What happened

After the company reported fourth-quarter results that failed to excite investors, shares of Impax Laboratories (NASDAQ:IPXL) are losing 29% of their value at 12:00 p.m. EST Wednesday.

So what

Since 2015, Impax Labs' share price has retreated from $50 to currently around $10. Unfortunately, its most recent financial results did little to reverse that disappointing course.

A frustrated investor with hands on his head stands in front of a wall-sized chart showing declining stock prices.


In the third quarter, the company took a $251 million impairment charge because contract prices were lower than anticipated for its recently acquired generics business. In the fourth quarter, management took an additional $254 million impairment charge for the same reason.

Overall, lower pricing on top sellers including generic diclofenac sodium gel 3%, metaxalone, fenofibrate, and mixed amphetamine salts ER caused revenue to tumble nearly 30% year over year to $198.4 million in the quarter. The company's been attempting to offset the competitive pricing and market share losses on diclofenac sodium gel 3% since the middle of last year.

Exiting the third quarter, management forecast full-year sales of between  $840 million and $855 million, which was down from prior guidance for at least $900 million. It also cut adjusted earnings per share to between $1.10 to $1.20 from at least $1.57.  Apparently, they didn't cut estimates by nearly enough. Total revenue decreased 4.2% to $824.4 million and adjusted EPS were $1.16 in 2016.

"During 2016, a number of our generic products faced aggressive competition and pricing pressure, which impacted our revenue and profitability. As we enter 2017, we expect these headwinds to persist and weigh on our results through the year," said Kevin Buchi, Interim President and Chief Executive Officer of Impax. "We continue to pursue opportunities to help offset these challenges by continuing the growth of our Specialty Pharma division, growing our share within key generic product markets, bringing new generic products to market and further reducing our cost base."

Now what

Impax Laboratories' acquisition of 15 generic drugs from Teva Pharmaceutical isn't panning out as well as initially hoped, and with competitive pressure mounting, CEO Fred Wilkinson resigned in December.

New management may be able help this stock find a floor, but the company's still conducting its search, and as of now, there's no evidence in its financials to suggest to investors that better times are indeed ahead for this stock. Until Impax Labs can begin delivering results that reflect growth, it's probably best to concentrate on other investment ideas.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.