Impax Laboratories Inc. (NASDAQ:IPXL)

01/21/2013 FDA decision on Rytary for treatment of idiopathic Parkinson's disease.

Expecting a pop if Rytary is approved. Also this stock beat up way too much.

Great potential with its drug candidate IPX066.

I was already eyeing Impax for an outperform when the company dropped sharply intraday on word that the CFO was leaving the company. Now, no one likes change, but a 10% drop for a change in CFO seems excessive. Generic Adderall revenues are a little too lumpy for my taste but the company made a good move in acquiring Zomig. I think quality control warning letters from the FDA are being overblown and IPX066 stands a decent chance of first pass FDA approval in October. Today's drop was the first time the stock went below 20 since February, and barring a broad market meltdown I'd be surprised to see it cross that level again.

MFI simulation

With better management and teeth clinching legal respondents, the CROX is monopolizing the fun relaxing, medical shoe market. Their emphasis on children is strong and retail outlets are growing. Just go to the mall and count how many people you see wearing Crox. They are also attacking the leather shoe side of things with a Sperry-like model now out.

I am collecting some cheap shares on a bloody day

I'm waiting for the MACD (12,26,9) to upcross the MACD signal line. The fundamentals look good, so I'm just trying to time my purchase.

http://www.fool.com/investing/high-growth/2011/01/26/our-top-stock-idea.aspx

The numbers are kinda insane.

market cap $1.43 billion
p/e 5
PEG 0.72
profit margin 28%
operating margin 47%
ROE 83%
cash $358 million
no debt

revenue 2008: $210 million
revenue 2009: $358 million (70% growth)
revenue 2010: $580 million (through 3 quarters, should be over $700 million for the year, 100% growth).

earnings 2008: $18 million
earnings 2009: $50 million (175% growth)
earnings 2010: $180 million (through 3 quarters, should easily pass $200 million for year, or 300% growth)

One of the reasons this stock is so cheap is because the generic market is hard to predict. Here are the revenues for the last four quarters: $176 million, $323 million, $153 million, $303 million. So the general direction is up but there's a huge fluctuation. The way the generic model works, the first to file has six months of exclusivity (i.e. has a duopoly with the original drug maker). But after that the drug prices usually fall through the floor. Add to this uncertainty all the litigation in the sector, and the race to file first, and you have a really unpredictable business model.

On the plus side, they have a huge pipeline. They have filed for drug approval for 33 drugs with the FDA. At least eight of those have first-to-file or first-to-market potential. Some of those are likely to surprise to the upside. What is a small or unprofitable drug for a big pharma can be a nice money-maker for a generic company who sells the hell out of it at a cheaper price. And of course some of them will not surprise at all. For instance, they just got a tentative approval for Cymbalta, the anti-depression drug ($3 billion in annual sales). It goes off-patent in two years. So just write in an extra $600 million in sales for 2013.

In the short term, we're all expecting bad news. There's been a huge demand for their ADD drug and Shire (the original drug maker) is supposed to supply them with unlimited quantities. Shire has been screwing them over, sending their supplies to Teva instead. So that's another lawsuit. The last conference call was a mess, with the company unhappy with their lack of supplies and unable to predict their near term revenues. Go ahead and write in a bad quarter, I don't care. Their p.e. is (bleep) 5. $200 million in profits and they're growing those profits annually at 300%. And those numbers include a bad quarter. Which is just theoretical at this point, anyway. The company is looking to make an acquisition to bolster their near term earnings.

I ask you, does it really matter? I wouldn't mind a cheaper price. Look at the business, look at what they are doing. Impax is printing money and they have 63 drugs in the pipeline. I want to put real money in this one.

The nicest thing about this company, for those of you who hate the bottom-feeders--and I am with you--is that this company is actually making the transition to real pharmaceutical company. They have two unique drugs in phase III trials, an MS drug and a Parkinson's drug. They are particularly happy with the Parkinson's drug. They file in Q4 of this year. Glaxo has already signed on as a partner for international sales. Impax gets $11 million in cash, plus $125 million if the drug is approved, plus double digit royalties.

The stock has done nothing but go up in two years. It's beating Apple, man. And the scary thing is that the near term uncertainty is actually suppressing the stock.

Speaking of beating Apple:

http://finance.yahoo.com/q/bc?t=my&s=TEVA&l=on&z=l&q=l&c=aapl

Wow. I'm sorry I missed that. But I'm ready for the sequel.

screen result

Cheap price/earnings at 4.30. Plenty of room for growth with market cap of 1.18 billion. Very low debt/equity levels makes it extremely attractive. Specialty pharma company in niche industry.

This is an interesting niche in the generic pharmaceutical market. The creation of sustained-release products is vital in many areas to create a valuable generic alternative to innovator products. This technology should create lasting partnerships for IPXL and the potential for growth. As more products requiring sustain-release formulations lose patent protection if positioned properly this company could continue to be very interesting.

more generics coming off patent, this specialty generic maker can handle the difficult ones

good cash position, insider purchases

On 30 stocks over $50 million market cap magic formula screen.

Three star CAPS rating and Schwab rates it a B. Small generic drug manufacturer. Very solid balance sheet with no debt and plenty of cash. Earnings and cash flow are not what you might call steady. The huge jump this past quarter was due to the exclusivity period for the tamsulosin product, which ended and future sales of the drug are not expected to remain very good as bigger companies will lower price and take market share. So IPXL will need to continue to find new generic drug exclusive deals in order to continue to make money. It appears they do have quite a few drugs in the pipeline and waiting for approval at the FDA, and based on the past, IPXL is good at getting generic exclusive distribution contracts. It looks like IPXL financed their expansion through debt and equity in the past, but they are now getting to the point where cash flow from operations is sufficient to fund growth – this seems like good news for investors. Going to purchase with real money.

I have been trading IPXL for years. Was stuck holding thousands of shares when delisted. Lucky enough to double up in the stock when it was re-listed at about $5.00 a share. This stock will easily trade back to it's old high trading range, about $25 - 30. in the next year or so.

CAPS=3/43

Lowest P/E and growing product & sales lines