ChangeWave: A New Generic Buy

05/30/2003 12:00 am EST

Focus:

Tobin Smith

Founder and Chief Research Analyst, NBT Equity Group

"Our Legacy Buy List provides long-term investors with picks that they can purchase now and basically ignore until 2010," says Tobin Smith, editor of ChangeWave Investing . "This is for investors who don't worry about daily, weekly, and monthly price fluctuations in the market and want to set aside money in stocks for a longer time frame. We will add to this list as we uncover stocks that have the potential to be big winners in the next decade." Here's the latest addition--Impax, a generic drug firm.

"Generic drugs have been real winners for us and we think we've uncovered another gem. Impax Laboratories (IPXL NASDAQ) is a micro-cap company that is ready to break out and is poised to make tons of cash in the coming quarters. The company has over 36 different abbreviated new drug applications filed with the FDA that address $6 billion of branded pharmaceuticals. In addition, IPXL is a possible winner in the Claritin wars. Impax has FDA approval to manufacture a 12-hour dosage of Claritin and approval for a 24-hour dosage is pending. As is the case with first-to-market generic drugs, IPXL has a 180-day window of exclusivity for its versions of Claritin. Claritin generic sales have taken over the vast majority of the branded sales in less than six months."

"AstraZeneca's Prilosec is next. In April, AstraZeneca announced that sales of Prilosec fell 60% in the US due to stiffer competition from generics. IPXL has FDA approval for various strengths of a generic Prilosec, though marketing of the drug has been held up by patent lawsuits--not a major concern to us. We view generic Prilosec as being the next home run in the generic drug space."

"Impax is not solely focused on Claritin and Prilosec but rather has developed and owns eight different proprietary controlled-release delivery technologies used in a wide variety of therapies and drugs. The company has 10 products approved and 36 products pending approval or that are under development, as we said above. The company currently has 19 applications pending before the FDA, three with tentative approval and 14 that would be treated as first-to-market generics, which would give it a six-month window of exclusivity. The 19 applications are for drugs facing a market currently worth $5.9 billion. Moreover, the company just completed a $20 million dollar private placement that insures the stock's profitability. The $10 to $12 level is the next stop before our $20 price target in 2005."

"The conclusion of this private offering is the financial ChangeQuake we were looking for to ensure the company was going to make the turn to profitability soon. We are putting IPXL on the Legacy Buy List with a buy under of $8. The $10 to $12 level is the next stop before our $20 price target in 2005. Remember, stocks on the Legacy list are very speculative and should only be ventured into with your Vegas money."

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