Impax Beats Earnings Estimate

Zacks

Impax Laboratories Inc.’s (IPXL) first quarter 2013 adjusted earnings of 37 cents per share were above the Zacks Consensus Estimate of 23 cents but below the year-ago earnings of 53 cents per share.

Quarter in Details

Total revenues for the first quarter stood at $148.5 million, up 15.5% year over year. First quarter revenues were also ahead of the Zacks Consensus Estimate of $138 million.

First quarter revenues consisted of revenues from Impax Laboratories’ two divisions-Global Pharmaceuticals and Impax Pharmaceuticals.

Revenues of Global Pharmaceuticals came in at $101.6 million in the first quarter, down 17.5% year over year. Revenues declined during the quarter on account of reduced sales of Impax’s authorized generic version of attention deficit hyperactivity disorder drug Adderall XR. However, this was partially mitigated by the January launch of Opana (oxymorphone hydrochloride) extended-release tablets.

Revenues from Impax Pharmaceuticals division came in at $46.9 million in the reported quarter compared with $5.3 million in the year-ago quarter. The growth was driven by US sales of Zomig.

Total research and development expenses for the quarter increased 4.2% to $19.6 million. Selling, general and administrative expenses increased 40% to $29.7 million.

Higher sales and marketing expenses related to Zomig along with pre-launch marketing expenses related to Rytary lead to a rise in operating expenses during the first quarter of 2013.

We remind investors that GlaxoSmithKline (GSK) recently terminated its Rytary agreement with Impax. As per the terms of the agreement, Glaxo was responsible for the development and commercialization of the candidate outside the US and Taiwan. Glaxo decided to return those rights to Impax, effective end Jul 2013, due to the delays in regulatory approval and launch dates in countries that Glaxo has rights to.

Following Glaxo’s decision, Impax will be responsible for the development of the candidate across the globe. The company will look for a partner in ex-US markets.

We note that a New Drug Application (:NDA) for Rytary was filed in Dec 2011. However, in Jan 2013, the FDA issued a complete response letter in relation to the NDA for Rytary. The company is seeking approval for Rytary for the symptomatic treatment of adults suffering from idiopathic Parkinson’s diseases. In Mar 2013, when the FDA completed its re-inspection of the company’s manufacturing facility at Hayward, it issued a new Form 483 with 12 observations. Impax is working diligently on the issues noted by the FDA and expects to resolve the matter quickly. However, the new Form 483 remains a major overhang on the stock.

2013 Guidance

Apart from announcing the financial results, Impax also maintained its expense guidance for 2013. Total research and development expenses in the generic and brand divisions of Impax are still expected in the range of $87–$95 million. Generic research and development expenses are expected in the range of $49–$53 million, whereas brand research and development expenses are expected in the range of $38–$42 million.

Impax also maintained its patent litigation expenses estimates in the range of $10–$12 million.

The company also confirmed its selling, general and administrative expenses for 2013 in the range of $115–$120 million.

Impax currently carries a Zacks Rank #3 (Hold). Companies that look attractive at present in the pharma space include Transcept Pharmaceuticals Inc. (TSPT) and Catalyst Pharmaceuticals Partners Inc. (CPRX). Both the stocks carry a Zacks Rank #1 (Strong Buy).

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