With Acquisitions, Will Impax Become the Next Great Generic Drug Seller?

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Impax Laboratories Inc. (NASDAQ: IPXL) is about to step into a key role in the U.S. generic drug market. The company plans to take on a substantial portfolio of generic drugs in a transaction that will be immediately accretive and allow for accelerating growth in the years to come. In a sense, Impax could become the next big name in the generic market.

Keep in mind that this transaction is in connection with the divestiture process mandated by the Federal Trade Commission (FTC) in connection with the acquisition by Teva Pharmaceutical Industries Ltd. (NYSE: Teva) of the U.S. generics business of Allergan PLC (NYSE: Allergan).

Early on Tuesday, Impax announced that it has signed definitive agreements with Teva and affiliates of Allergan for the acquisition of a broad portfolio of generic products across solid oral, inhalable, injectable and topical dosage forms, and the return to Impax of its rights to its pending Abbreviated New Drug Application (ANDA) for the generic equivalent to Concerta (methylphenidate hydrochloride) for an aggregate purchase price of $586 million.

Upon closing, the immediately accretive transaction will provide Impax with a profitable and growing commercialized portfolio of 15 currently marketed generic products. The acquired marketed generic products generated roughly $150 million in net sales and about $100 million in gross profit in 2015.

Apart from this, Impax is looking to add a few others:

  • One approved generic product and two approved strengths of a currently marketed product, which have not yet launched.
  • One pipeline generic product and one pipeline strength of a currently marketed product, which are pending U.S. Food and Drug Administration (FDA) approval.
  • The full commercial rights to Impax’s pending ANDA for the generic equivalent to Concerta (methylphenidate hydrochloride), a product previously partnered with Teva.
  • One generic product under development.

Fred Wilkinson, president and CEO of Impax, commented:

The anticipated acquisition of these currently marketed and pipeline products fits with our strategic priorities of maximizing our generic platform, optimizing R&D and accelerating business development to create long term growth. Through this transaction, we will be expanding our portfolio of difficult-to-manufacture or limited-competition products and maximizing utilization of our existing manufacturing facilities in Hayward, California and Taiwan. The acquisition of full commercial rights to generic Concerta provides an additional opportunity to add another valuable near term launch and accentuates the strength of our internal R&D program.

Shares of Impax were last trading down 9% at $29.09 on Tuesday, with a consensus analyst price target of $38.86 and a 52-week trading range of $27.62 to $51.42.

Teva shares were recently down 1.3% to $51.31. The consensus price target is $71.68, and the 52-week range is $49.51 to $72.31.

Allergan’s stock was trading at $234.61, within a 52-week trading range of $195.50 to $340.34. The consensus price target is $292.63.