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Impax (IPXL) Q4 Earnings in Line, Revenues Miss Estimates

Zacks Equity Research

Impax Laboratories Inc. IPXL posted fourth-quarter 2016 adjusted earnings of 16 cents per share, in line with the Zacks Consensus Estimate. Earnings were also down 74.2% from 62 cents in the year-ago period due to lower generic product sales. The company’s share price fell 34.74% following its fourth-quarter earnings release.

Total revenue decreased 29.7% to $198.4 million year over year, due to increased competition and lower pricing on generic diclofenac sodium gel 3%, metaxalone, fenofibrate and mixed amphetamine salts ER.

Moreover, revenues were well below the Zacks Consensus Estimate of $220 million in the reported quarter.

Impax’s share price has decreased 30% year to date, while the Zacks classified Medical-Generic Drugs industry gained 6.5%.



Quarter in Detail

During the reported quarter, Impax Generic division revenues declined 38.6% from the year-ago quarter to $139.2 million. The decline in revenues was due to decreased sales of diclofenac gel, metaxalone, fenofibrate and mixed amphetamine salts ER as a result of increased competition and pricing pressure.

The Impax Specialty Pharma division recorded revenues of $59.2 million, up 7.1% year over year, largely due to higher sales of Rytary and Albenza, and the addition of sales from the March 2016 launch of Emverm. Adjusted research and development (R&D) expenses grew 2.8% to $19.9 million in the reported quarter.

Adjusted selling, general and administrative expenses (SG&A) decreased 5.8% to $49.9 million.

2016 Results

For the full year 2016, adjusted earnings were $1.16 per share compared with $1.45 in 2015. Earnings were in line with the Zacks Consensus Estimate.

Revenues for 2016 came in at $824.4 million, down 4.2% from $860.5 million in 2015. Revenues missed the Zacks Consensus Estimate of $846.02 million.

2017 Outlook

Impax’s full year 2017 outlook reflects management's current expectations with respect to prescription trends, pricing and inventory levels, and the anticipated timing of future product launches and events.

The company did not provide 2017 guidance estimates for total revenues or earnings per share due to ongoing revenue volatility within the company's Generics division as a result of increased competition and the continued impact of lower pricing.  

As a result of these events and excluding the impact from significant new product approvals and launches expected in 2017, the company expects its Generics division revenues to decline in 2017 compared to 2016.

The pricing erosion is expected to be in the high single to low double-digit range in 2017.

The company expects gross margins to be about 47% to 49%.

Adjusted research and development expenses, including patent litigation expenses, across the generic and brand divisions of are forecast to be in the range of $90 million to $95 million.

Adjusted selling, general and administrative expenses are expected to be in the range of $190 million to $195 million.

Our Take

The company posted in line earnings but missed revenue estimates in the fourth quarter. During 2016, few of the company’s generic products faced aggressive competition and pricing pressure, which impacted its revenue and profitability. These headwinds are expected to persist and weigh on its results through 2017.

Impax Laboratories, Inc. Price, Consensus and EPS Surprise

 

Impax Laboratories, Inc. Price, Consensus and EPS Surprise | Impax Laboratories, Inc. Quote

Zacks Rank & Other Key Picks

Impax currently carries a Zacks Rank #2 (Buy). Some other favorably placed stocks in the health care sector include Sunesis Pharmaceuticals SNSS, Celgene Corp. CELG and GlaxoSmithKline plc GSK. All of them carry a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Sunesis’ loss estimates narrowed by 5.06% and 8.80% for 2016 and 2017, respectively, over the past 30 days. The company recorded a positive earnings surprise in three of the last four quarters, the average being 0.54%.

GlaxoSmithKline’s earnings estimates increased from $2.66 to $2.76 for 2017 and from $2.80 to $2.85 for 2018 over the last 30 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 11.03%.

Celgene’s earnings estimates increased from $6.52 to $6.60 for 2017 and from $8.15 to $8.16 for 2018 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 5.08%.

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