Impax Labs Needs A Lot To Go Right To Meet Its Earnings Goals

Impax Laboratories Inc IPXL was in the news last week with the Department of Justice announcement of an investigation into generic price fixing. Shares of Impax fell 19.5 percent over the course of Thursady's trading session, recovering slightly during Friday’s session.

On Monday, Bank of America analyst Sumant Kulkarnl downgraded the stock from Neutral to Underperform and lowered the price target from $29 to $19.

“While it is too early to estimate a potential outcome, we view the overall DOJ news as one that could lead to incremental net generic pricing pressure, which in this Specialty Pharma investing environment is hardly helpful,” said Kulkarnl, regarding the Department of Justice investigation.

Adding to the coming obstacles, Impax has already lowered its financial outlook twice this year and the company’s peers in Specialty Pharma have conducted “several executional missteps." Kulkarnl stated that a Q3 report demonstrating that Impax can reach its already-lowered outlook is crucial, especially given the “shoot first, ask later” mindset in Specialty Pharma investing.

Moreover, Kulkarnl stated that Impax will need to see significant growth in generics, acceleration in its Rytary drug and a successful launch of Emverm to hit the company’s targets.

“Given that a lot needs to go right in order for IPXL to execute against its outlook, we believe the risk- reward on IPXL is less favorable than other stocks in our coverage and we are moving back to Underperform from Neutral,” said Kulkarnl.