Will Impax Earnings Really Plunge?

Impax Laboratories (IPXL +0.00%) will release its quarterly report in early November, and investors are bracing themselves for the pharmaceutical company to post a loss, reversing a year-ago profit. But even though Impax earnings might not be producing the growth investors would like to see right now, the bigger question for shareholders is whether the company will be able to get past recent challenges and move toward longer-term success.

Impax has taken a two-pronged approach at the pharmaceutical industry. On one hand, it produces generic versions of drugs originally developed by other manufacturers, benefiting from their past success. At the same time, Impax also has its own pipeline of potential drug candidates, with an emphasis on products treating central-nervous-system ailments. Let's take an early look at what's been happening with Impax Laboratories over the past quarter and what we're likely to see in its report.

Stats on Impax Laboratories

Source: Yahoo! Finance.

Will Impax earnings cure the company's woes?
In recent months, analysts have had mixed views on prospects for Impax earnings. They've boosted their views for the full 2013 year by two-thirds, but they've also cut their 2014 earnings projections by more than a dime per share, almost matching the 2013 increase. The stock has continued to bounce back from major losses earlier in the year, climbing 6% since late June.

Impax's June-quarter earnings report gave shareholders a lot to think about the company's prospects. Sales fell 22%, with much of the decline coming due to competition from other generic-drug makers for its ADHD treatment Adderall XR and fenofibrate cholesterol-treating products. In addition, loss of exclusivity for its Zomig drug for patients suffering from migraines. Moreover, CEO Larry Hsu noted that a failure to gain new product approvals, as well as continuing issues at its manufacturing facility in Hayward, Calif., will likely produce operating losses in the second half of 2013. Hsu announced in June that he would step down once Impax finds a new CEO.

Still, Impax is working hard to move forward. In July, the company launched a generic version of TRILIPIX, following through on an agreement with AbbVie (ABBV +0.79%) to sell an authorized version of the drug. AbbVie managed to get almost $550 million in revenue from TRILIPIX sales for the most recent year, giving Impax a solid opportunity to boost its overall generic revenue.

One question facing Impax concerns its agreement with Sanofi (SNY +1.97%) to produce generic versions of kidney-disease treatments Renvela and Renagel next year. Small pharma Keryx Biopharmaceuticals (KERX +0.00%) has had clinical-trial success with its Zerenex treatment, which could potentially displace Renvela if Zerenex proves to be safer and involve less need for supplemental nutrients. Because of the timing of a potential approval of Keryx's Zerenex, Impax arguably has a lot more to lose than Sanofi, which would presumably see a substantial drop in its own revenue for Renvela in any event.

In the Impax earnings report, watch for news of how the leadership search is going, as well as updates on its pipeline of branded drugs. The key to balance for diversified pharma companies like Impax is keeping both wings of its business working smoothly, and if Impax can succeed in getting its Hayward facility back to full operation, it should help its future growth prospects.

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