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Impax taps Morgan Stanley for strategic review

March 7, 2017

Generic drugmaker Impax Laboratories Inc (IPXL.O) has asked investment bank Morgan Stanley (MS.N) to help it conduct a strategic review, as it tries to cope with a tougher drug pricing environment, people familiar with the matter said.

The past year has seen mounting pressure on generic drugmakers, as speedier approvals of generic products by U.S. regulators ratchets up competition in the sector, squeezing smaller players such as Impax that lack bargaining power.

The review will consider multiple options available to Impax, including the possibility of it participating in the industry’s consolidation wave through an acquisition or a sale of the company, the people said on Tuesday.

No decision to pursue a course of action will be made, however, until Impax appoints a new chief executive officer, after Fred Wilkinson abruptly stepped down from the post in December, the people said. The new CEO’s appointment is expected to be announced as early as April, the people added.

The sources asked not to be identified because the deliberations are confidential. Impax did not immediately respond to requests for comment. Morgan Stanley declined to comment.

Impax shares jumped as much as 11 percent on the news, and were trading up 3.5 percent at $8.70 on the Nasdaq in afternoon trading on Tuesday, giving the Fort Washington, Pennsylvania-based company a market capitalization of around $700 million.

In its most recent earnings call, Impax said that its sales in 2016 declined 4 percent compared to the previous year, to around $825 million, largely driven by pricing pressure on its generics drugs. It also has a smaller business focused on the specialty pharmaceuticals.

That decline disappointed investors, who had come to expect robust annual sales growth. Going into 2016, management had said it expected revenues to grow by at least 15 percent.

“Our business was impacted by new and aggressive competition on several of our generic products as the FDA accelerated the rate of (new generic drug) approvals,” interim chief executive Kevin Buchi said during the company’s latest quarterly earnings call.

U.S. President Donald Trump said in January that some drugmakers are “getting away with murder,” and vowed to use new negotiating tactics to reign in price hikes.

Meanwhile, the U.S. Food and Drug Administration has been implementing new rules that are designed to speed up approval of new generic drugs that analysts say will continue to put considerable pressure on generics drug makers in the coming years.

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