In a move to streamline operations,
Impax Laboratories, Inc.
) recently announced that it reduced its workforce, primarily in
Impax eliminated approximately 110 positions from its existing
The majority of the reductions took place at the company's
manufacturing facility at Hayward, California.
The facility has been plagued by lower production volumes
arising from the production transfer to the more cost efficient
plant in Taiwan, previously announced product discontinuations
and delayed product launches.
Impax has been facing challenges at its Hayward manufacturing
facility in recent times. We note that Impax's Parkinson's
disease candidate, Rytary, was denied approval by the US Food and
Drug Administration (FDA) in Jan 2013 due to manufacturing issues
at this particular facility.
Moreover, in Mar 2013, the FDA completed its re-inspection of
the company's manufacturing facility at Hayward and issued a new
Form 483 with 12 observations. Out of these, 3 were repeat
observations from inspections that occurred prior to the warning
The re-inspection was due to issuance of Form 483 in Mar 2012.
Additionally, the FDA conducted a Pre-Approval Inspection (PAI)
for Rytary in order to validate the analytical method.
The FDA also conducted a general Good Manufacturing Practices
(GMP) inspection and observed deviations from the current
practices by Impax.
We remind investors that Impax has been plagued with quality
control issues since 2011. In May 2011, Impax received a warning
letter from the FDA after an inspection at the Hayward
Thereafter, in 2012, the FDA completed the re-inspection of
the concerned facility along with a general GMP inspection and
issued Form 483 with its observations.
) has decided to terminate its collaboration agreement for the
development and commercialization of Rytary (outside the US and
Taiwan) in Apr 2013 due to delays in regulatory approval.
Hence, Impax decided to realign its resources at the Hayward
facility to reduce expenses and improve the cost structure. Impax
targets annual cost savings of approximately $15 million,
resulting from the reduction in both personnel and other variable
expenses which included product discontinuations.
Impax estimates $10 million of cost savings from these actions
within the line item of cost of goods sold.
Due to a delay in Rytary's approval, Impax also plans to
reduce its contracted brand sales force by 20 and eliminate 4
regional sales management positions.
This move is expected to lower the company's selling expenses
by approximately $2 million in 2013 without impacting the margin
Given the steps undertaken by Impax, we currently have low
visibility on when the company will be able to resolve the
Both Impax and GlaxoSmithKline currently carry a Zacks Rank #3
(Hold). Right now, the companies that look attractive include
) with a Zacks Rank #1 (Strong Buy).
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