Impax Beats on Both Counts

Impax Laboratories, Inc.’s(IPXL - Snapshot Report) fourth quarter 2012 adjusted earnings of 30 cents per share, were above the Zacks Consensus Estimate of 20 cents but below the year-ago earnings of 33 cents per share.

Total revenues for the fourth quarter stood at $141.0 million, down 11% year over year, but ahead of the Zacks Consensus Estimate of $127 million.

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

Revenues of Global Pharmaceuticals came in at $91.9 million in the fourth quarter, down 40% 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 US sales of Zomig, used for the treatment of migraine headache.

Revenues from Impax Pharmaceuticals division came in at $49.1 million in the reported quarter compared to $5.3 million in the year-ago quarter. The growth was driven by US sale of Zomig.

Total research and development expenses of Impax Laboratories for the quarter increased 10.9% to $22.6 million. Selling, general and administrative expenses of Impax Laboratories increased 66.6% to $33.4 million.

Expansion of infrastructure and commercial spending on Zomig and Rytary caused operating expenses to increase in 2012.

Full-year adjusted earnings of Impax Laboratories came in at $1.91 per share, well above the Zacks Consensus Estimate of $1.78 and approximately 95% above the year-ago earnings. Revenues climbed 13% to $581.7 million in 2012, above the Zacks Consensus Estimate of $576 million.

2013 Guidance

The financial guidance of 2013 includes anticipated launch expenses related to Rytary on its approval.

Total research and development expenses in the generic and brand divisions of Impax Laboratories are expected in the range of $87-$95 million. This however excludes patent litigation expense.

Generic research and development expenses are expected in the range of $49-$53 million, where as, brand research and development expenses are expected in the range of $38-$42 million.

Impax Laboratories estimates patent litigation expenses in the range of $10-$12 million.

Selling, general and administrative expenses should be in the range of $115-$120 million, down from the previous estimate of $154-$162 million.

Our Take

We believe that the investor focus will remain on the approval status of Rytary. Notably, 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. We note that the company is seeking approval for Rytary for the treatment of Parkinson’s diseases. The company intends to work closely with the FDA to resolve the issues raised in the CRL.

Impax Laboratories currently carries a Zacks Rank #4 (Sell). However, stocks such as Salix Pharmaceuticals Ltd. (SLXP - Analyst Report), Avanir Pharmaceuticals, Inc. (AVNR - Snapshot Report) and Mylan, Inc. (MYL - Analyst Report) appear to be more favorably placed. They all carry a Zacks Rank #2 (Buy).