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Generic drug maker Impax Laboratories (NASDAQ:IPXL) was counting on a branded drug for Parkinson's disease to help boost revenue. The company will have to wait a bit longer after the Food and Drug Administration rejected the product.

Impax says the FDA rejected Rytary, an extended-release drug for treatment of Parkinson's due to some previously known problems with a company plant. Impax has to resolve manufacturing violations at a plant in Hayward, California, a site that has had issues since at least 2010. The US agency issued a warning in 2011 after its investigators found multiple and significant violations of manufacturing practices. Rytary won't be approved until those issues are resolved, according to Impax.

The company says that it had withdrawn the Hayward plant as an alternative site for production of Rytary but the FDA isn't satisfied. The rejection based on the Hayward plant issues came as a surprise. Some Wall Street analysts expected the drug, which helps motor symptoms in patients, to win approval.

"We will work with the FDA on the appropriate next steps for the Rytary application," Impax CEO Larry Hsu says in a statement. "We remain committed to resolving the warning letter and bringing this new treatment option to patients."

Shares of Impax fell 9% to $19.07 in early trading Tuesday morning. The stock is down 25% in the past three months.

In October 2012, Impax said its fourth-quarter revenue would decline by as much as 20% from third-quarter sales as the generic business faces increased competition.

Some analysts previously said Rytary appeared to be an approvable drug but cautioned that the product may face other challenges. An analysis by Leerink Swann last year raised the possibility of insurance coverage challenges if Rytary is launched.

In a note to clients Monday, Leerink Swann analyst Jason Gerberry estimated that it will take up to 6 months for Impax to satisfy the FDA on the Hayward plant. He expects the company will bring Rytary back to the agency for approval.

"Hayward issues are resolvable and we expect Rytary to eventually get approved," Gerberry says.

If Impax is successful with its next attempt to win approval, the drug may hit the market as soon as early 2014, the analyst says.

GlaxoSmithKline (NYSE:GSK) has rights to the sell the drug in most countries outside the US.

This article by Brett Chase was previously published on Minyanville.

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Disclaimer: The views represented on this blog are those of the individual authors only, and do not necessarily represent the views of Schaeffer's Investment Research.


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