Parkinson's Drug Awaits OK While ADHD Lifts Impax Now

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While its long-awaited novel drug to treat Parkinson's disease inches closer to the finish line,Impax Laboratories ( IPXL ) has found other ways to keep its growth engine humming.

Products treating migraine headache and attention deficit hyperactivity disorder, or ADHD, have recently led the way.

Revenue from the two treatments powered Impax's second-quarter results, which in turn lifted shares more than 8% July 31, the day of the report, to over 22. They've since climbed a bit higher.

Hayward, Calif.-based Impax is a specialty drug company that has built a reputation on controlled-release oral delivery techniques. It focuses on both generic and branded drugs, especially for disorders of the central nervous system.

But it's Rytary, Impax's first internally developed branded drug for Parkinson's disease, that could be the big game-changer. The drug is also known by its filing name, IPX066.

Parkinson's is a neurodegenerative movement disorder afflicting more than 3 million people in the U.S., Europe and Japan alone. Impax will have a lock on the big U.S. market.GlaxoSmithKline ( GSK ) is licensed to sell Rytary outside the U.S. and Taiwan.

Better Efficacy

Rytary is an extended release capsule reformulation of an immediate release version containing the treatment standard bearer, levodopa. It's meant to maintain more consistent and longer-lasting improvements in patients.

"Clinicians are pretty enthusiastic about the better efficacy and with what appears to be fewer side effects," said Cowen & Co. analyst Ken Cacciatore.

Analysts expect Rytary to generate more than $300 million in annual sales as the product fully ramps up about five years after the launch date, which is expected to occur early next year.

In the second quarter, sales from generic Adderall XR, which treats ADHD, made up $70 million of the company's $166.5 million in revenue.

That was better than many had expected, considering past supply shortfalls fromShire ( SHPG ).

Revenue in the quarter was 32% higher than in the same period a year earlier.

Profit soared 173% to 60 cents a share. Analysts forecast an 83% rise in full-year profit, to $2.05 a share, and much slower growth next year as launch expenses rise.

In migraines, U.S. sales of the tablet form of Zomig began April 1 on the heels of a licensing agreement withAstraZeneca ( AZN ) for three formulations, tablets, oral disintegrating pills and nasal spray.

Zomig generated $29 million in sales in the quarter just from the tablet form, delivering on management's earlier vow that the drug would help support growth as they prepared for the Rytary launch.

The two other formulations of Zomig started contributing to sales in July. Even if overall Zomig volume has been declining, as analysts say, it's all new revenue for Impax.

But analysts say Rytary is the real key to Impax's success for now. Cacciatore calls Rytary "critical."

"It's a brand product you can invest behind and grow," he said.

Compared to the short, jittery sales cycles of generic drugs, it'll provide the company with a much longer period of patent protection and with smoother and more balanced growth.

Last year, Impax's revenue fell 42% and profit by over 60% as it lost sales from generic Flomax, which was a big contributor in 2010.

Though Rytary approval is expected, it's not yet a done deal. After extensive clinical studies, the FDA accepted Impax's new-drug application filing for IPX066 in February. It's set to weigh in with a further decision in late October in what is known as a Prescription Drug User Fee Date.

Some analysts are concerned that a warning letter from the FDA on Impax's manufacturing plant in Hayward, Calif., could throw a wrench in Rytary's final approval.

That's despite the fact that the Hayward plant is only a backup facility for making the drug. The company's Taiwan plant will be the primary site.

FDA Inspection

Management has told analysts and investors they are working to get the plant up to speed to satisfy the FDA's concerns. It's unclear when the FDA will reinspect the plant.

"There's a chance (Rytary) gets approved without the resolution of Hayward," Cacciatore said.

Executives have said they could possibly remove the Hayward plant from the FDA application if necessary.

Manufacturing issues at the Hayward plant "have been an overhang," says ThinkEquity analyst James Molloy, who believes issues will eventually be resolved.

Meanwhile, Impax's medicine chest is hardly low on supplies. Impax markets more than 100 generic products. And it has a pipeline of 46 pending applications with the FDA, including some filed jointly with partners.

In its central-nervous-system-focused branded pharma business, a drug to treat restless legs syndrome is currently in clinical studies. It's an oral controlled-release formulation.

In late June, Impax announced it will partner with Colorado-based Tolmar to commercialize several generic topical prescription products.

Three-Way Battle

New products could help offset an expected falloff in generic Adderall XR sales as new generics enter the market. The FDA recently approved a drug submitted by Actavis, a company being acquired byWatson Pharmaceuticals ( WPI ).

That spells an end to the three-way market battle between Shire and its two authorized generic partners, Impax being one of them. The other: generic-drug giantTeva (TEVA).

Adderall XR brand and generic versions took in nearly $2 billion in sales in the 12 months ending in March, according to industry figures cited by Drug Store News.

Impax is "still levered to (Adderall XR) for better or worse," wrote Jefferies & Co. analysts on Aug. 1. Revenue from the drug, they added, "continues to drive this boat quarter to quarter until new approvals come through."

Though Impax's Adderall sales will likely fall off, reduced royalty rates paid to Shire lifts gross margins on the drug, the Jefferies & Co. analysts wrote.

Meanwhile, with over $354 million in cash and no debt, Impax execs boast that they can make acquisitions and enter into new partnerships to drive growth.

Then of course there is Rytary. CEO Larry Hsu said in a conference call on July 31, "We continue to be excited about (Rytary) and its market potential."



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Investing Ideas

Referenced Stocks: AZN , GSK , IPXL , SHPG , WPI

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