Impax Laboratories is a is a technology-based, specialty pharmaceutical company. It makes money by developing, manufacturing and marketing generics in addition to the development of branded products. By using a first-to-file and first-to-market strategy, Impax tries to take advantage of high barriers to entry for potential competitors. Increased legislation favoring generic production and limiting original pharmaceutical patent lives will help companies such as Impax reach greater profitability.
Impax operates under two categories, including:
By focusing the company's particular attention to the Impax Division, the company believes the research will deliver significant improvements over existing therapies.
Typically, a pharmaceutical company that sells a patented drug receives special designation to hold all rights to reap the benefits of R&D for the original development of the drug for a set number of years after approval from the Food and Drug Administration (FDA). Once these patents expire, generic companies receive the authorization to develop same or similar products that often dilute the market share of the first developer. Because the Food and Drug Administration (FDA) give special privileges to the first generic manufacturer to submit an application, called Abbreviated New Drug Application (ANDA), for approval in order to encourage the generics industry, generics are highly incentivized to rush into drug as soon as the medicine is off-patent. Unfortunately, this prompts extremely high competition which erodes the profitability quickly such that generics have a tougher time to sustain the same gross profit margins experienced by the same pharmaceuticals under patent.
Impax's five major customers, McKesson (MCK), Cardinal Health (CAH), AmerisourceBergen Corporation (Holding Co) (ABC), Walgreen Company (WAG), and MedcoHealth Solutions (MHS) accounted for 20%, 14%, 14%, 7% and 3%, respectively, or an aggregate of 58%, of gross revenue. As a result, these large customers control the ability to influence the price Impax may charge to them, which therefore influences its profitability. Any significant reduction of businesses from these top five customers may have material effects upon the business, and this is a force that is similar across most companies producing generic drugs (small molecule).
Impax competes against other generic manufacturers including: