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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from     to
 Commission file number: 001-34263
 Impax
Laboratories, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    65-0403311(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)30831 Huntwood Avenue, Hayward, CA
    
    94544(Address of principal executive offices)
    
    (Zip Code)
 (510) 476-2000   Registrants telephone number, including area code
 Former name, former address and former fiscal year, if changed since last report
 þ o
 o o
  Large accelerated filer o
Accelerated
filer þ
Non-accelerated filer o(Do not check if a smaller reporting company)
Smaller reporting company 
o o þ




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##### 



Impax Laboratories, Inc.
 INDEX
 PART I: FINANCIAL INFORMATIONItem 1: Financial Statements- Consolidated Balance Sheets as of September 30, 2010 (unaudited)
and December 31, 2009
    
    
    3- Consolidated Statements of Operations for each of the three and nine months ended
September 30, 2010 and 2009 (unaudited)
    
    
    4- Consolidated Statements of Cash Flows for each of the nine months ended
September 30, 2010 and 2009 (unaudited)
    
    
    5- Notes to Consolidated Financial Statements (unaudited)
    
    
    7Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    44Item 3: Quantitative and Qualitative Disclosures About Market Risk
    
    
    74Item 4:Controls and Procedures
    
    
    74PART II: OTHER INFORMATIONItem 1:Legal Proceedings
    
    
    75Item 1A:Risk Factors
    
    
    78Item 2:Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    79Item 3:Defaults Upon Senior Securities
    
    
    80Item 4:(Removed and Reserved)
    
    
    80Item 5:Other Information
    
    
    80Item 6: Exhibits
    
    
    81SIGNATURES
    
    
    82EXHIBIT INDEX
    
    
    83Exhibit 10.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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PART I: FINANCIAL INFORMATION
 
 ITEM 1: FINANCIAL STATEMENTS
 
 Impax Laboratories, Inc.  CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
 September 30,
    
    
    December 31,2010
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    165,772
    
    
    $
    31,770Short-term investments
    
    
    192,579
    
    
    
    58,599Accounts receivable, net
    
    
    95,567
    
    
    
    185,854Inventory, net
    
    
    42,036
    
    
    
    49,130Current portion of deferred product manufacturing costs-alliance agreements
    
    
    3,006
    
    
    
    11,624Current portion of deferred income taxes
    
    
    37,114
    
    
    
    32,286Prepaid expenses and other current assets
    
    
    2,958
    
    
    
    4,748Total current assets
    
    
    539,032
    
    
    
    374,011Property, plant and equipment, net
    
    
    103,066
    
    
    
    101,650Deferred product manufacturing costs-alliance agreements
    
    
    8,231
    
    
    
    96,619Deferred income taxes, net
    
    
    1,396
    
    
    
    48,544Other assets
    
    
    25,587
    
    
    
    12,358Goodwill
    
    
    27,574
    
    
    
    27,574Total assets
    
    $
    704,886
    
    
    $
    660,756LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    19,156
    
    
    $
    23,295Accrued expenses
    
    
    82,083
    
    
    
    62,055Accrued income taxes payable
    
    
    32,942
    
    
    
    31,627Accrued profit sharing and royalty expenses
    
    
    15,235
    
    
    
    53,695Current portion of deferred revenue-alliance agreements
    
    
    19,438
    
    
    
    33,196Total current liabilities
    
    
    168,854
    
    
    
    203,868Deferred revenue-alliance agreements
    
    
    36,773
    
    
    
    224,522Other liabilities
    
    
    13,645
    
    
    
    10,139Total liabilities
    
    $
    219,272
    
    
    $
    438,529Commitments and contingencies (Note 8)Stockholders equity:Preferred Stock, $0.01 par value, 2,000,000 shares authorized,
0 shares outstanding at September 30, 2010 and December 31, 2009
    
    $
    
    
    
    $
    Common stock, $0.01 par value, 90,000,000 shares authorized and
63,800,776 and 62,210,089 shares issued at September 30, 2010
and December 31, 2009, respectively
    
    
    638
    
    
    
    622Additional paid-in capital
    
    
    247,764
    
    
    
    223,239Treasury stock  243,729 shares
    
    
    (2,157
    )
    
    
    (2,157
    )Accumulated other comprehensive income (loss)
    
    
    366
    
    
    
    (524
    )Retained earnings
    
    
    238,824
    
    
    
    828485,435
    
    
    
    222,008Noncontrolling interest
    
    
    179
    
    
    
    219Total stockholders equity
    
    
    485,614
    
    
    
    222,227Total liabilities and stockholders equity
    
    $
    704,886
    
    
    $
    660,756
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Impax Laboratories, Inc.  CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share and per share data)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Revenues:Global Product sales, net
    
    $
    91,051
    
    
    $
    46,636
    
    
    $
    537,794
    
    
    $
    123,144Private Label Product sales
    
    
    528
    
    
    
    1,752
    
    
    
    1,539
    
    
    
    5,269Rx Partner
    
    
    202,800
    
    
    
    8,328
    
    
    
    213,504
    
    
    
    30,183OTC Partner
    
    
    2,365
    
    
    
    1,769
    
    
    
    6,439
    
    
    
    5,255Research Partner
    
    
    3,714
    
    
    
    2,962
    
    
    
    10,593
    
    
    
    8,406Promotional Partner
    
    
    3,535
    
    
    
    3,499
    
    
    
    10,538
    
    
    
    10,077Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11Total revenues
    
    
    303,993
    
    
    
    64,946
    
    
    
    780,407
    
    
    
    182,275Cost of revenues
    
    
    143,122
    
    
    
    28,055
    
    
    
    291,589
    
    
    
    81,589Gross profit
    
    
    160,871
    
    
    
    36,891
    
    
    
    488,818
    
    
    
    100,686Operating expenses:Research and development
    
    
    23,846
    
    
    
    15,243
    
    
    
    63,264
    
    
    
    46,744Patent litigation
    
    
    1,033
    
    
    
    1,647
    
    
    
    4,786
    
    
    
    4,058Litigation settlement
    
    
    
    
    
    
    818
    
    
    
    
    
    
    
    1,674Selling, general and administrative
    
    
    12,632
    
    
    
    9,020
    
    
    
    37,136
    
    
    
    29,926Total operating expenses
    
    
    37,511
    
    
    
    26,728
    
    
    
    105,186
    
    
    
    82,402Income from operations
    
    
    123,360
    
    
    
    10,163
    
    
    
    383,632
    
    
    
    18,284Other (expense) income, net
    
    
    (91
    )
    
    
    (6
    )
    
    
    (134
    )
    
    
    52Interest income
    
    
    405
    
    
    
    180
    
    
    
    680
    
    
    
    636Interest expense
    
    
    (38
    )
    
    
    (185
    )
    
    
    (108
    )
    
    
    (735
    )Income before income taxes
    
    
    123,636
    
    
    
    10,152
    
    
    
    384,070
    
    
    
    18,237Provision for income taxes
    
    
    48,501
    
    
    
    3,495
    
    
    
    146,114
    
    
    
    6,373Net income before noncontrolling interest
    
    
    75,135
    
    
    
    6,657
    
    
    
    237,956
    
    
    
    11,864Add back loss attributable to
noncontrolling interest
    
    
    28
    
    
    
    28
    
    
    
    40
    
    
    
    53Net income
    
    $
    75,163
    
    
    $
    6,685
    
    
    $
    237,996
    
    
    $
    11,917Net Income per share:Basic
    
    $
    1.20
    
    
    $
    0.11
    
    
    $
    3.85
    
    
    $
    0.20Diluted
    
    $
    1.15
    
    
    $
    0.11
    
    
    $
    3.65
    
    
    $
    0.20Weighted average common shares outstanding:Basic
    
    
    62,435,116
    
    
    
    60,559,064
    
    
    
    61,778,465
    
    
    
    60,130,608Diluted
    
    
    65,470,341
    
    
    
    61,247,700
    
    
    
    65,171,055
    
    
    
    60,667,227
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Impax Laboratories, Inc.  CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
 Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009(unaudited)
    
    
    (unaudited)Cash flows from operating activities:Net income
    
    $
    237,996
    
    
    $
    11,917Adjustments to reconcile net income to net cash provided by (used in)
operating activities:Depreciation
    
    
    9,066
    
    
    
    7,806Amortization of 3.5% Debentures discount and deferred financing costs
    
    
    
    
    
    
    301Amortization of Credit Agreement deferred financing costs
    
    
    25
    
    
    
    50Accretion of interest income on short-term investments
    
    
    (374
    )
    
    
    (424
    )Deferred income taxes (benefit)
    
    
    46,657
    
    
    
    (9,430
    )Provision for uncertain tax positions
    
    
    35
    
    
    
    695Tax benefit related to the exercise of employee stock options
    
    
    (4,337
    )
    
    
    Deferred revenue-Alliance Agreements
    
    
    22,947
    
    
    
    36,388Deferred product manufacturing costs-Alliance Agreements
    
    
    (9,739
    )
    
    
    (20,853
    )Recognition of deferred revenue-Alliance Agreements
    
    
    (224,454
    )
    
    
    (43,844
    )Amortization of deferred product manufacturing costs-Alliance Agreements
    
    
    106,746
    
    
    
    29,750Accrued profit sharing and royalty expense
    
    
    86,985
    
    
    
    523Payments of profit sharing and royalty expense
    
    
    (125,445
    )
    
    
    (455
    )Payments of exclusivity period fees
    
    
    
    
    
    
    (6,000
    )Payments of accrued litigation settlements
    
    
    (5,865
    )
    
    
    (8,037
    )Share-based compensation expense
    
    
    7,706
    
    
    
    5,179Bad debt expense
    
    
    215
    
    
    
    131Changes in certain assets and liabilities:Accounts receivable
    
    
    90,072
    
    
    
    (18,368
    )Inventory
    
    
    7,094
    
    
    
    (6,606
    )Prepaid expenses and other assets
    
    
    (11,225
    )
    
    
    1,346Accounts payable, accrued expenses and income taxes payable
    
    
    22,349
    
    
    
    14,824Other liabilities
    
    
    3,431
    
    
    
    2,740Net cash provided by (used in) operating activities
    
    $
    259,885
    
    
    $
    (2,367
    )Cash flows from investing activities:Purchase of short-term investments
    
    
    (306,784
    )
    
    
    (49,563
    )Maturities of short-term investments
    
    
    173,178
    
    
    
    47,748Purchases of property, plant and equipment
    
    
    (10,541
    )
    
    
    (8,405
    )Net cash (used in) investing activities
    
    $
    (144,147
    )
    
    $
    (10,220
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    
    
    
    
    (12,887
    )Tax benefit related to the exercise of employee stock options
    
    
    4,337
    
    
    
    Proceeds from exercise of stock options and ESPP
    
    
    13,927
    
    
    
    3,776Net cash provided by (used in) financing activities
    
    $
    18,264
    
    
    $
    (9,111
    )Net increase (decrease) in cash and cash equivalents
    
    $
    134,002
    
    
    $
    (21,698
    )Cash and cash equivalents, beginning of period
    
    $
    31,770
    
    
    $
    69,275Cash and cash equivalents, end of period
    
    $
    165,772
    
    
    $
    47,577
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Nine Months EndedSeptember 30,
    
    
    September 30,2010
    
    
    2009(in $000s)Cash paid for interest
    
    $
    108
    
    
    $
    597Cash paid for income taxes
    
    $
    98,201
    
    
    $
    187
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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
        Page 7 of 83




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2. REVENUE RECOGNITION
   Global Product sales, net :
     Page 8 of 83




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2. REVENUE RECOGNITION (continued)
      Page 9 of 83




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2. REVENUE RECOGNITION (continued)
 Private Label Product sales:
  Rx Partner and OTC Partner:
     Page 10 of 83




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Research Partner :
  Promotional Partner:
  Shipping and Handling Fees and Costs
   Page 11 of 83




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3. RECENT ACCOUNTING PRONOUNCEMENTS
     Page 12 of 83




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4. INVESTMENTS
   Gross
    
    
    Gross(in $000s)
    
    Amortized
    
    
    Unrecognized
    
    
    Unrecognized
    
    
    FairSeptember 30, 2010
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueCommercial paper
    
    $
    106,656
    
    
    $
    47
    
    
    $
    (8
    )
    
    $
    106,695Government sponsored
enterprise obligations
    
    
    75,994
    
    
    
    75
    
    
    
    
    
    
    
    76,069Corporate bonds
    
    
    9,688
    
    
    
    12
    
    
    
    
    
    
    
    9,700Certificates of deposit
    
    
    241
    
    
    
    
    
    
    
    
    
    
    
    241Total short-term investments
    
    $
    192,579
    
    
    $
    134
    
    
    $
    (8
    )
    
    $
    192,705
 Gross
    
    
    Gross(in $000s)
    
    Amortized
    
    
    Unrecognized
    
    
    Unrecognized
    
    
    FairDecember 31, 2009
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueCommercial paper
    
    $
    13,387
    
    
    $
    4
    
    
    $
    (1
    )
    
    $
    13,390Government sponsored
enterprise obligations
    
    
    41,953
    
    
    
    32
    
    
    
    (1
    )
    
    
    41,984Corporate bonds
    
    
    3,021
    
    
    
    1
    
    
    
    (1
    )
    
    
    3,021Certificates of deposit
    
    
    238
    
    
    
    
    
    
    
    
    
    
    
    238Total short-term investments
    
    $
    58,599
    
    
    $
    37
    
    
    $
    (3
    )
    
    $
    58,633
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5. ACCOUNTS RECEIVABLE
  September 30,
    
    
    December 31,(in $000s)
    
    2010
    
    
    2009Gross accounts receivable
    
    $
    138,128
    
    
    $
    254,094Less: Chargeback reserve
    
    
    (17,298
    )
    
    
    (21,448
    )Less: Rebate reserve
    
    
    (16,993
    )
    
    
    (37,781
    )Less: Other deductions
    
    
    (8,270
    )
    
    
    (9,011
    )Accounts receivable, net
    
    $
    95,567
    
    
    $
    185,854
  (in $000s)
    
    September 30,
    
    

December 31,Chargeback reserve
    
    2010
    
    
    2009Beginning balance
    
    $
    21,448
    
    
    $
    4,056Provision recorded during the period
    
    
    141,653
    
    
    
    126,105Credits issued during the period
    
    
    (145,803
    )
    
    
    (108,713
    )Ending balance
    
    $
    17,298
    
    
    $
    21,448
 (in $000s)
    
    September 30,
    
    

December 31,Rebate reserve
    
    2010
    
    
    2009Beginning balance
    
    $
    37,781
    
    
    $
    4,800Provision recorded during the period
    
    
    73,397
    
    
    
    72,620Credits issued during the period
    
    
    (94,185
    )
    
    
    (39,639
    )Ending balance
    
    $
    16,993
    
    
    $
    37,781
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6. INVENTORY
  September 30,
    
    
    December 31,(in $000s)
    
    2010
    
    
    2009Raw materials
    
    $
    30,789
    
    
    $
    30,758Work in process
    
    
    3,064
    
    
    
    2,768Finished goods
    
    
    15,828
    
    
    
    17,051Total inventory, net
    
    $
    49,680
    
    
    $
    50,577Less: Non-current inventory, net
    
    
    (7,644
    )
    
    
    (1,447
    )Total inventory-current, net
    
    $
    42,036
    
    
    $
    49,130
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7. PROPERTY, PLANT AND EQUIPMENT
  September 30,
    
    
    December 31,(in $000s)
    
    2010
    
    
    2009Land
    
    $
    2,270
    
    
    $
    2,270Buildings and improvements
    
    
    81,093
    
    
    
    77,778Equipment
    
    
    65,938
    
    
    
    59,612Office furniture and equipment
    
    
    8,118
    
    
    
    7,425Construction-in-progress
    
    
    4,867
    
    
    
    4,880Property, plant and equipment, gross
    
    $
    162,286
    
    
    $
    151,965Less: Accumulated depreciation
    
    
    (59,220
    )
    
    
    (50,315
    )Property, plant and equipment, net
    
    $
    103,066
    
    
    $
    101,650
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8. ACCRUED EXPENSES
  September 30
    
    
    December 31(in $000s)
    
    2010
    
    
    2009Payroll-related expenses
    
    $
    15,235
    
    
    $
    15,274Product returns
    
    
    39,478
    
    
    
    22,114Shelf stock adjustments
    
    
    614
    
    
    
    225Medicaid rebates
    
    
    14,913
    
    
    
    9,759Physician detailing sales force fees
    
    
    2,330
    
    
    
    2,449Legal and professional fees
    
    
    4,651
    
    
    
    3,660Litigation settlements
    
    
    
    
    
    
    5,865Other
    
    
    4,862
    
    
    
    2,709Total accrued expenses
    
    $
    82,083
    
    
    $
    62,055
 Accrued Litigation Settlement Expenses
   Taiwan Facility Construction
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8. ACCRUED EXPENSES (continued)
 Product Returns
  September 30,
    
    
    December 31,Product Return Reserve
    
    2010
    
    
    2009(in $000s)Beginning balance
    
    $
    22,114
    
    
    $
    13,675Provision related to sales recorded in the period
    
    
    20,340
    
    
    
    11,847Credits issued during the period
    
    
    (2,976
    )
    
    
    (3,408
    )Ending balance
    
    $
    39,478
    
    
    $
    22,114
 Purchase Order Commitments
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9. INCOME TAXES
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10. REVOLVING LINE OF CREDIT
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11. ALLIANCE AND COLLABORATION AGREEMENTS
 License and Distribution Agreement with Shire
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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 Strategic Alliance Agreement with Teva
      
    
    Research and development related activities (the Combined Unit)  Consideration received as a result of research and
development related activities performed under the Teva Agreement will be deferred and recognized on the straight-line
method over the Companys expected period of performance of the research and development related services, which is
estimated to be from July 2001 (following the June 2001 commencement of the Teva Agreement) to October 2014 (with FDA approval of the
ANDA for the final product under the Teva Agreement).
    
    Manufacture and delivery of 10 products  Consideration received as a result of the manufacture and delivery of 10
products under the Teva Agreement will be recognized under the Companys revenue recognition policy, as proscribed by SAB
104, as follows:
 
    
    Product shipments  The Company will account for the shipment of products under the Teva Agreement as current period
revenue in accordance with its revenue recognition policy applicable to its Global products.
    
    Profit share  The Company will recognize profit share, if any, as current period revenue when earned.
 
    
    Gain on the repurchase of Company stock  This represents additional profit share revenue resulting from the successful
December 2006 commercial sale of a Tier 2 or Tier 3 product, and was recognized as revenue in the period earned.
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Nine MonthsEnded
    
    
    Inception(in $000s)
    
    September 30,
    
    
    ThroughDeferred revenue
    
    2010
    
    
    Dec 31, 2009Beginning balance
    
    $
    202,032
    
    
    $
    Additions:Product-related and cost sharing
    
    
    10,084
    
    
    
    417,269Exclusivity charges
    
    
    
    
    
    
    (50,600
    )All other
    
    
    
    
    
    
    12,527Total additions
    
    $
    10,084
    
    
    $
    379,196Less:Amount recognized
    
    
    (10,978
    )
    
    
    (177,164
    )Accounting adjustment
    
    
    (196,440
    )
    
    
    Total deferred revenue
    
    $
    4,698
    
    
    $
    202,032
 Nine Months(in $000s)
    
    Ended
    
    
    InceptionDeferred product
    
    September 30,
    
    
    Throughmanufacturing costs
    
    2010
    
    
    Dec 31, 2009Beginning balance
    
    $
    94,040
    
    
    $
    Additions
    
    
    7,416
    
    
    
    175,565Less:Amount recognized
    
    
    (6,030
    )
    
    
    (81,525
    )Accounting adjustment
    
    
    (95,426
    )
    
    
    Total deferred product
manufacturing costs
    
    $
    
    
    
    $
    94,040
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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 OTC Partners Alliance Agreements
  Nine MonthsEnded
    
    
    Inception(in $000s)
    
    September 30
    
    
    ThroughDeferred revenue
    
    2010
    
    
    Dec 31, 2009Beginning balance
    
    $
    16,162
    
    
    $
    Additions:Upfront fees and milestone payments
    
    
    
    
    
    
    8,436Cost-sharing and other
    
    
    
    
    
    
    1,642Product-related deferrals
    
    
    2,863
    
    
    
    83,826Total additions
    
    $
    2,863
    
    
    $
    93,904Less: amount recognized
    
    
    (6,438
    )
    
    
    (77,742
    )Total deferred revenue
    
    $
    12,587
    
    
    $
    16,162
 Nine Months(in $000s)
    
    Ended
    
    
    InceptionDeferred product
    
    September 30,
    
    
    Throughmanufacturing costs
    
    2010
    
    
    Dec 31, 2009Beginning balance
    
    $
    14,203
    
    
    $
    Additions
    
    
    2,323
    
    
    
    77,870Less: amount recognized
    
    
    (5,289
    )
    
    
    (63,667
    )Total deferred product
manufacturing costs
    
    $
    11,237
    
    
    $
    14,203
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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 Joint Development Agreement with Medicis Pharmaceutical Corporation
   Nine MonthsEnded
    
    
    Inception(in $000s)
    
    September 30,
    
    
    ThroughDeferred revenue
    
    2010
    
    
    Dec 31, 2009Beginning balance
    
    $
    39,487
    
    
    $
    Additions:Upfront fees and milestone payments
    
    
    
    
    
    
    52,000Product-related deferrals
    
    
    
    
    
    
    Total additions
    
    $
    
    
    
    $
    52,000Less: amount recognized
    
    
    (10,153
    )
    
    
    (12,513
    )Total deferred revenue
    
    $
    29,334
    
    
    $
    39,487
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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 Development and Co-Promotion Agreement with Endo Pharmaceuticals Inc.
     Page 27 of 83




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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 Co-Promotion Agreement with Pfizer
   Promotional Services Agreement with Shire
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12. SHARE-BASED COMPENSATION
   Three Months Ended:
    
    
    Nine Months Ended:September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,(in $000s)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Manufacturing expenses
    
    $
    482
    
    
    $
    409
    
    
    $
    1,841
    
    
    $
    1,145Research and development
    
    
    797
    
    
    
    655
    
    
    
    2,535
    
    
    
    1,906Selling, general & administrative
    
    
    1,194
    
    
    
    922
    
    
    
    3,330
    
    
    
    2,128Total
    
    $
    2,473
    
    
    $
    1,986
    
    
    $
    7,706
    
    
    $
    5,179
  Weighted AverageNumber of Shares
    
    
    Exercise PriceUnder Option
    
    
    per ShareOutstanding at December 31, 2009
    
    
    8,229,818
    
    
    $
    9.87Options granted
    
    
    349,000
    
    
    $
    20.06Options exercised
    
    
    (1,481,766
    )
    
    $
    8.75Options forfeited
    
    
    (122,342
    )
    
    $
    9.55Outstanding at September 30, 2010
    
    
    6,974,710
    
    
    $
    10.63Vested and expected to vest at September 30, 2010
    
    
    6,918,474
    
    
    $
    10.64Options exercisable at September 30, 2010
    
    
    3,923,311
    
    
    $
    11.55
   Weighted AverageRestricted
    
    Number of Restricted
    
    
    Grant-DateStock Awards
    
    Stock Awards
    
    
    Fair ValueNon-vested at December 31, 2009
    
    
    1,152,923
    
    
    $
    7.72Granted
    
    
    167,800
    
    
    $
    18.65Vested
    
    
    (234,219
    )
    
    $
    7.67Forfeited
    
    
    (45,161
    )
    
    $
    8.95Non-vested at September 30, 2010
    
    
    1,041,343
    
    
    $
    9.44
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12. SHARE-BASED COMPENSATION (continued)
   Page 30 of 83




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13. STOCKHOLDERS EQUITY
 Preferred Stock
  Common Stock
  Shareholders Rights Plan
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14. EARNINGS PER SHARE
  Three Months Ended:
    
    
    Nine Months Ended:September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,(in $000s except per share amounts)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net income
    
    $
    75,163
    
    
    $
    6,685
    
    
    $
    237,996
    
    
    $
    11,917Denominator:Weighted average common
shares outstanding
    
    
    62,435,116
    
    
    
    60,559,064
    
    
    
    61,778,465
    
    
    
    60,130,608Effect of dilutive options and common
stock purchase warrants
    
    
    3,035,225
    
    
    
    688,636
    
    
    
    3,392,590
    
    
    
    536,619Diluted weighted average
common shares outstanding
    
    
    65,470,341
    
    
    
    61,247,700
    
    
    
    65,171,055
    
    
    
    60,667,227Basic net income per share
    
    $
    1.20
    
    
    $
    0.11
    
    
    $
    3.85
    
    
    $
    0.20Diluted net income per share
    
    $
    1.15
    
    
    $
    0.11
    
    
    $
    3.65
    
    
    $
    0.20
  15. COMPREHENSIVE INCOME
 Three Months Ended:
    
    
    Nine Months Ended:September 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,(in $000s)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    75,163
    
    
    $
    6,685
    
    
    $
    237,996
    
    
    $
    11,917Currency translation adjustments
    
    
    (127
    )
    
    
    351
    
    
    
    890
    
    
    
    380Comprehensive income
    
    
    75,036
    
    
    
    7,036
    
    
    
    238,886
    
    
    
    12,297Comprehensive income attributable to
the noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income attributable
to Impax Laboratories, Inc.
    
    $
    75,036
    
    
    $
    7,036
    
    
    $
    238,886
    
    
    $
    12,297
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16. SEGMENT INFORMATION
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16. SEGMENT INFORMATION (continued)
  (in $000s)
    
    Global
    
    
    Impax
    
    
    Corporate
    
    
    TotalThree Months Ended September 30, 2010
    
    Division
    
    
    Division
    
    
    and Other
    
    
    CompanyRevenue, net
    
    $
    300,128
    
    
    $
    3,865
    
    
    $
    
    
    
    $
    303,993Cost of revenue
    
    
    140,279
    
    
    
    2,843
    
    
    
    
    
    
    
    143,122Research and development
    
    
    12,819
    
    
    
    11,027
    
    
    
    
    
    
    
    23,846Patent Litigation
    
    
    1,033
    
    
    
    
    
    
    
    
    
    
    
    1,033Income (loss) before provision for income taxes
    
    $
    141,870
    
    
    $
    (10,935
    )
    
    $
    (7,299
    )
    
    $
    123,636
 (in $000s)
    
    Global
    
    
    Impax
    
    
    Corporate
    
    
    TotalThree Months Ended September 30, 2009
    
    Division
    
    
    Division
    
    
    and Other
    
    
    CompanyRevenue, net
    
    $
    61,447
    
    
    $
    3,499
    
    
    $
    
    
    
    $
    64,946Cost of revenue
    
    
    25,098
    
    
    
    2,957
    
    
    
    
    
    
    
    28,055Research and development
    
    
    8,909
    
    
    
    6,337
    
    
    
    
    
    
    
    15,243Patent Litigation
    
    
    1,647
    
    
    
    
    
    
    
    
    
    
    
    1,647Income (loss) before provision for income taxes
    
    $
    23,232
    
    
    $
    (6,553
    )
    
    $
    (6,527
    )
    
    $
    10,152
 (in $000s)
    
    Global
    
    
    Impax
    
    
    Corporate
    
    
    TotalNine Months Ended September 30, 2010
    
    Division
    
    
    Division
    
    
    and Other
    
    
    CompanyRevenue, net
    
    $
    769,429
    
    
    $
    10,978
    
    
    $
    
    
    
    $
    780,407Cost of revenue
    
    
    282,309
    
    
    
    9,280
    
    
    
    
    
    
    
    291,589Research and development
    
    
    32,608
    
    
    
    30,656
    
    
    
    
    
    
    
    63,264Patent Litigation
    
    
    4,786
    
    
    
    
    
    
    
    
    
    
    
    4,786Income (loss) before provision for income taxes
    
    $
    438,577
    
    
    $
    (31,436
    )
    
    $
    (23,071
    )
    
    $
    384,070
 (in $000s)
    
    Global
    
    
    Impax
    
    
    Corporate
    
    
    TotalNine Months Ended September 30, 2009
    
    Division
    
    
    Division
    
    
    and Other
    
    
    CompanyRevenue, net
    
    $
    172,268
    
    
    $
    10,007
    
    
    $
    
    
    
    $
    182,275Cost of revenue
    
    
    72,339
    
    
    
    9,250
    
    
    
    
    
    
    
    81,589Research and development
    
    
    28,761
    
    
    
    17,983
    
    
    
    
    
    
    
    46,744Patent Litigation
    
    
    4,058
    
    
    
    
    
    
    
    
    
    
    
    4,058Income (loss) before provision for income taxes
    
    $
    59,482
    
    
    $
    (19,754
    )
    
    $
    (21,493
    )
    
    $
    18,237
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17. LEGAL AND REGULATORY MATTERS
 Patent Litigation
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17. LEGAL AND REGULATORY MATTERS (continued)
 Patent Infringement Litigation
 AstraZeneca AD et al. v. Impax Laboratories, Inc. (Omeprazole)
  Aventis Pharmaceuticals Inc., et al. v. Impax Laboratories, Inc.
(Fexofenadine/Pseudoephedrine)
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17. LEGAL AND REGULATORY MATTERS (continued)
 Endo
Pharmaceuticals, Inc., et al. v. Impax Laboratories, Inc. (Oxymorphone)
 Markman decision
 Pfizer Inc., et aI. v. Impax Laboratories, Inc. (Tolterodine)
 Pfizer Inc. et al. v. Teva Pharmaceuticals USA, Inc. Pfizer
 Boehringer Ingelheim Pharmaceuticals, et al. v. Impax Laboratories, Inc. (Tamsulosin)
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17. LEGAL AND REGULATORY MATTERS (continued)
 Purdue Pharma Products L.P., et al. v. Impax Laboratories, Inc. (Tramadol)
 Pharma Products L.P. et al, v. Par
Pharmaceutical, Inc. et al. .
 Eli Lilly and Company v. Impax Laboratories, Inc. (Duloxetine)
  Warner Chilcott, Ltd. et.al. v. Impax Laboratories, Inc. (Doxycycline Hyclate)
  Eurand, Inc., et al. v. Impax Laboratories, Inc. (Cyclobenzaprine)
  Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Hydrochloride)
 Markman
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17. LEGAL AND REGULATORY MATTERS (continued)
 Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Carbonate)
 Markman
 The Research Foundation of State University of New York et al. v. Impax Laboratories, Inc.
(Doxycycline Monohydrate)
  Elan Pharma International Ltd. and Fournier Laboratories Ireland Ltd. v. Impax Laboratories,
Inc. Abbott Laboratories and Laboratoires Fournier S.A. v. Impax Laboratories, Inc.
(Fenofibrate)
  Daiichi Sankyo, Inc. et al. v. Impax Laboratories, Inc. (Colesevelam)
  Abbott Laboratories, et al. v. Impax Laboratories, Inc. (Choline Fenofibrate)
  Shionogi Pharma, Inc. and LifeCycle Pharma A/S v. Impax Laboratories, Inc. (Fenofibrate)
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17. LEGAL AND REGULATORY MATTERS (continued)
 Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Carbonate Powder)
  Schering Corporation, et al. v. Impax Laboratories, Inc. (Ezetimibe/Simvastatin)
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Other Litigation Related to Our Business
 Axcan Scandipharm Inc. v. Ethex Corp, et al. (Lipram UL)
  Budeprion XL Litigation
 Kelly v. Teva Pharmaceuticals Indus. Ltd, et al. Morgan v. Teva Pharmaceuticals Indus. Ltd, et al Weber v. Teva Pharmaceuticals Indus., Ltd., et al. Rosenfeld v. Teva Pharmaceuticals
USA, Inc.. et al. Henchenski and Vogel v. Teva
Pharmaceuticals Industries Ltd., et al. Anderson v.
Teva Pharmaceuticals Indus., Ltd., et al. Brown et al. v.
Teva Pharmaceuticals Inds., Ltd., et al. Latvala et al. v.
Teva Pharmaceuticals Inds., Ltd., et al. Jordan v. Teva
Pharmaceuticals Indus. Ltd et al. Leighty v. Teva Pharmaceuticals Indus. Ltd et al.
 Impax Laboratories, Inc. v. Shire LLC and Shire Laboratories, Inc. (generic Adderall XR)
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18. SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)
  2010 Quarters Ended:(in $000s except per share amounts)
    
    March 31
    
    
    June 30
    
    
    September 30Revenue:Global Product sales, gross
    
    $
    425,986
    
    
    $
    224,318
    
    
    $
    167,759Less:Chargebacks
    
    
    56,168
    
    
    
    49,420
    
    
    
    36,065Rebates
    
    
    29,425
    
    
    
    16,739
    
    
    
    21,630Product Returns
    
    
    7,400
    
    
    
    4,596
    
    
    
    8,344Other credits
    
    
    23,888
    
    
    
    15,925
    
    
    
    10,669Global Product sales, net
    
    
    309,105
    
    
    
    137,638
    
    
    
    91,051Private Label Product sales
    
    
    672
    
    
    
    339
    
    
    
    528Rx Partner
    
    
    4,903
    
    
    
    5,802
    
    
    
    202,799OTC Partner
    
    
    1,765
    
    
    
    2,309
    
    
    
    2,365Research Partner
    
    
    3,385
    
    
    
    3,494
    
    
    
    3,714Promotional Partner
    
    
    3,503
    
    
    
    3,500
    
    
    
    3,535Other
    
    
    
    
    
    
    
    
    
    
    Total revenues
    
    
    323,333
    
    
    
    153,082
    
    
    
    303,992Gross profit
    
    
    243,757
    
    
    
    84,190
    
    
    
    160,871Net income
    
    $
    131,485
    
    
    $
    31,348
    
    
    $
    75,163Net income per share (basic)
    
    $
    2.16
    
    
    $
    0.51
    
    
    $
    1.20Net income per share (diluted)
    
    $
    2.06
    
    
    $
    0.48
    
    
    $
    1.15Weighted Average:common shares outstanding:Basic
    
    
    61,008,015
    
    
    
    61,876,599
    
    
    
    62,435,116Diluted
    
    
    63,865,678
    
    
    
    65,538,805
    
    
    
    65,470,341
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18. SUPPLEMENTARY FINANCIAL INFORMATION
  2009 Quarters Ended:(in $000s except per share amounts)
    
    March 31
    
    
    June 30
    
    
    September 30Revenues:Global Product sales, gross
    
    $
    78,696
    
    
    $
    81,764
    
    
    $
    82,514Less:Chargebacks
    
    
    22,638
    
    
    
    24,844
    
    
    
    21,265Rebates
    
    
    10,819
    
    
    
    13,425
    
    
    
    9,411Product Returns
    
    
    3,256
    
    
    
    3,100
    
    
    
    2,030Other credits
    
    
    2,862
    
    
    
    3,008
    
    
    
    3,172Global Product sales, net
    
    
    39,121
    
    
    
    37,387
    
    
    
    46,636Private Label Product sales
    
    
    1,297
    
    
    
    2,220
    
    
    
    1,752Rx Partner
    
    
    10,736
    
    
    
    11,119
    
    
    
    8,328OTC Partner
    
    
    1,858
    
    
    
    1,628
    
    
    
    1,769Research Partner
    
    
    2,611
    
    
    
    2,833
    
    
    
    2,962Promotional Partner
    
    
    3,284
    
    
    
    3,224
    
    
    
    3,499Other
    
    
    6
    
    
    
    5
    
    
    
    Total revenues
    
    
    58,913
    
    
    
    58,416
    
    
    
    64,946Gross profit
    
    
    32,663
    
    
    
    31,132
    
    
    
    36,891Net income
    
    $
    2,219
    
    
    $
    3,013
    
    
    $
    6,685Net income per share (basic)
    
    $
    0.04
    
    
    $
    0.05
    
    
    $
    0.11Net income per share (diluted)
    
    $
    0.04
    
    
    $
    0.05
    
    
    $
    0.11Weighted averagecommon shares outstanding:Basic
    
    
    59,711,133
    
    
    
    60,112,308
    
    
    
    60,559,064Diluted
    
    
    60,222,215
    
    
    
    60,552,344
    
    
    
    61,247,700
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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
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Overview
     Page 45 of 83




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Global product sales, net.
 Private Label Sales. TM
  Page 46 of 83




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Rx Partner and OTC Partner.
   Page 47 of 83




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Research Partner
 Promotional Partner
 Impact of Economic Conditions
    Page 48 of 83




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Critical Accounting Estimates
     Page 49 of 83




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Chargebacks.
  (in $000s)
    
    September 30,
    
    
    December 31,Chargeback reserve
    
    2010
    
    
    2009Beginning balance
    
    $
    21,448
    
    
    $
    4,056Provision recorded during the period
    
    
    141,653
    
    
    
    126,105Credits issued during the period
    
    
    (145,803
    )
    
    
    (108,713
    )Ending balance
    
    $
    17,298
    
    
    $
    21,448Provision as a percent of gross Global Product sales
    
    
    17
    %
    
    
    24
    %
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Rebates.
  (in $000s)
    
    September 30,
    
    
    December 31,Rebate reserve
    
    2010
    
    
    2009Beginning balance
    
    $
    37,781
    
    
    $
    4,800Provision recorded during the period
    
    
    73,397
    
    
    
    72,620Credits issued during the period
    
    
    (94,185
    )
    
    
    (39,639
    )Ending balance
    
    $
    16,993
    
    
    $
    37,781Provision as a percent of gross Global Product sales
    
    
    9
    %
    
    
    14
    %
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Returns.
  (in $000s)
    
    September 30,
    
    
    December 31,Product Returns Reserve
    
    2010
    
    
    2009Beginning balance
    
    $
    22,114
    
    
    $
    13,675Provision related to
sales recorded in the period
    
    
    20,340
    
    
    
    11,847Credits issued during the period
    
    
    (2,976
    )
    
    
    (3,408
    )Ending balance
    
    $
    39,478
    
    
    $
    22,114Provision as a percent of gross Global Product sales
    
    
    2
    %
    
    
    2
    %
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Medicaid Rebate.
 Shelf-Stock Adjustments.
 Allowance for Uncollectible Amounts
  Page 53 of 83




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Estimated Lives of Alliance Agreements.
    Page 54 of 83




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Third-Party Research and Development Agreements.
 Share-Based Compensation.
 Income Taxes.
 Fair Value of Financial Instruments.
 Contingencies.
  Page 55 of 83




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Goodwill
  Page 56 of 83




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Results of Operations
 Three Months Ended September 30, 2010 Compared to the Three Months Ended September 30, 2009
 Overview:
  Three Months EndedSeptember 30,
    
    
    September 30,
    
    
    Increase/2010
    
    
    2009
    
    
    (Decrease)(in $000s)
    
    (unaudited)
    
    
    (unaudited)
    
    
    $
    
    
    %Total revenues
    
    $
    303,993
    
    
    $
    64,946
    
    
    $
    239,047
    
    
    
    368
    %Gross profit
    
    
    160,871
    
    
    
    36,891
    
    
    
    123,980
    
    
    
    336
    %Income from operations
    
    
    123,360
    
    
    
    10,163
    
    
    
    113,197
    
    
    nmIncome before income taxes
    
    
    123,636
    
    
    
    10,152
    
    
    
    113,484
    
    
    nmProvision for income taxes
    
    
    48,501
    
    
    
    3,495
    
    
    
    45,006
    
    
    nm75,135
    
    
    
    6,657
    
    
    
    68,478
    
    
    nmNon-controlling interest
    
    
    28
    
    
    
    28
    
    
    
    
    
    
    
    0
    %Net income
    
    $
    75,163
    
    
    $
    6,685
    
    
    $
    68,478
    
    
    nm
  nm  not meaningful Net Income
   Page 57 of 83




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Global Division
  Three Months EndedSeptember 30,
    
    
    September 30,
    
    
    Increase/2010
    
    
    2009
    
    
    (Decrease)(in $000s)
    
    (unaudited)
    
    
    (unaudited)
    
    
    $
    
    
    %Revenues:Global Product sales, net
    
    $
    91,051
    
    
    $
    46,636
    
    
    $
    44,415
    
    
    
    95
    %Private Label Product sales
    
    
    528
    
    
    
    1,752
    
    
    
    (1,224
    )
    
    
    (70
    )%Rx Partner
    
    
    202,800
    
    
    
    8,328
    
    
    
    194,472
    
    
    nmOTC Partner
    
    
    2,365
    
    
    
    1,769
    
    
    
    596
    
    
    
    34
    %Research Partner
    
    
    3,384
    
    
    
    2,962
    
    
    
    422
    
    
    
    14
    %Total revenues
    
    
    300,128
    
    
    
    61,447
    
    
    
    238,681
    
    
    
    388
    %Cost of revenues
    
    
    140,279
    
    
    
    25,098
    
    
    
    115,181
    
    
    
    459
    %Gross profit
    
    
    159,849
    
    
    
    36,349
    
    
    
    123,500
    
    
    
    340
    %Operating expenses:Research and development
    
    
    12,819
    
    
    
    8,909
    
    
    
    3,910
    
    
    
    44
    %Patent litigation
    
    
    1,033
    
    
    
    1,647
    
    
    
    (614
    )
    
    
    (37
    )%Selling, general and administrative
    
    
    4,127
    
    
    
    2,561
    
    
    
    1,566
    
    
    
    61
    %Total operating expenses
    
    
    17,979
    
    
    
    13,117
    
    
    
    4,862
    
    
    
    37
    %Income from operations
    
    $
    141,870
    
    
    $
    23,232
    
    
    $
    118,638
    
    
    
    511
    %
 nm  not meaningful
 Revenues
      Page 58 of 83




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Cost of Revenues
  Gross Profit
  Research and Development Expenses
  Patent Litigation Expenses
  Selling, General and Administrative Expenses
   Page 59 of 83




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Impax Division
  Three Months Ended,September 30,
    
    
    September 30,
    
    
    Increase/2010
    
    
    2009
    
    
    (Decrease)(in $000s)
    
    (unaudited)
    
    
    (unaudited)
    
    
    $
    
    
    %Promotional Partner revenue
    
    $
    3,535
    
    
    $
    3,499
    
    
    
    36
    
    
    
    1
    %Research Partner revenue
    
    
    330
    
    
    
    
    
    
    
    330
    
    
    nmTotal revenues
    
    
    3,865
    
    
    
    3,499
    
    
    
    366
    
    
    
    10
    %Cost of revenues
    
    
    2,843
    
    
    
    2,957
    
    
    
    (114
    )
    
    
    (4
    )%Gross profit
    
    
    1,022
    
    
    
    542
    
    
    
    480
    
    
    
    89
    %Operating expenses:Research and development
    
    
    11,027
    
    
    
    6,334
    
    
    
    4,693
    
    
    
    74
    %Selling, general and administrative
    
    
    930
    
    
    
    761
    
    
    
    169
    
    
    
    22
    %Total operating expenses
    
    
    11,957
    
    
    
    7,095
    
    
    
    4,862
    
    
    
    69
    %Loss from operations
    
    $
    (10,935
    )
    
    $
    (6,553
    )
    
    
    (4,382
    )
    
    
    (67
    )%
  nm  not meaningful Revenues
  Cost of Revenues
  Gross Profit
  Research and Development Expenses
  Selling, General and Administrative Expenses
   Page 60 of 83




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Corporate and other
  Three Months EndedSeptember 30,
    
    
    September 30,
    
    
    Increase/2010
    
    
    2009
    
    
    (Decrease)(in $000s)
    
    (unaudited)
    
    
    (unaudited)
    
    
    $
    
    
    %Litigation settlement
    
    $
    
    
    
    $
    818
    
    
    
    (818
    )
    
    
    (100
    )%General and administrative expenses
    
    
    7,575
    
    
    
    5,698
    
    
    
    1,877
    
    
    
    33
    %Total operating expenses
    
    
    7,575
    
    
    
    6,516
    
    
    
    1,059
    
    
    
    16
    %Loss from operations
    
    
    (7,575
    )
    
    
    (6,516
    )
    
    
    (1,059
    )
    
    
    (16
    )%Other income (expense), net
    
    
    (91
    )
    
    
    (6
    )
    
    
    (85
    )
    
    nmInterest income
    
    
    405
    
    
    
    180
    
    
    
    225
    
    
    
    125
    %Interest expense
    
    
    (38
    )
    
    
    (185
    )
    
    
    147
    
    
    
    79
    %Provision for income taxes
    
    $
    48,501
    
    
    $
    3,495
    
    
    
    45,006
    
    
    nm
 nm  not meaningful
 Litigation settlement
  General and Administrative Expenses
  Other income (expense), net
  Interest Income
  Interest Expense
   Page 61 of 83




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Income Taxes
   Page 62 of 83




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Results of Operations
 Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009
 Overview:
  Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    Increase/2010
    
    
    2009
    
    
    (Decrease)(in $000s)
    
    (unaudited)
    
    
    (unaudited)
    
    
    $
    
    
    %Total revenues
    
    $
    780,407
    
    
    $
    182,275
    
    
    $
    598,132
    
    
    
    328
    %Gross profit
    
    
    488,818
    
    
    
    100,686
    
    
    
    388,132
    
    
    
    385
    %Income from operations
    
    
    383,632
    
    
    
    18,284
    
    
    
    365,348
    
    
    nmIncome before income taxes
    
    
    384,070
    
    
    
    18,237
    
    
    
    365,833
    
    
    nmProvision for income taxes
    
    
    146,114
    
    
    
    6,373
    
    
    
    139,741
    
    
    nm237,956
    
    
    
    11,864
    
    
    
    226,092
    
    
    nmNon-controlling interest
    
    
    40
    
    
    
    53
    
    
    
    (13
    )
    
    
    (25
    )%Net income
    
    $
    237,996
    
    
    $
    11,917
    
    
    $
    226,079
    
    
    nm
 nm  not meaningful
 Net Income
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Global Division
  Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    Increase/2010
    
    
    2009
    
    
    (Decrease)(in $000s)
    
    (unaudited)
    
    
    (unaudited)
    
    
    $
    
    
    %Revenues:Global Product sales, net
    
    $
    537,794
    
    
    $
    123,144
    
    
    $
    414,650
    
    
    
    337
    %Private Label Product sales
    
    
    1,539
    
    
    
    5,269
    
    
    
    (3,730
    )
    
    
    (71
    )%Rx Partner
    
    
    213,504
    
    
    
    30,183
    
    
    
    183,321
    
    
    
    607
    %OTC Partner
    
    
    6,439
    
    
    
    5,255
    
    
    
    1,184
    
    
    
    23
    %Research Partner
    
    
    10,153
    
    
    
    8,406
    
    
    
    1,747
    
    
    
    21
    %Other
    
    
    
    
    
    
    11
    
    
    
    (11
    )
    
    
    (100
    )%Total revenues
    
    
    769,429
    
    
    
    172,268
    
    
    
    597,161
    
    
    
    347
    %Cost of revenues
    
    
    282,309
    
    
    
    72,339
    
    
    
    209,970
    
    
    
    290
    %Gross profit
    
    
    487,120
    
    
    
    99,929
    
    
    
    387,191
    
    
    
    387
    %Operating expenses:Research and development
    
    
    32,608
    
    
    
    28,761
    
    
    
    3,847
    
    
    
    13
    %Patent litigation
    
    
    4,786
    
    
    
    4,058
    
    
    
    728
    
    
    
    18
    %Selling, general and administrative
    
    
    11,149
    
    
    
    7,628
    
    
    
    3,521
    
    
    
    46
    %Total operating expenses
    
    
    48,543
    
    
    
    40,447
    
    
    
    8,096
    
    
    
    20
    %Income from operations
    
    $
    438,577
    
    
    $
    59,482
    
    
    $
    379,095
    
    
    
    637
    %
 Revenues
  ®
   Page 64 of 83




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Cost of Revenues
  Gross Profit
  Research and Development Expenses
   Page 65 of 83




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Patent Litigation Expenses
  Selling, General and Administrative Expenses
   Page 66 of 83




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Impax Division
  Nine Months Ended,September 30,
    
    
    September 30,
    
    
    Increase/2010
    
    
    2009
    
    
    (Decrease)(in $000s)
    
    (unaudited)
    
    
    (unaudited)
    
    
    $
    
    
    %Promotional Partner revenue
    
    $
    10,538
    
    
    $
    10,007
    
    
    
    531
    
    
    
    5
    %Research Partner revenue
    
    
    440
    
    
    
    
    
    
    
    440
    
    
    nmTotal revenues
    
    
    10,978
    
    
    
    10,007
    
    
    
    971
    
    
    
    10
    %Cost of revenues
    
    
    9,280
    
    
    
    9,250
    
    
    
    30
    
    
    
    0.3
    %Gross profit
    
    
    1,698
    
    
    
    757
    
    
    
    941
    
    
    
    124
    %Operating expenses:Research and development
    
    
    30,656
    
    
    
    17,983
    
    
    
    12,673
    
    
    
    70
    %Selling, general and administrative
    
    
    2,478
    
    
    
    2,528
    
    
    
    (50
    )
    
    
    (2
    )%Total operating expenses
    
    
    33,134
    
    
    
    20,511
    
    
    
    12,623
    
    
    
    62
    %Loss from operations
    
    $
    (31,436
    )
    
    $
    (19,754
    )
    
    
    (11,682
    )
    
    
    (59
    )%
 nm  not meaningful
 Revenues
  Cost of Revenues
  Gross Profit
  Research and Development Expenses
  Selling, General and Administrative Expenses
   Page 67 of 83




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Corporate and other
  Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    Increase/2010
    
    
    2009
    
    
    (Decrease)(in $000s)
    
    (unaudited)
    
    
    (unaudited)
    
    
    $
    
    
    %Litigation settlement
    
    $
    
    
    
    $
    1,674
    
    
    
    (1,674
    )
    
    
    (100
    )%General and administrative expenses
    
    
    23,509
    
    
    
    19,770
    
    
    
    3,739
    
    
    
    19
    %Total operating expenses
    
    
    23,509
    
    
    
    21,444
    
    
    
    2,065
    
    
    
    10
    %Loss from operations
    
    
    (23,509
    )
    
    
    (21,444
    )
    
    
    (2,065
    )
    
    
    (10
    )%Other income (expense), net
    
    
    (134
    )
    
    
    52
    
    
    
    (186
    )
    
    
    (358)
    %Interest income
    
    
    680
    
    
    
    636
    
    
    
    44
    
    
    
    7
    %Interest expense
    
    
    (108
    )
    
    
    (735
    )
    
    
    627
    
    
    
    85
    %Provision for income taxes
    
    $
    146,114
    
    
    $
    6,373
    
    
    
    139,741
    
    
    nm
 nm  not meaningful
 Litigation settlement
  General and Administrative Expenses
  Other income (expense), net
  Interest Income
  Interest Expense
   Page 68 of 83




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Income Taxes
   Page 69 of 83




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Liquidity and Capital Resources
    Cash and Cash Equivalents
  Cash Flows
 Nine Months Ended September 30, 2010 Compared to the Nine Months Ended September 30, 2009.
    Page 70 of 83




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Page 71 of 83




---



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Outstanding Debt Obligations
 Senior
Lenders; Well Fargo Bank
     Page 72 of 83




---



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Recent Accounting Pronouncements
     Page 73 of 83




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
   Page 74 of 83




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Patent Infringement Litigation
 Purdue Pharma Products L.P., et al. v. Impax Laboratories, Inc. (Tramadol)
 Pharma Products L.P. et al, v. Par Pharmaceutical, Inc. et al. .
 Warner Chilcott, Ltd. et.al. v. Impax Laboratories, Inc. (Doxycycline Hyclate)
  Eurand, Inc., et al. v. Impax Laboratories, Inc. (Cyclobenzaprine)
  The Research Foundation of State University of New York et al. v. Impax Laboratories, Inc.
(Doxycycline Monohydrate)
   Page 75 of 83




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Elan Pharma International Ltd. and Fournier Laboratories Ireland Ltd. v. Impax Laboratories,
Inc. and Abbott Laboratories and Laboratories Fournier S.A. v. Impax Laboratories, Inc.
(Fenofibrate)
  Abbott Laboratories, et al. v. Impax Laboratories, Inc. (Choline Fenofibrate)
  Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Carbonate Powder)
  Schering Corporation, et al. v. Impax Laboratories, Inc. (Ezetimibe/Simvastatin)
   Page 76 of 83




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Other Litigation Related to Our Business
 Impax Laboratories, Inc. v. Shire LLC and Shire Laboratories, Inc. (generic Adderall XR)
   Page 77 of 83




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##### Table of Contents



ITEM 1A. RISK FACTORS
   Page 78 of 83




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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  Maximum Number (orTotal Number of
    
    Approximate DollarShares (or Units)
    
    Value) of SharesPurchased as Part
    
    (or Units) that MayTotal Number of
    
    
    
    
    
    of Publicly
    
    Yet Be PurchasedShares (or Units)
    
    Average Price Paid
    
    
    Announced Plans or
    
    Under the Plans orPeriod
    
    Purchased(1)
    
    Per Share (or Unit)
    
    
    Programs
    
    ProgramsJuly 1, 2010 to
July 31, 2010
    
    311 shares of
common stock
    
    
    $17.90
    
    
    
    
    August 1, 2010 to
August 31, 2010
    
    
    
    
    
    
    
    
    
    September 1, 2010
to September 30,
2010
    
    4,955 shares of
common stock
    
    
    $16.22
    
    
    
    
    
 (1)
    
    Represents shares of our common stock we accepted during the indicated periods as a tax
withholding from certain of our employees in connection with the vesting of shares of
restricted stock pursuant to the terms of our 2002 Plan.
  Page 79 of 83




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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. (REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION
   Page 80 of 83




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ITEM 6. EXHIBITS
 Exhibit No.
    
    Description of Document10.1
    
    Fifth Amendment to Amended and Restated Loan and Security
Agreement, dated as of June 30, 2010, by and among the Company
and Wells Fargo Bank, National Association, successor by
merger to Wachovia Bank, National Association. (1)10.2
    
    Sixth Amendment to Amended and Restated Loan and Security
Agreement, dated as of September 30, 2010, by and among the
Company and Wells Fargo Bank, National Association, successor
by merger to Wachovia Bank, National Association.11.1
    
    Statement re computation of per share earnings (incorporated
by reference to Note 14 to the Notes to the unaudited interim
Consolidated Financial Statements in this Quarterly Report on
Form 10-Q).31.1
    
    Certification of the Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 (1)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2010.
  Page 81 of 83




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SIGNATURES
  Date: November 4, 2010
    Impax Laboratories, Inc.By:
    /s/ Larry Hsu, Ph.D.Name:
    Larry Hsu, Ph.D.Title:
    President and Chief Executive Officer
(Principal Executive Officer)By:
    /s/ Arthur A. Koch, Jr.Name:
    Arthur A. Koch Jr.Title:
    Senior Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)  Page 82 of 83




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EXHIBIT INDEX
 Exhibit No.
    
    Description of Document10.1
    
    Fifth Amendment to Amended and Restated Loan and Security
Agreement, dated as of June 30, 2010, by and among the Company
and Wells Fargo Bank, National Association, successor by
merger to Wachovia Bank, National Association. (1)10.2
    
    Sixth Amendment to Amended and Restated Loan and Security
Agreement, dated as of September 30, 2010, by and among the
Company and Wells Fargo Bank, National Association, successor
by merger to Wachovia Bank, National Association.11.1
    
    Statement re computation of per share earnings (incorporated
by reference to Note 14 to the Notes to the unaudited interim
Consolidated Financial Statements in this Quarterly Report on
Form 10-Q).31.1
    
    Certification of the Chief Executive Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of the Chief Financial Officer Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of the Chief Executive Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of the Chief Financial Officer Pursuant to 18
U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.
 (1)
    
    Incorporated by reference to the Companys Quarterly Report on Form 10-Q for the quarter
ended June 30, 2010.
  Page 83 of 83