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• | 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. |
• | 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. |
• | Chargebacks |
• | Rebates and Administrative Fees |
• | Distribution Service Fees |
• | Returns |
• | Shelf-Stock Adjustments |
• | Cash Discounts |
• | Medicaid and Other U.S. Government Pricing Programs |
• | Rx Partner and OTC Partner |
• | Research Partner |
Percent of Total Accounts Receivable | 2017 | 2016 | 2015 | |||||
Customer #1 | 44.7 | % | 36.2 | % | 52.4 | % | ||
Customer #2 | 23.6 | % | 35.6 | % | 24.8 | % | ||
Customer #3 | 23.4 | % | 20.5 | % | 14.4 | % | ||
Top three largest customers | 91.7 | % | 92.3 | % | 91.6 | % |
Percent of Gross Revenues | 2017 | 2016 | 2015 | |||||
Customer #1 | 32.9 | % | 40.1 | % | 45.6 | % | ||
Customer #2 | 30.0 | % | 28.4 | % | 21.7 | % | ||
Customer #3 | 25.0 | % | 20.1 | % | 18.8 | % | ||
Top three largest customers | 87.9 | % | 88.6 | % | 86.1 | % |
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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 |
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 | |||
Inventory - raw materials | 2,868 | |||
Total assets acquired | $ | 615,900 |
Years Ended December 31, | ||||||||
2016 | 2015 | |||||||
Total revenues | $ | 927,593 | $ | 1,025,598 | ||||
Net (loss) income | (450,190 | ) | 70,057 |
• | Adjustments to selling, general and administrative expense related to transaction costs directly attributable to the transaction include the elimination of $3.1 million of charges in the pro forms results for the year ended December 31, 2016 which have been included in the pro forma results for the year ended December 31, 2015. |
Accounts receivable (1) | $ | 56,851 | |
Inventory | 31,259 | ||
Income tax receivable and other prepaid expenses | 2,407 | ||
Property, plant and equipment | 27,540 | ||
Intangible assets | 632,600 | ||
Intangible assets held for sale | 4,000 | ||
Goodwill | 179,755 | ||
Deferred income taxes | 37,041 | ||
Other non-current assets | 3,844 | ||
Total assets acquired | 975,297 | ||
Current liabilities | 67,584 | ||
Deferred tax liabilities | 210,005 | ||
Other non-current liabilities | 6,360 | ||
Total liabilities assumed | 283,949 | ||
Cash paid, net of cash acquired | $ | 691,348 |
(1) | The accounts receivable acquired in the Tower Acquisition had a fair value of $56.9 million, including an allowance for doubtful accounts of $9.0 million, which represented the Company’s best estimate on March 9, 2015 (the closing date of the transaction) of the contractual cash flows not expected to be collected by the acquired companies. |
Estimated Fair Value | Weighted-Average Estimated Useful Life (years) | ||||
Marketed product rights | $ | 381,100 | 13 | ||
Royalty rights | 80,800 | 12 | |||
Acquired IPR&D product rights | 170,700 | n/a | |||
Total intangible assets | $ | 632,600 |
Year Ended December 31, 2015 | |||
Total revenues | $ | 892,906 | |
Net income | $ | 54,285 |
• | Adjustments to amortization expense related to identifiable intangible assets acquired; |
• | Adjustments to depreciation expense related to property, plant and equipment acquired; |
• | Adjustments to interest expense to reflect the long-term debt held by Tower and Lineage paid out and eliminated at the closing and the Company's Senior Secured Credit Facilities (described in “Note 10. Debt”); |
• | Adjustments to cost of revenues related to the fair value adjustments in inventory sold, including elimination of $6.1 million for the year ended December 31, 2015; |
• | Adjustments to selling, general and administrative expense related to the elimination of severance and retention costs of $3.4 million incurred as part of the transaction; |
• | Adjustments to selling, general and administrative expense related to transaction costs directly attributable to the transaction include the elimination of $12.2 million of charges in the pro forma results for the year ended December 31, 2015; and |
• | Adjustments to reflect the elimination of $2.3 million in commitment fees related to the Company's $435.0 million term loan with Barclays Bank PLC (described in "Note 10. Debt") that were incurred during the year ended December 31, 2015. |
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• | 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. |
As of December 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 assets(1) | $ | 43,023 | $ | 43,023 | $ | — | $ | 43,023 | $ | — | |||||||||
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) | $ | 305,000 | $ | 305,000 | $ | — | $ | 305,000 | $ | — | |||||||||
2% Convertible Senior Notes due June 2022 (3) | $ | 600,000 | $ | 579,378 | $ | 579,378 | $ | — | $ | — | |||||||||
Deferred Compensation Plan liabilities (1) | $ | 33,413 | $ | 33,413 | $ | — | $ | 33,413 | $ | — | |||||||||
Contingent consideration, long-term portion (4) | $ | — | $ | — | $ | — | $ | — | $ | — |
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 assets(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 item 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 as of December 31, 2017 and 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 December 31, 2017 and 2016 represents the unaccreted discounts related to deferred debt issuance costs and bifurcation of the conversion feature of the notes. |
(4) | Under the terms of the Termination Agreement related to the Teva Transaction as described in "Note 3. Business Acquisitions.", the Company could be contractually obligated to make payments up to $40.0 million based on the achievement of certain commercial and time-based milestones associated with its methylphenidate hydrochloride product. A discounted cash flow valuation model was used to value the contingent consideration using significant unobservable inputs, including the probability and timing of successful product launch, the expected number of product competitors in the market at the time of launch (as defined in the Termination Agreement) and the expected number of such competitors in the market on the one-year launch anniversary date. The Company conducted a review of the underlying inputs and assumptions at December 31, 2017, and based on timing and probability of the product launch, and corresponding number of competitors expected to be in the market at both launch and the one-year anniversary of launch, the Company concluded that the fair value of its contingent consideration is $0. |
Years Ended December 31, | |||||||
Contingent consideration | 2017 | 2016 | |||||
Beginning balance | $ | 31,048 | $ | — | |||
Completion of Teva Transaction August 3, 2016 | — | 30,100 | |||||
Change in fair value included in earnings | (31,048 | ) | 948 | ||||
Ending balance | $ | — | $ | 31,048 |
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December 31, 2017 | December 31, 2016 | ||||||
Gross accounts receivable (1) | $ | 634,059 | $ | 794,173 | |||
Less: Rebate reserve | (181,611 | ) | (293,816 | ) | |||
Less: Chargeback reserve | (136,891 | ) | (151,978 | ) | |||
Less: Distribution services reserve | (11,037 | ) | (18,318 | ) | |||
Less: Discount reserve | (14,344 | ) | (17,957 | ) | |||
Less: Uncollectible accounts reserve (2) | (49,423 | ) | (54,736 | ) | |||
Accounts receivable, net | $ | 240,753 | $ | 257,368 |
(1) | Includes estimated $44.3 million and $40.3 million as of December 31, 2017 and 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 19. 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 year ended December 31, 2017, the Company increased the reserve balance by a net $4.0 million, consisting of a $5.0 million increase in the reserve resulting from additional Medicaid rebate claims received during the period and a $1.0 million reduction in the reserve balance resulting from payments received from Turing during the period. As of December 31, 2017, the $44.3 million estimated receivable due from Turing was fully reserved. |
Years Ended December 31, | |||||||||||
Rebate reserve | 2017 | 2016 | 2015 | ||||||||
Beginning balance | $ | 293,816 | $ | 265,229 | $ | 88,812 | |||||
Acquired balances | — | — | 75,447 | ||||||||
Provision recorded during the period for Impax Generics rebates | 642,447 | 756,774 | 571,642 | ||||||||
Credits issued during the period for Impax Generics rebates | (754,652 | ) | (728,187 | ) | (470,672 | ) | |||||
Ending balance | $ | 181,611 | $ | 293,816 | $ | 265,229 |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Chargeback reserve | |||||||||||
Beginning balance | $ | 151,978 | $ | 102,630 | $ | 43,125 | |||||
Acquired balances | — | — | 24,532 | ||||||||
Provision recorded during the period | 1,212,039 | 1,011,400 | 833,157 | ||||||||
Credits issued during the period | (1,227,126 | ) | (962,052 | ) | (798,184 | ) | |||||
Ending balance | $ | 136,891 | $ | 151,978 | $ | 102,630 |
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December 31, 2017 | December 31, 2016 | ||||||
Raw materials | $ | 63,732 | $ | 53,808 | |||
Work in-process | 3,046 | 3,280 | |||||
Finished goods | 104,187 | 130,879 | |||||
Total inventory | 170,965 | 187,967 | |||||
Less: Non-current inventory | 12,494 | 12,737 | |||||
Total inventory-current, net | $ | 158,471 | $ | 175,230 |
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December 31, 2017 | December 31, 2016 | ||||||
Land | $ | 3,500 | $ | 5,603 | |||
Buildings and improvements | 96,775 | 174,303 | |||||
Equipment | 82,442 | 143,818 | |||||
Office furniture and equipment | 11,082 | 15,767 | |||||
Construction-in-progress | 46,622 | 50,191 | |||||
Property, plant and equipment, gross | 240,421 | 389,682 | |||||
Less: Accumulated depreciation | (115,608 | ) | (156,310 | ) | |||
Property, plant and equipment, net | $ | 124,813 | $ | 233,372 |
|
Marketed Product Rights | IPR&D and Royalties | Total Company | ||||||||||||||||
Gross Carrying Value | Accumulated Amortization | Intangible Assets, Net | Non-amortized Value | Intangible Assets, Net | ||||||||||||||
Balance as of December 31, 2015 | $ | 460,875 | $ | (83,095 | ) | $ | 377,780 | $ | 224,240 | $ | 602,020 | |||||||
Additions | (1) | 455,529 | — | 455,529 | 161,003 | 616,532 | ||||||||||||
Amortization | — | (56,489 | ) | (56,489 | ) | — | (56,489 | ) | ||||||||||
Commercial Launch | (2) | 97,300 | — | 97,300 | (97,300 | ) | — | |||||||||||
Impairment Charge | (3) | (488,632 | ) | — | (488,632 | ) | (52,965 | ) | (541,597 | ) | ||||||||
Balance as of December 31, 2016 | 525,072 | (139,584 | ) | 385,488 | 234,978 | 620,466 | ||||||||||||
Additions | — | 50 | 50 | |||||||||||||||
Amortization | — | (68,375 | ) | (68,375 | ) | — | (68,375 | ) | ||||||||||
Commercial Launch | (2) | 4,216 | — | 4,216 | (4,216 | ) | — | |||||||||||
Divestiture | (4) | (2,414 | ) | 2,414 | — | — | — | |||||||||||
Impairment Charge | (3) | (96,865 | ) | — | (96,865 | ) | (192,809 | ) | (289,674 | ) | ||||||||
Balance as of December 31, 2017 | $ | 430,009 | $ | (205,545 | ) | $ | 224,464 | $ | 38,003 | $ | 262,467 |
(1) | During the first quarter of 2016, the Company capitalized $3.5 million of milestone payments due to an affiliate of Teva under the terms of the Mebendazole Product Agreement related to the FDA's approval and the Company's subsequent commercial launch of Emverm® (mebendazole) 100 mg chewable tablets. See "Note 17. Alliance and Collaboration Agreements" for additional information related to the Mebendazole Product Agreement. |
(2) | During the year ended December 31, 2017, the Company commercially launched two products acquired as IPR&D as part of the Teva Transaction and Tower Acquisition and, as a result, transferred the $4.2 million asset value from non-amortized, indefinite-lived acquired IPR&D product rights to amortized, finite lived marketed product rights. These assets will be amortized over an estimated useful life ranging from seven to eight years based on the pattern of economic benefit expected to be realized through 2025. |
(3) | For the year ended December 31, 2017 the Company recognized a total of $289.7 million of intangible asset impairment charges, of which $96.9 million were recognized in cost of revenues impairment charges and $192.8 million were recognized in in-process research and development impairment charges on the Company’s consolidated statement of operations. |
(4) | During the second quarter of 2017, the Company divested 29 ANDAs and one NDA for non-strategic approved generic products, the vast majority of which were not marketed, and all acquired as part of the Tower Acquisition, for gross proceeds of $12.0 million. These intangible assets had a fully amortized gross carrying value of $2.4 million at the time of the sale. The Company incurred $0.1 million of legal expense in connection with the divestiture, resulting in a net gain on sale of $11.9 million recognized as gain on sale of assets on the Company’s consolidated statement of operations. |
For the years ending December 31, | Amortization Expense | ||
2018 | $ | 56,431 | |
2019 | 46,771 | ||
2020 | 36,140 | ||
2021 | 23,778 | ||
2022 | 19,701 | ||
Thereafter | 41,643 | ||
Total | $ | 224,464 |
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December 31, 2017 | December 31, 2016 | ||||||
Payroll-related expenses | $ | 38,415 | $ | 37,986 | |||
Product returns | 76,293 | 72,888 | |||||
Accrued shelf stock | 7,525 | 7,032 | |||||
Government rebates | 73,970 | 72,063 | |||||
Legal and professional fees | 14,005 | 8,395 | |||||
Estimated Teva and Allergan chargebacks and rebates (1) | 13,277 | 14,813 | |||||
Accrued profit sharing and royalty expenses | 8,373 | 13,642 | |||||
Other | 16,269 | 17,834 | |||||
Total accrued expenses | $ | 248,127 | $ | 244,653 |
(1) | As discussed in "Note 3. Business Acquisitions," in connection with 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 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 December 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. |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Returns reserve | |||||||||||
Beginning balance | $ | 72,888 | $ | 48,950 | $ | 27,174 | |||||
Acquired balances | — | — | 11,364 | ||||||||
Provision related to sales recorded in the period | 47,709 | 52,383 | 43,967 | ||||||||
Credits issued during the period | (44,304 | ) | (28,445 | ) | (33,555 | ) | |||||
Ending balance | $ | 76,293 | $ | 72,888 | $ | 48,950 |
|
(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. |
Years ending December 31, | |||
2018 | $ | 20,000 | |
2019 | 20,000 | ||
2020 | 20,000 | ||
2021 | 265,000 | ||
2022 | 600,000 | ||
Total | $ | 925,000 |
|
Shares issued | 74,234 | |
Stock options outstanding (1) | 3,175 | |
Conversion of Notes payable (2) | 9,471 | |
Warrants outstanding (see below) | 9,471 | |
Total shares of common stock issued and reserved for issuance | 96,351 |
|
Years Ended December 31, | ||||||||||||||
2017 | 2016 | 2015 | ||||||||||||
Basic (Loss) Earnings Per Common Share: | ||||||||||||||
Net (loss) income | $ | (469,287 | ) | $ | (472,031 | ) | $ | 38,997 | ||||||
Weighted-average common shares outstanding | 71,857 | 71,147 | 69,640 | |||||||||||
Basic (loss) earnings per share | $ | (6.53 | ) | $ | (6.63 | ) | $ | 0.56 | ||||||
Diluted (Loss) Earnings Per Common Share: | ||||||||||||||
Net (loss) income | $ | (469,287 | ) | $ | (472,031 | ) | $ | 38,997 | ||||||
Add-back of interest expense on outstanding convertible notes payable, net of tax | — | (1) | — | (1) | — | (2) | ||||||||
Adjusted net (loss) income | $ | (469,287 | ) | $ | (472,031 | ) | $ | 38,997 | ||||||
Weighted-average common shares outstanding | 71,857 | 71,147 | 69,640 | |||||||||||
Weighted-average incremental shares related to assumed exercise of warrants, stock options, vesting of non-vested shares and ESPP share issuance | — | (3) | — | (4) | 2,387 | (5) | ||||||||
Weighted-average incremental shares assuming conversion of outstanding notes payable | — | (1) | — | (1) | — | (2) | ||||||||
Diluted weighted-average common shares outstanding | 71,857 | (3) | 71,147 | (4) | 72,027 | (6) | ||||||||
Diluted net (loss) income per share | $ | (6.53 | ) | $ | (6.63 | ) | $ | 0.54 |
(1) | For the years ended December 31, 2017 and 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) | The numerator and denominator adjustments related to the Company’s convertible notes payable were excluded from the computation because the add-back of interest expense, net of tax, to the numerator had a greater effect on the quotient than the inclusion of the incremental shares assuming conversion of the convertible notes payable in the denominator, resulting in anti-dilution. |
(3) | For the year ended December 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 December 31, 2017, shares issuable but not included in the Company's calculation of diluted EPS, which could potentially dilute future earnings, included 9.47 million warrants outstanding, 9.47 million shares for conversion of outstanding Notes payable, 3.2 million stock options outstanding and 1.9 million non-vested restricted stock awards. |
(4) | For the year ended December 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 December 31, 2016, shares issuable but not included in the Company's calculation of diluted EPS, which could potentially dilute future earnings, included 9.47 million warrants outstanding, 9.47 million shares for conversion of outstanding Notes payable, 2.2 million stock options outstanding and 2.2 million non-vested restricted stock awards. |
(5) | As of December 31, 2015, the approximately 9.47 million warrants outstanding have been excluded from the denominator of the diluted EPS computation under the treasury stock method because the exercise price of the warrants exceeds the average market price of the Company’s common stock for the period, so inclusion in the calculation would be anti-dilutive. |
(6) | As of December 31, 2015, shares issuable but not included in the Company’s calculation of diluted EPS, which could potentially dilute future earnings, included 9.47 million for warrants outstanding, 9.47 million shares for conversion of outstanding Notes payable, 1.7 million stock options outstanding and 1.5 million non-vested restricted stock awards. |
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Stock Options | Number of Shares Under Option | Weighted- Average Exercise Price per Share | ||||
Outstanding at December 31, 2014 | 3,042,180 | $ | 14.78 | |||
Options granted | 406,950 | 41.27 | ||||
Options exercised | (1,042,198 | ) | 9.87 | |||
Options forfeited | (1,561 | ) | 16.70 | |||
Outstanding at December 31, 2015 | 2,405,371 | 21.39 | ||||
Options granted | 572,625 | 12.27 | ||||
Options exercised | (477,910 | ) | 19.09 | |||
Options forfeited | (265,755 | ) | 35.88 | |||
Outstanding at December 31, 2016 | 2,234,331 | 22.67 | ||||
Options granted | 1,198,726 | 12.21 | ||||
Options exercised | (74,643 | ) | 10.22 | |||
Options forfeited | (183,417 | ) | 33.07 | |||
Outstanding at December 31, 2017 | 3,174,997 | 18.36 | ||||
Options exercisable at December 31, 2017 | 1,634,133 | $ | 19.63 |
Restricted Stock Awards | Non-Vested Restricted Stock Awards | Weighted- Average Grant Date Fair Value | ||||
Non-vested at December 31, 2014 | 2,327,176 | $ | 23.61 | |||
Granted | 973,742 | 45.40 | ||||
Vested | (930,159 | ) | 22.64 | |||
Forfeited | (224,261 | ) | 29.01 | |||
Non-vested at December 31, 2015 | 2,146,498 | 33.20 | ||||
Granted | 1,245,184 | 31.77 | ||||
Vested | (893,190 | ) | 28.97 | |||
Forfeited | (338,365 | ) | 33.87 | |||
Non-vested at December 31, 2016 | 2,160,127 | 34.02 | ||||
Granted | 980,419 | 13.89 | ||||
Vested | (730,160 | ) | 31.99 | |||
Forfeited | (548,897 | ) | 30.27 | |||
Non-vested at December 31, 2017 | 1,861,489 | $ | 25.36 |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Volatility (range) | 46.5% | - | 49.2% | 38.1% | - | 40.3% | 39.9% | - | 40.1% | ||
Volatility (weighted average) | 48.1% | 38.3% | 40.0% | ||||||||
Risk-free interest rate (range) | 1.9% | - | 2.2% | 1.2% | - | 1.9% | 0.8% | - | 1.8% | ||
Risk-free interest rate (weighted average) | 2.1% | 1.4% | 1.7% | ||||||||
Dividend yield | —% | —% | —% | ||||||||
Weighted-average expected life (years) | 6.18 | 6.14 | 6.18 | ||||||||
Weighted average grant date fair value | $5.93 | $12.27 | $17.08 |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Manufacturing expenses | $ | 4,975 | $ | 6,364 | $ | 4,479 | |||||
Research and development | 16,174 | 5,697 | 5,996 | ||||||||
Selling, general and administrative | 5,109 | 20,119 | 18,138 | ||||||||
Total | $ | 26,258 | $ | 32,180 | $ | 28,613 |
|
|
• | Consolidating all of Generic R&D and U.S. manufacturing and packing operations to the Company's Hayward, California facility; |
• | Continuing the previously announced closure of the Middlesex, New Jersey manufacturing site, which will now include the closure of the Middlesex Generic R&D site as further discussed below under "Middlesex, New Jersey Manufacturing and Packaging Operations" and "Middlesex, New Jersey Generic R&D"; |
• | Reorganizing certain functions including quality, engineering and supply chain operations as further described below under "Technical Operations Reduction-in-Force"; |
• | Reviewing strategic alternatives for the Company’s Taiwan facility, including a sale of the facility as further described below under "Sale of Impax Laboratories (Taiwan), Inc." and |
• | Rationalizing the generic portfolio to eliminate low-value products and streamline operations such as the Company's divestment during the second quarter of 2017 of 29 ANDAs and one NDA for approved non-strategic generic products, the vast majority of which were not marketed, and all acquired as part of the Tower Acquisition, as described in "Note 8. Intangible Assets and Goodwill." |
Type of Cost | Cumulative Amount Incurred | ||
Employee retention and severance payments | $ | 12,725 | |
Technical transfer of products | 9,544 | ||
Asset impairment and accelerated depreciation charges | 20,900 | ||
Facilities lease terminations and asset retirement obligations | 209 | ||
Legal and professional fees | 12 | ||
Total estimated restructuring charges | $ | 43,390 |
Balance as of December 31, 2015 | Expensed /Accrued Expense | Cash Payments | Non-Cash Items | Balance as of December 31, 2016 | ||||||||||||||||
Employee retention and severance payments | $ | — | $ | 6,636 | $ | (691 | ) | $ | — | $ | 5,945 | |||||||||
Technical transfer of products | — | 6,573 | (6,573 | ) | — | — | ||||||||||||||
Asset impairment and accelerated depreciation charges | — | 13,678 | — | (13,678 | ) | — | ||||||||||||||
Facilities lease terminations and asset retirement obligations | — | 209 | — | — | 209 | |||||||||||||||
Legal and professional fees | — | 12 | (12 | ) | — | — | ||||||||||||||
Total | $ | — | $ | 27,108 | $ | (7,276 | ) | $ | (13,678 | ) | $ | 6,154 |
Balance as of December 31, 2016 | Expensed /Accrued Expense | Cash Payments | Non-Cash Items | Balance as of December 31, 2017 | ||||||||||||||||
Employee retention and severance payments | $ | 5,945 | $ | 6,089 | $ | (4,648 | ) | $ | — | $ | 7,386 | |||||||||
Technical transfer of products | — | 2,671 | (2,671 | ) | — | — | ||||||||||||||
Asset impairment and accelerated depreciation charges | — | 7,525 | — | (7,525 | ) | — | ||||||||||||||
Facilities lease terminations and asset retirement obligations | 209 | — | — | — | 209 | |||||||||||||||
Total | $ | 6,154 | $ | 16,285 | $ | (7,319 | ) | $ | (7,525 | ) | $ | 7,595 |
December 31, 2017 | |||
Current assets | $ | 11,527 | |
Property, plant and equipment | 18,500 | ||
Assets held for sale | $ | 30,027 | |
Current liabilities | $ | 7,170 | |
Liabilities held for sale | $ | 7,170 |
|
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Current: | |||||||||||
Federal taxes | $ | (55,844 | ) | $ | 21,386 | $ | 48,078 | ||||
State taxes | (372 | ) | 266 | 2,286 | |||||||
Foreign taxes | 639 | 1,377 | (442 | ) | |||||||
Total current tax (benefit) expense | (55,577 | ) | 23,029 | 49,922 | |||||||
Deferred: | |||||||||||
Federal taxes | $ | 73,357 | $ | (133,387 | ) | $ | (23,605 | ) | |||
State taxes | (371 | ) | 5,502 | (5,733 | ) | ||||||
Foreign taxes | 917 | 562 | (213 | ) | |||||||
Total deferred tax expense (benefit) | 73,903 | (127,323 | ) | (29,551 | ) | ||||||
Provision for (benefit from) income taxes | $ | 18,326 | $ | (104,294 | ) | $ | 20,371 |
Years Ended December 31, | ||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||
(Loss) income before income taxes | $ | (450,961 | ) | $ | (576,325 | ) | $ | 59,368 | ||||||||||||
Tax (benefit) provision at the federal statutory rate | (157,836 | ) | 35.0 | % | (201,714 | ) | 35.0 | % | 20,779 | 35.0 | % | |||||||||
Increase (decrease) in tax rate resulting from: | ||||||||||||||||||||
Tax rate differential and permanent items on foreign income | 662 | (0.2 | )% | 186 | — | % | 412 | 0.7 | % | |||||||||||
State income taxes, net of federal benefit | (8,291 | ) | 1.8 | % | (7,394 | ) | 1.3 | % | 365 | 0.6 | % | |||||||||
State research and development credits | (1,324 | ) | 0.3 | % | (1,767 | ) | 0.3 | % | (2,357 | ) | (4.0 | )% | ||||||||
Federal research and development credits | (1,243 | ) | 0.3 | % | (2,213 | ) | 0.4 | % | (2,672 | ) | (4.5 | )% | ||||||||
Share-based compensation | 5,471 | (1.2 | )% | 1,768 | (0.3 | )% | 968 | 1.6 | % | |||||||||||
Executive compensation | 543 | (0.1 | )% | (761 | ) | 0.1 | % | 3,140 | 5.3 | % | ||||||||||
Domestic manufacturing deduction | — | — | % | (1,286 | ) | 0.2 | % | (1,422 | ) | (2.4 | )% | |||||||||
Other permanent book/tax differences | (1,846 | ) | 0.4 | % | (258 | ) | — | % | 2,003 | 3.4 | % | |||||||||
Provision for uncertain tax positions | (807 | ) | 0.2 | % | 337 | — | % | 184 | 0.3 | % | ||||||||||
Revision of prior years’ estimates | 1,371 | (0.3 | )% | (792 | ) | 0.1 | % | 859 | 1.5 | % | ||||||||||
Taiwan rural area investment tax credit | — | — | % | — | — | % | (2,134 | ) | (3.6 | )% | ||||||||||
Impact on gross deferred net assets from 2017 Tax Reform Act | 100,065 | (22.2 | )% | — | — | % | — | — | % | |||||||||||
Foreign withholding tax | 1,534 | (0.3 | )% | — | — | % | — | — | % | |||||||||||
Other, net | 2,888 | (0.7 | )% | 842 | (0.1 | )% | 246 | 0.4 | % | |||||||||||
Valuation allowance | 77,139 | (17.1 | )% | 108,758 | (18.9 | )% | — | — | % | |||||||||||
Provision for (benefit from) income taxes | $ | 18,326 | (4.1 | )% | $ | (104,294 | ) | 18.1 | % | $ | 20,371 | 34.3 | % |
December 31, | |||||||
2017 | 2016 | ||||||
Deferred tax assets: | |||||||
Accrued expenses | $ | 60,069 | $ | 114,825 | |||
Inventory reserves | 17,602 | 15,873 | |||||
Net operating loss carryforwards | 2,518 | 2,302 | |||||
Depreciation and amortization | 2,657 | 651 | |||||
Acquired product rights and intangibles | 118,168 | 128,401 | |||||
Capitalized legal fees | 6,695 | 10,231 | |||||
Credit carryforwards | 11,205 | 8,453 | |||||
Share based compensation expense | 3,535 | 6,371 | |||||
Sale of subsidiary | 7,794 | — | |||||
Other | 495 | 525 | |||||
Deferred tax assets | 230,738 | 287,632 | |||||
Deferred tax liabilities: | |||||||
Tax depreciation and amortization in excess of book amounts | 3,808 | 5,428 | |||||
Acquired product rights and intangibles | 35,698 | 95,517 | |||||
Derivative | 3,411 | 6,192 | |||||
Foreign withholding tax | 1,824 | — | |||||
Other | 3,326 | 1,871 | |||||
Deferred tax liabilities | 48,067 | 109,008 | |||||
Deferred tax assets (liabilities), net | 182,671 | 178,624 | |||||
Valuation allowance | (185,897 | ) | (108,758 | ) | |||
Deferred tax assets (liabilities), net after valuation allowance | $ | (3,226 | ) | $ | 69,866 |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Unrecognized tax benefits beginning of year | $ | 6,425 | $ | 5,680 | $ | 6,517 | |||||
Gross change for current year positions | 328 | 549 | 1,079 | ||||||||
Gross change for prior period positions | (105 | ) | 1,318 | (673 | ) | ||||||
Gross change due to Tower Acquisition | — | — | 1,037 | ||||||||
Decrease due to expiration of statutes of limitations | (972 | ) | — | — | |||||||
Decrease due to settlements and payments | — | (1,122 | ) | (2,280 | ) | ||||||
Unrecognized tax benefits end of year | $ | 5,676 | $ | 6,425 | $ | 5,680 |
|
• | 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. |
• | 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. |
• | 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 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. |
|
Years ending December 31, | |||
2018 | $ | 5,575 | |
2019 | 3,740 | ||
2020 | 2,578 | ||
2021 | 2,551 | ||
2022 | 2,585 | ||
Thereafter | 11,113 | ||
Total minimum lease payments | $ | 28,142 |
|
|
Year Ended December 31, 2017 | Impax Generics | Impax Specialty Pharma | Corporate and Other | Total Company | |||||||||||
Revenues, net | $ | 549,077 | $ | 226,710 | $ | — | $ | 775,787 | |||||||
Cost of revenues | 454,911 | 80,212 | — | 535,123 | |||||||||||
Cost of revenues impairment charges | 96,865 | — | — | 96,865 | |||||||||||
Selling, general and administrative | 28,294 | 67,949 | 120,027 | 216,270 | |||||||||||
Research and development | 63,245 | 17,602 | — | 80,847 | |||||||||||
In-process research and development impairment charges | 192,809 | — | — | 192,809 | |||||||||||
Fixed assets impairment charges | 8,380 | 74,128 | — | 82,508 | |||||||||||
Change in fair value of contingent consideration | (31,048 | ) | — | — | (31,048 | ) | |||||||||
Patent litigation | 827 | 4,278 | — | 5,105 | |||||||||||
(Loss) before income taxes | (265,206 | ) | (17,459 | ) | (168,296 | ) | (450,961 | ) |
Year Ended December 31, 2016 | Impax Generics | Impax Specialty Pharma | Corporate and Other | Total Company | |||||||||||
Revenues, net | $ | 606,320 | $ | 218,109 | $ | — | $ | 824,429 | |||||||
Cost of revenues | 417,316 | 69,583 | — | 486,899 | |||||||||||
Cost of revenues impairment charges | 464,319 | 24,313 | — | 488,632 | |||||||||||
Selling, general and administrative | 20,508 | 61,448 | 119,874 | 201,830 | |||||||||||
Research and development | 61,980 | 18,486 | — | 80,466 | |||||||||||
In-process research and development impairment charges | 27,765 | 25,200 | — | 52,965 | |||||||||||
Patent litigation | 829 | 6,990 | — | 7,819 | |||||||||||
(Loss) income before income taxes | (386,397 | ) | 12,089 | (202,017 | ) | (576,325 | ) |
Year Ended December 31, 2015 | Impax Generics | Impax Specialty Pharma | Corporate and Other | Total Company | |||||||||||
Revenues, net | $ | 710,932 | $ | 149,537 | $ | — | $ | 860,469 | |||||||
Cost of revenues | 442,742 | 58,020 | — | 500,762 | |||||||||||
Cost of revenues impairment charges | 7,303 | — | — | 7,303 | |||||||||||
Selling, general and administrative | 29,641 | 52,427 | 119,219 | 201,287 | |||||||||||
Research and development | 52,478 | 18,144 | — | 70,622 | |||||||||||
In-process research and development impairment charges | 6,360 | — | — | 6,360 | |||||||||||
Patent litigation | 2,942 | 1,625 | — | 4,567 | |||||||||||
Income (loss) before income taxes | 169,466 | 19,321 | (129,419 | ) | 59,368 |
Segment | Product Family | 2017 | |||||||
$ | % | ||||||||
Impax Generics | Epinephrine Auto-Injector family (generic Adrenaclick®) | $ | 113,931 | 15 | % | (1) | |||
Impax Specialty Pharma | Rytary® family | $ | 91,637 | 12 | % | (2) | |||
Impax Generics | Oxymorphone HCI ER family | $ | 68,587 | 9 | % | (3) | |||
Impax Generics | Budesonide family | $ | 51,548 | 7 | % | (4) | |||
Impax Generics | Zomig family | $ | 51,115 | 7 | % | (5) |
Segment | Product Family | 2016 | |||||||
$ | % | ||||||||
Impax Generics | Epinephrine Auto-Injector family (generic Adrenaclick®) | $ | 91,572 | 11 | % | (1) | |||
Impax Specialty Pharma | Rytary® family | $ | 73,833 | 9 | % | (2) | |||
Impax Generics | Oxymorphone HCI ER family | $ | 72,661 | 9 | % | (3) | |||
Impax Generics | Diclofenac Sodium Gel family (generic Solaraze®) | $ | 69,035 | 8 | % | (6) | |||
Impax Generics | Fenofibrate family | $ | 64,001 | 8 | % | (7) |
Segment | Product Family | 2015 | |||||||
$ | % | ||||||||
Impax Generics | Diclofenac Sodium Gel family (generic Solaraze®) | $ | 148,610 | 17 | % | (6) | |||
Impax Generics | Amphetamine Salts ER (CII) family (generic Adderall®) | $ | 106,252 | 12 | % | (8) | |||
Impax Generics | Fenofibrate family | $ | 93,458 | 11 | % | (7) | |||
Impax Generics | Metaxalone family (generic Skelaxin) | $ | 69,876 | 8 | % | (9) | |||
Impax Generics | Oxymorphone HCI ER family | $ | 59,175 | 7 | % | (3) |
|
2017 Quarters Ended | ||||||||||||||||
(in thousands, except share and per share amounts) | March 31 | June 30 | September 30 | December 31 | ||||||||||||
Revenue: | ||||||||||||||||
Impax Generics sales, gross | $ | 635,897 | $ | 663,167 | $ | 622,252 | $ | 584,374 | ||||||||
Less: | ||||||||||||||||
Chargebacks | 298,744 | 286,092 | 281,835 | 302,394 | ||||||||||||
Rebates | 164,792 | 170,398 | 162,914 | 144,344 | ||||||||||||
Product returns | 9,733 | 15,210 | 7,003 | 4,657 | ||||||||||||
Other credits | 28,481 | 40,578 | 19,402 | 20,036 | ||||||||||||
Impax Generics sales, net | 134,147 | 150,889 | 151,098 | 112,943 | ||||||||||||
Impax Specialty Pharma sales, gross | 84,133 | 84,238 | 107,407 | 111,918 | ||||||||||||
Less: | ||||||||||||||||
Chargebacks | 9,828 | 8,967 | 14,121 | 10,058 | ||||||||||||
Rebates | 4,483 | 4,682 | 5,914 | 6,198 | ||||||||||||
Product returns | 1,844 | 1,416 | 3,614 | 4,234 | ||||||||||||
Other credits | 17,722 | 17,980 | 28,464 | 21,461 | ||||||||||||
Impax Specialty Pharma revenues, net | 50,256 | 51,193 | 55,294 | 69,967 | ||||||||||||
Total revenues | 184,403 | 202,082 | 206,392 | 182,910 | ||||||||||||
Gross profit | 24,891 | 72,406 | 34,033 | 12,469 | ||||||||||||
Net loss | $ | (98,431 | ) | $ | (20,417 | ) | $ | (49,369 | ) | $ | (301,070 | ) | ||||
Net loss per common share: | ||||||||||||||||
Basic | $ | (1.37 | ) | $ | (0.28 | ) | $ | (0.69 | ) | $ | (4.18 | ) | ||||
Diluted | $ | (1.37 | ) | $ | (0.28 | ) | $ | (0.69 | ) | $ | (4.18 | ) | ||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 71,594,472 | 71,803,920 | 71,924,592 | 72,098,533 | ||||||||||||
Diluted | 71,594,472 | 71,803,920 | 71,924,592 | 72,098,533 |
2016 Quarters Ended | ||||||||||||||||
(in thousands, except share and per share amounts) | March 31 | June 30 | September 30 | December 31 | ||||||||||||
Revenue: | ||||||||||||||||
Impax Generics sales, gross | $ | 614,176 | $ | 532,968 | $ | 658,099 | $ | 690,674 | ||||||||
Less: | ||||||||||||||||
Chargebacks | 217,354 | 197,864 | 252,303 | 308,253 | ||||||||||||
Rebates | 185,476 | 178,097 | 183,347 | 211,359 | ||||||||||||
Product returns | 11,913 | 10,237 | 16,151 | 7,920 | ||||||||||||
Other credits | 29,354 | 25,075 | 30,978 | 23,916 | ||||||||||||
Impax Generics revenues, net | 170,079 | 121,695 | 175,320 | 139,226 | ||||||||||||
Impax Specialty Pharma sales, gross | 82,073 | 81,254 | 77,841 | 108,121 | ||||||||||||
Less: | ||||||||||||||||
Chargebacks | 6,111 | 8,826 | 5,439 | 15,253 | ||||||||||||
Rebates | 2,853 | 2,430 | 3,556 | 3,016 | ||||||||||||
Product returns | 1,508 | 1,279 | 574 | 2,802 | ||||||||||||
Other credits | 16,172 | 17,824 | 15,683 | 27,854 | ||||||||||||
Impax Specialty Pharma revenues, net | 55,429 | 50,895 | 52,589 | 59,196 | ||||||||||||
Total revenues | 225,508 | 172,590 | 227,909 | 198,422 | ||||||||||||
Gross profit (loss) | 102,590 | 72,984 | (165,426 | ) | (161,250 | ) | ||||||||||
Net loss | $ | (10,408 | ) | $ | (2,701 | ) | $ | (179,337 | ) | $ | (279,585 | ) | ||||
Net loss per common share: | ||||||||||||||||
Basic | $ | (0.15 | ) | $ | (0.04 | ) | $ | (2.51 | ) | $ | (3.91 | ) | ||||
Diluted | $ | (0.15 | ) | $ | (0.04 | ) | $ | (2.51 | ) | $ | (3.91 | ) | ||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 70,665,394 | 71,100,123 | 71,331,247 | 71,487,071 | ||||||||||||
Diluted | 70,665,394 | 71,100,123 | 71,331,247 | 71,487,071 |
|
Column A | Column B | Column C | Column D | Column E | |||||||||||||
Description | Balance at Beginning of Period | Charge to Costs and Expenses | Charge to Other Accounts | Deductions | Balance at End of Period | ||||||||||||
For the Year Ended December 31, 2015: | |||||||||||||||||
Reserve for bad debts | $ | 515 | 5,122 | 9,550 | * | — | $ | 15,187 | |||||||||
For the Year Ended December 31, 2016: | |||||||||||||||||
Reserve for bad debts | $ | 15,187 | 41,213 | — | (1,664 | ) | $ | 54,736 | |||||||||
For the Year Ended December 31, 2017: | |||||||||||||||||
Reserve for bad debts | $ | 54,736 | 3,804 | — | (9,117 | ) | $ | 49,423 |
|
• | 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. |
• | 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. |
• | Chargebacks |
• | Rebates and Administrative Fees |
• | Distribution Service Fees |
• | Returns |
• | Shelf-Stock Adjustments |
• | Cash Discounts |
• | Medicaid and Other U.S. Government Pricing Programs |
• | Rx Partner and OTC Partner |
• | Research Partner |
|
Percent of Total Accounts Receivable | 2017 | 2016 | 2015 | |||||
Customer #1 | 44.7 | % | 36.2 | % | 52.4 | % | ||
Customer #2 | 23.6 | % | 35.6 | % | 24.8 | % | ||
Customer #3 | 23.4 | % | 20.5 | % | 14.4 | % | ||
Top three largest customers | 91.7 | % | 92.3 | % | 91.6 | % |
Percent of Gross Revenues | 2017 | 2016 | 2015 | |||||
Customer #1 | 32.9 | % | 40.1 | % | 45.6 | % | ||
Customer #2 | 30.0 | % | 28.4 | % | 21.7 | % | ||
Customer #3 | 25.0 | % | 20.1 | % | 18.8 | % | ||
Top three largest customers | 87.9 | % | 88.6 | % | 86.1 | % |
|
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 |
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 | |||
Inventory - raw materials | 2,868 | |||
Total assets acquired | $ | 615,900 |
Years Ended December 31, | ||||||||
2016 | 2015 | |||||||
Total revenues | $ | 927,593 | $ | 1,025,598 | ||||
Net (loss) income | (450,190 | ) | 70,057 |
Accounts receivable (1) | $ | 56,851 | |
Inventory | 31,259 | ||
Income tax receivable and other prepaid expenses | 2,407 | ||
Property, plant and equipment | 27,540 | ||
Intangible assets | 632,600 | ||
Intangible assets held for sale | 4,000 | ||
Goodwill | 179,755 | ||
Deferred income taxes | 37,041 | ||
Other non-current assets | 3,844 | ||
Total assets acquired | 975,297 | ||
Current liabilities | 67,584 | ||
Deferred tax liabilities | 210,005 | ||
Other non-current liabilities | 6,360 | ||
Total liabilities assumed | 283,949 | ||
Cash paid, net of cash acquired | $ | 691,348 |
(1) | The accounts receivable acquired in the Tower Acquisition had a fair value of $56.9 million, including an allowance for doubtful accounts of $9.0 million, which represented the Company’s best estimate on March 9, 2015 (the closing date of the transaction) of the contractual cash flows not expected to be collected by the acquired companies. |
Estimated Fair Value | Weighted-Average Estimated Useful Life (years) | ||||
Marketed product rights | $ | 381,100 | 13 | ||
Royalty rights | 80,800 | 12 | |||
Acquired IPR&D product rights | 170,700 | n/a | |||
Total intangible assets | $ | 632,600 |
Year Ended December 31, 2015 | |||
Total revenues | $ | 892,906 | |
Net income | $ | 54,285 |
|
As of December 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 assets(1) | $ | 43,023 | $ | 43,023 | $ | — | $ | 43,023 | $ | — | |||||||||
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) | $ | 305,000 | $ | 305,000 | $ | — | $ | 305,000 | $ | — | |||||||||
2% Convertible Senior Notes due June 2022 (3) | $ | 600,000 | $ | 579,378 | $ | 579,378 | $ | — | $ | — | |||||||||
Deferred Compensation Plan liabilities (1) | $ | 33,413 | $ | 33,413 | $ | — | $ | 33,413 | $ | — | |||||||||
Contingent consideration, long-term portion (4) | $ | — | $ | — | $ | — | $ | — | $ | — |
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 assets(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 item 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 as of December 31, 2017 and 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 December 31, 2017 and 2016 represents the unaccreted discounts related to deferred debt issuance costs and bifurcation of the conversion feature of the notes. |
(4) | Under the terms of the Termination Agreement related to the Teva Transaction as described in "Note 3. Business Acquisitions.", the Company could be contractually obligated to make payments up to $40.0 million based on the achievement of certain commercial and time-based milestones associated with its methylphenidate hydrochloride product. A discounted cash flow valuation model was used to value the contingent consideration using significant unobservable inputs, including the probability and timing of successful product launch, the expected number of product competitors in the market at the time of launch (as defined in the Termination Agreement) and the expected number of such competitors in the market on the one-year launch anniversary date. The Company conducted a review of the underlying inputs and assumptions at December 31, 2017, and based on timing and probability of the product launch, and corresponding number of competitors expected to be in the market at both launch and the one-year anniversary of launch, the Company concluded that the fair value of its contingent consideration is $0. |
Years Ended December 31, | |||||||
Contingent consideration | 2017 | 2016 | |||||
Beginning balance | $ | 31,048 | $ | — | |||
Completion of Teva Transaction August 3, 2016 | — | 30,100 | |||||
Change in fair value included in earnings | (31,048 | ) | 948 | ||||
Ending balance | $ | — | $ | 31,048 |
|
December 31, 2017 | December 31, 2016 | ||||||
Gross accounts receivable (1) | $ | 634,059 | $ | 794,173 | |||
Less: Rebate reserve | (181,611 | ) | (293,816 | ) | |||
Less: Chargeback reserve | (136,891 | ) | (151,978 | ) | |||
Less: Distribution services reserve | (11,037 | ) | (18,318 | ) | |||
Less: Discount reserve | (14,344 | ) | (17,957 | ) | |||
Less: Uncollectible accounts reserve (2) | (49,423 | ) | (54,736 | ) | |||
Accounts receivable, net | $ | 240,753 | $ | 257,368 |
(1) | Includes estimated $44.3 million and $40.3 million as of December 31, 2017 and 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 19. 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 year ended December 31, 2017, the Company increased the reserve balance by a net $4.0 million, consisting of a $5.0 million increase in the reserve resulting from additional Medicaid rebate claims received during the period and a $1.0 million reduction in the reserve balance resulting from payments received from Turing during the period. As of December 31, 2017, the $44.3 million estimated receivable due from Turing was fully reserved. |
Years Ended December 31, | |||||||||||
Rebate reserve | 2017 | 2016 | 2015 | ||||||||
Beginning balance | $ | 293,816 | $ | 265,229 | $ | 88,812 | |||||
Acquired balances | — | — | 75,447 | ||||||||
Provision recorded during the period for Impax Generics rebates | 642,447 | 756,774 | 571,642 | ||||||||
Credits issued during the period for Impax Generics rebates | (754,652 | ) | (728,187 | ) | (470,672 | ) | |||||
Ending balance | $ | 181,611 | $ | 293,816 | $ | 265,229 |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Chargeback reserve | |||||||||||
Beginning balance | $ | 151,978 | $ | 102,630 | $ | 43,125 | |||||
Acquired balances | — | — | 24,532 | ||||||||
Provision recorded during the period | 1,212,039 | 1,011,400 | 833,157 | ||||||||
Credits issued during the period | (1,227,126 | ) | (962,052 | ) | (798,184 | ) | |||||
Ending balance | $ | 136,891 | $ | 151,978 | $ | 102,630 |
|
December 31, 2017 | December 31, 2016 | ||||||
Raw materials | $ | 63,732 | $ | 53,808 | |||
Work in-process | 3,046 | 3,280 | |||||
Finished goods | 104,187 | 130,879 | |||||
Total inventory | 170,965 | 187,967 | |||||
Less: Non-current inventory | 12,494 | 12,737 | |||||
Total inventory-current, net | $ | 158,471 | $ | 175,230 |
|
December 31, 2017 | December 31, 2016 | ||||||
Land | $ | 3,500 | $ | 5,603 | |||
Buildings and improvements | 96,775 | 174,303 | |||||
Equipment | 82,442 | 143,818 | |||||
Office furniture and equipment | 11,082 | 15,767 | |||||
Construction-in-progress | 46,622 | 50,191 | |||||
Property, plant and equipment, gross | 240,421 | 389,682 | |||||
Less: Accumulated depreciation | (115,608 | ) | (156,310 | ) | |||
Property, plant and equipment, net | $ | 124,813 | $ | 233,372 |
|
Marketed Product Rights | IPR&D and Royalties | Total Company | ||||||||||||||||
Gross Carrying Value | Accumulated Amortization | Intangible Assets, Net | Non-amortized Value | Intangible Assets, Net | ||||||||||||||
Balance as of December 31, 2015 | $ | 460,875 | $ | (83,095 | ) | $ | 377,780 | $ | 224,240 | $ | 602,020 | |||||||
Additions | (1) | 455,529 | — | 455,529 | 161,003 | 616,532 | ||||||||||||
Amortization | — | (56,489 | ) | (56,489 | ) | — | (56,489 | ) | ||||||||||
Commercial Launch | (2) | 97,300 | — | 97,300 | (97,300 | ) | — | |||||||||||
Impairment Charge | (3) | (488,632 | ) | — | (488,632 | ) | (52,965 | ) | (541,597 | ) | ||||||||
Balance as of December 31, 2016 | 525,072 | (139,584 | ) | 385,488 | 234,978 | 620,466 | ||||||||||||
Additions | — | 50 | 50 | |||||||||||||||
Amortization | — | (68,375 | ) | (68,375 | ) | — | (68,375 | ) | ||||||||||
Commercial Launch | (2) | 4,216 | — | 4,216 | (4,216 | ) | — | |||||||||||
Divestiture | (4) | (2,414 | ) | 2,414 | — | — | — | |||||||||||
Impairment Charge | (3) | (96,865 | ) | — | (96,865 | ) | (192,809 | ) | (289,674 | ) | ||||||||
Balance as of December 31, 2017 | $ | 430,009 | $ | (205,545 | ) | $ | 224,464 | $ | 38,003 | $ | 262,467 |
(1) | During the first quarter of 2016, the Company capitalized $3.5 million of milestone payments due to an affiliate of Teva under the terms of the Mebendazole Product Agreement related to the FDA's approval and the Company's subsequent commercial launch of Emverm® (mebendazole) 100 mg chewable tablets. See "Note 17. Alliance and Collaboration Agreements" for additional information related to the Mebendazole Product Agreement. |
(2) | During the year ended December 31, 2017, the Company commercially launched two products acquired as IPR&D as part of the Teva Transaction and Tower Acquisition and, as a result, transferred the $4.2 million asset value from non-amortized, indefinite-lived acquired IPR&D product rights to amortized, finite lived marketed product rights. These assets will be amortized over an estimated useful life ranging from seven to eight years based on the pattern of economic benefit expected to be realized through 2025. |
(3) | For the year ended December 31, 2017 the Company recognized a total of $289.7 million of intangible asset impairment charges, of which $96.9 million were recognized in cost of revenues impairment charges and $192.8 million were recognized in in-process research and development impairment charges on the Company’s consolidated statement of operations. |
(4) | During the second quarter of 2017, the Company divested 29 ANDAs and one NDA for non-strategic approved generic products, the vast majority of which were not marketed, and all acquired as part of the Tower Acquisition, for gross proceeds of $12.0 million. These intangible assets had a fully amortized gross carrying value of $2.4 million at the time of the sale. The Company incurred $0.1 million of legal expense in connection with the divestiture, resulting in a net gain on sale of $11.9 million recognized as gain on sale of assets on the Company’s consolidated statement of operations. |
For the years ending December 31, | Amortization Expense | ||
2018 | $ | 56,431 | |
2019 | 46,771 | ||
2020 | 36,140 | ||
2021 | 23,778 | ||
2022 | 19,701 | ||
Thereafter | 41,643 | ||
Total | $ | 224,464 |
|
December 31, 2017 | December 31, 2016 | ||||||
Payroll-related expenses | $ | 38,415 | $ | 37,986 | |||
Product returns | 76,293 | 72,888 | |||||
Accrued shelf stock | 7,525 | 7,032 | |||||
Government rebates | 73,970 | 72,063 | |||||
Legal and professional fees | 14,005 | 8,395 | |||||
Estimated Teva and Allergan chargebacks and rebates (1) | 13,277 | 14,813 | |||||
Accrued profit sharing and royalty expenses | 8,373 | 13,642 | |||||
Other | 16,269 | 17,834 | |||||
Total accrued expenses | $ | 248,127 | $ | 244,653 |
(1) | As discussed in "Note 3. Business Acquisitions," in connection with 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 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 December 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. |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Returns reserve | |||||||||||
Beginning balance | $ | 72,888 | $ | 48,950 | $ | 27,174 | |||||
Acquired balances | — | — | 11,364 | ||||||||
Provision related to sales recorded in the period | 47,709 | 52,383 | 43,967 | ||||||||
Credits issued during the period | (44,304 | ) | (28,445 | ) | (33,555 | ) | |||||
Ending balance | $ | 76,293 | $ | 72,888 | $ | 48,950 |
|
Years ending December 31, | |||
2018 | $ | 20,000 | |
2019 | 20,000 | ||
2020 | 20,000 | ||
2021 | 265,000 | ||
2022 | 600,000 | ||
Total | $ | 925,000 |
|
Shares issued | 74,234 | |
Stock options outstanding (1) | 3,175 | |
Conversion of Notes payable (2) | 9,471 | |
Warrants outstanding (see below) | 9,471 | |
Total shares of common stock issued and reserved for issuance | 96,351 |
|
Years Ended December 31, | ||||||||||||||
2017 | 2016 | 2015 | ||||||||||||
Basic (Loss) Earnings Per Common Share: | ||||||||||||||
Net (loss) income | $ | (469,287 | ) | $ | (472,031 | ) | $ | 38,997 | ||||||
Weighted-average common shares outstanding | 71,857 | 71,147 | 69,640 | |||||||||||
Basic (loss) earnings per share | $ | (6.53 | ) | $ | (6.63 | ) | $ | 0.56 | ||||||
Diluted (Loss) Earnings Per Common Share: | ||||||||||||||
Net (loss) income | $ | (469,287 | ) | $ | (472,031 | ) | $ | 38,997 | ||||||
Add-back of interest expense on outstanding convertible notes payable, net of tax | — | (1) | — | (1) | — | (2) | ||||||||
Adjusted net (loss) income | $ | (469,287 | ) | $ | (472,031 | ) | $ | 38,997 | ||||||
Weighted-average common shares outstanding | 71,857 | 71,147 | 69,640 | |||||||||||
Weighted-average incremental shares related to assumed exercise of warrants, stock options, vesting of non-vested shares and ESPP share issuance | — | (3) | — | (4) | 2,387 | (5) | ||||||||
Weighted-average incremental shares assuming conversion of outstanding notes payable | — | (1) | — | (1) | — | (2) | ||||||||
Diluted weighted-average common shares outstanding | 71,857 | (3) | 71,147 | (4) | 72,027 | (6) | ||||||||
Diluted net (loss) income per share | $ | (6.53 | ) | $ | (6.63 | ) | $ | 0.54 |
(1) | For the years ended December 31, 2017 and 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) | The numerator and denominator adjustments related to the Company’s convertible notes payable were excluded from the computation because the add-back of interest expense, net of tax, to the numerator had a greater effect on the quotient than the inclusion of the incremental shares assuming conversion of the convertible notes payable in the denominator, resulting in anti-dilution. |
(3) | For the year ended December 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 December 31, 2017, shares issuable but not included in the Company's calculation of diluted EPS, which could potentially dilute future earnings, included 9.47 million warrants outstanding, 9.47 million shares for conversion of outstanding Notes payable, 3.2 million stock options outstanding and 1.9 million non-vested restricted stock awards. |
(4) | For the year ended December 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 December 31, 2016, shares issuable but not included in the Company's calculation of diluted EPS, which could potentially dilute future earnings, included 9.47 million warrants outstanding, 9.47 million shares for conversion of outstanding Notes payable, 2.2 million stock options outstanding and 2.2 million non-vested restricted stock awards. |
(5) | As of December 31, 2015, the approximately 9.47 million warrants outstanding have been excluded from the denominator of the diluted EPS computation under the treasury stock method because the exercise price of the warrants exceeds the average market price of the Company’s common stock for the period, so inclusion in the calculation would be anti-dilutive. |
(6) | As of December 31, 2015, shares issuable but not included in the Company’s calculation of diluted EPS, which could potentially dilute future earnings, included 9.47 million for warrants outstanding, 9.47 million shares for conversion of outstanding Notes payable, 1.7 million stock options outstanding and 1.5 million non-vested restricted stock awards. |
|
Stock Options | Number of Shares Under Option | Weighted- Average Exercise Price per Share | ||||
Outstanding at December 31, 2014 | 3,042,180 | $ | 14.78 | |||
Options granted | 406,950 | 41.27 | ||||
Options exercised | (1,042,198 | ) | 9.87 | |||
Options forfeited | (1,561 | ) | 16.70 | |||
Outstanding at December 31, 2015 | 2,405,371 | 21.39 | ||||
Options granted | 572,625 | 12.27 | ||||
Options exercised | (477,910 | ) | 19.09 | |||
Options forfeited | (265,755 | ) | 35.88 | |||
Outstanding at December 31, 2016 | 2,234,331 | 22.67 | ||||
Options granted | 1,198,726 | 12.21 | ||||
Options exercised | (74,643 | ) | 10.22 | |||
Options forfeited | (183,417 | ) | 33.07 | |||
Outstanding at December 31, 2017 | 3,174,997 | 18.36 | ||||
Options exercisable at December 31, 2017 | 1,634,133 | $ | 19.63 |
Restricted Stock Awards | Non-Vested Restricted Stock Awards | Weighted- Average Grant Date Fair Value | ||||
Non-vested at December 31, 2014 | 2,327,176 | $ | 23.61 | |||
Granted | 973,742 | 45.40 | ||||
Vested | (930,159 | ) | 22.64 | |||
Forfeited | (224,261 | ) | 29.01 | |||
Non-vested at December 31, 2015 | 2,146,498 | 33.20 | ||||
Granted | 1,245,184 | 31.77 | ||||
Vested | (893,190 | ) | 28.97 | |||
Forfeited | (338,365 | ) | 33.87 | |||
Non-vested at December 31, 2016 | 2,160,127 | 34.02 | ||||
Granted | 980,419 | 13.89 | ||||
Vested | (730,160 | ) | 31.99 | |||
Forfeited | (548,897 | ) | 30.27 | |||
Non-vested at December 31, 2017 | 1,861,489 | $ | 25.36 |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Volatility (range) | 46.5% | - | 49.2% | 38.1% | - | 40.3% | 39.9% | - | 40.1% | ||
Volatility (weighted average) | 48.1% | 38.3% | 40.0% | ||||||||
Risk-free interest rate (range) | 1.9% | - | 2.2% | 1.2% | - | 1.9% | 0.8% | - | 1.8% | ||
Risk-free interest rate (weighted average) | 2.1% | 1.4% | 1.7% | ||||||||
Dividend yield | —% | —% | —% | ||||||||
Weighted-average expected life (years) | 6.18 | 6.14 | 6.18 | ||||||||
Weighted average grant date fair value | $5.93 | $12.27 | $17.08 |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Manufacturing expenses | $ | 4,975 | $ | 6,364 | $ | 4,479 | |||||
Research and development | 16,174 | 5,697 | 5,996 | ||||||||
Selling, general and administrative | 5,109 | 20,119 | 18,138 | ||||||||
Total | $ | 26,258 | $ | 32,180 | $ | 28,613 |
|
Type of Cost | Cumulative Amount Incurred | ||
Employee retention and severance payments | $ | 12,725 | |
Technical transfer of products | 9,544 | ||
Asset impairment and accelerated depreciation charges | 20,900 | ||
Facilities lease terminations and asset retirement obligations | 209 | ||
Legal and professional fees | 12 | ||
Total estimated restructuring charges | $ | 43,390 |
Balance as of December 31, 2015 | Expensed /Accrued Expense | Cash Payments | Non-Cash Items | Balance as of December 31, 2016 | ||||||||||||||||
Employee retention and severance payments | $ | — | $ | 6,636 | $ | (691 | ) | $ | — | $ | 5,945 | |||||||||
Technical transfer of products | — | 6,573 | (6,573 | ) | — | — | ||||||||||||||
Asset impairment and accelerated depreciation charges | — | 13,678 | — | (13,678 | ) | — | ||||||||||||||
Facilities lease terminations and asset retirement obligations | — | 209 | — | — | 209 | |||||||||||||||
Legal and professional fees | — | 12 | (12 | ) | — | — | ||||||||||||||
Total | $ | — | $ | 27,108 | $ | (7,276 | ) | $ | (13,678 | ) | $ | 6,154 |
Balance as of December 31, 2016 | Expensed /Accrued Expense | Cash Payments | Non-Cash Items | Balance as of December 31, 2017 | ||||||||||||||||
Employee retention and severance payments | $ | 5,945 | $ | 6,089 | $ | (4,648 | ) | $ | — | $ | 7,386 | |||||||||
Technical transfer of products | — | 2,671 | (2,671 | ) | — | — | ||||||||||||||
Asset impairment and accelerated depreciation charges | — | 7,525 | — | (7,525 | ) | — | ||||||||||||||
Facilities lease terminations and asset retirement obligations | 209 | — | — | — | 209 | |||||||||||||||
Total | $ | 6,154 | $ | 16,285 | $ | (7,319 | ) | $ | (7,525 | ) | $ | 7,595 |
December 31, 2017 | |||
Current assets | $ | 11,527 | |
Property, plant and equipment | 18,500 | ||
Assets held for sale | $ | 30,027 | |
Current liabilities | $ | 7,170 | |
Liabilities held for sale | $ | 7,170 |
|
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Current: | |||||||||||
Federal taxes | $ | (55,844 | ) | $ | 21,386 | $ | 48,078 | ||||
State taxes | (372 | ) | 266 | 2,286 | |||||||
Foreign taxes | 639 | 1,377 | (442 | ) | |||||||
Total current tax (benefit) expense | (55,577 | ) | 23,029 | 49,922 | |||||||
Deferred: | |||||||||||
Federal taxes | $ | 73,357 | $ | (133,387 | ) | $ | (23,605 | ) | |||
State taxes | (371 | ) | 5,502 | (5,733 | ) | ||||||
Foreign taxes | 917 | 562 | (213 | ) | |||||||
Total deferred tax expense (benefit) | 73,903 | (127,323 | ) | (29,551 | ) | ||||||
Provision for (benefit from) income taxes | $ | 18,326 | $ | (104,294 | ) | $ | 20,371 |
Years Ended December 31, | ||||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||
(Loss) income before income taxes | $ | (450,961 | ) | $ | (576,325 | ) | $ | 59,368 | ||||||||||||
Tax (benefit) provision at the federal statutory rate | (157,836 | ) | 35.0 | % | (201,714 | ) | 35.0 | % | 20,779 | 35.0 | % | |||||||||
Increase (decrease) in tax rate resulting from: | ||||||||||||||||||||
Tax rate differential and permanent items on foreign income | 662 | (0.2 | )% | 186 | — | % | 412 | 0.7 | % | |||||||||||
State income taxes, net of federal benefit | (8,291 | ) | 1.8 | % | (7,394 | ) | 1.3 | % | 365 | 0.6 | % | |||||||||
State research and development credits | (1,324 | ) | 0.3 | % | (1,767 | ) | 0.3 | % | (2,357 | ) | (4.0 | )% | ||||||||
Federal research and development credits | (1,243 | ) | 0.3 | % | (2,213 | ) | 0.4 | % | (2,672 | ) | (4.5 | )% | ||||||||
Share-based compensation | 5,471 | (1.2 | )% | 1,768 | (0.3 | )% | 968 | 1.6 | % | |||||||||||
Executive compensation | 543 | (0.1 | )% | (761 | ) | 0.1 | % | 3,140 | 5.3 | % | ||||||||||
Domestic manufacturing deduction | — | — | % | (1,286 | ) | 0.2 | % | (1,422 | ) | (2.4 | )% | |||||||||
Other permanent book/tax differences | (1,846 | ) | 0.4 | % | (258 | ) | — | % | 2,003 | 3.4 | % | |||||||||
Provision for uncertain tax positions | (807 | ) | 0.2 | % | 337 | — | % | 184 | 0.3 | % | ||||||||||
Revision of prior years’ estimates | 1,371 | (0.3 | )% | (792 | ) | 0.1 | % | 859 | 1.5 | % | ||||||||||
Taiwan rural area investment tax credit | — | — | % | — | — | % | (2,134 | ) | (3.6 | )% | ||||||||||
Impact on gross deferred net assets from 2017 Tax Reform Act | 100,065 | (22.2 | )% | — | — | % | — | — | % | |||||||||||
Foreign withholding tax | 1,534 | (0.3 | )% | — | — | % | — | — | % | |||||||||||
Other, net | 2,888 | (0.7 | )% | 842 | (0.1 | )% | 246 | 0.4 | % | |||||||||||
Valuation allowance | 77,139 | (17.1 | )% | 108,758 | (18.9 | )% | — | — | % | |||||||||||
Provision for (benefit from) income taxes | $ | 18,326 | (4.1 | )% | $ | (104,294 | ) | 18.1 | % | $ | 20,371 | 34.3 | % |
December 31, | |||||||
2017 | 2016 | ||||||
Deferred tax assets: | |||||||
Accrued expenses | $ | 60,069 | $ | 114,825 | |||
Inventory reserves | 17,602 | 15,873 | |||||
Net operating loss carryforwards | 2,518 | 2,302 | |||||
Depreciation and amortization | 2,657 | 651 | |||||
Acquired product rights and intangibles | 118,168 | 128,401 | |||||
Capitalized legal fees | 6,695 | 10,231 | |||||
Credit carryforwards | 11,205 | 8,453 | |||||
Share based compensation expense | 3,535 | 6,371 | |||||
Sale of subsidiary | 7,794 | — | |||||
Other | 495 | 525 | |||||
Deferred tax assets | 230,738 | 287,632 | |||||
Deferred tax liabilities: | |||||||
Tax depreciation and amortization in excess of book amounts | 3,808 | 5,428 | |||||
Acquired product rights and intangibles | 35,698 | 95,517 | |||||
Derivative | 3,411 | 6,192 | |||||
Foreign withholding tax | 1,824 | — | |||||
Other | 3,326 | 1,871 | |||||
Deferred tax liabilities | 48,067 | 109,008 | |||||
Deferred tax assets (liabilities), net | 182,671 | 178,624 | |||||
Valuation allowance | (185,897 | ) | (108,758 | ) | |||
Deferred tax assets (liabilities), net after valuation allowance | $ | (3,226 | ) | $ | 69,866 |
Years Ended December 31, | |||||||||||
2017 | 2016 | 2015 | |||||||||
Unrecognized tax benefits beginning of year | $ | 6,425 | $ | 5,680 | $ | 6,517 | |||||
Gross change for current year positions | 328 | 549 | 1,079 | ||||||||
Gross change for prior period positions | (105 | ) | 1,318 | (673 | ) | ||||||
Gross change due to Tower Acquisition | — | — | 1,037 | ||||||||
Decrease due to expiration of statutes of limitations | (972 | ) | — | — | |||||||
Decrease due to settlements and payments | — | (1,122 | ) | (2,280 | ) | ||||||
Unrecognized tax benefits end of year | $ | 5,676 | $ | 6,425 | $ | 5,680 |
|
Years ending December 31, | |||
2018 | $ | 5,575 | |
2019 | 3,740 | ||
2020 | 2,578 | ||
2021 | 2,551 | ||
2022 | 2,585 | ||
Thereafter | 11,113 | ||
Total minimum lease payments | $ | 28,142 |
|
Year Ended December 31, 2017 | Impax Generics | Impax Specialty Pharma | Corporate and Other | Total Company | |||||||||||
Revenues, net | $ | 549,077 | $ | 226,710 | $ | — | $ | 775,787 | |||||||
Cost of revenues | 454,911 | 80,212 | — | 535,123 | |||||||||||
Cost of revenues impairment charges | 96,865 | — | — | 96,865 | |||||||||||
Selling, general and administrative | 28,294 | 67,949 | 120,027 | 216,270 | |||||||||||
Research and development | 63,245 | 17,602 | — | 80,847 | |||||||||||
In-process research and development impairment charges | 192,809 | — | — | 192,809 | |||||||||||
Fixed assets impairment charges | 8,380 | 74,128 | — | 82,508 | |||||||||||
Change in fair value of contingent consideration | (31,048 | ) | — | — | (31,048 | ) | |||||||||
Patent litigation | 827 | 4,278 | — | 5,105 | |||||||||||
(Loss) before income taxes | (265,206 | ) | (17,459 | ) | (168,296 | ) | (450,961 | ) |
Year Ended December 31, 2016 | Impax Generics | Impax Specialty Pharma | Corporate and Other | Total Company | |||||||||||
Revenues, net | $ | 606,320 | $ | 218,109 | $ | — | $ | 824,429 | |||||||
Cost of revenues | 417,316 | 69,583 | — | 486,899 | |||||||||||
Cost of revenues impairment charges | 464,319 | 24,313 | — | 488,632 | |||||||||||
Selling, general and administrative | 20,508 | 61,448 | 119,874 | 201,830 | |||||||||||
Research and development | 61,980 | 18,486 | — | 80,466 | |||||||||||
In-process research and development impairment charges | 27,765 | 25,200 | — | 52,965 | |||||||||||
Patent litigation | 829 | 6,990 | — | 7,819 | |||||||||||
(Loss) income before income taxes | (386,397 | ) | 12,089 | (202,017 | ) | (576,325 | ) |
Year Ended December 31, 2015 | Impax Generics | Impax Specialty Pharma | Corporate and Other | Total Company | |||||||||||
Revenues, net | $ | 710,932 | $ | 149,537 | $ | — | $ | 860,469 | |||||||
Cost of revenues | 442,742 | 58,020 | — | 500,762 | |||||||||||
Cost of revenues impairment charges | 7,303 | — | — | 7,303 | |||||||||||
Selling, general and administrative | 29,641 | 52,427 | 119,219 | 201,287 | |||||||||||
Research and development | 52,478 | 18,144 | — | 70,622 | |||||||||||
In-process research and development impairment charges | 6,360 | — | — | 6,360 | |||||||||||
Patent litigation | 2,942 | 1,625 | — | 4,567 | |||||||||||
Income (loss) before income taxes | 169,466 | 19,321 | (129,419 | ) | 59,368 |
Segment | Product Family | 2017 | |||||||
$ | % | ||||||||
Impax Generics | Epinephrine Auto-Injector family (generic Adrenaclick®) | $ | 113,931 | 15 | % | (1) | |||
Impax Specialty Pharma | Rytary® family | $ | 91,637 | 12 | % | (2) | |||
Impax Generics | Oxymorphone HCI ER family | $ | 68,587 | 9 | % | (3) | |||
Impax Generics | Budesonide family | $ | 51,548 | 7 | % | (4) | |||
Impax Generics | Zomig family | $ | 51,115 | 7 | % | (5) |
Segment | Product Family | 2016 | |||||||
$ | % | ||||||||
Impax Generics | Epinephrine Auto-Injector family (generic Adrenaclick®) | $ | 91,572 | 11 | % | (1) | |||
Impax Specialty Pharma | Rytary® family | $ | 73,833 | 9 | % | (2) | |||
Impax Generics | Oxymorphone HCI ER family | $ | 72,661 | 9 | % | (3) | |||
Impax Generics | Diclofenac Sodium Gel family (generic Solaraze®) | $ | 69,035 | 8 | % | (6) | |||
Impax Generics | Fenofibrate family | $ | 64,001 | 8 | % | (7) |
Segment | Product Family | 2015 | |||||||
$ | % | ||||||||
Impax Generics | Diclofenac Sodium Gel family (generic Solaraze®) | $ | 148,610 | 17 | % | (6) | |||
Impax Generics | Amphetamine Salts ER (CII) family (generic Adderall®) | $ | 106,252 | 12 | % | (8) | |||
Impax Generics | Fenofibrate family | $ | 93,458 | 11 | % | (7) | |||
Impax Generics | Metaxalone family (generic Skelaxin) | $ | 69,876 | 8 | % | (9) | |||
Impax Generics | Oxymorphone HCI ER family | $ | 59,175 | 7 | % | (3) |
|
2017 Quarters Ended | ||||||||||||||||
(in thousands, except share and per share amounts) | March 31 | June 30 | September 30 | December 31 | ||||||||||||
Revenue: | ||||||||||||||||
Impax Generics sales, gross | $ | 635,897 | $ | 663,167 | $ | 622,252 | $ | 584,374 | ||||||||
Less: | ||||||||||||||||
Chargebacks | 298,744 | 286,092 | 281,835 | 302,394 | ||||||||||||
Rebates | 164,792 | 170,398 | 162,914 | 144,344 | ||||||||||||
Product returns | 9,733 | 15,210 | 7,003 | 4,657 | ||||||||||||
Other credits | 28,481 | 40,578 | 19,402 | 20,036 | ||||||||||||
Impax Generics sales, net | 134,147 | 150,889 | 151,098 | 112,943 | ||||||||||||
Impax Specialty Pharma sales, gross | 84,133 | 84,238 | 107,407 | 111,918 | ||||||||||||
Less: | ||||||||||||||||
Chargebacks | 9,828 | 8,967 | 14,121 | 10,058 | ||||||||||||
Rebates | 4,483 | 4,682 | 5,914 | 6,198 | ||||||||||||
Product returns | 1,844 | 1,416 | 3,614 | 4,234 | ||||||||||||
Other credits | 17,722 | 17,980 | 28,464 | 21,461 | ||||||||||||
Impax Specialty Pharma revenues, net | 50,256 | 51,193 | 55,294 | 69,967 | ||||||||||||
Total revenues | 184,403 | 202,082 | 206,392 | 182,910 | ||||||||||||
Gross profit | 24,891 | 72,406 | 34,033 | 12,469 | ||||||||||||
Net loss | $ | (98,431 | ) | $ | (20,417 | ) | $ | (49,369 | ) | $ | (301,070 | ) | ||||
Net loss per common share: | ||||||||||||||||
Basic | $ | (1.37 | ) | $ | (0.28 | ) | $ | (0.69 | ) | $ | (4.18 | ) | ||||
Diluted | $ | (1.37 | ) | $ | (0.28 | ) | $ | (0.69 | ) | $ | (4.18 | ) | ||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 71,594,472 | 71,803,920 | 71,924,592 | 72,098,533 | ||||||||||||
Diluted | 71,594,472 | 71,803,920 | 71,924,592 | 72,098,533 |
2016 Quarters Ended | ||||||||||||||||
(in thousands, except share and per share amounts) | March 31 | June 30 | September 30 | December 31 | ||||||||||||
Revenue: | ||||||||||||||||
Impax Generics sales, gross | $ | 614,176 | $ | 532,968 | $ | 658,099 | $ | 690,674 | ||||||||
Less: | ||||||||||||||||
Chargebacks | 217,354 | 197,864 | 252,303 | 308,253 | ||||||||||||
Rebates | 185,476 | 178,097 | 183,347 | 211,359 | ||||||||||||
Product returns | 11,913 | 10,237 | 16,151 | 7,920 | ||||||||||||
Other credits | 29,354 | 25,075 | 30,978 | 23,916 | ||||||||||||
Impax Generics revenues, net | 170,079 | 121,695 | 175,320 | 139,226 | ||||||||||||
Impax Specialty Pharma sales, gross | 82,073 | 81,254 | 77,841 | 108,121 | ||||||||||||
Less: | ||||||||||||||||
Chargebacks | 6,111 | 8,826 | 5,439 | 15,253 | ||||||||||||
Rebates | 2,853 | 2,430 | 3,556 | 3,016 | ||||||||||||
Product returns | 1,508 | 1,279 | 574 | 2,802 | ||||||||||||
Other credits | 16,172 | 17,824 | 15,683 | 27,854 | ||||||||||||
Impax Specialty Pharma revenues, net | 55,429 | 50,895 | 52,589 | 59,196 | ||||||||||||
Total revenues | 225,508 | 172,590 | 227,909 | 198,422 | ||||||||||||
Gross profit (loss) | 102,590 | 72,984 | (165,426 | ) | (161,250 | ) | ||||||||||
Net loss | $ | (10,408 | ) | $ | (2,701 | ) | $ | (179,337 | ) | $ | (279,585 | ) | ||||
Net loss per common share: | ||||||||||||||||
Basic | $ | (0.15 | ) | $ | (0.04 | ) | $ | (2.51 | ) | $ | (3.91 | ) | ||||
Diluted | $ | (0.15 | ) | $ | (0.04 | ) | $ | (2.51 | ) | $ | (3.91 | ) | ||||
Weighted-average common shares outstanding: | ||||||||||||||||
Basic | 70,665,394 | 71,100,123 | 71,331,247 | 71,487,071 | ||||||||||||
Diluted | 70,665,394 | 71,100,123 | 71,331,247 | 71,487,071 |
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