Heightened Drug Pricing Scrutiny Now A Factor In Analysts Views Of Impax Labs, Concordia International

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There is “heightened drug pricing scrutiny across the US and UK,” Goldman Sachs’ Stephan Stewart said in a report. He upgraded the rating on Impax Laboratories Inc IPXL from Sell to Neutral, while lowering estimates for Concordia International Corp CXRX.

Impax Labs

Analyst Stewart cited “limited branded pricing risk, rebased generic earnings, and potential near-term upside risk from the pipeline” as reasons for the upgrade in rating. The price target for the company has been raised from $25 to $26.

Impax Labs' shares have declined 26 percent since the stock was added to the Americas Sell List on June 6, 2016, versus a 2 percent gain in the S&P 500 and an 11 percent gain in LTM. Consensus expectations and the stock valuation have been “largely reset” to reflect intensifying competition to the company’s largest product gSolaraze, Stewart noted.

The analyst added that there was also potential upside from pending pipeline opportunities. The current portfolio presents limited pricing risk and Impax continues to be a potential takeout candidate against the backdrop of generic consolidation.

Concordia

Stewart maintained a Neutral rating on Concordia, while reducing the price target from $13 to $4.

The EPS estimates for 2016 through 2018 have been reduced by 2-14 percent, reflecting the outlook for the company’s UK segment, which contributes 40 percent of revenues.

“We revisit the CXRX story after the recently introduced UK pricing Bill, and lower estimates and price target to reflect a now flat pricing outlook for its UK segment versus mid-single digit increases previously,” the Goldman Sachs report noted.

Concordia’s shares have lost 88 percent year to date, versus a 5 percent gain in the S&P. Despite this downturn, the risk/reward is still not attractive, with potential price cuts across the company’s UK portfolio expected to drive shares even lower, the analyst mentioned.

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Posted In: Analyst ColorUpgradesPrice TargetReiterationAnalyst RatingsGoldman SachsStephan Stewart
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