##### Table of Contents



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 June 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 incorporation or
    
    (I.R.S. Employer Identification No.)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
    
    Smaller reporting company o(Do not check if a smaller 
reporting company)
 Yes o No þ




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##### 



Impax Laboratories, Inc.
 INDEX
 PART I: FINANCIAL INFORMATIONItem 1:Financial Statements- Consolidated Balance Sheets as of June 30, 2010 (unaudited) and December 31, 2009
    
    
    3- Consolidated Statements of Operations for each of the three and six months ended June 30, 2010 and 2009 (unaudited)
    
    
    4- Consolidated Statements of Cash Flows for each of the six months ended June 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
    
    
    41Item 3:Quantitative and Qualitative Disclosures About Market Risk
    
    
    70Item 4:Controls and Procedures
    
    
    70PART II: OTHER INFORMATIONItem 1:Legal Proceedings
    
    
    71Item 1A:Risk Factors
    
    
    73Item 2:Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    74Item 3:Defaults Upon Senior Securities
    
    
    75Item 4:(Removed and Reserved)
    
    
    75Item 5:Other Information
    
    
    75Item 6:Exhibits
    
    
    76SIGNATURES
    
    
    77EXHIBIT INDEX
    
    
    78Exhibit 10.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   Page 2 of 78




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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)
 June 30,
    
    
    December 31,2010
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    177,444
    
    
    $
    31,770Short-term investments
    
    
    150,666
    
    
    
    58,599Accounts receivable, net
    
    
    136,015
    
    
    
    185,854Inventory, net
    
    
    42,576
    
    
    
    49,130Current portion of deferred product manufacturing costs-alliance agreements
    
    
    10,647
    
    
    
    11,624Current portion of deferred income taxes
    
    
    35,047
    
    
    
    32,286Prepaid expenses and other current assets
    
    
    2,380
    
    
    
    4,748Total current assets
    
    
    554,775
    
    
    
    374,011Property, plant and equipment, net
    
    
    103,021
    
    
    
    101,650Deferred product manufacturing costs-alliance agreements
    
    
    96,962
    
    
    
    96,619Deferred income taxes, net
    
    
    43,086
    
    
    
    48,544Other assets
    
    
    22,704
    
    
    
    12,358Goodwill
    
    
    27,574
    
    
    
    27,574Total assets
    
    $
    848,122
    
    
    $
    660,756LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilitiesAccounts payable
    
    $
    20,291
    
    
    $
    23,295Accrued expenses
    
    
    73,144
    
    
    
    62,055Accrued income taxes payable
    
    
    47,054
    
    
    
    31,627Accrued profit sharing and royalty expenses
    
    
    30,671
    
    
    
    53,695Current portion of deferred revenue-alliance agreements
    
    
    33,477
    
    
    
    33,196Total current liabilities
    
    
    204,637
    
    
    
    203,868Deferred revenue-alliance agreements
    
    
    224,347
    
    
    
    224,522Other liabilities
    
    
    12,034
    
    
    
    10,139Total liabilities
    
    $
    441,018
    
    
    $
    438,529Commitments and contingencies (Note 8)Stockholders equity:Preferred Stock, $0.01 par value, 2,000,000 shares authorized,
0 shares outstanding at June 30, 2010 and December 31, 2009
    
    $
    
    
    
    $
    Common stock, $0.01 par value, 90,000,000 shares authorized and
63,659,520 and 62,210,089 shares issued at June 30, 2010
and December 31, 2009, respectively
    
    
    637
    
    
    
    622Additional paid-in capital
    
    
    244,263
    
    
    
    223,239Treasury stock  243,729 shares
    
    
    (2,157
    )
    
    
    (2,157
    )Accumulated other comprehensive income (loss)
    
    
    493
    
    
    
    (524
    )Retained earnings
    
    
    163,661
    
    
    
    828406,897
    
    
    
    222,008Noncontrolling interest
    
    
    207
    
    
    
    219Total stockholders equity
    
    
    407,104
    
    
    
    222,227Total liabilities and stockholders equity
    
    $
    848,122
    
    
    $
    660,756
   Page 3 of 78




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Impax Laboratories, Inc.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (dollars in thousands, except share and per share data)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(unaudited)
    
    
    (unaudited)
    
    
    (unaudited)
    
    
    (unaudited)Revenues:Global Product sales, net
    
    $
    137,638
    
    
    $
    37,387
    
    
    $
    446,743
    
    
    $
    76,508Private Label Product sales
    
    
    339
    
    
    
    2,220
    
    
    
    1,011
    
    
    
    3,517Rx Partner
    
    
    5,802
    
    
    
    11,119
    
    
    
    10,705
    
    
    
    21,855OTC Partner
    
    
    2,309
    
    
    
    1,628
    
    
    
    4,074
    
    
    
    3,486Research Partner
    
    
    3,494
    
    
    
    2,833
    
    
    
    6,879
    
    
    
    5,444Promotional Partner
    
    
    3,500
    
    
    
    3,224
    
    
    
    7,003
    
    
    
    6,508Other
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    11Total revenues
    
    
    153,082
    
    
    
    58,416
    
    
    
    476,415
    
    
    
    117,329Cost of revenues
    
    
    68,892
    
    
    
    27,284
    
    
    
    148,468
    
    
    
    53,534Gross profit
    
    
    84,190
    
    
    
    31,132
    
    
    
    327,947
    
    
    
    63,795Operating expenses:Research and development
    
    
    21,684
    
    
    
    15,712
    
    
    
    39,993
    
    
    
    31,502Patent litigation
    
    
    1,769
    
    
    
    1,394
    
    
    
    3,753
    
    
    
    2,411Litigation settlement
    
    
    
    
    
    
    619
    
    
    
    
    
    
    
    855Selling, general and administrative
    
    
    11,443
    
    
    
    9,420
    
    
    
    23,929
    
    
    
    20,905Total operating expenses
    
    
    34,896
    
    
    
    27,145
    
    
    
    67,675
    
    
    
    55,673Income from operations
    
    
    49,294
    
    
    
    3,987
    
    
    
    260,272
    
    
    
    8,122Other (expense) income, net
    
    
    (25
    )
    
    
    3
    
    
    
    (42
    )
    
    
    58Interest income
    
    
    192
    
    
    
    307
    
    
    
    274
    
    
    
    456Interest expense
    
    
    (23
    )
    
    
    (256
    )
    
    
    (70
    )
    
    
    (550
    )Income before income taxes
    
    
    49,438
    
    
    
    4,041
    
    
    
    260,434
    
    
    
    8,086Provision for income taxes
    
    
    18,130
    
    
    
    1,043
    
    
    
    97,613
    
    
    
    2,879Net income before noncontrolling interest
    
    
    31,308
    
    
    
    2,998
    
    
    
    162,821
    
    
    
    5,207Add back loss attributable to
noncontrolling interest
    
    
    40
    
    
    
    15
    
    
    
    12
    
    
    
    25Net income
    
    $
    31,348
    
    
    $
    3,013
    
    
    $
    162,833
    
    
    $
    5,232Net Income per share:Basic
    
    $
    0.51
    
    
    $
    0.05
    
    
    $
    2.65
    
    
    $
    0.09Diluted
    
    $
    0.48
    
    
    $
    0.05
    
    
    $
    2.51
    
    
    $
    0.09Weighted average common shares outstanding:Basic
    
    
    61,876,599
    
    
    
    60,112,308
    
    
    
    61,444,707
    
    
    
    59,912,829Diluted
    
    
    65,538,805
    
    
    
    60,552,344
    
    
    
    64,887,770
    
    
    
    60,384,179
   Page 4 of 78




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Impax Laboratories, Inc.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (dollars in thousands)
 Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009(unaudited)
    
    
    (unaudited)Cash flows from operating activities:Net income
    
    $
    162,833
    
    
    $
    5,232Adjustments to reconcile net income to net cash provided by (used in)
operating activities:Depreciation
    
    
    6,068
    
    
    
    5,192Amortization of 3.5% Debentures discount and deferred financing costs
    
    
    
    
    
    
    301Amortization of Wachovia Credit Agreement deferred financing costs
    
    
    25
    
    
    
    25Bad debt expense
    
    
    153
    
    
    
    45Deferred income taxes (benefit)
    
    
    7,026
    
    
    
    (6,972
    )Provision for uncertain tax positions
    
    
    24
    
    
    
    463Tax benefit related to the exercise of employee stock options
    
    
    (4,329
    )
    
    
    Deferred revenue-Alliance Agreements
    
    
    21,764
    
    
    
    33,891Deferred product manufacturing costs-Alliance Agreements
    
    
    (8,791
    )
    
    
    (15,957
    )Deferred revenue recognized-Alliance Agreements
    
    
    (21,658
    )
    
    
    (30,785
    )Amortization deferred product manufacturing costs-Alliance Agreements
    
    
    9,425
    
    
    
    13,884Accrued profit sharing and royalty expense
    
    
    71,902
    
    
    
    424Profit sharing and royalty payments
    
    
    (94,925
    )
    
    
    (277
    )Payments on exclusivity period fee
    
    
    
    
    
    
    (6,000
    )Payments on accrued litigation settlements
    
    
    (5,865
    )
    
    
    (4,556
    )Share-based compensation expense
    
    
    5,234
    
    
    
    3,193Accretion of interest income on short-term investments
    
    
    (168
    )
    
    
    (277
    )Changes in assets and liabilities:Accounts receivable
    
    
    49,686
    
    
    
    (10,269
    )Inventory
    
    
    6,554
    
    
    
    (703
    )Prepaid expenses and other assets
    
    
    (7,852
    )
    
    
    1,899Accounts payable, accrued expenses and income taxes payable
    
    
    29,151
    
    
    
    7,751Other liabilities
    
    
    1,859
    
    
    
    1,437Net cash provided by (used in) operating activities
    
    $
    228,116
    
    
    $
    (2,059
    )Cash flows from investing activities:Purchase of short-term investments
    
    
    (195,450
    )
    
    
    (41,772
    )Maturities of short-term investments
    
    
    103,551
    
    
    
    31,687Purchases of property, plant and equipment
    
    
    (7,690
    )
    
    
    (5,367
    )Net cash (used in) investing activities
    
    $
    (99,589
    )
    
    $
    (15,452
    )Cash flows from financing activities:Repayment of long-term debt
    
    
    
    
    
    
    (12,823
    )Tax benefit related to the exercise of employee stock options
    
    
    4,329
    
    
    
    Proceeds from exercise of stock options and ESPP
    
    
    12,818
    
    
    
    3,257Net cash provided by (used in) financing activities
    
    $
    17,147
    
    
    $
    (9,566
    )Net increase (decrease) in cash and cash equivalents
    
    $
    145,674
    
    
    $
    (27,077
    )Cash and cash equivalents, beginning of period
    
    $
    31,770
    
    
    $
    69,275Cash and cash equivalents, end of period
    
    $
    177,444
    
    
    $
    42,198
  Page 5 of 78




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Six Months EndedJune 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009Cash paid for interest
    
    $
    70
    
    
    $
    511Cash paid for income taxes
    
    $
    75,195
    
    
    $
    97
    Page 6 of 78




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NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
 1. BASIS OF PRESENTATION
        Page 7 of 78




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2. REVENUE RECOGNITION
   Global Product sales, net :
     Page 8 of 78




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2. REVENUE RECOGNITION (continued)
      Page 9 of 78




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2. REVENUE RECOGNITION (continued)
 Private Label Product sales:
  Rx Partner and OTC Partner:
       Page 10 of 78




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2. REVENUE RECOGNITION (continued)
 Research Partner :
  Promotional Partner:
  Shipping and Handling Fees and Costs
   Page 11 of 78




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3. RECENT ACCOUNTING PRONOUNCEMENTS
     Page 12 of 78




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4. INVESTMENTS
   Gross
    
    
    Gross(in $000s)
    
    Amortized
    
    
    Unrecognized
    
    
    Unrecognized
    
    
    FairJune 30, 2010
    
    Cost
    
    
    Gains
    
    
    Losses
    
    
    ValueCommercial paper
    
    $
    59,692
    
    
    $
    4
    
    
    $
    (7
    )
    
    $
    59,689Government sponsored
enterprise obligations
    
    
    87,239
    
    
    
    52
    
    
    
    
    
    
    
    87,291Corporate bonds
    
    
    3,495
    
    
    
    
    
    
    
    (13
    )
    
    
    3,482Certificates of deposit
    
    
    240
    
    
    
    
    
    
    
    
    
    
    
    240Total short-term investments
    
    $
    150,666
    
    
    $
    56
    
    
    $
    (20
    )
    
    $
    150,702
 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
  Page 13 of 78




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5. ACCOUNTS RECEIVABLE
  June 30,
    
    
    December 31,(in $000s)
    
    2010
    
    
    2009Gross accounts receivable
    
    $
    191,132
    
    
    $
    254,094Less: Chargeback reserve
    
    
    (25,669
    )
    
    
    (21,448
    )Less: Rebate reserve
    
    
    (19,521
    )
    
    
    (37,781
    )Less: Other deductions
    
    
    (9,927
    )
    
    
    (9,011
    )Accounts receivable, net
    
    $
    136,015
    
    
    $
    185,854
  (in $000s)
    
    June 30,
    
    
    December 31Chargeback reserve
    
    2010
    
    
    2009Beginning balance
    
    $
    21,448
    
    
    $
    4,056Provision recorded during the period
    
    
    105,588
    
    
    
    126,105Credits issued during the period
    
    
    (101,367
    )
    
    
    (108,713
    )Ending balance
    
    $
    25,669
    
    
    $
    21,448
 (in $000s)
    
    June 30,
    
    
    December 31Rebate reserve
    
    2010
    
    
    2009Beginning balance
    
    $
    37,781
    
    
    $
    4,800Provision recorded during the period
    
    
    51,767
    
    
    
    72,620Credits issued during the period
    
    
    (70,027
    )
    
    
    (39,639
    )Ending balance
    
    $
    19,521
    
    
    $
    37,781
   Page 14 of 78




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6. INVENTORY
  June 30,
    
    
    December 31,(in $000s)
    
    2010
    
    
    2009Raw materials
    
    $
    32,204
    
    
    $
    30,758Work in process
    
    
    3,235
    
    
    
    2,768Finished goods
    
    
    13,846
    
    
    
    17,051Total inventory, net
    
    $
    49,285
    
    
    $
    50,577Less: Non-current inventory, net
    
    
    (6,709
    )
    
    
    (1,447
    )Total inventory-current, net
    
    $
    42,576
    
    
    $
    49,130
       Page 15 of 78




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7. PROPERTY, PLANT AND EQUIPMENT
  June 30,
    
    
    December 31,(in $000s)
    
    2010
    
    
    2009Land
    
    $
    2,270
    
    
    $
    2,270Buildings and improvements
    
    
    79,468
    
    
    
    77,778Equipment
    
    
    64,407
    
    
    
    59,612Office furniture and equipment
    
    
    7,657
    
    
    
    7,425Construction-in-progress
    
    
    5,589
    
    
    
    4,880Property, plant and equipment, gross
    
    $
    159,391
    
    
    $
    151,965Less: Accumulated depreciation
    
    
    (56,370
    )
    
    
    (50,315
    )Property, plant and equipment, net
    
    $
    103,021
    
    
    $
    101,650
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8. ACCRUED EXPENSES
  June 30
    
    
    December 31(in $000s)
    
    2010
    
    
    2009Payroll-related expenses
    
    $
    14,298
    
    
    $
    15,274Product returns
    
    
    32,265
    
    
    
    22,114Shelf stock adjustments
    
    
    563
    
    
    
    225Medicaid rebates
    
    
    17,739
    
    
    
    9,759Physician detailing sales force fees
    
    
    2,350
    
    
    
    2,449Legal and professional fees
    
    
    3,265
    
    
    
    3,660Litigation settlements
    
    
    
    
    
    
    5,865Other
    
    
    2,664
    
    
    
    2,709Total accrued expenses
    
    $
    73,144
    
    
    $
    62,055
 Accrued Litigation Settlement Expenses
   Taiwan Facility Construction
  Product Returns
  (in $000s)
    
    June 30,
    
    
    December 31,Product Return Reserve
    
    2010
    
    
    2009(in $000s)Beginning balance
    
    $
    22,114
    
    
    $
    13,675Provision related to
sales recorded in the period
    
    
    11,996
    
    
    
    11,847Credits issued during the period
    
    
    (1,845
    )
    
    
    (3,408
    )Ending balance
    
    $
    32,265
    
    
    $
    22,114
 Purchase Order Commitments
   Page 17 of 78




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9. INCOME TAXES
     Page 18 of 78




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10. REVOLVING LINE OF CREDIT
     Page 19 of 78




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11. ALLIANCE AND COLLABORATION AGREEMENTS
 Strategic Alliance Agreement with Teva
  Six MonthsEnded
    
    
    Inception(in $000s)
    
    June 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
    
    
    (10,702
    )
    
    
    (177,164
    )Total deferred revenue
    
    $
    201,414
    
    
    $
    202,032
 Six Months(in $000s)
    
    Ended
    
    
    InceptionDeferred product
    
    June 30,
    
    
    Throughmanufacturing costs
    
    2010
    
    
    Dec 31, 2009Beginning balance
    
    $
    94,040
    
    
    $
    Additions
    
    
    7,416
    
    
    
    175,565Less: amount amortized
    
    
    (6,030
    )
    
    
    (81,525
    )Total deferred product
manufacturing costs
    
    $
    95,426
    
    
    $
    94,040
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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 OTC Partners Alliance Agreements
  Six MonthsEnded
    
    
    Inception(in $000s)
    
    June 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
    
    
    1,680
    
    
    
    83,826Total additions
    
    $
    1,680
    
    
    $
    93,904Less: amount recognized
    
    
    (4,074
    )
    
    
    (77,742
    )Total deferred revenue
    
    $
    13,768
    
    
    $
    16,162
 Six Months(in $000s)
    
    Ended
    
    
    InceptionDeferred product
    
    June 30,
    
    
    Throughmanufacturing costs
    
    2010
    
    
    Dec 31, 2009Beginning balance
    
    $
    14,203
    
    
    $
    Additions
    
    
    1,375
    
    
    
    77,870Less: amount amortized
    
    
    (3,395
    )
    
    
    (63,667
    )Total deferred product
manufacturing costs
    
    $
    12,183
    
    
    $
    14,203
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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 Joint Development Agreement with Medicis Pharmaceutical Corporation
 ® ®
  Six MonthsEnded
    
    
    Inception(in $000s)
    
    June 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
    
    
    (6,769
    )
    
    
    (12,513
    )Total deferred revenue
    
    $
    32,718
    
    
    $
    39,487
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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 Agreements with Shire LLC
 License and Distribution Agreement
 ®
 Promotional Services Agreement
 ®
  Page 23 of 78




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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 Co-Promotion Agreement with Pfizer
 ®
 ®
  Page 24 of 78




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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 Development and Co-Promotion Agreement with Endo Pharmaceuticals Inc.
     Page 25 of 78




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11. ALLIANCE AND COLLABORATION AGREEMENTS (continued)
 Exclusive License, Development and Supply Agreement with Putney
 ®
  Page 26 of 78




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12. SHARE-BASED COMPENSATION
   Three Months Ended:
    
    
    Six Months Ended:June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Manufacturing expenses
    
    $
    461
    
    
    $
    387
    
    
    $
    1,360
    
    
    $
    736Research and development
    
    
    840
    
    
    
    648
    
    
    
    1,738
    
    
    
    1,250Selling, general & administrative
    
    
    1,060
    
    
    
    721
    
    
    
    2,136
    
    
    
    1,207Total
    
    $
    2,361
    
    
    $
    1,756
    
    
    $
    5,234
    
    
    $
    3,193
  Weighted AverageNumber of Shares
    
    
    Exercise PriceUnder Option
    
    
    per ShareOutstanding at December 31, 2009
    
    
    8,229,818
    
    
    $
    9.87Options granted
    
    
    319,000
    
    
    $
    20.17Options exercised
    
    
    (1,350,720
    )
    
    $
    8.88Options forfeited
    
    
    (104,998
    )
    
    $
    9.15Outstanding at June 30, 2010
    
    
    7,093,100
    
    
    $
    10.54Vested and expected to vest at June 30, 2010
    
    
    7,589,065
    
    
    $
    10.53Options exercisable at June 30, 2010
    
    
    3,886,548
    
    
    $
    11.50
   Weighted AverageRestricted
    
    Number of Restricted
    
    
    Grant-DateStock Awards
    
    Stock Awards
    
    
    Fair ValueNon-vested at December 31, 2009
    
    
    1,152,923
    
    
    $
    7.72Granted
    
    
    156,700
    
    
    $
    18.63Vested
    
    
    (219,970
    )
    
    $
    7.63Forfeited
    
    
    (40,190
    )
    
    $
    8.53Non-vested at June 30, 2010
    
    
    1,049,463
    
    
    $
    9.34
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12. SHARE-BASED COMPENSATION (continued)
   Page 28 of 78




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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:
    
    
    Six Months Ended:June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(in $000s except per share amounts)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Numerator:Net income
    
    $
    31,348
    
    
    $
    3,013
    
    
    $
    162,833
    
    
    $
    5,232Denominator:Weighted average common
shares outstanding
    
    
    61,876,599
    
    
    
    60,112,308
    
    
    
    61,444,707
    
    
    
    59,912,829Effect of dilutive options and common
stock purchase warrants
    
    
    3,662,206
    
    
    
    440,036
    
    
    
    3,443,063
    
    
    
    471,350Diluted weighted average
common shares outstanding
    
    
    65,538,805
    
    
    
    60,552,344
    
    
    
    64,887,770
    
    
    
    60,384,179Basic net income per share
    
    $
    0.51
    
    
    $
    0.05
    
    
    $
    2.65
    
    
    $
    0.09Diluted net income per share
    
    $
    0.48
    
    
    $
    0.05
    
    
    $
    2.51
    
    
    $
    0.09
  15. COMPREHENSIVE INCOME
 Three Months Ended:
    
    
    Six Months Ended:June 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    31,348
    
    
    $
    3,013
    
    
    $
    162,833
    
    
    $
    5,232Currency translation adjustments
    
    
    670
    
    
    
    729
    
    
    
    1,017
    
    
    
    29Comprehensive income
    
    
    32,018
    
    
    
    3,742
    
    
    
    163,850
    
    
    
    5,261Comprehensive income attributable to
the noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive income attributable
to Impax Laboratories, Inc.
    
    $
    32,018
    
    
    $
    3,742
    
    
    $
    163,850
    
    
    $
    5,261
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16. SEGMENT INFORMATION
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16. SEGMENT INFORMATION (continued)
  (in $000s)
    
    Global
    
    
    Impax
    
    
    Corporate
    
    
    TotalThree Months Ended June 30, 2010
    
    Division
    
    
    Division
    
    
    and Other
    
    
    CompanyRevenue, net
    
    $
    149,472
    
    
    $
    3,610
    
    
    $
    
    
    
    $
    153,082Cost of revenue
    
    
    65,599
    
    
    
    3,293
    
    
    
    
    
    
    
    68,892Research and development
    
    
    10,929
    
    
    
    10,755
    
    
    
    
    
    
    
    21,684Patent Litigation
    
    
    1,769
    
    
    
    
    
    
    
    
    
    
    
    1,769Income (loss) before provision for income taxes
    
    $
    68,062
    
    
    $
    (11,176
    )
    
    $
    (7,448
    )
    
    $
    49,438
 (in $000s)
    
    Global
    
    
    Impax
    
    
    Corporate
    
    
    TotalThree Months Ended June 30, 2009
    
    Division
    
    
    Division
    
    
    and Other
    
    
    CompanyRevenue, net
    
    $
    55,192
    
    
    $
    3,224
    
    
    $
    
    
    
    $
    58,416Cost of revenue
    
    
    24,007
    
    
    
    3,277
    
    
    
    
    
    
    
    27,284Research and development
    
    
    9,578
    
    
    
    6,134
    
    
    
    
    
    
    
    15,712Patent Litigation
    
    
    1,394
    
    
    
    
    
    
    
    
    
    
    
    1,394Income (loss) before provision for income taxes
    
    $
    17,740
    
    
    $
    (6,914
    )
    
    $
    (6,785
    )
    
    $
    4,041
 (in $000s)
    
    Global
    
    
    Impax
    
    
    Corporate
    
    
    TotalSix Months Ended June 30, 2010
    
    Division
    
    
    Division
    
    
    and Other
    
    
    CompanyRevenue, net
    
    $
    469,302
    
    
    $
    7,113
    
    
    $
    
    
    
    $
    476,415Cost of revenue
    
    
    142,031
    
    
    
    6,437
    
    
    
    
    
    
    
    148,468Research and development
    
    
    20,364
    
    
    
    19,629
    
    
    
    
    
    
    
    39,993Patent Litigation
    
    
    3,753
    
    
    
    
    
    
    
    
    
    
    
    3,753Income (loss) before provision for income taxes
    
    $
    296,706
    
    
    $
    (20,500
    )
    
    $
    (15,772
    )
    
    $
    260,434
 (in $000s)
    
    Global
    
    
    Impax
    
    
    Corporate
    
    
    TotalSix Months Ended June 30, 2009
    
    Division
    
    
    Division
    
    
    and Other
    
    
    CompanyRevenue, net
    
    $
    110,821
    
    
    $
    6,508
    
    
    $
    
    
    
    $
    117,329Cost of revenue
    
    
    47,240
    
    
    
    6,294
    
    
    
    
    
    
    
    53,534Research and development
    
    
    19,853
    
    
    
    11,649
    
    
    
    
    
    
    
    31,502Patent Litigation
    
    
    2,411
    
    
    
    
    
    
    
    
    
    
    
    2,411Income (loss) before provision for income taxes
    
    $
    36,251
    
    
    $
    (13,202
    )
    
    $
    (14,963
    )
    
    $
    8,086
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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)
 ® ® ®
 ® ® ®
  Page 34 of 78




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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)
 ®
  Page 35 of 78




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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
  Page 36 of 78




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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)
 ®
 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 a 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. ®
  Page 38 of 78




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18. SUPPLEMENTARY FINANCIAL INFORMATION (unaudited)
  Quarter Ended:(in $000s except per share amounts)
    
    March 31, 2010
    
    
    June 30, 2010Revenue:Global Product sales, gross
    
    $
    425,986
    
    
    $
    224,318Less:Chargebacks
    
    
    56,168
    
    
    
    49,420Rebates
    
    
    29,425
    
    
    
    16,739Product Returns
    
    
    7,400
    
    
    
    4,596Other credits
    
    
    23,888
    
    
    
    15,925Global Product sales, net
    
    
    309,105
    
    
    
    137,638Private Label Product sales
    
    
    672
    
    
    
    339Rx Partner
    
    
    4,903
    
    
    
    5,802OTC Partner
    
    
    1,765
    
    
    
    2,309Research Partner
    
    
    3,385
    
    
    
    3,494Promotional Partner
    
    
    3,503
    
    
    
    3,500Other
    
    
    
    
    
    
    Total revenues
    
    
    323,333
    
    
    
    153,082Gross profit
    
    
    243,757
    
    
    
    84,190Net income
    
    $
    131,485
    
    
    $
    31,348Net income per share (basic)
    
    $
    2.16
    
    
    $
    0.51Net income per share (diluted)
    
    $
    2.06
    
    
    $
    0.48Weighted Average:common shares outstanding:Basic
    
    
    61,008,015
    
    
    
    61,876,599Diluted
    
    
    63,865,678
    
    
    
    65,538,805
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18. SUPPLEMENTARY FINANCIAL INFORMATION (unaudited) (continued)
  Quarter Ended:(in $000s except per share amounts)
    
    March 31, 2009
    
    
    June 30, 2009Revenues:Global Product sales, gross
    
    $
    78,696
    
    
    $
    81,764Less:Chargebacks
    
    
    22,638
    
    
    
    24,844Rebates
    
    
    10,819
    
    
    
    13,425Product Returns
    
    
    3,256
    
    
    
    3,100Other credits
    
    
    2,862
    
    
    
    3,008Global Product sales, net
    
    
    39,121
    
    
    
    37,387Private Label Product sales
    
    
    1,297
    
    
    
    2,220Rx Partner
    
    
    10,736
    
    
    
    11,119OTC Partner
    
    
    1,858
    
    
    
    1,628Research Partner
    
    
    2,611
    
    
    
    2,833Promotional Partner
    
    
    3,284
    
    
    
    3,224Other
    
    
    6
    
    
    
    5Total revenues
    
    
    58,913
    
    
    
    58,416Gross profit
    
    
    32,663
    
    
    
    31,132Net income
    
    $
    2,219
    
    
    $
    3,013Net income per share (basic)
    
    $
    0.04
    
    
    $
    0.05Net income per share (diluted)
    
    $
    0.04
    
    
    $
    0.05Weighted averagecommon shares outstanding:Basic
    
    
    59,711,133
    
    
    
    60,112,308Diluted
    
    
    60,222,215
    
    
    
    60,552,344
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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
    Page 41 of 78




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Overview
     Page 42 of 78




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Global product sales, net.
 Private Label Sales. TM
  Page 43 of 78




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Rx Partner and OTC Partner.
   Page 44 of 78




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Research Partner
 Promotional Partner
 Impact of Economic Conditions
    Page 45 of 78




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Critical Accounting Estimates
     Page 46 of 78




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Chargebacks.
  (in $000s)
    
    June 30,
    
    
    December 31Chargeback reserve
    
    2010
    
    
    2009Beginning balance
    
    $
    21,448
    
    
    $
    4,056Provision recorded during the period
    
    
    105,588
    
    
    
    126,105Credits issued during the period
    
    
    (101,367
    )
    
    
    (108,713
    )Ending balance
    
    $
    25,669
    
    
    $
    21,448Provision as a percent of gross Global Product sales
    
    
    16
    %
    
    
    24
    %
   Page 47 of 78




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Rebates.
  (in $000s)
    
    June 30,
    
    
    December 31Rebate reserve
    
    2010
    
    
    2009Beginning balance
    
    $
    37,781
    
    
    $
    4,800Provision recorded during the period
    
    
    51,767
    
    
    
    72,620Credits issued during the period
    
    
    (70,027
    )
    
    
    (39,639
    )Ending balance
    
    $
    19,521
    
    
    $
    37,781Provision as a percent of gross Global Product sales
    
    
    8
    %
    
    
    14
    %
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Returns.
  (in $000s)
    
    June 30,
    
    
    December 31Product Returns Reserve
    
    2010
    
    
    2009Beginning balance
    
    $
    22,114
    
    
    $
    13,675Provision related to
sales recorded in the period
    
    
    11,996
    
    
    
    11,847Credits issued during the period
    
    
    (1,845
    )
    
    
    (3,408
    )Ending balance
    
    $
    32,265
    
    
    $
    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 50 of 78




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Estimated Lives of Alliance Agreements.
    Page 51 of 78




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Third-Party Research and Development Agreements.
 Share-Based Compensation.
 Income Taxes.
 Fair Value of Financial Instruments.
 Contingencies.
  Page 52 of 78




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Goodwill
  Page 53 of 78




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Results of Operations
 Three Months Ended June 30, 2010 Compared to the Three Months Ended June 30, 2009
 Overview:
  Increase/Three Months Ended
    
    
    (Decrease)June 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009
    
    
    $
    
    
    %(unaudited)
    
    
    (unaudited)Total revenues
    
    $
    153,082
    
    
    $
    58,416
    
    
    $
    94,666
    
    
    
    162
    %Gross profit
    
    
    84,190
    
    
    
    31,132
    
    
    
    53,058
    
    
    
    170
    %Income from operations
    
    
    49,294
    
    
    
    3,987
    
    
    
    45,307
    
    
    nmIncome before income taxes
    
    
    49,438
    
    
    
    4,041
    
    
    
    45,397
    
    
    nmProvision for income taxes
    
    
    18,130
    
    
    
    1,043
    
    
    
    17,087
    
    
    nm31,308
    
    
    
    2,998
    
    
    
    28,310
    
    
    nmNon-controlling interest
    
    
    40
    
    
    
    15
    
    
    
    25
    
    
    
    167
    %Net income
    
    $
    31,348
    
    
    $
    3,013
    
    
    $
    28,335
    
    
    nm
 - nm
    
     not meaningful Net Income
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Global Division
  Increase/Three Months Ended
    
    
    (Decrease)June 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009
    
    
    $
    
    
    %(unaudited)
    
    
    (unaudited)Revenues:Global Product sales, net
    
    $
    137,638
    
    
    $
    37,387
    
    
    $
    100,251
    
    
    
    268
    %Private Label Product sales
    
    
    339
    
    
    
    2,220
    
    
    
    (1,881
    )
    
    
    (85
    )%Rx Partner
    
    
    5,802
    
    
    
    11,119
    
    
    
    (5,317
    )
    
    
    (48
    )%OTC Partner
    
    
    2,309
    
    
    
    1,628
    
    
    
    681
    
    
    
    42
    %Research Partner
    
    
    3,384
    
    
    
    2,833
    
    
    
    551
    
    
    
    19
    %Other
    
    
    
    
    
    
    5
    
    
    
    (5
    )
    
    
    (100
    %)Total revenues
    
    
    149,472
    
    
    
    55,192
    
    
    
    94,280
    
    
    
    171
    %Cost of revenues
    
    
    65,599
    
    
    
    24,007
    
    
    
    41,592
    
    
    
    173
    %Gross profit
    
    
    83,873
    
    
    
    31,185
    
    
    
    52,688
    
    
    
    169
    %Operating expenses:Research and development
    
    
    10,929
    
    
    
    9,578
    
    
    
    1,351
    
    
    
    14
    %Patent litigation
    
    
    1,769
    
    
    
    1,394
    
    
    
    375
    
    
    
    27
    %Selling, general and administrative
    
    
    3,113
    
    
    
    2,473
    
    
    
    640
    
    
    
    26
    %Total operating expenses
    
    
    15,811
    
    
    
    13,445
    
    
    
    2,366
    
    
    
    18
    %Income from operations
    
    $
    68,062
    
    
    $
    17,740
    
    
    $
    50,322
    
    
    
    284
    %
 Revenues
  ®
  ® ®
 ®
  Page 55 of 78




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Cost of Revenues
  Gross Profit
  Research and Development Expenses
  Patent Litigation Expenses
  Selling, General and Administrative Expenses
   Page 56 of 78




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Impax Division
  Increase/Three Months Ended,
    
    
    (Decrease)June 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009
    
    
    $
    
    
    %(unaudited)
    
    
    (unaudited)Promotional Partner revenue
    
    $
    3,500
    
    
    $
    3,224
    
    
    
    276
    
    
    
    9
    %Research Partner revenue
    
    
    110
    
    
    
    
    
    
    
    110
    
    
    nmTotal revenues
    
    
    3,610
    
    
    
    3,224
    
    
    
    386
    
    
    
    12
    %Cost of revenues
    
    
    3,293
    
    
    
    3,277
    
    
    
    16
    
    
    
    0.5
    %Gross profit
    
    
    317
    
    
    
    (53
    )
    
    
    370
    
    
    nmOperating expenses:Research and development
    
    
    10,755
    
    
    
    6,134
    
    
    
    4,621
    
    
    
    75
    %Selling, general and administrative
    
    
    738
    
    
    
    727
    
    
    
    11
    
    
    
    2
    %Total operating expenses
    
    
    11,493
    
    
    
    6,861
    
    
    
    4,632
    
    
    
    68
    %Loss from operations
    
    $
    (11,176
    )
    
    $
    (6,914
    )
    
    
    (4,262
    )
    
    
    (62
    )%
 - nm
    
     not meaningful Revenues
  Cost of Revenues
  Gross Profit
  Research and Development Expenses
  Selling, General and Administrative Expenses
   Page 57 of 78




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##### Table of Contents



Corporate and other
  Increase/Three Months Ended
    
    
    (Decrease)June 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009
    
    
    $
    
    
    %(unaudited)
    
    
    (unaudited)Litigation settlement
    
    $
    
    
    
    $
    619
    
    
    
    (619
    )
    
    
    (100
    %)General and administrative expenses
    
    
    7,592
    
    
    
    6,220
    
    
    
    1,372
    
    
    
    22
    %Total operating expenses
    
    
    7,592
    
    
    
    6,839
    
    
    
    753
    
    
    
    11
    %Loss from operations
    
    
    (7,592
    )
    
    
    (6,839
    )
    
    
    (753
    )
    
    
    (11
    )%Other income (expense), net
    
    
    (25
    )
    
    
    3
    
    
    
    (28
    )
    
    nmInterest income
    
    
    192
    
    
    
    307
    
    
    
    (115
    )
    
    
    (38
    )%Interest expense
    
    
    (23
    )
    
    
    (256
    )
    
    
    233
    
    
    
    91
    %Provision for income taxes
    
    $
    18,130
    
    
    $
    1,043
    
    
    
    17,087
    
    
    nm
 - nm
    
     not meaningful Litigation settlement
  General and Administrative Expenses
  Other income (expense), net
  Interest Income
  Interest Expense
   Page 58 of 78




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Income Taxes
   Page 59 of 78




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##### Table of Contents



Results of Operations
 Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30, 2009
 Overview:
  Increase/Six Months Ended
    
    
    (Decrease)June 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009
    
    
    $
    
    
    %(unaudited)
    
    
    (unaudited)Total revenues
    
    $
    476,415
    
    
    $
    117,329
    
    
    $
    359,086
    
    
    
    306
    %Gross profit
    
    
    327,947
    
    
    
    63,795
    
    
    
    264,152
    
    
    
    414
    %Income from operations
    
    
    260,272
    
    
    
    8,122
    
    
    
    252,150
    
    
    nmIncome before income taxes
    
    
    260,434
    
    
    
    8,086
    
    
    
    252,348
    
    
    nmProvision for income taxes
    
    
    97,613
    
    
    
    2,879
    
    
    
    94,734
    
    
    nm162,821
    
    
    
    5,207
    
    
    
    157,614
    
    
    nmNon-controlling interest
    
    
    12
    
    
    
    25
    
    
    
    (13
    )
    
    
    (52
    )%Net income
    
    $
    162,833
    
    
    $
    5,232
    
    
    $
    157,601
    
    
    nm
 - nm
    
     not meaningful Net Income
   Page 60 of 78




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##### Table of Contents



Global Division
  Increase/Six Months Ended
    
    
    (Decrease)June 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009
    
    
    $
    
    
    %(unaudited)
    
    
    (unaudited)Revenues:Global Product sales, net
    
    $
    446,743
    
    
    $
    76,508
    
    
    $
    370,235
    
    
    
    484
    %Private Label Product sales
    
    
    1,011
    
    
    
    3,517
    
    
    
    (2,506
    )
    
    
    (71
    )%Rx Partner
    
    
    10,705
    
    
    
    21,855
    
    
    
    (11,150
    )
    
    
    (51
    )%OTC Partner
    
    
    4,074
    
    
    
    3,486
    
    
    
    588
    
    
    
    17
    %Research Partner
    
    
    6,769
    
    
    
    5,444
    
    
    
    1,325
    
    
    
    24
    %Other
    
    
    
    
    
    
    11
    
    
    
    (11
    )
    
    
    (100
    )%Total revenues
    
    
    469,302
    
    
    
    110,821
    
    
    
    358,481
    
    
    
    324
    %Cost of revenues
    
    
    142,031
    
    
    
    47,240
    
    
    
    94,791
    
    
    
    201
    %Gross profit
    
    
    327,271
    
    
    
    63,581
    
    
    
    263,690
    
    
    
    415
    %Operating expenses:Research and development
    
    
    20,364
    
    
    
    19,853
    
    
    
    511
    
    
    
    3
    %Patent litigation
    
    
    3,753
    
    
    
    2,411
    
    
    
    1,342
    
    
    
    56
    %Selling, general and administrative
    
    
    6,448
    
    
    
    5,066
    
    
    
    1,382
    
    
    
    27
    %Total operating expenses
    
    
    30,565
    
    
    
    27,330
    
    
    
    3,235
    
    
    
    12
    %Income from operations
    
    $
    296,706
    
    
    $
    36,251
    
    
    $
    260,455
    
    
    
    719
    %
 Revenues
  ®
  ® ®
 ®
  Page 61 of 78




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Cost of Revenues
  Gross Profit
  Research and Development Expenses
  Patent Litigation Expenses
  Selling, General and Administrative Expenses
   Page 62 of 78




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Impax Division
  Increase/Six Months Ended,
    
    
    (Decrease)June 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009
    
    
    $
    
    
    %(unaudited)
    
    
    (unaudited)Promotional Partner revenue
    
    $
    7,003
    
    
    $
    6,508
    
    
    
    495
    
    
    
    8
    %Research Partner revenue
    
    
    110
    
    
    
    
    
    
    
    110
    
    
    nmTotal revenues
    
    
    7,113
    
    
    
    6,508
    
    
    
    605
    
    
    
    9
    %Cost of revenues
    
    
    6,437
    
    
    
    6,294
    
    
    
    143
    
    
    
    2
    %Gross profit
    
    
    676
    
    
    
    214
    
    
    
    462
    
    
    
    216
    %Operating expenses:Research and development
    
    
    19,629
    
    
    
    11,649
    
    
    
    7,980
    
    
    
    69
    %Selling, general and administrative
    
    
    1,547
    
    
    
    1,767
    
    
    
    (220
    )
    
    
    (13
    )%Total operating expenses
    
    
    21,176
    
    
    
    13,416
    
    
    
    7,760
    
    
    
    58
    %Loss from operations
    
    $
    (20,500
    )
    
    $
    (13,202
    )
    
    
    (7,298
    )
    
    
    (55
    )%
 - nm
    
     not meaningful Revenues
  Cost of Revenues
  Gross Profit
  Research and Development Expenses
  Selling, General and Administrative Expenses
   Page 63 of 78




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Corporate and other
  Increase/Six Months Ended
    
    
    (Decrease)June 30,
    
    
    June 30,(in $000s)
    
    2010
    
    
    2009
    
    
    $
    
    
    %(unaudited)
    
    
    (unaudited)Litigation settlement
    
    $
    
    
    
    $
    855
    
    
    
    (855
    )
    
    
    (100
    )%General and administrative expenses
    
    
    15,934
    
    
    
    14,072
    
    
    
    1,862
    
    
    
    13
    %Total operating expenses
    
    
    15,934
    
    
    
    14,927
    
    
    
    1,007
    
    
    
    7
    %Loss from operations
    
    
    (15,934
    )
    
    
    (14,927
    )
    
    
    (1,007
    )
    
    
    (7
    )%Other income (expense), net
    
    
    (42
    )
    
    
    58
    
    
    
    (100
    )
    
    
    (172
    )%Interest income
    
    
    274
    
    
    
    456
    
    
    
    (182
    )
    
    
    (40
    )%Interest expense
    
    
    (70
    )
    
    
    (550
    )
    
    
    480
    
    
    
    87
    %Provision for income taxes
    
    $
    97,613
    
    
    $
    2,879
    
    
    
    94,734
    
    
    nm
 - nm
    
     not meaningful Litigation settlement
  General and Administrative Expenses
  Other income (expense), net
  Interest Income
  Interest Expense
   Page 64 of 78




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Income Taxes
   Page 65 of 78




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Liquidity and Capital Resources
    Cash and Cash Equivalents
  Cash Flows
 Six Months Ended June 30, 2010 Compared to the Six Months Ended June 30, 2009.
    Page 66 of 78




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Page 67 of 78




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Outstanding Debt Obligations
 Senior Lenders; Wachovia Bank
     Page 68 of 78




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Recent Accounting Pronouncements
     Page 69 of 78




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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 70 of 78




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 Patent Infringement Litigation
 Endo Pharmaceuticals Inc., et al. v. Impax Laboratories, Inc. (Oxymorphone)
 ® Markman
decision
 Purdue Pharma Products L.P., et al. v. Impax Laboratories, Inc. (Tramadol)
 ® ® Pharma Products L.P. et al, v. Par Pharmaceutical, Inc. et al. .
 The Research Foundation of State University of New York et al. v. Impax Laboratories, Inc.
(Doxycycline Monohydrate)
 ®
 Abbott Laboratories, et al. v. Impax Laboratories, Inc. (Choline Fenofibrate)
 ®
  Page 71 of 78




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Shionogi Pharma, Inc. and LifeCycle Pharma A/S v. Impax Laboratories, Inc. (Fenofibrate)
 ®
 Genzyme Corp. v. Impax Laboratories, Inc. (Sevelamer Carbonate Powder)
 ®
 Other Litigation Related to Our Business
 Budeprion XL Litigation
 Kelly v. Teva Pharmaceuticals Indus. Ltd, et al. Morgan v. Teva Pharmaceuticals Indus. Ltd, et al. th 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 ® In re:
Budeprion XL Marketing Sales Practices, and Products Liability Litigation
  Page 72 of 78




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ITEM 1A. RISK FACTORS
 Form 10-K Form 10-Q Form 10-Q
 We may be adversely affected by
alliance, collaboration, license and distribution agreements we enter into with
other companies.
    Page 73 of 78




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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  TotalNumber ofShares (orUnits)Purchased
    
    
    Maximum Number (oras Part of
    
    
    Approximate DollarAverage
    
    
    Publicly
    
    
    Value) of Shares (orTotal Number of
    
    
    Price Paid
    
    
    Announced
    
    
    Units) that May YetShares (or Units)
    
    
    Per Share
    
    
    Plans or
    
    
    Be Purchased UnderPeriod
    
    Purchased(1)
    
    
    (or Unit)
    
    
    Programs
    
    
    the Plans or ProgramsApril 1, 2010 to
April 30, 2010
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    May 1, 2010 to May 31, 2010
    
    29,039 shares of common stock
    
    
    $
    19.65
    
    
    
    
    
    
    
    June 1, 2010 to June 30, 2010
    
    6,878 shares of common stock
    
    
    $
    20.40
    
    
    
    
    
    
    
    
 (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 74 of 78




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ITEM 3. DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4. (REMOVED AND RESERVED)
 
 ITEM 5. OTHER INFORMATION
   Page 75 of 78




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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.10.2
    
    
    Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan. * (1)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.
 *
    
    Management contract, compensatory plan or arrangement.(1)
    
    Incorporated by reference to Appendix A to the Companys Proxy Statement filed on April 14,
2010.  Page 76 of 78




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##### Table of Contents



SIGNATURES
  Impax Laboratories, Inc.Date: August 5, 2010
    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 77 of 78




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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.10.2
    
    
    Impax Laboratories, Inc. Amended and Restated 2002 Equity Incentive Plan. * (1)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 onForm 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.
 *
    
    Management contract, compensatory plan or arrangement.(1)
    
    Incorporated by reference to Appendix A to the Companys Proxy Statement filed on April 14,
2010.  Page 78 of 78