Goldman Initiates Impax Labs With Sell Rating, $33 Target

Although Impax Laboratories Inc IPXL's prospects have improved since the remediation of its manufacturing issues in 2015, Goldman Sachs’ Stephan Stewart believes “the fundamental outlook is fully reflected in the stock,” and there could be “increased competition and tail risks to key portfolio generics.”

Stewart initiated coverage of the company with a Sell rating and price target of $33.

Competition And Tail Risk

“Admittedly, IPXL’s small scale, relatively flexible balance sheet and competitive positioning make for potential strategic activity as acquirer or target, but we believe the stock is also already reflecting some potential here, and our target also reflects an acquisition premium,” the analyst mentioned.

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Steward believes Impax Laboratories’ largest drug on the market, generic Solaraze, is facing competition from several manufacturers and that competition for the company’s large portfolio products was increasing.

In addition, the analyst believes that the application by Endo International plc - Ordinary Shares ENDP for label change for its second largest on-market drug, Opana ER, could eventually lead to the removal of Impax Pharma’s generic.

Limited Upside

“We also believe pipeline swing factors like generic Renvela and generic Welchol are at least partially embedded in consensus estimates as well as the company’s premium valuation,” Stewart pointed out.

The analyst also sees limited upside to the consensus expectations for the company’s main growth brand, Rytary, with which Impax Pharma is attempting to penetrate the “highly genericized” carbidopa-levodopa Parkinson’s market.