Barclays: Impax Labs-Amneal Pharma Merger Creates A Generics Leader

Impax Laboratories Inc IPXL announced an agreement in October to merge with privately held Amneal Pharma, with 75 percent of the combined company held by Amneal shareholders and 25 percent by Impax Labs shareholders.

The FTC recently laid down conditions — including the divestiture of Impax's rights and assets for 10 products to three other companies — while giving its OK for the proposed combination.

The Analyst

Barclays analyst Douglas Tsao initiated coverage of Impax Labs with an Outperform rating and $27 price target.

The Thesis

Impax Labs' pending merger with Amneal is likely to result in "a generics market leader positioned to deliver attractive growth," Tsao said in a Tuesday note.

"The idea of a 'growth' story in generics might strike some as an anachronism, understandable givent he disruption seen in the U.S. market over the last two years, but we see the opportunity for shareholders reaping the benefits of Amneal's investment in R&D to drive attractive top-line growth," the analyst said. 

The expected leadership of two generics- industry stalwarts, Rob Stewart and Paul Bisaro, increases Barclays' confidence in the proposed combination, Tsao said. 

Apart from executing on the existing pipeline, the analyst projects that the executives will rejuvenate the company's Paragraph IV strategy. The term refers to a certification given to a generics company that files its abbreviated new drug application first and secures market exclusivity for 180 days.

The leadership also increases confidence in the execution of merger integration and delivery on synergy targets, Tsao said. 

Barclays sees several attractive assets in Amneal's pipeline, including Copaxone, biosimilars filgrastim and pegfilgrastim.

"We expect the company to pursue opportunities within generics or even down the value chain including OTC," the analyst said. 

The Price Action

Impax Labs shares have gained 19 percent year-to-date.

The stock was up 1.26 percent at the time of publication Wednesday. 

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