payroll-related expenses
$
31,505

 
$
37,986

Product returns
75,783

 
72,888

Accrued shelf stock
5,906

 
7,032

Government rebates (1)
71,721

 
72,063

Legal and professional fees
9,464

 
8,395

Income taxes payable
462

 
—

Interest payable
3,500

 
544

Estimated Teva and Allergan chargebacks and rebates (2)
13,277

 
14,813

Accrued profit sharing and royalty expenses
8,175

 
13,642

Other
11,898

 
17,290

Total accrued expenses
$
231,691

 
$
244,653



(1) Includes estimated $3.1 million and $6.8 million as of March 31, 2017 and December 31, 2016, respectively, of liabilities for Daraprim® chargebacks and rebates resulting from utilization by Medicaid, Medicare and other federal, state and local governmental programs, health plans and other health care providers for product sold under the Company’s labeler code, which amounts are subject to reimbursement by Turing in accordance with the terms of the Company's purchase agreement with Turing. From August 7, 2015 through March 31, 2017, the Company has made $45.3 million of such payments on Turing's behalf.

(2) As discussed in "Note 2. Business Acquisition," pursuant to certain agreed upon transition related services by and among the Company, Teva and Allergan after the closing of the Teva Transaction, the Company agreed to manage the payment process for certain commercial chargebacks and rebates on behalf of Teva and Allergan related to products each of Teva and Allergan sold into the channel prior to the Company's acquisition of the products. On August 18, 2016, the Company received a payment totaling $42.4 million from Teva and Allergan, which represented their combined estimate of the amount of commercial chargebacks and rebates to be paid by the Company on their behalf to wholesalers who purchased products from Teva and Allergan prior to the closing. Pursuant to the agreed upon transition services, Teva and Allergan are obligated to reimburse the Company for additional payments related to chargebacks and rebates for products they sold into the channel prior to the closing and made on their behalf in excess of the $42.4 million. If the total payments made by the Company on behalf of Teva and Allergan are less than $42.4 million, the Company is obligated to refund the difference to Teva and/or Allergan. As of March 31, 2017, the Company had paid $29.1 million related to chargebacks and rebates as described above and $13.3 million remained in accrued expenses on the Company's consolidated balance sheet.

Product Returns

The Company maintains a return policy to allow customers to return product within specified guidelines. The Company estimates a provision for product returns as a percentage of gross sales based upon historical experience for sales made through its Impax Generics and Impax Specialty Pharma sales channels. Sales of product under the Private Label, Rx Partner and OTC Partner alliance, collaboration and supply agreements are not subject to returns.

A roll-forward of the return reserve activity for the three months ended March 31, 2017 and the year ended December 31, 2016 is as follows (in thousands):
 
Three Months Ended
 
Year Ended
Returns reserve
March 31, 2017
 
December 31, 2016
Beginning balance
$
72,888

 
$
48,950

Provision related to sales recorded in the period
11,577

 
52,383

Credits issued during the period
(8,682
)
 
(28,445
)
Ending balance
$
75,783

 
$
72,888

DEBT
DEBT
DEBT
Royal Bank of Canada Credit Facilities
On August 3, 2016, the Company entered into a restatement agreement with Royal Bank of Canada, as administrative agent, and the lenders and guarantors party thereto (the "Restatement Agreement"). The Restatement Agreement amends and restates the Company's existing Revolving Credit Facility Agreement (as amended and restated and amended to date, the "Amended and Restated Credit Agreement") to, among other things, (i) add a term loan feature to allow for the borrowing of up to $400.0 million of term loans (the "Term Loan Facility") by the Company in accordance with the terms of the Amended and Restated Credit Agreement, (ii) increase the aggregate principal amount of revolving loans permitted under the Amended and Restated Credit Agreement (the "Revolving Credit Facility," and, together with the Term Loan Facility, the "RBC Credit Facilities"), from $100.0 million to $200.0 million; and (iii) extend the maturity date of the Revolving Credit Facility from August 4, 2020 to August 3, 2021. On March 27, 2017, the Company entered into Amendment No. 1 by and among the Company, Royal Bank of Canada, as administrative agent, and the lenders party thereto (the “Amendment”) to the Amended and Restated Credit Agreement.

Borrowings under the Amended and Restated Credit Agreement will accrue interest at a rate equal to LIBOR or the base rate, plus an applicable margin. The applicable margin may be increased or reduced by 0.25% based on the Company's total net leverage ratio. Up to $12.5 million of the Revolving Credit Facility is available for issuance of letters of credit and any such letters of credit will reduce the amount available under the Revolving Credit Facility on a dollar-for-dollar basis. The Company is required to pay a commitment fee to the lenders on the average daily unused portion of the Revolving Credit Facility at 0.50% or 0.375% per annum, depending on the Company's total net leverage ratio.

The Amended and Restated Credit Agreement contains certain negative covenants (subject to exceptions, materiality thresholds and other allowances) including, without limitation, negative covenants that limit the Company's and its restricted subsidiaries' ability to incur additional debt, guarantee other obligations, grant liens on assets, make loans, acquisitions or other investments, dispose of assets, make optional payments in connection with or modify certain debt instruments, pay dividends or make other payments on capital stock, engage in mergers or consolidations, enter into arrangements that restrict the Company's and its restricted subsidiaries' ability to pay dividends or grant liens, engage in transactions with affiliates, or change its fiscal year. Prior to the effective date of the Amendment on March 27, 2017, the Amended and Restated Credit Agreement also included a financial maintenance covenant whereby the Company must not permit its total net leverage ratio in any 12-month period to exceed 5.00:1.00, as tested at the end of each fiscal quarter. Effective as of March 27, 2017 and pursuant to the Amendment, the total net leverage ratio financial covenant was replaced with a new senior secured net leverage ratio financial covenant. Pursuant to the Amendment, the Company must not permit its senior secured net leverage ratio to exceed 2.50:1.00 and the interest coverage ratio to be less than 3.00:1.00, in each case in any 12-month period, as tested at the end of each fiscal quarter. The Company was in compliance with all of its covenants under the Amended and Restated Credit Agreement as of March 31, 2017.

The Amended and Restated Credit Agreement contains events of default, including, without limitation (subject to customary grace periods and materiality thresholds), events of default upon (i) the failure to make payments pursuant to the terms of the Amended and Restated Credit Agreement, (ii) violation of covenants, (iii) incorrectness of representations and warranties, (iv) cross-default and cross-acceleration to other material indebtedness, (v) bankruptcy events, (vi) material monetary judgments (to the extent not covered by insurance), (vii) certain matters arising under the Employee Retirement Income Security Act of 1974, as amended, that could reasonably be expected to result in a material adverse effect, (viii) the actual or asserted invalidity of the documents governing the RBC Credit Facilities, any material guarantees or the security interests (including priority thereof) required under the Amended and Restated Credit Agreement and (ix) the occurrence of a change of control (as defined therein). Upon the occurrence of certain events of default, the obligations under the Amended and Restated Credit Agreement may be accelerated and any remaining commitments thereunder may be terminated.

The full amount of proceeds from the Term Loan Facility of $400.0 million, along with $196.4 million of cash were used to finance the Teva Transaction (including transaction costs) at closing on August 3, 2016. As of March 31, 2017, the full amount of the $200.0 million Revolving Credit Facility remains available to the Company for working capital and other general corporate purposes.
In connection with the Term Loan Facility, the Company incurred $11.0 million of debt issuance costs for banking, legal and accounting fees and other expenses during the third quarter of 2016. In connection with the Amendment, the Company incurred $0.8 million of debt issuance costs for banking fees during the first quarter of 2017. These debt issuance costs were recorded on the Company's consolidated balance sheet as a reduction to the current and long-term portions of debt related to the Term Loan Facility. These deferred debt issuance costs will be accreted to interest expense over the term of the debt using the effective interest method. In connection with the increase in the aggregate principal amount of revolving loans permitted under the Revolving Credit Facility, the Company incurred $0.8 million of debt issuance costs for banking fees which were recorded as an asset with current and long-term portions on the Company's consolidated balance sheet. These deferred debt issuance costs, in addition to the $0.3 million balance remaining from the initial $100.0 million revolving credit facility, will be amortized to interest expense over the term of the Revolving Credit Facility using the straight-line method.
For the three months ended March 31, 2017, the Company recognized $4.4 million of interest expense related to the Term Loan Facility, of which $3.8 million was cash and $0.6 million was non-cash accretion of the debt discount recorded for deferred debt issuance costs. As of March 31, 2017, the Term Loan Facility had a carrying value of $330.8 million, of which $17.8 million is classified as current debt and $313.0 million is classified as long-term debt on the Company's consolidated balance sheets. The Term Loan Facility requires quarterly principal payments of $5.0 million beginning from December 2016 through June 2021, and the remaining principal balance is payable in August 2021. As of March 31, 2017, the outstanding principal amount for the Term Loan Facility was $340.0 million.
Loss on Early Extinguishment of Debt - Voluntary Prepayment of $50.0 Million of Principal - RBC Term Loan Facility

On February 28, 2017, the Company made a voluntary prepayment in the amount of $50.3 million under its Term Loan Facility, representing $50.0 million of principal amount and $0.3 million of accrued interest thereon. As a result of this voluntary prepayment, for the quarter ended March 31, 2017, the Company recorded a loss on early extinguishment of debt of $1.2 million to write-off a pro rated portion of the related unaccreted debt issuance costs.

2% Convertible Senior Notes due June 2022

On June 30, 2015, the Company issued an aggregate principal amount of $600.0 million of 2.00% Convertible Senior Notes due June 2022 (the “Notes”) in a private placement offering, which are the Company’s senior unsecured obligations. The Notes were issued pursuant to an Indenture dated June 30, 2015 (the “Indenture”) between the Company and Wilmington Trust, N.A. as trustee. The Indenture includes customary covenants and sets forth certain events of default after which the Notes may be due and payable immediately. The Notes will mature on June 15, 2022, unless earlier redeemed, repurchased or converted. The Notes bear interest at a rate of 2.00% per year, and interest is payable semiannually in arrears on June 15 and December 15 of each year, beginning from December 15, 2015.

The conversion rate for the Notes is initially set at 15.7858 shares per $1,000 of principal amount, which is equivalent to an initial conversion price of $63.35 per share of the Company’s common stock. If a Make-Whole Fundamental Change (as defined in the Indenture) occurs or becomes effective prior to the maturity date and a holder elects to convert its Notes in connection with the Make-Whole Fundamental Change, the Company is obligated to increase the conversion rate for the Notes so surrendered by a number of additional shares of the Company’s common stock as prescribed in the Indenture. Additionally, the conversion rate is subject to adjustment in the event of an equity restructuring transaction such as a stock dividend, stock split, spinoff, rights offering, or recapitalization through a large, nonrecurring cash dividend (“standard antidilution provisions,” per FASB ASC 815-40, Contracts in Entity’s Own Equity ("ASC 815-40")).
The Notes are convertible at the option of the holders at any time prior to the close of business on the business day immediately preceding December 15, 2021 only under the following circumstances:
(i)
If during any calendar quarter commencing after the quarter ending September 30, 2015 (and only during such calendar quarter) the last reported sale price of the Company’s common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter is greater than 130% of the conversion price on each applicable trading day; or
(ii)
If during the five business day period after any 10 consecutive trading day period (the “measurement period”) in which the trading price per $1,000 of principal amount of Notes for each trading day of the measurement period was less than 98% of the product of the last report sale price of the Company’s common stock and the conversion rate on each such trading day; or
(iii)
Upon the occurrence of corporate events specified in the Indenture.
On or after December 15, 2021 until the close of business on the second scheduled trading day immediately preceding the maturity date, the holders may convert their Notes at any time, regardless of the foregoing circumstances. The Company may satisfy its conversion obligation by paying or delivering, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of the Company’s common stock, at the Company’s election and in the manner and subject to the terms and conditions provided in the Indenture.

Concurrently with the offering of the Notes and using a portion of the proceeds from the sale of the Notes, the Company entered into a series of convertible note hedge and warrant transactions (the “Note Hedge Transactions” and “Warrant Transactions”) which are designed to reduce the potential dilution to the Company’s stockholders and/or offset the cash payments the Company is required to make in excess of the principal amount upon conversion of the Notes. The Note Hedge Transactions and Warrant Transactions are separate transactions, in each case, entered into by the Company with a financial institution and are not part of the terms of the Notes. These transactions will not affect any holder’s rights under the Notes, and the holders of the Notes have no rights with respect to the Note Hedge Transactions and Warrant Transactions. See “Note 13. Stockholders’ Equity” for additional information.

At the June 30, 2015 issuance date of the Notes, the Company did not have the necessary number of authorized but unissued shares of its common stock available to share-settle the conversion option of the Notes. Therefore, in accordance with guidance found in FASB ASC 470-20, Debt with Conversion and Other Options, and FASB ASC 815-15, Embedded Derivatives, the conversion option of the Notes was deemed an embedded derivative requiring bifurcation from the Notes (host contract) and separate accounting as a derivative liability. The fair value of the conversion option derivative liability at June 30, 2015 was $167.0 million, which was recorded as a reduction to the carrying value of the debt and will be accreted to interest expense over the term of the debt using the effective interest method. Although the Company subsequently amended the Company's Restated Certificate of Incorporation to increase the authorized number of shares of the Company’s common stock in December 2015, the debt discount remained and continues to be accreted to interest expense over the term of the debt. See “Note 13. Stockholders’ Equity” for additional information.

In connection with the issuance of the Notes, the Company incurred $18.7 million of debt issuance costs for banking, legal and accounting fees and other expenses. This amount was also recorded on the Company’s balance sheet as a reduction to the carrying value of the debt and is being accreted to interest expense over the term of the debt using the effective interest method.

For the three months ended March 31, 2017 and March 31, 2016, the Company recognized $8.7 million and $8.3 million, respectively, of interest expense related to the Notes, of which $3.0 million for both periods was cash and $5.7 million and $5.3 million, respectively, was non-cash accretion of the debt discounts recorded. As the Notes mature in 2022, they have been classified as long-term debt on the Company's consolidated balance sheets, with a carrying value of $452.1 million and $446.4 million as of March 31, 2017 and December 31, 2016, respectively. Accrued interest payable on the Notes of $3.5 million and $0.5 million as of March 31, 2017 and December 31, 2016, respectively, is included in accrued expenses on the Company's consolidated balance sheets.
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY
STOCKHOLDERS’ EQUITY
Preferred Stock
Pursuant to its Restated Certificate of Incorporation, as amended (the “Certificate of Incorporation”), the Company is authorized to issue 2,000,000 shares of “blank check” preferred stock, $0.01 par value per share, which enables the Board of Directors, from time to time, to create one or more new series of preferred stock. Each series of preferred stock issued can have the rights, preferences, privileges and restrictions designated by the Board of Directors. The issuance of any new series of preferred stock could affect, among other things, the dividend, voting, and liquidation rights of the Company’s common stock. The Company had no preferred stock issued or outstanding as of March 31, 2017 and December 31, 2016. 
Common Stock
Pursuant to its Certificate of Incorporation, the Company is authorized to issue 150,000,000 shares of common stock, $0.01 par value per share, of which 74,048,203 shares have been issued and 73,804,474 shares were outstanding as of March 31, 2017. In addition, the Company had reserved for issuance the following amounts of shares of its common stock for the purposes described below as of March 31, 2017 (in thousands):
Shares issued
74,048

Stock options outstanding(1)
3,343

Conversion of Notes payable (2)
9,471

Warrants outstanding (see below)
9,471

Total shares of common stock issued and reserved for issuance
96,333


(1)See “Note 15. Share-based Compensation.”
(2)See “Note 12. Debt.”

Warrants
As discussed in “Note 12. Debt,” on June 30, 2015, the Company entered into a series of Note Hedge Transactions and Warrant Transactions with a financial institution which are designed to reduce the potential dilution to the Company’s stockholders and/or offset the cash payments the Company is required to make in excess of the principal amount upon conversion of the Notes. Pursuant to the Warrant Transactions, the Company sold to a financial institution 9.47 million warrants to purchase the Company’s common stock, for which it received proceeds of $88.3 million. The warrants have an exercise price of $81.277 per share (subject to adjustment), are immediately exercisable, and have an expiration date of September 15, 2022.
Additional Paid-in Capital
Pursuant to the Note Hedge Transactions, the Company purchased from a financial institution 0.6 million call options on the Company's common stock, for which it paid consideration of $147.0 million. Each call option entitles the Company to purchase 15.7858 shares of the Company's common stock at an exercise price of $63.35 per share, is immediately exercisable, and has an expiration date of June 15, 2022, subject to earlier exercise. At the time of the Note Hedge Transactions, because of an insufficient number of authorized but unissued shares of the Company's common stock, these call options did not meet the criteria for equity classification under ASC 815-40 and were accounted for as a derivative asset.
As of December 8, 2015, pursuant to the Company's amendment to its Certificate of Incorporation to increase the number of authorized shares of common stock, the call options purchased pursuant to the Note Hedge Transactions (formerly a derivative asset) and the conversion option of the Notes (formerly an embedded derivative liability) were reclassified to equity in additional paid-in capital. The net effect of the reclassification of these derivatives was a $21.0 million, net of tax, increase in additional paid-in capital reflected on the Company's December 31, 2015 consolidated balance sheet.

Retained Earnings

Effective January 1, 2017, the Company adopted ASU 2016-09 "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting" and elected to eliminate the use of a forfeiture rate estimate in the determination of share-based compensation expense for restricted stock awards using the modified retrospective transition method. Adoption of the new guidance using this method resulted in a $1.4 million charge to opening retained earnings for 2017.
EARNINGS PER SHARE
EARNINGS PER SHARE
EARNINGS PER SHARE
The Company's basic earnings per common share (“EPS”) is computed by dividing net income (loss) available to the Company’s common stockholders (as presented on the consolidated statements of operations) by the weighted-average number of shares of the Company’s common stock outstanding during the period. The Company’s restricted stock awards (non-vested shares) are issued and outstanding at the time of grant but are excluded from the Company’s computation of weighted-average shares outstanding in the determination of basic EPS until vesting occurs.

For purposes of calculating diluted EPS, the denominator includes both the weighted-average number of shares of common stock outstanding and the number of common stock equivalents if the inclusion of such common stock equivalents would be dilutive. Dilutive common stock equivalents potentially include warrants, stock options and non-vested restricted stock awards using the treasury stock method and the number of shares of common stock issuable upon conversion of the Company’s outstanding convertible notes payable. In the case of the Company’s outstanding convertible notes payable, the diluted EPS calculation is further affected by an add-back of interest expense, net of tax, to the numerator under the assumption that the interest would not have been incurred if the convertible notes had been converted into common stock.

The following is a reconciliation of basic and diluted net loss per share of common stock for the three months ended March 31, 2017 and 2016 (in thousands, except per share amounts):  
 
Three Months Ended March 31,
 
 
2017
 
 
2016
 
Basic Loss Per Common Share:
 
 
 
 
 
Net loss
$
(98,431
)
 
 
$
(10,408
)
 
Weighted-average common shares outstanding
71,594

 
 
70,665

 
  Basic loss per share
$
(1.37
)
 
 
$
(0.15
)
 
 
 
 
 
 
 
Diluted Loss Per Common Share:
 
 
 
 
 
Net loss
$
(98,431
)
 
 
$
(10,408
)
 
Add-back of interest expense on outstanding convertible notes payable, net of tax
—

(1) 
 
—

(1) 
Adjusted net loss
$
(98,431
)
 
 
$
(10,408
)
 
 
 
 
 
 
 
Weighted-average common shares outstanding
71,594

 
 
70,665

 
Weighted-average incremental shares related to assumed exercise of warrants and stock options, vesting of non-vested shares and ESPP share issuance
—

(2) 
 
—

(3) 
Weighted-average incremental shares assuming conversion of outstanding notes payable
—

(1) 
 
—

(1) 
Diluted weighted-average common shares outstanding
71,594

(2) 
 
70,665

(3) 
    Diluted net loss per share
$
(1.37
)
 
 
$
(0.15
)
 


(1)
For the three month periods ended March 31, 2017 and March 31, 2016, the Company incurred a net loss, which cannot be diluted, so basic and diluted loss per common share were the same. Accordingly, there were no numerator or denominator adjustments related to the Company’s outstanding Notes.

(2)
For the three month period ended March 31, 2017, the Company incurred a net loss, which cannot be diluted, so basic and diluted loss per common share were the same. As of March 31, 2017, shares issuable but not included in the Company's calculation of diluted EPS, which could potentially dilute future earnings, include 9.47 million warrants outstanding, 9.47 million shares for conversion of outstanding Notes payable, 3.34 million stock options outstanding and 2.21 million non-vested restricted stock awards.

(3)
For the three month period ended March 31, 2016, the Company incurred a net loss, which cannot be diluted, so basic and diluted loss per common share were the same. As of March 31, 2016, shares issuable but not included in the Company's calculation of diluted EPS, which could potentially dilute future earnings, include 9.47 million warrants outstanding, 9.47 million shares for conversion of outstanding Notes payable, 2.48 million stock options outstanding and 2.15 million non-vested restricted stock awards.
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION
The Company recognizes the grant date fair value of each option and share of restricted stock over its vesting period. Stock options and restricted stock awards are granted under the Company’s Third Amended and Restated 2002 Equity Incentive Plan (the “2002 Plan”) and generally vest over a four year period and, in the case of stock options, have a term of ten years.
Impax Laboratories, Inc. Third Amended and Restated 2002 Equity Incentive Plan ("2002 Plan")

The aggregate number of shares of common stock authorized for issuance pursuant to the Company's 2002 Plan is 15,950,000 shares. There were 2,491,671 and 2,233,393 stock options outstanding as of March 31, 2017 and December 31, 2016, respectively, and 2,207,455 and 2,160,127 non-vested restricted stock awards outstanding as of March 31, 2017 and December 31, 2016, respectively, under the 2002 Plan.

Impax Laboratories, Inc. 1999 Equity Incentive Plan ("1999 Plan")

The aggregate number of shares of common stock authorized for issuance pursuant to the Company’s 1999 Plan is 5,000,000 shares. There were 938 stock options outstanding at both March 31, 2017 and December 31, 2016 under the 1999 Plan.

Awards Granted Out of Plan - CEO Inducement

On March 27, 2017, the Company granted Paul M. Bisaro, its new President and Chief Executive Officer, an option to purchase 850,000 shares of the Company’s common stock pursuant to the terms of his Employment Agreement dated as of March 24, 2017 with the Company. The grant was made in accordance with NASDAQ’s employment inducement grant exemption and therefore was not granted under a stockholder approved plan. The grant is subject to the terms of an option agreement with Mr. Bisaro to evidence the award. There were 850,000 stock options outstanding related to this grant as of March 31, 2017.

The following table summarizes all of the Company's stock option activity for the current year through March 31, 2017:
Stock Options
Number of
Shares
Under Option
 
Weighted-
Average
Exercise
Price
per Share
Outstanding at December 31, 2016
2,234,331

 
$
22.67

     Options granted
1,116,770

 
5.80

     Options exercised
(6,122
)
 
8.20

     Options forfeited
(2,370
)
 
10.57

Outstanding at March 31, 2017
3,342,609

 
$
17.02

Options exercisable at March 31, 2017
1,623,770

 
$
19.81


As of March 31, 2017, stock options outstanding and exercisable had average remaining contractual lives of 6.15 years and 5.77 years, respectively. Also, as of March 31, 2017, stock options outstanding and exercisable each had aggregate intrinsic values of $10.3 million and $2.7 million, respectively, and restricted stock awards outstanding had an aggregate intrinsic value of $27.9 million. As of March 31, 2017, the Company estimated there were 2,959,188 stock options and 1,954,245 shares of restricted stock granted to employees and service providers which had vested or were expected to vest.

The Company grants restricted stock to certain eligible employees as a component of its long-term incentive compensation program. The restricted stock award grants are made in accordance with the Company’s 2002 Plan and are issued and outstanding at the time of grant but are subject to forfeiture if the vesting conditions are not met. A summary of the non-vested restricted stock awards is as follows:
Restricted Stock Awards
Number of
Restricted
Stock Awards
 
Weighted-
Average
Grant Date
Fair Value
Non-vested at December 31, 2016
2,160,127

 
$
34.02

     Granted
165,501

 
10.75

     Vested
(66,697
)
 
34.28

     Forfeited
(51,476
)
 
35.62

Non-vested at March 31, 2017
2,207,455

 
$
32.23


Included in the 66,697 shares of restricted stock vested during the three months ended March 31, 2017 are 31,682 shares with a weighted-average fair value of $14.13 per share that were withheld for minimum withholding tax purposes upon vesting of such awards from stockholders who elected to net share settle such tax withholding obligation.

As of March 31, 2017, the Company had 161,813 shares available for issuance of either stock options or restricted stock awards under the 2002 Plan. Although there were also 296,921 shares available for issuance under the 1999 Plan, the Company determined that it will cease granting equity awards under this plan. Additionally, the Company had 40,371 shares available for sale under its 2001 Non-Qualified Employee Stock Purchase Plan (“ESPP”).

As of March 31, 2017, the Company had total unrecognized share-based compensation expense, net of estimated forfeitures, of $64.0 million related to all of its share-based awards, which is expected to be recognized over a weighted average period of 2.1 years. The intrinsic value of options exercised during the three months ended March 31, 2017 and 2016 was immaterial and $4.0 million, respectively. The total fair value of restricted stock which vested during the three months ended March 31, 2017 and 2016 was $2.3 million and $2.6 million, respectively.

The Company estimated the fair value of each stock option award on the grant date using the Black-Scholes option pricing model, wherein expected volatility is based on historical volatility of the Company’s common stock. The expected term calculation is based on the “simplified” method described in SAB No. 107, Share-Based Payment, and SAB No. 110, Share-Based Payment, as the result of the simplified method provides a reasonable estimate in comparison to actual experience. The risk-free interest rate is based on the U.S. Treasury yield at the date of grant for an instrument with a maturity that is commensurate with the expected term of the stock options. The dividend yield of zero is based on the fact that the Company has never paid cash dividends on its common stock, and has no present intention to pay cash dividends. Options granted under each of the above plans generally vest over four years and have a term of ten years.

The amount of share-based compensation expense recognized by the Company is as follows (in thousands):
 
Three Months Ended March 31,
 
2017
 
2016
Manufacturing expenses
$
1,584

 
$
1,368

Research and development
1,423

 
1,340

Selling, general and administrative
3,950

 
4,570

Total
$
6,957

 
$
7,278

RESTRUCTURINGS
RESTRUCTURINGS
RESTRUCTURINGS
Technical Operations Reduction-in-Force

In March 2017, the Company's management determined that a reduction-in-force was necessary in the Company's technical operations group in an effort to achieve greater operational efficiencies and to further streamline the organization. The Company eliminated a total of 18 positions, of which two employees will stay with the Company through the end of 2017. In connection with this reduction-in-force, management currently estimates that the Company will incur aggregate pre-tax charges for employee termination benefits of $2.5 million through the end of 2017, of which $1.8 million was recognized during the first quarter of 2017. As of March 31, 2017, the $1.8 million of employee termination benefits was included in accrued expenses on the Company’s consolidated balance sheet.

Middlesex, New Jersey Manufacturing and Packaging Operations

In March 2016, the Company's Board of Directors approved a plan of restructuring designed to reduce costs, improve operating efficiencies and enhance the Company's long-term competitive position by closing the Company's Middlesex, New Jersey manufacturing and packaging site and transferring the products and the functions performed there to the Company's other facilities or to third-party manufacturers. This plan will take up to two years to complete. As a result of the restructuring, 215 positions are expected to be eliminated.
    
Management currently estimates that through mid-2018, the Company will incur aggregate pre-tax charges in connection with this plan of $48.3 million, of which $31.4 million has been incurred through the first quarter of 2017 and the remainder will be incurred by the second quarter of 2018. The following is a summary of the total estimated charges to be incurred by major type of cost (in millions):

Type of Cost
Amount Expected to be Incurred
Employee retention and severance payments
$
14.1

Technical transfer of products
11.2

Asset impairment and accelerated depreciation charges
20.9

Facilities lease terminations and asset retirement obligations
1.9

Legal and professional fees
0.2

     Total estimated restructuring charges
$
48.3



Employee retention and severance payments are being accrued over the estimated service period. For the three months ended March 31, 2017, the Company recorded $4.3 million of expense to cost of revenues on the consolidated statement of operations.

A rollforward of the charges incurred for the three months ended March 31, 2017 is as follows (in thousands):

 
 
Balance as of
 
Expensed/
 
Cash
 
Non-Cash
 
Balance as of
 
 
December 31, 2016
 
Accrued Expense
 
Payments
 
Items
 
March 31, 2017
Employee retention and severance payments
 
$
5,945

 
$
1,480

 
$
(155
)
 
$
—

 
$
7,270

Technical transfer of products
 
—

 
1,188

 
(1,188
)
 
—

 
—

Asset impairment and accelerated depreciation charges
 
—

 
1,561

 
—

 
(1,561
)
 
—

Facilities lease terminations and asset retirement obligations
 
209

 
93

 
—

 
—

 
302

Legal and professional fees
 
—

 
—

 
—

 
—

 
—

Total
 
$
6,154

 
$
4,322

 
$
(1,343
)
 
$
(1,561
)
 
$
7,572



Hayward, California Technical Operations and R&D
In November 2015, the Company's management assessed the headcount in the technical operations and research and development groups in Hayward, California, primarily as a result of the resolution of the warning letter at the Hayward facility, and determined that a reduction-in-force was necessary to adjust the headcount to the operating conditions of the post-warning letter resolution environment. The Company eliminated 27 positions and recorded an accrual for severance and related employee termination benefits of $2.5 million during the quarter ended December 31, 2015. As of March 31, 2017, the full $2.5 million has been paid.
INCOME TAXES
INCOME TAXES
INCOME TAXES
The Company has historically calculated the provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. However, the Company has used a discrete effective tax rate method to calculate taxes for the three month period ended March 31, 2017. The Company determined that since small changes in estimated “ordinary” income (or loss) would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the three month period ended March 31, 2017.

During the three month period ended March 31, 2017 and 2016, the Company recognized an aggregate consolidated tax expense (benefit) of $30.9 million and $(7.1) million, respectively, for U.S. domestic and foreign income taxes. The effective tax rate for the three month periods ended March 31, 2017 and 2016 was 45.8% and (40.5)%, respectively. The amount of tax expense recorded for the three months ended March 31, 2017 reflects the Company’s estimate as of such date using the discrete effective tax rate method. The amount of tax benefit recorded for the three month period ended March 31, 2016 was calculated using the annual estimated rate method. A discrete tax benefit of $17.4 million for the reserve recorded against the Turing receivable as described in "Note 7. Accounts Receivable" was also reflected in income tax benefit for the three months ended March 31, 2016. Excluding the discrete item, the Company’s estimate of the annualized effective tax rate for the three months ended March 31, 2016 was 34%.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of the existing deferred tax assets. A significant piece of objective evidence that management evaluated was the cumulative loss incurred over the three year period ended December 31, 2016. Such objective evidence limits management's ability to consider other subjective evidence, such as projected taxable income.

On the basis of this evaluation, as of December 31, 2016, the Company established a valuation allowance of $108.8 million. During the three month period ended March 31, 2017, the Company considered new evidence, both positive and negative, that could impact the Company's assessment with regard to future realization of deferred tax assets. Based on the cumulative loss over the three year period ended March 31, 2017, an additional valuation allowance in the amount of $53.9 million was recorded against the gross deferred tax asset balance for a total valuation allowance of $162.7 million as of March 31, 2017.

Tower Holdings, Inc. (“Tower”) is currently under audit for federal income tax by the U.S. Internal Revenue Service ("IRS") for the tax year ended March 9, 2015, which pre-dates the Company’s acquisition of Tower. The Company and the former stockholders of Tower are currently cooperating with the IRS in connection with the audit. Under the terms of the Stock Purchase Agreement related to the Tower Acquisition, the Company is not responsible for pre-acquisition income tax liabilities. Neither the Company nor any of its other affiliates is currently under audit for federal income tax.

As of March 31, 2017, no provision has been made for U.S. federal deferred income taxes on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries since it is the current intention of management to indefinitely reinvest the undistributed earnings in the foreign subsidiary. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation.
ALLIANCE AND COLLABORATION AGREEMENTS
ALLIANCE AND COLLABORATION AGREEMENTS
ALLIANCE AND COLLABORATION AGREEMENTS
The Company has entered into several alliance, collaboration, license and distribution agreements, and similar agreements with respect to certain of its products and services, with unrelated third-party pharmaceutical companies. The consolidated statements of operations include revenue recognized under agreements the Company has entered into to develop marketing and/or distribution relationships with its partners to fully leverage the technology platform and revenue recognized under development agreements which generally obligate the Company to provide research and development services over multiple periods.
The Company’s alliance and collaboration agreements often include milestones and provide for milestone payments upon achievement of these milestones. Generally, the milestone events contained in the Company’s alliance and collaboration agreements coincide with the progression of the Company’s products and technologies from pre-commercialization to commercialization.
The Company groups pre-commercialization milestones in its alliance and collaboration agreements into clinical and regulatory categories, each of which may include the following types of events:
Clinical Milestone Events:
•
Designation of a development candidate. Following the designation of a development candidate, generally, IND-enabling animal studies for a new development candidate take 12 to 18 months to complete.
•
Initiation of a Phase I clinical trial. Generally, Phase I clinical trials take one to two years to complete.
•
Initiation or completion of a Phase II clinical trial. Generally, Phase II clinical trials take one to three years to complete.
•
Initiation or completion of a Phase III clinical trial. Generally, Phase III clinical trials take two to four years to complete.
•
Completion of a bioequivalence study. Generally, bioequivalence studies take three months to one year to complete.
Regulatory Milestone Events:
•
Filing or acceptance of regulatory applications for marketing approval such as a New Drug Application in the United States or Marketing Authorization Application in Europe. Generally, it takes six to 12 months to prepare and submit regulatory filings and two months for a regulatory filing to be accepted for substantive review.
•
Marketing approval in a major market, such as the United States or Europe. Generally it takes one to three years after an application is submitted to obtain approval from the applicable regulatory agency.
•
Marketing approval in a major market, such as the United States or Europe for a new indication of an already-approved product. Generally it takes one to three years after an application for a new indication is submitted to obtain approval from the applicable regulatory agency.
Commercialization Milestones Events:
•
First commercial sale in a particular market, such as in the United States or Europe.
•
Product sales in excess of a pre-specified threshold, such as annual sales exceeding $100.0 million. The amount of time to achieve this type of milestone depends on several factors including but not limited to the dollar amount of the threshold, the pricing of the product and the pace at which customers begin using the product.
License and Distribution Agreement with Shire
In January 2006, the Company entered into a License and Distribution Agreement with an affiliate of Shire Laboratories, Inc., which was subsequently amended (“Prior Shire Agreement”), under which the Company received a non-exclusive license to market and sell an authorized generic of Shire’s Adderall XR® product (“AG Product”) subject to certain conditions, but in any event by no later than January 1, 2010. The Company commenced sales of the AG Product in October 2009. On February 7, 2013, the Company entered into an Amended and Restated License and Distribution Agreement with Shire (the “Amended and Restated Shire Agreement”), which amended and restated the Prior Shire Agreement. The Amended and Restated Shire Agreement was entered into by the parties in connection with the settlement of the Company’s litigation with Shire relating to Shire’s supply of the AG Product to the Company under the Prior Shire Agreement. Under the Amended and Restated Shire Agreement, Shire was required to supply the AG Product and the Company was responsible for marketing and selling the AG Product subject to the terms and conditions thereof until the earlier of (i) the first commercial sale of the Company’s generic equivalent product to Adderall XR® and (ii) September 30, 2014 (the “Supply Term”), subject to certain continuing obligations of the parties upon expiration or early termination of the Supply Term, including Shire’s obligation to deliver AG Products still owed to the Company as of the end of the Supply Term. Although the Supply Term expired on September 30, 2014, the Company was permitted to sell any AG Products in its inventory or owed to the Company by Shire under the Amended and Restated Shire Agreement until all such products are sold. The Company sold all remaining AG Products in its inventory during the year ended December 31, 2016. Pursuant to the terms of the Amended and Restated Shire Agreement, the Company is required to pay to Shire a specified profit share based on sales of the AG Product and a specified profit share based on sales of the Company’s generic Adderall XR® product. The Company began selling its generic Adderall XR® product during the second quarter of 2016. The Company owed a profit share payable to Shire of $0.8 million during the three months ended March 31, 2017, based on sales of the AG Product and the Company’s generic Adderall XR® product and of $4.0 million during the three months ended March 31, 2016, based on sales of the AG Product, in each case with a corresponding charge included in the cost of revenues line in the consolidated statement of operations.
Development, Supply and Distribution Agreement with TOLMAR, Inc.
In June 2012, the Company entered into the Tolmar Agreement with Tolmar. Under the terms of the Tolmar Agreement, Tolmar granted to the Company an exclusive license to commercialize up to 11 generic topical prescription drug products, including ten currently approved products in the United States and its territories; the parties agreed in 2015 to terminate development efforts of one product under the Tolmar Agreement that had been pending approval at the FDA. Under the terms of the Tolmar Agreement, Tolmar is responsible for developing and manufacturing the products, and the Company is responsible for marketing and sale of the products. As of March 31, 2017, the Company was currently marketing and selling four approved products. The Company is required to pay a profit share to Tolmar on sales of each product commercialized pursuant to the terms of the Tolmar Agreement.

The Company paid Tolmar a $21.0 million upfront payment upon signing of the agreement and, pursuant to the terms of the agreement, is also required to make payments to Tolmar up to an aggregate amount of $25.0 million upon the achievement of certain specified milestone events. The contingent milestone payments are initially recognized in the period the triggering event occurs. Milestone payments which are contingent upon commercialization events will be accounted for as an additional cost of acquiring the product license rights. Milestone payments which are contingent upon regulatory approval events are capitalized and amortized over the remaining estimated useful life of the approved product. As of March 31, 2017, the Company had paid a total of $20.0 million to Tolmar upon the achievement of certain specified milestone events, including $12.0 million upon the achievement of a regulatory milestone event and $5.0 million upon the achievement of a commercialization event, and does not currently expect to make any additional milestone payments under the agreement. The $21.0 million upfront payment for the Tolmar product rights has been allocated to the underlying topical products based upon the relative fair value of each product and will be amortized over the remaining estimated useful life of each underlying product, ranging from five to 12 years, starting upon commencement of commercialization activities by the Company during the second half of 2012. The amortization of the Tolmar product rights has been included as a component of cost of revenues on the consolidated statements of operations. The Company is also required to pay a profit share to Tolmar on sales of the topical products, of which the Company owed a profit share payable to Tolmar of $0.9 million and $24.7 million during the three months ended March 31, 2017 and 2016, respectively, with a corresponding charge included in the cost of revenues line in the Company’s consolidated statement of operations.

The Company entered into a Loan and Security Agreement with Tolmar in March 2012 (the “Tolmar Loan Agreement”), under which the Company agreed to lend to Tolmar one or more loans through December 31, 2014, in an aggregate amount not to exceed $15.0 million. The outstanding principal amount of, including any accrued and unpaid interest on, the loans under the Tolmar Loan Agreement are payable by Tolmar beginning from March 31, 2017 through March 31, 2020 or the maturity date, in accordance with the terms therein. Pursuant to the Tolmar Loan Agreement, Tolmar could prepay all or any portion of the outstanding balance of the loans prior to the maturity date without penalty or premium. In May 2016, Tolmar repaid in full the $15.0 million due to the Company under the Tolmar Loan Agreement.

Strategic Alliance Agreement with Teva

The Company is a party to a Strategic Alliance Agreement dated as of June 27, 2001 with Teva Pharmaceuticals USA, Inc. ("Teva USA"), an affiliate of Teva, which was subsequently amended (“Teva Agreement”). The Teva Agreement commits the Company to develop and manufacture, and Teva to distribute, a specified number of controlled release generic pharmaceutical products (“generic products”), each for a 10-year period. The Company is required to develop the products, obtain FDA approval to market the products, and manufacture the products for Teva. The revenue the Company earns from the sale of product under the Teva Agreement consists of Teva’s reimbursement of the Company’s manufacturing costs plus a profit share on Teva’s sales of the product to its customers. The Company invoices Teva for the manufacturing costs or products it ships to Teva and payment is due within 30 days. Teva has the right to determine all terms and conditions of the product sales to its customers. Within 30 days of the end of each calendar quarter, Teva is required to provide the Company with a report of its net sales and profits during the quarter and to pay the Company its share of the profits resulting from those sales. Net sales are Teva’s gross sales less discounts, rebates, chargebacks, returns, and other adjustments, all of which are based upon fixed percentages, except chargebacks, which are estimated by Teva and subject to a true-up reconciliation.

As of March 31, 2017, the Company was supplying Teva with oxybutynin extended release tablets (Ditropan XL® 5 mg, 10 mg and 15 mg extended release tablets); the other products under the Teva Agreement have either been returned to the Company, are being manufactured by Teva at its election, were voluntarily withdrawn from the market or the Company’s obligations to supply such product had expired or were terminated in accordance with the Teva Agreement. Further, in connection with the Teva Transaction and as described in “Note 2. Business Acquisition,” the Company and Teva terminated each party’s rights and obligations under the Teva Agreement effective on August 3, 2016 with respect to the methylphenidate hydrochloride product (generic Concerta®).

OTC Partners Alliance Agreement

In June 2002, the Company entered into a Development, License and Supply Agreement with Pfizer, Inc., formerly Wyeth LLC (“Pfizer”), for a term of 15 years, relating to the Company’s Loratadine and Pseudoephedrine Sulfate 5 mg/120 mg 12-hour Extended Release Tablets (the "D12 Product") and Loratadine and Pseudoephedrine Sulfate 10 mg/240 mg 24-hour Extended Release Tablets for the OTC market (the "D24 Product"); the agreement was terminated with respect to the D24 Product in 2005. The Company previously developed the products and is currently only responsible for manufacturing the products. Pfizer is responsible for marketing and sale of the products. The agreement included payments to the Company upon achievement of development milestones, as well as royalties paid to the Company by Pfizer on its sales of the product. Pfizer launched this product in May 2003 as Alavert® D-12 Hour. In December 2011, the Company and Pfizer entered into an agreement with L. Perrigo Company (“Perrigo”), which was subsequently amended whereby the parties agreed that the Company would supply the Company’s D-12 Product to Perrigo in the United States and its territories. The agreements with Pfizer and Perrigo are no longer a core area of the Company’s business, and the over-the-counter pharmaceutical products the Company sells to Pfizer and Perrigo under the agreements are older products which are only sold to Pfizer and Perrigo. The Company recognizes profit share revenue in the period earned.

During the quarter ended September 30, 2016, the Company sold the ANDAs for both the D12 Product and the D24 Product, in addition to other specified assets, to Perrigo pursuant to an asset purchase agreement with Perrigo dated as of March 31, 2016 (the "Perrigo APA"). Under the terms of the Perrigo APA, the Company will also continue to supply the D-12 Product to Pfizer and Perrigo until the date that is the earliest of (i) the date Perrigo’s manufacturing facility is approved to manufacture the D-12 Product and (ii) December 31, 2017 (the "Supply End Date"). On the Supply End Date, the Company will assign and transfer its supply agreement with Pfizer in its entirety to Perrigo in accordance with the Perrigo APA.

Agreements with Valeant Pharmaceuticals International, Inc.

In November 2008, the Company and Valeant Pharmaceuticals International, Inc., formerly Medicis Pharmaceutical Corporation (“Valeant”), entered into a Joint Development Agreement and a License and Settlement Agreement (“Joint Development Agreement”). The Joint Development Agreement provides for the Company and Valeant to collaborate in the development of a total of five dermatology products, including four of the Company’s generic products and one branded advanced form of Valeant’s Solodyn® product. Under the provisions of the Joint Development Agreement the Company has the potential to receive up to an additional $8.0 million of contingent milestone payments each of which the Company believes to be substantive, as well as the potential to receive royalty payments from sales, if any, by Valeant of its advanced form Solodyn® brand product. Finally, to the extent the Company commercializes any of its four generic dermatology products covered by the Joint Development Agreement, the Company will pay to Valeant a gross profit share on sales of such products. The Company began selling one of the four dermatology products during the year ended December 31, 2011 and began selling a second dermatology product during the quarter ended September 30, 2016.

The Joint Development Agreement results in three items of revenue for the Company, as follows:
 
(1)
Research & Development Services. Revenue from the remaining $8.0 million of contingent milestone payments, will be recognized using the Milestone Method of accounting. Revenue recognized under the Joint Development Agreement is included in “Note 22. Supplementary Financial Information,” in the line item captioned “Other Revenues.”

(2)
Royalty Fees Earned - Valeant’s Sale of Advanced Form Solodyn® (Brand) Product. Under the Joint Development Agreement, the Company granted Valeant a license for the advanced form of the Solodyn® product, with the Company receiving royalty fee income under such license for a period ending eight years after the first commercial sale of the advanced form Solodyn® product. Commercial sales of the new Solodyn® product, if any, are expected to commence upon FDA approval of Valeant’s NDA. The royalty fee income, if any, from the new Solodyn® product, will be recognized by the Company as current period revenue when earned.

(3)
Accounting for Sales of the Company’s Four Generic Dermatology Products. Upon FDA approval of the Company’s ANDA for each of the four generic products covered by the Joint Development Agreement, the Company will have the right (but not the obligation) to begin manufacture and sale of its four generic dermatology products. The Company sells its manufactured generic products to all Impax Generics division customers in the ordinary course of business through its Impax Generics Product sales channel. The Company accounts for the sale, if any, of the generic products covered by the Joint Development Agreement as current period revenue according to the Company’s revenue recognition policy applicable to its Impax Generics products. To the extent the Company sells any of the four generic dermatology products covered by the Joint Development Agreement, the Company pays Valeant a gross profit share, with such profit share payments accounted for as a current period cost of revenues in the consolidated statement of operations.

Distribution, License, Development and Supply Agreement with AstraZeneca UK Limited

In January 2012, the Company entered into the AZ Agreement with AstraZeneca and the parties subsequently entered into a First Amendment to the AZ Agreement dated May 31, 2016 (as amended, the "AZ Amendment"). Under the terms of the AZ Agreement, AstraZeneca granted to the Company an exclusive license to commercialize the tablet, orally disintegrating tablet and nasal spray formulations of Zomig® (zolmitriptan) products for the treatment of migraine headaches in the United States and in certain U.S. territories, except during an initial transition period when AstraZeneca fulfilled all orders of Zomig® products on the Company’s behalf and AstraZeneca paid to the Company the gross profit on such Zomig® products. The Company is obligated to fulfill certain minimum requirements with respect to the promotion of currently approved Zomig® products as well as other dosage strengths of such products approved by the FDA in the future. The Company may, but has no obligation to, develop and commercialize additional products containing zolmitriptan and additional indications for Zomig®, subject to certain restrictions as set forth in the AZ Agreement. Subject to the terms of the AZ Agreement, the Company will be responsible for conducting clinical studies and preparing regulatory filings related to the development of any such additional products and would bear all related costs. During the term of the AZ Agreement, AstraZeneca will continue to be the holder of the NDA for existing Zomig® products, as well as any future dosage strengths thereof approved by the FDA, and will be responsible for certain regulatory and quality-related activities for such Zomig® products. AstraZeneca will manufacture and supply Zomig® products to the Company and the Company will purchase its requirements of Zomig® products from AstraZeneca until a date determined in the AZ Agreement. Thereafter, AstraZeneca may terminate its supply obligations upon certain advance notice to the Company, in which case the Company would have the right to manufacture or have manufactured its own requirements for the applicable Zomig® product. Under the terms of the AZ Amendment, under certain conditions and depending on the nature and terms of the study agreed to with the FDA, the Company agreed to conduct, at its own expense, the juvenile toxicity study and pediatric study required by the FDA under the Pediatric Research Equity Act (“PREA”) for approval of the nasal formulation of Zomig® for the acute treatment of migraine in pediatric patients ages six through eleven years old, as further described in the study protocol mutually agreed to by the parties (the “PREA Study”). In consideration for the Company conducting the PREA Study at its own expense, the AZ Amendment provides for the total royalty payments payable by the Company to AstraZeneca on net sales of Zomig® products under the AZ Agreement to be reduced by certain specified amounts beginning from the quarter ended June 30, 2016 and through the quarter ended December 31, 2020, with such reduced royalty amounts totaling an aggregate amount of $30.0 million. In the event the royalty reduction amounts exceed the royalty payments payable by the Company to AstraZeneca pursuant to the AZ Agreement in any given quarter, AstraZeneca will be required to pay the Company an amount equal to the difference between the royalty reduction amount and the royalty payment payable by the Company to AstraZeneca. The Company’s commitment to perform the PREA Study may be terminated, without penalty, under certain circumstances as set forth in the AZ Amendment.

Under the terms of the AZ Agreement, AstraZeneca was required to make payments to the Company representing 100% of the gross profit on sales of AstraZeneca-labeled Zomig® products during the specified transition period. Beginning from January 2013, the Company has paid AstraZeneca tiered royalties on net sales of branded Zomig® products, depending on brand exclusivity and subject to customary reductions and other terms and conditions set forth in the AZ Agreement. The Company has also paid to AstraZeneca royalties based on gross profit from sales of authorized generic versions of the Zomig® products subject to certain terms and conditions set forth in the AZ Agreement. In May 2013, the Company’s exclusivity period for branded Zomig® tablets and orally disintegrating tablets expired and the Company launched authorized generic versions of those products in the United States. As discussed above, pursuant to the AZ Amendment, the total royalty payments payable by the Company to AstraZeneca on net sales of Zomig® products under the AZ Agreement is reduced by certain specified amounts beginning from the quarter ended June 30, 2016 and through the quarter ended December 31, 2020, with such reduced royalty amounts totaling an aggregate amount of $30.0 million. The Company owed a royalty payable to AstraZeneca of $3.3 million and $4.0 million during the three months ended March 31, 2017 and 2016, respectively, with a corresponding charge included in the cost of revenues line on the consolidated statements of operations.

Agreement with DURECT Corporation

During the three month period ended March 31, 2014, the Company entered into an agreement with DURECT Corporation (“Durect”) granting the Company the exclusive worldwide rights to develop and commercialize DURECT’s investigational transdermal bupivacaine patch for the treatment of pain associated with post-herpetic neuralgia, referred to by the Company as IPX239. The Company paid Durect a $2.0 million up-front payment upon signing of the agreement which was recognized immediately as research and development expense. The Company has the potential to pay up to $61.0 million in additional contingent milestone payments upon the achievement of certain specified development and commercialization events under the agreement. If IPX239 is commercialized, the Company would also be required to pay a tiered royalty based on product sales.

Mebendazole Product Acquisition Agreement with Teva Pharmaceuticals USA, Inc.

In August 2013, the Company, through its Amedra Pharmaceuticals subsidiary, entered into a product acquisition agreement (the “Mebendazole Product Acquisition Agreement”) with Teva pursuant to which the Company acquired the assets (including the ANDA and other regulatory materials) and related liabilities related to Teva’s mebendazole tablet product in all dosage forms. Pursuant to the Mebendazole Product Acquisition Agreement, the Company was required to pay certain milestone payments up to an aggregate amount of $3.5 million upon the approval and launch of the mebendazole tablet product; the Company paid the $3.5 million to Teva during the quarter ended March 31, 2016 upon the FDA's approval and the Company's subsequent launch of Emverm® (mebendazole) 100 mg chewable tablets. The Company is also obligated to pay Teva a royalty payment based on net sales of Emverm®, including a specified annual minimum royalty payment, subject to customary reductions and the other terms and conditions set forth in the Teva Product Acquisition Agreement.
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
Executive Employment Agreements
The Company is a party to employment and separation agreements with certain members of its executive management team that provide for severance and other payments following termination of their employment for various reasons.
Lease Agreements
The Company leases land, office space, manufacturing, warehouse and research and development facilities, and equipment under non-cancelable operating leases expiring at various dates through December 2027.
Purchase Order Commitments
As of March 31, 2017, the Company had $126.8 million of open purchase order commitments, primarily for raw materials. The terms of these purchase order commitments are generally less than one year in duration.
LEGAL AND REGULATORY MATTERS
LEGAL AND REGULATORY MATTERS
LEGAL AND REGULATORY MATTERS         

Patent Litigation

There is substantial litigation in the pharmaceutical, biological, and biotechnology industries with respect to the manufacture, use, and sale of new products which are the subject of conflicting patent and intellectual property claims. One or more patents often cover the brand name products for which the Company is developing generic versions and the Company typically has patent rights covering the Company’s branded products.

Under federal law, when a drug developer files an ANDA for a generic drug seeking approval before expiration of a patent, which has been listed with the FDA as covering the brand name product, the developer must certify its product will not infringe the listed patent(s) and/or the listed patent is invalid or unenforceable (commonly referred to as a “Paragraph IV” certification). Notices of such certification must be provided to the patent holder, who may file a suit for patent infringement within 45 days of the patent holder’s receipt of such notice. If the patent holder files suit within the 45 days period, the FDA can review and approve the ANDA, but is prevented from granting final marketing approval of the product until a final judgment in the action has been rendered in favor of the generic drug developer, or 30 months from the date the notice was received, whichever is sooner. The Company’s generic products division is typically subject to patent infringement litigation brought by branded pharmaceutical manufacturers in connection with the Company’s Paragraph IV certifications seeking an order delaying the approval of the Company’s ANDA until expiration of the patent(s) at issue in the litigation. Likewise, the Company’s branded products division is currently involved in patent infringement litigation against generic drug manufacturers who have filed Paragraph IV certifications to market their generic drugs prior to expiration of the Company’s patents at issue in the litigation.  

The uncertainties inherent in patent litigation make the outcome of such litigation difficult to predict. For the Company’s generic products division, the potential consequences in the event of an unfavorable outcome in such litigation include delaying launch of its generic products until patent expiration. If the Company were to launch its generic product prior to successful resolution of a patent litigation, the Company could be liable for potential damages measured by the profits lost by the branded product manufacturer rather than the profits earned by the Company if we are found to infringe a valid, enforceable patent. For the Company’s branded products division, an unfavorable outcome may significantly accelerate generic competition ahead of expiration of the patents covering the Company’s branded products. All such litigation typically involves significant expense.
 
The Company is generally responsible for all of the patent litigation fees and costs associated with current and future products not covered by its alliance and collaboration agreements. The Company has agreed to share legal expenses with respect to third-party and Company products under the terms of certain of the alliance and collaboration agreements. The Company records the costs of patent litigation as expense in the period when incurred for products it has developed, as well as for products which are the subject of an alliance or collaboration agreement with a third-party.
 
Although the outcome and costs of the asserted and unasserted claims is difficult to predict, based on the information presently known to management, the Company does not currently expect the ultimate liability, if any, for such matters to have a material adverse effect on its business, financial condition, results of operations, or cash flows.  

Patent Infringement Litigation
  
Endo Pharmaceuticals Inc. and Grunenthal GmbH v. Impax Laboratories, Inc. and ThoRx Laboratories, Inc. (Oxymorphone hydrochloride); Endo Pharmaceuticals Inc. and Grunenthal GmbH v. Impax Laboratories, Inc. (Oxymorphone hydrochloride)
 
In November 2012, Endo Pharmaceuticals, Inc. and Grunenthal GmbH (collectively, “Endo”) filed suit against ThoRx Laboratories, Inc., a wholly owned subsidiary of the Company (“ThoRx”), and the Company in the U.S. District Court for the Southern District of New York alleging patent infringement based on the filing of ThoRx’s ANDA relating to Oxymorphone hydrochloride, Extended Release tablets, 5 mg, 7.5 mg, 10 mg, 15 mg, 20 mg, 30 mg and 40 mg, generic to Opana ER®. In January 2013, Endo filed a separate suit against the Company in the U.S. District Court for the Southern District of New York alleging patent infringement based on the filing of the Company’s ANDA relating to the same products. ThoRx and the Company filed an answer and counterclaims to the November 2012 suit and the Company filed an answer and counterclaims with respect to the January 2013 suit. A bench trial was completed in April 2015. In June 2016, the Court entered an amended judgment in both cases that the products described in the Company’s and ThoRx’s ANDAs would, if marketed, infringe certain claims of the patents asserted by Endo and Grunenthal. The Court also found that the asserted claims of patents owned by Endo were not invalid, but that the asserted claims of patents owned by Grunenthal were invalid. As a result, the Court enjoined the Company and ThoRx from marketing their products until expiration of the Endo patents in 2023. The Company and ThoRx are appealing the Court's judgment.
 
In November 2014, Endo Pharmaceuticals Inc. and Mallinckrodt LLC filed suit against the Company in the U.S. District Court for the District of Delaware making additional allegations of patent infringement based on the filing of the Company’s Oxymorphone hydrochloride ANDA described above. Also in November 2014, Endo and Mallinckrodt filed a separate suit in the U.S. District Court for the District of Delaware making additional allegations of patent infringement based on the filing of ThoRx’s Oxymorphone hydrochloride ANDA described above. ThoRx and the Company filed an answer and counterclaim to those suits in which they are named as a defendant. The cases are currently stayed.

In May 2016, Endo Pharmaceuticals Inc. filed suit against the Company in the U.S. District Court for the District of New Jersey, alleging that the Company’s marketed oxymorphone hydrochloride tablets infringe certain patents owned by Endo. Endo’s complaint also alleges that the Company and Endo entered into a settlement and license agreement with respect to these products, but that the Company later breached that contract and breached its implied duty of good faith and fair dealing with respect to that agreement. Endo filed an amended complaint on August 1, 2016 and the Company filed a motion to dismiss the complaint. On October 25, 2016, that motion was granted in part and denied in part. On October 31, 2016, the Company received a letter from Endo purporting to terminate the settlement and license agreement for material breach. Discovery is underway. No trial date has been set.

Impax Laboratories Inc., et al. v. Lannett Holdings, Inc. and Lannett Company (Zomig®)

In July 2014, the Company filed suit against Lannett Holdings, Inc. and Lannett Company (collectively, “Lannett”) in the United States District Court for the District of Delaware, alleging patent infringement based on the filing of the Lannett ANDA relating to Zolmitriptan Nasal Spray, 5mg, generic to Zomig® Nasal Spray. The case went to trial in September 2016. On March 29, 2017, the District Court issued a Trial Opinion finding the asserted patents valid and infringed. On April 17, 2017, the District Court entered a Final Judgment and Injunction that, inter alia, bars FDA approval of Lannett’s proposed generic product prior to May 29, 2021.

Impax Laboratories Inc., et al. v. Par Pharmaceutical, Inc. (Zomig®)

On September 23, 2016, the Company filed suit against Par Pharmaceutical, Inc. (“Par”) in the United States District Court for the District of Delaware, alleging patent infringement based on the filing of the Par ANDA relating to Zolmitriptan Nasal Spray, 2.5 mg and 5 mg, generic to Zomig® Nasal Spray. On October 12, 2016, the parties stipulated to stay the case pending the outcome of the related case, Impax Laboratories Inc., et al. v. Lannett matter described above. On April 24, 2017, the parties stipulated that the stay shall remain in effect until the Impax Laboratories Inc., et al. v. Lannett matter is fully resolved. As such, Par has not yet filed an answer or counterclaims to the Company’s complaint. The 30-month stay of approval for applicable to the Par ANDA has been tolled pending resumption of this case. 

Impax Laboratories Inc., et al. v. Actavis Laboratories, Inc. and Actavis Pharma Inc. (Rytary®)
 
In September 2015, the Company filed suit against Actavis Laboratories, Inc. and Actavis Pharma Inc. (collectively, “Actavis”) in the United States District Court for the District of New Jersey, alleging patent infringement based on the filing of the Actavis ANDA relating to carbidopa and levodopa extended release capsules, generic to Rytary®. In December 2016, the Company filed a related action alleging infringement of related, later-issued U.S. Patent No. 9,463,246, which was consolidated with the lead action. Actavis filed an answer and counterclaims on November 19, 2015 in the lead action and on January 13, 2017 in the related action. Fact discovery and claim construction briefing have concluded and a claim construction hearing was held on April 26, 2017. On May 9, 2017, the District Court issued a decision interpreting certain claim terms in dispute in the litigation. Trial is expected in the fall of 2017.

Impax Laboratories, Inc. v. Sandoz Inc. (Rytary®)

On March 31, 2017, the Company filed suit against Sandoz Inc. in the United States District Court for the District of New Jersey, alleging infringement of U.S. Patent Nos. 7,094,427; 8,377,474; 8,454,998; 8,557,283; 9,089,607; 9,089,608; 9,463,246; and 9,533,046, based on the filing of Sandoz’s ANDA relating to carbidopa and levodopa extended release capsules, generic to Rytary®. Sandoz has not yet answered or otherwise responded to the Complaint.

Sanofi-Aventis U.S. LLC, et al. v. Impax Laboratories, Inc.

On January 3, 2017, Sanofi-Aventis U.S. LLC, Aventisub LLC, Sanofi, and Genzyme Corporation filed suit against the Company in the United States District Court for the District of Delaware alleging patent infringement based on the filing of the Company’s ANDA related to Teriflunomide Oral Tablets, 14 mg, generic to Aubagio®. The case was settled and terminated on April 21, 2017.

Bristol-Myers Squibb Company, et al. v. Impax Laboratories, Inc.

On April 10, 2017, Bristol-Myers Squibb Company and Pfizer Inc. filed suit against the Company in the United States District Court for the District of Delaware alleging patent infringement based on the filing of the Company’s ANDA related to Apixaban Tablets, 2.5 mg and 5 mg, generic to Eliquis®. The Company’s answer currently is due on June 2, 2017. No further schedule has been set.

Other Litigation Related to the Company’s Business 

Solodyn® Antitrust Class Actions 

From July 2013 to January 2016, 18 complaints were filed as class actions on behalf of direct and indirect purchasers, as well as by certain direct purchasers, against manufacturers of the brand drug Solodyn® and its generic equivalents, including the Company.
 
On July 22, 2013, Plaintiff United Food and Commercial Workers Local 1776 & Participating Employers Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On July 23, 2013, Plaintiff Rochester Drug Co-Operative, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.
   
On August 1, 2013, Plaintiff International Union of Operating Engineers Local 132 Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Northern District of California on behalf of itself and others similarly situated. On August 29, 2013, this Plaintiff withdrew its complaint from the United States District Court for the Northern District of California, and on August 30, 2013, re-filed the same complaint in the United States Court for the Eastern District of Pennsylvania, on behalf of itself and others similarly situated.
 
On August 9, 2013, Plaintiff Local 274 Health & Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.
 
On August 12, 2013, Plaintiff Sheet Metal Workers Local No. 25 Health & Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.
 
On August 27, 2013, Plaintiff Fraternal Order of Police, Fort Lauderdale Lodge 31, Insurance Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.
 
On August 29, 2013, Plaintiff Heather Morgan, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.
 
On August 30, 2013, Plaintiff Plumbers & Pipefitters Local 178 Health & Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.
 
On September 9, 2013, Plaintiff Ahold USA, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.
 
On September 24, 2013, Plaintiff City of Providence, Rhode Island, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Arizona on behalf of itself and others similarly situated.
 
On October 2, 2013, Plaintiff International Union of Operating Engineers Stationary Engineers Local 39 Health & Welfare Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.
 
On October 7, 2013, Painters District Council No. 30 Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.
 
On October 25, 2013, Plaintiff Man-U Service Contract Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated. 
 
On March 13, 2014, Plaintiff Allied Services Division Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.
 
On March 19, 2014, Plaintiff NECA-IBEW Welfare Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Massachusetts on behalf of itself and others similarly situated.
 
On February 25, 2014, the United States Judicial Panel on Multidistrict Litigation ordered the pending actions transferred to the District of Massachusetts for coordinated pretrial proceedings, as In Re Solodyn (Minocycline Hydrochloride) Antitrust Litigation.

On March 26, 2015, Walgreen Co., The Kruger Co., Safeway Inc., HEB Grocery Company L.P., Albertson’s LLC, direct purchasers, filed a separate complaint in the United States District Court for the Middle District of Pennsylvania. On April 8, 2015, the Judicial Panel on Multi-District Litigation ordered the action be transferred to the District of Massachusetts, to be coordinated or consolidated with the coordinated proceedings. The original complaint filed by the plaintiffs asserted claims only against defendant Medicis. On October 5, 2015, the plaintiffs filed an amended complaint asserting claims against the Company and the other generic defendants.
 
On April 16, 2015, Rite Aid Corporation and Rite Aid Hdqtrs. Corp, direct purchasers, filed a separate complaint in the United States District Court for the Middle District of Pennsylvania. On May 1, 2015, the Judicial Panel on Multi-District Litigation ordered the action be transferred to the District of Massachusetts, to be coordinated or consolidated with the coordinated proceedings. The original complaint filed by the plaintiffs asserted claims only against defendant Medicis. On October 5, 2015, the plaintiffs filed an amended complaint asserting claims against the Company and the other generic defendants.
 
On January 25, 2016, CVS Pharmacy, Inc., a direct purchaser, filed a separate complaint in the United States District Court for the Middle District of Pennsylvania. On February 11, 2016, the Judicial Panel on Multi-District Litigation ordered the action to be transferred to the District of Massachusetts to be coordinated or consolidated with the coordinated proceedings.
 
The consolidated amended complaints allege that Medicis engaged in anticompetitive schemes by, among other things, filing frivolous patent litigation lawsuits, submitting frivolous Citizen Petitions, and entering into anticompetitive settlement agreements with several generic manufacturers, including the Company, to delay generic competition of Solodyn® and in violation of state and federal antitrust laws. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. On August 14, 2015, the Court granted in part and denied in part defendants’ motion to dismiss the consolidated amended complaints. Discovery is ongoing. Trial is set for March 22, 2018.
 
Opana ER® FTC Antitrust Suit 

On February 25, 2014, the Company received a Civil Investigative Demand ("CID") from the FTC concerning its investigation into the drug Opana® ER and its generic equivalents. On March 30, 2016, the FTC filed a complaint against the Company, Endo, and others in the United States District Court for the Eastern District of Pennsylvania, alleging that the Company and Endo violated antitrust laws when they entered into a June 2010 co-promotion and development agreement and a June 2010 settlement agreement that resolved patent litigation in connection with the submission of the Company’s ANDA for generic original Opana® ER. In July 2016, the defendants filed a motion to dismiss the complaint, and a motion to sever the claims regarding Opana® ER from claims with respect to a separate settlement agreement that was challenged by the FTC. On October 20, 2016, the Court granted the motion to sever, formally terminating the suit against the Company, with an order that the FTC re-file no later than November 3, 2016 and dismissed the motion to dismiss as moot. On October 25, 2016, the FTC filed a notice of voluntary dismissal. On October 26, 2016, the Company and Endo filed a Declaratory Judgment complaint against the FTC in the Eastern District of Pennsylvania seeking resolution of the legal issues that were previously subject to the companies’ motion to dismiss. On December 30, 2016, the FTC filed a motion to dismiss the Declaratory Judgment complaint. The motion to dismiss has been fully briefed. On January 19, 2017, the FTC filed a Part 3 Administrative complaint against the Company with similar allegations regarding the Company’s June 2010 settlement agreement with Endo that resolved patent litigation in connection with the submission of the Company’s ANDA for generic original Opana® ER. The Company filed its answer to the Administrative Complaint on February 7, 2017 and trial is expected in September 2017.

Opana ER® Antitrust Class Actions 

From June 2014 to April 2015, 14 complaints were filed as class actions on behalf of direct and end-payor (indirect) purchasers, as well as by certain direct purchasers, against the manufacturer of the brand drug Opana ER® and the Company.
 
On June 4, 2014, Plaintiff Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.
 
On June 4, 2014, Plaintiff Rochester Drug Co-Operative, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On June 6, 2014, Plaintiff Value Drug Company, a direct purchaser, filed a class action complaint in the United States District Court for the Northern District of California on behalf of itself and others similarly situated. On June 26, 2014, this Plaintiff withdrew its complaint from the United States District Court for the Northern District of California, and on July 16, 2014, re-filed the same complaint in the United States District Court for the Northern District of Illinois, on behalf of itself and others similarly situated.

On June 19, 2014, Plaintiff Wisconsin Masons’ Health Care Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Northern District of Illinois on behalf of itself and others similarly situated.
 
On July 17, 2014, Plaintiff Massachusetts Bricklayers, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.
 
On August 11, 2014, Plaintiff Pennsylvania Employees Benefit Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Northern District of Illinois on behalf of itself and others similarly situated.
 
On September 19, 2014, Plaintiff Meijer Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Northern District of Illinois on behalf of itself and others similarly situated.
 
On October 3, 2014, Plaintiff International Union of Operating Engineers, Local 138 Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Northern District of Illinois on behalf of itself and others similarly situated.
 
On November 17, 2014, Louisiana Health Service & Indemnity Company d/b/a Blue Cross and Blue Shield of Louisiana, an indirect purchaser, filed a class action complaint in the United States District Court for the Middle District of Louisiana on behalf of itself and others similarly situated.
 
On December 19, 2014, Plaintiff Kim Mahaffay, an indirect purchaser, filed a class action complaint in the Superior Court of the State of California, Alameda County, on behalf of herself and others similarly situated. On January 27, 2015, the Defendants removed the action to the United States District Court for the Northern District of California.
 
On January 12, 2015, Plaintiff Plumbers & Pipefitters Local 178 Health & Welfare Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Northern District of Illinois on behalf of itself and others similarly situated.
  
On December 12, 2014, the United States Judicial Panel on Multidistrict Litigation ordered the pending actions transferred to the Northern District of Illinois for coordinated pretrial proceedings, as In Re Opana ER Antitrust Litigation.
 
On March 26, 2015 Walgreen Co., The Kruger Co., Safeway Inc., HEB Grocery Company L.P., Albertson’s LLC, direct purchasers, filed a separate complaint in the United States District Court for the Northern District of Illinois.
 
On April 23, 2015, Rite Aid Corporation and Rite Aid Hdqtrs. Corp, direct purchasers, filed a separate complaint in the United States District Court for the Northern District of Illinois.
 
In each case, the complaints allege that Endo engaged in an anticompetitive scheme by, among other things, entering into an anticompetitive settlement agreement with the Company to delay generic competition of Opana ER® and in violation of state and federal antitrust laws. Plaintiffs seek, among other things, unspecified monetary damages and equitable relief, including disgorgement and restitution. Consolidated amended complaints were filed on May 4, 2015 by direct purchaser plaintiffs and end-payor (indirect) purchaser plaintiffs.
 
On July 3, 2015, defendants filed motions to dismiss the consolidated amended complaints, as well as the complaints of the “Opt-Out Plaintiffs” (Walgreen Co., The Kruger Co., Safeway Inc., HEB Grocery Company L.P., Albertson’s LLC, Rite Aid Corporation and Rite Aid Hdqtrs. Corp.).

On February 1, 2016, CVS Pharmacy, Inc. filed a complaint in the United States District Court for the Northern District of Illinois. The parties agreed that CVS Pharmacy, Inc. would be bound by the court’s ruling on the defendants’ motion to dismiss the Opt-Out Plaintiffs’ complaints.

On February 10, 2016, the court granted in part and denied in part defendants’ motion to dismiss the end-payor purchaser plaintiffs’ consolidated amended complaint, and denied defendants’ motion to dismiss the direct purchaser plaintiffs’ consolidated amended complaint. The end-payor purchaser plaintiffs have filed a second consolidated amended complaint and the Company has moved to dismiss certain state law claims.

On February 25, 2016, the court granted defendants’ motion to dismiss the Opt-Out Plaintiffs’ complaints, with leave to amend. The Opt-Out Plaintiffs and CVS Pharmacy, Inc. have filed amended complaints and the Company has filed its answer.

Discovery is ongoing. No trial date has been scheduled.

Civil Investigation Demand from the Attorney General of the State of Alaska 

On February 10, 2015, the Company received three CIDs from the Office of the Attorney General of the State of Alaska (“Alaska AG”) concerning its investigations into the drugs Adderall XR®, Effexor XR® and Opana® ER (each a “Product” and collectively, the “Products”) and their generic equivalents. According to the Alaska AG, the investigation is to determine whether the Company may have violated Alaskan state law by entering into settlement agreements with the respective brand name manufacturer for each of the foregoing Products that delayed generic entry of such Product into the marketplace. The Company has cooperated with the Alaska AG in producing documents and information in response to the CIDs. To the knowledge of the Company, no proceedings have been initiated against the Company at this time; however no assurance can be given as to the timing or outcome of this investigation. 
 
United States Department of Justice Investigations
 
Previously on November 6, 2014, the Company disclosed that one of its sales representatives received a grand jury subpoena from the Antitrust Division of the United States Justice Department (the “Justice Department”). In connection with this same investigation, on March 13, 2015, the Company received a grand jury subpoena from the Justice Department requesting the production of information and documents regarding the sales, marketing, and pricing of certain generic prescription medications. In particular, the Justice Department’s investigation currently focuses on four generic medications: digoxin tablets, terbutaline sulfate tablets, prilocaine/lidocaine cream, and calcipotriene topical solution. The Company has been cooperating and intends to continue cooperating with the investigation. However, no assurance can be given as to the timing or outcome of the investigation. 

Attorney General of the State of Connecticut Interrogatories and Subpoena Duces Tecum
 
On July 14, 2014, the Company received a subpoena and interrogatories (the “Subpoena”) from the State of Connecticut Attorney General (“Connecticut AG”) concerning its investigation into sales of the Company’s generic product, digoxin. According to the Connecticut AG, the investigation is to determine whether anyone engaged in a contract, combination or conspiracy in restraint of trade or commerce which has the effect of (i) fixing, controlling or maintaining prices or (ii) allocating or dividing customers or territories relating to the sale of digoxin in violation of Connecticut state antitrust law. The Company intends to cooperate with the Connecticut AG in producing documents and information in response to the Subpoena. To the knowledge of the Company, no proceedings by the Connecticut AG have been initiated against the Company at this time; however no assurance can be given as to the timing or outcome of this investigation. 

In re Generic Pharmaceuticals Pricing Antitrust Litigation

From March 2016 to April 2017, 22 complaints were filed as class actions on behalf of direct and indirect purchasers against manufacturers of generic digoxin and doxycycline and the Company alleging a conspiracy to fix, maintain and/or stabilize prices of these generic products. From January 2017 to April 2017, three complaints were filed on behalf of indirect purchasers against manufacturers of generic lidocaine/prilocaine and the Company alleging a conspiracy to fix, maintain and/or stabilize prices of these generic products.

On March 2, 2016, Plaintiff International Union of Operating Engineers Local 30 Benefits Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated. The plaintiff filed an amended complaint on June 9, 2016.

On March 25, 2016, Plaintiff Tulsa Firefighters Health and Welfare Trust, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On March 25, 2016, Plaintiff NECA-IBEW Welfare Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On April 4, 2016, Plaintiff Pipe Trade Services MN, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On April 25, 2016, Plaintiff Edward Carpinelli, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On April 27, 2016, Plaintiff Fraternal Order of Police, Miami Lodge 20, Insurance Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On May 2, 2016, Plaintiff Nina Diamond, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On May 5, 2016, Plaintiff UFCW Local 1500 Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On May 6, 2016, Plaintiff Minnesota Laborers Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On May 12, 2016, Plaintiff The City of Providence, Rhode Island, an indirect purchaser, filed a class action complaint in the United States District Court for the District of Rhode Island on behalf of itself and others similarly situated.

On May 18, 2016, Plaintiff KPH Healthcare Services, Inc. a/k/a Kinney Drugs, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On May 19, 2016, Plaintiff Philadelphia Federation of Teachers Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On June 8, 2016, Plaintiff United Food & Commercial Workers and Employers Arizona Health and Welfare Trust, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On June 17, 2016, Plaintiff Ottis McCrary, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On June 20, 2016, Plaintiff Rochester Drug Co-Operative, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On June 27, 2016, Plaintiff César Castillo Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On June 29, 2016, Plaintiff Plumbers & Pipefitters Local 33 Health and Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On July 1, 2016, Plaintiff Plumbers & Pipefitters Local 178 Health and Welfare Trust Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On July 15, 2016, Plaintiff Ahold USA, Inc., a direct purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On September 7, 2016, Plaintiff United Here Health, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On September 20, 2016, Plaintiff Valerie Velardi, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On April 25, 2017, Plaintiff Louisiana Health Service Indemnity Company, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated.

On January 13, 2017, Plaintiff International Union of Operating Engineers Local 30 Benefits Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated against manufacturers of generic lidocaine/prilocaine and the Company alleging a conspiracy to fix, maintain and/or stabilize prices of this generic drug.

On April 17, 2017, Plaintiff UFCW Local 1500 Welfare Fund, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated against manufacturers of generic lidocaine/prilocaine and the Company alleging a conspiracy to fix, maintain and/or stabilize prices of this generic drug.

On April 25, 2017, Plaintiff Louisiana Health Service Indemnity Company, an indirect purchaser, filed a class action complaint in the United States District Court for the Eastern District of Pennsylvania on behalf of itself and others similarly situated against manufacturers of generic lidocaine/prilocaine and the Company alleging a conspiracy to fix, maintain and/or stabilize prices of this generic drug.

On May 19, 2016, several indirect purchaser plaintiffs filed a motion with the Judicial Panel on Multidistrict Litigation to transfer and consolidate the actions in the United States District Court for the Eastern District of Pennsylvania. The Judicial Panel ordered the actions consolidated in the Eastern District of Pennsylvania and ordered that the actions be renamed “In re Generic Digoxin and Doxycycline Antitrust Litigation.” On January 27, 2017, plaintiffs filed two consolidated class action complaints. With respect to doxycycline, the plaintiffs dropped their allegations against the Company. On March 28, 2017, the Company, separately and along with other defendants, filed motions to dismiss the digoxin class action complaint. Briefing has been taken off calendar by the court. On April 6, 2017, the Judicial Panel on Multidistrict Litigation ordered the consolidation of all civil actions involving allegations of antitrust conspiracies in the generic pharmaceutical industry regarding 18 generic drugs to the Eastern District of Pennsylvania. The consolidated actions have been renamed In re Generic Pharmaceuticals Pricing Antitrust Litigation. No schedule has been set.

AWP Litigation
 
On December 30, 2015, Plumbers’ Local Union No. 690 Health Plan and others similarly situated filed a class action against several generic drug manufacturers, including the Company, in the Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania, Civil Trial Division, alleging that the Company and others violated the law, including the Pennsylvania Unfair Trade Practices and Consumer Protection law, by inflating the Average Wholesale Price (“AWP”) of certain generic drugs. The case has since been removed to federal court in the United States District Court for the Eastern District of Pennsylvania. By virtue of an amended complaint filed on March 29, 2016, the suit has been amended to comprise a nationwide class of third party payors that allegedly reimbursed or purchased certain generic drugs based on AWP and to assert causes of action under the laws of other states in addition to Pennsylvania. On May 17, 2016, this case was stayed. On January 18, 2017, the Company, along with the other defendants, filed a joint motion to dismiss the complaint. Briefing has been completed and no court decision has been received.

On February 5, 2016, Delaware Valley Health Care Coalition filed a lawsuit based on substantially similar allegations in the Court of Common Pleas of Philadelphia County, First Judicial District of Pennsylvania, Civil Trial Division that seeks declaratory judgment. On May 20, 2016, this case was stayed pending resolution of the federal court action described above.

CID from the U.S. Attorney Office, Southern District of New York

On March 8, 2016, the Company received a CID from the U.S. Attorney Office, Southern District of New York, Civil Frauds Unit. The CID requests information and documents relating to the Company and any pharmacy benefit manager (“PBM”) concerning Zomig®, including any contracts between the Company and PBMs, as well as services performed by and payments to the PBMs pursuant to those contracts. The Company intends to cooperate with the U.S. Attorney Office in response to the CID. To the knowledge of the Company, no proceedings by the U.S. Attorney Office have been initiated against the Company at this time; however, no assurance can be given as to the timing or outcome of this investigation.

Attorney General of the State of West Virginia Subpoena

On September 7, 2016, the Company received a subpoena (the “Subpoena”) from the State of West Virginia Office of the Attorney General (“West Virginia AG”) seeking documents and responses to interrogatories in connection with its investigation into the marketing and sales of epinephrine auto-injectors. According to the West Virginia AG, the investigation aims to determine whether anyone engaged in a contract, combination, or conspiracy in restraint of trade of epinephrine auto-injectors in violation of West Virginia state antitrust law. The Company intends to cooperate with the West Virginia AG in producing documents and information in response to the Subpoena. To the knowledge of the Company, no proceedings by the West Virginia AG have been initiated against the Company at this time, however no assurance can be given as to the timing or outcome of this investigation.

Impax Laboratories, Inc. v. Turing Pharmaceuticals AG

On May 2, 2016, the Company filed suit against Turing Pharmaceuticals AG ("Turing") in the United States District Court for the Southern District of New York alleging breach of the terms of the contract by which Turing purchased from the Company the right to sell the drug Daraprim®, as well as the right to sell certain Daraprim® inventory (the “Purchase Agreement”).  Specifically, the Company seeks (i) a declaratory judgment that the Company may revoke Turing’s right to sell Daraprim® under the Company’s labeler code and national drug codes; (ii) specific performance to require Turing to comply with its obligations under the Purchase Agreement for past due reports and for reports going forward; and (iii) money damages to remedy Turing’s failure to reimburse the Company for chargebacks and Medicaid rebate liability when due, currently in excess of $38.1 million and for future amounts that may be due. Turing has filed its answer and a counterclaim against the Company alleging breach of contract and breach of the duty of good faith and fair dealing. Discovery is closed. On October 14, 2016, the Company filed a motion for summary judgment and briefing has been completed. No trial date has been set.

Telephone Consumer Protection Act Cases

On January 31, 2017, Plaintiff Family Medicine Pharmacy LLC filed a class action complaint in the United States District Court for the Southern District of Alabama on behalf of itself and others similarly situated against the Company alleging violation of the Telephone Consumer Protection Act, as amended by the Junk Fax Prevention Act of 2005 (the "Telephone Consumer Protection Act"). On March 27, 2017, the Company filed a motion to dismiss the complaint and plaintiff filed an amended complaint on April 10, 2017. No schedule has been set.

On February 14, 2017, Plaintiff Medicine To Go Pharmacies, Inc. filed a class action complaint in the United States District Court for the District of New Jersey on behalf of itself and others similarly situated against the Company alleging violation of the Telephone Consumer Protection Act. On April 17, 2017, the Company filed a motion to dismiss, transfer, or stay this case in light of the first-filed case described above.

Securities Class Action

On April 17, 2017, Lead Plaintiff New York Hotel Trades Council & Hotel Association of New York City, Inc. Pension Fund filed an amended class action complaint in the United States District Court for the Northern District of California on behalf of itself and others similarly situated against the Company alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5. The Company’s response to the amended complaint is due on June 1, 2017.
SEGMENT INFORMATION
SEGMENT INFORMATION
SEGMENT INFORMATION
The Company has two reportable segments, Impax Generics and Impax Specialty Pharma. Impax Generics develops, manufactures, sells, and distributes generic pharmaceutical products, primarily through the following sales channels: the Impax Generics sales channel for sales of generic prescription products directly to wholesalers, large retail drug chains, and others; the Private Label Product sales channel for generic over-the-counter and prescription products sold to unrelated third-party customers who, in turn, sell the products under their own label; the Rx Partner sales channel for generic prescription products sold through unrelated third-party pharmaceutical entities under their own label pursuant to alliance agreements; and the OTC Partner sales channel for over-the-counter products sold through unrelated third-party pharmaceutical entities under their own labels pursuant to alliance and supply agreements. Revenues from the “Impax Generics” sales channel and the “Private Label” sales channel are reported under the caption “Impax Generics sales, net” in “Note 22. Supplementary Financial Information.” Revenues from the “OTC Partner” sales channel are reported under the caption “Other Revenues” in “Note 22. Supplementary Financial Information.”
Impax Specialty Pharma is engaged in the development, sale and distribution of proprietary brand pharmaceutical products that the Company believes represent improvements to already-approved pharmaceutical products addressing central nervous system (“CNS”) disorders and other select specialty segments. Impax Specialty Pharma currently has one internally developed branded pharmaceutical product, Rytary® (IPX066), an extended release oral capsule formulation of carbidopa-levodopa for the treatment of Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide intoxication and/or manganese intoxication, which was approved by the FDA on January 7, 2015 and which the Company launched in April 2015. In November 2015, the European Commission granted marketing authorization for Numient® (IPX066) (referred to as Rytary® in the United States). The review of the Numient® application was conducted under the centralized licensing procedure as a therapeutic innovation, and authorization is applicable in all 28 member states of the European Union, as well as Iceland, Liechtenstein and Norway. Impax Specialty Pharma is also engaged in the sale and distribution of four other branded products including Zomig® (zolmitriptan) products, indicated for the treatment of migraine headaches, under the terms of the AZ Agreement with AstraZeneca in the United States and in certain U.S. territories, and Emverm® (mebendazole) 100 mg chewable tablets, indicated for the treatment of pinworm, whipworm, common roundworm, common hookworm, and American hookworm in single or mixed infections.
Revenues from Impax-labeled branded products are reported under the caption “Impax Specialty Pharma sales, net” in “Note 22. Supplementary Financial Information.” Impax Specialty Pharma also has a number of product candidates that are in varying stages of development.
The Company’s chief operating decision maker evaluates the financial performance of the Company’s segments based upon segment income (loss) before income taxes. Items below income (loss) from operations are not reported by segment, since they are excluded from the measure of segment profitability reviewed by the Company’s chief operating decision maker. Additionally, general and administrative expenses, certain selling expenses, certain litigation settlements, and non-operating income and expenses are included in “Corporate and Other.” The Company does not report balance sheet information by segment since it is not reviewed by the Company’s chief operating decision maker. The accounting policies for the Company’s segments are the same as those described above in the discussion of "Revenue Recognition" in “Note 4. Summary of Significant Accounting Policies.” The Company has no inter-segment revenue.
The tables below present segment information reconciled to total Company financial results, with segment operating income or loss including gross profit less direct research and development expenses and direct selling expenses as well as any litigation settlements, to the extent specifically identified by segment (in thousands):
Three Months Ended March 31, 2017
Impax
Generics
 
Impax
Specialty
Pharma
 
Corporate
and Other
 
Total
Company
Revenues, net
$
134,147

 
$
50,256

 
$
—

 
$
184,403

Cost of revenues
103,335

 
16,897

 
—

 
120,232

Cost of revenues impairment charges
39,280

 
—

 
—

 
39,280

Selling, general and administrative
6,468

 
16,330

 
24,257

 
47,055

Research and development
17,396

 
5,093

 
—

 
22,489

In-process research and development impairment charges
6,079

 
—

 
—

 
6,079

Patent litigation expense
368

 
704

 
—

 
1,072

(Loss) income before income taxes
$
(38,779
)
 
$
11,232

 
$
(39,983
)
 
$
(67,530
)

Three Months Ended March 31, 2016
Impax
Generics
 
Impax
Specialty
Pharma
 
Corporate
and Other
 
Total
Company
Revenues, net
$
170,079

 
$
55,429

 
$
—

 
$
225,508

Cost of revenues
110,122

 
12,796

 
—

 
122,918

Selling, general and administrative
4,774

 
13,818

 
25,706

 
44,298

Research and development
14,595

 
4,427

 
—

 
19,022

Patent litigation expense
114

 
1,205

 
—

 
1,319

Income (loss) before income taxes
$
40,474

 
$
23,183

 
$
(81,151
)
 
$
(17,494
)

Significant Products
The Company generally consolidates net revenue by "product family," meaning that it consolidates net revenue from products containing the same active ingredient(s) irrespective of dosage strength, delivery method or packaging size. The Company's significant product families, as determined based on net revenue, and their percentage of the Company's consolidated net revenue for each of the three month periods ended March 31, 2017 and 2016 are set forth below (in thousands):

Segment
 
Product Family
 
March 31, 2017
 
 
 
 
 
$
%
 
Impax Generics
 
Epinephrine Auto-Injector family (generic Adrenaclick®)
 
$
20,318

11
%
(1)
Impax Specialty Pharma
 
Rytary® family
 
$
19,905

11
%
(2)
Impax Generics
 
Oxymorphone HCI ER family
 
$
18,970

10
%
(3)
Impax Generics
 
Budesonide family
 
$
15,827

9
%
(4)
Impax Generics
 
Amphetamine Salts ER (CII) family (generic Adderall®)
 
$
12,173

7
%
(5)

Segment
 
Product Family
 
March 31, 2016
 
 
 
 
 
$
%
 
Impax Generics
 
Diclofenac Sodium Gel family (generic Solaraze®)
 
$
50,290

22
%
(6)
Impax Generics
 
Amphetamine Salts ER (CII) family (generic Adderall®)
 
$
21,518

10
%
(5)
Impax Generics
 
Fenofibrate family
 
$
16,380

7
%
(7)
Impax Specialty Pharma
 
Rytary® family
 
$
14,926

7
%
(2)
Impax Specialty Pharma
 
Albenza® family
 
$
13,088

6
%
(8)

(1) Epinephrine Auto-Injector (generic Adrenaclick®) product family consists of the injector product in two different strengths and is indicated in the emergency treatment of allergic reactions (Type 1) including anaphylaxis.

(2) Rytary® product family consists of the capsules product in four different strengths and is indicated for the treatment of Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide intoxication or manganese intoxication.

(3) Oxymorphone Hydrochloride Extended Release product family consists of the oxymorphone hydrochloride extended release tablet formulation of the product in seven different strengths and is indicated for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate.

(4) Budesonide product family consists of the budesonide inhalation suspension formulation of the product in two different strengths and is indicated for the maintenance treatment of asthma and as prophylactic therapy in children 12 months to 8 years of age.

(5) Amphetamine Salts extended release (ER) capsules, CII (generic Adderall XR®) product family consists of the capsules product in six different strengths and is indicated for the treatment of attention deficit hyperactivity disorder.

(6) Diclofenac Sodium Gel (generic Solaraze®) product family consists of one product strength and is indicated for the topical treatment of actinic keratosis.

(7) Fenofibrate product family consists of products in both capsule and tablet dosage forms in seven different strengths and is indicated as adjunctive therapy to diet to reduce elevated LDL-C, Total-C, Triglycerides and Apo B, and to increase HDL-C in adult patients with primary hypercholesterolemia or mixed dyslipidemia (Fredrickson Types IIa and IIb); and also indicated as adjunctive therapy to diet for treatment of adult patients with hypertriglyceridemia (Fredrickson Types IV and V hyperlipidemia).

(8) Albenza® product family consists of one strength and is indicated for the treatment of parenchymal neurocysticercosis due to active lesions caused by larval forms of the pork tapeworm, Taenia solium and the treatment of cystic hydatid disease of the liver, lung, and peritoneum, caused by the larval form of the dog tapeworm, Echinococcus granulosus.

Foreign Operations
The Company’s wholly-owned subsidiary, Impax Laboratories (Taiwan) Inc., has constructed a facility in Taiwan which is utilized for manufacturing, research and development, warehouse, and administrative functions, with $133.1 million and $134.9 million of net carrying value of assets, composed principally of a building and equipment, included in the Company's consolidated balance sheets at March 31, 2017 and December 31, 2016, respectively.
SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)
SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)
SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)
Selected financial information for the quarterly period noted is as follows:
(in thousands, except share and per share amounts)
 
Quarter Ended March 31, 2017
Revenue:
 
 
Impax Generic Product sales, gross
 
$
630,672

  Less:
 
 
    Chargebacks
 
298,744

    Rebates
 
164,792

    Product Returns
 
9,733

    Other credits
 
28,481

  Impax Generic Product sales, net
 
128,922

 
 
 
  Rx Partner
 
5,159

  Other Revenues
 
66

Impax Generic Division revenues, net
 
134,147

 
 
 
Impax Specialty Pharma sales, gross
 
84,133

  Less:
 
 
    Chargebacks
 
9,828

    Rebates
 
4,483

    Product Returns
 
1,844

    Other credits
 
17,722

  Impax Specialty Pharma sales, net
 
50,256

 
 
 
Impax Specialty Pharma revenues, net
 
50,256

 
 
 
Total revenues
 
184,403

 
 
 
Gross profit
 
24,891

 
 
 
Net loss
 
$
(98,431
)
 
 
 
Net loss per common share:
 
 
    Basic
 
$
(1.37
)
    Diluted
 
$
(1.37
)
 
 
 
Weighted-average common shares outstanding:
 
 
    Basic
 
71,594,472

    Diluted
 
71,594,472


(in thousands, except share and per share amounts)
 
Quarter Ended March 31, 2016
Revenue:
 
 
Impax Generic Product sales, gross
 
$
611,281

  Less:
 
 
    Chargebacks
 
217,354

    Rebates
 
185,476

    Product Returns
 
11,913

    Other credits
 
29,354

  Impax Generic Product sales, net
 
167,184

 
 
 
  Rx Partner
 
2,835

  Other Revenues
 
60

Impax Generic Division revenues, net
 
170,079

 
 
 
Impax Specialty Pharma sales, gross
 
82,073

  Less:
 
 
    Chargebacks
 
6,111

    Rebates
 
2,853

    Product Returns
 
1,508

    Other credits
 
16,172

  Impax Specialty Pharma sales, net
 
55,429

 
 
 
Impax Specialty Pharma revenues, net
 
55,429

 
 
 
Total revenues
 
225,508

 
 
 
Gross profit
 
102,590

 
 
 
Net loss
 
$
(10,408
)
 
 
 
Net loss per common share:
 
 
    Basic
 
$
(0.15
)
    Diluted
 
$
(0.15
)
 
 
 
Weighted-average common shares outstanding:
 
 
    Basic
 
70,665,394

    Diluted
 
70,665,394

SUBSEQUENT EVENTS
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS

Consolidation and Improvement Plan

On May 10, 2017, the Company announced that it has initiated a series of actions that are designed to improve manufacturing and R&D efficiencies, capitalize on growth opportunities, improve profitability and mitigate current challenges. The actions include:

•
Consolidating all of Generic R&D, U.S. manufacturing and packing operations to its Hayward, CA facility;
•
Continuing the previously announced closure of the Middlesex, NJ manufacturing site, which will now include the closure of the Middlesex Generic R&D site;
•
Reorganizing certain functions including quality, engineering and supply chain operations;
•
Reviewing strategic alternatives for the Company’s Taiwan manufacturing site, including a sale of the facility or, in the alternative, a closure of the facility; and
•
Rationalizing the generic portfolio to eliminate low-value products and streamline operations.

By consolidating activities as outlined above, the Company expects to achieve cost savings and operating efficiency benefits, while maintaining the infrastructure and expertise needed to capitalize on product and pipeline strengths. The Company will incur cash charges of up to $65.0 million to fully achieve these new initiatives. The timing to incur cash charges is dependent on the execution of the strategic alternatives relating to the Taiwan site.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
Revenue Recognition 
Revenue Recognition

The Company recognizes revenue when the earnings process is complete, which under SEC Staff Accounting Bulletin No. 104, Topic No. 13, “Revenue Recognition” (“SAB 104”), is when revenue is realized or realizable and earned, there is persuasive evidence a revenue arrangement exists, delivery of goods or services has occurred, the sales price is fixed or determinable, and collectability is reasonably assured.

The Company accounts for material revenue arrangements which contain multiple deliverables in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 605-25, Revenue Recognition - Multiple-Element Arrangements ("ASC 605-25"), which addresses the determination of whether an arrangement involving multiple deliverables contains more than one unit of accounting. A delivered item within an arrangement is considered a separate unit of accounting only if both of the following criteria are met:

•
the delivered item has value to the customer on a stand-alone basis; and

•
if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item is considered probable and substantially in the control of the vendor.

Under ASC 605-25, if both of the criteria above are not met, then separate accounting for the individual deliverables is not appropriate. Revenue recognition for arrangements with multiple deliverables constituting a single unit of accounting is recognized generally over the greater of the term of the arrangement or the expected period of performance, either on a straight-line basis or on a modified proportional performance method.

The Company accounts for milestones related to research and development activities in accordance with FASB ASC Topic 605-28, Revenue Recognition - Milestone Method ("ASC 605-28"). ASC Topic 605-28 allows for the recognition of consideration, which is contingent on the achievement of a substantive milestone, in its entirety in the period the milestone is achieved. A milestone is considered to be substantive if all of the following criteria are met:

•
the milestone is commensurate with either (1) the performance required to achieve the milestone or (2) the enhancement of the value of the delivered items resulting from the performance required to achieve the milestone;

•
the milestone relates solely to past performance; and

•
the milestone payment is reasonable relative to all of the deliverables and payment terms within the agreement.

Impax Generics revenues, net and Impax Specialty Pharma revenues, net

The Impax Generics revenues, net and Impax Specialty Pharma revenues, net include revenue recognized related to shipments of generic and branded pharmaceutical products to the Company’s customers, primarily drug wholesalers and retail chains. Gross sales revenue is recognized at the time title and risk of loss passes to the customer, which is generally when product is received by the customer. Net revenues may include deductions from the gross sales price related to estimates for chargebacks, rebates and administrative fees, distribution service fees, returns, shelf-stock adjustments, and other pricing adjustments. The Company records an estimate for these deductions in the same period when revenue is recognized. A description of each of these gross-to-net deductions follows.

•
Chargebacks

The Company has agreements establishing contract prices for certain products with certain indirect customers, such as retail pharmacy chains, group purchasing organizations, managed care organizations, hospitals and government agencies who purchase products from drug wholesalers. The contract prices are lower than the prices the customer would otherwise pay to the wholesaler, and the price difference is referred to as a chargeback, which generally takes the form of a credit memo issued by the Company to reduce the invoiced gross selling price charged to the wholesaler. An estimated accrued provision for chargeback deductions is recognized at the time of product shipment. The primary factors considered when estimating the provision for chargebacks are the average historical chargeback credits given, the mix of products shipped, and the amount of inventory on hand at the major drug wholesalers with whom the Company does business. The Company also monitors actual chargebacks granted and compares them to the estimated provision for chargebacks to assess the reasonableness of the chargeback reserve at each quarterly balance sheet date.

•
Rebates and Administrative Fees

The Company maintains various rebate and administrative fee programs with its customers in an effort to maintain a competitive position in the marketplace and to promote sales and customer loyalty. The rebates generally take the form of a credit memo to reduce the invoiced gross selling price charged to a customer for products shipped. An estimated accrued provision for rebate deductions is recognized at the time of product shipment. The primary factors the Company considers when estimating the provision for rebates are the average historical experience of aggregate credits issued, the mix of products shipped and the historical relationship of rebates as a percentage of total gross product sales, the contract terms and conditions of the various rebate programs in effect at the time of shipment, and the amount of inventory on hand at the major drug wholesalers with whom the Company does business. The Company also monitors actual rebates granted and compares them to the estimated provision for rebates to assess the reasonableness of the rebate reserve at each quarterly balance sheet date.

•
Distribution Service Fees

The Company pays distribution service fees to several of its wholesaler customers related to sales of its Impax Products. The wholesalers are generally obligated to provide the Company with periodic outbound sales information as well as inventory levels of the Company’s Impax Products held in their warehouses. Additionally, the wholesalers have agreed to manage the variability of their purchases and inventory levels within specified days on hand limits. An accrued provision for distribution service fees is recognized at the time products are shipped to wholesalers.

•
Returns

The Company allows its customers to return product if approved by authorized personnel in writing or by telephone with the lot number and expiration date accompanying any request and if such products are returned within six months prior to or until twelve months following, the product’s expiration date. The Company estimates and recognizes an accrued provision for product returns as a percentage of gross sales based upon historical experience. The product return reserve is estimated using a historical lag period, which is the time between when the product is sold and when it is ultimately returned, and estimated return rates which may be adjusted based on various assumptions including: changes to internal policies and procedures, business practices, commercial terms with customers, and the competitive position of each product; the amount of inventory in the wholesale and retail supply chain; the introduction of new products; and changes in market sales information. The Company also considers other factors, including significant market changes which may impact future expected returns and actual product returns. The Company monitors actual returns on a quarterly basis and may record specific provisions for returns it believes are not covered by historical percentages.

•
Shelf-Stock Adjustments

Based upon competitive market conditions, the Company may reduce the selling price of certain Impax Generics division products. The Company may issue a credit against the sales amount to a customer based upon their remaining inventory of the product in question, provided the customer agrees to continue to make future purchases of product from the Company. This type of customer credit is referred to as a shelf-stock adjustment, which is the difference between the initial sales price and the revised lower sales price, multiplied by an estimate of the number of product units on hand at a given date. Decreases in selling prices are discretionary decisions made by the Company in response to market conditions, including estimated launch dates of competing products and declines in market price. The Company records an estimate for shelf-stock adjustments in the period it agrees to grant such a credit memo to a customer.

•
Cash Discounts

The Company offers cash discounts to its customers, generally 2% to 3% of the gross selling price, as an incentive for paying within invoice terms, which generally range from 30 to 90 days. An estimate of cash discounts is recorded in the same period when revenue is recognized.

•
Medicaid and Other U.S. Government Pricing Programs

As required by law, the Company provides a rebate on drugs dispensed under the Medicaid program, Medicare Part D, TRICARE, and other U.S. government pricing programs. The Company determines its estimated government rebate accrual primarily based on historical experience of claims submitted by the various states and other jurisdictions and any new information regarding changes in the various programs which may impact the Company’s estimate of government rebates. In determining the appropriate accrual amount, the Company considers historical payment rates and processing lag for outstanding claims and payments. The Company records estimates for government rebates as a deduction from gross sales, with a corresponding adjustment to accrued liabilities.

•
Rx Partner and OTC Partner

The Rx Partner and OTC Partner contracts include revenue recognized under alliance and collaboration agreements between the Company and unrelated third-party pharmaceutical companies. The Company has entered into these alliance agreements to develop marketing and/or distribution relationships with its partners to fully leverage its technology platform.

The Rx Partners and OTC Partners alliance agreements obligate the Company to deliver multiple goods and/or services over extended periods. Such deliverables include manufactured pharmaceutical products, exclusive and semi-exclusive marketing rights, distribution licenses, and research and development services. In exchange for these deliverables the Company receives payments from its agreement partners for product shipments and research and development services, and may also receive other payments including royalties, profit sharing payments, and upfront and periodic milestone payments. Revenue received from the alliance agreement partners for product shipments under these agreements is not subject to deductions for chargebacks, rebates, product returns, and other pricing adjustments. Royalty and profit sharing amounts the Company receives under these agreements are calculated by the respective agreement partner, with such royalty and profit share amounts generally based upon estimates of net product sales or gross profit which include estimates of deductions for chargebacks, rebates, product returns, and other adjustments the alliance agreement partners may negotiate with their respective customers. The Company records the agreement partner's adjustments to such estimated amounts in the period the agreement partner reports the amounts to the Company.

The Company applies the updated guidance of ASC 605-25 to the Strategic Alliance Agreement, as amended, with Teva Pharmaceuticals USA, Inc., an affiliate of Teva Pharmaceutical Industries Limited (the “Teva Agreement”). The Company looks to the underlying delivery of goods and/or services which give rise to the payment of consideration under the Teva Agreement to determine the appropriate revenue recognition. The Company initially defers consideration received as a result of research and development-related activities performed under the Teva Agreement. The Company recognizes deferred revenue on a straight-line basis over the expected period of performance for such services. Consideration received as a result of the manufacture and delivery of products under the Teva Agreement is recognized at the time title and risk of loss passes to the customer, which is generally when product is received by Teva. The Company recognizes profit share revenue in the period earned.

OTC Partner revenue is related to agreements with Pfizer, Inc., formerly Wyeth LLC (“Pfizer”) and L. Perrigo Company (“Perrigo”) with respect to the supply of the Company's over-the-counter pharmaceutical product Loratadine and Pseudoephedrine Sulfate 5 mg/129 mg 12-hour Extended Release Tablets (the "D12 Product"). The OTC Partner sales channel is no longer a core area of the business, and the over-the-counter pharmaceutical products the Company sells through this sales channel are older products which are now only sold to Pfizer and Perrigo. The Company is currently only required to manufacture the over-the-counter pharmaceutical products under its agreements with Pfizer and Perrigo. The Company recognizes profit share revenue in the period earned. During the quarter ended September 30, 2016, the Company sold the ANDAs for both the D12 Product and the Loratadine and Pseudoephedrine Sulfate 10 mg/240 mg 24-hour Extended Release Tablets, in addition to other specified assets, to Perrigo pursuant to an asset purchase agreement with Perrigo dated as of March 31, 2016 (the "Perrigo APA"). Under the terms of the Perrigo APA, the Company will also continue to supply the D-12 Product to Pfizer and Perrigo until the date that is the earliest of (i) the date Perrigo’s manufacturing facility is approved to manufacture the D-12 Product and (ii) December 31, 2017 (the "Supply End Date"). On the Supply End Date, the Company will assign and transfer its supply agreement with Pfizer in its entirety to Perrigo in accordance with the Perrigo APA.

•
Research Partner

The Research Partner contract revenue results from development agreements the Company enters into with unrelated third-party pharmaceutical companies. The development agreements generally obligate the Company to provide research and development services over multiple periods. In exchange for this service, the Company generally receives upfront payments upon signing of each development agreement and is eligible to receive contingent milestone payments, payment of which is based upon the achievement of contractually specified events. Additionally, the Company may also receive royalty payments from the sale, if any, of a successfully developed and commercialized product under one of these development agreements. The Company recognizes revenue received from the achievement of contingent research and development milestones in the period such payment is earned. Royalty revenue, if any, will be recognized as current period revenue when earned.
Recent Accounting Pronouncements 
RECENT ACCOUNTING PRONOUNCEMENTS 
In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, “Revenue from Contracts with Customers” (Topic 606), regarding the accounting for and disclosures of revenue recognition, with an effective date for annual and interim periods beginning after December 15, 2016. This update provides a single comprehensive model for accounting for revenue from contracts with customers. The model requires that revenue recognized reflect the actual consideration to which the entity expects to be entitled in exchange for the goods or services defined in the contract, including in situations with multiple performance obligations. In July 2015, the FASB issued ASU 2015-14, “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,” which deferred the effective date of the previously issued revenue recognition guidance by one year. The guidance will be effective for annual and interim periods beginning after December 15, 2017. In April 2016 and May 2016, the FASB issued ASU 2016-10, "Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing" and ASU 2016-12, "Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients," respectively. Both of these updates provide improvements and clarification to the previously issued revenue recognition guidance. The new standard can be adopted using one of two methods: the full retrospective method, which requires the standard to be applied to each prior period presented, or the modified retrospective method, which requires the cumulative effect of adoption to be recognized as an adjustment to opening retained earnings in the period of adoption. The Company currently expects to adopt the new revenue recognition standard in 2018 using the modified retrospective method. The Company is currently evaluating the impact that adoption will have on its consolidated financial statements. The majority of the Company's revenue relates to the sale of finished products to various customers, and though the Company is still evaluating the impact of this standard, management does not currently believe that the adoption will have a material impact on these transactions. The Company is continuing to evaluate the impact on certain less significant transactions involving third-party collaborations and other arrangements.

In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330): “Simplifying the Measurement of Inventory,” with guidance regarding the accounting for and measurement of inventory. The update requires that inventory measured using first-in, first-out ("FIFO") shall be measured at the lower of cost and net realizable value. When there is evidence that the net realizable value of inventory is lower than its cost, the difference shall be recognized as a loss in earnings in the period in which it occurs. The guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this guidance during the first quarter of 2017, and it did not have a material effect on the Company's consolidated financial statements.

    
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), with guidance regarding the accounting for and disclosure of leases. The update requires lessees to recognize all leases, including operating leases, with a term greater than 12 months on the balance sheet. This update also requires lessees and lessors to disclose key information about their leasing transactions. The guidance will be effective for annual and interim periods beginning after December 15, 2018. The Company is currently evaluating the effect that this guidance will have on its consolidated financial statements and related disclosures. The Company expects the implementation of this standard to have an impact on its consolidated financial statements and related disclosures as its aggregate future minimum lease payments were $30.2 million as of December 31, 2016 under its current portfolio of non-cancelable leases for land, office space, and manufacturing, warehouse and research and development facilities with various expiration dates between April 2017 and December 2027. The Company anticipates recognition of additional assets and corresponding liabilities related to these leases on its consolidated balance sheet.

In March 2016, the FASB issued ASU 2016-06, Derivatives and Hedging (Topic 815): "Contingent Put and Call Options in Debt Instruments," with guidance regarding the accounting for embedded derivatives related to debt contracts. The update clarifies that determining whether the economic characteristics of a put or call are clearly and closely related to its debt host requires only an assessment of the four-step decision sequence outlined in FASB ASC paragraph 815-15-25-24. The update also indicates that entities are not required to separately assess whether the contingency itself is clearly and closely related. The guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted this guidance during the first quarter of 2017, and it did not have an effect on the Company's consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09, Compensation - Stock Compensation (Topic 718): "Improvements to Employee Share-Based Payment Accounting," with guidance regarding the simplification of accounting for share-based payment award transactions. The update changes the accounting for such areas as the accounting and cash flow classification for excess tax benefits and deficiencies; forfeitures; and tax withholding requirements and cash flow classification. The guidance is effective for annual and interim periods beginning after December 15, 2016. The Company adopted the new guidance effective January 1, 2017 and elected to eliminate the use of a forfeiture rate estimate in the determination of share-based compensation expense for restricted stock awards using the modified retrospective transition method, which resulted in a $1.4 million charge to opening retained earnings for 2017. In addition, the Company is now presenting the cash paid for tax withholdings on stock options exercised and restricted stock awards vested retrospectively in cash flows from financing activities as opposed to the historical presentation in cash flows from operating activities. Excess tax benefits or deficiencies, historically recorded to additional paid-in capital, are recorded to income tax expense as they occur on a prospective basis.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): "Classification of Certain Cash Receipts and Cash Payments," with guidance intended to reduce the diversity in practice regarding how certain cash receipts and cash payments are presented and classified within the statement of cash flows. The update addresses eight specific cash flow issues including debt prepayment or debt extinguishment costs, the settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies (COLIs) (including bank-owned life insurance policies (BOLIs)), distributions received from equity method investees, beneficial interests in securitization transactions, and separately identifiable cash flows and application of the predominance principle. The guidance will be effective for annual and interim periods beginning after December 15, 2017. The Company is currently evaluating the effect that this guidance may have on its consolidated financial statements.
In October 2016, the FASB issued ASU-2016-16, Income Taxes (Topic 740): "Intra-Entity Transfers of Assets Other Than Inventory," with guidance intended to more faithfully represent the economics of intra-entity asset transfers. The update clarifies that entities must recognize the income tax consequences of intra-entity asset transfers, other than inventory, when the transfer occurs. The guidance will be effective for annual and interim periods beginning after December 15, 2017. The Company is currently evaluating the effect that this guidance may have on its consolidated financial statements.
In January 2017, the FASB issued ASU-2017-01, Business Combinations (Topic 805): "Clarifying the Definition of a Business," with guidance intended to assist entities in evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. The update provides a screen to determine whether an integrated set of assets and activities constitute a business. If the screen is not met, it (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) removes the evaluation of whether a market participant could replace the missing elements. The guidance will be effective for annual and interim periods beginning after December 15, 2017 and should be applied prospectively. The Company is currently evaluating the effect that this guidance may have on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-03, Accounting Changes and Error Corrections (Topic 250) and Investments - Equity Method and Joint Ventures (Topic 323), which add to and amend SEC paragraphs pursuant to the SEC Staff Announcements at the September 22, 2016 and November 17, 2016 Emerging Issues Task Force (EITF) meetings. The guidance provides additional disclosure requirements regarding the impact of recently issued accounting standards on the financial statements of a registrant when such standards are adopted in a future period. The Company adopted this guidance during the first quarter of 2017, and it did not have an effect on the Company’s consolidated financial statements.
In January 2017, the FASB issued ASU-2017-04, Intangibles - Goodwill and Other (Topic 350): "Simplifying the Test for Goodwill Impairment," which removes the second step of the two-step goodwill impairment test. In order to reduce the cost and complexity of testing goodwill for impairment, entities are now only required to perform a one-step quantitative impairment test and to record the amount of goodwill impairment as the excess of a reporting unit's carrying amount over its fair value, not to exceed the total amount of goodwill allocated to the reporting unit. The new guidance does not amend the optional qualitative assessment of a reporting unit to determine if the quantitative impairment test is necessary. Entities should apply the guidance on a prospective basis and disclose the nature of and reason for the change in accounting principle upon transition. The guidance will be effective for annual and interim periods beginning after December 15, 2019, with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The Company adopted this guidance as of the first quarter of 2017, and it did not have an effect on the Company’s consolidated financial statements.

In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20), which provides clarification regarding the scope of the asset derecognition guidance and accounting for partial sales of nonfinancial assets. The update defines an in substance nonfinancial asset and clarifies that an entity should identify each distinct nonfinancial asset or in substance nonfinancial asset promised to a counterparty and derecognize each asset when a counterparty obtains control of it. All businesses and nonprofit activities within the scope of Subtopic 610-20 are excluded from the amendments in this update. This guidance will be effective for annual and interim periods beginning after December 15, 2017 and is required to be applied at the same time as ASU 2014-09 (described above) is applied. The guidance can be applied using one of two methods: retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the guidance recognized against retained earnings as of the beginning of the fiscal year of adoption. The Company is currently evaluating the effect that this guidance may have on its consolidated financial statements.
BUSINESS ACQUISITION (Tables) (Teva transaction)
Schedule of Business Acquisitions, by Acquisition 
The following is an estimate of the purchase price for the Teva Transaction as of the closing date of August 3, 2016 (in thousands):

 
Estimated Fair Value
Purchase price per the APAs
$
575,800

Upfront payment pursuant to Termination Agreement
10,000

     Total cash consideration
585,800

Fair value of contingent consideration pursuant to Termination Agreement (1)
30,100

     Total consideration transferred
$
615,900


(1) The contingent consideration arrangement pursuant to the Termination Agreement potentially requires the Company to pay up to $40.0 million of additional consideration to Teva upon the achievement of specified commercialization events related to methylphenidate hydrochloride. The $30.1 million fair value of the potential contingent consideration payments recognized on the acquisition date was estimated by applying a probability-weighted expected return methodology.
Schedule of Recognized Identified Assets Acquired and Liabilities Assumed 
The following is an estimate of the fair value of the intangible and tangible assets acquired in connection with the Teva Transaction on the closing date of August 3, 2016 (in thousands):

 
Estimated Fair Value
Intangible assets
$
613,032

Inventory - raw materials
2,868

     Total assets acquired
$
615,900

Finite-Lived and Indefinite-Lived Intangible Assets Acquired as Part of Business Combination 
The following identifies the Company’s allocations of purchase price to intangible assets, including the weighted-average amortization period, in total and by major intangible asset class as of the closing date (in thousands):

 
Estimated Fair Value
 
Weighted-Average Estimated Useful Life
Marketed product rights
$
455,529

 
19 years
Acquired IPR&D product rights (1)
157,503

 
n/a
     Total intangible assets
$
613,032

 
 

(1) "IPR&D" refers to the Company's in-process research and development product rights. Pursuant to the Termination Agreement, Teva returned to the Company its full commercial rights to its pending ANDA for the generic equivalent to Concerta® (methylphenidate hydrochloride), a product the Company previously partnered with Teva USA under a Strategic Alliance Agreement dated June 27, 2001, as amended. As a result, the Company recognized an intangible asset of $78.9 million related to the reacquired IPR&D. The Company engaged a third-party valuation specialist to measure the value of the reacquired product right using a discounted cash flow analysis. The asset was determined to be indefinite-lived based on the market participant methodology prescribed in ASC 805.
Business Acquisition, Pro Forma Information 
The unaudited pro forma combined results of operations for the three months ended March 31, 2016 (assuming the closing of the Teva Transaction occurred on January 1, 2015) are as follows (in thousands):

 
 
Three Months Ended March 31, 2016
Total revenues
 
$
269,721

Net income
 
1,053

FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS (Tables)
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis 
The carrying amounts and fair values of the Company’s financial instruments at March 31, 2017 and December 31, 2016 are indicated below (in thousands): 

 
As of March 31, 2017
 
 
 
 
 
Fair Value Measurement Based on
 
Carrying
Amount
 
Fair Value
 
Quoted Prices in Active Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
 
 
Deferred Compensation Plan asset(1)
$
35,257

 
$
35,257

 
$
—

 
$
35,257

 
$
—

Liabilities
 
 
 
 
 
 
 
 
 
Term Loan Facility due August 2021, current portion (2)
$
20,000

 
$
20,000

 
$
—

 
$
20,000

 
$
—

Term Loan Facility due August 2021, long-term portion (2)
$
320,000

 
$
320,000

 
$
—

 
$
320,000

 
$
—

2% Convertible Senior Notes due June 2022 (3)
$
600,000

 
$
493,500

 
$
493,500

 
$
—

 
$
—

Deferred Compensation Plan liabilities (1)
$
31,113

 
$
31,113

 
$
—

 
$
31,113

 
$
—

Contingent consideration, current portion (4)
$
18,538

 
$
18,538

 
$
—

 
$
—

 
$
18,538

Contingent consideration, long-term portion (4)
$
12,791

 
$
12,791

 
$
—

 
$
—

 
$
12,791


 
As of December 31, 2016
 
 
 
 
 
Fair Value Measurement Based on
 
Carrying
Amount
 
Fair Value
 
Quoted Prices in Active Markets
(Level 1)
 
Significant
Other
Observable
Inputs
(Level 2)
 
Significant Unobservable
Inputs
(Level 3)
Assets
 
 
 
 
 
 
 
 
 
Deferred Compensation Plan asset(1)
$
37,382

 
$
37,382

 
$
—

 
$
37,382

 
$
—

Liabilities
 
 
 
 
 
 
 
 
 
Term Loan Facility due August 2021, current portion (2)
$
20,000

 
$
20,000

 
$
—

 
$
20,000

 
$
—

Term Loan Facility due August 2021, long-term portion (2)
$
375,000

 
$
375,000

 
$
—

 
$
375,000

 
$
—

2% Convertible Senior Notes due June 2022 (3)
$
600,000

 
$
469,800

 
$
469,800

 
$
—

 
$
—

Deferred Compensation Plan liabilities (1)
$
28,582

 
$
28,582

 
$
—

 
$
28,582

 
$
—

Contingent consideration, long-term portion (4)
$
31,048

 
$
31,048

 
$
—

 
$
—

 
$
31,048



(1)
The Deferred Compensation Plan liabilities are non-current liabilities recorded at the value of the amount owed to the plan participants, with changes in value recognized as compensation expense in the Company’s consolidated statements of operations. The calculation of the Deferred Compensation Plan obligation is derived from observable market data by reference to hypothetical investments selected by the participants and is included in the line items captioned “Other non-current liabilities” on the Company’s consolidated balance sheets. The Company invests participant contributions in corporate-owned life insurance (“COLI”) policies, for which the cash surrender value is included in the line item captioned “Other non-current assets” on the Company’s consolidated balance sheets.

(2)
The difference between the amount shown as the carrying value in the above tables and the amount shown on the Company’s consolidated balance sheets at March 31, 2017 and December 31, 2016 represents the unaccreted discount related to deferred debt issuance costs.

(3)
The difference between the amount shown as the carrying value in the above tables and the amount shown on the Company’s consolidated balance sheets at March 31, 2017 and December 31, 2016 represents the unaccreted discounts related to deferred debt issuance costs and bifurcation of the conversion feature of the notes.

(4)
The contingent consideration liability represents future consideration potentially payable to Teva upon the achievement of specified commercialization events related to methylphenidate hydrochloride in accordance with the Termination Agreement related to the Teva Transaction as described in "Note 2. Business Acquisition." A discounted cash flow valuation model was used to value the contingent consideration. The valuation is based on significant unobservable inputs, including the probability and timing of successful product launch and the expected number of competitors at the time of launch and the launch anniversary date. The Company conducts a quarterly review of the underlying inputs and assumptions and significant changes in unobservable inputs could result in material changes to the contingent consideration liability. Changes in the value of the contingent consideration liability are included in "Other income (expense)" on the Company's consolidated statements of operations. A 5% increase or decrease in the probability of successful product launch would cause the fair value of the contingent consideration to both increase and decrease by $1.6 million, respectively. An increase or decrease in the number of competitors at the date of the product launch or the first anniversary would cause the fair value of the contingent consideration to decrease by $13.5 million and increase by $5.2 million, respectively. The maximum aggregate amount in contingent consideration payments the Company could be expected to make to Teva in accordance with the Termination Agreement related to methylphenidate hydrochloride is $40.0 million.
Changes in Level 3 Instruments on Recurring Basis 
The following table presents the changes in Level 3 instruments measured on a recurring basis for the three months ended March 31, 2017 (in thousands):

 
As of
December 31, 2016
 
Change in
Fair Value Included
in Earnings (1)
 
As of
March 31, 2017
Total contingent consideration
$
31,048

 
281

 
$
31,329


(1)
Earnings effect is included in Other, net in Other income (expense) in the Company's consolidated statement of operations.
ACCOUNTS RECEIVABLE (Tables)
Schedule of Accounts, Notes, Loans and Financing Receivable 
The composition of accounts receivable, net is as follows (in thousands):
 
March 31, 2017
 
December 31, 2016
Gross accounts receivable (1)
$
648,918

 
$
794,173

Less: Rebate reserve
(225,243
)
 
(293,816
)
Less: Chargeback reserve
(138,903
)
 
(151,978
)
Less: Distribution services reserve
(9,400
)
 
(18,318
)
Less: Discount reserve
(16,646
)
 
(17,957
)
Less: Uncollectible accounts reserve (2)
(44,708
)
 
(54,736
)
Accounts receivable, net
$
214,018

 
$
257,368



(1) Includes estimated $40.6 million and $40.3 million as of March 31, 2017 and December 31, 2016, respectively, receivable due from Turing Pharmaceuticals AG ("Turing") for reimbursement of Daraprim® chargebacks and Medicaid rebate liabilities pursuant to an Asset Purchase Agreement between the Company and Turing dated August 7, 2015 (the "Turing APA"). In accordance with the terms of the Turing APA and in accordance with federal laws and regulations, the Company receives, and is initially responsible for processing and paying (subject to reimbursement by Turing), all chargebacks and rebates resulting from utilization by Medicaid, Medicare and other federal, state and local government programs, health plans and other health care providers for products sold under the Company's labeler code. Under the terms of the Turing APA, Turing is responsible for liabilities related to chargebacks and rebates that arise as a result of Turing's marketing or selling related activities in connection with Daraprim®. Refer to "Note 20. Legal and Regulatory Matters" for a description of the Company's suit against Turing related to, among other matters, Turing's failure to reimburse the Company for chargebacks and Medicaid rebate liabilities when due.

(2) As a result of the uncertainty of collection from Turing that developed during the first quarter of 2016, the Company recorded a reserve of $48.0 million as of March 31, 2016, which represented the full amount of the estimated receivable due from Turing. During the fourth quarter of 2016, the Company received a $7.7 million payment from Turing. During the first quarter of 2017, the Company increased the reserve balance by $0.3 million to reflect additional estimated Medicaid rebate claims due from Turing. As of March 31, 2017, the $40.6 million estimated receivable due from Turing was fully reserved.
Allowance for Credit Losses on Financing Receivables 
A rollforward of the rebate and chargeback reserves activity for the three months ended March 31, 2017 and the year ended December 31, 2016 is as follows (in thousands):
 
Three Months Ended
 
Year Ended
Rebate reserve
March 31, 2017
 
December 31, 2016
Beginning balance
$
293,816

 
$
265,229

Provision recorded during the period
164,792

 
756,774

Credits issued during the period
(233,365
)
 
(728,187
)
Ending balance
$
225,243

 
$
293,816


The payment mechanisms for rebates in the Impax Generics and Impax Specialty Pharma divisions are different, which impacts the location on the Company's consolidated balance sheets. Impax Generics rebates are classified as "Accounts receivable, net" on the Company's consolidated balance sheets. Impax Specialty Pharma rebates are classified as "Accrued expenses" on the Company's consolidated balance sheets.

 
Three Months Ended
 
Year Ended
Chargeback reserve
March 31, 2017
 
December 31, 2016
Beginning balance
$
151,978

 
$
102,630

Provision recorded during the period
308,572

 
1,011,400

Credits issued during the period
(321,647
)
 
(962,052
)
Ending balance
$
138,903

 
$
151,978

INVENTORY (Tables)
Schedule of Inventory, Current
Inventory, net of carrying value reserves, as of March 31, 2017 and December 31, 2016 consisted of the following (in thousands): 
 
March 31, 2017
 
December 31, 2016
Raw materials
$
65,580

 
$
53,808

Work in process
5,056

 
3,280

Finished goods
137,874

 
130,879

     Total inventory
208,510

 
187,967

     Less: Non-current inventory
12,946

 
12,737

            Total inventory - current
$
195,564

 
$
175,230

PROPERTY, PLANT AND EQUIPMENT (Tables)
Property, Plant and Equipment
Property, plant and equipment, net of accumulated depreciation, consists of the following (in thousands):

 
March 31, 2017
 
December 31, 2016
Land
$
5,603

 
$
5,603

Buildings and improvements
180,134

 
174,303

Equipment
149,373

 
143,818

Office furniture and equipment
16,312

 
15,767

Construction-in-progress
55,214

 
50,191

    Property, plant and equipment, gross
406,636

 
389,682

    Less: Accumulated depreciation
(166,396
)
 
(156,310
)
           Property, plant and equipment, net
$
240,240

 
$
233,372

INTANGIBLE ASSETS AND GOODWILL (Tables)
Schedule of Finite-Lived Intangible Assets
The following tables show the gross carrying values and accumulated amortization, where applicable, of the Company’s intangible assets by type for the Company’s consolidated balance sheets presented (in thousands):

March 31, 2017
Gross Carrying Value
 
Accumulated Amortization
 
Intangible Assets, Net
Amortized intangible assets:
 
 
 
 
 
Marketed product rights
$
487,909

 
$
(156,478
)
 
$
331,431

Royalties
339

 
(339
)
 
—

 
488,248

 
(156,817
)
 
331,431

Non-amortized intangible assets:
 
 
 
 
 
Acquired IPR&D product rights
225,308

 
—

 
225,308

Acquired future royalty rights
1,135

 
—

 
1,135

 
226,443

 
—

 
226,443

Total intangible assets
$
714,691

 
$
(156,817
)
 
$
557,874


December 31, 2016
Gross Carrying Value
 
Accumulated Amortization
 
Intangible Assets, Net
Amortized intangible assets:
 
 
 
 
 
Marketed product rights
$
524,733

 
$
(139,245
)
 
$
385,488

Royalties
339

 
(339
)
 
—

 
525,072

 
(139,584
)
 
385,488

Non-amortized intangible assets:
 
 
 
 
 
Acquired IPR&D product rights
232,576

 
—

 
232,576

Acquired future royalty rights
2,402

 
—

 
2,402

 
234,978

 
—

 
234,978

Total intangible assets
$
760,050

 
$
(139,584
)
 
$
620,466

ACCRUED EXPENSES (Tables)
Schedule of Accrued Liabilities 
The following table sets forth the Company’s accrued expenses (in thousands):  

 
March 31, 2017
 
December 31, 2016
Payroll-related expenses
$
31,505

 
$
37,986

Product returns
75,783

 
72,888

Accrued shelf stock
5,906

 
7,032

Government rebates (1)
71,721

 
72,063

Legal and professional fees
9,464

 
8,395

Income taxes payable
462

 
—

Interest payable
3,500

 
544

Estimated Teva and Allergan chargebacks and rebates (2)
13,277

 
14,813

Accrued profit sharing and royalty expenses
8,175

 
13,642

Other
11,898

 
17,290

Total accrued expenses
$
231,691

 
$
244,653



(1) Includes estimated $3.1 million and $6.8 million as of March 31, 2017 and December 31, 2016, respectively, of liabilities for Daraprim® chargebacks and rebates resulting from utilization by Medicaid, Medicare and other federal, state and local governmental programs, health plans and other health care providers for product sold under the Company’s labeler code, which amounts are subject to reimbursement by Turing in accordance with the terms of the Company's purchase agreement with Turing. From August 7, 2015 through March 31, 2017, the Company has made $45.3 million of such payments on Turing's behalf.

(2) As discussed in "Note 2. Business Acquisition," pursuant to certain agreed upon transition related services by and among the Company, Teva and Allergan after the closing of the Teva Transaction, the Company agreed to manage the payment process for certain commercial chargebacks and rebates on behalf of Teva and Allergan related to products each of Teva and Allergan sold into the channel prior to the Company's acquisition of the products. On August 18, 2016, the Company received a payment totaling $42.4 million from Teva and Allergan, which represented their combined estimate of the amount of commercial chargebacks and rebates to be paid by the Company on their behalf to wholesalers who purchased products from Teva and Allergan prior to the closing. Pursuant to the agreed upon transition services, Teva and Allergan are obligated to reimburse the Company for additional payments related to chargebacks and rebates for products they sold into the channel prior to the closing and made on their behalf in excess of the $42.4 million. If the total payments made by the Company on behalf of Teva and Allergan are less than $42.4 million, the Company is obligated to refund the difference to Teva and/or Allergan. As of March 31, 2017, the Company had paid $29.1 million related to chargebacks and rebates as described above and $13.3 million remained in accrued expenses on the Company's consolidated balance sheet.

Schedule of Product Warranty Liability 
A roll-forward of the return reserve activity for the three months ended March 31, 2017 and the year ended December 31, 2016 is as follows (in thousands):
 
Three Months Ended
 
Year Ended
Returns reserve
March 31, 2017
 
December 31, 2016
Beginning balance
$
72,888

 
$
48,950

Provision related to sales recorded in the period
11,577

 
52,383

Credits issued during the period
(8,682
)
 
(28,445
)
Ending balance
$
75,783

 
$
72,888

STOCKHOLDERS' EQUITY (Tables)
Common Stock Reserved for Future Issuance
In addition, the Company had reserved for issuance the following amounts of shares of its common stock for the purposes described below as of March 31, 2017 (in thousands):
Shares issued
74,048

Stock options outstanding(1)
3,343

Conversion of Notes payable (2)
9,471

Warrants outstanding (see below)
9,471

Total shares of common stock issued and reserved for issuance
96,333


(1)See “Note 15. Share-based Compensation.”
(2)See “Note 12. Debt.”
EARNINGS PER SHARE (Tables)
Schedule of Earnings Per Share, Basic and Diluted
The following is a reconciliation of basic and diluted net loss per share of common stock for the three months ended March 31, 2017 and 2016 (in thousands, except per share amounts):  
 
Three Months Ended March 31,
 
 
2017
 
 
2016
 
Basic Loss Per Common Share:
 
 
 
 
 
Net loss
$
(98,431
)
 
 
$
(10,408
)
 
Weighted-average common shares outstanding
71,594

 
 
70,665

 
  Basic loss per share
$
(1.37
)
 
 
$
(0.15
)
 
 
 
 
 
 
 
Diluted Loss Per Common Share:
 
 
 
 
 
Net loss
$
(98,431
)
 
 
$
(10,408
)
 
Add-back of interest expense on outstanding convertible notes payable, net of tax
—

(1) 
 
—

(1) 
Adjusted net loss
$
(98,431
)
 
 
$
(10,408
)
 
 
 
 
 
 
 
Weighted-average common shares outstanding
71,594

 
 
70,665

 
Weighted-average incremental shares related to assumed exercise of warrants and stock options, vesting of non-vested shares and ESPP share issuance
—

(2) 
 
—

(3) 
Weighted-average incremental shares assuming conversion of outstanding notes payable
—

(1) 
 
—

(1) 
Diluted weighted-average common shares outstanding
71,594

(2) 
 
70,665

(3) 
    Diluted net loss per share
$
(1.37
)
 
 
$
(0.15
)
 


(1)
For the three month periods ended March 31, 2017 and March 31, 2016, the Company incurred a net loss, which cannot be diluted, so basic and diluted loss per common share were the same. Accordingly, there were no numerator or denominator adjustments related to the Company’s outstanding Notes.

(2)
For the three month period ended March 31, 2017, the Company incurred a net loss, which cannot be diluted, so basic and diluted loss per common share were the same. As of March 31, 2017, shares issuable but not included in the Company's calculation of diluted EPS, which could potentially dilute future earnings, include 9.47 million warrants outstanding, 9.47 million shares for conversion of outstanding Notes payable, 3.34 million stock options outstanding and 2.21 million non-vested restricted stock awards.

(3)
For the three month period ended March 31, 2016, the Company incurred a net loss, which cannot be diluted, so basic and diluted loss per common share were the same. As of March 31, 2016, shares issuable but not included in the Company's calculation of diluted EPS, which could potentially dilute future earnings, include 9.47 million warrants outstanding, 9.47 million shares for conversion of outstanding Notes payable, 2.48 million stock options outstanding and 2.15 million non-vested restricted stock awards.
SHARE-BASED COMPENSATION (Tables)
Schedule of Share-based Compensation, Stock Options, Activity 
The following table summarizes all of the Company's stock option activity for the current year through March 31, 2017:
Stock Options
Number of
Shares
Under Option
 
Weighted-
Average
Exercise
Price
per Share
Outstanding at December 31, 2016
2,234,331

 
$
22.67

     Options granted
1,116,770

 
5.80

     Options exercised
(6,122
)
 
8.20

     Options forfeited
(2,370
)
 
10.57

Outstanding at March 31, 2017
3,342,609

 
$
17.02

Options exercisable at March 31, 2017
1,623,770

 
$
19.81

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity 
A summary of the non-vested restricted stock awards is as follows:
Restricted Stock Awards
Number of
Restricted
Stock Awards
 
Weighted-
Average
Grant Date
Fair Value
Non-vested at December 31, 2016
2,160,127

 
$
34.02

     Granted
165,501

 
10.75

     Vested
(66,697
)
 
34.28

     Forfeited
(51,476
)
 
35.62

Non-vested at March 31, 2017
2,207,455

 
$
32.23

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs 
The amount of share-based compensation expense recognized by the Company is as follows (in thousands):
 
Three Months Ended March 31,
 
2017
 
2016
Manufacturing expenses
$
1,584

 
$
1,368

Research and development
1,423

 
1,340

Selling, general and administrative
3,950

 
4,570

Total
$
6,957

 
$
7,278

RESTRUCTURINGS (Tables)
Summary of Total Estimated Charges to be Incurred by Type 
The following is a summary of the total estimated charges to be incurred by major type of cost (in millions):

Type of Cost
Amount Expected to be Incurred
Employee retention and severance payments
$
14.1

Technical transfer of products
11.2

Asset impairment and accelerated depreciation charges
20.9

Facilities lease terminations and asset retirement obligations
1.9

Legal and professional fees
0.2

     Total estimated restructuring charges
$
48.3

Schedule of Restructuring Reserve by Type of Cost 
A rollforward of the charges incurred for the three months ended March 31, 2017 is as follows (in thousands):

 
 
Balance as of
 
Expensed/
 
Cash
 
Non-Cash
 
Balance as of
 
 
December 31, 2016
 
Accrued Expense
 
Payments
 
Items
 
March 31, 2017
Employee retention and severance payments
 
$
5,945

 
$
1,480

 
$
(155
)
 
$
—

 
$
7,270

Technical transfer of products
 
—

 
1,188

 
(1,188
)
 
—

 
—

Asset impairment and accelerated depreciation charges
 
—

 
1,561

 
—

 
(1,561
)
 
—

Facilities lease terminations and asset retirement obligations
 
209

 
93

 
—

 
—

 
302

Legal and professional fees
 
—

 
—

 
—

 
—

 
—

Total
 
$
6,154

 
$
4,322

 
$
(1,343
)
 
$
(1,561
)
 
$
7,572

SEGMENT INFORMATION (Tables)
Schedule of Segment Reporting Information, by Segment 
The tables below present segment information reconciled to total Company financial results, with segment operating income or loss including gross profit less direct research and development expenses and direct selling expenses as well as any litigation settlements, to the extent specifically identified by segment (in thousands):
Three Months Ended March 31, 2017
Impax
Generics
 
Impax
Specialty
Pharma
 
Corporate
and Other
 
Total
Company
Revenues, net
$
134,147

 
$
50,256

 
$
—

 
$
184,403

Cost of revenues
103,335

 
16,897

 
—

 
120,232

Cost of revenues impairment charges
39,280

 
—

 
—

 
39,280

Selling, general and administrative
6,468

 
16,330

 
24,257

 
47,055

Research and development
17,396

 
5,093

 
—

 
22,489

In-process research and development impairment charges
6,079

 
—

 
—

 
6,079

Patent litigation expense
368

 
704

 
—

 
1,072

(Loss) income before income taxes
$
(38,779
)
 
$
11,232

 
$
(39,983
)
 
$
(67,530
)

Three Months Ended March 31, 2016
Impax
Generics
 
Impax
Specialty
Pharma
 
Corporate
and Other
 
Total
Company
Revenues, net
$
170,079

 
$
55,429

 
$
—

 
$
225,508

Cost of revenues
110,122

 
12,796

 
—

 
122,918

Selling, general and administrative
4,774

 
13,818

 
25,706

 
44,298

Research and development
14,595

 
4,427

 
—

 
19,022

Patent litigation expense
114

 
1,205

 
—

 
1,319

Income (loss) before income taxes
$
40,474

 
$
23,183

 
$
(81,151
)
 
$
(17,494
)
Schedule of Product Information 
The Company's significant product families, as determined based on net revenue, and their percentage of the Company's consolidated net revenue for each of the three month periods ended March 31, 2017 and 2016 are set forth below (in thousands):

Segment
 
Product Family
 
March 31, 2017
 
 
 
 
 
$
%
 
Impax Generics
 
Epinephrine Auto-Injector family (generic Adrenaclick®)
 
$
20,318

11
%
(1)
Impax Specialty Pharma
 
Rytary® family
 
$
19,905

11
%
(2)
Impax Generics
 
Oxymorphone HCI ER family
 
$
18,970

10
%
(3)
Impax Generics
 
Budesonide family
 
$
15,827

9
%
(4)
Impax Generics
 
Amphetamine Salts ER (CII) family (generic Adderall®)
 
$
12,173

7
%
(5)

Segment
 
Product Family
 
March 31, 2016
 
 
 
 
 
$
%
 
Impax Generics
 
Diclofenac Sodium Gel family (generic Solaraze®)
 
$
50,290

22
%
(6)
Impax Generics
 
Amphetamine Salts ER (CII) family (generic Adderall®)
 
$
21,518

10
%
(5)
Impax Generics
 
Fenofibrate family
 
$
16,380

7
%
(7)
Impax Specialty Pharma
 
Rytary® family
 
$
14,926

7
%
(2)
Impax Specialty Pharma
 
Albenza® family
 
$
13,088

6
%
(8)

(1) Epinephrine Auto-Injector (generic Adrenaclick®) product family consists of the injector product in two different strengths and is indicated in the emergency treatment of allergic reactions (Type 1) including anaphylaxis.

(2) Rytary® product family consists of the capsules product in four different strengths and is indicated for the treatment of Parkinson’s disease, post-encephalitic parkinsonism, and parkinsonism that may follow carbon monoxide intoxication or manganese intoxication.

(3) Oxymorphone Hydrochloride Extended Release product family consists of the oxymorphone hydrochloride extended release tablet formulation of the product in seven different strengths and is indicated for the management of pain severe enough to require daily, around-the-clock, long-term opioid treatment and for which alternative treatment options are inadequate.

(4) Budesonide product family consists of the budesonide inhalation suspension formulation of the product in two different strengths and is indicated for the maintenance treatment of asthma and as prophylactic therapy in children 12 months to 8 years of age.

(5) Amphetamine Salts extended release (ER) capsules, CII (generic Adderall XR®) product family consists of the capsules product in six different strengths and is indicated for the treatment of attention deficit hyperactivity disorder.

(6) Diclofenac Sodium Gel (generic Solaraze®) product family consists of one product strength and is indicated for the topical treatment of actinic keratosis.

(7) Fenofibrate product family consists of products in both capsule and tablet dosage forms in seven different strengths and is indicated as adjunctive therapy to diet to reduce elevated LDL-C, Total-C, Triglycerides and Apo B, and to increase HDL-C in adult patients with primary hypercholesterolemia or mixed dyslipidemia (Fredrickson Types IIa and IIb); and also indicated as adjunctive therapy to diet for treatment of adult patients with hypertriglyceridemia (Fredrickson Types IV and V hyperlipidemia).

(8) Albenza® product family consists of one strength and is indicated for the treatment of parenchymal neurocysticercosis due to active lesions caused by larval forms of the pork tapeworm, Taenia solium and the treatment of cystic hydatid disease of the liver, lung, and peritoneum, caused by the larval form of the dog tapeworm, Echinococcus granulosus.

SUPPLEMENTARY FINANCIAL INFORMATION (Tables)
Schedule of Quarterly Financial Information
Selected financial information for the quarterly period noted is as follows:
(in thousands, except share and per share amounts)
 
Quarter Ended March 31, 2017
Revenue:
 
 
Impax Generic Product sales, gross
 
$
630,672

  Less:
 
 
    Chargebacks
 
298,744

    Rebates
 
164,792

    Product Returns
 
9,733

    Other credits
 
28,481

  Impax Generic Product sales, net
 
128,922

 
 
 
  Rx Partner
 
5,159

  Other Revenues
 
66

Impax Generic Division revenues, net
 
134,147

 
 
 
Impax Specialty Pharma sales, gross
 
84,133

  Less:
 
 
    Chargebacks
 
9,828

    Rebates
 
4,483

    Product Returns
 
1,844

    Other credits
 
17,722

  Impax Specialty Pharma sales, net
 
50,256

 
 
 
Impax Specialty Pharma revenues, net
 
50,256

 
 
 
Total revenues
 
184,403

 
 
 
Gross profit
 
24,891

 
 
 
Net loss
 
$
(98,431
)
 
 
 
Net loss per common share:
 
 
    Basic
 
$
(1.37
)
    Diluted
 
$
(1.37
)
 
 
 
Weighted-average common shares outstanding:
 
 
    Basic
 
71,594,472

    Diluted
 
71,594,472


(in thousands, except share and per share amounts)
 
Quarter Ended March 31, 2016
Revenue:
 
 
Impax Generic Product sales, gross
 
$
611,281

  Less:
 
 
    Chargebacks
 
217,354

    Rebates
 
185,476

    Product Returns
 
11,913

    Other credits
 
29,354

  Impax Generic Product sales, net
 
167,184

 
 
 
  Rx Partner
 
2,835

  Other Revenues
 
60

Impax Generic Division revenues, net
 
170,079

 
 
 
Impax Specialty Pharma sales, gross
 
82,073

  Less:
 
 
    Chargebacks
 
6,111

    Rebates
 
2,853

    Product Returns
 
1,508

    Other credits
 
16,172

  Impax Specialty Pharma sales, net
 
55,429

 
 
 
Impax Specialty Pharma revenues, net
 
55,429

 
 
 
Total revenues
 
225,508

 
 
 
Gross profit
 
102,590

 
 
 
Net loss
 
$
(10,408
)
 
 
 
Net loss per common share:
 
 
    Basic
 
$
(0.15
)
    Diluted
 
$
(0.15
)
 
 
 
Weighted-average common shares outstanding:
 
 
    Basic
 
70,665,394

    Diluted
 
70,665,394

DESCRIPTION OF BUSINESS (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 3 Months Ended 0 Months Ended
Mar. 31, 2017
product
segment
sales_channel
Mar. 31, 2017
California
property
Mar. 31, 2017
Hayward California
facility
Jul. 14, 2016
President
Dec. 31, 2016
Severance Charges And Accelerated Equity Expense
President, Chief Executive Officer, and Board of Directors Member
Dec. 31, 2016
Severance Charges
President, Chief Executive Officer, and Board of Directors Member
Dec. 31, 2016
Accelerated Equity Expense
President, Chief Executive Officer, and Board of Directors Member
Business Acquisition [Line Items]
 
 
 
 
 
 
 
Number of reportable segments
2 
 
 
 
 
 
 
Number of operating divisions
2 
 
 
 
 
 
 
Number of channels
4 
 
 
 
 
 
 
Number of internally developed branded pharmaceutical product candidate
1 
 
 
 
 
 
 
Number of other branded products
4 
 
 
 
 
 
 
Number of owned properties
 
5 
 
 
 
 
 
Number of leased properties
 
 
2 
 
 
 
 
Renewal period
 
 
 
1 year 
 
 
 
Notice of non-renewal period
 
 
 
90 days 
 
 
 
Employee related costs
 
 
 
 
$ 5.4 
$ 4.9 
$ 0.5 
BUSINESS ACQUISITION (Details) (USD $)
3 Months Ended 0 Months Ended 3 Months Ended 6 Months Ended 0 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Aug. 18, 2016
Teva transaction
Aug. 3, 2016
Teva transaction
Mar. 31, 2017
Teva transaction
Dec. 31, 2016
Teva transaction
Sep. 30, 2016
Teva transaction
Aug. 3, 2016
Teva transaction
Currently marketed product rights
Aug. 3, 2016
Teva transaction
Revolving Credit Facility
Term Loan
Aug. 3, 2016
Teva transaction
Maximum
Acquired Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Total cash consideration
 
 
 
 
$ 585,800,000 
 
 
 
 
 
 
Contingent consideration
 
 
 
 
 
 
 
 
 
 
40,000,000 
Proceeds from issuance of debt
 
 
 
 
 
 
 
 
 
400,000,000.0 
 
Business combination, acquisition related costs
 
 
 
 
 
 
 
3,800,000 
 
 
 
Acquired balances
 
 
 
42,400,000 
 
 
 
 
 
 
 
Chargeback and reserve payments
 
 
 
 
 
29,100,000 
 
 
 
 
 
Estimated Teva and Allergan chargebacks and rebates
13,277,000 
 
14,813,000 
 
 
13,300,000 
 
 
 
 
 
Fair value inputs, discount rate
 
 
 
 
 
 
 
 
6.70% 
 
 
Impairment charge
39,280,000 
0 
 
 
 
41,800,000 
308,400,000 
 
 
 
 
Total consideration transferred
 
 
 
 
$ 615,900,000 
 
 
 
 
 
 
BUSINESS ACQUISITIONS - Purchase Price Allocation - Teva (Details) (USD $)
0 Months Ended
Aug. 3, 2016
Business Acquisition [Line Items]
 
Fair value of contingent consideration pursuant to Termination Agreement
$ 30,100,000 
Teva transaction
 
Business Acquisition [Line Items]
 
Purchase price per the APAs
575,800,000 
Upfront payment pursuant to Termination Agreement
10,000,000 
Total cash consideration
585,800,000 
Fair value of contingent consideration pursuant to Termination Agreement
30,100,000 
Total consideration transferred
615,900,000 
Maximum |
Teva transaction
 
Business Acquisition [Line Items]
 
Additional consideration
$ 40,000,000 
BUSINESS ACQUISITIONS - Fair Values of Tangible and Identifiable Intangible Assets Acquired and Liabilities Assumed - Teva (Details) (Teva transaction, USD $)
In Thousands, unless otherwise specified
Aug. 3, 2016
Teva transaction
 
Business Acquisition [Line Items]
 
Intangible assets
$ 613,032 
Inventory - raw materials
2,868 
Total assets acquired
$ 615,900 
BUSINESS ACQUISITIONS - Acquired Intangible Assets - Teva (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 0 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Aug. 3, 2016
Teva transaction
Aug. 3, 2016
In-process research and development product rights
Teva transaction
Aug. 3, 2016
Reacquired in process research and development
Teva transaction
Mar. 31, 2017
Marketed product rights
Dec. 31, 2016
Marketed product rights
Aug. 3, 2016
Marketed product rights
Teva transaction
Mar. 31, 2017
Marketed product rights
Teva transaction
Aug. 3, 2016
Marketed product rights
Teva transaction
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
 
 
Marketed product rights
$ 488,248 
$ 525,072 
 
 
 
$ 487,909 
$ 524,733 
 
$ 2,500 
$ 455,529 
Acquired IPR&D product rights
226,443 
234,978 
 
157,503 
78,900 
 
 
 
 
 
Total intangible assets
$ 714,691 
$ 760,050 
$ 613,032 
 
 
 
 
 
 
 
Weighted average amortization period
7 years 5 months 
 
 
 
 
 
 
19 years 
 
 
BUSINESS ACQUISITIONS - Unaudited Condensed Pro Forma Consolidated Statements of Operations - Teva (Details) (Teva transaction, USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Teva transaction
 
Business Acquisition [Line Items]
 
Total revenues
$ 269,721 
Net income
$ 1,053 
BASIS OF PRESENTATION (Details) (Prohealth Biotech)
Mar. 31, 2017
Prohealth Biotech
 
Schedule of Equity Method Investments [Line Items]
 
Equity method investment, ownership percentage
57.54% 
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)
3 Months Ended
Mar. 31, 2017
Minimum
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
Cash discount, discount rate
2.00% 
Cash discount, invoice terms
30 days 
Maximum
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
Cash discount, discount rate
3.00% 
Cash discount, invoice terms
90 days 
RECENT ACCOUNTING PRONOUNCEMENTS (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2016
Jan. 1, 2017
Retained Earnings
Accounting Standards Update 2016-09
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
 
 
Future minimum lease payments
$ 30.2 
 
Opening retained earnings
 
$ 1.4 
FAIR VALUE MEASUREMENT AND FINANCIAL INSTRUMENTS (Details) (USD $)
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Aug. 3, 2016
Teva transaction
Maximum
Mar. 31, 2017
2% Convertible senior notes due June 2022
Dec. 31, 2016
2% Convertible senior notes due June 2022
Mar. 31, 2017
Term Loan
Dec. 31, 2016
Term Loan
Mar. 31, 2017
Quoted Prices in Active Markets (Level 1)
Dec. 31, 2016
Quoted Prices in Active Markets (Level 1)
Mar. 31, 2017
Quoted Prices in Active Markets (Level 1)
2% Convertible senior notes due June 2022
Dec. 31, 2016
Quoted Prices in Active Markets (Level 1)
2% Convertible senior notes due June 2022
Mar. 31, 2017
Significant Other Observable Inputs (Level 2)
Dec. 31, 2016
Significant Other Observable Inputs (Level 2)
Mar. 31, 2017
Significant Other Observable Inputs (Level 2)
2% Convertible senior notes due June 2022
Dec. 31, 2016
Significant Other Observable Inputs (Level 2)
2% Convertible senior notes due June 2022
Mar. 31, 2017
Significant Unobservable Inputs (Level 3)
Dec. 31, 2016
Significant Unobservable Inputs (Level 3)
Mar. 31, 2017
Significant Unobservable Inputs (Level 3)
2% Convertible senior notes due June 2022
Dec. 31, 2016
Significant Unobservable Inputs (Level 3)
2% Convertible senior notes due June 2022
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred compensation plan assets, carrying amount
$ 35,257,000 
$ 37,382,000 
 
 
 
 
 
$ 0 
$ 0 
 
 
$ 35,257,000 
$ 37,382,000 
 
 
$ 0 
$ 0 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term Loan Facility due August 2021, current portion, carrying amount
17,813,000 
17,719,000 
 
 
 
20,000,000 
20,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Term Loan Facility due August 2021, current portion, fair value
20,000,000 
20,000,000 
 
 
 
 
 
0 
0 
 
 
20,000,000 
20,000,000 
 
 
0 
0 
 
 
Term Loan Facility due August 2021, long-term portion, carrying amount
765,101,000 
813,545,000 
 
 
 
320,000,000 
375,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Term Loan Facility due August 2021, long-term portion, fair value
320,000,000 
375,000,000 
 
 
 
 
 
0 
0 
 
 
320,000,000 
375,000,000 
 
 
0 
0 
 
 
2% convertible senior notes due June 2022, carrying amount
 
 
 
600,000,000 
600,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2% convertible senior notes due June 2022, fair value
 
 
 
493,500,000 
469,800,000 
 
 
 
 
493,500,000 
469,800,000 
 
 
0 
0 
 
 
0 
0 
Deferred compensation plan liabilities, carrying amount
31,113,000 
28,582,000 
 
 
 
 
 
0 
0 
 
 
31,113,000 
28,582,000 
 
 
0 
0 
 
 
Contingent consideration, current portion, carrying amount
18,538,000 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration, current portion, fair value
18,538,000 
 
 
 
 
 
 
0 
 
 
 
0 
 
 
 
18,538,000 
 
 
 
Contingent consideration, long-term portion, carrying amount
12,791,000 
31,048,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Contingent consideration, long-term portion, fair value
12,791,000 
31,048,000 
 
 
 
 
 
0 
0 
 
 
0 
0 
 
 
12,791,000 
31,048,000 
 
 
Increase in value from change in 5% probability of successful product launch
1,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Decrease in value from change in 5% probability of successful product launch
1,600,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Decrease in value from decrease in competitors
13,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Increase in value from increase in competitors
5,200,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum contingent consideration payments
 
 
$ 40,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, interest rate, stated percentage
 
 
 
 
 
 
 
 
 
2.00% 
2.00% 
 
 
 
 
 
 
 
 
FAIR VALUE MEASURMENT AND FINANCIAL INSTRUMENTS - Fair Value Changes Unobservable Inputs (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
 
Contingent consideration, beginning balance
$ 31,048 
Change in Fair Value Included in Earnings
281 
Contingent consideration, ending balance
$ 31,329 
ACCOUNTS RECEIVABLE - Composition of Accounts Receivable Net (Details) (USD $)
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
Gross accounts receivable
$ 648,918,000 
$ 794,173,000 
 
Less: Rebate reserve
(225,243,000)
(293,816,000)
 
Less: Chargeback reserve
(138,903,000)
(151,978,000)
 
Less: Distribution services reserve
(9,400,000)
(18,318,000)
 
Less: Discount reserve
(16,646,000)
(17,957,000)
 
Uncollectible Accounts Reserve
(44,708,000)
(54,736,000)
 
Accounts receivable, net
214,018,000 
257,368,000 
 
Reserve for Turing receivable
317,000 
 
48,043,000 
Receivable from Turing Pharmaceuticals AG
 
 
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
Gross accounts receivable
40,600,000 
40,300,000 
 
Turing Pharmaceuticals AG
 
 
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
Gross accounts receivable
40,600,000 
 
 
Reserve for Turing receivable
 
 
48,000,000 
Change in reserve
$ 300,000 
$ 7,700,000 
 
ACCOUNTS RECEIVABLE - Roll Forward of the Rebate Reserves Activity (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2017
Rebate Reserve
Mar. 31, 2016
Rebate Reserve
Rebate reserve
 
 
 
 
Beginning balance
$ 225,243 
$ 293,816 
$ 293,816 
$ 265,229 
Provision recorded during the period
 
 
164,792 
756,774 
Credits issued during the period
 
 
(233,365)
(728,187)
Ending balance
$ 225,243 
$ 293,816 
$ 225,243 
$ 293,816 
ACCOUNTS RECEIVABLE - Roll Forward of the Chargeback Reserves Activity (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2017
Chargeback Reserve
Dec. 31, 2015
Chargeback Reserve
Mar. 31, 2016
Chargeback Reserve
Chargeback reserve
 
 
 
 
 
Beginning balance
$ 138,903 
$ 151,978 
$ 151,978 
 
$ 138,903 
Provision recorded during the period
 
 
308,572 
1,011,400 
 
Credits issued during the period
 
 
(321,647)
(962,052)
 
Ending balance
$ 138,903 
$ 151,978 
 
$ 102,630 
$ 138,903 
INVENTORY - Net of Carrying Value Reserves (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Inventory Disclosure [Abstract]
 
 
Raw materials
$ 65,580 
$ 53,808 
Work in process
5,056 
3,280 
Finished goods
137,874 
130,879 
Total inventory
208,510 
187,967 
Less: Non-current inventory
12,946 
12,737 
Total inventory - current
$ 195,564 
$ 175,230 
INVENTORY (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2017
Unapproved Inventory
Dec. 31, 2016
Unapproved Inventory
Mar. 31, 2017
Raw Materials
Mar. 31, 2017
Finished Goods
Inventory [Line Items]
 
 
 
 
 
 
Inventory valuation reserves
$ 55.6 
$ 38.0 
 
 
 
 
Unapproved product inventory, net
 
 
$ 47.1 
$ 29.2 
 
 
Inventory turnover period, minimum life
 
 
 
 
3 years 
 
Inventory turnover period, maximum life
 
 
 
 
5 years 
2 years 
PROPERTY, PLANT AND EQUIPMENT - Net (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Property, Plant and Equipment [Abstract]
 
 
Land
$ 5,603 
$ 5,603 
Buildings and improvements
180,134 
174,303 
Equipment
149,373 
143,818 
Office furniture and equipment
16,312 
15,767 
Construction-in-progress
55,214 
50,191 
Property, plant and equipment, gross
406,636 
389,682 
Less: Accumulated depreciation
(166,396)
(156,310)
Property, plant and equipment, net
$ 240,240 
$ 233,372 
PROPERTY, PLANT AND EQUIPMENT - Schedule (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Property, Plant and Equipment [Abstract]
 
 
Depreciation
$ 7.8 
$ 6.3 
Property, plant and equipment excluded from statement of cash flows
$ 4.3 
$ 4.5 
INTANGIBLE ASSETS AND GOODWILL - Schedule of Intangible Assets (Details) (USD $)
In Thousands, unless otherwise specified
Mar. 31, 2017
Dec. 31, 2016
Amortized intangible assets:
 
 
Gross Carrying Value
$ 488,248 
$ 525,072 
Accumulated Amortization
(156,817)
(139,584)
Intangible Assets, Net
331,431 
385,488 
Non-amortized intangible assets:
 
 
Gross Carrying Value
226,443 
234,978 
Total intangible assets
714,691 
760,050 
Total intangible assets, net
557,874 
620,466 
Acquired IPR&D product rights
 
 
Non-amortized intangible assets:
 
 
Gross Carrying Value
225,308 
232,576 
Acquired future royalty rights
 
 
Non-amortized intangible assets:
 
 
Gross Carrying Value
1,135 
2,402 
Marketed product rights
 
 
Amortized intangible assets:
 
 
Gross Carrying Value
487,909 
524,733 
Accumulated Amortization
(156,478)
(139,245)
Intangible Assets, Net
331,431 
385,488 
Royalties
 
 
Amortized intangible assets:
 
 
Gross Carrying Value
339 
339 
Accumulated Amortization
(339)
(339)
Intangible Assets, Net
$ 0 
$ 0 
INTANGIBLE ASSETS AND GOODWILL (Details) (USD $)
3 Months Ended 3 Months Ended 0 Months Ended 3 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Mar. 31, 2017
Impax Generics
Mar. 31, 2017
Impax Specialty Pharma
Mar. 31, 2017
Minimum
Mar. 31, 2017
Maximum
Mar. 31, 2017
IPR&D Product Rights
Dec. 31, 2016
IPR&D Product Rights
Mar. 31, 2017
Marketed Product Rights
Dec. 31, 2016
Marketed Product Rights
Mar. 31, 2017
Teva transaction
product
Mar. 31, 2017
Teva transaction
IPR&D Product Rights
product
Aug. 3, 2016
Teva transaction
In-process research and development
Aug. 3, 2016
Teva transaction
Marketed Product Rights
Mar. 31, 2017
Teva transaction
Marketed Product Rights
product
Aug. 3, 2016
Teva transaction
Marketed Product Rights
Mar. 31, 2017
Cost of Sales
Mar. 31, 2017
In-process research and development
Amortized intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average amortization period
7 years 5 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
19 years 
 
 
 
 
Intangible asset impairment charges
$ 45,400,000 
$ 0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 39,300,000 
$ 6,100,000 
Intangible assets, number of products impaired
 
 
 
 
 
 
 
 
 
 
 
3 
 
 
 
2 
 
 
 
Indefinite-lived intangible assets, number of products impaired
 
 
 
 
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
Carrying value
226,443,000 
 
234,978,000 
 
 
 
 
225,308,000 
232,576,000 
 
 
 
 
157,503,000 
 
 
 
 
 
Asset value
488,248,000 
 
525,072,000 
 
 
 
 
 
 
487,909,000 
524,733,000 
 
 
 
 
2,500,000 
455,529,000 
 
 
Useful life
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
7 years 
 
 
 
Amortization expense
17,200,000 
8,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Future amortization expense
 
 
 
 
 
31,100,000 
67,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
$ 207,329,000 
 
$ 207,300,000 
$ 147,600,000 
$ 59,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ACCRUED EXPENSES (Details) (USD $)
0 Months Ended 3 Months Ended 20 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Aug. 18, 2016
Teva transaction
Mar. 31, 2017
Teva transaction
Mar. 31, 2017
Turing Pharmaceuticals AG
Dec. 31, 2016
Turing Pharmaceuticals AG
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
 
 
 
Payroll-related expenses
$ 31,505,000 
$ 37,986,000 
 
 
 
 
Product returns
75,783,000 
72,888,000 
 
 
 
 
Accrued shelf stock
5,906,000 
7,032,000 
 
 
 
 
Government rebates
71,721,000 
72,063,000 
 
 
 
 
Legal and professional fees
9,464,000 
8,395,000 
 
 
 
 
Income taxes payable
462,000 
0 
 
 
 
 
Interest payable
3,500,000 
544,000 
 
 
 
 
Estimated Teva and Allergan chargebacks and rebates
13,277,000 
14,813,000 
 
13,300,000 
 
 
Accrued profit sharing and royalty expenses
8,175,000 
13,642,000 
 
 
 
 
Other
11,898,000 
17,290,000 
 
 
 
 
Total accrued expenses
231,691,000 
244,653,000 
 
 
 
 
Accounts receivable, net
 
 
 
 
3,100,000 
6,800,000 
Accounts receivable, payments made on behalf of counterparty
 
 
 
 
45,300,000 
 
Acquired balances
 
 
42,400,000 
 
 
 
Chargeback and reserve payments
 
 
 
$ 29,100,000 
 
 
ACCRUED EXPENSES - Product Returns (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Movement in Standard Product Warranty Accrual [Roll Forward]
 
 
Ending balance
$ 75,783 
$ 72,888 
Returns Reserve
 
 
Movement in Standard Product Warranty Accrual [Roll Forward]
 
 
Beginning balance
72,888 
48,950 
Provision related to sales recorded in the period
11,577 
52,383 
Credits issued during the period
(8,682)
(28,445)
Ending balance
$ 75,783 
$ 72,888 
DEBT (Details) (USD $)
0 Months Ended 3 Months Ended 0 Months Ended 3 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended 3 Months Ended 0 Months Ended
Jun. 30, 2015
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Jun. 30, 2015
Conversion Option
Jun. 30, 2015
Convertible Debt
day
Mar. 31, 2017
Convertible Debt
Mar. 31, 2016
Convertible Debt
Dec. 31, 2016
Convertible Debt
Jun. 30, 2015
Convertible Debt
Jun. 30, 2015
Convertible Debt
Conversion Circumstance 2
day
Aug. 3, 2016
Teva transaction
Mar. 31, 2017
Revolving Credit Facility
Mar. 27, 2017
Revolving Credit Facility
Aug. 3, 2016
Revolving Credit Facility
Aug. 2, 2016
Revolving Credit Facility
Aug. 3, 2016
Revolving Credit Facility
Maximum
Aug. 3, 2016
Revolving Credit Facility
Minimum
Aug. 3, 2016
Revolving Credit Facility
London Interbank Offered Rate (LIBOR) [Member]
Aug. 3, 2016
Letter of Credit
Mar. 31, 2017
Term Loan
Dec. 31, 2016
Term Loan
Feb. 28, 2017
Term Loan
Revolving Credit Facility
Mar. 31, 2017
Term Loan
Revolving Credit Facility
Aug. 3, 2016
Term Loan
Revolving Credit Facility
Aug. 3, 2016
Term Loan
Revolving Credit Facility
Teva transaction
Mar. 31, 2017
Term Loan
Revolving Credit Facility
Teva transaction
Sep. 30, 2016
Term Loan
Revolving Credit Facility
Teva transaction
Aug. 3, 2016
Term Loan
Revolving Credit Facility
Teva transaction
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Borrowing capacity
 
 
 
 
 
 
 
 
 
 
 
 
$ 200,000,000.0 
 
$ 200,000,000.0 
$ 100,000,000.0 
 
 
 
$ 12,500,000.0 
 
 
 
 
$ 400,000,000.0 
 
 
 
 
Change in margin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.25% 
 
 
 
 
 
 
 
 
 
 
Commitment fee percentage
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
0.50% 
0.375% 
 
 
 
 
 
 
 
 
 
 
 
Leverage ratio (not to exceed)
 
 
 
 
 
 
 
 
 
 
 
 
 
2.5 
5.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest coverage ratio (less than)
 
 
 
 
 
 
 
 
 
 
 
 
 
3.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Proceeds from issuance of debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
400,000,000 
 
 
 
Cash
 
 
 
 
 
 
 
 
 
 
 
196,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt issuance costs
 
 
 
 
 
 
 
 
 
18,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
11,000,000 
 
Debt issuance costs for lines of credit
 
 
 
 
 
 
 
 
 
 
 
 
 
 
300,000 
 
 
 
 
 
 
 
 
 
 
 
800,000 
 
800,000 
Interest expense
 
 
 
 
 
 
8,700,000 
8,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4,400,000 
 
 
 
 
 
Increase in accrued interest
 
 
 
 
 
 
3,000,000 
3,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,800,000 
 
 
 
 
 
Non-cash accretion
 
 
 
 
 
 
5,700,000 
5,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
600,000 
 
 
 
 
 
Long-term debt
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
330,800,000 
 
 
 
 
 
Current portion of long-term debt, net
 
17,813,000 
 
17,719,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20,000,000 
20,000,000 
 
17,800,000 
 
 
 
 
 
Long-term debt, net
 
765,101,000 
 
813,545,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
320,000,000 
375,000,000 
 
313,000,000 
 
 
 
 
 
Principal payment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,000,000 
 
 
 
 
 
Outstanding principal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
340,000,000 
 
 
 
 
 
Repayment of debt and accrued interest
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50,300,000 
 
 
 
 
 
 
Repayment of debt principal
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
50,000,000 
 
 
 
 
 
 
Interest payment
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
300,000 
 
 
 
 
 
 
Loss on debt extinguishment
 
1,215,000 
0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
1,200,000 
 
 
 
 
 
 
Convertible debt
600,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt instrument, interest rate, stated percentage
 
 
 
 
 
 
 
 
 
2.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion ratio
 
 
 
 
 
0.0157858 
15.7858 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exercise price (in Dollars per share)
 
 
 
 
 
 
$ 63.35 
 
 
$ 63.35 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of trading days (at least)
 
 
 
 
 
20 
 
 
 
 
5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of consecutive trading days
 
 
 
 
 
30 days 
 
 
 
 
10 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of stock price trigger
 
 
 
 
 
130.00% 
 
 
 
 
98.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of conversion option derivative liability
 
 
 
 
167,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Carrying value of convertible debt
 
452,100,000 
 
446,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest payable
 
 
 
 
 
 
$ 3,500,000 
 
$ 500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
STOCKHOLDERS' EQUITY (Details) (USD $)
In Millions, except Share data, unless otherwise specified
0 Months Ended 3 Months Ended 3 Months Ended 12 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2016
Jan. 1, 2017
Retained Earnings
Accounting Standards Update 2016-09
Jun. 30, 2015
Convertible Debt
Mar. 31, 2017
Convertible Debt
Jun. 30, 2015
Convertible Debt
Mar. 31, 2017
Warrant
Dec. 31, 2015
Warrant
Class of Stock [Line Items]
 
 
 
 
 
 
 
 
 
Shares authorized
2,000,000 
2,000,000 
 
 
 
 
 
 
 
Preferred stock, par value (in Dollars per share)
$ 0.01 
$ 0.01 
 
 
 
 
 
 
 
Preferred stock, shares issued
0 
0 
 
 
 
 
 
 
 
Preferred stock, shares outstanding
0 
0 
 
 
 
 
 
 
 
Common stock, shares authorized
150,000,000 
150,000,000 
 
 
 
 
 
 
 
Common stock, par value (in Dollars per share)
$ 0.01 
$ 0.01 
$ 0.01 
 
 
 
 
 
 
Common stock, shares issued
74,048,000 
73,948,340 
 
 
 
 
 
 
 
Common stock, shares outstanding
73,804,474 
73,704,611 
 
 
 
 
 
 
 
Warrants to purchase common stock
 
 
 
 
 
 
 
9,471,000 
 
Proceeds from sale of warrants
 
 
 
 
 
 
 
$ 88.3 
 
Exercise price of warrants (in Dollars per share)
 
 
 
 
 
 
 
$ 81.277 
 
Number of call options
 
 
 
 
 
600,000 
 
 
 
Consideration for call options
 
 
 
 
 
147.0 
 
 
 
Conversion ratio
 
 
 
 
0.0157858 
15.7858 
 
 
 
Exercise price (in Dollars per share)
 
 
 
 
 
$ 63.35 
$ 63.35 
 
 
Increase to additional paid-in capital
 
 
 
 
 
 
 
 
21 
Opening retained earnings
 
 
 
$ 1.4 
 
 
 
 
 
STOCKHOLDERS' EQUITY - Common Stock Reserved for Future Issuance (Details)
3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2017
Warrant
Mar. 31, 2017
Employee Stock Option
Mar. 31, 2017
Warrant
Class of Stock [Line Items]
 
 
 
 
 
Shares issued
74,048,000 
73,948,340 
 
 
 
Shares Outstanding
 
 
9,471,000 
3,343,000 
 
Conversion of Notes payable
 
 
 
 
9,471,000 
Total shares of common stock issued and reserved for issuance
96,333,000 
 
 
 
 
EARNINGS PER SHARE (Details)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Warrant
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
Antidilutive securities (shares)
9.47 
9.47 
Convertible Debt Securities
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
Antidilutive securities (shares)
9.47 
9.47 
Employee Stock Option
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
Antidilutive securities (shares)
3.34 
2.48 
Restricted Stock
 
 
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
Antidilutive securities (shares)
2.21 
2.15 
EARNINGS PER SHARE - Reconciliation of Basic and Diluted Earnings Per Share (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Earnings Per Share [Abstract]
 
 
Net loss
$ (98,431)
$ (10,408)
Weighted-average common shares outstanding
71,594,472 
70,665,000 
Basic loss per share (in Dollars per share)
$ (1.37)
$ (0.15)
Add-back of interest expense on outstanding convertible notes payable, net of tax
0 
0 
Adjusted net loss
$ (98,431)
$ (10,408)
Weighted-average incremental shares related to assumed exercise of warrants and stock options, vesting of non-vested shares and ESPP share issuance
0 
0 
Weighted-average incremental shares assuming conversion of outstanding notes payable
0 
0 
Diluted weighted-average common shares outstanding
71,594,000 
70,665,394 
Diluted net loss per share (in Dollars per share)
$ (1.37)
$ (0.15)
SHARE-BASED COMPENSATION (Details) (USD $)
3 Months Ended 0 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Mar. 27, 2017
President and CEO
Mar. 31, 2017
President and CEO
Mar. 31, 2017
Amended and Restated 2002 Equity Incentive Plan
Dec. 31, 2016
Amended and Restated 2002 Equity Incentive Plan
Mar. 31, 2017
The 1999 Equity Incentive Plan
Dec. 31, 2016
The 1999 Equity Incentive Plan
Mar. 31, 2017
The ESPP Plan
Mar. 31, 2017
Stock Options And Restricted Stock Awards
Mar. 31, 2017
Stock Options And Restricted Stock Awards
Maximum
Mar. 31, 2017
Restricted Stock
Mar. 31, 2016
Restricted Stock
Mar. 31, 2017
Restricted Stock
Withheld for Minimum Withholding Tax Purposes
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vesting period
 
 
 
 
 
 
 
 
 
 
 
4 years 
 
 
 
Term of awards
 
 
 
 
 
 
 
 
 
 
10 years 
 
 
 
 
Number of shares authorized
 
 
 
 
 
15,950,000 
 
5,000,000 
 
 
 
 
 
 
 
Stock options outstanding (shares)
3,342,609 
 
2,234,331 
 
850,000 
2,491,671 
2,233,393 
938 
938 
 
 
 
 
 
 
Restricted stock awards outstanding (shares)
 
 
 
 
 
2,207,455 
2,160,127 
 
 
 
 
 
 
 
 
Options granted (shares)
1,116,770 
 
 
850,000 
 
 
 
 
 
 
 
 
 
 
 
Weighted average contractual life
6 years 1 month 24 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average remaining contractual life
5 years 9 months 6 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intrinsic value of options outstanding
$ 10,300,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intrinsic value of exercisable options
2,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock awards intrinsic value
 
 
 
 
 
 
 
 
 
 
 
 
27,900,000 
 
 
Stock options vested or expected to vest (shares)
2,959,188 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restricted stock awards vested or expected to vest (shares)
1,954,245 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Vested (shares)
 
 
 
 
 
 
 
 
 
 
 
 
66,697 
 
31,682 
Vested (in Dollars per share)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 14.13 
Number of shares available for grant
 
 
 
 
 
161,813 
 
296,921 
 
40,371 
 
 
 
 
 
Unrecognized share-based compensation expense
64,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period of recognition
2 years 1 month 21 days 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intrinsic value of options exercisable
0 
4,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fair value of restricted stock vested
 
 
 
 
 
 
 
 
 
 
 
 
$ 2,300,000 
$ 2,600,000 
 
Dividend yield
0.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SHARE-BASED COMPENSATION - Summary of Stock Option Activity (Details) (USD $)
3 Months Ended
Mar. 31, 2017
Number of Shares Under Option
 
Outstanding at December 31, 2016 (shares)
2,234,331 
Options granted (shares)
1,116,770 
Options exercised (shares)
(6,122)
Options forfeited (shares)
(2,370)
Outstanding at March 31, 2017 (shares)
3,342,609 
Options exercisable at March 31, 2017 (shares)
1,623,770 
Weighted- Average Exercise Price per Share
 
Outstanding at December 31, 2016 (in Dollars per share)
$ 22.67 
Options granted (in Dollars per share)
$ 5.80 
Options exercised ( in Dollars per share)
$ 8.20 
Options forfeited (in Dollars per share)
$ 10.57 
Outstanding at March 31, 2017 (in Dollars per share)
$ 17.02 
Options exercisable at March 31, 2017 (in Dollars per share)
$ 19.81 
SHARE-BASED COMPENSATION - Summary of Non-vested Restricted Stock Awards (Details) (Restricted Stock Awards, USD $)
3 Months Ended
Mar. 31, 2017
Restricted Stock Awards
 
Number of Restricted Stock Awards
 
Non-vested at December 31, 2016 (shares)
2,160,127 
Granted (shares)
165,501 
Vested (shares)
(66,697)
Forfeited (shares)
(51,476)
Non-vested at March 31, 2017 (shares)
2,207,455 
Weighted- Average Grant Date Fair Value
 
Non-vested at December 31, 2016 (in Dollars per share)
$ 34.02 
Granted (in Dollars per share)
$ 10.75 
Vested (in Dollars per share)
$ 34.28 
Forfeited (in Dollars per share)
$ 35.62 
Non-vested at March 31, 2017 (in Dollars per share)
$ 32.23 
SHARE-BASED COMPENSATION - Share-based Compensation Expense (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
Share-based compensation expense
$ 6,957 
$ 7,278 
Manufacturing expenses
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
Share-based compensation expense
1,584 
1,368 
Research and development
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
Share-based compensation expense
1,423 
1,340 
Selling, general and administrative
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
 
 
Share-based compensation expense
$ 3,950 
$ 4,570 
RESTRUCTURINGS (Details) (USD $)
3 Months Ended 1 Months Ended 3 Months Ended 13 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2017
Cost of Sales
Mar. 31, 2017
Technical Operations Group Reduction-in-force
position
Mar. 31, 2017
Manufacturing and Packaging Site
position
Mar. 31, 2017
Manufacturing and Packaging Site
Mar. 31, 2017
Manufacturing and Packaging Site
Minimum
Mar. 31, 2017
Technical Operations and R&D
Dec. 31, 2015
Technical Operations and R&D
position
Mar. 31, 2017
Employee retention and severance payments
Mar. 31, 2017
Employee retention and severance payments
Manufacturing and Packaging Site
Mar. 31, 2017
Technical transfer of products
Mar. 31, 2017
Technical transfer of products
Manufacturing and Packaging Site
Mar. 31, 2017
Asset impairment and accelerated depreciation charges
Mar. 31, 2017
Asset impairment and accelerated depreciation charges
Manufacturing and Packaging Site
Mar. 31, 2017
Facilities lease terminations and asset retirement obligations
Mar. 31, 2017
Facilities lease terminations and asset retirement obligations
Manufacturing and Packaging Site
Mar. 31, 2017
Legal and professional fees
Mar. 31, 2017
Legal and professional fees
Manufacturing and Packaging Site
Restructuring Cost and Reserve [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of positions eliminated (employee)
 
 
18 
 
 
 
 
27 
 
 
 
 
 
 
 
 
 
 
Number of positions eliminated with employment through year end (employee)
 
 
2 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount expected to be incurred
 
 
$ 2,500,000 
$ 48,300,000 
$ 48,300,000 
$ 48,300,000 
 
 
 
$ 14,100,000 
 
$ 11,200,000 
 
$ 20,900,000 
 
$ 1,900,000 
 
$ 200,000 
Costs incurred to date
 
 
1,800,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and related cost, estimated completion period (up to)
 
 
 
2 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and related cost, expected number of positions eliminated
 
 
 
215 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Restructuring and related cost, incurred cost
 
4,300,000 
 
 
31,400,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Severance costs
 
 
 
 
 
 
 
2,500,000 
 
 
 
 
 
 
 
 
 
 
Cash payments
$ 1,343,000 
 
 
 
 
 
$ 2,500,000 
 
$ 155,000 
 
$ 1,188,000 
 
$ 0 
 
$ 0 
 
$ 0 
 
RESTRUCTURINGS - Summary of Reserve Activity (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Restructuring Reserve [Roll Forward]
 
Restructuring reserve, period start
$ 6,154 
Expensed / Accrued Expense
4,322 
Cash Payments
(1,343)
Non-Cash Items
(1,561)
Restructuring reserve, period end
7,572 
Employee retention and severance payments
 
Restructuring Reserve [Roll Forward]
 
Restructuring reserve, period start
5,945 
Expensed / Accrued Expense
1,480 
Cash Payments
(155)
Non-Cash Items
0 
Restructuring reserve, period end
7,270 
Technical transfer of products
 
Restructuring Reserve [Roll Forward]
 
Restructuring reserve, period start
0 
Expensed / Accrued Expense
1,188 
Cash Payments
(1,188)
Non-Cash Items
0 
Restructuring reserve, period end
0 
Asset impairment and accelerated depreciation charges
 
Restructuring Reserve [Roll Forward]
 
Restructuring reserve, period start
0 
Expensed / Accrued Expense
1,561 
Cash Payments
0 
Non-Cash Items
(1,561)
Restructuring reserve, period end
0 
Facilities lease terminations and asset retirement obligations
 
Restructuring Reserve [Roll Forward]
 
Restructuring reserve, period start
209 
Expensed / Accrued Expense
93 
Cash Payments
0 
Non-Cash Items
0 
Restructuring reserve, period end
302 
Legal and professional fees
 
Restructuring Reserve [Roll Forward]
 
Restructuring reserve, period start
0 
Expensed / Accrued Expense
0 
Cash Payments
0 
Non-Cash Items
0 
Restructuring reserve, period end
$ 0 
INCOME TAXES (Details) (USD $)
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Dec. 31, 2016
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
Provision for (benefit from) income taxes
$ 30,901,000 
$ (7,100,000)
 
Effective income tax rate reconciliation, percent
45.80% 
(40.50%)
 
Effective income tax rate reconciliation, excluding discrete items, percent
 
34.00% 
 
Valuation allowance
162,700,000 
 
108,800,000 
Additional valuation allowance
53,900,000 
 
 
Provision for U.S. federal deferred income taxes
0 
 
 
Turing Pharmaceuticals AG
 
 
 
Accounts, Notes, Loans and Financing Receivable [Line Items]
 
 
 
Provision for (benefit from) income taxes
 
$ 17,400,000 
 
ALLIANCE AND COLLABORATION AGREEMENTS (Details) (USD $)
3 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 3 Months Ended 1 Months Ended 3 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 3 Months Ended 0 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended 6 Months Ended 3 Months Ended
Mar. 31, 2017
Dec. 31, 2016
Mar. 31, 2017
Products Approved
product
May 31, 2016
Tolmar Incorporated
Mar. 31, 2012
Tolmar Incorporated
agreement
Aug. 31, 2013
Teva
Mar. 31, 2016
Teva
Mar. 31, 2017
Acceptance Of Regulatory Filings For Substantive Review
Mar. 31, 2017
Specified Threshold
Mar. 31, 2017
Shire Laboratories Incorporated
Mar. 31, 2016
Shire Laboratories Incorporated
Jun. 30, 2012
Tolmar Incorporated
product
Dec. 31, 2015
Tolmar Incorporated
product
Mar. 31, 2017
Tolmar Incorporated
Mar. 31, 2016
Tolmar Incorporated
Jun. 30, 2012
Tolmar Incorporated
Products Approved
product
Jun. 30, 2012
Tolmar Incorporated
Up-front Payment Arrangement
Jun. 30, 2012
Tolmar Incorporated
Milestone Payments
Mar. 31, 2017
Tolmar Incorporated
Milestone Payments
Mar. 31, 2017
Teva Pharmaceutical Industries Limited
Jun. 30, 2002
Pfizer Incorporated
Nov. 30, 2008
Valeant Pharmaceuticals International
product
Mar. 31, 2017
Valeant Pharmaceuticals International
Dec. 31, 2011
Valeant Pharmaceuticals International
Products Approved
product
Nov. 30, 2008
Valeant Pharmaceuticals International
Generic Products
product
Dec. 31, 2011
Valeant Pharmaceuticals International
Generic Products
product
Nov. 30, 2008
Valeant Pharmaceuticals International
Branded Advanced Form of Solodyn Product
product
Mar. 31, 2017
Valeant Pharmaceuticals International
Milestone Payments
Jun. 30, 2016
Astra Zeneca
Mar. 31, 2017
Astra Zeneca
Mar. 31, 2016
Astra Zeneca
Jan. 31, 2012
Astra Zeneca
Mar. 31, 2017
DURECT Corporation
Mar. 31, 2014
DURECT Corporation
Dec. 31, 2012
Minimum
Tolmar Product Rights
Mar. 31, 2017
Minimum
IND-enabling Animal Studies for New Development Candidate
Mar. 31, 2017
Minimum
Phase 1 Trials
Mar. 31, 2017
Minimum
Phase 2 Trials
Mar. 31, 2017
Minimum
Phase 3 Trials
Mar. 31, 2017
Minimum
Bioequivalence Studies
Mar. 31, 2017
Minimum
Preparation And Submission Of Regulatory Filings
Mar. 31, 2017
Minimum
Potential Marketing Approval One
Mar. 31, 2017
Minimum
Potential Marketing Approval Two
Dec. 31, 2012
Maximum
Tolmar Product Rights
Mar. 31, 2017
Maximum
IND-enabling Animal Studies for New Development Candidate
Mar. 31, 2017
Maximum
Phase 1 Trials
Mar. 31, 2017
Maximum
Phase 2 Trials
Mar. 31, 2017
Maximum
Phase 3 Trials
Mar. 31, 2017
Maximum
Bioequivalence Studies
Mar. 31, 2017
Maximum
Preparation And Submission Of Regulatory Filings
Mar. 31, 2017
Maximum
Potential Marketing Approval One
Mar. 31, 2017
Maximum
Potential Marketing Approval Two
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Completion period
 
 
 
 
 
 
 
2 months 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12 months 
1 year 
1 year 
2 years 
3 months 
6 months 
1 year 
1 year 
 
18 months 
2 years 
3 years 
4 years 
1 year 
12 months 
3 years 
3 years 
Product sales
 
 
 
 
 
 
 
 
$ 100,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current portion of contingent consideration
8,175,000 
13,642,000 
 
 
 
 
 
 
 
800,000 
4,000,000 
 
 
900,000 
24,700,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of products
 
 
4 
 
 
 
 
 
 
 
 
11 
 
 
 
10 
 
 
 
 
 
5 
 
1 
4 
4 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number of products with terminated development efforts
 
 
 
 
 
 
 
 
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Upfront payment
 
 
 
 
 
 
 
 
 
 
 
21,000,000 
 
 
 
 
21,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
2,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum achievement payments
 
 
 
 
 
3,500,000 
 
 
 
 
 
 
 
 
 
 
 
25,000,000 
 
 
 
 
 
 
 
 
 
8,000,000.0 
 
 
 
 
61,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Achievement payments made
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
20,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Regulatory milestone event amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
12,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercialization event amount
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Useful life
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
5 years 
 
 
 
 
 
 
 
 
12 years 
 
 
 
 
 
 
 
 
Number of loans
 
 
 
 
1 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum loan amount
 
 
 
 
15,000,000.0 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Payment received under Tolmar Loan Agreement
 
 
 
15,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Service agreement term
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10 years 
15 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Period after first commercial sale to receive royalty fee income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
8 years 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Reduced royalty amounts
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
30,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Required payments as a percent of gross profit on sales
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
100.00% 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Royalty payable
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
3,300,000 
4,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Milestone payment
 
 
 
 
 
 
$ 3,500,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
COMMITMENTS AND CONTINGENCIES (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]
 
Open purchase order commitments
$ 126.8 
Purchase commitment period (less than)
1 year 
LEGAL AND REGULATORY MATTERS (Details) (USD $)
In Millions, unless otherwise specified
0 Months Ended 3 Months Ended 31 Months Ended 11 Months Ended 4 Months Ended 14 Months Ended 0 Months Ended 0 Months Ended
Feb. 10, 2015
cid
Mar. 31, 2017
Jan. 31, 2016
Solodyn
complaint
Apr. 30, 2015
Opana ER
complaint
Apr. 30, 2017
Generic Drug Pricing Class Action
Subsequent Event
complaint
Apr. 30, 2017
Generic Drug Pricing Class Action
Subsequent Event
complaint
Jan. 27, 2017
Generic Digoxin and Doxycycline Antitrust Litigation
complaint
Apr. 6, 2017
Generic Digoxin and Doxycycline Antitrust Litigation
Subsequent Event
drug
May 2, 2016
Turing Pharmaceuticals AG
Loss Contingencies [Line Items]
 
 
 
 
 
 
 
 
 
Period to file suit for patent infringement
 
45 days 
 
 
 
 
 
 
 
Stay period for approval of abbreviated new drug application
 
30 months 
 
 
 
 
 
 
 
Number of complaints
 
 
18 
14 
3 
22 
2 
 
 
Number of generic drugs included in consolidation of civil actions
 
 
 
 
 
 
 
18 
 
Number of CIDs received
3 
 
 
 
 
 
 
 
 
Chargebacks not reimbursed for (more than)
 
 
 
 
 
 
 
 
$ 38.1 
SEGMENT INFORMATION (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
product
segment
Dec. 31, 2016
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Number of reportable segments
2 
 
Number of internally developed branded pharmaceutical product candidate
1 
 
Number of products sold and distributed
4 
 
Assets
$ 1,695,960 
$ 1,823,018 
Taiwan Facility
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
Assets
$ 133,100 
$ 134,900 
SEGMENT INFORMATION - Segment Information Reconciled to Consolidated Financial Results (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Segment Reporting Information [Line Items]
 
 
Total revenues
$ 184,403 
$ 225,508 
Cost of revenues
120,232 
122,918 
Cost of revenues impairment charges
39,280 
0 
Selling, general and administrative
47,055 
44,298 
Research and development
22,489 
19,022 
In-process research and development impairment charges
6,079 
0 
Patent litigation
1,072 
1,319 
(Loss) income before income taxes
(67,530)
(17,494)
Corporate and Other
 
 
Segment Reporting Information [Line Items]
 
 
Selling, general and administrative
24,257 
25,706 
In-process research and development impairment charges
0 
 
(Loss) income before income taxes
(39,983)
(81,151)
Impax Generics
 
 
Segment Reporting Information [Line Items]
 
 
Total revenues
134,147 
170,079 
Impax Generics |
Operating Segments
 
 
Segment Reporting Information [Line Items]
 
 
Total revenues
134,147 
170,079 
Cost of revenues
103,335 
110,122 
Cost of revenues impairment charges
39,280 
 
Selling, general and administrative
6,468 
4,774 
Research and development
17,396 
14,595 
In-process research and development impairment charges
6,079 
 
Patent litigation
368 
114 
(Loss) income before income taxes
(38,779)
40,474 
Impax Specialty Pharma
 
 
Segment Reporting Information [Line Items]
 
 
Total revenues
50,256 
55,429 
Impax Specialty Pharma |
Operating Segments
 
 
Segment Reporting Information [Line Items]
 
 
Total revenues
50,256 
55,429 
Cost of revenues
16,897 
12,796 
Cost of revenues impairment charges
0 
 
Selling, general and administrative
16,330 
13,818 
Research and development
5,093 
4,427 
In-process research and development impairment charges
0 
 
Patent litigation
704 
1,205 
(Loss) income before income taxes
$ 11,232 
$ 23,183 
SEGMENT INFORMATION - Schedule of Product Line Information (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Product Information [Line Items]
 
 
Total revenues
$ 184,403 
$ 225,508 
Impax Generics
 
 
Product Information [Line Items]
 
 
Total revenues
134,147 
170,079 
Impax Generics |
Epinephrine Auto-Injector family (generic Adrenaclick®)
 
 
Product Information [Line Items]
 
 
Total revenues
20,318 
 
Percentage of revenue
11.00% 
 
Impax Generics |
Oxymorphone HCI ER family
 
 
Product Information [Line Items]
 
 
Total revenues
18,970 
 
Percentage of revenue
10.00% 
 
Impax Generics |
Budesonide family
 
 
Product Information [Line Items]
 
 
Total revenues
15,827 
 
Percentage of revenue
9.00% 
 
Impax Generics |
Amphetamine Salts ER (CII) family (generic Adderall®)
 
 
Product Information [Line Items]
 
 
Total revenues
12,173 
21,518 
Percentage of revenue
7.00% 
10.00% 
Impax Generics |
Diclofenac Sodium Gel family (generic Solaraze®)
 
 
Product Information [Line Items]
 
 
Total revenues
 
50,290 
Percentage of revenue
 
22.00% 
Impax Generics |
Fenofibrate family
 
 
Product Information [Line Items]
 
 
Total revenues
 
16,380 
Percentage of revenue
 
7.00% 
Impax Specialty Pharma
 
 
Product Information [Line Items]
 
 
Total revenues
50,256 
55,429 
Impax Specialty Pharma |
Rytary® family
 
 
Product Information [Line Items]
 
 
Total revenues
19,905 
14,926 
Percentage of revenue
11.00% 
7.00% 
Impax Specialty Pharma |
Albenza® family
 
 
Product Information [Line Items]
 
 
Total revenues
 
$ 13,088 
Percentage of revenue
 
6.00% 
SUPPLEMENTARY FINANCIAL INFORMATION (Details) (USD $)
In Thousands, except Share data, unless otherwise specified
3 Months Ended 12 Months Ended 3 Months Ended
Mar. 31, 2017
Mar. 31, 2016
Mar. 31, 2017
Impax Generics
Mar. 31, 2016
Impax Generics
Mar. 31, 2017
Impax Specialty Pharma
Mar. 31, 2016
Impax Specialty Pharma
Mar. 31, 2017
Rx Partner
Impax Generics
Mar. 31, 2016
Rx Partner
Impax Generics
Mar. 31, 2017
Other Revenues
Impax Generics
Mar. 31, 2016
Other Revenues
Impax Generics
Mar. 31, 2017
Chargeback Reserve
Dec. 31, 2015
Chargeback Reserve
Mar. 31, 2017
Chargeback Reserve
Impax Generics
Mar. 31, 2016
Chargeback Reserve
Impax Generics
Mar. 31, 2017
Chargeback Reserve
Impax Specialty Pharma
Mar. 31, 2016
Chargeback Reserve
Impax Specialty Pharma
Mar. 31, 2017
Rebate Reserve
Mar. 31, 2016
Rebate Reserve
Mar. 31, 2017
Rebate Reserve
Impax Generics
Mar. 31, 2016
Rebate Reserve
Impax Generics
Mar. 31, 2017
Rebate Reserve
Impax Specialty Pharma
Mar. 31, 2016
Rebate Reserve
Impax Specialty Pharma
Mar. 31, 2017
Other Credits
Impax Generics
Mar. 31, 2016
Other Credits
Impax Generics
Mar. 31, 2017
Other Credits
Impax Specialty Pharma
Mar. 31, 2016
Other Credits
Impax Specialty Pharma
Revenue:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impax sales, gross
 
 
$ 630,672 
$ 611,281 
$ 84,133 
$ 82,073 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales Allowances
 
 
 
 
 
 
 
 
 
 
308,572 
1,011,400 
298,744 
217,354 
9,828 
6,111 
164,792 
756,774 
164,792 
185,476 
4,483 
2,853 
28,481 
29,354 
17,722 
16,172 
Product Returns
 
 
9,733 
11,913 
1,844 
1,508 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Impax product sales, net
 
 
128,922 
167,184 
50,256 
55,429 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Revenues
 
 
 
 
 
 
5,159 
2,835 
66 
60 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
184,403 
225,508 
134,147 
170,079 
50,256 
55,429 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit
24,891 
102,590 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
$ (98,431)
$ (10,408)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per common share:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic (in Dollars per share)
$ (1.37)
$ (0.15)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted (in Dollars per share)
$ (1.37)
$ (0.15)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted-average common shares outstanding:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic (in Shares)
71,594,472 
70,665,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Diluted (in Shares)
71,594,000 
70,665,394 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
SUBSEQUENT EVENTS (Details) (Subsequent Event, Maximum, USD $)
May 10, 2017
Subsequent Event |
Maximum
 
Subsequent Event [Line Items]
 
Cash charges to incur (up to)
$ 65,000,000.0