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GlaxoSmithKline (GSK - Analyst Report) and Impax Pharmaceuticals, the brand products division of Impax Laboratories, Inc. (IPXL - Snapshot Report), recently announced the termination of their agreement for Rytary (IPX066). Rytary is being developed for the symptomatic treatment of adults suffering from idiopathic Parkinson’s disease.

We remind investors that in Dec 2010, Impax had entered into a license, development and commercialization agreement with Glaxo for Rytary. As per the terms of the agreement, Glaxo is 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. Delays in regulatory approval and launch dates in countries that Glaxo has rights to led to the decision. 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 see the withdrawal of Glaxo from the Rytary deal as a huge disappointment for Impax. In the US, the regulatory path for Rytary has been far from smooth. In Jan 2013, Impax received a major setback with the US Food and Drug Administration (FDA) issuing a complete response letter (CRL) for the marketing application for Rytary.

According to the CRL, the NDA may be approved only after a satisfactory re-inspection of Impax’s Hayward facility for which a warning letter was issued in May 2011.The facility is involved in the development of Rytary. However, 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.

Impax and Glaxo both currently carry a Zacks Rank #3 (Hold). Companies that currently look attractive include UCB (UCBJF) and Catalyst Pharmaceuticals Partners Inc. (CPRX - Snapshot Report). Both stocks carry a Zacks Rank #1 (Strong Buy).

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