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Why Impax Labs Is Crashing 23.44% Today

By Todd Campbell – Updated Nov 9, 2016 at 9:43AM

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Weak third-quarter results and tepid forward guidance cast a shadow on this generic drugmaker.

Image source: Getty Images.

What happened

After reporting third-quarter results below industry watchers' forecast and lowering full-year guidance, Impax Laboratories (IPXL) shares are dropping 23.44% at 2:00 p.m. EST Wednesday.

So what

The generic drug company's sales increased 3.1% year over year to $227.9 million, and EPS came in at $0.37. Analysts were looking for sales and EPS of $234.75 million and $0.39, respectively.

In the quarter, a 30% increase in specialty pharmaceuticals sales due to higher sales of Rytary and Zomig nasal spray were offset by a 3% decline in the company's generic drug segment. Generic drug sales were negatively impacted by market share losses on the company's diclofenac sodium gel 3%, mixed amphetamine salts, and metaxalone.

The performance led management to lower its full-year sales outlook to between $840 million and $855 million from previously announced expectations of between $900 million and $940 million. Management also cut its adjusted EPS guidance to $1.10 to $1.20 from $1.57 to $1.70.

"Our third quarter 2016 results reflect the volatility we have experienced as a result of additional competition on a few of our largest generic products," said Fred Wilkinson, President and Chief Executive Officer of Impax. "Successful marketing and operational strategies are helping us to capitalize on several generic opportunities, including epinephrine auto-injector and oxymorphone, and we defended our share position across the majority of our generic portfolio. That said, the ongoing impact of an increasingly challenging market environment continues to weigh on our results and consequently we are revising our outlook for fiscal 2016 to reflect the impact of lower pricing across an increased number of products in our generic portfolio."

Now what

Impax Laboratories recently acquired 15 generic drugs from Teva Pharmaceutical and that did offset some of the headwind from lost diclofenac sales. Sales and profit uncertainty, however, remains a big overhang on this company's stock. Until it can prove to investors that it's overcoming obstacles, I think it's best to focus on other investment ideas that have a clearer path to upside.

Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may have positions in the companies mentioned. Like this article? Follow him on Twitter where he goes by the handle @ebcapital to see more articles like this.

The Motley Fool has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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