Leerink Affirms Impax Labs (IPXL) at 'Market Perform'; Teva Deal Positive, But Base Outlook Isn't
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Leerink affirms Impax Laboratories, Inc. (Nasdaq: IPXL) with a Market Perform rating and $31 price target after the company announced that it has signed definitive agreements with Teva Pharmaceutical Industries 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 for the generic equivalent to Concerta (methylphenidate hydrochloride) for an aggregate purchase price of $586 million.
Analyst Jason Gerberry commented that in order to justify the ~4x sales multiple, we believe investors will require greater visibility on quality of acquired assets (at time of TEVA-AGN deal close) and evidence IPXL can secure value for full rights to g-Concerta obtained in the deal.
Updated 2016 sales guidance will include 2H contribution of $80m from acquired products. Absent the acquisition, new guidance implies ~8% downside relative to the current FactSet consensus sales forecast. The guidance revision to the base biz is due to increasing competition to high margin generics relative to the 1Q16 update.
On the surface – the acquired assets appear to have reasonable durability as the divestiture process is intended to determine whether a generic category will see a 4th or 5th competitor entry in the foreseeable future. In addition, getting full ownership (vs. prior 50%) on a g-Concerta could swing the ROI profile; however that product appears at least 1-year away from a regulatory update. Given the base biz setback and limited information provided on the acquired assets, it is hard for us to get excited about the deal and we await further update,
the analyst noted.
For an analyst ratings summary and ratings history on Impax Laboratories click here. For more ratings news on Impax Laboratories click here.
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