Bay Area's IMPAX Labs Surges on Merger Buzz

Published: Sep 25, 2017

Bay Area's IMPAX Labs Surges on Merger Buzz September 22, 2017
By Mark Terry, Breaking News Staff

Impax Laboratories , headquartered in Hayward, Calif., is reportedly in talks to merge with privately-owned Amneal Pharmaceuticals, based in Paterson, NJ.

The Wall Street Journal reported yesterday that the two companies are in talks and a deal could be announced next month. The story was based on unidentified sources.

Impax has a generic business that targets solid oral and alternative dosage from Abbreviated New Drug Applications (ANDA), as well as a branded business that focuses primarily on developing its own drugs for central nervous system (CNS) disorders. Amneal focuses on generics by way of strategic acquisitions and investments in research, manufacturing and distribution. It is currently the fifth-largest generic manufacturer in the U.S.

Reuters notes that, “The merger talks come at a time when the largest U.S. retail pharmacies, including Wal-Mart Stores Inc (WMT) and Walgreens Boots Alliance Inc (WBA), are wielding more leverage when buying generic drugs, accelerating a decline in prices likely to affect drug companies for some time. The pressure is exacerbated as U.S. regulators push for the market entry of more generics to drive down branded drug prices otherwise spiraling out of control.”

On Aug. 8, Amneal launched phosphate capsules, a generic version of Tamiflu, in three different doses. They were manufactured at the company’s recently expanded facility in Brookhaven, NY and shipped out of its distribution center in Glasgow, KY. And on June 15, the company launched ezetimibe tablets, a generic of Zetia.

In its second-quarter report on August 9, Impax cited revenues of $202.1 million, an increase of 17.1 percent compared to $172.6 million in the same period in 2016. It noted the growth was driven by a 24 percent increase in generic product sales. The company also reported an adjusted income per share of $0.18, compared to $0.21 on the same period from 2016.

“Our results benefited from the prior year’s acquisition of products from Teva Pharmaceuticals , as well as the successful second quarter launch of generic Vytorin and continued growth of our epinephrine auto-injector product,” said Paul Bisaro, president and chief executive officer of Impax, in a statement. “In addition, we are pleased with the recent generic product approvals that should benefit future results, including our AB-rated generic version of Concerta, which we expect to launch later this year.”

In March, Impax had hired Morgan Stanley to help conduct a strategic review. At the end of close on Wednesday, Impax had a market cap of $1.6 billion.

At news of the possible deal, Impax rocketed 13.2 percent to $24.40. Shares are currently trading at $23.80.

The WSJ story came a short time after China’s Shanghai Fosun Pharmaceutical (Group) Co. Ltd. disclosed on Aug. 31 that it had a passive 5.19 percent stake in Impax.

The generics market has shown a tremendous amount of activity in the last couple years. It was particularly marked by Teva’s acquisition of Allergan plc (AGN)’s generic drug business for $40.5 billion in July 2015. At the time, in the U.S., Bloomberg Business reported that four major distributors controlled generics. They were McKesson Corporation , CVS Health Corp., through a partnership with Cardinal Health, Inc. , Walgreens Boots Alliance Inc., through a relationship with AmerisourceBergen Corporation and Wal-Mart Stores Inc. Larger pharmacies typically only buy brand-name drugs, not generics, via a drug wholesaler rather than directly from a manufacturer. However, that has been changing somewhat as pharmacies work to offer less expensive generics. Generic manufacturers, as a survival strategy, have worked to lock in on distribution channels.

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