UBS Says Impax 'Ahead Of Itself,' Downgrades To Sell

UBS downgraded Impax Laboratories Inc (NASDAQ: IPXL) Thursday from Neutral to Sell and maintained a $36 price target.

Analyst Marc Goodman noted that the stock had run up on expectations that the company may get acquired or do other deals.

While Goodman expected more deals to come, the stock appeared to have much of the speculation already priced-in with the risk-reward now biased to the downside.

Goodman also thought management was executing well, however, “the stock has gotten ahead of itself and already reflects a substantial deal in addition to multiple other key events going right.”

The analyst also saw risks to the base business, which included too high of expectations for Rytary. “The ramp has been slow,” and management guidance was $275-$350 million for 2019. The firm’s models included $155 million and Goodman did not have confidence in that number.

Goodman also assumed “Hayward issues get resolved midyear (timing unclear) and include $60M of sales from approvals from that plant. Given consensus EPS for 2016E, it appears that consensus assumes Hayward approval by 4Q.”

The analyst concluded, “Given the recent M&A activity in the sector, Impax remains both a target and a hunter, but we don’t see either driving the stock much above current levels any time soon.”

The $36 price target was based on approximately 15 to 16 times the P/E on 2016 estimated EPS of $2.30, which was above the consensus estimate of $2.23.

Impax Laboratories recently traded at $49.28, down 3.86 percent. Over the past 12 months, the stock has risen approximately 109 percent.