Bisaro to cut first and buy later as he works to restore Impax Labs' fiscal health

Pills in blisters
Impax Labs new CEO Paul Bisaro has laid out a restructuring plan that includes closing sites and cutting jobs but also is looking toward M&A to help revive the struggling pharma.

When former Allergan CEO Paul Bisaro became CEO of small and struggling Impax Laboratories, investors wondered if he would institute the same mix of aggressive M&A and consolidation that allowed him to build  Actavis from a small generics operation into a large branded player. The answer is yes, only in reverse.

During his first earnings call since becoming CEO of Impax in March, the pharma veteran laid out a job-cutting restructuring on top of one already underway, that he said will result in about $130 million in annual savings. He said the company also intends to jump into the M&A melee for generic and branded but conceded with a challenged balance sheet it will take creative thinking to get that done.

Related: Can ex-Actavis CEO Paul Bisaro work his growth magic at Impax?

“Of course, we have some challenges, but I believe that Impax has the essential ingredients to overcome these challenges that achieve our goals of providing value to our patients and customers and delivering long-term shareholder growth,” he told analysts, according to a transcript from Seeking Alpha (reg. req.)

It is classic Bisaro and plan that cheered investors which pushed shares up more than 35% on Wednesday, even after the company reported a Q1 loss of $1.37 a share on $184 million in revenues.

In a note to investors, RBC Capital Markets analyst Randall Stanicky, said the company “benefited from another ‘Bisaro bounce’ as the combination of cost restructuring and M&A messaging trumped a mixed 1Q.”

He acknowledged Impax still has some fiscals knots to untile but also said the cost restructuring was the greater than expected, giving his firm confidence to increase its forecast for the drugmaker earnings and shares in the next few years. On the M&A side, he was impressed by Bisaro’s suggestion the company was “willing to be creative in structuring deals to get around any potential capital structure impediment.”

The restructuring involves Impax closing its generics R&D and a manufacturing facility in Middlesex, New Jersey and consolidating those functions into its Hayward California facility to reduce overall costs. It also made what Bisaro called the “difficult decision” to divest its Taiwan manufacturing facility and will either sell or close that facility. No job cut numbers were provided and the company didn’t respond to questions about those.

The company also will also cherry pick its generics portfolio, jettisoning low-value products to improve profitability.

On the M&A side, the new CEO acknowledge that there are some changed factors in the business these days, with challenges to speciality meds and big pressures on generics with fewer buyers and more sellers.

He said the industry is in need of some consolidation, and he expects that to happen. “I think Impax can be part of that discussion....”

Related: More generics consolidation coming? Novartis deal rumors point up the industry's troubles

He said by being “creative” in that regard, he said the company can give itself some headroom to do some asset acquisitions in both generics and branded meds.

Because of his 25 years in the business, and success in building Actavis into a major player, investors and observers are anxious to see how Bisaro navigates Impax through current challenges in both the generics and branded pharma markets.

Bisaro took over in March from interim leader J. Kevin Buchi, who took over in December after Fred Wilkinson stepped down. Before he came on board, there there were thoughts the company might put itself up for sale.

Related: Impax Labs weighs M&A options, figuring bigger is better in struggling generics industry